Final Results

29th Jul 2008 07:00



For immediate release

29 July 2008

DQ ENTERTAINMENT PLC

('DQE' or the 'Group')

Preliminary Results for the year ended 31 March 2008

DQ Entertainment plc, a leading animation and game art content production company, today announces its maiden preliminary results for the year ended 31 March 2008 following its successful listing on AIM in December 2007.

Financial Highlights

Revenue up 58% to US $24.1m (Previous year: US $15.2m*)

EBIDTA up 68% to US $7.2m** (Previous year: US $4.3m*)

Profit Before Tax of US $7.4m** (Previous year: US $0.62m*)

Order book currently at US $94.3m including amounts already billed in the current year

Cash and cash equivalents of US $16.8m (previous year: US $(0.5)m)

\* The comparative information reflects the results and financial position of DQ Entertainment Limited, an Indian company which was acquired by the Group, and accounted for as a reverse acquisition.

** Profit Before Tax of US$ 7.4m includes a non recurring gain of US$ 4.4m and, as a result, adjusted Profit Before Tax is US $3.0m. The EBIDTA figure above does not include the non-recurring gain.

Operating Highlights

 

Tapaas Chakravarti, Chairman & CEO of DQE, commented:

"I am delighted to report our maiden preliminary results. The last 12 months have seen our business expand across a number of key areas.

We continue to invest in talent, the lifeblood of our business, and expand our production capabilities across India. We have also signed three MOU's with strategic partners and signed an important agreement with Sony Pictures and PNC.

The continued demand for our services coupled with the high levels of growth experienced within the Indian economy and the Media and Entertainment sector leaves us confident that 2008/9 will be another year of continued growth."

  

For further information please contact:

DQ Entertainment Plc Tapaas Chakravarti, Chairman & CEO Niranjan Prasad, VP Corporate Affairs	Tel: +91 40 235 53726
Evolution Securities Limited Tom Price Jeremy Ellis Chris Clarke	Tel +44 20 7071 4300
Buchanan Communications Mark Edwards Jeremy Garcia Miranda Higham	Tel: +44 20 7466 5000

  Preliminary Results for the year ended 31 March 2008

Chairman's Statement

Introduction

I am pleased to present the maiden preliminary results on behalf of the Board for the financial year ended 31 March 2008. This has been a significant year for DQE with many milestones achieved, including winning an Emmy, successfully listing on AIM, signing a number of co-production deals with renowned global production houses and acquiring a strategic stake in Method Films. 

Growth Strategy

DQE's management team continues to be dedicated to delivering long term growth. In order to maximise the current market opportunity, we have identified the following strategic goals to drive our business forward:

Increase the value of our intellectual property rights ("IPR") through collaborating with global partners via co-productions, joint ventures and strategic alliances

Explore new markets (including India) in order to increase the Group's client base and global footprint

Broaden DQE's service offering to include live action content by capitalising on the Group's strong reputation for animation content production

Invest and capitalise on the best local talent and encourage closer ties with the local community

Financial overview

Group turnover increased by 58% year on year from US$15.2m to US$24.1m, which is chiefly derived from two areas: production (through co-production & service agreements) and distribution (which includes licensing). The revenue split between the production division and the distribution division was 96% (2007: 99%) and 4% (2007: 1%) respectively. The level of turnover generated by our distribution division in 2008 reinforces our stated strategy to move from being a service provider to being a global IP player. The growth of EBIDTA to US $7.2m (being the sum of "Operating result before financing costs" of US$ 3.7m and "Depreciation/Amortization" cost of US$ 3.5m) reaffirms the Group's growth path.

The factors that have contributed to the Group's growth in revenue and profit have been undertaking high end projects with high profile customers while retaining its ability to deliver projects within the delivery schedules. The Group continues to focus on training manpower and this large capacity of skilled manpower has also allowed the Group to benefit from economies of scale. These are demonstrated in growth of operating margins (EBIDTA growth 68%). The Group's strategy of co-productions has also attracted additional revenue streams.

Operational review

New Media Division

In line with the Group's objective to explore new markets (including India) as well as create its own IPR, the New Media Division ("NMD") has been considerably strengthened during the past year.

The immediate focus of NMD is to explore the Indian market (including Bollywood) and the Japanese market. While our work in the Japanese market will be restricted to animation, DQE's entry in the Indian market will include live action and animation. 

Initial successes of this division have been to sign :

(a) MOU's with the following strategic partners:

Percept Picture Company for feature films, where discussions on scripting & other creative work have commenced

Think Corporation for animated series & DVD features. Creative work on "Coluboccoro" has commenced at the DQE US /Hyderabad offices and at Think Corporation's offices in Japan,

Pritish Nandy Communications for animated and live action features. The distribution agreement with Sony Pictures Entertainment Inc has been signed for a romantic cricket comedy to be released in the summer of 2008 while negotiations continue for an animated series.

(b) Strategic alliance with Moonscoop Group, Europe's leading animation management & entertainment company, for a US $100m co-production of 5 TV Series, 2 Feature Films and capitalise on the individual business networks and production expertise of both groups to provide global operational leverage. The co-production arrangement will target the release of at least one TV series / feature film for each year of the agreement and one or more co-productions may feature Indian mythology and characters, which are becoming increasingly popular with audiences worldwide

NMD has also started to create original content and therefore its own intellectual property ("IP"). The division has a mix of high calibre creative professionals located in the U.S.A, Europe as well as India. Our primary objective is to create IP both for local content celebrities and also those which have global appeal. Several IP opportunities are being developed and discussions with several broadcasters are ongoing with initial discussions proving to be positive. On this basis, DQE is confident of creating and producing its own TV series / feature film in the near future.

DQE continues to have healthy revenue visibility. Projects include co-productions of some world famous properties like "Casper" (in conjunction with Classic Media, Entertainment Rights and Moonscoop) and "Ironman" (in conjunction with Marvel, Method Films and others). In addition, repeat orders from clients including Disney and Nickelodeon highlight DQE's ability to deliver international quality to the highest standards.

Training

The training of our staff has been an integral part of the Group's focus, especially in an industry where quality people are a valuable commodity. In line with the overall expansion plan of the Group, two dedicated, state of the art training facilities are to become operational in Hyderabad by the end of July 2008. These are in addition to the training academies at Bhopal & Jaipur which DQE formed in partnership with the State Governments of Madhya Pradesh & Rajasthan respectively.

As part of the training curriculum, a significant number of industry experts, both domestic and international, are invited to participate in the training of associates in order to ensure the programme maintains compliance and best practice requirements.

Production Facilities

In addition to the existing 7 facilities in India & a sub-contracting facility at Manila, the new state of the art production facility in Hyderabad became operational during the year, with the capacity to house 700+ associates. 

Additionally production facilities have been set up in Mumbai, Kolkata & Chennai to meet the staffing requirements for current & future projects. These centres are being established in line with DQE's philosophy of targeting local talent and supporting local communities. Our aim is to foster local partnerships that benefit the wider community in the longer run.

Strategic Stake in Method Films

The Group completed the acquisition of a 20% strategic stake in Method Films, France ("MF"), a top ranking creative powerhouse. Our belief is that this investment will both create and enhance our existing strategic relationship with MF which has already seen collaborations on several projects including "Skyland", the action based TV series which was successfully telecast in the second half of  2007 on ITVUK, France3 France, Nickelodeon USA & other worldwide stations.

DQE & MF have several projects currently in co-production including - Mikido, Pinky and Perky, Ironman, to name a few, with more in the pipeline. 

By combining the skill sets of both DQE and MF, this alliance will offer a fully integrated solution for animation production services.

Agreement with Sony

In April 2008, the Group announced its first foray into the live action market place by forming a 50/50 partnership with Pritish Nandy Communications for the forthcoming comedy Meerabai Not Out. Central to this agreement is the involvement of Sony Pictures Entertainment who have acquired the worldwide distribution rights to the film.

This announcement is the first step by DQE to broaden its media offering and branch out into the live action productions. Negotiations for an animated series are ongoing. 

ISO Certification

DQE was recently awarded ISO 9001 certification, an internationally recognised set of standards. The award endorses the high working practices within our organisation and certifies that DQE can consistently deliver products or services that meet stringent quality requirements. It hallmarks DQE as a leading independent player in the global media and entertainment market.

DQE was awarded the ISO 9001 certification by M/s Det Norske Veritas , Norway (DNV). DNV is one of the world's leading certification bodies/registrars offering the latest in management systems certification services. DQE is the first among the Animation Industry to successfully complete the ISO 9001:2000 programme. 

Regional and Sector growth

The Indian economy continues to grow at a fast pace at a time when many of the world's leading economies have shown signs of slowdown. Nowhere is this more prevalent than in the media and entertainment ("M&E") sector. With the global M&E industry expected to become a US$ 2 trillion industry by 2011 PricewaterhouseCoopers ("PwC") Global M&E Outlook ranks India as the fastest growing market in the world in terms of total spend over the next five years.

An additional report by PwC estimates that the Indian television industry's revenue will grow at a CAGR of 22 per cent to US$ 13.11 billion by 2011 from US$ 4.82 billion in 2006. The buoyancy of the Indian economy coupled with new distribution platforms like Direct to Home ("DTH") and IPTV are likely to propel the growth of this industry. 

Significantly, there has been an increase in the growth of digital distribution platforms like DTH. A report by Ernst & Young estimates that by 2010, 28 per cent of the estimated 100 million pay TV households are likely to switch to digital platforms, with DTH at the top. 

