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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| DQ Entertain. | LSE:DQE | London | Ordinary Share | IM00B28Y2V20 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.125 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Nov 2019 to Nov 2024
TIDMDQE
RNS Number : 5725I
DQ Entertainment PLC
02 June 2014
For Immediate Release 2 June 2014
DQ Entertainment plc
Final results for the year ended 31 March 2014
DQ Entertainment plc (AIM: DQE), a leading animation, gaming, live action, entertainment production and distribution company, today announces its results for the year ended 31 March 2014.
Financial Highlights:
Hot Features
Premium
31 March 31 March
2014 2013
INR INR millions
millions
---------------------------------------- ---------- --------------
Income Statement
---------------------------------------- ---------- --------------
Revenue 2,397 2,294
---------------------------------------- ---------- --------------
Gross Profit 1,021 905
---------------------------------------- ---------- --------------
Other operating income 247 10
---------------------------------------- ---------- --------------
Net financing costs (243) (190)
---------------------------------------- ---------- --------------
Profit before tax 456 427
---------------------------------------- ---------- --------------
Tax expense (27) (46)
---------------------------------------- ---------- --------------
Profit after tax 429 381
---------------------------------------- ---------- --------------
Statement of Financial Position
---------------------------------------- ---------- --------------
Equity attributable to the owners
of the company 5,055 4,222
---------------------------------------- ---------- --------------
Intangibles (Intangible assets +
Intangible assets under construction) 5,684 4,524
---------------------------------------- ---------- --------------
Trade and Other receivables 3,048 2,379
---------------------------------------- ---------- --------------
Cash and Cash Equivalents (844) (624)
---------------------------------------- ---------- --------------
Order book* 5,634 6,588
---------------------------------------- ---------- --------------
* Includes contracted forward production revenues and signed licensing and distribution deals for the period over the next thirty months.
Chairman's Statement:
We are happy to place before you our annual results for the year ended 31 March 2014
During the last couple of years, DQE has remained focused on building its own television content production and distribution business while also leveraging its resources to benefit from alternate channels and platforms.
Furthermore, we continue to develop and progress on our feature film production which will complement our existing production pipeline and also adding several new intellectual properties to our portfolio that comprise the foundation of our business.
Our licensing and distribution group has performed well as we have been able to tap newer markets, namely Latin America, Africa, South East Asia and Middle Eastern territories, for concluding new agreements with international broadcast partners, as well as several licensees for a variety of merchandise products.
The business of entertainment has evolved into a highly dynamic industry, interconnected by varied global digital platforms. The demand for good quality content is growing due to the availability of digital platforms for exploitation and distribution. Broadband Internet connections across all major markets are on the rise due to the increased use of alternate screens such as the tablet and Smartphone. There are currently an estimated 2.1 billion mobile broadband users, growing at a rate of 30%, annually and projected to touch 7 billion subscribers by 2018. DQE is well positioned to take advantage of this mass market requirement of content, in addition to the normal revenue streams currently being generated, by entering into distribution agreements of its own properties through global digital distributors such as Netflix, Hulu, Vudu, Amazon and Youtube.
OPERATING HIGHLIGHTS:
Most notable amongst this year's achievement is the successful launch of our 2(nd) IP "The New adventures of Peter Pan and The Jungle Book TV series - Season 2
The first season of Peter Pan has done exceedingly well and our Broadcast partners - ZDF Group Germany, Tele Quebec Canada and De Agostini Group, Italy - have already given their approval for the 2(nd) season.
Productions successfully completed and delivered during 2013-14:
-- NFL2 20 x 22' CGI / 2D TV Series with Rollman Entertainment (USA) for Nick Toons (USA) -- Iesodo - 10x13' CGI TV series with Rollman Entertainment (USA) -- Lanfeust Quest - 26 x 22' 3D TV series coproduced with Gaumont Alphanim (France)
-- The Rising Star - 26 x 22' 2D TV series coproduced with TMS Entertainment (Japan) and Kodansha (Japan)
-- Peter Pan (Season 1) - 52 x 11' 3D TV series co-produced with Method Animation, (France)
-- The Jungle Book Season 2 - 52 x 11 3D TV series coproduced with ZDF TV (Germany), TF1 TV (France), Moonscoop (France), ZDF-E (Germany)
-- Turok DVD - 4 Mts [minutes?] DVD 3D with Bright Action Entertainment (Hongkong) -- Ethel & Ernest 4 Mts [minutes?] 3D with Real Heart (Hongkong) -- Court update and GSoccer - 7 minute and 3 minute 3D HD with Coral Reef productions (USA) -- Popples 30 minute TV Feature with Smart Silver (Hongkong) -- Tut the tiny Tug Boat 60 minute DVD - Impressive Digitals (Australia) -- Rotomation - 90 minute DVD 3D HD - Oyster Blue Media Corporation (USA) -- Lancer man home video movie - 3D 88 minutes - Oyster Blue Media Corporation (USA)
New projects concluded in the year 2013-14
We have concluded new co-productions/work-for hire contracts with international partners for delivery over the next 18-24 months as follows:
-- Leo & Pisa gang - 52 x 11' CGI TV series with MPP (Germany) -- Shabiyate 2 - 15 x 13' CGI TV series with Fanar productions (UAE) -- Miles from Tomorrow Land - _22 x 26' CGI TV series for Disney with Wild Canary (USA) -- Project Pop - 52 x 11' CGI TV series with Zag Toons, (USA) -- Seven Dwarfs and Me - 26 x 22' Hybrid TV series with Method Animation (France) -- Escape Hockey 52 x11' TV Series with Imira (Spain)
Projects in production:
Our production pipeline continues to be robust optimizing the utilization of man and machine resources. The under mentioned are currently in production to be progressively completed for delivery in 2013-14.
-- Jungle Book Christmas Special - CGI TV Feature coproduced with ZDF TV (Germany) and Moonscoop (France)
-- Jungle Book Safari - 26 x 12' - Documentary Hybrid YV Series with ZDF TV (Germany)
-- Lassie & Friends - 52 x 11' 2D TV series being coproduced series with DreamWorks Classics (USA), TF1 (France), ZDF (Germany) and Noga (Israel)
-- Robin Hood, Mischief in Sherwood - 52 x 11' 3D TV series being coproduced with Method Animation (France), TF1 (France), ATV (Turkey), De Agostini (Italy) and ZDF (Germany)
-- Manav - 65' 2D TV Feature with Disney (India)
-- Little Prince Season 3 - 26 x 22' CGI TV series - third season of this iconic series with Method Animation (France), France Televisions and RAI (Italy)
-- NFL Season 3 - 20 x 22' CGI / 2D TV Series with Rollman Entertainment, USA for Nick Toons (USA)
-- Shabiyate - 15 x 13' CGI TV serieswith Fanar productions (UAE) -- Pocket World - 60 minute DVD 3D HD - Real Heart -- Motion Maker - 45 minute TV Feature 3D HD - Smart Silver (Hongkong) -- Wyland's Universe - 90 minute DVD - Jayna Mid East (UAE) -- The Zula Man - 70 minute DVD - Smart Silver (Hong Kong) -- Tigger tales Inside - 90 minute DVD - Real Heart (Hong Kong) -- Witch wonders - 90 minute DVD - Bright Action (Hong Kong)
IPs currently in development:
5 & IT - 52 x 11' 3D HD TV series to be coproduced with ZDF Enterprises (Germany)
The Adventures of Pinnochio - 52 x 11' TV Series
The Jungle Book Feature Film - 90' 3D stereoscopic feature film. The screenplay has been finalized by Billy Frolick and other writers. The final output of the stereoscopic trailer has also been generated. Print & Advertisment and distribution deals are under advanced negotiations.
Wind in the Willows - 52 x 11' TV Series
Story of Amulet - 52 x 11' TV Series
Black Beauty - 52 x 11' TV Series
Yonagunies - 52 x 11' TV Series to be coproduced with Seaworld and Rollman Entertainment, USA.
Licensing and Distribution
Our licensing and distribution efforts help us to monetize our IPs across international markets. The deals signed during the year are as under:
BROADCAST & HOME VIDEO DEALS SIGNED IN 2013-14
------------------------------------------------------------------------
SERIAL PROPERTY BROADCASTER TERRITORIES
------- ------------ -------------------------- ---------------------
1 JUNGLE BOOK
1 UNIVISION USA & Puerto Rico
------- ------------ -------------------------- ---------------------
2 KNOWLEDGE NETWORK British Columbia
------- ------------ -------------------------- ---------------------
3 VIACOM 18 MEDIA
PRIVATE LIMITED Indian Sub Continent
------- ------------ -------------------------- ---------------------
4 JUNGLE BOOK VIACOM 18 MEDIA
2 PRIVATE LIMITED Indian Sub Continent
------- ------------ -------------------------- ---------------------
5 THE EDUCATIONAL
BROADCASTING SYSTEM Korea
------- ------------ -------------------------- ---------------------
6 ABC BROADCASTING Australia
------- -------------------------- ---------------------
7 GREEN NARAE MEDIA Korea
------- -------------------------- ---------------------
8 WORKPOINT Thailand
------- ------------ -------------------------- ---------------------
9 JUNGLE BOOK
SAFARI WORKPOINT Thailand
------- ------------ -------------------------- ---------------------
10 PETER PAN UAE, Bahrain, Omar,
Qatar, Lebanon,
MES Egypt, Iran
------- ------------ -------------------------- ---------------------
11 RAI CINEMA Italy
------- ------------ -------------------------- ---------------------
12 SKY ITALIA Italy
------- -------------------------- ---------------------
13 GREEN NARAE MEDIA Korea
------- ------------ -------------------------- ---------------------
14 ROBINHOOD Italy & Italian
DE AGOSTINI speaking Europe
------- ------------ -------------------------- ---------------------
15 Germany & German
ZDF speaking Europe
------- ------------ -------------------------- ---------------------
IRON MAN
16 2 2 X 2 Russia
------- ------------ -------------------------- ---------------------
17 CLEAR VISION UK
------- ------------ -------------------------- ---------------------
18 A PARENT MEDIA
CO Canada
------- -------------------------- ---------------------
19 SOUTH AFRICAN
BROADCASTING CORPORATION South Africa
------- -------------------------- ---------------------
20 RTM Malaysia
------- ------------ -------------------------- ---------------------
LICENSING & MERCHANDISING DEALS SIGNED IN 2013-14
----------------------------------------------------------------------------------
SERIAL PROPERTY LICENSEE TERRITORIES
------- ------------------- ------------------------- -------------------------
1 JUNGLE BOOK Showtime Attractions Australia & New
Extension Zealand
------- ------------------- ------------------------- -------------------------
2 Italy, San Marino,
BBS S.p.a Vatican City
------- ------------------- ------------------------- -------------------------
3 Seri Systems (for
Europe, Russia
Turkey) exclusive
------- ------------------------- -------------------------
4 Technoplast Chile & Peru
------- ------------------------- -------------------------
5 New Co International US & Canada
------- ------------------------- -------------------------
6 Kellytoy USA,
Inc.
