Bermaz Auto Philippines Inc. (formerly Berjaya Auto Philippines Inc.)

Transcription

1 Bermaz Auto Philippines Inc. (formerly Berjaya Auto Philippines Inc.) Financial Statements April 30, 2016, 2015 and 2014 and Years Ended April 30, 2016, 2015 and 2014 and Independent Auditors Report

2 C O V E R S H E E T for AUDITED FINANCIAL STATEMENTS SEC Registration Number C S C O M P A N Y N A M E B E R M A Z A U T O P H I L I P P I N E S I N C. ( F O R M E R L Y B E R J A Y A A U T O P H I L I P P I N E S I N C. ) PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province ) 9 T H F L O O R R U F I N O B U I L D I N G, A Y A L A A V E N U E C O R N E R V. A. R U F I N O S T R E E T, M A K A T I C I T Y, M E T R O M A N I L A Form Type Department requiring the report Secondary License Type, If Applicable A A F S S E C C O M P A N Y I N F O R M A T I O N Company s Address Company s Telephone Number Mobile Number N/A (+632) N/A No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day) 8 1 st Friday of September April 30 CONTACT PERSON INFORMATION The designated contact person MUST be an Officer of the Corporation Name of Contact Person Address Telephone Number/s Mobile Number Tan Eng Hwa tanenghwa@gmail.com N/A CONTACT PERSON s ADDRESS 9th Floor Rufino Building, 6784 Ayala Avenue corner V.A. Rufino Street, Makati City, Metro Manila NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated. 2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation s records with the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.

3 SyCip Gorres Velayo & Co Ayala Avenue 1226 Makati City Philippines Tel: (632) Fax: (632) ey.com/ph BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018 SEC Accreditation No FR-4 (Group A), November 10, 2015, valid until November 9, 2018 INDEPENDENT AUDITORS REPORT The Stockholders and the Board of Directors Bermaz Auto Philippines Inc. 9th Floor Rufino Building 6784 Ayala Avenue corner V.A. Rufino Street Makati City, Metro Manila Report on the Financial Statements We have audited the accompanying financial statements of Bermaz Auto Philippines Inc. (formerly Berjaya Auto Philippines Inc.), which comprise the statements of financial position as at April 30, 2016, 2015 and 2014, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended April 30, 2016, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. A member firm of Ernst & Young Global Limited

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5 BERMAZ AUTO PHILIPPINES INC. (formerly Berjaya Auto Philippines Inc.) STATEMENTS OF FINANCIAL POSITION April 30 ASSETS Current Assets Cash and cash equivalents (Note 6) P=1,199,830,636 P=812,416,571 P=332,778,294 Receivables (Note 7) 59,952,601 45,112,674 25,054,293 Inventories (Notes 8 and 16) 923,259, ,154, ,098,944 Other current assets (Note 9) 80,967,227 40,212,622 30,503,058 Total Current Assets 2,264,009,755 1,289,896, ,434,589 Noncurrent Assets Property and equipment (Note 10) 37,394,479 19,265,013 19,134,164 Available-for-sale (AFS) financial assets (Note 11) 9,000,000 Deferred tax assets - net (Note 23) 123,002,603 79,596,631 12,388,783 Other noncurrent assets (Note 9) 1,357,024 1,592,769 1,798,139 Total Noncurrent Assets 170,754, ,454,413 33,321,086 TOTAL ASSETS P=2,434,763,861 P=1,390,350,809 P=781,755,675 LIABILITIES AND EQUITY Current Liabilities Trade and other payables (Note 12) P=967,201,604 P=437,350,026 P=274,177,895 Provision for warranty (Note 13) 124,008,129 72,432,436 36,474,284 Deferred revenue (Note 15) 118,945,552 72,134,362 32,517,393 Income tax payable (Note 23) 88,965,739 89,249,895 11,545,066 Total Current Liabilities 1,299,121, ,166, ,714,638 Noncurrent Liability Deferred revenue - net of current portion (Note 15) 150,615, ,626,326 56,113,816 Total Liabilities 1,449,736, ,793, ,828,454 Equity (Note 14) Capital stock 209,000, ,000, ,000,000 Appropriated retained earnings 600,000, ,000,000 Unappropriated retained earnings 146,920,135 80,795, ,438,844 Equity contribution from Bermaz Auto Berhad (Note 4) 29,107,034 23,762,507 12,488,377 Total Equity 985,027, ,557, ,927,221 TOTAL LIABILITIES AND EQUITY P=2,434,763,861 P=1,390,350,809 P=781,755,675 See accompanying Notes to Financial Statements.

