ANNUAL REPORT 2016 PERSEKUTUAN MAJIKAN-MAJIKAN MALAYSIA MALAYSIAN EMPLOYERS FEDERATION FINANCIAL STATEMENTS.

Transcription

1 ANNUAL REPORT 2016 PERSEKUTUAN MAJIKAN-MAJIKAN MALAYSIA MALAYSIAN EMPLOYERS FEDERATION FINANCIAL STATEMENTS

2

3 (Registered under the Societies Act, 1966) CONTENTS PAGE NUMBERING Content Page 1 Federation Information 2 Statement by Council Members 3 Independent Auditors' Report 4 to 7 Financial Statements: Statements of Financial Position 8 Statements of Income and Expenditure 9 to 11 Statements of Changes in Equity 12 Statements of Receipts and Payments Policies and Notes to the Financial Statements 13 to to 31 1

4 (Registered under the Societies Act, 1966) FEDERATION INFORMATION PRESIDENT : TAN SRI AZMAN SHAH BIN DATO' SERI HARON VICE PRESIDENTS : EN. ABDUL WAHAB ABU BAKAR EN. A. RAMADASS DR. MICHAEL CHIAM TOW HUI EN. ALAN KHOO CHOOM KWONG HONORARY TREASURER : EN. MOHAMMED AMIN BIN AZIZ ADDRESS : 3A06-3A07, BLOCK A PUSAT DAGANGAN PHILEO DAMANSARA II NO. 15, JALAN 16/11 OFF JALAN DAMANSARA PETALING JAYA SELANGOR DARUL EHSAN AUDITORS : ATAREK KAMIL IBRAHIM & CO. TAX AGENT : ATAREK KAMIL IBRAHIM TAX SERVICES (M) SDN. BHD. PRINCIPAL BANKERS : AFFIN ISLAMIC BANK BERHAD : MALAYAN BANKING BERHAD 2

5

6

7

8

9

10 STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 GROUP FEDERATION Notes RM RM RM RM NON-CURRENT ASSETS Property, plant and equipment 5 8,194,819 7,826,868 8,188,931 7,811,726 Investment in subsidiary company , ,000 Total Non-Current Assets 8,194,819 7,826,868 8,438,931 8,061,726 CURRENT ASSETS Trade and other receivables 7 2,309,554 2,187,109 2,107,611 2,113,626 Tax recoverable 19,696-8,571 - Cash and cash equivalent 8 13,362,763 12,770,797 11,478,728 11,857,114 Total Current Assets 15,692,013 14,957,906 13,594,910 13,970,740 TOTAL ASSET 23,886,832 22,784,774 22,033,841 22,032,466 ACCUMULATED FUND 20,631,320 19,775,571 18,639,007 17,900,738 CURRENT LIABILITIES Other payables and accruals 9 3,255,512 2,987,582 3,394,834 4,131,728 Taxation - 21, Total Current Liabilities 3,255,512 3,009,203 3,394,834 4,131,728 TOTAL EQUITY AND LIABILITIES 23,886,832 22,784,774 22,033,841 22,032,466 The accompanying notes form an integral part of these financial statements. 8

11 STATEMENTS OF INCOME AND EXPENDITURE INCOME GROUP FEDERATION Notes RM RM RM RM Allowance for doubtful debts no longer required 20,812 12,897 20,812 12,897 Annual subscriptions 3,962,812 4,417,029 3,962,812 4,417,029 Dinners and conferences 2,262,207 2,176,681 2,262,207 2,176,681 Entrance fees 113, , , ,500 Interest from fixed deposits 461, , , ,410 Rental of office premises - 94,000-94,000 Representation receipts 1,086,727 1,044,984 1,086,727 1,044,984 Sale of publications 706, , , ,678 Income from insurance claims 37, ,349 37, ,349 Sundry income 50,143 22,465 50,143 22,465 Training courses and seminars 3,050,578 3,261,572 1,678,809 1,890,749 TOTAL INCOME 11,751,633 12,494,997 10,350,040 11,093,742 EXPENDITURE COURSE AND SEMINAR EXPENSES 1,495,627 1,515, ,150 1,109,283 REPRESENTATION EXPENSES 91,452 89,160 91,452 89,160 PUBLICATION, RESEARCH AND SURVEY EXPENSES 159, , , ,210 DINNER AND CONFERENCES EXPENSES 1,262,717 1,524,802 1,262,717 1,516,133 PREMISES EXPENSES Building and maintenance charges 80,626 86,202 80,626 86,202 Depreciation for office premises 181, , , ,798 Electricity and water charges 139, , , ,138 Office rental - 18,249-18,249 Quit rent and assessment 33,286 34,659 33,286 34,659 Upkeep of office 45,772 46,062 45,772 46, , , , ,108 The accompanying notes form an integral part of these financial statements. 9

