1. Material accounting policies
a. Revenue recognition
Revenue from contracts are recognized only when
the contract has been approved by the parties to the
contract and creates enforceable rights and obligations.
Revenue is recognized upon transfer of control of
promised products or services to customers in an
amount that reflects the consideration which the
Company expects to receive in exchange for those
products or services. Revenue do not include the
taxes collected from the customer on behalf of taxing
authorities. To ensure collectability of such consideration
and financial stability of the counterparty, the Company
performs certain standard Know Your Client (KYC)
procedures based on their locations and evaluates
trend of past collection.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for any discounts
and incentives, if any, as specified in the contract
with the customer. In case of variable consideration,
the Company estimates, at the contract inception,
the amount to be received using the "most likely
amount" approach, or the "expected value" approach,
as appropriate. This amount is then included in the
Company’s estimate of the transaction price only if it
is highly probable that a significant reversal of revenue
will not occur once any uncertainty associated with
the variable consideration is resolved. In making this
assessment the Company considers its historical
performance on similar contracts.
The Company recognises contract liabilities for
consideration received in respect of unsatisfied
performance obligations and reports these amounts
as deferred revenue under other current liabilities
in the balance sheet (see Note 29). Similarly, if the
Company satisfies a performance obligation before it
receives the consideration, the Company recognises
either a contract asset or a receivable in its balance
sheet, depending on whether something other than the
passage of time is required before the consideration is
due.
Consideration is generally due upon satisfaction of
performance obligations and a receivable is recognised
when it becomes unconditional. Generally, the credit
period varies between 0-180 days from the shipment or
delivery of goods or services as the case may be.
The transaction price, being the amount to which the
Company expects to be entitled and has rights to under
the contract is allocated to the identified performance
obligations. The transaction price will also include
an estimate of any variable consideration where the
Company’s performance may result in additional
revenues based on the achievement of agreed targets.
The Company does not expect to have any contracts
where the period between the transfer of the promised
goods or services to the customer and payment by the
customer exceeds one year. As a consequence, the
Company does not adjust any of the transaction prices
for the time value of money.
The Company disaggregates revenue from contracts
with customers by geography and nature of services.
The following additional criteria apply in respect of
various revenue streams within filmed entertainment:
Theatrical — Contracted minimum guarantees
are recognized on the theatrical release date. The
Company’s share of box office receipts in excess of the
minimum guarantee is recognized at the point they are
notified to the Company.
Television — In arrangements for television syndication,
license fees received in advance which do not meet the
revenue recognition criteria, including commencement
of the availability for broadcast under the terms of the
related licensing agreement, are included in contract
liability until the criteria for recognition is met. Revenues
from television licensing arrangements are recognized
when the feature film or television program is delivered
and the period for the exploitation of rights has begun.
Other — DVD, CD and video distribution revenue
is recognized on the date the product is delivered or
if licensed in line with the above criteria. Provision is
made for physical returns where applicable. Digital
and ancillary media revenues are recognized at the
earlier of when the content is accessed or declared.
Visual effects, production and other fees for services
rendered by the Company and overhead recharges
are recognized in the period in which they are earned
and in certain cases, the stage of production is used to
determine the proportion recognized in the period.
Other income
Dividend income is recognised when the Company’s
right to receive the payment is established, which is
generally when shareholders approve the dividend.
Interest income is recognized on a time proportion basis
taking into account the amount outstanding and the
effective interest rate applicable.
b. Property, plant and equipment and depreciation
Property, Plant and Equipment is stated at cost, net of
accumulated depreciation and accumulated impairment
losses, if any.
The cost of Property, Plant and Equipment comprises
of its purchase price or construction cost, any costs
directly attributable to bringing the asset into the
location and condition necessary for it to be capable
of operating in the manner intended by management,
the initial estimate of any decommissioning obligation,
if any, and borrowing costs for assets that necessarily
take a substantial period of time to get ready for their
intended use. Subsequent costs are included in the
asset's carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that
future economic benefits associated with the item will
flow to the Company and the cost of the item can be
measured reliably.
Capital Work-in-progress (CWIP) includes expenditure
that is directly attributable to the acquisition/construction
of assets, which are yet to be commissioned.
Depreciation is provided under written down value
method at the rates and in the manner prescribed under
Schedule II to the Companies Act, 2013. The residual
values, useful lives and methods of depreciation of
property, plant and equipment are reviewed at each
financial year end and adjusted prospectively, if
appropriate. Gains or losses arising from de-recognition
of a property, plant and equipment are measured as
the difference between the net disposal proceeds and
the carrying amount of the asset and are recognized in
the Statement of Profit and Loss when the asset is de¬
recognized.
c. Intangible assets
Intangible assets acquired by the Company are stated
at cost less accumulated amortization less impairment
loss, if any, (film production cost and content advances
are transferred to film and content rights at the point at
which content is first exploited).
Investments in films and associated rights, including
acquired rights and distribution advances in respect of
completed films, are stated at cost less amortization
less provision for impairment. Costs include production
costs, overhead and capitalized interest costs net
of any amounts received from third party investors. A
charge is made to write down the cost of completed
rights over the estimated useful lives, writing off more in
year one which recognizes initial income flows and then
the balance over a period of up to nine years, except
where the asset is not yet available for exploitation. The
average life of the assets is the lesser of 10 years or
the remaining life of the content rights. The amortization
charge is recognized in the statement of profit and loss
within cost of sales. The determination of useful life is
based upon Management’s judgment and includes
assumptions on the timing and future estimated
revenues to be generated by these assets, which are
summarized in Note 4.