6 BERMAZ AUTO PHILIPPINES INC. (formerly Berjaya Auto Philippines Inc.) STATEMENTS OF COMPREHENSIVE INCOME Years Ended April 30 REVENUE (Note 15) P=4,821,414,342 P=3,500,821,852 P=2,403,540,229 COST OF SALES (Notes 15 and 16) 3,641,792,786 2,555,242,493 1,850,071,882 GROSS PROFIT 1,179,621, ,579, ,468,347 SELLING AND MARKETING EXPENSES (Note 17) (393,620,293) (477,532,141) (265,722,034) ADMINISTRATIVE AND OTHER OPERATING EXPENSES (Note 18) (278,706,383) (145,177,127) (121,953,854) FINANCE COSTS (Note 20) (7,247,199) (5,369,396) (12,561,901) OTHER INCOME - net (Note 19) 24,674,272 18,203,703 10,891,996 INCOME BEFORE INCOME TAX 524,721, ,704, ,122,554 PROVISION FOR INCOME TAX (Note 23) 158,597, ,347,985 53,631,616 NET INCOME/TOTAL COMPREHENSIVE INCOME (Note 2) P=366,124,878 P=231,356,413 P=110,490,938 BASIC/DILUTED EARNINGS PER SHARE (Notes 4 and 25) P=0.55 P=0.35 P=0.17 See accompanying Notes to Financial Statements.

7 BERMAZ AUTO PHILIPPINES INC. (formerly Berjaya Auto Philippines Inc.) STATEMENTS OF CHANGES IN EQUITY For the Year Ended April 30, 2016 Retained Earnings Common Stock (Note 14) Unappropriated (Note 14) Appropriated (Note 14) Equity Contribution from Bermaz Auto Berhad (Notes 4 and 14) Total Balances as at May 1, 2015 P=209,000,000 P=80,795,257 P=300,000,000 P=23,762,507 P=613,557,764 Net income for the year 366,124, ,124,878 Employee share option scheme 5,344,527 5,344, ,000, ,920, ,000,000 29,107, ,027,169 Appropriation for capital expenditures (300,000,000) 300,000,000 Balances as at April 30, 2016 P=209,000,000 P=146,920,135 P=600,000,000 P=29,107,034 P=985,027,169 For the Year Ended April 30, 2015 Retained Earnings Common Stock Unappropriated Appropriated Equity Contribution from Bermaz Auto Berhad Total Balances as at May 1, 2014 P=209,000,000 P=149,438,844 P= P=12,488,377 P=370,927,221 Net income for the year 231,356, ,356,413 Employee share option scheme 11,274,130 11,274, ,000, ,795,257 23,762, ,557,764 Appropriation for capital expenditures (300,000,000) 300,000,000 Balances as at April 30, 2015 P=209,000,000 P=80,795,257 P=300,000,000 P=23,762,507 P=613,557,764 For the Year Ended April 30, 2014 Retained Earnings Common Stock Unappropriated Appropriated Equity Contribution from Bermaz Auto Berhad Total Balances as at May 1, 2013 P=209,000,000 P=38,947,906 P= P= P=247,947,906 Net income for the year 110,490, ,490,938 Employee share option scheme 12,488,377 12,488,377 Balances as at April 30, 2014 P=209,000,000 P=149,438,844 P= P=12,488,377 P=370,927,221 See accompanying Notes to Financial Statements.

