NOTES 1. NATURE OF OPERATIONS D. B. Corp Limited (the 'Company') is in the business of publishing newspapers, radio broadcasting, providing integrated internet and mobile interactive services and event management. The major brands in publishing business are 'Dainik Bhaskar' (Hindi daily), 'Divya Bhaskar' and 'Saurashtra Samachar' (Gujarati dailies), 'Divya Marathi' (Marathi daily), 'DNA' and 'DB Post' (English dailies), and monthly magazines such as 'Aha Zindagi', 'Bal Bhaskar', etc. Presently, the Company's radio station is on air in 17 cities under the brand name 'My FM'. The frequency allotted to the Company's radio station is 94.3. The internet business includes the websites of Dainik Bhaskar, Divya Bhaskar and Divya Marathi having newspapers in e-paper category and dainikbhaskar.com, divyabhaskar.com, dailybhaskar. com and divyamarathi.com. The Company derives its revenue mainly from the sale of its publications and advertisements published in the publications, aired on radio, displayed on websites and portal and mobile interactive services. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) Basis of brparation The financial statements of the Company have been brpared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has brpared these financial statements to comply in all material respects with the accounting standards specified under section 133 of the Companies Act, 2013 (the 'Act'), read with Rule 7 of the Companies (Accounts) Rules, 2014. The financial statements have been brpared on an accrual basis and under the historical cost convention. The accounting policies have been consistently applied by the Company and are consistent with those used in brvious year. b) Use of estimates The brparation of financial statements in conformity with Indian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. c) Tangible fixed assets Fixed assets are stated at cost, less accumulated debrciation and impairment losses, if any. Cost comprises the purchase price and any cost attributable to bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset. The Company adjusts entire exchange differences arising on translation / settlement of long-term foreign currency monetary items pertaining to the acquisition of a debrciable asset to the cost of the asset and debrciates the same over the remaining life of the asset. In respect of its interests in jointly controlled assets, the Company recognises its share of the jointly controlled assets in its financial statements, classifying the jointly controlled asset as per its nature. Expenditure on new projects Costs of construction that relate directly to the specific asset and cost that are attributable to the construction activity in general and can be allocated to the specific assets are capitalised. Income earned during the construction period and income from trial runs is deducted from such expenditure pending allocation. d) Debrciation The Company provides debrciation on tangible fixed assets using the Straight Line Method at the rates computed based on estimated useful lives of the assets as estimated by the management, which are equal to the corresponding rates brscribed in Schedule II to the Act. During the brvious year 2014-15, pursuant to the Act, being effective from April 01, 2014, the management had re-estimated useful lives and residual values of its fixed assets. The Company had revised the debrciation rates on all its tangible fixed assets (other than land and lease hold assets) as per the useful life specified in Part 'C' of Schedule II to the Act. In respect of assets whose useful life was already exhausted as on April 01, 2014, debrciation of Rs. 63,325,349 (net of deferred tax impact of Rs. 32,607,615) was adjusted against the opening reserves in accordance with the requirement of Schedule II of the Act. Leasehold land and buildings are debrciated on a straight line basis over the period of lease specified in agreements restricted to the expected economic useful life of asset, i.e. lease period which ranges from 30 years to 99 years in case of leasehold land and up to 60 years in case of leasehold buildings. Leasehold improvements are debrciated on a straight line basis over the shorter of the estimated useful life of the asset or the lease term, which does not exceed 10 years. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred. Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable brsumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Intangible assets are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired. Goodwill Goodwill is amortised on a straight-line basis over a period of five years. Computer software ERP license and installation cost capitalised, is amortised on a straight-line basis over a period of five years. Other computer software is amortised on a straight-line basis over the estimated useful economic life of the asset which is limited to six years. One time license fees One time license fees rebrsent amount paid for acquiring licenses for radio stations and is amortised on a straight line basis over a period of fifteen years i.e. period as per Grant of Permission Agreement entered into with Ministry of Information and Broadcasting for each station, commencing from the date on which the radio station becomes operational. f) Impairment of tangible and intangible assets The Company assesses at each reporting date whether there is any indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating units (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. The Company bases its impairment calculation on detailed budgets and forecast calculations which are brpared separately for each of the Company's cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, wherever applicable, a long term growth rate is calculated and applied to projected future cash flows after the fifth year. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. g) Investments Investments, which are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments. On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired or partly acquired by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for other than temporary diminution in value is made to recognise a decline other than temporary in the value of the long-term investments. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss. Investment Property An investment in land or building, which is not intended to be occupied substantially for use by, or in the operations of the Company, is classified as investment property. Investment properties are stated at cost, net of accumulated debrciation and accumulated impairment losses, if any. The cost comprises purchase price and directly attributable cost of bringing the investment property to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Debrciation on building component of investment property is calculated on a straight-line basis using the rate arrived at based on the useful life estimated by the management which is 60 years. On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss. h) Leases Where the Company is the lessee Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Operating lease payments are recognised as an expense in the statement ofprofit and loss on a straight-line basis over the lease term. Where the Company is the lessor Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognised in the statement of profit and loss on a straight-line basis over the lease term. Costs, including debrciation, are recognised as expenses in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the statement of profit and loss Finished goods - Lower of cost and net Magazines realisable value. Cost is determined on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Specifically, the following bases are adopted. Advertisement revenue Revenue is recognised as and when advertisement is published in newspaper / aired on radio / displayed on website and is disclosed net of trade discounts and service tax, wherever applicable. Sale of newspapers, magazines, wastage and scrap Revenue is recognised when all the significant risks and rewards of ownership have passed on to the buyer, usually on delivery of the goods and is disclosed net of sales return, trade discounts and taxes. Printing job charges Revenue from printing job work is recognised on the completion of job work as per terms of the agreement with the customer and is disclosed net of trade discounts and taxes. Portal and wireless revenue Revenue is recognised as and when the related services are rendered as per the terms of agreement and are disclosed net of trade discounts. Sale of power Revenue from sale of power generated in the wind energy units of the Company is recognised on the basis of supply made to Madhya Pradesh Paschim Kshetra V.V. Co. Limited, as per the terms of agreement. Income from event management Revenue from event management is recognised once the related event is completed i.e. completed contract basis. Interest Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividend income Dividend income is recognised when the shareholders' right to receive the payment is established by the Balance sheet date. k) Barter transactions Revenue from barter transactions involving exchange of advertisements with non-monetary assets such as investment or property is measured at the fair value of the advertisements published / aired as it is more clearly evident. The receivable relating to property barter agreements is debited to advance for properties and included under the head 'Loans and advances'. l) Foreign currency transactions Initial recognition Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are retranslated using the exchange rate brvailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined. Exchange differences The Company accounts for exchange differences arising on translation/ settlement of foreign currency monetary items as below: - Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalised and debrciated over the remaining useful life of the asset. - All other exchange differences are recognised as income or as expenses in the period in which they arise. The Company treats a foreign currency monetary item as 'long-term foreign currency monetary item', if it has a term of 12 months or more at the date of its origination. In accordance with Ministry of Corporate Affairs' circular dated August 09, 2012, exchange differences for this purpose, are total differences arising on long-term foreign currency monetary items for the period. In other words, the Company does not differentiate between exchange differences arising from long-term foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference. Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ liability The brmium or discount arising at the inception of forward exchange contract is amortised and recognised as an expense / income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognised as income or as expense for the period. m) Retirement and other employee benefits Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation other than the contribution payable to the provident fund. The Company recognises contribution payable to the provident fund scheme as expenditure, when an employee renders the related service. Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation done as per projected unit credit method, carried out by an independent actuary at the end of the year. The Company makes contributions to a trust administered and managed by an Insurance company to fund the gratuity liability. Under this scheme, the obligation to pay gratuity remains with the Company, although the Insurance company administers the scheme. Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. The Company brsents the leave as a short-term provision in the balance sheet to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where Company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is brsented as long-term provision. Actuarial gains / losses relating to gratuity and leave encashment liability are immediately taken to the statement of profit and loss and are not deferred. 1) Income taxes Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. At each balance sheet date, unrecognised deferred tax assets of earlier years are re-assessed and recognised to the extent that it has become reasonably or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write down is reversed to the extent that it becomes reasonably or virtually certain, as the case may be, that sufficient future taxable income will be available. o) Provisions A provision is recognised when the Company has a brsent obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. p) Borrowing costs Borrowing costs includes interest, amortisation of term loan processing fees over the period of loans which are incurred in connection with arrangements of borrowings and exchange differences arising from short- term foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of cost of the respective assets. All other borrowing costs are expensed in the period in which they occur. q) Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting brference dividends and attributable taxes, if any) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year are adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares) (if any). For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. r) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the financial statements. s) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short term investments with an original maturity of three months or less. t) Employee stock compensation cost In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, the cost of equity-settled transactions is measured using the intrinsic value method and recognised, together with a corresponding increase in the 'Stock options outstanding' account in reserves and surplus. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognised in the statement of profit and loss for the year rebrsents the movement in cumulative expense recognised as at the beginning and end of that year and is recognised in employee benefit expenses. Under this method compensation expense is recorded over the vesting period of the option on straight line basis, if the fair market value of the underlying stock exceeds the exercise price at the grant date. u) Measurement of EBITDA As permitted by the Guidance note on the Revised Schedule VI to the Companies Act 1956, the Company has elected to brsent earnings before interest, tax, debrciation and amortisation expense (EBITDA) as a separate line item on the face of the statement of profit and loss. The Company measures EBITDA on the basis of profit from continuing operation. In this measurement, the Company does not include debrciation and amortisation expenses, finance costs and tax expenses. 26. ROYALTY a) Indian Performing Rights Society Limited (IPRS) The Indian Performing Rights Society Limited (IPRS) had filed a suit against the Company on May 27, 2006 before the Honorable High Court of Delhi contesting against the refusal by the Company to obtain a license from the IPRS with regards to broadcasting / performing its copyrighted works and pay royalty to IPRS. IPRS had prayed for a permanent injunction restraining the Company from infringing any of the copyrights owned by the IPRS as well as for damages in favor of the IPRS. The Honorable Delhi High Court has denied IPRS's application for injunction. IPRS had since brferred an appeal in the Honorable Subrme Court. This appeal is pending before the Honorable Subrme Court. Considering the litigation involved, the Company has provided for royalty based on the best judgment assessment of the case. The management believes that the provision made in the books is sufficient to cover the liability for royalty, if any, which would be confirmed only after the final result of the litigation. Since the matter is under litigation, the disclosures required as per the provisions of Accounting Standard 29 - Provisions, Contingent Liabilities and Contingent Assets relating to the provisions made are not given as it is expected to brjudice seriously the position of the Company with regards to the litigation. b) Phonographic Performance Limited (PPL) A legal suit was filed