------- ------------------------- -------------------------
7 Inkology
------- ------------------------- -------------------------
8 Milestone
------- ------------------------- -------------------------
9 Playrific Worldwide
------- ------------------------- -------------------------
10 Craftstone Group All of Europe excluding
Ltd. Germany and German
Speaking Europe
including Austria
and Switzerland)
and Asia
------- ------------------------- -------------------------
11 Gruppo Cartorama Italy
------- ------------------------- -------------------------
12 South Africa, Swaziland,
Botswana, Mauritius,
Wimpy Marketing Namibia
------- ------------------------- -------------------------
13 Global excluding
Dragon-I Toys U.S., Canada, SA,
Limited AUS & New Zealand
------- ------------------------- -------------------------
14 Harlequinn International
Group Pty Ltd Australia
------- ------------------------- -------------------------
15 Jilcroft Pty Ltd
(MJM Australia
Imports) Australia
------- ------------------------- -------------------------
16 Brand Licensing
South Africa CC Africa & S. Africa
------- ------------------------- -------------------------
17 Synergy IT EMEA, North America,
South America,
Australia
------- ------------------------- -------------------------
18 Spafax Airline Inflight Entertainment
Network only
------- ------------------------- -------------------------
19 Universal Music
for JB 2 Worldwide
------- ------------------------- -------------------------
20 King Trade Limited Latin America excluding
(A unit of King Argentina, Uruguay,
Animation) Bolivia, Mexico,
China, south Korea
and Japan , Philippines
, Malaysia , Thailand,
Singapore, Vietnam,
Hong Kong, Taiwan
------- ------------------------- -------------------------
21 Great Chance Limited Middle east + Northern
Africa
------- ------------------------- -------------------------
22 Jayna Mid East East Europe, CIS
FZE including Russia
------- ------------------------- -------------------------
23 22D Music Group Worldwide
------- ------------------- ------------------------- -------------------------
24 PETER PAN Italy, San Marino,
RanocchioRe Vatican City
------- ------------------- ------------------------- -------------------------
25 Nestle
------- ------------------- ------------------------- -------------------------
26 Tendenze srl
------- ------------------------- -------------------------
27 22D Music Group Worldwide
------- ------------------- ------------------------- -------------------------
Feluda TV Special Smart Silver Limited UAE, Bahrain, Oman,
- L & M Qatar, Kuwait,
Saudi Arabia, Iran,
Lebanon, Jordan
28 & Egypt.
------- ------------------- ------------------------- -------------------------
Feluda TV Special UAE, Bahrain, Oman,
- The detective Qatar, Kuwait,
series Television Saudi Arabia, Iran,
rights and Home Lebanon, Jordan
29 video rights & Egypt.
------- ------------------- ------------------------- -------------------------
Surya putra - King Trade Limited USA and EUROPE
"The star Boy"
30 - (L& M)
------- ------------------- ------------------------- -------------------------
Surya putra - USA and EUROPE
"The star Boy"
- Television
rights and Home
31 video rights
------- ------------------- ------------------------- -------------------------
Our key strategic priorities for the forthcoming year include:
v VFX for Hollywood live action movies
v Digital distribution platforms such as YouTube, Amazon, Hulu etc. for exploiting existing library of content.
v Mobile gaming for IOS and Android platforms
v Accelerate distribution in untapped markets such as Eastern Europe and Latin America
Financial review
Over the year group revenues increased by 4.49%, demonstrating a sustained performance. The production revenue has increased marginally by 3.02% as compared to the previous year from INR 1819m to INR 1874m, while revenue from distribution has increased by 10.11% from INR 475m for FY 2013 to INR 523m for FY 2014. Geographically, 21% of revenue for FY 2014 is from the USA, 37% from Europe and 42% from rest of the world.
With the US market now opening up, we have engaged an independent marketing and business development professional, having over 15 years of experience in the entertainment industry, for strengthening the Company's business in North America. Currently we are focusing our sale efforts in the US with success demonstrated by over 52% of our order pipeline being projects from the US.
The Company has a net foreign exchange gain of INR 219m for the year 2013-14 (grouped under other operating income and financing cost). Out of the total sum, an amount of INR 170m is an unrealised gain and the balance of INR 49m is realised.
During the year the Company has made provision for bad and doubtful debts to the extent of INR 230m as detailed below, and in spite of this provision the Company was able to achieve operational efficiency by a significant reduction in personnel costs by INR 156m (18%) from INR 876m in FY13 to INR 720m in FY14. This reduction has not impacted our deliveries as during the year the Company witnessed increased productivity.
In the total for bad and doubtful debts of INR 230m at 31 March 2014, an amount of INR 55m is the amount due from Moonscoop SA, France, which has filed for administration, and INR 175m has been provided for receivables from SMC International Group Inc. (SMC). SMC was appointed as DQE's licensing agent for the Jungle Book Season 1 TV series for the North American territory, but has breached the terms of its contract with DQE. DQE has terminated the contract with SMC and also filed a legal claim against SMC for recovery of the dues. Our legal counsel is confident that the verdict will be in our favour. Advanced negotiations are ongoing with experienced licensing and merchandising agents in the US to replace SMC.
While the net cash flow from the operating activities after working capital changes is positive, the overall cash and cash equivalent was negative at the year end because of the continual investment by the Company in the development of Intellectual properties as part of its business plan. Our banks have been supportive in extending the facilities for carrying out its business activities. Cash available at year end was INR 28m and the main reason for the low cash position was on account of the slow recovery of receivables.
The total outstanding Trade Receivables of the Company at 31 March 2014 was INR 2,599m, out of which INR 1,322m was outstanding for more than 180 days. The Company has confirmations from its customers of their dues to the Company. The monies are being received on a regular basis from most of the customers, though in small values, thus confirming their commitment to pay and honour their liabilities.
The debtor position has inevitably put pressure on our cash flow and working capital which of course we are monitoring closely and our banks have been supportive. However, whilst debtors are gradually repaying, it has not come at a rate we expected and so we have been exploring options for a longer term funding solution for the Company to crystalize the large and growing pipeline of orders as quickly as possible. In this regard we are in active discussions with strategic / financial investors to refinance the business.
In view of our cash position, which as on 31(st) March 2014 stood at negative INR 844m, and the pressure on working capital, the Board is reviewing the Company's dividend policy and whilst it is not recommending a dividend at this time it will seek to pay dividends to shareholders as soon as financially and commercially viable.
Outlook :
Our focus markets are primarily in Europe, USA and Canada followed by Asia, Middle East and Latin America. The US surely has moved forward from subdued conditions while Europe is still under recessionary conditions, though production improvements have been seen in France, Germany, UK and Italy. We remain optimistic with US and Canada leading the growth path for TV and animated feature film markets which your company is taking full advantage of.
We have concluded several licensing and distribution deals for our own properties developed for Jungle Book Season-1 and Season-2, and Peter Pan-1, while its second season is in production. With the recent delivery of part of the Robin Hood and Lassie TV series, they too have begun to add to our portfolio. Several other service and co-production deals have been concluded as mentioned above, which will yield good results for your company.
Appreciation :
I sincerely thank our valued stakeholders and board members, as well as our partners' worldwide and valued clients, business associates, bankers and government authorities for their continuous support and trust.
Tapaas Chakravarti
Chairman & CEO
30 May 2014
For further information, please contact:
Contact
DQ Entertainment plc Tel: +91 40 235 Tapaas Chakravarti - Chairman 53726 and CEO Rashida Adenwala - Director Finance & Investor Relations Allenby Capital Limited Tel: +44(0) 20 Jeremy Porter / Alex Price 3328 5656 Buchanan Tel: +44 (0)20 Mark Edwards/Clare Akhurst 7466 5000
***
Consolidated Income Statement For the year
ended 31 March 2014
2013-14 2012-13
-----------------
Note Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
---------------------------- ------ ------- -------- ------- --------
Continuing operations
Revenue C 2,397 58 2,294 41
Cost of sales -1,376 - -1,389 -
Gross profit 1,021 58 905 41
------- -------- ------- --------
Other operating income D 247 1 10 4
Distribution expenses -26 - -34 -
Administrative expenses AF -553 -55 -281 -38
------- -------- ------- --------
-332 -54 -305 -34
Operating result before
financing costs 689 4 600 7
------- -------- ------- --------
Financial income 9 109 14 88
Financial expenses -252 - -204 -2
------- ------- --------
Net financing (costs)/
income E -243 109 -190 86
------- -------- ------- --------
Share of profit of
associate L 10 - 17 -
------- -------- ------- --------
Profit before tax 456 113 427 93
Income tax expense F -27 - -46 -
------- -------- ------- --------
Profit after tax 429 113 381 93
------- -------- ------- --------
Attributable to:
Owners of the Company 327 - -296 -
Non-controlling interests H 102 - -85 -
---------------------------- ------ ------- -------- ------- --------
Basic and diluted earnings
per share for profit
attributable to the
equity holders of the
Company during the
year (expressed as
Indian Rupees per share) T
Basic earnings per
share 6 - 8 -
Diluted earnings per
share 6 - 8 -
Consolidated Statement of
Financial Position
For the year ended 31 March
2014
2013-14 2012-13
-----------------
Note Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
------------------------------ ------ ------- -------- ------- --------
ASSETS
Non Current Assts
Property Plant and Equipment G 127 290
Goodwill I 432 432
Intangible Assets J 3474 3294
Intangible Assets under
Construction K 2210 1230
Investment in Asscoiate L 198 433 152 161
Loan to Subsidiary M 1341 1030
Prepaid leasehold Rights 11 11
Deferred Tax Asset O 166 60
Deposits P 14 20
Total Non Current Assets 6632 1774 5489 1191
------- -------- ------- --------
Current Assets
Trade and Other Receivables Q 3048 652 2379 512
Cash & Cash Equivalents R 28 0 42 1
Total Current Assets 3076 652 2421 513
------- -------- ------- --------
Total Assets 9708 2426 7910 1704
-------------------------------------- ------- -------- ------- --------
Consolidated Statement of
Financial Position
For the year ended 31 March
2014
2013-14 2012-13
-----------------
Note Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
--------------------------------- ------ ------- -------- ------- --------
EQUITY AND LIABILITIES
Equity S
Issued Capital 5 5 4 4
Share Premium 2816 2231 2616 2031
Reverse Acquisition Reserve 55 55 0
Capital Redemption Reserve 1 1 0
Equity Component of Convertible
Instruments 52 52 0
Foreign Currency Translation
Reserve 529 421 224 54
Retained Earnings 1597 -295 1270 -408
Equity Attributable to Owners
of the Company 5055 2382 4222 1681
------- -------- ------- --------
Non-Controlling Interests H 1226 0 1073 0
------- -------- ------- --------
Total Equity 6281 2382 5295 1681
------- -------- ------- --------
Non Current Liabilities
Interest Bearing Loans and
Borrowings W 967 0 719 0
Provisions X 116 0 131 0
Total Non current Liabilities 1083 0 850 0
------- -------- ------- --------
Current Liabilities
Trade and Other Payables U 853 44 690 23
Bank Overdraft V 872 0 666 0
Interest Bearing Loans and
Borrowings W 383 0 379 0
Provisions X 236 0 30 0
Total Current Liabilities 2344 44 1765 23
------- -------- ------- --------
Total Liabilities 3427 44 2615 23
Total Stakeholders Equity
and Liabilities 9708 2426 7910 1704
----------------------------------------- ------- -------- ------- --------
These financial statements were approved by the Board of Directors and authorised for use on 30 May2014.
