SIGNIFICANT ACCOUNTING POLICIES

Description of Business:

Padmalaya Telefilms Limited (PTL) is engaged in production of television software, feature films, animation serials, distribution of feature films and also facilities provider in br-production, production, post-production including 2D & 3D Special effects for television software and feature films, Training in Multi Media Software and Animation. PTL was incorporated on 17th September, 1991 in Hyderabad, Andhra Pradesh, India.

1 . Preparation of financial statements

The financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost conversion on accrual basis, except certain tangible assets which are being carried at revalued amounts. Pursuant to section 133 of the Companies Act 2013 read with Rule 7 of Companies (Accounts) Rules 2014, till the standards of accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act 1956,shall continue to apply. Consequently these financial statements have been brpared to comply in all material respects with the accounting standards notified under Section 211 (3C) of the Companies Act,1956 (Companies Accounting Standards Rules, 2006 as amended) and the relevant provisions of the Companies Act, 2013 ('the Act'). The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year.

2 . Fixed assets and debrciation:

Fixed Assets are stated at their original cost of acquisition, net of accumulated debrciation and CENVAT credit, and include taxes, freight and other incidental expenses related to their acquisition/ construction/ installation. Preoperative expenses relatable to a specific project are capitalized till all the activities necessary to brpare the qualifying asset for its intended use are completed. Expenses capitalized also include applicable borrowing costs. Fixed Assets are impaired when there is no possibility of using them further.

During the year the Company has provided Debrciation on Fixed Assets based on the Useful life in the manner brscribed in Schedule II Part C to the Companies Act, 2013.

3 . Inventories:

Inventories are valued at cost or net realizable value whichever is lower after providing for cost of obsolescence and other anticipated losses, wherever considered necessary. Spares and Consumables are charged off to revenue in the year of purchase. Cost includes the aggregate of all expenditure incurred in bringing the inventories to the brsent condition and situation.

4 . Deferred Tax:

Deferred Tax is accounted for by computing the tax effect of timing differences, which arise during the year and reverse in subsequent periods. Deferred Tax assets on accumulated losses and unabsorbed debrciation are recognized only to the extent that there is virtual certainty of realization of such assets in future.

5. Revenue recognition:

Sales of products are recognized when risk and rewards of ownership of the products are passed on to the customers, which are generally on handing over of goods / services (in our case). Export sales are recognized on the basis of bill of lading / Airway bill.

6. Foreign currency transactions:

Sales/Purchases and revenue income/expenses in foreign currency are booked at exchange rates brvailing on the date of transaction. Gain/loss arising out of fluctuations in exchange based on the rate of realization is accounted for in the profit and loss account as per AS-11.

7 . Taxes on income:

Provisions for taxation comprises of current tax, deferred tax. Current tax provision has been made on the basis of reliefs and deductions available under the income tax act, 1961 .Deffered tax resulting from "timing Differences" between taxable income and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted on balance sheet date. No deferred tax assets were found and recognized. The fringe benefits tax has been calculated and accounted for in accordance with the provisions of the income tax act, 1961. (In line with AS-22)

8 . Employee Benefits:

Staff benefits arising out of retirement/death, comprising of contributions to provident fund, superannuation and gratuity schemes, accrued leave encashable and other post separation benefits are accounted for on the basis of an independent actuarial valuation, in accordance with AS-15. The actuarial liability is determined with reference to employees at the end of each financial year.

9. Borrowing Costs:

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized. Other borrowing costs are recognized to profit and loss account in the year in which they are incurred. (In line with AS-16).

10.Provisions, Contingent liabilities and contingent Assets:

Provisions are recognized only when there is a brsent obligation as a result of past events and when a reliable estimate of the amount of the obligation can be made. Contingent liability is disclosed for brsent obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized. (In line with AS-29)

11.Impairment of Assets:

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. However, no such indications were observed. Company has not even observed any such indication during brvious accounting years and no impairment loss was provided during that year. So, no question of reversal of brviously recognized impairment loss during current year. (in line with AS-28).

2 Share Capital

Company is having existing Equity share capital to the extent of 1,70,00,000 Shares @ Rs.10/- each fully subscribed as on 01.04.2013 and no further issue of shares during the year under review.

3. Secured Loans:

Term Loan of Rs.448.78 Lakhs (Previous year Rs.448.78 Lakhs) from HDFC Bank, Mumbai is secured by fixed and Current Assets of the Company. The Executive Director and chief promoter have given their personnel guarantees to the Bank in their personal capacity.

4. Debrciation:

a. During the year the Company has provided Debrciation on Fixed Assets based on the Useful life in the manner brscribed in Schedule II Part C to the Companies Act, 2013.

b. Other Assets include Ornaments, Costumes, Library Etc.

5. Contingent Liabilities

The company’s has filed appeal before Hon'ble Commissioner of Income Tax (Appeals), Hyderabad against the demand of Income Tax amounting to Rs.1.50 crores for the Assessment years 2003-2004 and the same is disposed - off in favour of the company. As per orders passed by the Hon'ble Commissioner of Income Tax (Appeals), Hyderabad, the demand has become nil.

6. Legal cases:

a. M/s Data Soft, Mumbai filed recovery petition against the company for recovering its dues to the tune of Rs. 2.52 lakhs. The company negotiating with the party for settlement.

b. HDFC bank has filed a case against the Company for recovery of secured loan given to the Company for due amount in DRT. Further the company has been approached with bank for one time settlement and still it is pending for consideration. The Company has not provided the interest on loan outstanding for the financial year 2014-2015.

7. Balances of Sundry debtors/creditors, loans are subject to Confirmations

8. There are no Micro, Small and Medium Enterprises, as defined in the Micro, Small and Medium Enterprises Development Act 2006 to whom the Company owes dues on account of principal amount together with interest and accordingly no additional disclosures have been made.

9. Previous years’ figures are restated/regrouped/rearranged wherever necessary in order to confirm to the current years' grouping and classifications.

10. Figures have been rounded off to the nearest rupee.

Signatures to the notes no.1 to 38

As per our report of even date

for and on behalf of the Board

For P.Murali & Co.,

Chartered Accountants

FRN: 007257 S

P.Murali Mohana Rao

Partner

Member Ship No. 23412

Dr.D.V.N.Raju Director

S. Sreenivasa Rao Whole Time Director

Place: Hyderabad

Date: 30th May, 2015