TIER 2 RACING CLUB. Illustrative Financial Statements 2015/2016

Transcription

1 TIER 2 RACING CLUB Illustrative Financial Statements 2015/2016 Illustrative Financial Statements of the Tier 2 Racing Club includes the financial performance and financial position for the year ended 31 July 2016 This illustrative FS provides general information which is current at the time of production and prepared specifically for the racing clubs in New Zealand in relation to their transition to PBE IPSAS. The information contained in this document does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. NZRB disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. DRAFT ILLUSTRATIVE SAMPLE ONLY Tier 2 Racing Club Annual Report

2 DRAFT ILLUSTRATIVE SAMPLE ONLY TABLE OF CONTENTS Statement of comprehensive revenue and expense... 3 Statement of changes in equity... 4 Statement of financial position... 5 Statement of cash flows... 6 Notes to the financial statements Basis of Preparation Revenues and direct costs & expenses Other operating expenses Finance income and costs Other gains and losses Cash and cash equivalents Receivables Inventories Investments in associates and joint ventures Other financial assets Other assets Property, plant and equipment Intangible assets Investment property Biological assets Assets held for sale Trade and other payables Other financial liabilities Provisions Commitments and contingencies Financial instruments Reserves Related parties Subsequent events Adjustments to comparative year financial statements Independent auditor s report Tier 2 Racing Club Annual Report

3 Statement of comprehensive revenue and expense For the year ended 31 July Note $ $ Revenue Race meeting revenues 2.1 Sale of goods 2.2 Rendering of services 2.3 Other operating revenue 2.4 Finance revenue 4.1 Total operating revenue Expenses Race meeting costs and expenses 2.1 Cost of sales 2.2 Other operating expenses 3 Finance expense 4.2 Total operating and other expenses Net operating surplus / (deficit) Other gains / losses Other gains 5.1 Other losses 5.2 Share of surplus of associate and joint venture 9 Total other gains / (losses) Net surplus / (deficit) for the year Net surplus / (deficit) attributable to: Tier 2 Racing Club Non-controlling interest Net surplus / (deficit) for the year Other comprehensive revenue and expense Fair value gain/(loss) on AFS assets 22 Net movement in cash flow hedges 22 Revaluation gain on property, plant and equipment 22 Share of other comprehensive revenue/(expense) of 9 associate and joint venture Total other comprehensive revenue and expense Other comprehensive revenue and expense Tier attributable 2 Racing Club to: Non-controlling interest Total other comprehensive revenue and expense Total comprehensive revenue and expense for the year Total comprehensive revenue and expense attributable to: Tier 2 Racing Club Non-controlling interest Total comprehensive revenue and expense for the year The above statement of comprehensive revenue and expense should be read in conjunction with the accompanying notes. Tier 2 Racing Club Annual Report

4 Statement of changes in equity For the year ended 31 July 2016 Note Accumulated comprehensive Equity attributable to Noncontrolling revenue & controlling expense Reserves interest interest Total equity $ $ $ $ $ Balance as at 1 August Net surplus/(deficit) for the year - Other comprehensive revenue and expense 22 - Movements and transfers in 22 reserves - Balance as at 31 July Net surplus/(deficit) for the year - Other comprehensive revenue and expense 22 - Movements and transfers in 22 reserves - Balance as at 31 July The above statement of changes in equity should be read in conjunction with the accompanying notes. Tier 2 Racing Club Annual Report

5 Statement of financial position As at 31 July Note $ $ Current assets Cash and cash equivalents 6 Receivables from exchange transactions 7 Receivables from non-exchange transactions 7 Inventories 8 Other current financial assets 10 Other current assets 11 Assets held for sale 16 Total current assets Non-current assets Property, plant and equipment 12 Intangible assets 13 Investment property 14 Investment in associate and joint venture 9 Other financial assets 10 Biological assets 15 Other non-current assets 11 Total non-current assets Total assets Current liabilities Taxes and transfers payables 17.1 Payables under exchange transactions 17.2 Employee entitlements 17.3 Other financial liabilities 18 Provisions 19 Other current liabilities Total current liabilities Non-current liabilities Other financial liabilities 18 Provisions 19 Other non-current liabilities Total non-current liabilities Total liabilities Net assets Equity attributable to: Tier 2 Racing Club Non-controlling interest Total equity The above statement of financial position should be read in conjunction with the accompanying notes. Tier 2 Racing Club Annual Report