Signed on behalf of the Board of Directors by:
Director Director
Consolidated Statement of
Changes in Equity
Group Equity Equity Share Reverse Equity Foreign Capital Retained Attributable Non Total
shares Shares premium acquisition component currency Redemption earnings to owners controlling
- No - reserve of translation Reserve of the interest
of Shares Amount convertible reserve Company
instruments
--------------- ------------ ------- --------- ------------ ------------ ------------ ----------- --------- ------------- ------------ --------
INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn
--------------- ------------ ------- --------- ------------ ------------ ------------ ----------- --------- ------------- ------------ --------
Balance as
at 1 April
2012 3,59,66,047 3 2,516 55 52 204 1 974 3,805 992 4,797
Issue of
shares
during the
year 66,00,000 1 1 - 1
Premium on
issue of
shares 100 0 - - 100 - 100
Other
comprehensive
income 0 20 - - 20 -4 16
Income for
the year 0 0 -296 296 85 381
Balance as
at 31 March
2013 4,25,66,047 4 2,616 55 52 224 1 1,270 4,222 1,073 5,295
------------ ------- --------- ------------ ------------ ------------ ----------- --------- ------------- ------------ --------
Balance as
at 1 April
2013 4,25,66,047 4 2,616 55 52 224 1 1,270 4,222 1,073 5,295
Issue of
shares
during the
year 1,36,97,000 1 - - - - - - 1 - 1
Premium on
issue of
shares - - 200 - - - - - 200 - 200
Other
comprehensive
income - - - - - 305 - - 305 51 356
Income for
the year - - - - - - - 327 327 102 429
Balance as
at 31 March
2014 5,62,63,047 5 2,816 55 52 529 1 1,597 5,055 1,226 6,281
--------------- ------------ ------- --------- ------------ ------------ ------------ ----------- --------- ------------- ------------ --------
Consolidated Statement of Changes in Equity
- continued
Company Equity shares Equity Share Foreign Retained Total
- No of Shares premium currency earnings
Shares - Amount translation
reserve
INR'Mn
--------------------- -------------- --------------------------------------------------------
Balance as at
1 April 2012 3,59,66,047 3 1,931 63 -501 1,496
66,00,000 1 - - - 1
Premium on issue
of shares - - 100 - - 100
Other comprehensive
income - - - -9 - -9
Income for the
year - - - - 93 93
Balance as at
1 April 2013 4,25,66,047 4 2,031 54 -408 1,681
Issue of shares
during the year
for cash 1,36,97,000 1 200 - - 201
Premium on issue
of shares
Other comprehensive
income - - - 387 - 387
Income for the
year - - - - 113 113
Balance as at
31 March 2014 5,62,63,047 5 2,231 441 -295 2382
--------------------- -------------- ---------- --------- ------------- ---------- ------
Consolidated Statement
of Cash Flows
For the year ended 31
March 2014
2013-14 2012-13
------------------------------- ------ ----------------- -----------------
Note Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
Cash flows from operating
activities
Profit for the year before
tax 456 113 427 93
Adjustments for:
Depreciation and amortization 571 - 526 -
Financial income E -9 -109 -14 -88
Financial expenses E 252 - 204 2
Provisions for employee
benefits -3 - 39
Provision for bad and 231 - - -
doubtful debts (net)
Provision for retakes Z -8 - -7 -
Unrealized Gain on foreign
exchange fluctuations -170 9 -17 -4
Share of profit of associate L -10 - -17 -
(Loss) on sale of property,
plant and equipment -4 - 5 -
Operating cash flows
before changes in working
capital 1,306 13 1,146 3
------- -------- ------- --------
(Increase)/decrease in
trade and other receivables -909 -153 -764 -367
Employee benefits paid -11 - -6 -
Increase/ (decrease)
in trade and other payables 404 20 50 16
790 -120 426 -348
Income taxes paid -34 - -21
------- -------- ------- --------
Net cash generated from
/ (used in ) operating
Activities 756 -120 405 -348
--------------------------------------- ------- -------- ------- --------
Consolidated Statement
of Cash Flows
For the year ended 31 March
2014
2013-14 2012-13
------------------------------- ------ ----------------- -----------------
Note Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
Cash flows from Investing
Activities
Acquisition of Property
Plant and Equipment 0 0 -47 0
Acquisition and Advances
paid for Distribution Rights -1072 0 -1136 0
Proceed from Sale of Property
Plant and Equipment 9 0 1 0
Sale of Investment in Mutual
Funds 0 -583 61 0
Financial Assets at fair
value through 0 0 7 0
Profit and Loss 0 0 0 0
Deposits 5 0 -1 0
Financial Income 9 113 14 88
Net Cash Used / Generated
from Investing Activities -1049 -470 -1101 88
------- -------- ------- --------
Cash flow from Financing
Activities
Proceed from Borrowings
from term Loans 511 0 412 0
Repayment of Term Loans -307 0 -558 0
Issue of Share Capital 1 1 1 1
Premium Collected on issue
of share 200 200 100 100
Loans to Subsidiary 0 0 0 162
Interest Paid -267 0 -188 -2
Net Cash Used / Generated
from Financing Activities 138 201 -233 261
------- -------- ------- --------
Net (Decrease)/ Increase
cash and Cash Equivalents -155 -389 -929 1
Cash and Cash Equivalents
at the beginning of the
year R 42 1 645 21
Bank Overdraft R -666 0 -311 0
(Loss) / Gain of Foreign
Exchange Fluctuations -65 388 -29 -21
Cash and Cash Equivalents
at the end of the year R -844 0 -624 1
------------------------------- ------ ------- -------- ------- --------
Notes to Consolidated FinancialStatements
NOTE A - BASIS OF PREPARATION 1. General Information
DQ Entertainment Plc. (the "Company" or DQ Plc.) is a Company domiciled and incorporated in the Isle of Man on 19 April 2007 and was admitted to the Alternative Investment Market of London Stock Exchange on 18 December 2007.
The consolidated financial statements for DQ Entertainment (the "Group") and financial statements for the Company have been prepared for the year ended 31 March 2014.
As on 31 March 2014 the following companies formed part of the Group:
Company Immediate Parent Country % of
of Interest
Incorporation
========================== ============================= ================ ==========
Subsidiaries
=======================================================================================
DQ Entertainment
(Mauritius) Limited
(DQM) DQ Entertainment Plc. Mauritius 100
========================== ============================= ================ ==========
DQ Entertainment
(International) Limited
(DQ India) was formerly
known as "Animation
and Multimedia Private DQ Entertainment
Limited" (Mauritius) Limited India 75
========================== ============================= ================ ==========
DQ Entertainment
(Ireland) Limited DQ Entertainment
(DQ Ireland) (International) Limited Ireland 100
========================== ============================= ================ ==========
DQ Entertainment Joint Venture Company by DQ
(International) Films India and DQ Plc.
Limited (DQ Films)
========================== ============================= ================ ==========
DQ Power Kidz Private DQ Entertainment
Limited (International) Limited India 100
========================== ============================= ================ ==========
DQE ITES Parks Private DQ Entertainment
Limited (International) Limited India 100
========================== ============================= ================ ==========
Associate
=======================================================================================
Method Animation SAS France 20
========================================================= ================ ==========
The Company's registered address is 33-27, Athol Street, Douglas, IM1 1LB, Isle of Man.
The Group is primarily engaged in the business of providing Traditional and Digital Animation for Television, Home Video and Feature Films. The Group also is engaged in exploitation of its Distribution Rights to broadcasters, television channels, home video distributors and others.
The functional currency of each of the respective Group companies is:
DQ Plc. British Pound (GBP) DQ Mauritius US Dollar (USD) DQ India Indian Rupee (INR) DQ Ireland Euro (EURO) DQ Films Ltd Euro (EURO) DQ Power Kidz Indian Rupee (INR) DQE ITES Parks Indian Rupee (INR) Method Animation SAS Euro (EURO)
2. Significant accounting policies
(a) Adoption of new and revised standards
The following standards and amendments have been adopted during the financial year
x IAS 1 Presentation of Financial Statements - amendments x IFRS 7 Financial Instruments: Disclosures - amendments x IFRS 10 Consolidated Financial Statements x IFRS 11 Joint Arrangements, IAS 28 Investments in Associates and x Joint Ventures x IFRS 12 Disclosure of Interests in Other Entities x IFRS 13 Fair Value Measurement x IAS 19 Employee Benefits (revised) x Improvements to IFRS 2009-2011 cycle
IFRS 10, 'Consolidated Financial Statements', was issued in August 2011 and replaces the guidance on control and consolidation in IAS 27, 'Consolidated and Separate Financial Statements', and in SIC 12,
'Consolidation - Special Purpose Entities'. The group has reviewed its investments in other entities to
assess whether the conclusion to consolidate is different under IFRS 10 than under IAS 27. No differences were found for any of the investments.
IFRS 12, 'Disclosure of Interests in other Entities', was issued in May 2011 and requires entities to disclose significant judgements and assumptions made in determining whether the entity controls, jointly controls, significantly influences or has some other interests in other entities. Entities are also required to provide more disclosures around certain 'structured entities'. Adoption of the standard has impacted the Group's level of disclosures in certain of the above-noted areas, but has not impacted the Group's financial position or results of operations. The application of the remaining standards and interpretations did not result in material changes to the Group's Consolidated Financial Statements.