8 BERMAZ AUTO PHILIPPINES INC. (formerly Berjaya Auto Philippines Inc.) STATEMENTS OF CASH FLOWS Years Ended April 30 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=524,721,953 P=335,704,398 P=164,122,554 Adjustments for: Revenue items relating to preventive maintenance service Deferral during the period (Note 15) 166,129, ,316,271 70,481,591 Claims during the period (Note 15) (34,520,598) (13,325,187) (1,569,124) Expiration during the period (Note 15) (39,808,578) (19,861,605) (8,389,754) Provision for warranty (Notes 13 and 16) 81,868,935 54,113,517 34,864,836 Depreciation and amortization (Notes 10 and 18) 8,121,633 7,357,579 5,148,260 Employee share option scheme contribution 5,344,527 11,274,130 12,488,377 Inventory obsolescence (Notes 8 and 18) 3,508,168 1,711,163 13,543,818 Unrealized foreign exchange (gain) loss (2,299,928) 1,144,708 9,544,144 Gain on disposal of property and equipment (Note 19) (2,027,331) Expired warranty costs (Note 13) (8,902,172) (3,688,974) (8,394,169) Operating income before working capital changes 702,136, ,746, ,840,533 Changes in working capital: Decrease (increase) in: Receivables (14,839,927) (20,058,381) 11,567,200 Inventories (600,827,436) (60,213,410) (312,738,130) Other current assets (40,754,605) (9,709,564) (29,847,720) Increase (decrease) in: Trade and other payables 573,496, ,618,793 84,834,336 Provision for warranty (21,391,069) (14,466,391) (1,034,523) Net cash generated from operations 597,819, ,917,047 44,621,696 Income taxes paid (202,287,203) (93,851,004) (65,347,772) Net cash provided by (used in) operating activities 395,532, ,066,043 (20,726,076) CASH FLOWS FROM INVESTING ACTIVITIES Increase (decrease) in other noncurrent assets 235, ,370 (320,000) Acquisition of AFS financial assets (Note 11) (9,000,000) Acquisitions of property and equipment (Note 10) (7,408,651) (7,488,428) (10,224,127) Proceeds from sale of property and equipment 5,754,553 Net cash used in investing activities (10,418,354) (7,283,058) (10,544,127) EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2,299,928 (1,144,708) (9,544,144) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 387,414, ,638,277 (40,814,347) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 6) 812,416, ,778, ,592,641 CASH AND CASH EQUIVALENTS AT END OF THE YEAR (Note 6) P=1,199,830,636 P=812,416,571 P=332,778,294 NONCASH ACTIVITY Transfer of vehicles under inventories to transportation equipment under property and equipment (Notes 8 and 10) P=22,569,670 P= P= See accompanying Notes to Financial Statements.

9 BERMAZ AUTO PHILIPPINES INC. (formerly Berjaya Auto Philippines Inc.) NOTES TO FINANCIAL STATEMENTS 1. Corporate Information Bermaz Auto Philippines Inc. (formerly Berjaya Auto Philippines Inc.) (the Company) is a domestic corporation incorporated and registered with the Securities and Exchange Commission (SEC) on August 10, The Company is engaged in purchasing, acquiring, owning, selling, transferring, encumbering, and generally dealing in all types of new automobiles, trucks, and other motor vehicles and any parts or accessories used in connection therewith, and is engaged in purchasing, acquiring, owning, selling, and generally dealing in all types of supplies used by all types of motor vehicles. On August 19, 2016, the Board of Directors of the Company amended its articles of incorporation to change the name Berjaya Auto Philippines Inc. to Bermaz Auto Philippines Inc. On September 1, 2016, the Securities and Exchange Commission approved the amendment. The Company is owned by Bermaz Motor International, Ltd., Berjaya Philippines Inc. and various shareholders sharing 60.39%, 25.48% and 14.13%, respectively, of its outstanding capital stock. The Company s ultimate parent company is Bermaz Auto Berhad which is domiciled in Malaysia. On August 19, 2016, the Board of Directors approved the amendment of the principal office of the Company. The Company s amended registered office address and principal place of business is at the 9th Floor Rufino Building, 6784 Ayala Avenue corner V.A. Rufino Street, Makati City, Metro Manila. 2. Basis of Preparation Basis of Preparation The accompanying financial statements have been prepared using the historical cost basis and are presented in Philippine Peso (P=), the Company s functional currency. All amounts are rounded to the nearest peso unit except as otherwise indicated. There are no items of other comprehensive income (OCI) for the years ended April 30, 2016, 2015 and This is a special purpose financial statements that is intended for filing to the Securities and Exchange Commission. Statement of Compliance The accompanying financial statements have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). 3. Changes in Accounting Policies and Disclosures The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of new and amended PFRS and Philippine Interpretations which became effective beginning May 1, Except as otherwise indicated, the adoption of amended PFRS and Philippine Interpretations did not have any impact on the financial statements of the Company.

