On December 17, 2007, the Company has availed of the incentives under Book VI of Executive Order (EO) 226 which include the following:

Transcription

1 ALLSECTECH MANILA, INC. (A Wholly Owned Subsidiary of ALLSEC TECHNOLOGIES LTD.) (A PEZA Registered Ecozone Export Enterprise) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2014 AND 2013 (Amounts in Philippine Peso) 1. COMPANY INFORMATION Allsectech Manila, Inc. (the Company ) is primarily engage in the business of business process outsourcing including contact center operations. It is also engage in trading information technology related goods and services on wholesale or retail basis. Goods such as computer equipment, software and operating systems, services such as programming, consultation, systems and administration and deployment, managing information services, creating consumer software applications, building enterprise applications, integrating independent solutions, and data warehousing. On October 3, 2007, all of the Company s equity holders signed a share purchase agreement with Allsec Technologies, Ltd., (the Parent ), a foreign company, thereby transferring all their respective shares to the latter. Accordingly, the Company s management has changed. Parent Company is a publicly- listed company based in Chennai, India. It is an integrated contact third party management services center offering both voice and non-voice services. On December 17, 2007, the Company has availed of the incentives under Book VI of Executive Order (EO) 226 which include the following: Corporate income tax holiday (ITH) of original project for four (4) years effective on the committed date of start of commercial operations, or the actual date of start of commercial operations, whichever is earlier: ITH entitlement for the original project can also be extended for another three (3) years provided specific criteria are met for each additional year and prior Philippine Export Zone Authority (PEZA) approval is obtained; duly approved and registered Expansion and New projects are entitled to a three-year, and four- year ITH, respectively; Tax and duty free importation of merchandise which include raw materials, capital equipment, machineries and spare parts: Exemption from wharfage dues and export tax, impost or fees;

2 VAT zero-rating of local purchases subject to compliance with the Bureau of Internal Revenue (BIR) and PEZA requirements; and, Exemption from payment of any and all local government imposts, fees, licenses or taxes except real estate tax; however, machineries installed and operated in the ecozone for manufacturing, processing or for industrial purposes shall not be subject to payment of real estate taxes for the first three (3) years of operation of such machineries, production equipment not attached to real estate shall be exempt from real property taxes. After the lapse of ITH, the following incentives shall apply: a. Exemption from national and local taxes, in lieu thereof payment of 5% final tax on gross income as provided in Section 24 of R.A and Rule of the Rules and Regulations to Implement R.A. 7616, and b. Additionally for training expenses (1/2 of value) against the 5% tax on gross income earned, but not to exceed 3%, subject to guidelines to be formulated by PEZA in coordination with the Department of Labor and Employment and the Department of Finance (Section 42 of R.A. 7916). c. Pursuant to BIR s Revenue Regulations No [Amending Further Pertinent Provisions of Revenue Regulations No. 2-98, as amended], income payments to PEZA registered enterprises under the ITH and 5% GIT incentives are exempt from expanded withholding tax. d. Non-fiscal incentives shall include the following: 1. Permanent resident status within the ecozone for foreign investors with initial investment of at least $150, Employment of foreign nationals; and 3. Simplified import and export procedures. The latest fiscal incentive certificate obtained by the Company was dated December 17, 2007 applicable until the taxable year The financial statements of the Company for the fiscal year ended March 31, 2014 and 2013 were authorized for issuance by the Board of Directors (BOD) on May 2, As of March 31, 2014, the Company s application for renewal for extension of ITH is pending for PEZA s approval. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies that have been used in the preparation of these financial statements are summarized below. The policies have been consistently applied to all years presented, unless otherwise stated. The Company s financial statements are prepared on the assumption that the Company would be able to continue as a going concern. -2-

3 Basis of Presentation Statement of Compliance with Philippine Financial Reporting Standards (PFRS) Applicable to Small And Medium Enterprises (SMEs) The financial statements of the Company have been prepared in accordance with financial reporting standards acceptable in the Philippines applicable to SMEs (i.e. PFRS for SMEs). PFRSs are adopted by the Financial Reporting Standards Council (FRSC) from the pronouncements issued by the International Accounting Standards Board (IASB). The financial statements have been prepared using the measurement bases specified by PFRS for each type of asset, liability, income and expense. These financial statements have been prepared on the historical cost basis. The measurement bases are more fully described in the accounting policies that follow. Impact of New Standards, and Amendments and Interpretations to Existing Standards that are Relevant to the Company 2010: PFRS for SMEs (i) The PFRS for SMEs is intended for use by small and medium-sized entities (effective for annual period beginning January 1, 2010) that do not have public accountability and publish general purpose financial statements for external users. Examples of external users include owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies. An entity is considered to have public accountability if: a. Its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or b. It holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. This is typically the case for banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks. -3-