We believe that DQE, with its unique positioning within the Indian market, is ideally positioned to exploit the substantial market opportunity that exists within its home market as well as the M&E sector across the globe.

  Summary of IPO

On 18 December 2007, DQE listed on AIM raising £26.8 million (equivalent to US$ 54.2 million). The net proceeds of the placing are primarily being used for the expansion of production facilities, investment in intellectual property partnerships and possible acquisitions and joint ventures.

Outlook

The continued demand for our services and strong order visibility, coupled with the high levels of growth experienced within the Indian economy and the media and entertainment sector, leave us confident that 2008/9 will be another year of continued growth.

Statements of Income

For the year ended 31 March 2008

		2007-08			2006-07
	Note	Group USD'000	Company USD'000		Group USD'000	Company USD'000
Revenue	C	24,133	429		15,239	-
Cost of sales		(17,651)	-		(11,575)	-
Gross profit		6,482	429		3,664	-
Other gains and losses	D	365	-		35	-
Distribution expenses		(219)	(8)		(304)	-
Administrative expenses		(2,922)	(410)		(1,418)	-
Other operating expenses		(26)	(2)		(23)	-
		(2,802)	(420)		(1,710)	-
Operating result before financing costs		3,680	9		1,954	-
Financial income		428	526		6	-
Financial expenses		(1,110)	(19,418)		(1,338)	-
Net financing costs	E	(682)	(18,892)		(1,332)	-
Profit on extinguishment of liability	AD	4,409	-		-	-
Profit/(loss) before tax		7,407	(18,883)		622	-
Income tax expense	F	(222)	-		-	-
Profit/(loss) after tax		7,185	(18,883)		622	-
Basic and diluted earnings per share for profit attributable to the equity holders of the company during the year (expressed as cents per share)	S
Basic earnings per share		60¢			82¢
Diluted earnings per share		60¢			51¢

  Balance Sheets

As at 31 March 2008

		2007-08			2006-07
	Note	Group USD'000	Company USD'000		Group USD'000	Company USD'000
ASSETS
Non current assets
Property, plant and equipment	G	11,543	-		6,105	-
Goodwill	H	10,818	-		-	-
Intangible assets	I	7,127	-		4,126	-
Advances paid for distribution rights	J	6,520	-		4,373	-
Investment in associate	K	3,884	3,884		-	-
Investment in subsidiary		-	5		-	-
Loan to subsidiary	L	-	16,937		-	-
Deposits	N	518	-		239	-
Total non current assets		40,410	20,826		14,843	-
Current assets
Trade and other receivables	O	12,508	3,629		5,594	-
Income tax receivable		-	-		19
Financial assets at fair value through profit or loss	P	177	-		-	-
Cash and cash equivalents	Q	17,510	7,057		806	-
Total current assets		30,195	10,686		6,419	-
Total assets		70,605	31,512		21,262	-

  

Balance Sheets

As at 31 March 2008 - continued

		2007-08			2006-07
	Note	Group USD'000	Company USD'000		Group USD'000	Company USD'000
EQUITY AND LIABILITIES
Equity	R
Issued capital		73	73		178	-
Share premium		49,017	49,017		1,511	-
Reverse acquisition reserve		1,218	-		-	-
Equity component of convertible instruments		1,158	-		1,060	-
Foreign currency translation reserve		(1,660)	(749)		36	-
Share options outstanding		-	-		793	-
Statutory reserve		-	-		932	-
Retained earnings		3,938	(18,883)		(4,080)	-
Total stockholders' equity		53,744	29,458		430	-
Non current liabilities
Interest-bearing loans and borrowings	V	5,450	-		4,060	-
Provisions	W	1,289	-		603	-
Total non current liabilities		6,739	-		4,663	-
Current liabilities
Trade and other payables	T	4,706	2,054		1,816	-
Bank overdraft	U	730	-		1,276	-
Interest-bearing loans and borrowings	V	4,073	-		12,860	-
Income tax payable		114	-		-	-
Provisions	W	499	-		217	-
Total current liabilities		10,122	2,054		16,169	-
Total liabilities		16,861	2,054		20,832
Total stockholders' equity and liabilities		70,605	31,512		21,262	-

These financial statements were approved by the Board of Directors and authorised for use on 28 July 2008.

Statement of Changes in Equity

GROUP	Equity shares - No of Shares	Equity Shares - Amount USD'000	Share premium USD'000	Reverse acquisition reserve USD'000	Equity component of convertible instruments USD'000	Foreign currency translation reserve USD'000	Stock options outstanding USD'000	Statutory reserve USD'000	Retained earnings USD'000	Total USD'000
Balance as at 01 April 2006	757,295	174	1,493	-	1,060	(33)	793	636	(4,444)	(321)
Effect of correction of errors	-	-	-	-	-	(10)	-	-	38	28
As restated	757,295	174	1,493	-	1,060	(43)	793	636	(4,406)	(293)
Changes in equity for the year ended 31 March 2007
Profit for the year	-	-	-	-	-	-	-	-	622	622
Issue of share capital	19,800	4	18	-	-	-	-	-	-	22
Transfer to statutory reserve	-	-	-	-	-	-	-	296	(296)	-
Foreign currency translation	-	-	-	-	-	79	-	-	-	79
Balance as at 31 March 2007	777,095	178	1,511	-	1,060	36	793	932	(4,080)	430

  

 

 

 

Statement of Changes in Equity - continued

GROUP	Equity shares - No of Shares	Equity Shares - Amount USD'000	Share premium USD'000	Reverse acquisition reserve USD'000	Equity component of convertible instruments USD'000	Foreign currency translation reserve USD'000	Stock options outstanding USD'000	Statutory reserve USD'000	Retained earnings USD'000	Total USD'000
Brought forward balance as at 31 March 2007	777,095	178	1,511	-	1,060	36	793	932	(4,080)	430
Changes in equity for the year ended 31 March 2008
Profit for the year	-	-	-	-	-	-	-	-	7,185	7,185
Changes in equity due to reverse acquisition	(777,095)	(178)	(293)	-	-	-	-	(932)	932	(471)
Transfer to Reverse acquisition reserve	-	-	(1,218)	1,218	-	-	-	-	-	-
Issue of share capital	35,966,047	73	54,449	-	-	-	-	-	-	54,522
Share issue expenses	-	-	(5,432)	-	-	-	-	-	-	(5,432)
Issue of convertible preference shares	-	-	-	-	98	-	-	-	-	98
Stock options written back	-	-	-	-	-	-	(793)	-	-	(793)
Foreign currency translation	-	-	-	-	-	(1,696)	-	-	-	(1,696)
Effect of correction of errors	-	-	-	-	-	-	-	-	(99)	(99)
Balance as at 31 March 2008	35,966,047	73	49,017	1,218	1,158	(1,660)	-	-	3,938	53,744

 

 Statement of Changes in Equity - continued

COMPANY	Equity shares - No of Shares	Equity Shares - Amount USD'000	Share premium USD'000	Foreign currency translation reserve USD'000	Retained earnings USD'000	Total USD'000
Balance as at 01 April 2006	-	-	-	-	-	-
Changes in equity for the year ended 31 March 2007	-	-	-	-	-	-
Balance as at 31 March 2007	-	-	-	-	-	-
Changes in equity for the year ended 31 March 2008
Loss for the year	-	-	-	-	(18,883)	(18,883)
Issue of share capital	35,966,047	73	54,449	-	-	54,522
Share issue expenses	-	-	(5,432)	-	-	(5,432)
Foreign currency translation	-	-	-	(749)	-	(749)
Balance as at 31 March 2008	35,966,047	73	49,017	(749)	(18,883)	29,458

 

 

 

 

 

Statement of Cash Flows

For the year ended 31 March 2008

		2007-08			2006-07
	Note	Group USD'000	Company USD'000		Group USD'000	Company USD'000
Cash flows from operating activities
Profit/(loss) for the year before tax		7,407	(18,883)		622	-
Adjustments for:
Depreciation and amortization		3,555	-		2,319	-
Interest income	E	(428)	(526)		(6)	-
Interest expense	E	1,205	2		1,303	-
Provisions for employee benefits	X	584	-		241	-
Gain on revaluation of fair value through profit or loss on financial assets	D	(177)	-		-	-
Loss on valuation of financial assets at fair value through profit or loss	E	-	19,416		-	-
Provision for retakes	Y	229	-		(43)	-
Employee stock options waived	X	(793)	-		-	-
Profit on extinguishment of liability	AD	(4,409)	-		-	-
Gain on foreign exchange fluctuations		(239)	(868)		(155)	-
Other provisions		(13)	-		-	-
Losses on sale of property, plant and equipment		-	-		23	-
Operating cash flows before changes in working capital		6,921	(859)		4,304	-
Increase in trade and other receivables		(6,678)	(3,629)		(2,724)	-
Decrease in inventories		-	-		2	-
Employee benefits paid		(39)	-		(4)	-
Increase in trade and other payables		2,901	2,054		345	-
		3,105	(2,434)		1,923	-
Income taxes paid		(94)	-		17	-
Net cash from/(used in) operating activities		3,011	(2,434)		1,940	-