12 STATEMENTS OF INCOME AND EXPENDITURE (continued) EXPENDITURE GROUP FEDERATION Notes RM RM RM RM STAFF AND PAYROLL EXPENSES Advertisement of staff recruitment 1,176 1, Bonus 644, , , ,713 EPF contributions 644, , , ,610 Insurance premium 92,934 66,389 79,412 55,945 Medical expenses 322, , , ,544 Salaries and allowances 3,995,338 3,750,486 3,557,034 3,331,997 SOCSO contributions 31,342 24,823 27,572 21,469 Staff training expenses 8,548 26,644 7,700 26, ,741,026 5,717,314 5,121,127 5,101,943 GENERAL AND OFFICE ADMINISTRATIVE EXPENSES Affiliation fees 78,166 60,803 78,166 60,803 Auditors' remuneration 15,500 15,500 8,500 8,500 Bank charges 2,182 2,604 2,007 2,204 Depreciation of property, plant and equipment 184, , , ,040 Fixed asset written-off General insurance 34,778 21,053 30,267 20,332 General office expenses 34,647 29,015 34,647 28,595 Gift and donations 1, Internet access and homepage expenses 33,003 32,455 33,003 32,455 Licensing Family day expenses 49,513 55,756 44,704 48,864 Newspapers, periodicals and government publications 24,437 17,163 23,930 16,753 Postage and stamps 32,478 34,008 32,328 33,858 Printing and stationery 80,484 69,587 80,484 69,587 Balance c/f 571, , , ,994 The accompanying notes form an integral part of these financial statements. 10

13 STATEMENTS OF INCOME AND EXPENDITURE (continued) EXPENDITURE GROUP FEDERATION Notes RM RM RM RM GENERAL AND OFFICE ADMINISTRATIVE EXPENSES Balance b/f 571, , , ,994 Professional and legal fees 12,260 12,180 4,000 4,350 Provision for doubtful debts 77,228 78,784 68,041 67,681 Secretarial fees 1,900 1, Telephone and fax 62,596 69,183 62,596 69,183 Upkeep of office and equipment 96,982 95,950 96,128 94, , , , ,121 TRAVEL, HOTEL AND MEETING EXPENSES Entertainment expenses 2,557 1,591 2,557 1,591 Meeting expenses 204, , , ,145 Membership drive expenses 6,832 28,293 6,832 28,293 Membership fee 1,000 1, Overseas seminars and conferences 175,290 97, ,303 67,654 Public relation expenses 27,917 27,904 27,917 27,904 Travelling expenses 159, , , , , , , ,707 TOTAL EXPENDITURE 10,631,479 10,629,695 9,382,482 9,503,665 SURPLUS OF INCOME OVER EXPENDITURE BEFORE TAXATION 1,120,154 1,865, ,558 1,590,077 TAXATION 10 (264,405) (234,275) (229,289) (170,787) SURPLUS OF INCOME OVER EXPENDITURE AFTER TAXATION 855,749 1,631, ,269 1,419,290 The accompanying notes form an integral part of these financial statements. 11

14 STATEMENTS OF CHANGES IN EQUITY GROUP Accumulated fund RM Total RM Balance at 1 January ,144,544 18,144,544 Surplus income over expenditure after taxation 1,631,027 1,631,027 Balance at 31 December ,775,571 19,775,571 Surplus income over expenditure after taxation 855, ,749 Balance at 31 December ,631,320 20,631,320 FEDERATION Balance at 1 January ,481,448 16,481,448 Surplus income over expenditure after taxation 1,419,290 1,419,290 Balance at 31 December ,900,738 17,900,738 Surplus income over expenditure after taxation 738, ,269 Balance at 31 December ,639,007 18,639,007 The accompanying notes form an integral part of these financial statements. 12