4 Financial Assets Moreover, to specifically determine the covered SMEs in the Philippines, an En Banc SEC Resolution was released on December 03, 2009, which covers the following entities to adopt the PFRS for SMEs: 1. With total assets of between P3 Million and P350 Million or total liabilities of between P3 Million and P250 Million; 2. That has special requirement to file financial statements under SEC Rule for corporation as a) issuers of securities under the Securities Regulation Code, b) issuers with a class of securities listed in an Exchange, and c) public companies or those corporations with total assets of at least P50 million pesos and at least 200 stockholders owning at least 100 shares each. 3. That is not in the process of filing its financial statements for the purpose of issuing any class of instruments in a public market; 4. That is not a holder of a secondary license issued by a regulatory agency, such as a bank, an investment house, a finance Company, an insurance Company, a securities broker/dealer, a mutual fund and a pre-need Company; and 5. That is not a public utility. Financial assets include cash and trade receivables and other financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired. The designation of financial assets is re-evaluated at every reporting date at which date a choice of classification or accounting treatment is available, subject to compliance with specific provisions of applicable accounting standards. Revenue and Cost Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: a. Revenue from services is recognized when the services have been rendered and the cost is reliably measured. b. Interest income is recognized as it accrues to the Company. Cost and expenses are recognized in the statement of comprehensive income upon utilization of the service or at the date they are incurred. -4-

5 Property and Equipment Property and equipment are stated at cost less accumulated depreciation and any impairment in value. The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset to working condition for its intended use. Expenditures for additions, major improvements and renewals are capitalized; expenditures for repairs and maintenance are charged to expense as incurred. When assets are sold, retired or otherwise disposed of, their cost and related accumulated depreciation and impairment losses are removed from the accounts and any resulting gain or loss is reflected in income for the period. Depreciation is computed on the straight-line basis over the estimated useful lives of the asset as follows: Computer and information technology equipment Furniture and fixtures Transportation equipment 2 3 years 3 5 years 3 5 years Leasehold improvements are amortized over the term of the lease which is 6 to 7 years or the estimated life of the improvements which is 6 to 7 years, whichever is shorter. The residual values and estimated useful lives of property and equipment are reviewed, and adjusted if appropriate, at each statement of financial position. An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of comprehensive income in the year the item is derecognized. Impairment of Non-financial Assets The Company s property and equipment and investment property are subject to impairment testing. Intangible assets with an indefinite useful life or those not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. -5-

6 An impairment loss is recognized for the amount by which the asset or cashgenerating unit s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use, based on an internal evaluation of discounted cash flow. Impairment loss is charged pro-rata to the other assets in the cashgenerating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist and the carrying amount of the asset is adjusted to the recoverable amount resulting in the reversal of the impairment loss. Financial Liabilities Financial liabilities include trade and other payables and due to related parties, which are measured at amortized cost using the effective interest rate method. Financial liabilities are recognized when the Company becomes a party to the contractual agreements of the instrument. All interest related charges are recognized as an expense in the statement of comprehensive income under the caption Finance Costs. Trade and other payables are initially recognized at their nominal value and subsequently measured at amortized cost less settlement payments. Financial liabilities are derecognized from the statement of financial position only when the obligations are extinguished either through discharge, cancellation or expiration. Provisions Provisions are recognized when present obligations will probably lead to an outflow of economic resources and they can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events. -6-

7 Functional Currency and Foreign Currency Transactions a. Functional and Presentation Currency Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The financial statements are presented in Philippine pesos, which is the Company s functional and presentation currency. b. Transaction and Balances The accounting records of the Company are maintained in Philippine pesos. Foreign currency transactions during the year are translated into the functional currency at exchange rates which approximate those prevailing on transaction dates. Income Taxes Current tax assets or liabilities comprise those claims from, or obligations to, fiscal authorities relating to the current or prior reporting period, that are uncollected or unpaid at the statement of financial position date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognized as a component of tax expense in the statement of comprehensive income. Equity Capital stock is determined using the nominal value of shares that have been issued. Any transaction costs associated with the issuance of shares are deducted from additional paid-in capital, net of any related income tax benefits. Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income. 3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES The Company s financial statements prepared in accordance with PFRS require management to make judgments and estimates that affect amounts reported in the financial statements and related notes. Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under circumstances. Actual results may ultimately differ from these estimates. -7-