10 - 2 - PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments) PAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognize such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. The amendment had no impact on the Company s financial statements. Annual Improvements to PFRSs ( cycle) The Annual Improvements to PFRSs ( cycle) are effective for annual periods beginning on or after May 1, 2015 and did not have a material impact on the Company. PFRS 2, Share-based Payment - Definition of Vesting Condition This improvement is applied prospectively and clarifies various issues relating to the definitions of performance and service conditions which are vesting conditions, including: A performance condition must contain a service condition; A performance target must be met while the counterparty is rendering service; A performance target may relate to the operations or activities of an entity, or to those of another entity in the same group; A performance condition may be a market or non-market condition; and If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied. PFRS 3, Business Combinations - Accounting for Contingent Consideration in a Business Combination The amendment is applied prospectively for business combinations for which the acquisition date is on or after July 1, It clarifies that a contingent consideration that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of PAS 39, Financial Instruments: Recognition and Measurement (or PFRS 9, Financial Instruments, if early adopted). PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the Total of the Reportable Segments Assets to the Entity s Assets The amendments are applied retrospectively and clarify that: An entity must disclose the judgments made by management in applying the aggregation criteria in the standard, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are similar. The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.

11 - 3 - PAS 16, Property, Plant and Equipment - Revaluation Method - Proportionate Restatement of Accumulated Depreciation The amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the asset may be revalued by reference to the observable data on either the gross or the net carrying amount. In addition, the accumulated depreciation or amortization is the difference between the gross and carrying amounts of the asset. PAS 24, Related Party Disclosures - Key Management Personnel The amendment is applied retrospectively and clarifies that a management entity, which is an entity that provides key management personnel services, is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. Annual Improvements to PFRSs ( cycle) The Annual Improvements to PFRSs ( cycle) are effective for annual periods beginning on or after May 1, 2015 and did not have a material impact on the Company. PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements The amendment is applied prospectively and clarifies the following regarding the scope exceptions within PFRS 3: Joint arrangements, not just joint ventures, are outside the scope of PFRS 3. This scope exception applies only to the accounting in the financial statements of the joint arrangement itself. PFRS 13, Fair Value Measurement - Portfolio Exception The amendment is applied prospectively and clarifies that the portfolio exception in PFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of PAS 39. PAS 40, Investment Property The amendment is applied prospectively and clarifies that PFRS 3, and not the description of ancillary services in PAS 40, is used to determine if the transaction is the purchase of an asset or business combination. The description of ancillary services in PAS 40 only differentiates between investment property and owner-occupied property (i.e., property, plant and equipment). There are new PFRS and PAS amendments, annual improvements and interpretations to existing standards that are effective for periods subsequent to April 30, 2016 and these will be adopted on their effectivity dates in accordance with the transition provisions. Except as otherwise stated, these amendments and improvements to PFRS and new standards are not expected to have any significant impact on the Company s financial statements.