15 STATEMENTS OF RECEIPTS AND PAYMENTS GROUP FEDERATION Notes RM RM RM RM CASH AND BANK BALANCES AS AT 1 JANUARY Cash in hand 9,501 9,501 8,000 8,000 Cash at bank 891, , , ,374 Fixed deposits with licensed financial institutions 11,869,537 11,040,194 11,044,693 10,243,005 12,770,797 11,929,318 11,857,114 10,523,379 RECEIPTS Conference and dinner receipts 2,328,896 2,152,036 2,328,896 2,152,036 Entrance fees 101, , , ,500 Interest from term deposits 283, , , ,038 Proceeds from training courses and seminars 3,653,520 2,323,479 1,453,899 1,635,736 Rental of office premises - 115, ,056 Representation receipts 1,401,329 1,357,999 1,401,329 1,357,999 Sale of publications 618, , , ,577 Subscriptions 4,147,323 4,668,103 4,147,323 4,668,103 Sundry income 130, ,475 49,200 18,493 Sundry receipts 176, , , ,122 Withdrawal of fixed deposits 5,157,381 7,423,971 4,957,185 7,246,037 Insurance claim 15, , ,349 18,014,225 19,652,202 15,516,199 18,613,047 PAYMENTS Advances to subsidiary company 1,597, ,000 1,597, ,000 Advertisement for staff recruitment 1,214 1, Affiliation fees 70,633 60,503 70,633 60,503 Auditors' remuneration 16,536-9,010 - Bank charges 2,451 2,544 2,273 2,149 Books and periodicals 12,249 6,544 11,780 6,133 Building maintenance charges 82,859 91,762 82,859 91,762 Conference and dinner expenses 1,148,852 1,263,794 1,148,852 1,263,794 Balance c/f 2,932,454 1,527,136 2,923,518 1,524,892 The accompanying notes form an integral part of these financial statements. 13

16 STATEMENTS OF RECEIPTS AND PAYMENTS (continued) GROUP FEDERATION Notes RM RM RM RM PAYMENTS Balance b/f 2,932,454 1,527,136 2,923,518 1,524,892 Deposit for postage 15,000 6,000 15,000 6,000 Electricity and water charges 145, , , ,403 Entertainment expenses 2,578 1,940 2,578 1,940 EPF contributions 604, , , ,088 Family day expenses 51,435 55,119 49,977 53,461 General office expenses 34,957 33,540 34,957 33,540 Gift and donations 2, Human resource development fund 35,092 32,858 35,092 32,858 Income tax paid 305, , , ,206 Internet access and homepage expenses 33,566 31,570 33,566 31,570 Insurance premium 133,658 49, ,759 47,074 Medical expenses 302, , , ,448 Meeting expenses 230, , , ,023 Membership drive expenses 35,857 55,122 35,857 55,122 Office rental - Johor Bahru - 15,789-15,789 - Kuantan Sarawak - 2,050-2,050 Overseas seminars and conference expenses 158,894 93, ,667 67,815 Placement of fixed deposits 4,962,579 7,250,000 4,790,523 7,100,000 Postage and stamps 30,810 27,168 24,700 23,794 Prepayments of seasonal car parking expenses and others 56,624 97,313 56,624 97,313 Printing and stationery 140, , ,750 89,655 Balance c/f 10,215,012 11,102,400 9,738,244 10,738,991 The accompanying notes form an integral part of these financial statements. 14

17 STATEMENTS OF RECEIPTS AND PAYMENTS (continued) GROUP FEDERATION Notes RM RM RM RM PAYMENTS Balance b/f 10,215,012 11,102,400 9,738,244 10,738,991 Printing newsletter and Annual Report 20,000 20,000 20,000 20,000 Professional and legal fees 20,368 13,719 4,240 4,611 Purchase of property, plant and equipment 687,883 1,652, ,339 1,639,349 Quit rent and assessment 35,087 33,484 35,087 33,484 Representation expenses 83,908 89,107 83,908 89,107 Research and survey expenses 142, , , ,099 Salaries, bonuses and allowances 4,651,954 4,367,542 4,178,731 3,904,822 SOCSO contributions 31,342 23,138 27,572 19,781 Staff training expenses 8,824 27,676 7,976 27,177 Subscription fees 1,060 1, Sundry deposits 56,900 6,972 56,900 6,972 Sundry payables and accrued charges 88, ,031 37,027 39,095 Telephone and fax 75,820 68,948 75,820 68,948 Training courses and seminars expenses 470, ,562 1,880 14,653 Transport expenses 133, , , ,328 Upkeep of office and equipment 146, , , ,198 Vehicle loan for staff 106,150 43, ,150 43,662 GST return 446, , , ,036 17,422,259 18,810,723 15,894,585 17,279,312 SURPLUS/(DEFICIT) OF RECEIPTS OVER PAYMENTS 591, ,479 (378,386) 1,333,735 CASH AND BANK BALANCES AS AT 31 DECEMBER Cash in hand 10,518 9,501 9,000 8,000 Cash at bank 695, , , ,421 Fixed deposits with licensed financial institutions 12,657,036 11,869,537 10,904,266 11,044, ,362,763 12,770,797 11,478,728 11,857,114 The accompanying notes form an integral part of these financial statements. 15