  Statement of Cash Flows

For the year ended 31 March 2008 - continued

		2007-08			2006-07
	Note	Group USD'000	Company USD'000		Group USD'000	Company USD'000
Cash flows from investing activities
Acquisition of property, plant and equipment		(8,600)	-		(3,048)	-
Acquisition and advances paid for distribution rights		(5,901)	-		(3,264)	-
Proceeds from sale of property, plant and equipment		-	-		55	-
Investment in associate	K	(3,884)	(3,884)		-	-
Investment in subsidiary		-	(5)		-	-
Goodwill	H	(10,818)	-		-	-
Deposits	N	(279)	-		(105)	-
Finance income	E	346	204		9	-
Net cash used in investing activities		(29,136)	(3,685)		(6,353)	-
Cash flows from financing activities
Proceeds from issue of share capital		54,522	54,522		22	-
Payments to equity shareholders on capital restructuring		(471)	-
Proceeds from term loans		5,405	-		3,878	-
Issue of term loan	L	-	(35,912)		-	-
Payment to preference shareholders		(9,692)	-		-	-
Proceeds from issue of preference shares		265	-		-	-
Share issue expenses		(5,432)	(5,432)		-	-
Interest paid		(1,127)	(2)		(285)	-
Payment of finance lease liabilities		(67)	-		(108)	-
Net cash from financing activities		43,403	13,176		3,507	-
Net increase / (decrease) in cash and cash equivalents		17,278	7,057		(906)	-
Cash and cash equivalents at beginning of year	Q	(470)	-		433	-
Gain/(loss) on foreign exchange fluctuations		(28)	-		3	-
Cash and cash equivalents at year end	Q	16,780	7,057		(470)	-

  Notes to Financial Statements

 

NOTE A - BASIS OF PREPARATION

 

1. General Information

DQ Entertainment Plc, (the "Company", or "DQplc") 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 Company raised approximately USD 54 million (£26.83 million) at listing (before Admission costs).

The consolidated financial statements for DQ Entertainment (the "Group") and financial statements for the Company have been prepared for the year ended 31 March 2008.

As on 31 March 2008 the following companies formed part of the Group:

Company	Immediate Parent	Country of Incorporation	% of Interest
DQ Entertainment (Mauritius) Limited (DQM)	DQ Entertainment Plc	Mauritius	100
DQ Entertainment (International) Private Limited (DQ India) was formerly known as "Animation and Multimedia Private Limited"	DQ Entertainment (Mauritius) Limited	India	100

The Company's registered address is 15-19, Athol Street, Douglas, Isle of Man.

The Group is primarily engaged in the business of providing Traditional and Digital Animation for Television, Home Video, Feature Films and the like, game art development. . The Group also is engaged in exploitation of its Distribution Rights to broadcasters, television channels, home video distributors and others.

The functional currency of the respective Group companies are: 

DQplc  Great British Pound (GBP)

DQM US Dollar (USD)

DQ India Indian Rupee (INR)

DQ Entertainment (International) Private Limited was formerly known as Animation and Multimedia Private Limited (AMPL). AMPL was incorporated on 13 April 2007 and the name was subsequently changed to DQ Entertainment (International) Private Limited on 17 January 2008 via a fresh certificate of incorporation issued by Registrar of Companies, Andhra Pradesh, India.

During the FY 2007-08, AMPL acquired the business of an existing company DQ Entertainment Limited ( a company incorporated in India) through a reverse acquisition as defined under IFRS 3. This acquisition was through a scheme of amalgamation sanctioned by the Hon'ble High Court of State of Andhra Pradesh, India. 

The broad features of the scheme were:

All Assets, Liabilities, contractual obligations etc. of DQ Entertainment Limited were transferred to AMPL

All employees of DQ Entertainment Limited became employees of AMPL with the same benefits & terms of employment enjoyed by them.

Holders of Equity Shares, Preference Shares & Debentures of DQ Entertainment Limited could exchange the respective instruments held by them with optionally convertible preference shares of AMPL (in the ratio of 4:1 respectively) or partly with the optionally convertible preference shares (ratio of 4:1) and for cash.

The amounts disclosed in the prior year Group column relate to DQ Entertainment Limited, which is the Legal Subsidiary accounted under the reverse acquisition and hence are not comparable to the current year.

2. Significant accounting policies

 

(a) Adoption of new and revised standards 

(i) Standards and interpretations effective in the current period

In the current year, the Group has adopted IFRS 7 Financial Instruments: Disclosures, which is effective for annual reporting periods beginning on or after 1 January 2007, and the consequential amendments to IAS 1 Presentation of Financial Statements (effective 1 January 2007).

The impact of the adoption of IFRS 7 and the changes to IAS 1 has been to expand the disclosures provided in these financial statements regarding the Group's financial instruments and management of capital (see note Z).

The principal effects of these changes are as follows:

IFRS7: Financial Instruments: Disclosures

Requires disclosures that enable users of the financial statements to evaluate the significance of the Group's financial instruments and the nature and extent of risks arising from those financial instruments. 

The new disclosures are included throughout the financial statements. Whilst there has been no effect on the financial position or results, comparative information has been revised where necessary.

IAS1: Presentation of Financial Statements

Requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group's objectives, policies and processes for managing capital.

Four Interpretations issued by the International Financial Reporting Interpretations Committee are effective for the current period.

The principal effects of these changes are as follows:

IFRIC8: Scope of IFRS 2

Requires IFRS 2 to be applied to any arrangements in which the Group cannot identify specifically some or all of the goods received, in particular where equity instruments are issued for consideration, which appears to be less than fair value. As the Group only issues equity instruments as a reinvestment of profit for cash consideration, the interpretation had no impact on the financial position or performance of the Group.

  

(i) Standards and interpretations effective in the current period - continued

IFRIC 9: Reassessment of Embedded Derivatives

Requires that the date to assess the existence of an embedded derivative is that on which an entity first becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. As the Group had no embedded derivatives requiring separation from the host contract, the interpretation had no impact on the financial position or performance of the Group.

IFRIC 10: Interim Financial Reporting and Impairment

Requires that an entity must not reverse an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. As the Group had no impairment losses previously reversed, the interpretation had no impact on the financial position or performance of the Group.

IFRIC 11: IFRS 2: Group and treasury share transactions

Requires that an entity must always account for share-based payment involving an entity's own equity instruments in which the entity chooses or is required to buy its own equity instruments (treasury shares) to settle the share-based payment obligation as equity-settled share-based payment transactions under IFRS 2. The interpretation had no impact on the financial position or performance of the Group

The adoption of these Interpretations has not led to any changes in the Group's accounting policies.

(ii) Standards and interpretations in issue not yet adopted

At the date of authorisation of these financial statements the following Interpretations were in issue but not yet effective:

Amendments to IFRS 3: Business combinations (effective 1 July 2009);

IFRS 8: Operating segments (effective 1 January 2009);

Amendments to IAS 1: Presentation of financial statement (effective 1 January 2009);

Amendments to IAS 23: Borrowing costs (effective 1 January 2009);

Amendments to IAS 27: Consolidated and Separate Financial Statements (effective 1 January 2009);

IFRIC 12: Service concession arrangements (effective 1 January 2008);

IFRIC 13: Customer loyalty programmes (effective 1 July 2008);

IFRIC 14: IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction (effective 1 January 2008);

IFRIC 15: Agreements for the Construction of Real Estate (effective 1 January 2009); and

IFRIC 16: Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008);

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. 

  (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).

Although this is the first year of presentation of financial statements of the Group under IFRS, the historical financial information is prepared in accordance with IFRS as adopted for use in the European Union (EU) and the historical information has been prepared as if the date of transition to IFRS was 1 April 2004, and the requirements of IFRS 1 have been applied since that date.

The historical financial information incorporates the financial statements of the Group made up to 31 March each year. 

(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 financial statements are presented in United States Dollars (USD), rounded to the nearest thousand unless otherwise indicated. They are prepared on the historical cost basis except for financial instruments, which are carried at their fair values. 

The historical financial information has been prepared on a historical cost basis. In the process of applying the Group's accounting policies, management is required to make judgements, estimates and assumptions that may affect the 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 ongoing 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 AG.

As explained above, the Group's deemed transition date to IFRS is 1 April 2004. The rules for first-time adoption of IFRS are set out in IFRS 1. In preparing subsequent financial statements in accordance with IFRS, the date of transition, as determined in accordance with IFRS 1, will be 1 April 2004 and therefore the first-time adoption rules will be applied as on 1 April 2004.

IFRS 1 allows certain exemptions in the application of particular standards to prior periods in order to assist companies with the transition process none of which have been applied by the Group.

(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. In respect of associates, the last audited financial statements not exceeding three months from year ending 31 March 2008.

Intra group balances and 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.

(e) Business combination through reverse acquisition

The acquisition of an existing entity, which will have the power to govern the financial and operating policies of the Group so as to obtain benefits from its activities, will be accounted as a business combination through reverse acquisition. 

In a reverse acquisition, the cost of business combination may be deemed to have been incurred by the legal subsidiary (i.e acquirer for accounting purposes). If the published price of equity instruments of the legal subsidiary is used to determine the cost of combination, a calculation could be made to determine the number of equity instruments the legal subsidiary would have had to issue to provide the same percentage ownership interest of the combined entity to the owners of the legal parent as they have in the combined entity as a result of the reverse acquisition. The fair value of the number of equity instruments so calculated could be used as the cost of combination.

In the event the fair value of equity instruments of the legal subsidiary is not clearly evident, the total fair value of all the issued equity instruments of the legal parent before the business combination could be used as a basis for arriving at the cost of combination.