6 Statement of cash flows As at 31 July Note $ $ Cash flow s from operating activities Cash w as received from: Industry profit distribution Other race meeting receipts Donations, fundraising and other similar receipts Fees, subscriptions and other receipts from members Receipts from providing goods or services Net GST refund Others (specify) Cash w as applied to: Payments to suppliers and employees NZRB charges Donations or grants paid Net cash flow s from operating activities Cash flow s from investing activities Cash w as received from: Proceeds from disposal of property, plant and equipment Proceeds from disposal of intangible assets Proceeds from disposal of investments in associates & JVs Proceeds from disposal of other financial assets Proceeds from disposal of other assets Proceeds from finance lease receivable Interest received Proceeds from dividends and other distributions from investee Cash w as applied to: Payments for purchase of property, plant and equipment Payments for purchase of intangible assets Payments for purchase of investments in associates & JVs Payments for purchase of other financial assets Payments for purchase of other assets Net cash flow s from investing activities Cash flow s from financing activities Cash w as received from: Proceeds from borrow ings Cash w as applied to: Payments for borrow ings Payments for finance lease liability Interest paid Net cash flow s from financing activities Net Increase / (Decrease) in Cash Opening Cash Closing Cash This is represented by: Cash on hand and in bank Short term deposits Cash and cash equivalents at end of the period The above statement of cash flows should be read in conjunction with the accompanying notes. Tier 2 Racing Club Annual Report

7 Notes to the financial statements For the year ended 31 July BASIS OF PREPARATION Items in Yellow need to be changed as it applies to the Club while items in grey are to be included (and amended as necessary) only when it applies to the Club. Reporting entity Tier 2 Racing Club (henceforth, the Club ) is incorporated under the Incorporated Societies Act The primary objective of the Club is to promote, conduct and control [thoroughbred / harness / greyhound] racing and is registered with the [New Zealand Thoroughbred Racing / Harness Racing New Zealand / Greyhound Racing New Zealand] Code ( the Code ) consistent with the Code s constitution. The Club is a recognised industry organisation in accordance with the Racing Act The financial statements presented are for the Club [and its subsidiaries (collectively the Group)] for the year ended 31 July 2016 and were authorised for issue by [the Chairman / the Board ] on 30 September Basis of consolidation Controlled entities are those entities over which the Club (the controlling entity) has the power to govern the financial and operating policies so as to obtain benefits from their activities. Potential exercisable or convertible voting rights are considered when assessing whether the Club controls another entity. Controlled entities are fully consolidated from the date on which control is obtained by the Club and cease to be consolidated from the date on which control is lost. Assets, liabilities, income and expenses of a controlled entity acquired or disposed of during the year are included in the financial statements from the date the Club gains control until the date the Club ceases to control the entity. Investments in controlled entities held by the Club are accounted for at cost less any impairment charges in the separate financial statements of the Club. Statement of compliance The financial statements have been prepared in accordance with the Racing Act 2003, which requires compliance with generally accepted accounting practice in New Zealand ( NZ GAAP ). As the primary objective of the Club is not towards making financial returns but the promotion, conduct and control of [thoroughbred / harness / greyhound] racing, it has designated itself as a not-for-profit public benefit entity (PBE) for financial reporting purposes. The Club has elected to report in accordance with the Tier 2 Racing PBE accounting standards on the basis that it is not publicly accountable and not considered large for financial reporting purposes. The financial statements of the Club comply with the Public Benefit Entity Standards Reduced Disclosure Regime (PBE Standards RDR) as appropriate for Tier 2 Racing not-for-profit entities and disclosure concessions have been applied. Measurement basis The financial statements have been prepared on a historical cost basis, with the exception of certain items for which specific accounting policies have been identified and are presented in New Zealand dollars which is also the Club s functional currency. Going concern The financial statements have been prepared on a going concern basis. OR If there are indications of going concern issue, please refer to section 1.12 of the Guide. Changes in accounting policies Effect of first time adoption of PBE standards This is the first set of annual financial statements prepared in the accordance with the PBE standards. The Club has previously reported in accordance with NZ IFRS (Differential Reporting framework) / Old GAAP. The accounting policies adopted in these financial statements are consistent with those of the previous financial year, except for instances when the accounting or reporting requirements of a PBE standard are different to the requirements under the previous reporting standards as outlined in the following section. All changes in accounting policies (and retrospective adjustments resulting from these changes) have arisen purely due to initial application of PBE standards. The Club has applied the guidelines under PBE FRS 46, First-time adoption of PBE standards by entities previously applying NZ IFRS in transitioning to the PBE standards. PBE FRS 46 requires retroactive application of the PBE standards with exceptions for prospective application in certain cases (see discussion below). This means that both opening balances and comparative figures are adjusted to reflect what the Club would have reported in previous years had it applied PBE standards for those years. Details of changes in the comparative figures and opening balances, if any, as a result of adoption of the PBE standards are discussed in note 25 (including correction of prior period errors). Tier 2 Racing Club Annual Report