18 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 1 GENERAL INFORMATION The Federation principal place of business is located at 3A06-3A07, Block A, Pusat Dagangan Phileo Damansara II, No. 15, Jalan 16/11, Off Jalan Damansara, Petaling Jaya, Selangor Darul Ehsan. The principal activity of the Federation is to promote and safeguard the rights and interests of private sector employers who are members of the Federation. The principal activities of the Federation's whollyowned subsidiary company are as stated in Note 6 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. 2 SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Group and of the Federation have been prepared in accordance with Malaysian Private Entities Reporting Standard ("MPERS") and the provisions of the Societies Act, Basis of preparation The financial statements of the Group and of the Federation have been prepared under the historical cost basis, except for the revaluation of certain assets and liabilities. The principal accounting policies adopted are set out below. 2.2 Basis of consolidation The consolidated financial statements include the audited financial statements of the Federation and its subsidiary company made up to 31 December A subsidiary company is defined as an enterprise in which the Federation has the power, directly or indirectly to exercise control over the financial and operating policies so as to obtain benefits from its activities. The subsidiary company is consolidated using the acquisition method of accounting. Under the acquisition method of accounting, the result of the subsidiary company acquired or disposed of is included from the date of acquisition up to the date of disposal. At the date of acquisition, the fair value of the subsidiary company's net assets is determined and this value is reflected in the consolidated financial statements. 16

19 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Basis of consolidation (continued) Intragroup transactions, balances and unrealised gains on transactions is eliminated, unrealised loss is also eliminated unless cost cannot be recovered. Where necessary, adjustment is made to the financial statements of the subsidiary company to ensure consistency of accounting policies with those of the Group. 2.3 Financial assets Financial assets are recognised in the statements of financial position when the Federation become a party to the contractual provisions of the instrument. On initial recognition, financial assets are measured at transaction price, include transaction costs for financial assets not measured at fair value through profit or loss, unless the arrangement constitutes, in effect, a financing transaction for the counterparty to the arrangement. After initial recognition, financial assets are classified into one of three categories: financial assets measured at fair value through profit or loss, financial assets that are debt instruments measured at amortised cost, and financial assets that are equity instruments measured at cost less impairment. i) Financial assets that are debt instruments measured at amortised cost After initial recognition, debt instruments are measured at amortised cost using the effective interest method. Debt instruments that are classified as current assets are measured at the undiscounted amount of the cash or other consideration expected to be received. Effective interest method is a method of calculating the amortised cost of financial assets and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimate future cash receipts through the expected life of the financial assets or, when appropriate, a shorter period, to the carrying amount of the financial assets. 17

20 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.3 Financial assets (Continued) ii) Financial assets that are debt instruments measured at amortised cost After initial recognition, debt instruments are measured at amortised cost using the effective interest method. Debt instruments that are classified as current assets are measured at the undiscontinued amount of the cash or other consideration expected to be received. Effective interest method is a method of calculating the amortised cost of financial assets and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimate future cash receipts through the expected life of the financial assets or, when appropriate, a shorter period, to the carrying amount of the financial assets. iii) Financial assets that are equity instruments measured at cost less impairment Equity instruments that are not publicly traded and whose fair value cannot otherwise be measured reliably without undue cost or effort, and contracts linked to such instruments that, if exercised, will result in delivery of such instruments, are measured at cost less impairment. 2.4 Property, plant and equipment The cost of an item or property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the Group and the Federation and the cost of the item can be measured reliably. After recognition as an asset, an item of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses. Depreciation is provided on a straight-line method so as to write off the depreciable amount of the following assets over their estimated useful lives, as follows: Years Leasehold office premises 99 Freehold office premises 50 Furniture and fittings 5 Office equipments 5 Computer hardware and software 2-3 Renovation 5 18