Reverse acquisition accounting determines the allocation of the cost of the business combination as at the acquisition date and does not apply to transactions after the combination.

In the event of acquisition of subsidiaries and businesses otherwise than through reverse acquisition, the acquisition will be accounted using the purchase method as set out in IFRS 3. 

The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

(f) Goodwill

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.

(g) 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.

(h) Foreign currency

(i) Translation to presentation currency

The functional currency of the respective Group companies is: 

DQ plc	Great British Pound (GBP)
DQM	US Dollar (USD)
DQ India	Indian Rupee (INR)

At the reporting date the assets and liabilities of the Group are translated into the presentation currency, which is in US Dollars (USD) at the rate of exchange ruling at the balance sheet date and the income statement is translated at the weighted 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 USD were as follows:

Closing rate at 31 March Average rate for the year ended 31 March

2008 39.9451 40.2856

2007 43.4417 45.2539

The GBP:USD exchange rates used to translate the GBP financial information into the presentation currency of USD were as follows:

Closing rate at 31 March 2008	1.99510
Average rate for the year ended 31 March 2008	2.00758

(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.

Goodwill and fair value adjustments, arising on consolidation of financial statements and presentation of financial instruments acquired other than by subscription of subsidiaries, are treated as assets of the purchasing entity.

Goodwill is measured at cost less any accumulated impairment losses. Impairment review is performed at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

  (i) 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 remeasurement 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.

(j) 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 gains and losses" for gains and "other operating expenses" for losses in the statement of income.

(ii) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. The assets acquired by way of finance lease are stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation. Lease payments are accounted for as described in accounting policy 2 (w).

 

(iii) 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 with 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.

(iv) 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.

  Property, plant and equipment - continued

(v) 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 software 3 - 6 years

  equipment including office equipment 6 - 10 years

  fixtures and fittings 10 years

  vehicles 4 years

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.

(k) Intangible assets

(i) Distribution rights

Distribution rights that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. 

(ii) Advance paid for distribution rights

Advances paid for distribution rights include amounts paid to the producers for acquisition of the distribution rights. These advances are transferred to distribution rights on completion of the entire production activities and when the asset is ready for exploitation. No amortisation is charged on these advances until they are transferred to the distribution rights. Up to that point, they are assessed annually for impairment.

(iii) Projects under development

Direct or indirect expenses incurred on the Development of Projects in order to create Intellectual Property or Content, which are exploited on any form of media are capitalized as an intangible asset under development in accordance with IAS 38 (intangible assets). In the event, the project is not scheduled for production within three years, or project is abandoned, the carrying value of the Development Rights would be expensed in the year in which such project is discontinued or abandoned.

(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. All other expenditure is expensed as incurred.

(v) Amortisation

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. 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 which ever 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").

  (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 as 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) Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

(n) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits and are carried in the balance sheet 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.

(o) Impairment

The carrying amounts of the Group's assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date 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.

(i) 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.

(ii) Reversals of impairment

An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. In respect of other assets impairment losses are reversed when there is an indication that the impairment loss may no longer exist and if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

  (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 period in which they are declared.

(q) Compound financial instruments

Compound financial instruments issued by the Group comprise of convertible debenture and convertible preference shares that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. Interest, dividends, losses and gains relating to the financial liability are recognised in profit or loss. Distributions to the equity holders are recognised against equity, net of any tax benefit.

(r) 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 basis.

(s) 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.

  Defined benefit plans - continued

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.

(iii) Share-based payment transactions

The share option programme allows Group employees to acquire shares of the Group. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the 'Black Scholes' model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.

(t) Provisions

A provision is recognised in the balance sheet 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.

(u) Trade and other payables

Trade payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.

(v) Revenue recognition

(i) Production service fee and licensing revenue

Revenue represents amounts receivable for production services rendered and is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion can be measured reliably and is assessed by reference to work completed as on the balance sheet date. 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.

  Production service fee and licensing revenue - continued

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 and in the case of the license fee from co-production rights on the date declared by the licensee.

No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due.

(ii) Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received.

Grants that compensate the Group for the cost of an asset are recognised on receipt by way of deduction from the carrying cost of the asset. The grant is recognised as income over the life of the depreciable asset by way of a reduced depreciation charge. 

Grants that compensate the Group for expenses incurred are recognised as reduction from relevant head of expense in the income statement on a systematic basis in the same periods in which the expenses are incurred.

(w) 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.

(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 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.

(x) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

  Income tax - continued

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(y)  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.

(z) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

(aa) 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 to IAS 8 with relevant disclosures.

  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 in relation to the production of animation television series and movies.

Gaming:

The services provided for the contents in Console / Mobile / Other platforms.

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
	2007-08 USD'000	2006-07 USD'000	2007-08 USD'000	2006-07 USD'000
Animation	21,398	13,016	9,946	5,683
Gaming	1,774	2,170	1,214	1,670
Distribution	961	53	267	(309)
	24,133	15,239	11,427	7,044
Unallocated Expenses			(4,020)	(6,422)
Profit before tax			7,407	622
Income tax expense			(222)	-
Profit for the year			7,185	622

  

SEGMENT REPORTING - continued

Segment assets and liabilities

	Assets		Liabilities
	2007-08 USD'000	2006-07 USD'000	2007-08 USD'000	2006-07 USD'000
Animation	10,822	5,057	2,266	1,200
Gaming	190	431	69	58
Distribution	13,647	8,499	-	-
Total of all segments	24,659	13,987	2,335	1,258
Unallocated	45,946	7,275	14,526	19,574
Consolidated	70,605	21,262	16,861	20,832

Other segment information

	Depreciation and amortisation		Additions to non-current assets
	2007-08 USD'000	2006-07 USD'000	2007-08 USD'000	2006-07 USD'000
Animation	-	-	-	-
Gaming	-	-	-	-
Distribution	694	362	5,061	3,264
	694	362	5,061	3,264

Geographical segments

The animation, gaming 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 external customers		Segment assets		Acquisition of segment assets
	2007-08 USD'000	2006-07 USD'000	2007-08 USD'000	2006-07 USD'000	2007-08 USD'000	2006-07 USD'000
America	9,901	7,380	3,929	1,974	-	-
Europe	14,102	7,636	6,968	3,319	-	-
Others	130	223	59,708	15,969	12,785	6,533
	24,133	15,239	70,605	21,262	12,785	6,533

 

NOTE C - REVENUE

	2007-08			2006-07
	Group USD'000	Company USD'000		Group USD'000	Company USD'000
Revenue from animation and gaming	23,172	-		15,186	-
Revenue from distribution	961	-		53	-
Service income	-	429		-	-
	24,133	429		15,239	-

 

NOTE D - OTHER GAINS AND LOSSES

		2007-08 Group USD'000	2006-07 Group USD'000
Gain on foreign exchange fluctuations		149	35
Gain on valuation of financial assets at fair value through profit or loss		177	-
Other income		39	-
		365	35

 

NOTE E - NET FINANCING COSTS

	2007-08			2006-07
	Group USD'000	Company USD'000		Group USD'000	Company USD'000
Interest income	428	526		6	-
Financial income	428	526		6	-
Interest on convertible debentures	(71)	-		(113)	-
Dividend on convertible preference shares	-	-		(919)	-
Finance lease charges	(12)	-		(7)	-
Interest on short term borrowings and other financing costs	(322)	(2)		(181)	-
Loss on valuation of financial assets at fair value through profit or loss	-	(19,416)		-	-
Interest on term loans	(693)	-		(189)	-
Net foreign exchange (loss)/gain	(12)	-		71	-
Financial expenses	(1,110)	(19,418)		(1,338)	-
Net financing costs	(682)	(18,892)		(1,332)	-

 

NOTE F - INCOME TAX EXPENSE

		2007-08 Group USD'000	2006-07 Group USD'000
Current tax expense
Current tax (MAT)		222	-
		222	-
Deferred tax expense
Origination and reversal of temporary differences		1,135	102
Benefit of tax losses recognized		(1,135)	(102)
		-	-
Total income tax expense in income statement		222	-

Reconciliation of effective tax rate

		2007-08 Group USD'000	2006-07 Group USD'000
Profit before tax		7,407	622
Indian corporate income tax rate		33.99%	33.99%
Income tax at standard rate		2,518	211
Differences on account of items taxed at zero/lower rates		(2,296)	(211)
Tax charge		222	-

CURRENT TAX EXPENSE

DQplc 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 10A 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 10% of the book profits was deemed to have a tax liability equivalent to 10% of the book profits derived as per Income Statement. The amount paid under section 115JB is allowed to be adjusted against tax liabilities in the succeeding seven financial years. Till the financial year 2006-07, companies which enjoyed exemption under section 10A were outside the ambit of the provisions of section 115JB. However, by way of an amendment in the Finance Act 2007 such companies were brought within the provisions of MAT under section 115JB and were liable to pay tax of at least 10%.

Consequently DQ India's current tax expense for the FY: 2007-08 of USD 222 Thousand represents the amount of MAT payable and can be carried forward and adjusted against income tax liability (other than MAT tax provision) in the next seven financial years.

