1A METHOD OF ACCOUNTING
 
 The financial statements are prepared to comply in all material aspects
 with all the applicable accounting principles in India, the applicable
 accounting standards notified under section 211(3C) of the Companies
 Act, 1956 and the relevant provisions of the Companies Act, 1956.
 
 1B USE OF ESTIMATES
 
 The preparation of financial statements requires the management of the
 Company to make estimates and assumptions that affect the reported
 balances of assets and liabilities and disclosures relating to the
 contingent liabilities as at the date of the financial statements and
 reported amounts of income and expenses during the period. Example of
 such estimates include provisions for doubtful debts/ advances,
 employee retirement benefit plans, warranty, provision for income
 taxes, useful life of fixed assets, diminution in value of investments,
 other probable obligations and inventory write down.
 
 2 REVENUE RECOGNITION
 
 Revenue from sale of goods is recognised on transfer of significant
 risks and rewards of ownership to the customer and when no significant
 uncertainty exists regarding realisation of the consideration. Sales
 are recorded net of sales returns, rebates, trade discounts and price
 differences and are inclusive of excise duty.
 
 Revenue in respect of contracts, which extend beyond an accounting
 period and where the outcome can be reliably estimated, is recognised
 on ''Percentage of Completion'' method by calculating the portion that
 costs incurred upto the reporting date bear to the latest estimated
 total costs of each contract. In other cases revenue is recognised only
 to the extent of contract costs incurred of which recovery is probable.
 
 Theatrical revenues from films are recognised as and when the films are
 exhibited.
 
 Revenue from other rights such as satellite rights, music rights,
 overseas assignment rights etc. is recognised on the date when the
 rights are available for exploitation.
 
 Service income of SEZ Division is recognised as and when services are
 rendered.
 
 Interest is accounted for based on a time proportion basis taking into
 account the amount invested and the rate of interest.
 
 Dividend is recognised as and when the right of the company to receive
 payment is established.
 
 FPS incentive is recognised as income based on the export of
 manufactured goods as per the revenue recognition policy of the
 company.
 
 3 FIXED ASSETS
 
 Tangible Fixed Assets are stated at cost less accumulated depreciation.
 Cost includes all expenses, direct and indirect, specifically
 attributable to its acquisition and bringing it to its working
 condition for its intended use.
 
 Incidental expenditure pending allocation and attributable to the
 acquisition of fixed assets is allocated/ capitalized with the related
 fixed assets.
 
 Intangible assets are stated at cost less accumulated amortisation. The
 cost incurred to acquire right to use and exploit home video titles,
 are capitalized as copyrights/marketing and distribution rights where
 the right allows the company to obtain a future economic benefit from
 such titles.
 
 Impairment, if any, in the carrying value of fixed assets is assessed
 at the end of each financial year in accordance with the accounting
 policy given below on Impairment of Assets.
 
 Fixed assets held for sale are recorded at lower of book value or
 estimated net realisable value.
 
 4 DEPRECIATION / AMORTISATION
 
 Depreciation on tangible fixed assets is provided based on the
 estimated useful life on a pro-rata basis under the straight-line
 method. The depreciation rates are not below the minimum rate as
 specified in Schedule XIV to the Companies Act, 1956.
 
 In respect of assets whose useful life has been revised, the
 unamortised depreciable amount is charged over the revised remaining
 useful life.
 
 In case the historical cost of an asset undergoes a change due to an
 increase or decrease in related long term liability on account of
 foreign exchange fluctuations, the depreciation on the revised
 unamortized depreciable amount is provided prospectively over the
 residual useful life of the asset effective from 1st April 2007.
 
 Intangible assets other than copyrights/marketing and distribution
 rights are amortised on equated basis over their estimated economic
 life not exceeding 10 years.
 
 Copyrights/marketing and distribution rights are amortized from the
 date they are available for use, at the higher of the amount calculated
 on a straight line basis over the period the intangible asset is
 available, not exceeding 10 years, and the number of units sold during
 the period basis.
 
 Leasehold Land and improvement to the leased premises are amortised
 over the period of the lease.
 
 The assets taken on finance lease are depreciated over the lease
 period.
 
 5 INVESTMENTS
 
 Long term investments are stated at cost of acquisition inclusive of
 expenditure incidental to acquisition. A provision for diminution is
 made to recognise a decline, other than temporary in the value of long
 term investments.
 