(i) Standards and interpretations in issue not yet adopted
The following new Standards and Interpretations, which are all mandatory with the exception of
IFRS29, have not been applied in the Company's Financial Statements.
Standard or Interpretation Effective for reporting
periods starting on or
after
IFRS - 9 Financial instruments-classification Annual periods beginning
and measurement of on or after 1
Financial assets January 2015
IAS-32 Offsetting financial Annual periods beginning
assets and financial liabilities on or after 1January 2014
Based on the Company's current business model and accounting policies, management does not expect any material impact on the Company's financial statements when any of the above standards or interpretations becomes effective. There are no other IFRS or IFRIC interpretations that are effective subsequent to the company's financial year end that would have a material impact on the group.
The Company does not intend to apply any of these pronouncements early.
(b)Basis of preparation and statement of compliance with International Financial Reporting Standards
The consolidated financial statements have been prepared under applicable International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board (IASB). The historical financial information incorporates the financial statements of the Group made up to 31 March each year.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement. In addition, note Z to the financial statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit and liquidity risk. The Group has considerable financial resources together with long term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the management believes that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
After making enquiries, the management has a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.
(c) The basis of presentation and accounting policies used in preparing the historical financial information
These accounting policies have been consistently applied to the results, gains and losses, assets, liabilities and cash flows of all entities included in the consolidated financial statements for all the periods presented unless otherwise stated. The consolidated financial statements are presented in INR, rounded to the nearest million unless otherwise indicated. They are prepared on the historical cost basis except for financial instruments, which are carried at their fair values.
In the process of applying the Group's accounting policies, management is required to make judgements, estimates and assumptions that may affect the consolidated financial statements. Management believes that the judgements made in the preparation of the historical financial information are reasonable. However, actual outcomes may differ from those anticipated.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of IFRSs that have significant effect on the historical financial information and estimates with a significant risk of material adjustment in the next year are discussed in note AF.
(d) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March each year. The group controls the entity where the groups is exposed to, or has right to variable returns from its investment with the entity and has the ability to effect those returns through its power to direct the activities of the entity. In respect of the associate, the consolidated financial statements incorporate the last audited financial statements not exceeding three months from year ending 31 March 2014.
Intra group balances, transactions and any resulting unrealised gains arising from intragroup transactions are eliminated on consolidation. Unrealised losses resulting from intragroup transactions are also eliminated unless cost cannot be recovered. Amounts reported in the financial statements of the subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or at the non- controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non- controlling interests having a deficit balance.
Changes in the Group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Group.
(e) Goodwill
(i) Recognition and initial measurement
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceed the cost of the business combination, the excess is recognised immediately in profit or loss. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
(ii) Subsequent measurement
Goodwill is not subject to amortisation but is tested for impairment annually and is measured at cost less accumulated impairment losses, if any.
(f) Investment in associate
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount
of the investment and is assessed for impairment as part of that investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate.
(g) Foreign currency
(i) Translation to presentation currency
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency).
The functional currency of each of the respective Group companies is:
DQ Plc British Pound (GBP) DQ Mauritius US Dollar (USD) DQ India Indian Rupee (INR) DQ Ireland Euro (EURO) Method Animation Euro (EURO) SAS DQ Films Ltd Euro (EURO) DQ Power Kidz Indian Rupee (INR) Pvt Ltd DQE ITES Pvt. Indian Rupee (INR) Ltd
At the reporting date the assets and liabilities of the Group are translated into the presentation currency, which is in Indian Rupees (INR) at the rate of exchange ruling at the balance sheet date and the income statement is translated at the average exchange rate for the year.
Although the functional currency of the ultimate holding Company DQ Plc is GBP, the presentation currency of the Group is not GBP as majority of the operations of the group are transacted in currencies other than GBP.
The USD: INR exchange rates used to translate the INR financial information into the presentation currency of INR were as follows:
2014 2013
Closing rate at 31 March 59.8105 54.4828
Average rate for the year
ended 31 March 60.4267 54.3141
The GBP: INR exchange rates used to translate the GBP financial information into the presentation currency of INR were as follows:
2014 2013
Closing rate at 31 March 99.5211 82.5469
Average rate for the year
ended 31 March 96.1556 85.8434
The EURO: INR exchange rates used to translatethe EURO financial information into the presentation currency of INR were as follows:
2014 2013
Closing rate at 31 March 82.2559 69.7271
Average rate for the year
ended 31 March 81.0551 69.9674
(ii) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to functional currency at foreign exchange rates ruling at the dates the fair value was determined.
(iii) Financial statements of foreign operations
The assets and liabilities of the Group's subsidiaries and other entities controlled by the Group based outside the Isle of Man ("foreign operations") are translated into INR at the exchange rates prevailing at the balance sheet date. The income and expenses of foreign operations are translated into INR at average exchange rates prevailing during the year. Exchange differences arising on translation of foreign operations are recognised directly in equity as foreign currency translation reserve.
(h) Derivative financial instruments
The Group uses derivative financial instruments to manage its exposure to foreign exchange risks arising from operational activities. The Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised at fair value. The subsequent gain or loss on re measurement to fair value is recognised immediately in profit or loss.
The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price.
(i) Property, plant and equipment (i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised within "other Income" for gains and "other operating expenses" for losses in the statement of income.
(ii) Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. Replaced parts are de-recognised with any profit / (loss) on disposal recognised immediately in the income statement. All other costs are recognised in the income statement as an expense as incurred.
(iii) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised as part of the costs of those assets. Qualifying assets are those that necessarily take a substantial period of time to prepare for their intended use. Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use. All other borrowing costs are expensed in the period in which they are incurred.
(iv) Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:
Computer hardware and 3 - 6 years software Equipment including 6 - 10 years office equipment Fixtures and furniture 10 years Vehicles 4 years
Lease acquisition cost and leasehold improvements are depreciated over the primary period of the lease or estimated useful lives of the assets whichever is less. Assets under construction are not depreciated, as they are not ready for use.
The depreciation methods, useful lives and residual value, are reassessed annually.
(j) Intangible assets
(i) Distribution rights
Distribution rights that are acquired by the company are stated at cost less accumulated amortisation and impairment losses.
(ii) Intangible assets under construction
Under certain distribution contracts, the Group was required to make advance payments in order to acquire distribution rights. These payments have been capitalised as intangible assets on the basis that (i) they will be realised through future sales to be made by the Group; (ii) they are separately identifiable and (iii) they are controlled through their legal rights.
The expectation is that these advance payments will be fully recouped by the Group, however, the extent to which full value will be obtained is dependent on the ability of the Group to generate sufficient sales on a go-forward basis under the various distribution contracts. On this basis, no systematic amortisation is charged. However, at each reporting date the asset is assessed for impairment, based on projected sales.
(iii) Projects under development
Direct or indirect expenditure incurred on the development of film production projects in order to create intellectual property or content, which are exploited on any form of media, are capitalised within Intangible Assets under construction, in accordance with IAS 38 (Intangible Assets), only from the point that the company can demonstrate:
(i) The technical feasibility of the project;
(ii) Its intention to complete the intangible asset and sell it; (iii) Its ability to use or sell the intangible asset;
(iv) How the intangible asset will generate probable future economic benefits;
(v) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
(vi) Its ability to measure reliably the expenditure attributable to the intangible asset during its development
(iv) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
(v) Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets apart from Intangible assets under construction. Intangible assets are amortised from the date they are available for use. The estimated useful lives are the term of the licensing agreement or 10 years whichever is less.
Useful lives for individual assets are determined based on the nature of the asset, its expected use, the length of the legal agreement or patent and the period over which the asset is expected to generate economic benefits for the Group ("economic life").
(k) Financial assets
All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: 'held for trading', 'held-to- maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Investment in Mutual funds is classified as held for trading as it has been acquired principally for the purpose of selling it in the near term.
(l) Trade and other receivables
Trade receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method. They are reduced by appropriate allowances for estimated irrecoverable amounts. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original term of the receivable. The amount of the provision is the difference between the carrying amount and the recoverable amount and this difference is recognised in the income statement.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, cash in transit and call deposits and are carried in the consolidated statement of financial position at cost. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
(n) Impairment
The carrying amounts of the Group's assets are reviewed at the end of every year to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash- generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of assets in the unit on a pro rata basis.
(o) Calculation of recoverable amount
The recoverable amount of the Group's receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their fair value less costs to sell 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 the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
(p) Share capital
(i) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
(ii) Dividends
Dividends are recognised as a liability in the year in which they are declared.
(q) Interest-bearing loans and borrowings
Interest-bearing loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest rate basis.
(r) Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.
(ii) Defined benefit plans
The Group's net obligation in respect of gratuity, which include amounts payable to employees on termination, resignation or retirement on completion of a minimum service period with the Group, and compensated absences, which include amounts payable to employees on utilisation of accumulated leave balances during the service period or encashment at the time of termination, resignation or retirement, is calculated estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on government bonds that have maturity dates approximating to the terms of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit credit method. Expected cost of compensated absences by way of sick leave is recognised in the income statement.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement.
All actuarial gains and losses as at 1 April 2004, the date of transition to IFRSs, were recognised. In respect of actuarial gains and losses that arise subsequent to 1 April 2004 in calculating the Group's obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds 10 per cent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, that portion is recognised in the income statement over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.
(s) Provisions
A provision is recognised in the consolidated statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Provisions for retakes are recognised wherever they are considered to be material. Retakes include creative changes to the final product delivered to the customer, performed on the specific request of the customer at the Group's own cost. Requests for retakes from customers are expected to be received by the Group within a period of 3 months from the final delivery and hence the provision is not discounted.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.
(t) Trade and other payables
Trade and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.
(u) Revenue recognition
(i) Production service fee and licensing revenue
Revenue represents amounts receivable for production and imparting production training skill services rendered and is recognised in the income statement in proportion to the stage of completion of the transaction at the period end. The stage of completion can be measured reliably and is assessed by reference to work completed as at the period end. The Group uses the services performed to date as a percentage of total services to be performed as the method for determining the stage of completion. Where services are in progress and where the amounts invoiced exceed the revenue recognised, the excess is shown as deferred income. Where the revenue recognised exceeds the invoiced amount, the amounts are classified as unbilled revenue.
The stage of completion for each project is estimated by the management at the onset of the project by breaking each project into specific activities and estimating the efforts required for the completion of each activity. Revenue is then allocated to each activity based on the proportion of efforts required to complete the activity in relation to the overall estimated efforts. The management's estimates of the efforts required in relation to the stage of completion, determined at the onset of the project, are revisited at the balance sheet date and any material deviations from the initial estimate are recognised in the income statement.