12 - 4 - Standards Issued but not yet Effective Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate This interpretation covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as construction contract to be accounted for under PAS 11 or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and reward of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion. The Securities and Exchange Commission and the Financial Reporting Standards Council have deferred the effectivity of this interpretation until the final Revenue standard is issued by the International Accounting Standards Board (IASB) and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed. PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture These amendments address an acknowledged inconsistency between the requirements in PFRS 10 and those in PAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. These amendments are effective from annual periods beginning on or after January 1, Effective May 1, 2016 PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification of Acceptable Methods of Depreciation and Amortization (Amendments) The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets. The amendments are effective prospectively for annual periods beginning on or after January 1, 2016, with early adoption permitted. PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants (Amendments) The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply. After initial recognition, bearer plants will be measured under PAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of PAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, PAS 20, Accounting for Government Grants and Disclosure of Government Assistance, will apply. The amendments are retrospectively effective for annual periods beginning on or after January 1, 2016, with early adoption permitted.

13 - 5 - PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements (Amendments) The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying PFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. For first-time adopters of PFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to PFRS. PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations (Amendments) The amendments to PFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business must apply the relevant PFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, scope exclusion has been added to PFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party. The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. PFRS 14, Regulatory Deferral Accounts PFRS 14 is an optional standard that allows an entity, whose activities are subject to rateregulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity s rate-regulation and the effects of that rate-regulation on its financial statements. PFRS 14 is effective for annual periods beginning on or after January 1, Since the Company is an existing PFRS preparer, this standard would not apply. Annual Improvements to PFRSs ( cycle) The Annual Improvements to PFRSs ( cycle) are effective for annual periods beginning on or after May 1, 2016 and are not expected to have a material impact on the Company. PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations - Changes in Methods of Disposal The amendment is applied prospectively and clarifies that changing from a disposal through sale to a disposal through distribution to owners and vice-versa should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in PFRS 5. The amendment also clarifies that changing the disposal method does not change the date of classification.

14 - 6 - PFRS 7, Financial Instruments: Disclosures - Servicing Contracts PFRS 7 requires an entity to provide disclosures for any continuing involvement in a transferred asset that is derecognized in its entirety. The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and arrangement against the guidance in PFRS 7 in order to assess whether the disclosures are required. The amendment is to be applied such that the assessment of which servicing contracts constitute continuing involvement will need to be done retrospectively. However, comparative disclosures are not required to be provided for any period beginning before the annual period in which the entity first applies the amendments. PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim Financial Statements This amendment is applied retrospectively and clarifies that the disclosures on offsetting of financial assets and financial liabilities are not required in the condensed interim financial report unless they provide a significant update to the information reported in the most recent annual report. PAS 19, Employee Benefits - regional market issue regarding discount rate This amendment is applied prospectively and clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. PAS 34, Interim Financial Reporting - disclosure of information elsewhere in the interim financial report The amendment is applied retrospectively and clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the greater interim financial report (e.g., in the management commentary or risk report). Effective May 1, 2018 PFRS 9, Financial Instruments (2014 or final version) In July 2014, the final version of PFRS 9, Financial Instruments, was issued. PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. PFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of PFRS 9 is permitted if the date of initial application is before February 1, The adoption of PFRS 9 will have an effect on the classification and measurement of the Company s financial assets and impairment methodology for financial assets, but will have no impact on the classification and measurement of the Company s financial liabilities. The requirements on hedge accounting will not have any impact on the Company s financial statements.