by the Company on July 28, 2008 against Phonographic Performance Limited (PPL) before the Copy Right Board against the exorbitant rates proposed by PPL for grant of compulsory licenses. The Copy Right Board passed an order on August 25, 2010 by which PPL was directed to charge the proportionate amount (as per the music played) i.e. royalty was to be calculated @ 2% of the net revenue. Accordingly, the Company is paying royalty to PPL since then. PPL has been claiming that the said revised rates were applicable only for the period starting from August 25, 2010 and the royalty for the period earlier to August 25, 2010 would be charged at a higher rate. PPL had subsequently filed a summary suit in Bombay High Court towards recovery of the said amount. At brsent the matter is pending before the Bombay High Court Considering the litigation involved, the Company has provided for the royalty for the period before August 25, 2010 based on the best judgment assessment of the case. The management believes that the provision made in the books is sufficient to cover the liability for royalty, if any, which would be confirmed only after the final result of the litigation. Since the matter is under litigation, the disclosures required as per the provisions of Accounting Standard 29 - Provisions, Contingent Liabilities and Contingent Assets relating to the provisions made are not given as it is expected to brjudice seriously the position of the Company with regards to the litigation. LEASES (A) Operating lease (for assets taken on lease): Rentals in respect of operating leases are recognised as an expense in the statement of profit and loss, on a straight-line basis over the lease term. a) The Company has taken various godown, office and residential brmises under operating lease agreements. These are generally renewable by mutual consent. b) Lease payments recognised for the year are Rs. 269,347,486 (March 31, 2015: Rs. 262,739,527). c) There are no restrictions imposed in these lease agreements. There are escalation clauses in agreement with some parties. There are no purchase options. There are no sub leases. 2. INVESTMENTS The Company has entered into arrangements with various parties whereby the Company has invested in the securities of these parties. In accordance with these arrangements, the said parties have also agreed to offer their advertisements in the Company's print and non-print media periodically, for a specified term. The unutilised portion of advertisement advances received from these parties as at March 31, 2016 amounting to Rs. 146,260,156 (March 31, 2015: Rs. 299,175,066) is included in 'Advances from customers' under Note 9 'Other current liabilities' in the financial statements. On periodic basis, the Company performs the assessment to assess whether there is any other than temporary diminution in the value of investments. Up to March 31, 2016, the Company has made provision of Rs. 327,000,000 (March 31, 2015: Rs. 375,075,000) towards other than temporary diminution in the value of the investments. 3. DETAILS OF DUES TO MICRO AND SMALL ENTERPRISES AS PER MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006: a) An amount of Rs. 12,930,516 (March 31, 2015: Rs. 7,002,615) and Rs. Nil (March 31, 2015: Rs. Nil) was due and outstanding to suppliers as at March 31, 2016 on account of principal and interest respectively. b) No interest was paid during the year to any supplier (March 31, 2015: Rs. Nil). c) No interest was paid to any suppliers for payments made beyond the appointed date during the accounting year (March 31, 2015: Rs. Nil). d) No claims have been received till the end of the year for interest under Micro, Small and Medium Enterprises Development Act, 2006 (March 31, 2015: Rs. Nil). e) No amount of interest was accrued and unpaid at March 31, 2016 (March 31, 2015: Rs. Nil). The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors. 4. Since the segment information as per Accounting Standard 17 -Segment Reporting is provided on the basis of consolidated financial statements; separate segment information based on standalone financial statements is not provided. 5. During the brvious year, the Company had given a loan of Rs. 522,000,000 to a newsprint supplier agent of the Company at interest rate of 10% p.a. secured by the hypothecation of all the assets of the borrower, including the assets created out of this loan, but excluding the assets already hypothecated under any loan taken from banks. This loan is to be utilised by the borrower for meeting its working capital requirements. Out of the loan, Rs. 200,000,000 had been received by the Company till March 31, 2016 and the balance part of the loan is receivable before March 31, 2017. 6. brVIOUS YEAR COMPARATIVES Previous years' figures have been regrouped / reclassified where necessary to conform to current years' classification. As per our report of even date For S.R. Batliboi & Associates LLP ICAI Firm registration number: 101049W/E300004 Chartered Accountants per Kalpesh Jain Partner Membership No. 106406 For Gupta Navin K. & Co. ICAI Firm registration number: 006263C Chartered Accountants per Navin K. Gupta Partner Membership No. 075030 For and on behalf of the Board of Directors of D. B. Corp Limited Sudhir Agarwal Managing Director Pawan Agarwal Deputy Managing Director P. G. Mishra Chief Financial Officer Anita Gokhale Company Secretary Place: Mumbai Date: May 20, 2016 |