The Group's services are performed by a determinable number of acts over the duration of the project and hence revenue is not recognised on a straight-line basis.
Contract costs that are not probable of being recovered are recognised as an expense immediately.
Revenue from the licensing of distribution rights (including withholding tax) is recognised on a straight line basis over the term of the licensing agreement where there is an on-going performance obligation and in the case of the license fee from co-production rights on the date declared by the licensee. Revenue from licensing of distribution rights is recognised at the time of sale under a non-cancellable contract which permits the licensee to exploit those rights freely and the Group has no remaining obligations to perform.
No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due.
(ii) Royalties
Fees and royalties paid for the use of the group's assets (such as trademarks, patents, software, music copyright, record masters and motion picture films) are recognised in accordance with the substance of the agreement. This may be on a straight line basis over the life of the agreement, for example, when a licensee has the right to use certain technology for a specified period of time. An assignment of rights for a fixed fee or non-refundable guarantee under a non-cancellable contract which permits the licensee to exploit those rights freely and the licensor has no remaining obligations to perform is, in substance, a sale.
(v) Expenses
(i) Operating lease payments
Payments made under non-cancellable operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Payments made under cancellable operating leases are recognised as expense in the period in which they are incurred.
Leasehold interest in Land is classified as an operating lease and the amount paid for acquisition of such rights is classified as prepayments and amortised over the period of lease term
(ii) Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
(iii) Net financing costs
Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, dividends on redeemable preference shares, interest receivable on funds invested and foreign exchange gains and losses that are recognised in the income statement.
Interest income is recognised in the income statement as it accrues, using the effective interest rate method. The interest expense component of finance lease payments is recognised in the income statement using the effective interest rate method.
Foreign currency gains and losses are reported on a net basis.
(w) Income tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary timing differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally 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 temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other 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 period 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.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
(x) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes, convertible preference shares and share options granted to employees.
(y) Segment reporting
The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.
(z) Voluntary changes in accounting policies and corrections of prior period errors
The Group presents all retrospective application of voluntary changes in the accounting policies and retrospective restatement to correct prior period errors as far as practical to conform with IAS 8 with relevant disclosures.
(aa) Financial instruments
Financial instruments comprise investments in equity, investments in equity trade receivables, unbilled revenues, loans to subsidiaries, cash and cash equivalents, bank borrowings and trade payables. Financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.
NOTE B - SEGMENT REPORTING
Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments, is based on the Group's management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-bearing loans, borrowings and expenses, and corporate assets and expenses.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.
Business segments
The Group comprises the following main business segments:
Animation:
The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animation television series and movies.
Distribution:
The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Group.
Segment revenue and segment result
Segment Revenue Segment Result
------------------ -------------------
2013-14 2012-13 2013-14 2012-13
INR'Mn INR'Mn INR'Mn
---------------------- -------- -------- --------- --------
Animation 1,874 1819 1,111 987
Distribution 523 475 153 120
2,397 2,294 1,264 1,107
Unallocated Expenses (808) (680)
--------- --------
Profit before tax 456 427
Income tax expense (27) (46)
--------- --------
Profit for the year 429 381
--------- --------
Segment assets and liabilities
Assets Liabilities
------------------ ------------------
2013-14 2012-13 2013-14 2012-13
INR'Mn INR'Mn INR'Mn INR'Mn
----------------------- -------- -------- -------- --------
Animation 2,448 4,648 347 1,044
Distribution 6,172 2,892 140 226
Total of all segments 8,620 7,540 487 1,270
Unallocated 1,088 370 2,940 1,345
-------- -------- -------- --------
Consolidated 9,708 7,910 3,427 2,615
-------- -------- -------- --------
Other segment information
Depreciation and Additions to
amortisation non-current
assets
------------------- ------------------
2012-13 2011-12 2012-13 2011-12
INR'Mn INR'Mn INR'Mn INR'Mn
-------------- --------- -------- -------- --------
Animation 171 174 25 106
Distribution 400 352 208 1,028
--------- -------- -------- --------
571 526 233 1,134
--------- -------- -------- --------
Geographical segments
The animation and distribution segments are managed on a worldwide basis, but operate in three principal geographical areas: America, Europe and Others.
The Group's revenue from external customers and information about its segment assets by geographical location are detailed below
Revenue from Segment assets Acquisition
external customers of segment
assets
---------------------- ------------------ ------------------
2013-14 2012-13 2013-14 2012-13 2013-14 2012-13
INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn
--------- ---------- ---------- -------- -------- -------- --------
America 514 374 790 739 - -
Europe 876 1,313 4,733 1,672 208 214
Others 1,007 607 4,185 5,499 25 920
---------- ---------- -------- -------- -------- --------
2,397 2,294 9,708 7,910 233 1,134
---------- ---------- -------- -------- -------- --------
NOTE C - REVENUE
2013-14 2012-13
--------------------------- ----------------- ------------------
Group Company Group Company
---------------------------
INR'Mn INR'Mn INR'Mn INR'Mn
--------------------------- ------- -------- ------- ---------
Revenue from animation 1,874 - 1,819 -
Revenue from distribution 523 - 475 -
Service income 58 41
2,397 58 2,294 41
--------------------------- ------- -------- ------- ---------
NOTE D - OTHER OPERATING INCOME
2013-14 2012-13
------------------------- ----------------- -----------------
Group Company Group Company
-------------------------
INR'Mn INR'Mn INR'Mn INR'Mn
------------------------- ------- -------- ------- --------
Gain /(Loss) on foreign
exchange movements` 231 -9 7 4
Sundry Balance written
back/off 10 10 - -
Gain on Sale of Fixed 4 - - -
Assets
Other income 2 - 3 -
------- -------- ------- --------
247 1 10 4
------- -------- ------- --------
NOTE E - NET FINANCING COSTS
2013-14 2012-13
--------------------------------- ----------------- -----------------
Group Company Group Company
---------------------------------
INR'Mn INR'Mn INR'Mn INR'Mn
--------------------------------- ------- -------- ------- --------
Interest income 9 109 14 88
------- -------- ------- --------
Financial income 9 109 14 88
------- -------- ------- --------
Interest on short term
borrowings and other financing
costs -58 -97 -2
Interest on term loans -182 -107 -
Net foreign exchange loss -12 - -
------- -------- ------- --------
Financial expenses -252 -204 -2
------- -------- ------- --------
Net financing (costs)/income -243 109 -190 86
======= ======== ======= ========
The interest expense is net of INR 10 Mn (PY 2012-13 INR 8 Mn) which has been capitalized as part of the acquisition cost of Intangible assets under construction.
NOTE F - INCOME TAX EXPENSE
2013-14 2012-13
-------------------------------
Group Group
-------------------------------
INR'Mn INR'Mn
------------------------------- -------- --------
Current tax expense
Current tax (MAT) 156 82
156 82
-------- --------
Deferred tax (credit)/expense
Origination and reversal
of temporary differences -58 22
Mat credit entitlement -71 -58
-------- --------
-129 -36
-------- --------
Total income tax expense
in income statement 27 46
------------------------------- -------- --------
Reconciliation of effective tax rate
2013-14 2012-13
----------------------------------
Group Group
----------------------------------
INR'Mn INR'Mn
---------------------------------- -------- --------
Profit before tax 456 427
Indian corporate income
tax rate 33.99% 33.99%
Income tax at standard rate 155 145
Differences on account of
items taxed at zero/lower
rates -45 -12
MAT credit entitlement -71 -58
Differences on account of tax
rates in any other jurisdiction
(DQ Ireland @12.5%) -12 -29
Tax charge 27 46
---------------------------------- -------- --------
CURRENT TAX EXPENSE
DQ Plc is liable to Manx corporate tax at the 0% rate.
DQM is liable to Mauritian corporate tax at the general rate of 15%, although in respect of its overseas income, after an available credit of 80% of the tax payable, the effective rate is reduced to 3%.
DQ India enjoys exemption of its taxable profits from export profits from production as per the provisions of section 10AA of the Indian Income Tax Act, 1961. However, as per the provisions of section 115JB of the Indian Income Tax Act, 1961, relating to Minimum Alternate Tax (MAT), companies whose tax liability was less than 20% of the book profits was deemed to have a tax liability equivalent to 20% of the book profits derived as per the Income Statement. The amount paid under section 115JB is allowed to be adjusted against tax liabilities in the succeeding seven financial years.
DQ Ireland is liable to Irish corporate tax at the general rate of 12.5%. However the company gets relief for the capital allowance in excess of depreciation, utilisation of tax losses and losses carried forward.
Consequently DQ India's current tax expense for the FY: 2013-14 of INR 156 million (FY: 2012-13: INR 82 million) represents the amount of MAT payable and can be carried forward and adjusted against the income tax liability (other than MAT tax provision) in the next ten financial years. Out of this DQ India has recognised INR 102 million of MAT Credit Entitlement on the basis of expected future recoveries.
Current tax expenses of the Group for FY: 2013-14 is INR 27 million (FY: 2012-13: INR 46 million) which comprises of Income Tax of INR 156 million (FY: 2012-13: INR 82 million), reversal of deferred tax (liability)/asset recognised in earlier years INR (58) million (FY: 2012-13: INR 22 million) and MAT Credit Entitlement INR (71) million (FY: 2012-13: INR (58) million).
NOTE G - PROPERTY, PLANT AND EQUIPMENT
Computer Assets
Hardware Fixtures Leasehold Under
and software Equipment and Furnitures Improvement Vehicles Construction Total
INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn
Cost
Balance at 1
April 2012 1,157 42 45 30 28 3 1,305
Acquisitions 51 - 2 1 - 52 106
Disposals /
Transfers -60 -7 -14 -15 -1 -54 -151
Balance at 31
March 2013 1,148 35 33 16 27 1 1,260
-------------- ---------- ---------------- ------------- --------- -------------- -------
Balance at 1
April 2013 1,148 35 33 16 27 1 1,260
Acquisitions 12 - - - - 13 25
Disposals /
Transfers -26 -11 -4 - -10 -13 -64
Balance at 31
March 2014 1,134 24 29 16 17 1 1,221
-------------- ---------- ---------------- ------------- --------- -------------- -------
Depreciation
Balance at 1
April 2012 806 25 22 20 12 - 885
Depreciation
charge for the
year 157 3 5 3 6 - 174
Disposals -59 -6 -8 -15 -1 - -89
Balance at 31
March 2013 904 22 19 8 17 - 970
-------------- ---------- ---------------- ------------- --------- -------------- -------
Balance at 1
April 2013 904 22 19 8 17 - 970
Depreciation
charge for the
year 158 3 3 2 5 - 171
Disposals -24 -11 -4 - -8 - -47
Balance at 31
March 2014 1,038 14 18 10 14 - 1,094
-------------- ---------- ---------------- ------------- --------- -------------- -------
Carrying amounts
At 31 March 2014 96 10 11 6 3 1 127
At 31 March 2013 244 13 14 8 10 1 290
--------------------- -------------- ---------- ---------------- ------------- --------- -------------- -------
PROPERTY, PLANT AND EQUIPMENT - continued
Security
At 31 March 2014 assets with a carrying amount of INR 127 million (31 March 2013 INR 290 million) are secured to borrowings from banks.
