president & cfo - UB Group

Consolidated Financial StatementSchedules forming part of account for the year ended March 31, 2009 (Contd.)4. (a) The Group through Royal Challengers Sports Private Limited, a subsidiary Company, holds the perpetualright to the Bangalore Franchise of BCCI-IPL. Although this right is perpetual it would be prudent to considerthis as having a ‘finite’ rather than an ‘infinite’ life. The limited over version of the game which was firstintroduced in 1970s is continuing even now after 38 years and an even shorter version (20 over) has onlyrecently being introduced and is more popular than the 50 over format. The Management has held discussioninternally as well as with other experts in the field on the subject of useful life and the period of amortisation.Although the Management regards the useful life as indefinite, as a measure of prudence a useful life of 50years is considered as appropriate and the rights are amortised over 50 years having regard to the followingfactors:• The game of cricket has been in existence for over 100 years and there is no indication of interest in thegame and the commercial prospects waning• The shorter version of the game is increasingly popular.• The commercial exploitation of the shorter version is on an increasing scale and is expected to reach thescale which other games like soccer have reached.• This industry (cricket) is, therefore, highly stable and the market demand for this game is likely to remainfor more than 50 years with its spread to many countries.• IPL and its teams have acquired brand status and teams are not identified with countries or geographiesbut with brand names.• The franchisees have the intent and ability to provide the necessary financial and other resources requiredto obtain the expected future economic benefits from this for atleast 50 years.The carrying value of the capitalized Rights would be assessed for impairment at every balance sheet dateThe carrying amount of Franchise Rights as at March 31, 2009 is Rs.4,834.328 Million to be amortised overthe remaining period of 49 years.Term liability towards franchisee rights at the year end aggregating to Rs.4,431.413 Million is payable over aperiod of 9 years, of which Rs.492.379 Million is payable within one year.(b) The governing bodies of this sport in India and globally, over a period of last 7 to 15 years have experiencedan annualised growth of 19 to 35% in their Media/Central Rights. The management believes, given the sheerappeal of this format which has surpassed all expectations, an annualised growth of 20% from 2015 to 2025,a 15% annualized growth from 2026 to 2035 and a 4% annualised growth for the balance period of life. TheGate Receipts and Merchandising revenues are based on specific interventions designed to increase the samein the near to medium term, including geographical expansion in the case of Merchandising revenue, with a5-7% inflation / premiumisation assumptions built in. The key assumption in Local Rights has been indexedto Central Rights.Management has tested for impairment of Franchise Rights at the balance sheet date based on the cash flowprojection using the above assumptions, which did not indicate any impairment.104