 Current investments are stated at lower of cost and fair value
 determined on an individual basis.
 
 6 INVENTORY VALUATION
 
 Finished Goods, Work in progress, Traded Goods and Film Rights -i At
 lower of cost and net Raw Materials, Packing Materials and Stores and
 Spares J realisable value Cost of Raw material, goods held for resale,
 packing materials and stores and spares is determined on the basis of
 weighted average method.
 
 Cost of Work in progress and finished goods is determined by
 considering direct material cost, labour costs and appropriate portion
 of overheads Liability for excise duty in respect of goods manufactured
 by the company, other than for exports, is accounted upon completion of
 manufacture.
 
 Inventories of under production films and films completed and not
 released are valued at lower of cost and net realisable value.
 
 The cost of released films is amortized using the individual film
 forecast method. The said amortization pertaining to theatrical rights,
 satellite rights, music rights, home video rights and others is based
 on management estimates of revenues from each of these rights. The
 inventory, thus, comprises of unamortized cost of such movie rights.
 These estimates are reviewed periodically and losses, if any, based on
 revised estimates are provided in full.
 
 At the end of each accounting period, such unamortized cost is compared
 with net expected revenue. In case of net expected revenue being lower
 than actual unamortized costs, inventories are written down to net
 expected revenue.
 
 The purchase cost of the rights acquired in released films is
 apportioned between satellite rights and other rights (excluding home
 video rights) based on management''s estimates of revenue potential.
 
 Provision for Slow moving inventory is made below cost based on
 Management''s best estimates of net realisable value.
 
 7 GOVERNMENT GRANTS
 
 Grants in the nature of contribution towards capital cost of setting up
 projects are treated as Capital Reserve and grants in respect of
 specific fixed assets are adjusted from the cost of the related fixed
 assets.
 
 8 BORROWING COSTS
 
 Borrowing costs directly attributable to the acquisition or
 construction of qualifying assets are capitalised as part of the cost
 of assets till the date of commencement of commercial use of the asset.
 All other borrowing costs are charged to the Profit and Loss Account.
 
 9 EMPLOYEE BENEFITS
 
 The Company has Defined Contribution plans for post employment benefits
 namely Provident Fund which is recognized by the income tax
 authorities. These funds are administered through Regional Provident
 Fund Commissioner and the Company''s contributions thereto are charged
 to revenue every year. The Company''s contributions to State plans
 namely Employee''s State Insurance Fund and Employee''s Pension Scheme
 1995 are charged to revenue every year.
 
 The Company has Defined Benefit plans namely Leave Encashment and
 Gratuity for all employees, the liability for which is determined on
 the basis of an actuarial valuation at the end of the year. Gratuity
 Fund is administered through Life Insurance Corporation of India. Short
 term compensated absences are recognised at the undiscounted amount of
 benefit for services rendered during the year.
 
 Liability for long term employee retention scheme is determined on the
 basis of actuarial valuation at the year end.
 
 Termination benefits are recognised as an expense immediately.
 Actuarial gains and losses comprise experience adjustments and the
 effects of changes in actuarial assumptions and are recognised
 immediately in the Profit and Loss Account as income or expense.
 
 In the year of transition (i.e. 2006-07), the difference between
 transitional liability and the liability that would have been
 recognized at the beginning of the transitional year under the
 Company''s previous accounting policy has been adjusted against the
 opening revenue reserves of that year in accordance with Accounting
 Standard 15 (revised 2005) ''Employee Benefits''.
 
 10 FOREIGN CURRENCY TRANSACTIONS
 
 Transactions in foreign currency are converted at the exchange rate
 prevailing at the date of the transaction. Foreign Currency monetary
 assets and liabilities (except long term) not covered by forward
 exchange contracts are restated at the year end rates and the resultant
 gains or losses are recognized in the profit and loss account. Gain/
 Loss on account of exchange fluctuations arising on long term foreign
 currency liabilities in so far as it relates to the acquisition of
 depreciable capital assets is added to the cost of such assets and in
 other cases, by transfer to Foreign Currency Monetary Item Translation
 Difference Account, to be amortized over the balance period of such
 long term foreign currency liabilities or March 31, 2012, whichever is
 earlier.
 
 Non monetary items are carried in terms of historical cost denominated
 in foreign currency using the exchange rate at the date of transaction.
 
