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Annual Report 2011-12
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amortization and accumulated impairment losses, if
any. Internally generated intangible assets, excluding
capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and
loss in the year in which the expenditure is incurred. The
following are the intangible assets recognised by the group
Value for individual software license acquired from the
holding company in an earlier year is allocated based
on the valuation carried out by an independent expert
Software licenses acquired from the holding company,
which are estimated to have lower residual lives
than that envisaged above, are amortised over such
estimated lower residual lives.
Purchased copyrights by a subsidiary are accounted for
at costs. In case of slump purchases by a subsidiary,
value for copyright acquired is allocated based on the
valuation carried out by an independent expert at the
time of acquisition
Costs incurred by one of the subsidiary in planning or
conceptual development of the web site are expensed
as incurred. Once the planning or conceptual
development of a web site has been achieved, and
the project has reached the application development
stage, the Group capitalizes all costs related to web site
application and infrastructure development including
costs relating to the graphics and content development
stages. Training and routine maintenance costs are
expensed as incurred.
Intangible assets are amortized on a straight line basis
over the estimated useful economic life. The company
uses a rebuttable presumption that the useful life
of an intangible asset will not exceed ten years from
the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life
of an intangible asset exceeds ten years, the company
amortizes the intangible asset over the best estimate
of its useful life. Such intangible assets and intangible
assets not yet available for use are tested for impairment
annually, either individually or at the cash-generating
unit level. All other intangible assets are assessed for
impairment whenever there is an indication that the
intangible asset may be impaired.
The amortization period and the amortization method
are reviewed at least at each financial year end. If the
expected useful life of the asset is significantly different
from previous estimates, the amortization period is
changed accordingly. If there has been a significant
change in the expected pattern of economic benefits
from the asset, the amortization method is changed
to reflect the changed pattern. Such changes are
accounted for in accordance with AS 5 Net Profit or
Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of
the asset and are recognized in the statement of profit
and loss when the asset is derecognized.
License fees are changed to revenue at the rate of 4%
of gross revenue for the period or 10% of Reserve
One Time Entry Fee (ROTEF) for the concerned city,
whichever is higher by a subsidiary company. Gross
Revenue for this purpose is revenue derived on the
basis of billing rates inclusive of any taxes and without
deduction of any discount given the advertiser and
any commission paid to advertising agencies. ROTEF
means 25% of highest valid bid in the city.
Software licenses costing below `5,000 each are fully
depreciated in the year of acquisition.
A summary of amortization policies applied to the
company’s intangible assets is as below:
Useful life (in years)
Website Development 6
Software Licenses 5-6
License Fees (one time entry fee) 10
Music Contents (for Radio Business) 4
Purchased Copy rights 6
e) Goodwill on Consolidation
Goodwill represents the difference between the Group’s
share in the net worth of the investee companies and
the cost of acquisition at each point of time of making
the investment. For this purpose, the Groups’ share of
equity in the investee companies are determined on the
basis of the latest financial statements of the respective
companies available as on the date of acquisition, after
making necessary adjustments for material events
between the date of such financial statements and the
date of respective acquisition.
For acquisitions done till 2005-06, Goodwill is
amortised pro-rata over a period of 5 years from the
date of acquisition. For acquisitions done, Goodwill is
tested for impairment
f) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity
is capitalized. Indirect expenditure incurred during
construction year is capitalized as part of the indirect
construction cost to the extent to which the expenditure
is directly related to construction or is incidental thereto.
Other indirect expenditure (including borrowing costs)
incurred during the construction year, which is not
related to the construction activity nor is incidental
thereto is charged to the Statement of Profit & Loss.
Income earned during construction year is adjusted
against the total of the indirect expenditure.
All direct capital expenditure incurred on expansion
is capitalized. As regards indirect expenditure on
expansion, only that portion is capitalized which
represents the marginal increase in such expenditure
involved as a result of capital expansion. Both direct
and indirect expenditure are capitalized only if they
increase the value of the asset beyond its originally
assessed standard of performance.
g) Leases
Where the Group is lessee
Finance leases, which effectively transfer to the Group
substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the
inception of the lease term at the lower of the fair