 

NOTE G - PROPERTY, PLANT AND EQUIPMENT

 

	Computer hardware and software	Equipment	Fixtures and furniture	Leasehold improvements	Vehicles	Assets under construction	Total
	USD'000	USD'000	USD'000	USD'000	USD'000	USD'000	USD'000
Cost
Balance at 1 April 2006	5,792	356	757	285	245	34	7,469
Effect of correction of errors	(18)	-	-	-	-	-	(18)
As restated	5,774	356	757	285	245	34	7,451
Acquisitions	2,566	146	78	39	95	345	3,269
Disposals	(47)	-	(76)	(14)	(73)	-	(210)
Transfers	15	-	-	-	-	(15)	-
Translation adjustment	128	4	11	4	-	(34)	113
Balance at 31 March 2007	8,436	506	770	314	267	330	10,623
Balance at 1 April 2007	8,436	506	770	314	267	330	10,623
Acquisitions	746	-	-	-	193	6,785	7,724
Disposals	(334)	-	-	-	-	-	(334)
Transfers	4,442	31	180	82	-	(4,735)	-
Translation adjustment	779	46	69	28	26	46	994
Balance at 31 March 2008	14,069	583	1,019	424	486	2,426	19,007
Depreciation
Balance at 1 April 2006	2,175	86	145	121	79	-	2,606
Effect of correction of errors	(40)	(1)	-	(1)	-	-	(42)
As restated	2,135	85	145	120	79	-	2,564
Depreciation charge for the year	1,807	61	70	45	62	-	2,045
Effect of correction of errors	(87)	-	-	-	-	-	(87)
Disposals	(30)	-	(31)	(14)	(53)	-	(128)
Translation adjustment	110	1	6	4	3	-	124
Balance at 31 March 2007	3,935	147	190	155	91	-	4,518
Balance at 1 April 2007	3,935	147	190	155	91	-	4,518
Depreciation charge for the year	2,544	77	88	54	98	-	2,861
Disposals	(334)	-	-	-	-	-	(334)
Translation adjustment	364	15	17	14	9	-	419
Balance at 31 March 2008	6,509	239	295	223	198	-	7,464
Carrying amounts
At 31 March 2007	4,501	359	580	159	176	330	6,105
At 31 March 2008	7,560	344	724	201	288	2,426	11,543

PROPERTY, PLANT AND EQUIPMENT - continued

Leased plant and machinery

The Group acquires vehicles under finance lease agreements. At the end of each of the leases the Group has the option to purchase the vehicle. At 31 March 2008, the net carrying amount of leased vehicles was USD 283 Thousand (31 March 2007: USD 175 Thousand). Amounts due under finance leases are secured on the leased assets.

Security

At 31 March 2008, properties with a carrying amount of USD 11,260 Thousand (31 March 2007: USD 5,930 Thousand) are secured to borrowings from banks.

Property, plant and equipment under construction

During the year ended 31 March 2007, the Group has paid USD 317 Thousand towards acquisition of land for the construction of new premises for its business. The legal title to the land is yet to be registered in favour of the Group and hence the amount paid has been disclosed as assets under construction.

 

NOTE H - GOODWILL

Goodwill arising on consolidation of subsidiaries

An amount of USD 10,818 Thousand 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 DQM acquired from certain shareholders.

	Goodwill USD'000
Purchase of equity shares	10,063
Purchase of preference shares	755
	10,818

 

NOTE I - INTANGIBLE ASSETS 

		2007-08 Group USD'000	2006-07 Group USD'000
Cost
Opening balance		4,738	2,214
Acquisitions		3,311	2,430
Disposals		-	(65)
Translation adjustment		443	159
Closing Balance		8,492	4,738
Amortisation
Opening balance		612	296
Amortisation for the year		694	362
Disposals		-	(65)
Translation adjustment		59	19
Closing Balance		1,365	612
Carrying amounts
At beginning of year		4,126	1,918
At end of year		7,127	4,126

  DISTRIBUTION RIGHTS - continued

Intangible assets are distribution rights representing the unamortized value of costs incurred in acquiring distribution rights. The Company started acquiring these rights from the year 2003-04 and to date twenty series of Animation rights have been acquired for different territories across the globe. The Company has started receiving revenues from exploitation of rights during the year and accordingly, it is estimated that the net present value of future cash flows from exploitation of these rights will be adequate to cover their respective carrying values. Consequently no provision for impairment is considered necessary by the management at this stage.

The amortisation is recognised as cost of sales in the income statement.

 

NOTE J - ADVANCES PAID FOR DISTRIBUTION RIGHTS

Advances paid for distribution rights include amounts paid to the producers for acquisition of the distribution rights. These advances are transferred to distribution rights on completion of the entire production activities and when the asset is ready for exploitation.

		2007-08 Group USD'000	2006-07 Group USD'000
Opening Balance		4,373	3,411
Acquisitions		5,061	3,264
Transfers to distribution rights		(3,311)	(2,430)
Translation adjustment		397	128
Closing Balance		6,520	4,373

 

NOTE K - INVESTMENT IN ASSOCIATE

DQplc invested an amount aggregating to USD 3,884 Thousand in Method Animation SAS, France on 28 March 2008 in consideration for acquiring 20% ownership interest and also the right to nominate one director.

For the purpose of applying equity method of accounting, as the financial year of Method Animation, SAS ends on 31 December, the provisional financial statements as of 31 March 2008 of Method Animation, SAS have been used. On the basis of these provisional financial statements the net book value of assets were as follows: 

	2007-08 USD'000
Total assets	45,402
Total liabilities	(37,184)
Net assets	8,218
Group's share of net assets of associate	1,644

Goodwill of USD 2,240 Thousand arose on the transaction and is included in the carrying cost of the investment.

The Company shall make appropriate adjustments to the initial investment accounted on a provisional value:

(a) within 12 months of the acquisition date and 

(b) from the acquisition date 

to comply with IFRS 3 by an amount equal to the adjustment to the fair value at the acquisition date of the identifiable asset, liability being recognised or adjusted.

The Group's share of Profit / Loss of the associate from the date of acquisition to 31 March 2008 is not significant and has not been accounted for.

 

NOTE L - LOAN TO SUBSIDIARY

As per the shareholders loan agreement DQplc has given an interest free loan amounting to USD 35,912 Thousand to its subsidiary DQM.

Fair value on initial recognition of the loan has amounted to USD 19,296 Thousand assuming an interest rate of 8% per annum and repayment period of 10 years. As at 31 March 2008, the fair value of the loan outstanding amounted to USD 16,937 Thousand.

DQM shall repay the Loan Amount to DQplc at such time and on such terms and conditions as may be mutually agreed between them.

 

NOTE M - DEFERRED TAX ASSETS AND LIABILITIES

Recognised deferred tax assets and liabilities of the Group

Deferred tax assets and liabilities of the Group are attributable to the following:

	Assets		Liabilities		Net
	2007-08 USD'000	2006-07 USD'000	2007-08 USD'000	2006-07 USD'000	2007-08 USD'000	2006-07 USD'000
Property, plant and equipment	-	-	(973)	(555)	(973)	(555)
Intangible assets	-	-	(581)	(331)	(581)	(331)
Employee benefits	419	234	-	-	419	234
Tax value of loss carry forwards recognized	1,135	652	-	-	1,135	652
Net tax assets/(liabilities)	1,554	886	(1,554)	(886)	-	-

Unrecognised deferred tax assets of the Group

Deferred tax assets of the Group have not been recognised in respect of the following items:

		2007-08 USD'000	2006-07 USD'000
Business losses		438	519
Unabsorbed depreciation		59	72
		497	591

The depreciation losses can be carried forward for indefinite period of time and business losses can be carried forward for a period of eight years immediately succeeding the year in which the business loss was incurred under Indian Tax laws. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which DQ India can utilise the benefits there from.

Further, DQ India is exempt from income tax on profits from production as it is eligible for tax holiday under the Indian Tax laws until the year ending 31 March 2010 and hence temporary differences which arise during the tax holiday period are recognised at the expected tax rate when these differences reverse, being zero.

  DEFERRED TAX ASSETS AND LIABILITIES - continued

Movement in temporary differences during the year

	Balance as at 1 April 2006	Recognised in income statement	Recognised in equity	Translation adjustment	Balance as at 31 March 2007
	USD'000	USD'000	USD'000	USD'000	USD'000
Property, plant and equipment	(553)	(2)	-	-	(555)
Intangible assets	(149)	(182)	-	-	(331)
Employee benefits	152	82	-	-	234
Tax value of carry forward tax losses	550	102	-	-	652
Net tax assets/(liabilities)	-	-	-	-	-

	Balance as at 1 April 2007	Recognised in income statement	Recognised in equity	Translation adjustment	Balance as at 31 March 2008
	USD'000	USD'000	USD'000	USD'000	USD'000
Property, plant and equipment	(555)	(364)	-	(54)	(973)
Intangible assets	(331)	(217)	-	(33)	(581)
Employee benefits	234	161	-	24	419
Tax value of carry forward tax losses	652	420	-	63	1,135
Net tax assets/(liabilities)	-	-	-	-	-

 

NOTE N - 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 the services with these agencies.

NOTE O - TRADE AND OTHER RECEIVABLES

	2007-08			2006-07
	Group  USD'000	Company USD'000		Group USD'000	Company USD'000
Trade receivables	5,792	426		3,528	-
Unbilled revenue	5,221	-		1,960	-
Prepayments	443	50		44	-
Other receivables	1,052	3,153		62	-
	12,508	3,629		5,594	-

Total trade receivables (net of allowances) held by the Group at 31 March 2008 amounted to USD 5,792 Thousand (31 March 2007: USD 3,528 Thousand) comprising of USD 5 Thousand being above 120 days (31 March 2007: USD 1,072 Thousand). 