15 - 7 - The following new standard issued by the IASB has not yet been adopted by the FRSC IFRS 15, Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after January 1, 2018 with early adoption permitted. The Company is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date once adopted locally. Effective May 1, 2019 IFRS 16, Leases On January 13, 2016, the International Accounting Standards Board (IASB) issued its new standard, IFRS 16, Leases, which replaces International Accounting Standards (IAS) 17, the current leases standard, and the related Interpretations. Under the new standard, lessees will no longer classify their leases as either operating or finance leases in accordance with IAS 17. Rather, lessees will apply the single-asset model. Under this model, lessees will recognize the assets and related liabilities for most leases in their balance sheets, and subsequently, will depreciate the lease assets and recognize interest on the lease liabilities in their profit or loss. Leases with a term of twelve (12) months or less or for which the underlying asset is of low value are exempted from these requirements. The accounting by lessors is substantially unchanged as the new standard carries forward the principles of lessor accounting under IAS 17. Lessors, however, will be required to disclose more information in their financial statements, particularly on the risk exposure to residual value. The new standard is effective for annual periods beginning on or after January 1, The Company is currently assessing the impact of the IFRS 16 and plans to adopt the new standard on the required effective date once adopted locally. 4. Summary Significant Accounting Policies Current and Noncurrent Recognition The Company presents assets and liabilities in the statement of financial position based on current and noncurrent classification. An asset is current when it is: Expected to be realized or intended to be sold or consumed in the normal operating cycle; Held primarily for the purpose of trading; Expected to be realized within twelve months after the reporting period; or Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as noncurrent.

16 - 8 - A liability is current when: It is expected to be settled in normal operating cycle; It is held primarily for the purpose of trading; It is due to be settled within twelve months after the reporting period; or There is no unconditional right to defer the settlement of the liability for at least twelve (12) months after the reporting period The Company classifies all other liabilities as noncurrent. The provision for warranty previously classified as noncurrent as of April 30, 2016, 2015 and 2014 have been classified as current to conform to the October 31, 2016 presentation. As this is a reclassification only, the total liabilities did not change. Cash and Cash Equivalents Cash includes cash in banks and cash on hand. Cash in banks earns interest at the prevailing bank deposit rates. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three (3) months or less from dates of placement and are subject to an insignificant risk of change in value. Financial Instruments Date of recognition The Company recognizes a financial asset or a financial liability in the statement of financial position when it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the trade date, which is the date when the Company commits to purchase or sell assets. Initial recognition All financial instruments are initially recognized at fair value. Except for financial instruments at fair value through profit or loss (FVPL), the initial measurement of financial assets and financial liabilities includes transaction costs. The Company classifies its financial assets within the scope of PAS 39 in the following categories: financial assets at FVPL, held-to-maturity (HTM) financial assets, available-for-sale (AFS) financial assets, and loans and receivables. The Company classifies its financial liabilities into financial liabilities at FVPL and other financial liabilities. The classification depends on the purpose for which the investments were acquired or liabilities incurred and whether they are quoted in an active market. The management determines the classification of its investments at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date. Financial instruments are classified as liability or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a component that is a financial liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to OCI, net of any related income tax benefits. As of April 30, 2016, 2015 and 2014, the Company s financial instruments are of the nature of loans and receivables, AFS financial assets and other financial liabilities. Where the transaction price in a non-active market is different to the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Company recognizes the difference

17 - 9 - between the transaction price and fair value (a Day 1 difference) in the statement of comprehensive income under Finance Costs accounts unless it qualifies for recognition as some other type of asset or liability. In cases where inputs to the valuation technique are not observable, the difference between the transaction price and model value is only recognized in the statement of comprehensive income when the inputs become observable or when the instrument is derecognized. For each transaction, the Company determines the appropriate method of recognizing the Day 1 difference amount. Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. These are not entered into with the intention of immediate or short-term resale and are not classified as financial assets at FVPL or AFS financial assets. Receivables are recognized initially at fair value which normally pertains to the billable amount. After initial measurement, the loans and receivables are subsequently measured at amortized cost using the effective interest rate (EIR) method, less allowance for impairment losses. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. The amortization, if any, is included in the statement of comprehensive income. The losses arising from impairment of such loans and receivables are recognized in statement of comprehensive income. This accounting policy applies primarily to the Company s receivables from trade, officers and employees, others and rental deposit. AFS financial assets AFS financial assets are those investments which are designated as such or do not qualify to be classified as designated as at FVPL, HTM investments or loans and receivables. These are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions. These include equity investments, money market papers and other debt instruments. After initial measurement, AFS financial assets are measured at fair value. The unrealized gains and losses arising from the fair valuation of AFS financial assets are excluded from reported earnings and are reported in other comprehensive income. When the investment is disposed of, the cumulative gain or loss previously recognized in equity is recognized in Other income account in the statement of comprehensive income. Where the Company holds more than one investment in the same security, these are deemed to be disposed of on a first-in first-out basis. Interests earned on holding AFS debt investments are reported as interest income using the EIR. Dividends earned on holding AFS equity investments are recognized in the statement of comprehensive income as Other income account when the right to receive payment has been established. The losses arising from impairment of such investments are recognized as Provisions on Impairment Losses under administrative and other operating expenses in the statement of comprehensive income. Investments in unquoted equity securities are carried at cost net of impairment losses, if any. The Company s AFS financial assets pertain to unquoted equity securities included under Availablefor-sale (AFS) financial assets account in the statement of financial position.

