2 Summary of significant accounting policies2.1 Basis of preparation
(i) Compliance with Indian Accounting Standard (Ind AS)
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards
(Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies
(Indian Accounting Standards) Rules, 2016. The Company adopted Ind AS from April 1,2016.
(ii) Historical Cost Convention
The financial statements have been prepared on an accrual basis and under the historical cost convention, except
for certain financial assets and liabilities and defined benefit plan assets which have been measured at fair value.
2.2 Current versus non-current classification
The assets and liabilities reported in the balance sheet are classified as current or non-current. Current assets, which
include cash and cash equivalents, are assets that are intended to be realised during the normal operating cycle of the
Company or within 12 months of the balance sheet date; current liabilities are expected to be settled during the normal
operating cycle of the Company or within 12 months of balance sheet date. The deferred tax assets and liabilities are
classified as non-current assets and liabilities.
2.3 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker.
The chief operating decision maker of the Company assesses the financial performance and position of the Company
and makes strategic decisions on the advice of the Managing Director of the Company.
2.4 Foreign Currency Transactions
The financial statements are presented in Indian rupee (INR), which is the functional and presentation currency of the
Company.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are
recognised in profit or loss.In case of Non-monetary items that are measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the fair value gain or loss.
2.5 Revenue Recognition
Ind AS 115 Revenue from Contracts with Customers, mandatory for reporting periods beginning on or after April 1,
2018, replaced the existing revenue recognition requirements. Under the modified retrospective approach there were
no adjustments required to the retained earnings at April 1,2018. The application of Ind AS 115 has been considered
and transactions entered into during the current year have been recorded accordingly.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company, revenue
can be reliably measured and recoverability is reasonably certain and the goods or services have been transferred to
the Customer. The amount recognised as income is exclusive of goods and services tax and net of trade discounts.
Revenue from fixed rate contracts is recognised over the period as per the cotractual agreement. Unbilled revenue
represents costs incurred and revenues recognised on contracts to be billed in subsequent periods as per the terms of
the contract.
Film/content production and related income
Revenue from sale of content/ motion pictures is recognised on assignment/sale of the rights in the concerned content/
motion picture from the date of their availability for exploitation or on the date of release of the content/ movie, as
applicable.
Revenue from other rights in motion pictures such as satellite rights, overseas rights, music rights, video rights, etc.,
is recognised on assignment/ sale of the rights in the concerned motion picture from the date of their availability for
exploitation.
Income from distribution and exhibition
Distribution/ sub-distribution commission is recognised as it is earned based on intimation by the theatre owners/
distributors.
Revenue from equipment hire/ facility rental
Income from equipment hire/ facility rental is recognised on a straight-line basis over the period of the relevant
agreement/ arrangement.
Revenue from business support service
Revenue from business support service is recognised on rendering of service as per the terms and conditions of the
agreement.
Dividend & Interest income
Dividend income from investments is recognised when the shareholder's right to receive payment has been established
(provided that it is probable that the economic benefits will flow to the Company and the amount of income can be
measured reliably). Interest income from a financial asset is recognised when it is probable that the economic benefits
will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying
amount on initial recognition. Interest income is recorded using the effective interest rate (EIR). EIR is the rate that
exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a
shorter period, where appropriate, to the gross carrying amount of the financial asset. Interest income is recorded using
the Effective Interest rate.
2.6 Employee benefits
Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term
employee benefits. These benefits include salaries and wages, bonus, Compensated absences such as paid annual
leave and seekness leave. The undiscounted amount of short-term employee benefits expected to be paid in exchange
for the services rendered by employees is charged to the Statement of profit and loss in the period in which such
services are rendered.
Post-employment benefits
Defined contribution plan:
A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to
a separate entity/fund and has no obligation to pay any further amounts. The Company makes specified monthly
contributions towards Provident Fund. The Company's contribution is recognised as an expense in the Statement of
profit and loss during the period in which employee renders the related service.
Defined benefit plan:
The Company has calculated the gratuity liability for fifteen days per month based on the last basic salary drawn by the
employee for every completed year of service or part thereof in excess of six months. The gratuity liability recognised
in the Balance sheet represents the gratuity liability and as reduced by the fair value of the said assets. The scheme is
funded with an insurance company in form of qualified insurance policy.
Contributions are made to LIC in respect of gratuity based upon actuarial valuation done at the end of every financial
year using ‘Projected Unit Credit Method'. Major drivers in actuarial assumptions, typically, are years of service and
employee compensation. Gains and losses on changes in actuarial assumptions are accounted in the statement of
profit and loss.
Other long-term employee benefits
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 a liability. The Company calculates the liability based on the
total leave hour balance as at the year end restricted to forty two days and the last salary drawn by the employees.
2.7 Borrowing Costs
General and specific borrowing costs that are directly attributable to the acquisition, construction of a qualifying asset
are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale.
Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
2.8 Leases
Assets taken on operating lease
The Company has various operating leases, principally for office space, with various renewal options. Rental expense
in agreements with scheduled rent increases is recorded on a straight-line basis over the lease term.
Assets given on operating lease
Lease rentals in respect of assets given on operating lease are recognised on a straight-line basis over the lease term
unless another systematic basis is more representative of the time pattern of the benefit received.
2.9 Taxation
Income-tax expense comprises current tax expense and deferred tax charge or credit.
Current tax
Provision for current tax is recognised in accordance with the provisions of the Income-tax Act, 1961 and is made
based on the tax liability after taking credit for tax allowances and exemptions.
Minimum Alternative Tax Credit entitlement
Minimum Alternative Tax (‘MAT') credit is recognised only to the extent there is convincing evidence that the Company
will pay normal income tax in excess of MAT during the specified period.
MAT credit entitlement is reviewed as at each Balance sheet date and written down to the extent there is no longer
convincing evidence that the Company will pay normal income tax during the specified period.
Deferred tax
Deferred tax liability or asset is recognised for timing differences between the profits or losses offered for income taxes
and profits/losses as per the financial statements. Deferred tax assets and liabilities and the corresponding deferred
tax credit or charge are measured using the tax rates and tax laws that have been enacted or substantively enacted as
at the Balance sheet date.
Deferred tax asset is recognised only to the extent there is reasonable certainty that the assets can be realised in
future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax
assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed
as at each Balance sheet date and written down or written up to reflect the amount that is reasonably/virtually certain
to be realised.
2.10 Property, plant and equipment (PPE)
Items of Property, plant and equipment (PPE) are stated at cost less accumulated depreciation and impairment losses,
if any. Cost includes freight, duties, taxes (other than those recoverable from tax authorities) and other expenses
directly attributable to the acquisition/ construction and installation of the fixed assets for bringing the asset to its
working condition for its intended use. Borrowing costs relating to acquisition of PPE which take 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.
Cost incurred on fixed assets not ready for their intended use is disclosed under capital work-in-progress. Capital work-
in-progress includes estimates of work completed, as certified by the management.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of its property, plant and equipment
recognised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost
of the property, plant and equipment, except for certain properties, the fair market value of which had appreciated
substantially and the increase in their carrying amounts, supported by reports of independent valuers, was therefore
recognised in profit and loss account and accumulated in reserves in shareholders' equity.
Depreciation methods, estimated useful lives and residual value
The Company applies depreciation rates as per the useful lives of the assets as specified in Part ‘C' of Schedule II
to the Companies Act 2013, except for the following class of assets where the useful life is higher than the useful life
prescribed in Schedule II based on management estimates which is supported by assessment carried out by technical
experts.The residual values are not more than 5% of the original cost of the asset. The assets' residual values and
useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Leasehold improvements/ premises are depreciated at the lower of the estimated useful lives of the assets and the
lease term, on a straight-line basis.
2.11 Investment properties
Property that is held for long-term rental yields or for capital appreciation or both, is classified as investment property.
Investment property is measured initially at cost, including related transaction costs. Subsequent expenditure is
capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the
expenditure will flow to the entity and the cost of the item can be measured reliably.
Investment properties are depreciated using the written down value method over their estimated useful lives. Investment
properties generally have a useful life of 30 years. The useful life has been determined based on technical evaluation
performed by techinical experts.
Transition to Ind AS
On transition to Ind AS, the entity has elected to continue with the carrying value of all of its investment properties
recognised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of
investment properties, the fair value of investment property is disclosed in notes.
2.12 Intangible assets
Film rights comprising negative rights and distribution rights
Negative film rights are generally exploited through media such as theatrical exhibition, television/ satellite, cable, etc.
Negative film rights in respect of films produced are recorded at cost, which is determined on specific identification
basis. Acquired negative rights are recorded at the purchase price paid to acquire the rights plus any additional cost
incurred which is determined on specific identification basis. Cost incurred on films-in-progress is reported as Intangible
assets under development.
Distribution rights in films are for a contractually specified mode of exploitation, period and territory and are stated
at cost. Cost of distribution comprises original purchase price/ minimum guarantee, which is ascertained on specific
identification basis. In case multiple films/ rights are acquired for a consolidated amount, cost is allocated to each film/
right based on the agreement or where it is not specified in the agreement, based on management's best estimates. In
respect of unreleased films, payments towards distribution rights are classified under capital advances as the amounts
are refundable in the event of non-release of the film.
Costs are amortised in the proportion that gross revenue realised bears to management's estimate of total gross
revenue expected to be received. If estimates of the total revenue and other events or changes in circumstances
indicate that the realisable value of a right is less than its unamortised cost, a loss is recognised for the excess of
unamortised cost over the film rights' realisable value.
Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and
amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis.