8 OR IF PREVIOUSLY USING OLD GAAP [The Club has applied the guidelines under PBE FRS 47, First-time adoption of PBE standards by entities other than those previously applying NZ IFRSs in transitioning to the PBE standards. PBE FRS 47 requires retroactive application of the PBE standards with exceptions for prospective application in certain cases (see discussion below). This means that both opening balances and comparative figures are adjusted to reflect what the Club would have reported in previous years had it applied PBE standards for those years; however, PBE FRS 47 grants concession to entities not previously reporting under NZ IFRS not to present comparative figures in the first year of adoption to PBE standards. On this basis, the financial statements of the current period do not include comparative figures prepared under PBE standards but the prior financial statements are attached to comply with the requirements of PBE FRS 47. Details of changes in the opening balances, if any, as a result of adoption of the PBE standards are discussed in note 25 (including correction of prior period errors).] The changes to accounting policies and disclosures caused by first time application of PBE accounting standards are as follows: PBE IPSAS 1, Presentation of financial statements Statement of cash flows and Statement of changes in equity In the financial statements of the previous financial year, the Club has availed of the differential reporting concessions not to present a Statement of cash flows and Statement of changes in equity. Under PBE IPSAS 1, the Statement of cash flows and the Statement of changes in net assets/equity form part of a full set of financial statements and are required to be presented on a comparative basis. Hence, the Club presented a statement of cash flows and statement of changes in equity in the current year s financial statements including comparative information. Receivable from non-exchange transaction In the financial statements of the previous financial year, receivables were presented as a single total in the statement of financial position. However, PBE IPSAS 1 requires receivables from non-exchange transactions and receivables from exchange transactions to be presented separately in the statement of financial position. This requirement affected the presentation of both current and comparative receivables figures. Taxes and payables from non-exchange transactions and Payables under exchange transactions In the financial statements of the previous financial year, trade payables were presented as a single total in the statement of financial position. However, PBE IPSAS 1 requires payables on taxes and transfers (including any deferred revenue from nonexchange transactions with attached conditions) and payables under exchange / trade transactions to be presented separately in the statement of financial position. This requirement affected the presentation of both current and comparative payables figures. The above changes represent minor presentation differences between PBE IPSAS 1 and the equivalent standard previously applied by the Club and did not require a change in the policy with respect to measurement and recognition requirements except as discussed in the following sections. Please refer to note 25 for details of changes made on opening balances and comparative figures as a result of adoption of this PBE standard. PBE IPSAS 23, Revenue from non-exchange transactions PBE IPSAS 23 prescribes the financial reporting requirements for revenue arising from non-exchange transactions which has no equivalent in the previous reporting framework. In a non-exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange. The recognition and measurement of revenues from non-exchange transactions differ compared to the recognition and measurement criteria for an exchange transaction which is broadly similar with the revenue recognition and measurement criteria under NZ IAS 18. Under PBE IPSAS 23, revenue from non-exchange transaction is recognised as soon as the inflow of resources can be recognised as an asset in the financial statements, unless the inflow of resources meets the definition of and recognition criteria for a liability representing a present obligation for the receiving entity. A present obligation exists when there is a condition attached to the resources received that requires the entity to use the resources as specified by the transferor or return the same if the entity does not perform as specified. The change involves identification of the nature of the transactions giving rise to revenues either as exchange or and nonexchange; the recognition and measurement criteria shall then be applied depending on the nature of the transaction. This assessment shall be applied both on the current year and for comparative information. As further discussed in note 2 below, the Club has identified certain types of revenues from non-exchange transactions and has presented the same separately in the financial statements as required by PBE IPSAS 1 and PBE IPSAS 23. The Club has assessed, however, that the adoption of PBE IPSAS 23 did not result to any material re-measurement of any non-exchange revenues recognised in prior periods including any present obligation attached thereto. Hence, there have been no restatements of opening balances with respect to these items as required by the PBE Standards. OR IF THERE ARE ANY CHANGES MADE [The Club has assessed that the adoption of PBE IPSAS 23 did not result in a material re-measurement of non-exchange revenues recognised in prior periods. This includes any present obligation attached thereto with the exception of revenue realised from re-measuring concessionary loan liabilities to their fair value. Please refer to note 25 for details of changes made on the opening balances and comparative figures as a result of adoption of this PBE standard.] Tier 2 Racing Club Annual Report