Intangible assets comprising film scripts and related
costs are stated at cost less amortization less provision
for impairment. The script costs are amortized over
a period of 3 years on a straight-line basis and the
amortization charge is recognized in the statement of
profit and loss within cost of sales. The determination of
useful life is based upon Management’s estimate of the
period over which the Company explores the possibility
of making films using the script.
Other intangible assets, which comprise internally
generated and acquired software used within the
Entity’s digital, home entertainment and internal
accounting activities, are stated at cost less amortization
less provision for impairment. A charge is made to write
down the cost of software over the estimated useful
lives except where the software is not yet available
for use. The average life of the software is the lesser
of 3 years or the remaining life of the software. The
amortization charge is recognized in the statement of
profit and loss.
d. Impairment of non-financial assets
At each reporting date, for the purposes of assessing
impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash
generating units). As a result, some assets are tested
individually for impairment and some are tested at the
cash generating unit level. All individual assets or cash
generating units are tested for impairment whenever
events or changes in circumstances both internal and
external indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised wherever the carrying
amount of an asset exceeds its recoverable amount
which represents the greater of the net selling price of
assets and their ‘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 the risks
specific to the asset. In determining fair value less costs
of disposal, recent market transactions are taken into
account. If no such transactions can be identified, an
appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share
prices for publicly traded companies or other available
fair value indicators.
Film and content rights are stated at the lower of
unamortized cost and estimated recoverable amounts.
In accordance with Ind AS 36 Impairment of Assets, film
content costs are assessed for indication of impairment
on a library basis as the nature of the Company’s
business, the contracts it has in place and the markets
it operates in do not yet make an ongoing individual film
evaluation feasible with reasonable certainty. Impairment
losses on content advances are recognized when film
production does not seem viable and refund of the
advance is not probable. Irrespective of existence of
indicators of impairment, Company makes provision on
Content Advances in accordance with the provisioning
policy, such that, unadjusted advances are provided
over a period of 3 to 5 years.
All assets are subsequently reassessed for indications
that an impairment loss previously recognized may no
longer exist.
e. Borrowing costs
The Company is capitalising borrowing costs that are
directly attributable to the acquisition or construction
of qualifying assets. Qualifying assets are assets that
necessarily take a substantial period of time to get
ready for their intended use or sale.
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently
stated at amortized costs with any difference between
the proceeds (net of transaction costs) and the
redemption value recognised in the income statement
within Finance costs over the period of the borrowings
using the effective interest method. Finance costs in
respect of film productions and other assets which take
a substantial period of time to get ready for use or for
exploitation are capitalized as part of the assets. All
other borrowing costs are recognized as expense in the
period in which they are incurred and charged to the
Statement of Profit and Loss.
Borrowings are classified as current liabilities unless the
Company has an unconditional right to defer settlement
of the liability for at least 12 months after the balance
sheet date.
f. Impairment of financial assets
In accordance with Ind AS 109, the Company applies
expected credit loss (ECL) model for measurement and
recognition of impairment loss on risk exposure arising
from financial assets like debt instruments measured at
amortized cost e.g., trade receivables and deposits.
The Company follows ‘simplified approach’ for
recognition of impairment loss allowance on Trade
receivables or contract revenue receivables. The
application of simplified approach does not require
the Company to track changes in credit risk. Rather,
it recognises impairment loss allowance based on
lifetime ECLs at each reporting date, right from its initial
recognition.
For recognition of impairment loss on other financial
assets and risk exposure, the Company determines
that whether there has been a significant increase in the
credit risk since initial recognition. If credit risk has not
increased significantly, 12-month ECL is used to provide
for impairment loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a subsequent
period, credit quality of the instrument improves such
that there is no longer a significant increase in credit
risk since initial recognition, then the entity reverts
to recognising impairment loss allowance based on
12-month ECL.
Lifetime ECL are the expected credit losses resulting
from all possible default events over the expected life
of a financial instrument. The 12-month ECL is a portion
of the lifetime ECL which results from default events that
are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows
that are due to the Company in accordance with the
contract and all the cash flows that the entity expects
to receive (i.e., all cash shortfalls), discounted at the
original EIR. When estimating the cash flows, an entity is
required to consider all contractual terms of the financial
instrument (including prepayment, extension, call and
similar options) over the expected life of the financial
instrument. However, in rare cases when the expected
life of the financial instrument cannot be estimated
reliably, then the entity is required to use the remaining
contractual term of the financial instrument.
ECL impairment loss allowance (or reversal) recognized
during the period is recognized as income/ expense in
the statement of profit and loss. This amount is reflected
under the head ‘Other income or other expenses’ in the
statement of profit and loss.
For assessing increase in credit risk and impairment
loss, the Company combines financial instruments on
the basis of shared credit risk characteristics with the
objective of facilitating an analysis that is designed to
enable significant increases in credit risk to be identified
on a timely basis.
g. Inventories
Inventories primarily comprise of music CDs and DVDs
are valued at the lower of cost and net realizable value.
Cost in respect of goods for resale is defined as all
costs of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present
location and condition. Cost in respect of raw materials
is purchase price.
Purchase price is assigned using a weighted average
basis. Net realisable value is the estimated selling price
in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary
to make the sale.
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