  TRADE AND OTHER RECEIVABLES - continued

The ageing analysis of trade receivables is given below:

 

		2007-08			2006-07
		Group USD’000	Company USD’000		Group USD’000	Company USD’000
	Less than 30 days	3,995	426		1,293	-
	30 – 60 days	1,437	-		551	-
	60 – 90 days	294	-		298	-
	90 – 120 days	61	-		314	-
	Greater than 120 days	5	-		1,072	-
		5,792	426		3,528	-

 

Allowance for doubtful debts is made by the Group for trade receivables beyond 180 days & where the Group is of the opinion that the amount is not recoverable. As of 31 March 2008, amount of trade receivables beyond 180 days was USD nil (31 March 2007: USD 712 Thousand). Historically the Group has recovered all its trade receivables. 

 

NOTE P - FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through profit or loss comprise of plain vanilla currency option contracts held by the Group as at 31 March 2008. The fair value of these derivative instruments is as follows:

		2007-08 Group USD'000	2006-07 Group USD'000
Foreign exchange option contracts		177	-
		177	-

 

NOTE Q - CASH AND CASH EQUIVALENTS

	2007-08			2006-07
	Group USD'000	Company USD'000		Group USD'000	Company USD'000
Cash and bank balances	3,163	604		792	-
Call deposits	14,347	6,453		14
Cash and cash equivalents	17,510	7,057		806	-
Bank overdraft	(730)	-		(1,276)	-
Cash and cash equivalents in the statement of cash flows	16,780	7,057		(470)	-

 

NOTE R - EQUITY

Ordinary shares

DQplc 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 50,000,000 equity shares of 0.1 pence aggregating to USD 99.755 Thousand.

 

 

 

EQUITY - continued

 

Issue of ordinary shares

	2007-08		2006-07
	Group	Company	Group	Company
Number of shares in thousands
Opening balance	777	-	757	-
Changes due to reverse acquisition	(777)	-	-	-
Issued for cash	35,966	35,966	20	-
Closing balance	35,966	35,966	777	-

	2007-08		2006-07
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Share capital
Opening balance	178	-	174	-
Changes due to reverse acquisition	(178)	-	-	-
Issued for cash	73	73	4	-
Closing balance - fully paid	73	73	178	-

	2007-08		2006-07
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Share premium
Opening balance	1,511	-	1,493	-
Changes due to reverse acquisition	(293)	-	-	-
Transfer to reverse acquisition reserve	(1,218)	-	-	-
Issued for cash	54,449	54,449	18	-
Share issue expenses	(5,432)	(5,432)	-	-
Closing balance	49,017	49,017	1,511	-

 

b. Reserves

Share premium - The amount received by the Group over and above the par value of shares issued and reduced by share issue expenses amounting to USD 5,432 Thousand is shown under this head.

Statutory reserves- Statutory reserve in the previous year amounting to USD 932 Thousand represents reserves in the records of the DQ Entertainment Limited (now merged into DQ India) being the amount transferred to debenture redemption reserve out of profits every year as required under the Indian Companies Act, 1956. The profits for this purpose are profits as calculated under the local accounting standards (IGAAP). This reserve is to be utilised exclusively for redemption of the debentures and is not available for distribution

During the FY: 2007-08, as part of the scheme of arrangement approved by the Honourable High Court of Andhra Pradesh, India, these reserves are no longer required and hence taken to retained earnings.

  EQUITY - continued

Statutory reserves

		2007-08 Group USD'000	2006-07 Group USD'000
Opening balance		932	636
Addition during the year		-	296
Transferred to retained earnings		(932)	-
Closing balance		-	932

Translation reserve - Assets, liabilities, income, expenses and cash flows are translated in to USD (presentation currency) from Indian Rupees (functional currency of DQ India) and Great British Pounds (functional currency of DQplc). The exchange difference arising out of the year-end translation is being debited or credited to Foreign Currency Translation Reserve, which is amounting to USD (1,660) Thousand (31 March 2007: USD 36 Thousand).

	2007-08		2006-07
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Opening balance	36	-	(33)	-
Increase/(decrease) during the year	(1,696)	(749)	79	-
Closing balance	(1,660)	(749)	46	-
Effect of correction of errors	-	-	(10)	-
Closing balance - as restated	(1,660)	(749)	36	-

Accumulated earnings - Accumulated earnings amounting to USD 3,938 Thousand (31 March 2007: USD (4,080) Thousand) include all current and prior period results as disclosed in the income statement.

	2007-08		2006-07
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Opening balance	(4,080)	-	(4,444)	-
Profit/(loss) for the year	7,185	(18,883)	622	-
Transfer from / (to) statutory reserve	932	-	(296)	-
Closing balance	4,037	(18,883)	(4,118)	-
Effect of correction of errors	(99)	-	38	-
Closing balance - as restated	3,938	(18,883)	(4,080)	-

 

NOTE S - EARNINGS PER SHARE

Basic earnings per share

The calculation of basic earnings per share at 31 March 2008 was based on the profit attributable to ordinary shareholders of USD 7,185 Thousand (31 March 2007: USD 622 Thousand) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2008 of 11,902 Thousand (31 March 2007: 757 Thousand), calculated as follows:

  EARNINGS PER SHARE - continued

Profit attributable to ordinary shareholders

		2007-08 USD'000	2006-07 USD'000
Profit for the year		7,185	622
Profit attributable to ordinary shareholders		7,185	622

Weighted average number of ordinary shares

			2007-08 In thousands of shares	2006-07 In thousands of shares
Issued ordinary shares at 1 April			-	757
Effect of new issue of shares			11,902	-
Weighted average number of ordinary shares			11,902	757

Diluted earnings per share

The calculation of diluted earnings per share at 31 March 2008 was based on the profit attributable to ordinary shareholders (diluted) of USD 7,185 Thousand (31 March 2007: USD 1,654 Thousand) and a weighted average number of ordinary shares (diluted) outstanding during the year ended 31 March 2008 of 11,902 Thousand (31 March 2007: 3,246 Thousand), calculated as follows:

Profit attributable to ordinary shareholders (diluted)

			2007-08 USD'000	2006-07 USD'000
Profit attributable to ordinary shareholders			7,185	622
Dividends on convertible preference shares			-	919
Interest on convertible debentures			-	113
Profit attributable to ordinary shareholders (diluted)			7,185	1,654

Weighted average number of ordinary shares (diluted)

			2007-08 In thousands of shares	2006-07 In thousands of shares
Weighted average number of ordinary shares			11,902	757
Effect of conversion of convertible preference shares			-	1,922
Effect of conversion of convertible debentures			-	356
Employee stock options outstanding			-	211
Weighted average number of ordinary shares (diluted)			11,902	3,246

The Group does not have any dilutive instruments for the year ended 31 March 2008.

NOTE T - TRADE AND OTHER PAYABLES

 

	2007-08			2006-07
	Group USD’000	Company USD’000		Group USD’000	Company USD’000
Trade payables	1,734	-		336	-
Deferred income	682	-		416	-
Non-trade payables and accrued expenses	2,290	2,054		1,064	-
	4,706	2,054		1,816	-
Ageing analysis of trade payables is as follows:
On demand	-	-		-	-
Less than three months	1,723	-		335	-
Three to twelve months	11	-		-	-
One to five years	-	-		1	-
Greater than five years	-	-		-	-
	1,734	-		336	-

 

 

NOTE U - BANK OVERDRAFT

Secured bank overdraft facility:

		2007-08 Group USD'000	2006-07 Group USD'000
Amount used		730	1,276
Amount unused		772	105
		1,502	1,381

 

NOTE V - 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 Z.

		2007-08 Group USD'000	2006-07 Group USD'000
Non-current liabilities
Secured bank loans		5,200	2,527
Convertible debentures		-	1,488
Redeemable convertible preference shares		170	-
Finance lease liabilities		80	45
		5,450	4,060
Current liabilities
Current portion of secured bank loans		4,000	1,315
Redeemable convertible preference shares		-	11,489
Current portion of finance lease liabilities		73	56
		4,073	12,860

  INTEREST-BEARING LOANS AND BORROWINGS - continued

		2007-08 Group USD'000	2006-07 Group USD'000
The borrowings are repayable as follows:
On demand or within one year		4,073	12,860
In the second year		3,225	1,963
In the third to fifth years inclusive		2,270	2,115
After five years		-	-
		9,568	16,938
Unrealised direct issue cost of secured bank loan		(45)	(18)
		9,523	16,920
Less: Amount due for settlement within twelve months (shown under current liabilities)		4,073	12,860
Amount due for settlement after twelve months		5,450	4,060

The secured bank loans are secured over properties with a carrying amount of USD 11,260 Thousand (31 March 2007: USD 5,930 Thousand).

The interest rate for one of the 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.

191,723 1% redeemable non-cumulative preference shares were issued on 12 December 2007 and 12,044 1% redeemable non-cumulative preference shares were issued on 18 February 2008 at an issue price of equivalent USD 0.254 per share. 

The Group shall be entitled, at its option, to call for redemption of all or part of the Preference Shares in one or more tranches, at a redemption price of equivalent USD 0.254 per share plus an amount equal to any accrued but unpaid dividend on such Preference Shares.