9 PBE IPSAS 17, Property, plant and equipment PBE IPSAS 17 requires depreciable assets measured using the cost model to be depreciated using the appropriate accounting depreciation rates based on the rational pattern of use of such assets. Under the differential reporting framework, the Club has the option to use tax depreciation rates for such assets as published and issued by the Inland Revenue Department. The impact of the change will be the allocation of the remaining net book value of the assets from the first date of adoption of the PBE standards should the accounting depreciation rates significantly differ with the tax depreciation rates. PBE FRS 46 allows prospective application of the accounting depreciation rates and the Club has reviewed its depreciation policy and has assessed that the rates previously used either represent the useful life of the assets based on their reasonable pattern of use or are not significantly different with their accounting depreciation rates. On this basis, the Club has retained the depreciation rates used in the previous year and will perform regular reassessment of useful life as required by PBE IPSAS 17. Details of accounting depreciation rates used per class of asset are discussed in note 12 of the financial statements. OR IF PREVIOUSLY USING OLD GAAP [PBE FRS 47 allows prospective application of adjustments due to estimates which include depreciation rate of fixed asset and the Club has reviewed its depreciation policy and has assessed that the rates previously used either represent the useful life of the assets based on their reasonable pattern of use or are not significantly different with their accounting depreciation rates. On this basis, the Club has retained the depreciation rates used in the previous year and will perform regular reassessment of useful life as required by PBE IPSAS 17. Details of accounting depreciation rates used per class of asset are discussed in note 12 of the financial statements.] PBE IPSAS 27, Agriculture PBE IPSAS 27 requires initial and subsequent measurement at each reporting date of biological assets at their fair value less costs to sell and agricultural produce at their fair value less costs to sell at the point of harvest. Under the differential reporting framework, the Club has the option to measure biological assets and agricultural produce either at cost or fair value. Moreover, when the fair value model is used, livestock are permitted to be measured using the national average market value issued by the Inland Revenue Department as a proxy for fair value. The Club has adopted the measurement concessions in the previous reporting periods both with respect to its agricultural assets and produce. PBE FRS 46 allows prospective application of the measurement requirement from the first date of adoption of PBE IPSAS 27 and allows entities to continue measuring agricultural produce harvested prior to adoption of PBE IPSAS 27 under the previous measurement basis. The Club has applied the fair value measurement requirements of PBE IPSAS 27 starting the current financial year with reference to an active market for similar assets. The Club has assessed, however, that the value of its agricultural assets existing on initial adoption of PBE IPSAS 27 is not materially different if the fair value would have been measured with reference to an active market on initial adoption of the PBE IPSAS 27. On this basis, no adjustment has been made to revalue the agricultural assets on adoption of PBE IPSAS 27. The policy applied since adoption of PBE IPSAS 27 is discussed in note 15. OR IF PREVIOUSLY USING OLD GAAP [The Club has applied the fair value measurement requirements of PBE IPSAS 27 starting the current financial year with reference to an active market for similar assets. The Club has assessed, moreover, that the value of its agricultural assets existing on initial adoption of PBE IPSAS 27 is not materially different if the fair value would have been measured with reference to an active market on initial adoption of the PBE IPSAS 27. On this basis, no adjustment has been made to revalue the agricultural assets on adoption of PBE IPSAS 27. The policy applied since adoption of PBE IPSAS 27 is discussed in note 15.] Significant accounting judgements, estimates and assumptions IF THERE IS ANY SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS [The preparation of the Club s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that may require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The judgements, estimates and assumptions are evaluated on a regular and continuing basis, including expectations of future events, to a reasonable extent to assess their implication on reported revenues, expenses, assets, liabilities and disclosures in the financial statements. In the process of applying the Club s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements]: (Examples only select items that apply to your case and delete those that do not) Classification of non-financial assets as cash generating assets or non-cash-generating assets For the purpose of assessing impairment indicators and impairment testing, the Club classifies non-financial assets as either cash-generating or non-cash-generating assets. The Club classifies a non-financial asset as cash-generating asset if the primary objective of the asset is to generate commercial return. All other assets are classified as non-cash-generating assets. All property, plant and equipment, investment property and intangible assets held by the Club are classified as cashgenerating assets as the cash flows generated through the use of these assets are generally sufficient to represent commercial return on the assets and considering that they are primarily used for the Club s main revenue generating activities. The Club has no non-financial assets classified as non-cash generating assets. Tier 2 Racing Club Annual Report

