2. Significant Accounting Policies
A) Basis of preparation of Financial Statements
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2021 (as amended) and the relevant provisions of the Companies Act, 2013. The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
B) Use of estimates
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
C) Inventories
The inventories are valued at cost or NRV whichever is lower. The company holds work in progress of movie projects which are in the process of production. All the expenses incurred directly in connection to the specified movie is added to the cost of the inventory of the
corresponding movie till such date of sale or release.
D) Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are shortterm balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
E) Cash Flow Statement
'The statement of cash flows has been prepared under indirect method, whereby profit or loss is adjusted for the effects of transactions of a noncash nature, any deferrals. The cash flows from operating, investing and financing activities of the Company are segregated.
F) Revenue Recognition
Revenue from sale or licensing of film is recognized when:
a ) Persuasive evidence of a sale or licensing agreement with a customer exists and
b) Film is certified by authorities for release in case of own exhibition of films produced and
c) The film is complete and has been delivered or is available for immediate and unconditional delivery (in accordance with the terms of the arrangement) and
d) The customer can begin its exploitation, exhibition, or sale and
e) The fee is fixed or determinable and
f) Collection of the fee is reasonably assured. All other revenue, including but not limited to, the following, is recognised on the basis of sale or licensing agreements.
Nature of Income
(i) Revenue from Theatrical rights (Domestic & Overseas)
(ii) Revenue from Dubbing Rights (Domestic & Overseas)
(iii) Revenue from Satellite Rights (Domestic & Overseas)
(iv) Revenue from Music Rights (Domestic & Overseas)
(v) Revenue from Sale of Transfer of Rights (Domestic & Overseas)
(vi) Revenue from Sale of Digital Rights (Domestic & Overseas)
Other Income :
Interest on loans given is recognised as per the terms of agreement and accounted on time proportionate basis in the books of accounts. All other income is recognised based on the terms of contract with third parties and corresponding billings made.
Subsidies received from the Government are recognised in the profit & loss account where there are no conditions attached to the subsidy.
G) Costs and Expenses
Film costs include all direct costs incurred in the physical production of a film, such as the costs of story; compensation of cast, directors, producers, and extras; costs of set construction, operations, and wardrobe; costs of sound synchronization; costs of rental facilities on location; and postproduction costs (music, special effects, and editing). Production overhead consists of the costs of the individuals and departments that have a significant (or exclusive) responsibility for the production of the film. These costs do not include administrative and general expenses.
H) Property, Plant and Equipment
Property, plant and equipment are stated at cost comprising of purchase price, including nonrefundable taxes and duties and any initial directly attributable cost of bringing the asset to its working condition for its intended use, less accumulated depreciation and impairment loss, if any.
Depreciation is provided for property, plant, and equipment on written down value basis to expense the cost less residual value over their estimated useful lives. The estimated useful lives and residual values are reviewed at the end of each reporting period. Useful life of assets are as prescribed under Schedule II of the Companies Act, 2013.
I) Foreign currency transactions and translations
Initial recognition and treatment of exchange differences
Transactions in foreign currencies entered by the Company are accounted at the exchange rates
prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction. They are re-translated at the exchange rate prevailing at the Balance sheet date. The unrealised gains or losses are recognised as income or expense in the Statement of Profit and Loss on restatement at the end of reporting period.
J) Investments
The cost of an investment includes acquisition charges such as brokerage, fees, and duties.
Any receivables from these investments are recognised as income in the Statement of Profit and Loss.
On disposal of an investment, the difference between the carrying amount and the disposal proceeds, net of expenses, is recognised in the profit and loss statement.
K) Employee Benefits
The provisions of gratuity, provident fund and employee state insurance do not apply to the Company; hence no provision is made.
The company does not have the policy of compensating absences and encashment of leave.
L) Borrowing cost:
The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised to the asset. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation on that asset is determined as the actual borrowing costs incurred on that borrowing during the period less any income on the temporary investment of those borrowings.
In case of other borrowing costs, the interest is recognised as expenses as per terms of the borrowing, as and when they become payable and on time proportionate basis.
M) Segment reporting
Business Segment:
A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments.
The Company is engaged in only one single activity of Production of films and sale of film rights.
Hence, there are no different business segments to be reported separately.
Geographical Segment:
A geographical segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.
The Company operates from only one geographical/ economic environment and hence there are no separate reportable segments.
N) Earnings per share
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during year. Diluted EPS is computed by dividing profit or loss attributable to equity shareholders by weighted average number of additional equity shares that would have been outstanding assuming conversion of all dilutive potential equity shares.
O) Taxes on Income
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred taxes are recognised in statement of profit and loss.
Current Income Taxes
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.
Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets and liabilities are reviewed at each Balance Sheet date for their realisability.
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