21 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 2.4 Property, plant and equipment (Continued) Depreciation of an asset begins when it is ready for its intended use. If there is an indication of a significant change in factors affecting the residual value, useful life or asset consumption pattern since the last annual reporting date, the residual values, depreciation method and useful lives of depreciable assets are reviewed, and adjusted prospectively. The carrying amounts of items of property, plant and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal. Any gain or loss arising from the derecognition of items of property, plant and equipment, determined as the difference between the net disposal proceeds, if any, and the carrying amounts of the item, is recognised in profit or loss. Neither the sale proceeds nor any gain on disposal is classified as revenue. 2.5 Impairment of assets, other than goodwill, inventories and financial assets At each reporting date, the Group and the Federation assess whether there is any indication that an asset may be impaired. If any such indication exists, the recoverable amount of the asset is estimated. When there is an indication that an asset may be impaired but it is not possible to estimate the recoverable amount of the individual asset, the Group and the Federation estimate the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount of an asset and a cash-generating unit is the higher of the fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset or a cash-generating unit is less than the carrying amount, an impairment loss is recognised to reduce the carrying amount to its recoverable amount. An impairment loss for a cash-generating unit is firstly allocated to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then, to the other non-current assets of the unit pro rata on the basis of the carrying amount of each appropriate asset in the cash-generating unit. Impairment loss is recognised immediately in profit or loss, unless the asset is carried at a revalued amount, in which case it is treated as a revaluation decrease. 19

22 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.5 Impairment of assets, other than goodwill, inventories and financial assets (Continued) The recoverable amount is the higher of an asset's or cash-generating unit's fair value less to sell, value in use and zero. An impairment loss recognised in prior periods for an asset or the appropriate assets of a cashgenerating unit is reversed when there has been a change in the estimates used to determine the asset's recoverable amount. An impairment loss is reversed to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised in prior periods. A reversal of an impairment loss is recognised immediately in profit or loss, unless the asset is carried at revalued amount, in which case it is treated as a revaluation increase. 2.6 Investment in subsidiary company Investment in subsidiary company and a jointly controlled entity are stated at cost in the balance sheet of the Federation, and are reviewed for impairment at the end of the financial year if events or changes in circumstances indicate that their carrying values may not be recoverable. 2.7 Cash and cash equivalents For the purposes of the cash flow statements, cash and bank balances consist of cash in hand and at bank which are readily convertible to known amount of cash and subjected to an insignificant risk of change in value, and net of outstanding bank overdraft. 2.8 Financial liabilities i) Financial liabilities Financial liabilities are recognised in the statements of financial position when the Company become a party to the contractual provisions of the instrument. On initial recognition, financial liabilities are measured at transaction price, include transaction costs for financial liabilities not measured at fair value through profit or loss, unless the arrangement constitutes, in effect, a financing transaction for the Company to the arrangement. 20

23 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.8 Financial liabilities (Continued) After initial recognition, financial liabilities are classified into one of three categories: financial liabilities measured at fair value through profit or loss, financial liabilities measured at amortised cost, or loan commitments measured at cost less impairment. ii) Financial liabilities measured at amortised cost After initial recognition, financial liabilities other than financial liabilities at fair value through profit or loss are measured at amortised cost using the effective interest method. Gains or losses are recognised in profit or loss when the financial liabilities are derecognised or impaired. Effective interest method is a method of calculating the amortised cost of financial liabilities and of allocating the interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimate future cash payments through the expected life of the financial liabilities or, when appropriate, a shorter period, to the carrying amount of the financial liabilities. iii) Derecognition of financial liabilities 2.9 Provisions Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires. Any difference between the carrying amounts of the financial liabilities derecognised and the consideration paid is recognised in profit or loss. A provision is recognised when the Group and the Federation has an obligation at the reporting date as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties are taken into account in reaching the best estimate of a provision. When the effect of the time value of money is material, the amount recognised in respect of the provision is the present value of the expenditure expected to be required to settle the obligation. 21