10 Fair value measurement of financial instruments When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See notes 10 and 18 for further disclosures. Revaluation of land and building and investment properties The Club carries its investment properties at fair value, with changes in fair value being recognised in surplus or deficit. A discounted direct cash flow (DCF) model was used as valuation methodology as there is a lack of comparable market data because of the nature of the properties. Further details are included in note 14. In addition, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive revenue and expense. The Club engaged an independent valuer to assess the fair value of its land and buildings and were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property. Further details of the result of revaluation are provided in note 12. Impairment of property, plant and equipment and intangible assets The Club performs impairment testing with respect to its property, plant and equipment and intangible assets. In determining whether impairment exists, the carrying value of an asset (other than property, plant and equipment measured using the revaluation model) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the forecasted / budgeted cash flows for the next five years and do not include restructuring activities that the Club is not yet committed to or significant future investments that will enhance the asset s performance of the cash generating unit being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. Further details are provided under notes 12 and 13. Useful lives and residual values The useful lives and residual values of assets are assessed using the following indicators to inform potential future use and value from disposal: The condition of the asset based on the assessment of experts employed by the Club The nature of the asset, its susceptibility and adaptability to changes in technology and processes The nature of the processes in which the asset is deployed Availability of funding to replace the asset Changes in the market in relation to the asset Further details are provided under notes 12 and 13. Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions is included in Note 19. Provisions are measured at the management's best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material. Income taxes The Club is exempt from New Zealand income tax pursuant to section CW 47(2) of the Income Tax Act Tier 2 Racing Club Annual Report

11 2. REVENUES AND DIRECT COSTS & EXPENSES Revenue is recognised to the extent that it is probable that the economic benefits or service potential will flow to the Club and it can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. Revenues are classified as to whether they arise from an exchange or non-exchange transactions. An exchange transaction is one in which the Club receives assets or services, or has liabilities extinguished, and directly gives approximately equal value to another entity in exchange and includes sale of goods, rendering of services and charges for the use of the Club s assets (e.g., interest and dividends). The Club recognises revenue from exchange transactions when the revenue recognition criteria mentioned above are satisfied. A non-exchange transaction is any other transaction not classified as exchange. The Club s revenue recognition criteria are detailed in note 2.5 below. 2.1 Race meeting revenue and expenses Race meeting revenues comprise the amounts received or receivable for services provided and goods sold that directly relate to race meeting events conducted by the Club during the financial year. These primarily include industry distributions from the New Zealand Racing Board (NZRB) and the Code and other receipts that directly relate to the Club s race meeting activities from members of the Club (aside from membership fees included in other operating income) and third parties in the form of grants and subsidies. The Club incurred certain direct costs and expenses in conducting its race meeting days and recognises these as costs and expenses when incurred regardless of when the payment is made unless they qualify for recognition as asset. Direct costs and expenses on race meeting days are presented below excluding salaries and wages and depreciation expenses which are included as part of other operating expenses are in note Note $ $ Industry profit distribution On-course totalisator income Other subsidies, grants and donations Gaming grants Subsidies and other revenues relating to race day Race meeting sponsorships Other industry-related grants and subsidies Bar sales (race meeting days related) Race book sales Other race meeting income Total race meeting revenues Stakes Course venue charges Advertising and promotions Direct race meeting operating costs Track maintenance, repairs and set-up costs NZRB charges Other race meeting costs Salaries and w ages (direct) Total race meeting costs & expenses Net race meeting surplus/(deficit) Tier 2 Racing Club Annual Report

12 2.2 Revenue from sale of goods and cost of sales Revenue from the sale of goods (i.e., agricultural produce and harvest and bar sales) is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount can be measured reliably and it is probable that the economic benefits or service potential associated with the transaction will flow to the Club. The direct costs and expenses included in this table relate to purchases of inventory items and other directly attributable costs on acquiring the inventories sold. Salaries and wages and depreciation relating to sale of goods are included under note Note $ $ Industry profit distribution On-course totalisator income Other subsidies, grants and donations Gaming grants Subsidies and other revenues relating to race day Race meeting sponsorships Other industry-related grants and subsidies Bar sales (race meeting days related) Race book sales Other race meeting income Total race meeting revenues Stakes Course venue charges Advertising and promotions Direct race meeting operating costs Track maintenance, repairs and set-up costs NZRB charges Other race meeting costs Salaries and w ages (direct) Total race meeting costs & expenses Net race meeting surplus/(deficit) 2.3 Revenue from rendering of services The Club performed various services including course and venue rental and animal-care related services to members of the Club and other third parties. Costs and expenses related to these revenues are included in note 3. Tier 2 Racing Club Annual Report

13 Note $ $ Industry profit distribution On-course totalisator income Other subsidies, grants and donations Gaming grants Subsidies and other revenues relating to race day Race meeting sponsorships Other industry-related grants and subsidies Bar sales (race meeting days related) Race book sales Other race meeting income Total race meeting revenues Stakes Course venue charges Advertising and promotions Direct race meeting operating costs Track maintenance, repairs and set-up costs NZRB charges Other race meeting costs Salaries and w ages (direct) Total race meeting costs & expenses Net race meeting surplus/(deficit) 2.4 Other operating revenue Note $ $ Industry profit distribution On-course totalisator income Other subsidies, grants and donations Gaming grants Subsidies and other revenues relating to race day Race meeting sponsorships Other industry-related grants and subsidies Bar sales (race meeting days related) Race book sales Other race meeting income Total race meeting revenues Stakes Course venue charges Advertising and promotions Direct race meeting operating costs Track maintenance, repairs and set-up costs NZRB charges Other race meeting costs Salaries and w ages (direct) Total race meeting costs & expenses Net race meeting surplus/(deficit) 2.5 Revenue from non-exchange transactions Revenue from a non-exchange transaction is recognised as soon as the inflow of resources can be recognised as an asset in the financial statements but only to the extent that no present obligation is recognised with respect to the asset received/receivable. A present obligation exists when there is a condition attached to the asset received that requires the Club to use the resources as specified by the transferor or return the same if the condition is not satisfied. Tier 2 Racing Club Annual Report