NOTE H - NON-CONTROLLING INTEREST
2013-14 2012-13
----------------------
Group Group
----------------------
INR'Mn INR'Mn
---------------------- -------- --------
Balance at beginning
of year 1.073 992
Profit for the year 102 85
Other comprehensive
income for the year 51 -4
Closing balance 1,226 1,073
---------------------- -------- --------
NOTE I - GOODWILL
Goodwill arising on acquisition of subsidiaries
An amount of INR 432 million represents goodwill arising on consolidation of financial statements of the Company's subsidiaries. Goodwill represents the excess amount paid over the nominal value of the shares of DQ India, which DQ Mauritius acquired from certain shareholders.
2013-14 2012-13
-----------------
Group Group
-----------------
INR'Mn INR'Mn
----------------- -------- --------
Cost
Opening balance 432 432
Closing balance 432 432
----------------- -------- --------
The Group tests for impairment of goodwill annually or more frequently if there are any indications that the impairment may have arisen. The recoverable amount of a Cash Generating Unit ("CGU") is determined based on the higher of fair values less costs to sell and value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding discount rates and long term growth rates. The discount rate is based on the risk free rate of interest on government of India bonds, while growth rates are based on management's experience and expectations and do not exceed the long term average growth rate for the region in which the CGU operates. These calculations use cash flow projections based on financial budgets approved by the management. Cash flows are extrapolated using the estimated growth rates. No impairment losses were recognised in 2013-14 (2012-13: Nil). The discount rate used for discounting the future cash flows is 18.04% (FY 2012-13: 18 %).
NOTE J - INTANGIBLE ASSETS
2013-14 2012-13
Group Group
INR'Mn INR'Mn
Cost
Opening balance 4,247 3,720
Acquisitions 208 529
Disposal -284 -
Translation adjustment 445 5
Closing Balance 4,616 4,254
-------- --------
Amortisation
Opening balance 960 604
Amortisation expense 223 218
Impairment losses charged
to profit or loss 177 134
Disposal -284 -
Translation adjustment 66 4
Closing Balance 1,142 960
-------- --------
Carrying amounts
At beginning of year 3,287 3,116
At end of year 3,474 3,294
--------------------------- -------- --------
Intangible assets represent the unamortized value of costs incurred in acquiring advance paid for distribution rights and copy rights. The Group started acquiring these rights from the year 2003-04 and to date fifty eight series (FY: 2012-13: fifty eight series) of Animation rights have been acquired for different territories across the globe. In the current year the group earned revenue of INR 525 million (FY: 2012-13: INR 475 million) from exploitation of distribution rights. The Group has performed testing for impairment of intangibles which resulted in an impairment loss of INR 177 million (FY: 2012-13: INR 134 million) on account of recoverable amount of certain intangibles being less that their carrying amount.
NOTE K - INTANGIBLE ASSETS UNDER CONSTRUCTION
Intangible assets under construction include amounts paid to the producers for acquisition of the distribution rights and amounts incurred on internally generated intellectual property rights pending for capitalisation. These advances are transferred to distribution rights on completion of the entire production activities and when the asset is ready for exploitation.
2013-14 2012-13
---------------------------
Group Group
---------------------------
INR'Mn INR'Mn
--------------------------- -------- --------
Opening Balance 1,230 751
Acquisitions 913 934
Transfers to distribution
rights -108 -475
Translation adjustment 175 -20
-------- --------
Closing Balance 2,210 1,230
--------------------------- -------- --------
NOTE L - INVESTMENT IN ASSOCIATE
On 28 March 2008 the Company acquired a 20% equity stake in Method Animation, SAS (the "Associate"), for a consideration of INR 156 million. For the purpose of applying the equity method of accounting, as the financial year of Associate ends on 31 December, the financial statements as of 31 December 2013 of the Associate, adjusted or significant transactions occurred between 31 December 2013 and 31 March 2014, have been used.
Details of acquisition and the accounting for the Associates share of profits are as follows:
2013-14 2012-13
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
Opening balance 152 161 132 162
Cost of acquisition 152 161 132 162
------- -------- ------- --------
Share of post-acquisition
profit 10 - 17 -
Translation adjustment 36 - 3 -1
Closing balance 198 433 152 161
--------------------------- ------- -------- ------- --------
The summarised financial information as at and for the year ended 31 March 2014 is as follows:
2013-14 2012-13
INR'Mn INR'Mn
------------------------ -------- --------
Ownership share 20% 20%
Assets 3492 2996
Adjustment to the fair - -
value
Assets - restated 3492 2996
Liabilities -3036 -2747
Revenue 542 1881
Profit 52 88
------------------------ -------- --------
Goodwill of INR 156 million arose on acquisition of the 20% equity stake in the associate during 2007-08 and is included in the carrying cost of the investment.
NOTE M - LOAN TO SUBSIDIARY
As per the shareholders' loan agreement DQ Plc has given an interest free loan amounting toINR 1,142 million to its subsidiary DQ Mauritius.
Fair value on initial recognition of the loan amounted to INR 758 million assuming an interest rate of 8% per annum and repayment period of 10 years. As at 31 March 2014, the fair value of the loan outstanding amounted to INR 1,341 million (31 March 2013: INR 1,030 million).
DQM shall repay the loan amount to DQ plc at such time and on such terms and conditions as may be mutually agreed between them.
2013-14 2012-13
Company Company
INR Mn INR Mn
------------------------ -------- --------
Opening balance 1,030 958
Interest accrued 96 2
Translation adjustment 215 70
Closing balance 1,341 1,030
------------------------ -------- --------
NOTE N - INTERESTS IN OTHER ENTITIES
DQE is principally involved with structured entities, as defined by IFRS 12 Interests in Other Entities, through the sale of (i) production rights, (ii) production services and (iii) the licensing of distribution rights for the completed productions from which is generates distribution income. The structured entities generally finance these activities through the upfront sales of the distribution rights to DQE. The business activities of all of these structured entities relates to the acquisition of TV and film rights, their development and exploitation. DQE has some level of involvement in all aspects of these businesses.
Risk associated with unconsolidated structured entities:
The following table summarises the carry values recognised in the statement of financial position of DQE's interests in unconsolidated structured entities as at 31 March 2014.
Maximum exposure to loss
The Maximum Exposure to Loss is the maximum loss which DQE could be required to record in its consolidated statement of comprehensive income as a result of its involvement with the structured entities. This loss is contingent in nature and may arise as a result of a significant change to the business of the structured entities, their requirement for additional capital, failure of the licensed production, etc. Due to DQE's involvement with these entities, it also creates potential exposure to loss due to impairment.
For both Receivables and Advances paid for Distribution Rights, the maximum exposure to loss is the current carrying value of these interests.
Maximum exposure Carry Amount
to loss
-------------------- --------------------------------------------- ------ ------------------------
Balance sheet Receivables Payables Advances Total Total Total
line item paid Assets Liabilities
for assets for distribution
and liabilities rights
INR Mn. INR INR Mn. INR INR Mn. INR Mn.
Mn. Mn.
Trade and
other receivables 760 760 760
Trade and
other payables 262 262 262
Intangible
assets 2,193 2,193 2,193
Total 760 262 2,193 2,691 2,953 262
------------ ----------- ------------------ ------ --------- -------------
Commitments
to make further
payments 670 670 670
-------------------- ------------ ----------- ------------------ ------ --------- -------------
Distribution Production
Commission Revenue Total
================= ============== ============== =======
Sales contracts 250 250
================================= ============== =======
NOTE O - DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities of the Group are attributable to the following:
Assets Liabilities Net
------------------ ------------------ ------------------
2013-14 2012-13 2013-14 2012-13 2013-14 2012-13
INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn INR'Mn
-------- -------- -------- -------- -------- --------
Property, plant
and equipment 64 - - 27 64 -27
Intangible assets - - - 159 - -159
Employee benefits - 46 1 - -1 46
Tax value of loss - - - - - -
carry forwards
recognized
Share Issue expenses 32 33 - - 32 33
MAT Credit Entitlement 102 167 31 - 71 167
Net tax assets 198 246 32 186 166 60
------------------------ -------- -------- -------- -------- -------- --------
Unrecognised deferredtax assets of the Group
Deferred Tax Assets of the Group have not been recognized in respect of the following items
2013-14 2012-13
INR'Mn INR'Mn
Unabsorbed depreciation 0 0
0 0
------------------------- -------- --------
NOTE P - DEPOSITS
Deposits represent amounts paid to various government agencies for the use of services including electricity, water and telephone supplied by these agencies. These amounts are refundable to the group on the termination of services with these agencies.
NOTE Q - TRADE AND OTHER RECEIVABLES
2013-14 2012-13
----------------- -----------------
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
------- -------- ------- --------
Trade receivables 2,599 79 1,624 214
Unbilled revenue 320 - 642 -
Prepayments 31 1 13 1
Receivables
from Group - 572 - 297
Other receivables 98 - 100 -
3,048 652 2,379 512
------------------- ------- -------- ------- --------
Total trade receivables (net of allowances) held by the Group at 31 March 2013 amounted to INR 2,599 million (31 March 2013: INR 1,624 million) includes INR 1,690 million being above 120 days (31 March 2013: INR 938 million).
The Ageing analysis of trade receivables is given below:
2013-14 2012-13
----------------- -----------------
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
------- -------- ------- --------
Less than
30 days 642 10 95 11
30 - 60 days 107 - 254 -
60 - 90 days 84 15 112 -
90 - 120 days 76 - 225 11
Greater than
120 days 1,690 54 938 192
2,599 79 1,624 214
--------------- ------- -------- ------- --------
Ageing of impaired trade receivables
2013-14 2012-13
----------------- -----------------
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
------- -------- ------- --------
Less than 30 days
30 - 60 days
60 - 90 days
90 - 120 days
Greater than 120
days 77 -21
------------------- ------- -------- ------- --------
Allowance for doubtful debts is made by the Group for trade receivables beyond 120 days and where the Group is of the opinion that the amount is not recoverable. As of 31 March 2014, the amount of trade receivables beyond 180 days was INR 1,391 million (31 March 2013: INR 734 million). Historically the Group has recovered all its trade receivables.
