SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Sep. 30, 2012

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of New Frontier Media, Inc. and its wholly owned and majority controlled subsidiaries (collectively hereinafter referred to as New Frontier Media, the Company, we, us, and other similar pronouns) have been prepared without audit pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. We believe these statements include all adjustments, which are of a normal and recurring nature, considered necessary for a fair presentation of the financial position and results of operations. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K filed with the SEC on July 19, 2012.  The results of operations for the six month period ended September 30, 2012 are not necessarily indicative of the results to be expected for the full fiscal year.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of New Frontier Media.  All intercompany accounts and transactions have been eliminated in consolidation.

Agreement and Plan of Merger with LFP Broadcasting, LLC and Flynt Broadcast, Inc.

On October 15, 2012, we entered into an Agreement and Plan of Merger, pursuant to which LFP Broadcasting, LLC and Flynt Broadcast, Inc. commenced a tender offer on October 29, 2012 to acquire all of the issued and outstanding shares of our common stock at a price per share equal to (1) $2.02, net to the seller in cash, without interest, and (2) one contingent right per share of our common stock, which shall represent the contractual right to receive a contingent cash payment as defined in the Agreement and Plan of Merger.

Noncontrolling Interests

During fiscal year 2011, we entered into an agreement to create an entity within the Transactional TV segment to develop new channel services. We controlled a majority of the entity’s common stock and included the accounts of the entity in our financial statements. The net loss applicable to the noncontrolling interests of the entity was presented herein as net loss attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), and the portion of the equity applicable to the noncontrolling interests of the entity was presented as noncontrolling interests in the Condensed Consolidated Statements of Total Equity.

During the first quarter of fiscal year 2012, we entered into an arrangement that resulted in the loss of our majority controlling interest in the entity’s common stock. As a result, we deconsolidated the entity, which resulted in an immaterial loss within the Transactional TV segment.  During the fourth quarter of fiscal year 2012, we entered into an agreement to assign our remaining shares. As of March 31, 2012, we had no remaining interests in the entity.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Estimates have been made in several areas, including, but not limited to, estimated revenue for certain Transactional TV segment pay-per-view (PPV) and video-on-demand (VOD) services; the recognition and measurement of income tax expenses, assets and liabilities (including the measurement of uncertain tax positions, the valuation of deferred tax assets, and the deductibility of certain strategic transaction costs for income tax purposes); the assessment of film costs and the forecast of anticipated revenue (ultimate revenue), which is used to amortize film costs; the determination of the allowance for unrecoverable accounts, which reserves for certain recoupable costs and producer advances that are not expected to be recovered; the amortization methodology and valuation of content and distribution rights; and the valuation of other identifiable intangible and other long-lived assets. We base our estimates and judgments on historical experience and on various other factors that are considered reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources. Actual results could differ materially from these estimates.

Accrued and Other Liabilities

As of September 30, 2012, accrued and other liabilities included approximately $0.7 million of accrued transport fees, $1.2 million of unsettled customer receipt liabilities, and $0.6 million of accrued legal liabilities. As of March 31, 2012, accrued and other liabilities included approximately $0.2 million of accrued transport fees and $1.0 million of unsettled customer receipt liabilities. Accrued legal liabilities as of March 31, 2012 were immaterial.

Other Long-Term Liabilities

Other long-term liabilities included $1.3 million and $1.4 million of incentive from lessor liabilities as of September 30, 2012 and March 31, 2012, respectively.