14 An asset acquired through a non-exchange transaction (e.g., cash, goods, inventory, or property, plant and equipment) is initially measured at its fair value as at the date of acquisition consistent with the fair value basis applicable for each type of asset received (note 6 for cash; note 8 for inventory; and note 12 for property, plant and equipment). Revenue from nonexchange transaction is measured on the basis of the value of the asset received less any present obligation attached as of the date of transfer. Tier 2 Racing Club Annual Report

15 The Club s revenues from exchange and non-exchange transactions are detailed in the following table. Tier 2 Racing Club Annual Report

16 Tier 2 Racing Club Statement of comprehensive revenue and expense For the year ended 31 July Note $ $ Revenue Race meeting revenues 2.1 Sale of goods 2.2 Rendering of services 2.3 Other operating revenue 2.4 Finance revenue 4.1 Total operating revenue If a lin chang follow Expenses Race meeting costs and expenses 2.1 Cost of sales 2.2 Other operating expenses 3 Finance expense 4.2 IPSAS Total operating and other expenses IPSAS1 Net operating surplus / (deficit) Other gains / losses Other gains 5.1 Other losses 5.2 Share of surplus of associate and joint venture 9 IPSAS Total other gains / (losses) Net surplus / (deficit) for the year IPSAS Net surplus / (deficit) attributable to: Tier 2 Racing Club Non-controlling interest Net surplus / (deficit) for the year Other comprehensive revenue and expense Fair value gain/(loss) on AFS assets 22 Net movement in cash flow hedges 22 Revaluation gain on property, plant and equipment 22 Share of other comprehensive revenue/(expense) of 9 associate and joint venture Total other comprehensive revenue and expense IPSAS Other comprehensive revenue and expense Tier attributable 2 Racing Club to: PBE IP Non-controlling interest PBE IP Total other comprehensive revenue and expense Total comprehensive revenue and expense for the year IPSAS Total comprehensive revenue and expense attributable to: Tier 2 Racing Club Non-controlling interest Total comprehensive revenue and expense for the year Tier 2 Racing Club Annual Report

17 Any outstanding liability recognised with respect to assets acquired through non-exchange transactions as of balance date is detailed in note 17. Other non-exchange revenues include gain realised on concessionary loan liabilities arising from adjustment of the face amount of concessionary loans to their fair value at inception of the loan. Further details are discussed in notes 4 and 18. The Club also receives services in kind from members and external parties and although these are greatly valued, such types of revenues are usually difficult to measure. As such, these revenues are not included in the Club s financial statements. 3. OTHER OPERATING EXPENSES Costs and expenses relating to the overall costs of running the Club include staff time, office space, rental, information technology and asset costs. These are recognised as incurred and are presented in the table below. This includes portion of salaries and wages and depreciation and amortisation expenses incurred in relation to the revenues generated by the Clubs; all other direct costs and expenses are presented in note 2. Other fees paid to auditors include payments for other assurance and non-assurance services provided by professional firms other than the Club s auditor for audit of the financial statements; these services include business advisory services (2016: $$$; 2015: $$$) and review of the Club s payroll system (2016:$$$; 2015: nil). Tier 2 Racing Club Annual Report

18 4. FINANCE INCOME AND COSTS 4.1 Finance revenue Interest revenue primarily arises from investments in banks in the form of cash and term deposits. The Club also has investments in loans and advances and portfolio investments of interest-bearing instruments for which interest is earned during the term of the investment. The amount of finance revenue includes valuation adjustments on concessionary loan liabilities (see note 18 for details). 4 FINANCE INCOME AND COSTS 4.2 Finance cost The Club has outstanding borrowings from banks and other entities and has incurred interest thereon at the agreed rate of interest. The amount of finance cost includes valuation adjustments on concessionary loan assets (see note 10 for details). 4 FINANCE INCOME AND COSTS 5. OTHER GAINS AND LOSSES 5.1 Other gains Tier 2 Racing Club Annual Report