24 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.10 Income tax Tax expense is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised in other comprehensive income. Tax payable on taxable profit for current and past periods is recognised as a current tax liability to the extent unpaid. If the amount paid in respect of the current and past periods exceeds the amount payable for those periods, the excess is recognised as a current tax asset. Current tax assets and liabilities are measured at the amounts expected to be paid or recovered, using the tax rates and laws that have been enacted or substantially enacted by the reporting date. Current tax liabilities and assets are offset if, and only if the Group and the Federation have a legally enforceable right to set off the amounts and plan either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Deferred tax is provided in full on temporary differences which are the differences between the carrying amounts in the financial statements and the corresponding tax base of an asset or liability at the end of the reporting period. Deferred tax liabilities are recognised for all taxable temporary differences that are expected to increase taxable profit in the future. Deferred tax assets are recognised for all deductible temporary differences that are expected to reduce taxable profit in the future and the carryforward of unused tax losses and unused tax credits. Deferred tax liabilities and assets are not recognised in respect of the temporary differences associated with the initial recognition of an asset or a liability in a transaction that is not a business combination and at the time of the transactions, affects neither accounting profit nor taxable profit. Deferred tax liabilities and assets reflect the tax consequences that would follow from the manner in which the Group and the Federation expect to recover or settle the carrying amounts of their assets and liabilities and are measured at the tax rates and laws that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantially enacted by the reporting date. 22

25 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.11 Revenue recognition Revenue, represent income from members' subscriptions, entrance fees, training course and seminar and administrative fees which are recognised on an accrual basis. Other revenues are recognised on the following basis : a) Rental income : b) Interest income : as it accrues unless probability of collection is remote. on a time apportionment basis taking into account the principal outstanding and the interest rate applicable Employee benefits i) Short-term employment benefits Short-term employment benefits, such as wages, salaries and other benefits, are recognised at the undiscounted amount as a liability and an expense when the employees have rendered services to the Group and the Federation. The expected cost of accumulating compensated absences are recognised when the employees render services that increase their entitlement to future compensated absences. The expected cost of non-accumulating compensated absences, such as sick and medical leaves, are recognised when the absences occur. The expected cost of profit-sharing and bonus payments are recognised when the Group and the Federation have a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. A present obligation exists when the Group and the Federation have no realistic alternative but to make the payments. ii) Defined contribution plan Contributions payable to the defined contribution plan are recognised as a liability and an expense when the employees have rendered services to the Group and the Federation. 23

26 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY 3.1 Critical judgements in applying the accounting policies The judgements, that the management has made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in the financial statements, are as follows: i) Fair value of other financial assets and liabilities The fair value for certain other financial assets and financial liabilities are obtained from the quoted price in an active market, if quoted prices are unavailable, the price of a recent transaction for an identical financial assets or liabilities provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of the time since the transaction took place. 3.2 Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows: i) Measurement of a provision The Federation use a "best estimate" as the basis for measuring a provision. Management evaluates the estimates based on the Federation's historical experiences and other inputs or assumptions, current developments and future events that are reasonably possible under the particular circumstances. In the case when a provision relates to large population of customers (such as warranty provision), a probabilityweighted estimate of the outflows required to settle the obligation is used. in the case of a single estimate (such as a provision for environmental restoration costs), a referenced contractor's price or market price is used as the best estimate. if an obligation is to be settled over time, the expected outflows are discounted at a rate that takes into account the time value of money and the risk that the actual outcome might differ from estimates made. 24

27 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) ii) Loss allowances of financial assets The Federation recognises impairment losses for loans and receivables using the incurred loss model. Individually significant loans and receivables are tested for impairment separately by estimating the cash flows expected to be revorables. All others are grouped into credit risk classes and tested for impairment collectively, using the Federation's past experiences of loss statistics, ageing of past due amounts and current economic trends. The actual eventual losses may be different from the allowance made and this may affect the Federation's financial position and results. iii) Depreciation of plant and equipment The cost of an item of plant and equipment is depreciated on the straight-line method or another systematic method that reflects the consumption of the economic benefits of the asset over its useful life. Estimates are applied in the selection of the depreciation method, the useful lives and the residual values. The actual consumption of the economic benefits of the plant and equipment may differ from the estimates applied at this may lead to a gain or loss on a eventual disposal of an item of plant and equipment. 4 TRANSITION TO THE MPERS 4.1 Basis of transition to the MPERS The Federation's financial statements for the financial year from 1 January 2016 to 31 December 2016 are the first financial statements prepared in accordance with the MPERS, which is the beginning of the earliest period presented. The Federation's transition date is 1 January The Federation prepared its opening MPERS statement of financial position at that date. The Federation has applied all the mandatory exceptions and certain of the optional exemptions from full retrospective application of the MPERS. Previously, the Federation presents the most recent financial statements using Private Entity Reporting Standards ("PERS"). The Federation has also chosen to early adopt the limited amendments issued by the MASB, which are effective for annual periods on or after 1 January The Council members are of the opinion that the transition to Malaysian Private Entity Reporting Standards (MPERS) did not have material impact on the Federation's financial statements. 25