Movement in the allowance for doubtful debts
2013-14 2012-13
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
Balance at beginning
of the year 21 - -9 -
Impairment losses recognised
on receivables 55 - -14 -
Amounts recovered during - - - - -
the year
Foreign exchange translation
gains and losses 1 - -2 -
------- -------- ------- --------
77 - -21 -
------------------------------ ------- -------- ------- --------
NOTE R - CASH AND CASH EQUIVALENTS
2013-14 2012-13
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
Cash and bank balances 10 - -26 1
Call deposits 18 - -16 -
Cash and cash equivalents 28 - -42 1
Bank overdraft -872 - -666 -
Cash and cash equivalents
in the statement
of cash flows -844 -624 1
--------------------------- -------- -------- --------- ---------
NOTE S - EQUITY
a) Ordinary shares
DQ Plc. presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders' meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company. The Company has an authorized share capital of 60,000,000 equity shares of Sterling 0.1 pence each.
Issue of ordinary
shares
2013-14 2012-13
Group Company Group Company
------------ ------------ ------------ ------------
Number of shares
Opening balance 4,25,66,047 4,25,66,047 3,59,66,047 3,59,66,047
Issued for
cash 1,36,97,000 1,36,97,000 66,00,000 66,00,000
Closing balance 5,62,63,047 5,62,63,047 4,25,66,047 4,25,66,047
2013-14 2012-13
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
------------ ------------ ------------ ------------
Share capital
Opening balance 4 4 3 3
Issued for
cash 1 1 1 1
Closing balance
- fully paid 5 5 4 4
2013-14 2012-13
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
------------ ------------ ------------ ------------
Share premium
Opening balance 2,616 2,031 2,516 1,931
Issue for cash 200 200 100 100
Closing balance 2,816 2,231 2,616 2,031
------------------- ------------ ------------ ------------ ------------
The share premium reserve can be utilised by the company for declaration of bonus shares and off setting incremental costs directly attributable to the issues of new shares.
b) Reserves
Translation reserve - Assets, liabilities, income, expenses and cash flows are translated in to INR (presentation currency) from Euros (functional currency of DQ Ireland & DQ Films Ltd), USD (functional currency of DQ Mauritius) and British Pounds (functional currency of DQ Plc). The exchange difference arising out of the year-end translation is being debited or credited to Foreign Currency Translation Reserve, which amounts to INR 529 million (31 March 2013: INR 224 million).
Translation reserve
2013-14 2012-13
===================== =================== ==================
Group Company Group Company
=====================
INR'Mn INR'Mn INR'Mn INR'Mn
===================== ======= ========== ======= =========
Opening balance 224 54 204 63
Increase/(decrease)
during the year 305 387 20 -9
======= ========== ======= =========
Closing balance 529 441 224 54
======= ========== ======= =========
Exchange differences relating to the translation of the net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency (i.e. INR) are recognized directly in other comprehensive income and accumulated in the foreign currency translation reserve
Accumulated earnings - Accumulated earnings aggregating to INR 1,597 million (31 March
2013: INR 1,270 million) include all current and prior year results as disclosed in the income statement.
2013-14 2012-13
==================== ======================== ============ ================== ============
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
==================== ======================== ============ ================== ============
Opening balance 1,270 (408) 974 (501)
Profit for the year 327 113 296 93
======================== ============ ================== ============
Closing balance 1,597 (295) 1,270 (408)
======================== ============ ================== ============
The accumulated earnings are in the nature of distributable reserves for the purposes of distribution of dividend by the parent company DQ Plc.
Other Reserves - The Reverse Acquisition Reserve, Equity component of convertible instruments and Capital Redemption Reserve is non-distributable in nature.
NOTE T- EARNINGS PER SHARE ("EPS")
Profit attributable to ordinary shareholders
2013-14 2012-13
--------------------------------- -------- --------
Profit attributable to
ordinary shareholders
- INR'Mn 327 296
Weighted average number
of ordinary shares outstanding
during the year (in million) 55,889 36,201
Basic EPS 6 8
Diluted EPS 6 8
--------------------------------- -------- --------
The Group does not have any dilutive instruments for the year ended 31 March 2013 and as such Diluted EPS equals Basic EPS.
NOTE U - TRADE AND OTHER PAYABLES
2013-14 2012-13
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
----------------------- ------- ---------- ------- ---------
Trade Payables 683 584
Deferred Income 121 80
Non Trade payables
and accrued Expenses 49 44 26 23
853 44 690 23
----------------------- ------- ---------- ------- ---------
Ageing analysis of trade payables is as follows:
2013-14 2012-13
Group Company Group Company
INR'Mn INR'Mn INR'Mn INR'Mn
------------------------ ------- -------- ------- --------
Less than three months 146 302
Three to twelve months 537 282
683 584
------------------------ ------- -------- ------- --------
NOTE V - BANKOVERDRAFT
Secured bank overdraft facility:
2013-14 2012-13
--------------- -------- --------
Group Group
INR'Mn INR'Mn
--------------- -------- --------
Amount used 872 666
Amount unused 0 1
872 667
--------------- -------- --------
NOTE W - INTEREST-BEARING LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note AA.
2013-14 2012-13
Group Group
INR'Mn INR'Mn
---------------------------- -------- --------
Non-current liabilities
Secured bank loans 967 719
967 719
-------- --------
Current liabilities
Current portion of secured
bank loans 383 379
383 379
---------------------------- -------- --------
The borrowings are repayable as follows:
2013-14 2012-13
Group Group
INR'Mn INR'Mn
--------------------------- -------- --------
On demand or within one
year 383 379
In the second year 430 454
In the third to fifth
years inclusive 537 265
1,350 1,098
-------- --------
Unrealised direct issue - -
cost of secured bank
loan
1,350 1,098
-------- --------
Less: Amount due for
settlement within twelve
months
(shown under current
liabilities) 383 379
Amount due for settlement
after twelve months 967 719
--------------------------- -------- --------
The term loans from bank are secured by first charge on entire Property, plant and equipment and Intangible assets of the group both present and future except vehicles and second charge on current assets.
The interest rate for three loans is pegged at a factor to the bank's Prime Lending Rate, while in respect of other loans they are pegged at a factor to LIBOR.
NOTE X - PROVISIONS
Provisions include the following:
2013-14 2012-13
Group Group
INR'Mn INR'Mn
--------------------------------------- -------- --------
Current employee benefits
(note Y) 11 9
Provision for Income
tax 212
Provision for retakes (note Z) 13 21
236 30
Non-current employee benefits (note Y) 116 131
NOTE Y - EMPLOYEE BENEFITS
The defined benefit obligations of the Group include gratuity and compensated absences. Gratuity represents amounts payable to the employees, at the time of termination, resignation or retirement from services, on completion of a minimum service period of 5 years with the Group. The amount of gratuity payable to an employee is equal to the product of 15 days salary and the number of completed years of service or part thereof in excess of 6 months.
Compensated absences represent amounts payable to employees on utilisation of accumulated leave balances during service with the Group or encashment of such accumulated leave balances on termination, resignation or retirement from the services. Maximum leave available for encashment on termination, resignation or retirement is 60 days.
2013-14 2012-13
INR'Mn INR'Mn
Present value of unfunded
obligations 90 96
Recognised liability
for defined benefit obligations 90 96
Liability for compensated
absences 35 42
Total employee benefit
liability 125 138
---------------------------------- --------
Movements in the net liability for defined benefitobligations recognised in the balancesheet
2013-14 2012-13
INR'Mn INR'Mn
------- -------
Opening balance 96 71
Expense recognised in
the income statement
(see below) 20 20
Actuarial loss -18 9
Contributions to defined
benefit obligations -8 -4
Closing balance 90 96
------- -------
Employeebenefits recognised in the balancesheet are as follows:
2013-14 2012-13
INR'Mn INR'Mn
----------------------------- -------- --------
Current employee benefits 11 9
Non-current employee
benefits 116 131
127 140
-------- --------
Expense recognised in the income statement
2013-14 2012-13
INR'Mn INR'Mn
-------- --------
Current service costs 12 14
Interest on obligation 8 6
Actuarial loss -18 9
2 29
-------- --------
The expense is recognised in the following line items in the income statement:
2013-14 2012-13
INR'Mn INR'Mn
Cost of sales 2 27
General and administrative expenses 0 2
2 29
Liability for defined benefit obligations
Principal Actuarial assumptions as the balance sheet date
2013-14 2012-13
INR'Mn INR'Mn
Discount rate at 31 March 9.10% 8.20%
Future Salary Increases 4% 4%
Withdrawal rate
Age group (in years) 18 -30 5% 5%
31-40 4% 4%
41-45 3% 3%
46 and above 2% 2%
Mortality: Standard table of Life Insurance Corporation of India (1994-96) was used for mortality rate.
Personnel costs 2013-14 2012-13
INR'Mn INR'Mn
Wages and salaries 671 777
Contributions to defined contribution plans 47 54
Increase in liability for defined benefit plans 2 29
Increase / (Decrease) in liability for compensated
absences -4 10
716 870
NOTE Z - PROVISION FOR RETAKES
2013-14 2012-13
Group Group
INR'Mn INR'Mn
----------------------------
Opening balance 21 28
Provisions made during
the year 18 17
Provisions used during
the year - -1
Provisions reversed during
the year -26 -23
Closing balance 13 21
Retakes include creative changes to the final product delivered to the customer, performed on the specific request of the customer at the Group's own cost. Requests for retakes will be accepted from customers by the group for a maximum period of three months from the final delivery and hence the provision is not discounted.
NOTE AA- FINANCIAL INSTRUMENTS Financial risk management objectives
The Group's major financial instruments during the year comprised bank loans, call deposits, options and forward foreign exchange contracts. The principal objective of these financial instruments is to finance the Group's operations, to manage the interest rate risk arising from its sources of finance and to minimise the impact of fluctuations in exchange rates on future cash flows. The Group's other financial instruments consist of trade receivables and trade payables, which arise directly from its operations.
The Group regularly reviews its exposure to interest, liquidity and foreign currency risk. Where appropriate the Group will take action, in accordance with a Board approved Treasury Policy, to minimise the impact on the business of movements in interest rates and currency rates.
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group only enters into derivative instruments with approved banking institutions to ensure appropriate counterparty credit quality.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimization of the debt and equity balance.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note X, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes S and T respectivel
Gearing ratio
The Group's management reviews the capital structure on a semi-annual basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. The Group has a target gearing ratio of 1:1 determined as the proportion of net debt to equity.