19 5.2 Other losses CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value Note $ $ Cash on hand Cash in bank Short-term deposits Foreign currency accounts Total cash and cash equivalents 7. RECEIVABLES Receivables are initially recognised at the fair value of the amount to be received and subsequently measured at amortised cost less any provision for impairment loss due to uncollectibility. Impairment is assessed if there is objective evidence that the customer cannot settle the amount due to the Club. The Club also provides an estimate of potential uncollectibility based on past experience and maintains a provision for impairment against receivables. Any bad debts are recognised in surplus or deficit and the amount of receivables adjusted to their net realisable value. If such bad debts are subsequently recovered, they are recognised as gains in surplus or deficit on the date they are collected by the Club. Receivables from non-exchange transactions include committed grants and subsidies from external parties or assets donated but not yet physically transferred as of balance date and for which the Club has legal and contractual right over said assets. The following table summarises the Club s receivables from exchange and non-exchange transactions Note $ $ Receivables from exchange transactions Trade receivables Rent receivables 20.2 Interest receivable Insurance receivables Other receivables Provision for doubtful accounts Receivables from non-exchange transactions Grants, subsidies and other transfers GST receivable Other non-exchange receivables Provision for doubtful accounts Total net realisable value of receivables 8. INVENTORIES Inventory is measured at cost upon initial recognition. For inventory acquired through non-exchange transactions (i.e., for no cost or for a nominal cost to the Club), the cost of the inventory is its fair value at the date of acquisition. After initial recognition, inventories held for resale are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale, exchange or distribution. The Club uses [specific identification / FIFO / weighted average] cost formula in valuing inventories. Tier 2 Racing Club Annual Report

20 Agricultural produce and harvests are recognised on initial recognition and at each reporting date at their fair value with reference to current market price less cost to sell at the point of harvest. Any fair value changes with respect to these inventory items are recognised in surplus or deficit as part of direct cost of sale of goods Note $ $ Food and beverage Agricultural produce Farming harvest Other (specify) Provision for impairment Total inventories at net realisable value During 2016, $$$$ (2015: $$$$) was recognised as an expense for inventories carried at net realisable value. This is recognised as part of direct expenses in note INVESTMENTS IN ASSOCIATES AND JOINT VENTURES The Club holds ownership interest in the form of shareholding or other formal equity structure with certain entities over which the Club exercises significant influence demonstrated by its ability to participate in but not control or joint control over the financial and operating policy decisions of the investees. The Club also has interest in joint venture that is a jointly controlled (asset/operation/entity) with respect to the management, operation and maintenance of the Super Race track located in Wellington. Moreover, the Club is party to a consortium with Superb Racing Club and Excellent Racing to form Star Team Racing which is classified as a jointly controlled entity by the Club. Investments in associates and joint venture are accounted for using the equity method under which the investment is initially recognised at cost and subsequently adjusted to recognise post acquisition changes in the Club s share in the associate s or joint venture s comprehensive revenue and expense; the adjustment to the carrying amount of the investment is included in the Club s statement of comprehensive revenue and expense. The Club assess at each balance date whether the investments are impaired and when there is objective evidence of impairment, an impairment loss is recognised in surplus or deficit. For the year ended 31 July 2016, the carrying value of investments in associates is $0.250 million (2015: $0.175 million) after taking up the Club s share in the investees net comprehensive revenue and expense of $0.075 million (2015: $0.050 million) while interest in joint venture amounted to $1.2 million (2015: $1.0 million) after taking up the adjustment for the Club s share of the investees net comprehensive revenue and expense of $0.2 million (2015: $0.1 million). No distributions have been received from the investees during 2016 (2015: nil) and the Club assessed that the investments are not impaired as of balance date. As of 31 July 2016, the Club has no commitments relating to its investment in Super Race track joint venture (2015: nil). 10. OTHER FINANCIAL ASSETS Tier 2 Racing Club Annual Report

21 Tier 2 Racing Club Statement of comprehensive revenue and expense For the year ended 31 July Note $ $ Revenue Race meeting revenues 2.1 Sale of goods 2.2 Rendering of services 2.3 Other operating revenue 2.4 Finance revenue 4.1 Total operating revenue If a lin chang follow Expenses Race meeting costs and expenses 2.1 Cost of sales 2.2 Other operating expenses 3 Finance expense 4.2 IPSAS Total operating and other expenses IPSAS1 Net operating surplus / (deficit) Other gains / losses Other gains 5.1 Other losses 5.2 Share of surplus of associate and joint venture 9 IPSAS Total other gains / (losses) Net surplus / (deficit) for the year IPSAS Net surplus / (deficit) attributable to: Tier 2 Racing Club Non-controlling interest Net surplus / (deficit) for the year Other comprehensive revenue and expense Fair value gain/(loss) on AFS assets 22 Net movement in cash flow hedges 22 Revaluation gain on property, plant and equipment 22 Share of other comprehensive revenue/(expense) of 9 associate and joint venture Total other comprehensive revenue and expense IPSAS Other comprehensive revenue and expense Tier attributable 2 Racing Club to: PBE IP Non-controlling interest PBE IP Total other comprehensive revenue and expense Total comprehensive revenue and expense for the year IPSAS Total comprehensive revenue and expense attributable to: Tier 2 Racing Club Non-controlling interest Total comprehensive revenue and expense for the year Tier 2 Racing Club Annual Report