28 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 5 PROPERTY, PLANT AND EQUIPMENT GROUP 1/1/2016 Additions Disposal 31/12/2016 Cost RM RM RM RM Office premises 9,400, ,000-9,909,759 Furniture and fittings 615,603 40, ,857 Office equipment 1,293,523 71,159-1,364,682 Computer hardware and software 2,396,382 92,951-2,489,333 Renovation 717,003 20, ,503 14,423, ,864-15,157,134 1/1/2016 Additions Disposal 31/12/2016 Accumulated depreciation RM RM RM RM Office premises 2,111, ,723-2,292,970 Furniture and fittings 591,781 13, ,396 Office equipment 1,222,655 29,895-1,252,550 Computer hardware and software 2,331,949 48,754-2,380,703 Renovation 338,770 91, ,696 6,596, ,913-6,962,315 1/1/2016 Last year 31/12/2016 Net book value depreciation Net book value RM RM RM Office premises 7,289, ,798 7,616,789 Furniture and fittings 23,822 7,703 50,461 Office equipment 70,868 26, ,132 Computer hardware and software 64,433 31, ,630 Renovation 378,233 62, ,807 7,826, ,195 8,194,819 26

29 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 5 PROPERTY, PLANT AND EQUIPMENT (continued) FEDERATION 1/1/2016 Additions Disposal 31/12/2016 Cost RM RM RM RM Office premises 9,400, ,000-9,909,759 Furniture and fittings 606,995 40, ,249 Office equipment 1,293,523 71,159-1,364,682 Computer hardware and software 2,324,404 89,608-2,414,012 Renovation 717,003 20, ,503 14,342, ,521-15,073,205 1/1/2016 Additions Disposal 31/12/2016 Accumulated depreciation RM RM RM RM Office premises 2,111, ,723-2,292,970 Furniture and fittings 584,367 12, ,927 Office equipment 1,222,655 29,895-1,252,550 Computer hardware and software 2,273,919 37,212-2,311,131 Renovation 338,770 91, ,696 6,530, ,316-6,884,274 1/1/2016 Last year 31/12/2016 Net book value depreciation Net book value RM RM RM Office premises 7,289, ,798 7,616,789 Furniture and fittings 22,628 6,410 50,322 Office equipment 70,868 26, ,132 Computer hardware and software 50,485 21, ,881 Renovation 378,233 62, ,807 7,811, ,838 8,188,931 27

30 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 6 INVESTMENT IN SUBSIDIARY COMPANY Unquoted shares - at cost FEDERATION RM RM 250, ,000 Details of the subsidiary company, incorporated in Malaysia, are as follows: Name of the Company Effective percentage of Ownership Principal Activities MEF Academy 100% 100% Sdn. Bhd. # # Audited by Atarek Kamil Ibrahim & Co. Provision of training and academic education for employers in the management of human resources, industrial relations, occupational safety and health. 7 TRADE AND OTHER RECEIVABLES Subscription fee receivable Provision for doubtful debts Course fee receivable Provision for doubtful debts Representation fee receivable Provision for doubtful debts Sundry receivables Provision for doubtful debts Other receivables Sundry deposits and prepaid expenses GROUP FEDERATION RM RM RM RM 443, , , , , , , , , , , ,265 (56,974) (72,213) (56,974) (61,111) 496, , , , , , , ,055 (44,549) (35,974) (44,549) (35,974) 488, , , , , , , ,711 (45,004) (38,294) (45,004) (38,294) 313, , , , , , , , , , , ,148 2,309,554 2,187,109 2,107,611 2,113,626 28