8 Critical Judgments in Applying Accounting Policies In the process of applying the Company s accounting policies, management has made judgments, apart from those involving estimation, which have the most significant effect on the amounts recognized in the financial statements: Useful Life of Property and Equipment The Company estimates the useful lives of property and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of property and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the assets. In addition, estimation of the useful lives of property and equipment is based on collective assessment of industry practice, internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of property and equipment would increase recorded operating expenses and decrease non-current assets. 4. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in bank. Cash in bank generally earn interest at rates based on prevailing daily bank deposit rates. Cash and cash equivalents consists of the following as of March 31: Petty cash P 7,500 P 7,500 Cash in bank 7,080,326 2,451,238 Total P 7,087,826 P 2,458,738 The maturity profile of the Company s cash and cash equivalents is less than six months. -8-

9 5. TRADE AND OTHER RECEIVABLES Receivable represents open accounts with customers valued at the lower of cost and net realizable value. Most sales are made on the basis of normal credit terms, and the receivables do not bear interest. Where credit is extended beyond normal credit terms, receivable are measured at amortized cost using effective interest method. At the end of each reporting period, the carrying amount of trade and other receivables are reviewed to determine whether there is any objective evidence that the amounts are not recoverable. If so, an impairment loss is recognised immediately in statements of comprehensive income. This account as of March 31 consisted of the following: Accounts receivable P 10,399,932 P 24,230,306 Advances to employees and officers 208,619 57,717 Advances to others 297,804 54,056 Total P 10,906,355 P 24,342, PREPAYMENT AND OTHER CURRENT ASSETS As of March 31, the Company s prepayments and other current assets are as follows: Prepaid rent P 2,798,763 P 2,688,711 Others 1,393, ,837 Total P 4,192,247 P 2,937,548-9-

10 7. PROPERTY AND EQUIPMENT-NET The balance of property and equipment and the corresponding reconciliation of cost and accumulated depreciation as of March 31, 2014 and 2013 are presented below: Balance at April 1, 2013-net Computer and Furniture and Leasehold IT Equipment Fixtures Improvement Totals of accumulated depreciation P 3,825,222 P 17,747 P - P 3,842,969 Additions - 157, ,300 Disposals Adjustments Depreciation charge - for the year (see also Note 11,12) ( 2,513,666 ) ( 41,019 ) - ( 2,554,685 ) Balance at M arch 31, 2014-net of accumulated depreciation P 1,311,556 P 134,028 P - P 1,445,584 Carrying cost, March 31, 2014 P 64,241,950 P 15,212,487 P 44,163,953 P 123,618,390 Accumulated depreciation ( 62,930,394 ) ( 15,078,459 ) ( 44,163,953 ) ( 122,172,806 ) Net Carrying Amount P 1,311,556 P 134,028 P - P 1,445,584 Balance at April 1, 2012-net Computer and Furniture and Leasehold IT Equipment Fixtures Improvement Totals of accumulated depreciation P 10,383,641 P 2,214,297 P 5,692,139 P 18,290,077 Additions 908,915 22, ,596 Adjustments ( 3,588 ) - - ( 3,588 ) Depreciation charge for the year (see also Note 11,12) ( 7,463,746 ) ( 2,219,231 ) ( 5,692,139 ) ( 15,375,116 ) Balance at M arch 31, 2013-net of accumulated depreciation P 3,825,222 P 17,747 P - P 3,842,969 Carrying cost, March 31, 2013 P 64,241,950 P 15,055,187 P 44,163, ,461,090 Accumulated depreciation ( 60,416,728 ) ( 15,037,440 ) ( 44,163,953 ) ( 119,618,121 ) Net Carrying Amount P 3,825,222 P 17,747 P - P 3,842,

11 8. OTHER NON-CURRENT ASSETS This account as of March 31 consisted of the following: Security deposit- SSECC P 4,668,117 P 3,988,145 Security deposit- Helius 95,074 94,527 Others 140, ,000 Total P 4,903,191 P 4,372,672 Other non-current asset for 2014 include undeposited funds amounting to P5,545,440. The recovery of the amount based on management assessment is highly probable as of the audit report date. Where the probability of recovery of the asset shall change from high probable to remote, then management will consider impairment loss recognition on this particular asset. 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses as of March 31, consist of the following: Trade accounts P 252,876 P 114,063 Accrued expenses 2,076,203 11,703,069 Unearned income 7,169,431 - Income tax (see also Note 16) 886,681 1,113,283 SSS, HDMF and PHIC 466, ,890 Withholding tax (see also Note 16) 466, ,513 13th month 1,228,965 1,496,042 Security deposit 2,397,998 - Other payables 405, ,439 Total P 15,351,037 P 16,397,299 These liabilities of the Company are non-interest bearing with a maturity of less than six months to one year. -11-