22 Term deposits The Club has investments in term deposits with banks for which interest revenue is recognised during the term of the investment. These investments have original maturities of more than 90 days or those restricted for specific purposes and are rolled on a continuing basis unless used by the Club for its operational cash requirements. Unrestricted term deposits with original maturities of at least or less than 90 days are classified by the Club as cash and cash equivalents. Loans and advances The Club has various loans and advances to external and related parties. These are usually interest bearing loans and have maturities ranging from 1 to 5 years. Details of loans and advances to related parties are discussed further in note 23. Included in the loans and advances are loans issued at zero or below market interest rates (concessionary loans). Concessionary loans are initially measured at fair value representing the discounted cash flows of the investment using the current market rate of interest on similar loans. Any difference between the fair value and the net proceeds on the loan at inception is recognised as finance cost included in surplus or deficit. These investments are accounted for as Loans and receivables as detailed in note 21. The movements and carrying value of such loans are summarised in the following table. Tier 2 Racing Club Annual Report

23 Tier 2 Racing Club Statement of comprehensive revenue and expense For the year ended 31 July Note $ $ Revenue Race meeting revenues 2.1 Sale of goods 2.2 Rendering of services 2.3 Other operating revenue 2.4 Finance revenue 4.1 Total operating revenue If a lin chang follow Expenses Race meeting costs and expenses 2.1 Cost of sales 2.2 Other operating expenses 3 Finance expense 4.2 IPSAS Total operating and other expenses IPSAS1 Net operating surplus / (deficit) Other gains / losses Other gains 5.1 Other losses 5.2 Share of surplus of associate and joint venture 9 IPSAS Total other gains / (losses) Net surplus / (deficit) for the year IPSAS Net surplus / (deficit) attributable to: Tier 2 Racing Club Non-controlling interest Net surplus / (deficit) for the year Other comprehensive revenue and expense Fair value gain/(loss) on AFS assets 22 Net movement in cash flow hedges 22 Revaluation gain on property, plant and equipment 22 Share of other comprehensive revenue/(expense) of 9 associate and joint venture Total other comprehensive revenue and expense IPSAS Other comprehensive revenue and expense Tier attributable 2 Racing Club to: PBE IP Non-controlling interest PBE IP Total other comprehensive revenue and expense Total comprehensive revenue and expense for the year IPSAS Total comprehensive revenue and expense attributable to: Tier 2 Racing Club Non-controlling interest Total comprehensive revenue and expense for the year Tier 2 Racing Club Annual Report

24 The details of loans and advances for the year (including the concessionary loans above) are presented in the following table: Tier 2 Racing Club Annual Report

25 Tier 2 Racing Club Statement of comprehensive revenue and expense For the year ended 31 July Note $ $ Revenue Race meeting revenues 2.1 Sale of goods 2.2 Rendering of services 2.3 Other operating revenue 2.4 Finance revenue 4.1 Total operating revenue If a lin chang follow Expenses Race meeting costs and expenses 2.1 Cost of sales 2.2 Other operating expenses 3 Finance expense 4.2 IPSAS Total operating and other expenses IPSAS1 Net operating surplus / (deficit) Other gains / losses Other gains 5.1 Other losses 5.2 Share of surplus of associate and joint venture 9 IPSAS Total other gains / (losses) Net surplus / (deficit) for the year IPSAS Net surplus / (deficit) attributable to: Tier 2 Racing Club Non-controlling interest Net surplus / (deficit) for the year Other comprehensive revenue and expense Fair value gain/(loss) on AFS assets 22 Net movement in cash flow hedges 22 Revaluation gain on property, plant and equipment 22 Share of other comprehensive revenue/(expense) of 9 associate and joint venture Total other comprehensive revenue and expense IPSAS Other comprehensive revenue and expense Tier attributable 2 Racing Club to: PBE IP Non-controlling interest PBE IP Total other comprehensive revenue and expense Total comprehensive revenue and expense for the year IPSAS Total comprehensive revenue and expense attributable to: Tier 2 Racing Club Non-controlling interest Total comprehensive revenue and expense for the year Tier 2 Racing Club Annual Report