31 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 7 TRADE AND OTHER RECEIVABLES (Continued) The trade receivables comprise receivables from services rendered. The credit period granted is 30 days (2015 : 30 days). 8 CASH AND CASH EQUIVALENT GROUP FEDERATION RM RM RM RM Cash in hand 10,518 9,501 9,000 8,000 Cash at bank 695, , , , , , , ,421 Fixed deposits with licensed financial institutions 12,657,036 11,869,537 10,904,266 11,044,693 13,362,763 12,770,797 11,478,728 11,857,114 Fixed deposits with: Local licensed banks 4,930,501 6,956,995 4,930,501 6,956,995 A local financial institution 7,726,535 4,912,542 5,973,765 4,087,698 12,657,036 11,869,537 10,904,266 11,044,693 The average effective interest rates per annum are as follows: GROUP AND FEDERATION % % Local licensed banks A local financial instituition Fixed deposits of the Group and of the Federation have an average maturity period ranging from 90 to 365 days (2015 : 90 to 365 days). 9 OTHER PAYABLES AND ACCRUALS GROUP FEDERATION RM RM RM RM Other payables 2,684,238 2,288,014 2,618,616 2,236,311 Accruals 571, , , ,716 Amount due to subsidiary company ,450 1,354,701 3,255,512 2,987,582 3,394,834 4,131,728 29

32 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 9 OTHER PAYABLES AND ACCRUALS (Continued) Amount due to subsidiary company which arose mainly from course fees, seminar fees, administration fees and advances payable to the Academy, is unsecured, interest free and has no fixed term of repayment. 10 TAX EXPENSES GROUP FEDERATION RM RM RM RM Current taxation 280, , , ,915 Under/(Over) provision in previous year (16,296) (128) (8,572) (128) Tax recoverable - (2,125) , , , ,787 Effective tax rate in percentage (%) Reconciliation of current taxation to the product of accounting profits multiplied by applicable tax rates: GROUP FEDERATION RM RM RM RM Accounting profits on normal tax rate 117, ,783 88,807 67,518 Non-deductible expenses 41,199 22,386 26,845 12,392 Non-taxable income 119,088 86, ,755 92,620 Utilisation of capital allowances (3,053) (3,260) (2,546) (1,614) Other income subjected to tax 5,667 6, Under/(Over) provision in previous year (16,296) (128) (8,572) (128) Tax recoverable - (2,125) , , , ,787 30

33 POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 11 RELATED PARTY DISCLOSURE a) Related parties and relationships The related parties and their relationship with the Federation are as follows: Related parties MEF Academy Sdn. Bhd. Relationship Subsidiary company b) Significant related party balances and transactions Balances RM RM Amount due to subsidiary company 325,450 1,354,701 Transactions Course fees, seminar fees and administration fees paid and payable by the Federation 665, ,409 For the purpose of these financial statements, the Federation is considered to be related to the party if the party has the ability, directly or indirectly, to control the Federation or exercise significant influence over the Federation in making financial and operating decisions, or vice versa, or where the Federation and the party are subject to common control or common significant influence. 12 STAFF COSTS AND NUMBER OF EMPLOYEES GROUP FEDERATION RM RM RM RM Staff costs 5,741,026 5,717,314 5,121,127 5,101,943 Number of employees Staff costs include all forms of remuneration including contributions to Employee Provident Fund of the Group and the Federation of RM644,394 (2015: RM620,397) and RM570,800 (2015: RM547,610) respectively. 31

34 HEADQUARTERS 3A06 3A07, Block A Pusat Dagangan Phileo Damansara II No. 15, Jalan 16/11, Seksyen Petaling Jaya, Selangor Darul Ehsan Tel : Fax : / mef-hq@mef.org.my Homepage: NORTHERN REGION OFFICE 379 D, Jalan Hajjah Rehmah Jelutong, Penang Tel : / Fax : mefpg@mef.org.my SOUTHERN REGION OFFICE No & 17 02, Jalan Cantik 6 Taman Pelangi Indah Ulu Tiram Johor Darul Takzim Tel : Fax : mefjb@mef.org.my PERAK OFFICE A 1 3, 1 st Floor, Wisma MFCB No. 1, Persiaran Greentown 2 Greentown Business Centre Ipoh, Perak Darul Ridzuan Tel : / Fax : mefip@mef.org.my SARAWAK OFFICE Lot No. 95, Jalan Nyiur Kuching, Sarawak Tel : Fax : mefkch@mef.org.my EAST COAST REGION OFFICE B 8 & B 10, First Floor Jalan Haji Ahmad 3 Sri Pahang Business Centre Kuantan, Pahang Darul Makmur Tel : Fax : mefktn@mef.org.my SABAH OFFICE Lot No 1, Block A, 3 rd Floor Damai Point, Luyang Kota Kinabalu, Sabah Tel : Fax : mefkk@mef.org.my