12 10. RELATED PARTY TRANSACTIONS (a) Payables to Allsectech, Inc. USA represents non-interest bearing cash advances to the Company. The outstanding balance of these non-interest open-account amounted to P4,092,569 and P3,275,040 as of March 31, 2014 and 2013, respectively. (b) Payables to Allsec Technologies Limited (the Parent ) representing noninterest bearing cash advances to support working capital requirements of the Company. The outstanding balance of these non-interest open-account with the Parent amounted to zero and P107,882,171 as of March 31, 2014 and 2013, respectively. The Company s BOD made a resolution on February 5, 2013 to increase its authorized capital stock by converting Payables to Allsec Technologies Limited to a non-voting preferred stock. During the year, the entire payable to parent was already converted to non-voting preferred stock. 11. COST OF SERVICES The component of cost of services for the year ended March 31 is as follows: Salaries and wages P 54,152,717 P 75,038,045 Rent (see also Note 14) 18,747,161 16,034,864 Power, light and water 7,206,844 8,548,077 Depreciation (see also Note 7) 2,513,666 7,463,746 Communications 1,639,095 1,982,135 Others 299,504 58,544 Total P 84,558,987 P 109,125,411 The Company s cost of services account classification was also made to confirm with the supplemental disclosure requirements of the current rules and regulation of the local taxing authority. These cost of services are considered as deductible expense for income tax purposes (see also Note 16). -12-

13 12. GENERAL AND ADMINISTRATIVE EXPENSES Salaries and wages P 8,493,197 P 8,522,336 Common area charges 5,211,368 5,211,368 Medical 2,256,671 2,909,788 Security 1,616,595 1,599,895 Repairs and maintenance 1,487, ,359 Management professional fee 1,449,642 3,045,542 Rent 895, ,823 Taxes and licenses (see also Note 16) 876,500 24,354 Janitorial 867, ,348 Utilities 447, ,754 Meal 303, ,634 Telephone 301, ,606 Recruitment 171, ,587 Office supplies 167, ,615 Bank charges 166, ,483 Insurance 160, ,397 Representation and entertainment 124, ,141 Others 125,912 - Transportation and travel 88, ,458 Depreciation (see also Note 7) 41,019 7,911,370 Total P 25,253,753 P 33,816,858 The Company s general and administrative expense classification was made to conform with the requirements of the current rules and regulation of the local taxing authority and these expenses were considered as deductible expenses for income tax purposes (see also Note 16). 13. RETIREMENT BENEFITS Under PAS 19, Employee Benefits, the cost of defined retirement benefits, including those mandated under Republic Act (RA) No. 7641, should be determined using an accrued benefit valuation method or a projected benefit valuation method. RA No shall apply to employees of at least (5) years and minimum service in the private sector, regardless of their position, designation or status and irrespective of the method by which their wage are paid. Pursuant to the provision, a covered employee who retires shall be entitled to a retirement pay equivalent to at least one- half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. The Company as of March 31, 2014, has not yet accrued retirement benefits since it s not yet required under RA No

14 14. COMMITMENTS AND CONTINGENCIES The Company rents under operating leases. The leases are for an average period of 3 years, with fixed rentals over the same period. Minimum lease payments under operating leases recognized as expense during the year amounted to P18,747,161. At year-end, the Company has outstanding commitments under noncancellable operating leases that fall due as follows: Within one year P 18,747,161 P 18,747,161 At least two years 14,765,910 33,513,071 Total P 33,513,071 P 52,260, APPLICATION FOR INCREASE ON AUTHORIZED CAPITAL STOCK On February 5, 2013, the Company approved a resolution to increase authorized capital from P85,000,000 to P195,000,000. The new authorized capital stock is composed of 850,000 common stock and 110,000,000 preferred stock with a par value of P100 and P1, respectively. In June 11, 2013, the SEC approved the pending application of the Company for the increase in authorized capital stocks; therefore, the following structure of capital has been in effect after the approval: Common Stocks: Issued and Authorized Outstanding No. of No. of Shares Amount Shares Amount Balance at beginning 850,000 P 85,000, ,500 P 81,250,000 Additional issuances During the year Balance at the end of year 850,000 P 85,000, ,500 P 81,250,000 Preferred Stocks: Balance at beginning - P - - P - Additional issuances During the year 110,000, ,000, ,882, ,882,171 Balance at the end of year 110,000,00 P110,000, ,882,171 P107,882,