2.13 Impairment of Non Financial Asset
In accordance with Ind AS 36 - intangible assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they
might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of
the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in
use. An impairment loss is recognised whenever the carrying amount of an asset or the cash generating unit to which
it belongs exceeds its recoverable amount. Impairment loss is recognised in the Statement of profit and loss or against
revaluation surplus, where applicable.
If at the Balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the
recoverable amount is re-assessed and the asset is reflected at the recoverable amount subject to a maximum of the
depreciated historical cost.
Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset
and from its disposal at the end of its useful life.
2.14 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
2.15 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial Asset
The entity classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive income, or through profit or
loss), and
• those measured at amortised cost.
The classification depends on the entity's business model for managing the financial assets and the contractual terms
of the cash flows.
Initial recognition and measurement
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, and transaction costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets that are carried at fair value through profit or loss are expensed in profit or
loss.
Subsequent measurement
Subsequent measurement of financial asset depends on the Company's business model for managing the asset
and the contractual cash flow characteristics of the asset. There are three measurement categories into which the
Company classifies its financial assets as below:
• amortised cost
• fair value through profit and loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
Financial Assets measured at amortised cost
A ‘financial asset' is measured at the amortised cost if both the following conditions are met.
a) Asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) 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 less impairment.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. EIR amortisation is included in finance income in the Statement of Profit and Loss.
Losses arising from impairment are recognised in the Statement of Profit and Loss.
Financial Assets measured at fair value through other comprehensive income (FVTOCI)
A ‘financial asset' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial
assets, and
b) The contractual cash flows of the assets represent SPPI: Financial assets included within the FVTOCI category
are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the
other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses &
reversals and foreign exchange gain or loss in the Statement of Profit and Loss. On derecognition of the asset,
cumulative gain or loss previously recognised in Other Comprehensive Income is reclassified from the equity to
Statement of Profit and Loss. Interest earned whilst holding FVTOCI financial asset is reported as interest income
using the EIR method.
Financial Assets measured at fair value through profit and loss (FVTPL)
A financial asset not classified as either amortised cost or FVOCI, is classified as FVTPL. Such financial assets are
measured at fair value with all changes in fair value, including interest income and dividend income if any, recognised
as ‘other income' in the Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind-AS 109, “Financial Instruments” are measured at fair value. Where the company's
management has elected to present fair value gains and losses on equity investments in other comprehensive income,
there is no subsequent reclassification of fair value gains and losses to profit or loss. The Company makes such
election on an instrument-by-instrument basis. The classification is made on initial recognition which is irrevocable.
If the company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument,
excluding dividends, are recognized in the Other Comprehensive Income.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the
Statement of Profit and Loss.The Company has elected to measure its investment in subsidiaries at its previous GAAP
carrying value which shall be the deemed cost as at the date of transition.
Derecognition of Financial Assets
A financial asset is primarily derecognised when: a) Rights to receive cash flows from the asset have expired, or b)
The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a ‘pass-through' arrangement and either(a)
the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset,
where the entity retains control of the financial asset, the asset is continued to be recognised to the extent of continuing
involvement in the financial asset.
Impairment of financial assets :
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at
amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has
been a significant increase in credit risk. Note 36 details how the Company determines whether there has been a
significant increase in credit risk.
For trade receivables, only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments,
which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Trade receivables
The company evaluates the concentration of risk with respect to trade receivables as low, as its customers operate in
largely independent markets and their credit worthiness is monitored at periodical intervals. The company has used a
practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix.
The provision matrix takes into account historical credit loss experience and adjusted for forward looking information.
The expected credit loss allowance is based on the ageing of the days for which the receivables are due and is rated
as given in the provision matrix. The provision matrix at the end of the reporting period is as follows:
Financial Liabilities
(i) Initial recognition and measurement
All financial liabilities are recognised initially at fair value, in the case of loans, borrowings and payables, net of directly
attributable transaction costs. Financial liabilities include trade and other payables, loans and borrowings including
bank overdrafts and derivative financial instruments
(ii) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described herein:
Financial liabilities at fair value through Profit or Loss:
Financial liabilities at fair value through Profit or Loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for
trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative
financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships
as defined by Ind AS 109. Gains or losses on liabilities held for trading are recognised in the Statement of Profit and
Loss.
Financial Liabilities measured at amortised cost:
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised
as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as
finance costs in the statement of Profit and Loss.
Derecognition of Financial Liabilities
A financial liability is derecognised 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 derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in
the Statement of Profit and Loss.
Offsetting :
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only
when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them
on a net basis or to realise the asset and settle the liablity simultanesously.
2.16 Measurement of fair values
The Company measures financial instruments, such as derivatives, 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. The fair value measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability
Management uses its judgement in selecting an appropriate valuation technique for financial instruments not quoted in
an active market. Valuation techniques commonly used by market participants are applied. Other financial instruments
are valued using a discounted cash flow method based on assumptions supported, where possible, by observable
market prices or rates.
The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information,
such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence
obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including
the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest
level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during
which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes on financial
instruments.
|