Finance lease liabilities reflect the lease obligations on loans obtained for purchase of vehicles, details of which are explained in the subsequent paragraphs in this section.

Compound financial instruments

		Convertible Debentures	Redeemable convertible preference shares
		Group	Group
		USD'000	USD'000
Balance at 1 April 2006		1,431	10,354
Proceeds from issue		-	-
Amount classified as equity		-	-
Accredited interest/dividend capitalized		23	919
Translation adjustment		34	216
Balance at 31 March 2007		1,488	11,489
Balance at 1 April 2007		1,488	11,489
Proceeds from issue		-	265
Reduction due to reverse acquisition		(1,488)	(11,489)
Amount classified as equity		-	(98)
Translation adjustment		-	3
Balance at 31 March 2008		-	170

INTEREST-BEARING LOANS AND BORROWINGS - continued

1% Redeemable Optionally Convertible Non Cumulative Preference Shares (Preference Shares):

These shares are issued by DQ India with the following terms and conditions: 

Dividends: Each Preference Share shall carry an annual preference dividend of 1% (one percent) per annum, such dividends to be non cumulative and payable annually prior to the payment of dividends on the equity shares. The Preference Shares being non-cumulative in nature, any dividend unpaid for any financial year shall not be carried forward and/or accumulate in the next financial year. No dividend shall be paid on the Equity Shares if the preference dividends or any portion thereof on Preference Shares are in arrears.

Redemption: DQ India shall be entitled, at its option to call for redemption of all or part of the Preference Shares in or more tranches, at a redemption price of USD 0.248 per Preference Share plus an amount equal to any accrued but unpaid dividend on such Preference Shares ("Redemption Price").

Conversion: After the expiry of twenty four months from the date of issuance of the Preference Shares and to the extent the Preference Shares have not been redeemed by DQ India, the holders of the Preference Shares shall be entitled, at their option to call for conversion for all or part of such Preference Shares in one or more tranches into Equity Shares at a conversion ratio of 1:1, i.e., issue and allotment of 1 (One) Equity Share for each converted Preference Share.

Maturity: The Preference Shares shall (unless converted into Equity Shares or redeemed in the manner stated above) be redeemed at the Redemption Price at the expiry of sixty months from the date of issuance thereof.

Ranking and Pari-passu: The Preference Shares shall inter-se rank pari passu, and shall at all times rank senior to the Equity Shares in regard to the payment of dividends.

Finance lease liabilities

Finance lease liabilities are payable as follows:

	Minimum lease payments		Present value of minimum lease payments
	2007-08 USD'000	2006-07 USD'000	2007-08 USD'000	2006-07 USD'000
Less than one year	85	62	69	52
Between one and five years	89	48	67	38
More than five years	-	-	-	-
	174	110	136	90
Less: Future finance charges	(38)	(20)	-	-
Present value of minimum lease payments	136	90	136	90

The interest rate inherent in the leases is fixed at the contract date for the entire lease term. The effective interest rate contracted ranged approximately between 4.77% to 13.54% per annum (31 March 2007: 4.77% to 13.54% per annum).

INTEREST-BEARING LOANS AND BORROWINGS - continued

The Group acquires vehicles under finance lease agreements. At the end of each of the leases the Group has the option to purchase the vehicle. Under the terms of the lease agreements, no contingent rents are payable.

 

NOTE W - PROVISIONS

Provisions include the following:

		2007-08 Group USD'000	2006-07 Group USD'000
Current employee benefits (note X)		64	29
Provision for retakes (note Y)		435	188
		499	217
Non-current employee benefits (note X)		1,289	603

 

NOTE X - 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.

			2007-08 USD'000	2006-07 USD'000
Present value of unfunded obligations			587	333
Actuarial gains and losses			-	13
Recognised liability for defined benefit obligations			587	346
Liability for compensated absences			766	286
Total employee benefit liability			1,353	632

Movements in the net liability for defined benefit obligations recognised in the balance sheet

			2007-08 USD'000	2006-07 USD'000
Net liability for defined benefit obligations at 1 April			345	240
Expense recognised in the income statement (see below)			240	143
Actuarial gains			(16)	(51)
Contributions to defined benefit obligations			(14)	(6)
Translation adjustment			32	7
Net liability for defined benefit obligations			587	333

EMPLOYEE BENEFITS - continued

Employee benefits recognised in the balance sheet are as follows:

		2007-08 USD'000	2006-07 USD'000
Current employee benefits		64	29
Non-current employee benefits		1,289	603
		1,353	632

Expense recognised in the income statement

		2007-08 USD'000	2006-07 USD'000
Current service costs		210	126
Interest on obligation		30	17
Actuarial gains		(16)	(51)
		224	92

The expense is recognised in the following line items in the income statement:

		2007-08 USD'000	2006-07 USD'000
Cost of sales		212	90
General and administrative expenses		12	2
		224	92

Liability for defined benefit obligations

Principal actuarial assumptions at the balance sheet date:

		2007-08 USD'000	2006-07 USD'000
Discount rate at 31 March		8.00%	8.10%
Future salary increases
- first 5 years		6%	12%
- next 5 years		6%	10%
- thereafter		6%	7%
Withdrawal rate
Age group (in years): 18-30		10%	15%
31-40		5%	5%
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

		2007-08 USD'000	2006-07 USD'000
Wages and salaries		11,090	6,055
Contributions to defined contribution plans		897	298
Increase in liability for defined benefit plans		224	143
Increase in liability for compensated absences		360	98
Equity-settled transactions		(793)	-
		11,778	6,594

EMPLOYEE BENEFITS - continued

Share-based payments

At 28 March 2005, DQ India established a share option programme that entitles senior employees to purchase shares in the company. In accordance with the programme options are exercisable at the face value of the shares. 

The terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares:

Grant date	28 March 2005
Number of options	241,000
Vesting conditions	None - shares vest on the date of grant
Exercise price	USD 0.22
Contractual life of option	3 years

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on a Black Scholes model. The contractual life of the option (3 years) is used as an input into this model.

Fair value of share options and assumptions
Fair value at measurement date (USD)			3.76
Share price (USD)			3.94
Exercise price (USD)			0.22
Expected volatility			54.70%
Option life			3 years
Expected dividends			-
Risk-free interest rate (based on national government bonds)			6.65%

The expected volatility is based on the historic volatility of listed companies having a similar risk profile as that of the company.

There are no market conditions associated with the share option grants.

Cost of employee stock options granted recognised as an employee stock compensation cost for the year ended 31 March 2005 aggregating to USD 905 Thousand is recognised in the following line items in the income statement 

	USD'000
Cost of sales	119
General and administrative expenses	786
	905

During FY: 2007-08, as part of business combination through reverse acquisition between DQ Entertainment Limited and DQ India, the beneficiaries of the stock options in DQ Entertainment Limited consented to waive their respective options resulting in write back of stock options outstanding to the income statement amounting to USD 793 Thousand.

 

NOTE Y - PROVISION FOR RETAKES

		2007-08 Group USD'000	2006-07 Group USD'000
Opening balance		188	227
Provisions made during the year		489	307
Provisions used during the year		(105)	(91)
Provisions reversed during the year		(155)	(259)
Translation adjustment		18	4
Closing balance		435	188

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 three months from the final delivery and hence the provision is not discounted.

 

NOTE Z - FINANCIAL INSTRUMENTS

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 only enters into derivative instruments with bankers 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 optimisation of the debt and equity balance.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note V, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes Q and R respectively.

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.

  FINANCIAL INSTRUMENTS - continued

The gearing ratio at the year end was as follows:

		2007-08 Group USD'000	2006-07 Group USD'000
Debt (i)		10,253	18,196
Cash and cash equivalents		(17,510)	(806)
Net debt		-	17,390
Equity (ii)		53,744	430
Net debt to equity ratio		-	40:1

(i) Debt is defined as long and short-term borrowings, as detailed in note V.

(ii) Equity includes all capital and reserves of the Group.

Credit risk

The Group's principal financial assets are bank balances and cash, 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 creditߛratings assigned by international creditߛrating agencies.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers. The Group does not require collateral in respect of financial assets. 

At 31 March 2008 there was concentration of credit risk in one customer to the extent of 37% of the total trade receivables. However the Group does not foresee any credit risk, as the receivable from such customer is less than 90 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. 