15 16. SUPPLEMENTARY INFORMATION REQUIRED BY THE BUREAU OF INTERNAL REVENUE (BIR) Presented below is the supplementary information which is required by the Bureau of Internal Revenue (BIR) under its existing revenue regulations to be disclosed as part of the notes to financial statements. The supplementary tax information is presented as follows: 1. Requirements under Revenue Regulations (RR) The information on taxes, duties and license fees paid or accrued during the taxable year required under RR No issued on November 25, 2010 are as follows: (a) Output Value-Added Tax (VAT) The Company being a PEZA registered enterprises enjoys certain privileges under the tax code which includes zero rating of VAT on its export sale of services and as long it maintains the seventy percent (70%) to thirty percent (30%) ratio of export sales to local sales in accordance with PEZA rules and regulations which coincides with the tax rules and regulations. (b) Withholding tax The Company withholding tax withheld during the fiscal year are as follows: a. On Compensation P 5,899,203 b. Expanded 1,330,937 Total 7,230,140 Less: adjustments 1,126,870 remitted during the year 5,637,077 Withholding tax to be remitted in April 2014 P 466,193 (c) Taxes and license paid during the fiscal year are follows (see Note 12): 2014 Documentary stamp P 595,655 Increase of capital stock and evaluation of shares 222,905 PEZA permit 31,140 BIR registration 500 Notary 300 Immigration fees 26,000 Total taxes and licenses P 876,

16 2. Requirements under RR On January 24, 2014, then BIR issued RR No which prescribes the new form that will be used for income tax filing covering and starting with periods ending December 31, 2013 and onwards. This recent RR requires schedules of taxable revenues and other non-operating income, costs of sales and services, and itemized deductions. The amounts of taxable revenues and income, and deductible costs and expenses presented below are based on relevant tax regulations issued by the BIR, hence, may not be the same as the amounts reflected in the 2013 statement of income. The reconciliation of the Company s pre- tax accounting income to the taxable income for the fiscal years ended March 31 are as follows: (a) Taxable Income The amounts of taxable revenues and income, and deductible costs and expenses presented below are based on relevant tax regulations issued by the BIR, hence, may not be the same as the amounts reflected in the 2014 statement of comprehensive income. Call center operation P 74,148,098 A&R project 8,095,659 DCG 5,672,213 Web development 2,831,360 Other income 11,532,549 Miscellaneous 12,721 Total P102,292,600 These revenues were considered as part of the taxable income for the taxable year (b) The cost of service considered as deduction to revenues amounted to P84,558,987 (see also Note 11). The Company, being a PEZA registered enjoys certain fiscal incentives under Book IV of EO 226 as disclosed in Note 1 of this accompanying note to financial statements. For the taxable year 2014, the Company s income tax holiday (ITH) expires and application for renewal of PEZA registration is pending for PEZA s approval. This will require the Company to compute income tax for the fiscal year ended March 31, 2014 using the special rate of 5% of Gross income. -16-

17 Computation of Income tax is shown below: Revenue P 102,298,703 Less: income already subject to final tax 6,103 Gross taxable revenue 102,292,600 Cost of services 84,558,987 Gross income subject to special rate 17,733,613 Multiply: Special rate 5% Income tax P 886, FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Company s principal financial instruments comprise mainly of cash and cash equivalents and trade and other receivables. The main purpose of these financial instruments is to raise finances for the Company s operations. The Company has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Company s financial instruments are credit risk and liquidity risk. The Company s management reviews and agrees on policies for managing each of these risks as they are summarized below. Credit Risk It is the Company s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Company s exposure to bad debts is not significant. The Company does not offer credit terms without the specific approval of the management. With respect to credit risk arising from cash, the Company s exposure to credit risk arises from the default of the counterparty, with a maximum exposure equal to the carrying amount of cash. Since the Company trades only with recognized customers and related parties, there is no requirement for collateral. Liquidity Risk The Company seeks to manage its liquidity profile to be able to finance its capital expenditures and working capital requirements. The Company s objective is to maintain a balance between continuity of funding and flexibility through valuation of projected and actual cash flow information. -17-