 In case of forward foreign exchange contracts where an underlying asset
 or liability exists at the balance sheet date, the difference between
 the forward rate and the exchange rate at the inception of the contract
 is recognised as income or expense over the life of the contract.
 
 In case of forward foreign exchange contracts taken for highly
 probable/ forecast transactions, the net loss, if any, calculated on ''
 Mark to Market principle as at the balance sheet date is recorded.
 
 Profit or loss arising on cancellation or renewal of a forward contract
 is recognised as income or expense in the year in which such
 cancellation or renewal is made.
 
 In respect of integral foreign branches, all revenues, expenses,
 monetary assets/ liabilities and fixed assets are accounted at the
 exchange rate prevailing on the date of the transaction. Monetary
 assets and liabilities are restated at the year end rates and resultant
 gains or losses are recognised in the Profit and Loss Account.
 
 11 TAXATION
 
 Current Tax:
 
 Provision is made for current income tax liability based on the
 applicable provisions of the Income Tax Act, 1961 for the income
 chargeable under the said Act and as per the applicable overseas laws
 relating to the foreign branch.
 
 Deferred Tax:
 
 Deferred tax assets (DTA) and liabilities are computed on the timing
 differences at the balance sheet date between the carrying amount of
 assets and liabilities and their respective tax bases. DTA is
 recognised based on management estimates of reasonable/ virtual
 certainty that sufficient future taxable income will be available
 against which such DTA can be realised.  The deferred tax charge or
 credit is recognised using the tax rates and tax laws that have been
 enacted or substantively enacted by the balance sheet date.
 
 12 LEASES
 
 Assets acquired under finance leases are recognised as an Asset and a
 Liability at the lower of the fair value of the leased assets at
 inception of the lease and the present value of minimum lease payments.
 Lease payments are apportioned between the finance charge and the
 reduction of the outstanding liability. The finance charge is allocated
 to periods during the lease term so as to produce a constant periodic
 rate of interest on the remaining balance of the liability and charged
 to the profit and loss account.
 
 Payments made under operating leases are charged to Profit and Loss
 Account on a straight line basis over the period of the lease.
 
 Assets given under finance leases are recognised as receivables at an
 amount equal to the net investment in the lease and the finance income
 is recognised based on a constant periodic rate of return on the
 outstanding net investment in respect of the finance lease.
 
 13 STOCK OPTION PLANS
 
 Stock options grants to the employees and to the non-executive
 Directors who accepted the grant under the Company''s Stock Option Plan
 are accounted in accordance with Securities and Exchange Board of India
 (Employees Stock Option Scheme and Employees Stock Purchase Scheme)
 Guidelines, 1999. The Company follows the intrinsic value method and
 accordingly, the excess, if any, of the market price of the underlying
 equity shares as of the date of the grant of the option over the
 exercise price of the option, is recognised as employee compensation
 cost and amortised on straight line basis over the vesting period.
 
 14 IMPAIRMENT OF ASSETS
 
 At each balance sheet date, the Company assesses whether there is any
 indication that an asset may be impaired. If such indication exists,
 the Company estimates the recoverable amount and where carrying amount
 of the asset exceeds such recoverable amount, an impairment loss is
 recognised in the profit and loss account to the extent the carrying
 amount exceeds recoverable amount. Where there is any indication that
 an impairment loss recognised for an asset in prior accounting periods
 may no longer exist or may have decreased, the Company books a reversal
 of the impairment loss not exceeding the carrying amount that would
 have been determined (net of amortisation or depreciation) had no
 impairment loss been recognised for the asset in prior accounting
 periods.
 
 15 PROVISIONS AND CONTINGENT LIABILITIES
 
 The Company creates a provision when there is a present obligation as a
 result of past event that probably requires an outflow of resources and
 a reliable estimate can be made of the amount of obligation. A
 disclosure of contingent liability is made when there is a possible
 obligation or a present obligation that will probably not require
 outflow of resources or where a reliable estimate of the obligation
 cannot be made.
 
 16 EARNINGS PER SHARE
 
 Basic earnings per share is calculated by dividing the net profit or
 loss for the year attributable to equity shareholders by the weighted
 average number of equity shares outstanding during the year.
 
 For the purpose of calculating diluted earnings per share, the net
 profit or loss for the year attributable to equity shareholders and the
 weighted average number of shares outstanding during the year are
 adjusted for the effects of all dilutive potential equity shares,
 except where results would be anti-dilutive.