18 Other financial liabilities Other financial liabilities pertain to issued financial instruments that are not classified or designated as financial liabilities at FVPL and contain contractual obligations to deliver cash or another financial asset to the holder or to settle the obligation other than the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. Other financial liabilities are initially recognized at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the EIR. Gains and losses are recognized in statement of comprehensive income when the liabilities are derecognized, as well as through the amortization process. This accounting policy applies primarily to the Company s trade and other payables. Impairment of Financial Assets The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in economic conditions that correlate with defaults. Loans and receivables For loans and receivables carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is charged to the statement of comprehensive income. Interest income continues to be recognized based on the original EIR of the asset. If the Company determines that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in the collective assessment for impairment.

19 For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as past due status and term. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Company to reduce any differences between loss estimates and actual loss experience. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. Derecognition of Financial Instruments Financial asset A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when: the right to receive cash flows from the asset have expired; the Company retains the right to receive cash flows from the asset but has assumed an obligation to pay them in full without material delay to a third party under a pass-through arrangement ; or the Company has transferred its right to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained the risk and rewards of the asset but has transferred the control over the asset. Where the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Financial liability A financial liability is derecognized when the obligation under the liability is discharged, cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement of comprehensive income. Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, if and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. The Company assesses that it has a currently enforceable right to offset if the right is not contingent on a future event, and is legally enforceable in the normal course of

20 business, event of default, and event of insolvency or bankruptcy of the Company and all of the counterparties. Classification of Financial Instruments Between Debt and Equity A financial instrument is classified as debt, if it provides for a contractual obligation to: deliver cash or another financial asset to another entity; or exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the Company; or satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. If the Company does not have an unconditional right to avoid delivering cash or another financial asset to settle its contractual obligation, the obligation meets the definition of a financial liability. The components of issued financial instruments that contain both liability and equity elements are accounted for separately, with the equity component being assigned the residual amount, after deducting from the instrument as a whole the amount separately determined as the fair value of the liability component on the date of issue. Inventories Inventories are stated at the lower of cost or net realizable value (NRV). Cost for vehicles are determined on a specific identification basis and cost for spare parts and accessories are on a weighted average basis. NRV represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. An impairment in inventory is charged to the profit or loss for the year. Prepaid Expenses Prepaid expenses are carried at cost less the amortized portion. These typically comprise prepayments of health insurance, rentals and business taxes and licenses. Value-Added Tax (VAT) The input value-added tax pertains to the 12% indirect tax paid by the Company in the course of the trade or business on local purchase of goods or services. Output VAT pertains to the 12% tax due on the local sale of goods or services by the Company. If at the end of any taxable month, the output VAT exceeds the input VAT, the outstanding balance is included under Accounts and Other Payables account. If the input VAT exceeds the output VAT, the excess shall be carried over to the succeeding months and included under Other Current Assets account. Other Assets Other assets pertain to resources controlled by the Company as a result of past events and from which future economic benefits are expected to flow to the Company. Other assets expected to be consumed or realized within twelve months from reporting period are classified under "Other current assets". Other assets not within the definition of other current assets are classified as "Other noncurrent assets".