  FINANCIAL INSTRUMENTS - continued

Liquidity risk

Group	Less than one month	One to three months	Three to twelve months	One to five years	Greater than five years	Total
31 March 2008
Interest bearing loans and borrowings (note V)	91	729	3,253	5,495	-	9,568
Trade and other payables	4,535	46	125	-	-	4,706
	4,626	775	3,378	5,495	-	14,274
31 March 2007
Interest bearing loans and borrowings (note V)	5	9	12,846	4,078	-	16,938
Trade and other payables	1,780	35	-	1	-	1,816
	1,785	44	12,846	4,079	-	18,754

Interest rate risk

The Group regularly evaluates profile of borrowings and the associated interest rates. The Group 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 USD'000
2007-08
Increase	100	(73)
Decrease	(100)	73
2006-07
Increase	100	(24)
Decrease	(100)	24

FINANCIAL INSTRUMENTS - continued

Effective interest rates

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: 

	2007-08 USD'000					2006-07 USD'000
	Effective		On demand			Effective		On demand
	Interest		Less than	1 - 5	More than	interest		Less than	1 -5	More than
	Rate	Total	1 year	years	5 years	rate	Total	1 year	years	5 years
Financial assets
Cash and bank balances	-	3,163	3,163	-	-	-	792	792	-	-
Call deposits	4% - 10%	14,347	14,347	-	-	3% - 12%	14	14	-	-
Trade and other receivables	-	12,508	12,508	-	-	-	5,594	5,594	-	-
Deposits	-	518	-	518	-	-	239	-	239	-
		30,536	30,018	518	-		6,639	6,400	239	-
Financial liabilities
US dollar floating rate loan	5% - 9%	7,315	2,477	4,838	-	11%	1,096	279	817	-
Rupee floating rate loan	9% - 12%	1,885	1,523	362	-	11%	2,746	1,036	1,710	-
Convertible debentures	-	-	-	-	-	8%	1,488	-	1,488	-
Redeemable convertible preference shares	8%	170	-	170	-	9% - 12%	11,489	11,489	-	-
Finance lease liabilities	4.77% - 13.54%	153	73	80	-	4.77% - 13.54%	101	56	45	-
Bank overdraft	11% - 13.50%	730	730	-	-	9%	1,276	1,276	-	-
Trade and other payables	-	4,706	4,706	-	-	-	1,816	1,816	-	-
		14,959	9,509	5,450	-		20,012	15,952	4,060	-

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. The Group has currency option contracts as at the balance sheet date details of which are given in note P.

The financial instruments of the Group include the following amounts, which are denominated in the following foreign currencies:

	2007-08 USD'000				2006-07 USD'000
	Euro	USD	Other	Total	Euro	USD	Other	Total
Assets
Cash and bank balances	962	799	1,402	3,163	154	621	17	792
Call deposits	-	-	14,347	14,347	-	-	14	14
Trade and other receivables	3,647	1,557	7,304	12,508	2,646	741	2,207	5,594
Liabilities
Trade and other payables	-	62	4,644	4,706	-	-	1,816	1,816
Borrowings  - current	-	2,477	1,596	4,073	-	279	12,581	12,860
- non current	-	4,838	612	5,450	-	817	3,243	4,060

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: USD for Group and USD: GBP for Company). 

	Group		Company
	Increase/(decrease) in value of INR	Effect on Group net profit before tax USD'000	Increase/(decrease) in value of USD	Effect on Company net profit before tax USD'000
2007-08
Increase	INR 1	(179)	10¢	896
Decrease	(INR 1)	189	(10¢)	(990)
2006-07
Increase	INR 1	(13)	-	-
Decrease	(INR 1)	14	-	-

FINANCIAL INSTRUMENTS - continued

Fair values

The fair values together with the carrying amounts shown in the balance sheet are as follows:

	Carrying	Fair	Carrying	Fair
	Amounts	Value	Amounts	value
	2007-08 USD'000	2007-08 USD'000	2006-07 USD'000	2006-07 USD'000
Investment in associate	3,884	3,884	-	-
Deposits	518	518	239	239
Trade and other receivables	12,508	12,508	5,594	5,594
Financial assets at fair value through profit and loss	177	177	-	-
Cash and cash equivalents	17,510	17,510	806	806
Secured bank loans	(9,200)	(9,200)	(3,842)	(3,842)
Convertible debentures	-	-	(1,488)	(1,488)
Redeemable convertible preference shares	(170)	(170)	(11,489)	(9,258)
Finance lease liabilities	(153)	(151)	(101)	(97)
Trade and other payables	(4,706)	(4,706)	(1,816)	(1,816)
Bank overdraft	(730)	(730)	(1,276)	(1,276)
	19,638	19,640	(13,373)	(11,138)
Unrecognised gains		2		2,235

Estimation of fair values

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.

Interest-bearing loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows. 

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.

Finance lease liabilities 

The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect change in interest rates.

Trade and other receivables / payables

The Group considers that the carrying amount of trade and other receivables / payables approximates their fair values

NOTE AA - OPERATING LEASES

Leases as lessee

The Group leases a number of office and residential facilities under cancellable operating leases. The leases typically run for a period of 2 - 9 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

		2007-08 USD'000	2006-07 USD'000
Minimum lease payments		656	324
		656	324

NOTE AB - CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

During the year ended 31 March 2008, the Group entered into a contract to purchase property, plant and equipment for USD 55 Thousand (31 March 2007: USD 26 Thousand) and distribution rights for USD 2,232 Thousand (31 March 2007: USD 3,942 Thousand). These commitments are expected to be settled in the following financial year in respect of property, plant and equipment and in respect of distribution rights ranging from one to two years following the current financial year. 

Further, as at 31 March 2008, the Group has outstanding letters of credit amounting to USD 6,723 Thousand (31 March 2007: USD 141 Thousand) and has executed guarantees in favour of Indian customs and excise authorities amounting to USD 879 Thousand (31 March 2007: USD 730 Thousand).

NOTE AC - EFFECT OF CORRECTIONS OF PRIOR PERIOD ERRORS

During the year corrections were made in respect of the following for prior period to comply with IAS 8:

Particulars	Nature	Amount USD'000	Treatment in prior period
Application of correct rate based on estimated life of the asset	The rate based on estimated useful life of Computer Hardware and Software was 30%, which was erroneously taken as 33.33%.	122	USD 83 Thousand has been reduced from depreciation in the financial statements & USD 39 Thousand has been increased in the retained earnings for the year 2006-07.
Cancelable leases	Accounting for Cancelable Lease has been rectified from straight-line basis to actual payment becomes due	43	USD 28 Thousand has been reduced from Rent in the financial statements & USD 15 Thousand has been increased in the retained earnings for the year 2006-07.

  EFFECT OF CORRECTIONS OF PRIOR PERIOD ERRORS - continued

Particulars	Nature	Amount USD'000	Treatment in prior period
Government grants	Recognition of Government Grants for Capital Assets was treated as Revenue as opposed to deducting the amount from the cost of Capital Asset	18	USD 18 Thousand has been reduced from Fixed Assets & USD 5 Thousand has been reduced from Depreciation in the financial statements and USD 14 Thousand has been decreased in the opening retained earnings & USD 9 Thousand has been decreased from retained earnings in the financial statements for the year 2006-07.
Provision for sick leave	Provision for sick leave was not provided as per IAS 19	99	USD 99 Thousand is decreased from retained earnings and the same is increased in employee benefits payable in the year 2007-08.
Earnings per share	Earnings per share was lower in financial year 2006-07 due to errors as mentioned above	-	Corrected earnings per share (basic) is 82 cents per share and corrected earnings per share (diluted) is 51 cents per share

NOTE AD - EXCEPTIONAL ITEM

Sl	Particulars	Amount USD'000	Remarks
1	Extinguishment of liability on Preference Share Capital & Convertible Debentures	4,409	The outstanding liability towards 8% Redeemable Optionally Convertible Cumulative Preference Share Capital and 6% Convertible Debentures of DQ Entertainment Limited were extinguished at the time of reverse acquisition. The excess of the outstanding liability over the payment made and the amount of the 1% Redeemable Optionally Convertible Non Cumulative Preference Shares as per the reverse acquisition has been recognized during FY 2007-08

  NOTE AE - RELATED PARTIES

Identity of related parties

DQplc has a related party relationship with its directors, executive officers, subsidiaries and associate.

Related parties and their relationships

 

a. Subsidiaries

DQ Entertainment (Mauritius) Limited (with effect from 27 November 2007)

DQ Entertainment (International) Private Limited (with effect from 18 February 2008)

 

b. Associate

Method Animation SAS (with effect from 28 March 2008)

 

c. Key management personnel

Mr. Tapaas Chakravarti - Director

Mr. K. Balasubrahmanyam - Director

Mr. Michael Herlihy - Director

Mr. Rusi Brij - Director

Ms. Theresa Plummer - Director

 

d. Relatives of Key Management Personnel with whom DQ India had transactions during the year - Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti)

Trading transactions

Transactions between DQplc 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 owed by related parties
	2007-08 USD'000	2007-08 USD'000
Associate	80	2,103

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 company and their immediate relatives control 14.47 per cent of the voting shares of the company.

The remuneration of directors and other members of key management during the year was as follows:

		2007-08 USD'000	2006-07 USD'000
Short term benefits		390	93
Post employment benefits		-	-
Other long term benefits		-	-
Share-based payments		-	-
		390	93
Outstanding balance		56	-

  RELATED PARTIES - continued

Other related party transactions

Remuneration paid to relatives of key management personnel during the year was USD 19 Thousand (31 March 2007: USD 17 Thousand) and the outstanding balance as at 31 March 2008 was USD 1 Thousand (31 March 2007: USD 1 Thousand).

NOTE AF - AUDITORS' REMUNERATION

Details of the auditors' remuneration are as follows:

		2007-08 Group USD'000	2006-07 Group USD'000
Statutory audit fees		57	10
Tax audit fee		3	1
Other services		38	12
		98	23

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 future. Management is also required to use its discretion as to the application of the accounting principles used to prepare these statements. 

Deferred Tax

Management is required to assess the recoverability of deferred tax assets at each balance sheet date. On that basis certain deferred tax assets in respect of tax losses have not been recognised as described in note M.

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 instruments. 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 recognises revenue in accordance with the accounting policy in 2(v) (i). When recognising revenue management is required to estimate the stage of completion with such estimates being revisited at each balance sheet date. Material deviations are recognised 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'.

ENDFR SEWFMASASELW

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Related Shares:

DQE.L