The gearing ratio at the year-end was as follows:
2013-14 2012-13
Group Group
INR'Mn INR'Mn
--------------------------
Debt (i) 2,222 1,764
Cash and cash equivalents -28 -42
Net debt 2,194 1,722
Equity (ii) 6,281 5,295
Net debt to equity ratio 0.35 0.33
(i) Debt is defined as long and short-term borrowings, as detailed in note V and W (ii) Equity includes all capital and reserves of the Group.
Credit risk
The Group's principal financial assets are cash and bank balances, trade and other receivables and currency derivative financial instruments.
The credit risk on liquid funds and currency derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.
Management has a credit policy in place and the exposure to credit risk is monitored on an on- going basis. Credit evaluations are performed on all customers. The Group does not require collateral in respect of financial assets.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk.
At 31 March 2014 there was concentration of credit risk in four customers to the extent of 40% of the total trade receivables. However the Group does not foresee any credit risk, as 50% of the receivable from such customer is less than 180 days. Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the Group and hence management does not expect any counterparty to fail to meet its obligations.
Liquidity risk
The Group keeps its short, medium and long term funding requirements under constant review. Its policy is to have sufficient committed funds available to meet medium term requirements, with flexibility and headroom to make minor acquisitions for cash if the opportunity should arise. The table below analyses the Group's financial liabilities which will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.
Liquidity risk
Group Less than one month One to three months Three to twelve months More than one year Total
31-Mar-14
Interest bearing loans
and borrowings (note
W) - 223 160 967 1,350
Bank Overdraft (note
V) 872 - - - 872
Trade and other
payables(note
U) 100 46 377 330 853
972 269 537 1,297 3,075
31-Mar-13
Interest bearing loans
and borrowings (note
W) 84 80 215 719 1,098
Bank Overdraft (note
V) 666 - - - 666
Trade and other
payables(note
U) 394 14 282 - 690
-------------------
1,144 94 497 719 2,454
------------------------- -------------------
Interest rate risk
The Group regularly evaluates the profile of borrowings and the associated interest rates. TheGroup does not foresee any significant risk because of the level of exposure.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, on the Group's net profit before tax (through the impact on floating rate borrowings).
Increase/(decrease) in basis points Effect on Group net profit before tax - INR'Mn
2013-14
Increase 100 7
Decrease -100 -5
2012-13
Increase 100 5
Decrease -100 -5
Effective interestrates
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates and the maturity profiles of their carrying amounts at the balance sheet date:
2013-14 2012-13
INR'Mn INR'Mn
Effective Total On demand 1 - 5 More than Effective Total On demand 1 - 5 More than
Interest less than years 5 years Interest less than years 5 years
Rate 1 year Rate 1 year
Financial
assets
Cash and
bank
balances - 10 10 - - - 26 26 -
Call
deposits 4% -10% 18 18 - - 4% - 10% 16 16 -
Trade and
other
receivables 3048 3048 2379 2379
Deposits - 14 - 14 - 20 4 16
3,090 3,076 14 2,441 2,425 16
Financial
liabilities
US dollar
floating 2.96% -
rate loan 6.5% 838 194 644 - 2.96% - 6.5% 266 103 163 -
Rupee
floating 13.5% -
rate loan 16.50% 512 189 323 - 13.5% -14.75 654 276 378 -
Euro
floating
rate loan 3% 0 0 0.03 178 - 178
Bank
overdraft - 872 872 - - - 666 666 - -
Trade and
other
payables 853 523 330 - -690 690 - -
3,075 1,778 1,297 2,454 1,735 719
--------- --------- ------------ ---------
FINANCIAL INSTRUMENTS - continued
Currency risk
The Group is exposed to currency risk on sales, purchase of fixed assets, overseas outsourcing and borrowings that are denominated in currencies other than the Indian Rupee. The currencies giving rise to this risk are primarily Euros and U.S. Dollars.
The Group uses currency forward exchange contracts and currency option contracts to manage its foreign currency risk. As at the balance sheet date the Group did not have any outstanding currency option contracts in place.
The financial instruments of the Group include the following amounts, which are denominated in the following foreign currencies:
2013-14 2012-13
INR'000 INR'000
Euro USD Other Total Euro USD Other Total
Assets
Cash and bank balances 8 - 2 10 1 1 24 26
Call deposits - - 18 18 - - 16 16
Trade and other receivables 1,613 830 605 3,048 1,095 991 293 2,379
Liabilities
Trade and other payables 384 221 248 853 385 1 304 690
Borrowings -
- current - 194 189 383 - 103 276 379
- non current - 644 323 967 177 163 379 719
Bank overdraft - - 872 872 267 - 399 666
Currency risk table
The following table demonstrates the sensitivity to a reasonably possible change in currency rates, with all other variables held constant, on the Group's net profit before tax (through the impact on currency rate changes between the INR: Euro for Group and INR: GBP for Company).
Group Company
Increase/ (decrease) Effect on Group net profit Increase/ (decrease) Company net profit before tax
before tax
in value of INR INR'000 in value of INR INR'000
2013-14
INR
Increase 1 -455 INR 1 0
Decrease (INR 1) 455 (INR 1) 0
-----------------------------
2012-13
Increase INR -427 INR 1
1
Decrease (INR 1) 427 (INR 1)
FINANCIAL INSTRUMENTS - continued
Fair Values
The fair values of the financial assets are approximately equal to the carrying amount as reflected in the consolidated statement of financial position.
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows. For vehicle loans, the fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous vehicle loans. The estimated fair values reflect changes in interest rates.
Cash and cash equivalents
The Group considers that the carrying amount of cash and cash equivalents approximates their fair value.
Convertible debentures and redeemable convertible preference shares
The fair value for the liability portion of the instrument is based on the prevailing market rates for a similar term non-convertible instrument.
Trade and other receivables / payables
The Group considers that the carrying amount of trade and other receivables / payables approximates their fair values.
NOTE AB - OPERATING LEASES Leases as lessee
The Group leases a number of offices, residential facilities and land under cancellable operating leases. The leases typically run for a period of 2 - 33 years, with an option to renew the lease after that date. Lease payments are increased every year to reflect market rentals. None of the leases includes contingent rentals. The Group does not have an option to purchase the leased asset at the expiry of the lease period.
Payments recognised as an expense
2013-14 2012-13
INR'Mn INR'Mn
Minimum lease payments 30 39
30 39
--------
NOTE AC - CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
2013-14 2012-13
Group Group
INR'Mn INR'Mn
--------
Capital commitments:
Purchase of property, plant and equipment
Purchase of distribution rights 575 1,044
Contingent liabilities:
Outstanding letters of credit for capital investments 1225 777
Bonds executed in favour of Indian customs and excise authorities 3 3
Claims not acknowledged as debts 10 10
--------
NOTE AD - RELATED PARTIES Identity of related parties
DQ Plc. has a related party relationship with its directors, executive officers, subsidiaries and associate. DQ Plc. does not have any ultimate controlling entity.
Related parties and their relationships
a) Subsidiaries
DQ Entertainment (Mauritius) Limited (with effect from 27 November 2007) DQ Entertainment (International) Limited (with effect from 18 February 2008) DQ Entertainment (Ireland) Limited (with effect from 12 November 2008)
DQ Power Kidz Private Limited (with effect from 5 October 2012)
DQE ITES Parks Private Limited (with effect from 19 October 2012)
b) Joint Venture
DQ Entertainment (International) Films Limited (with effect from 11 March 2013)
c) Associate
Method Animation SAS (with effect from 28 March 2008)
d) Key management personnel
Mr. Tapaas Chakravarti - Director
Mr. K. Balasubrahmanyam - Director
Ms. Theresa Plummer - Director
Mr. Anthony BM (Tony) Good - Director
Ms. Rashida Adenwala - Director
e) Relatives of Key Management Personnel with whom DQ India had transactions during the year -
Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti)
Ms Nivedita Chakravarti (daughter of Mr.Tapaas Chakravarti)
Mr Hatim Adenwala - Senior Vice President Human Resources (Husband of Rashida
Adenwala)
Trading transactions
Transactions between DQ Plc and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
Revenue from Animation Amounts owned by Related Parties
2013-14 2012-13
INR'Mn INR'Mn
Associate 59 215 180 292
Revenue from production from related parties were at prices arising out of the Group's usual trade practices. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.
Compensation of key management personnel
Directors of the Group and their immediate relatives control 14.47% per cent of the voting shares of the Group.
The remuneration of directors and other members of key management during the year are as follows:
Other related party transactions
Remuneration paid to relatives of key management personnel during the year was INR 83 million (31 March 2013: INR 83 million)
2013-14 2012-13
INR'Mn INR'Mn
--------
Short term benefits 36 35
36 35
--------
NOTE AE - AUDITORS' REMUNERATION
Details of theauditors' remuneration are as follows:
2013-14 2012-13
Group Group
INR'Mn INR'Mn
--------
Statutory audit fees 9 7
Tax audit fee - -
Other services - -
9 7
NOTE AF - ADMINISTRATIVE EXPENSES
Details of the administrative expenses are as follows:
2013-14 2012-13
Group Group
INR'Mn INR'Mn
--------
Depreciation and amortization 18 17
Director Remuneration 36 35
Salaries and wages 125 109
Other adminstrative expenses 374 120
553 281
NOTE AG - ACCOUNTING ESTIMATES AND JUDGEMENTS
Management discussed the development, selection and disclosure of the Group's critical accounting policies and estimates and the application of these policies and estimates.
The preparation of the financial statements in conformity with IFRS requires management to make estimates and assumptions, which may differ from actual results in the future. Management is also required to use its discretion as to the application of the accounting principles used to prepare these statements.
Convertible financial instruments
In accordance with IAS 32 'Financial Instruments: Disclosure and Presentation' management is required to assess the liability component of any compound financial instrument. Such an assessment requires management to consider the characteristics of similar financial instruments without conversion options. In the absence of any such instruments being in issue by the Group management must estimate what those characteristics would be.
Revenue recognition
The Group recognizes revenue in accordance with the accounting policy in 2(v) (i). When recognizing revenue, management is required to estimate the stage of completion with such estimates being revisited at each balance sheet date. Material deviations are recognized in the income statement of the current period unless an error is identified in which case prior periods are revised in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash- generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
Impairment of Intangible assets
Determining whether Intangible assets are impaired requires an estimation of the value in use of the intangible assets. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the intangibles assets and a suitable discount rate in order to calculate present value.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GRGDLLUGBGSD
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