The Recording Industry of South Africa (Reg. No. 1995/005158/08) Annual Financial Statements For the year ended 31 December 2014

Transcription

1 Annual Financial Statements For the year ended 31 December 2014

2 Annual Financial Statements For the year ended 31 December 2014 Contents Page Directors responsibility 3 eport of the independent auditors 4-5 Directors report 6-7 Statement of financial position 8 Statement of comprehensive income 9 Statement of changes in equity 10 Statement of cash flows

3 Directors responsibility and approval For the year ended 31 December 2014 The Directors responsibility The directors are required by the Companies Act of South Africa, 2008, to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the company and the group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial eporting Standards. The external auditors are engaged to express an independent opinion on the financial statements. The financial statements are prepared in accordance with International Financial eporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highest ethical standards in ensuring the company s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The directors have reviewed the company cash flow forecasts for the year to 31 December 2014 and, in the light of this review and the current financial position, they are satisfied that the company had or has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the company statements. The financial statements have been examined by the company external auditors and their report is presented on page 4 to 5. Directors approval of the annual financial statements The financial statements set out on page 6 to 23, which have been prepared on the going concern basis, were approved by the board on 25 May 2015 and were signed on its behalf by:

4 eport of the independent auditors to the members of The ecording Industry of South Africa We have audited the annual financial statements of The ecording Industry of South Africa which comprise the directors report, the statement of financial position as at 31 December 2014, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 6 to 23. Directors esponsibility for the Financial Statements The company s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial eporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s esponsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of 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 judgement, 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 directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.. Head Office 20 Morris Street East, Woodmead, 2191 P.O. Box 2939, Saxonworld, 2132 Tel: +27 (0) Fax: +27 (0) , Victor Sekese (Chief Executive) A comprehensive list of all Directors is available at the company offices or registered office. SizweNtsalubaGobodo Incorporated. egistration Number: 2005/034639/21

5 Directors eport For the year ended 31 December 2014 Audit Opinion In our opinion the financial statements present fairly, in all material respects, the financial position of the company as at 31 December 2014, and of its financial performance and its cash flows for the period then ended in accordance with International Financial eporting Standards and in the manner required by the Companies Act of South Africa. Other reports required by the Companies Act As part of our audit of the financial statements, we have read the Directors eport, for the purpose of identifying whether there are material inconsistencies between these report and the audited financial statements. This report is the responsibility of the preparer. Based on our reading of this report, we have not identified material inconsistencies between the report and the audited financial statements. However, we have not audited these reports and accordingly we do not express an opinion thereon. SizweNtsalubaGobodo Inc Director: Nkanyiso Ngobese egistered Auditor Woodmead

6 Directors eport For the year ended 31 December 2014 The directors have pleasure in presenting their report. Nature of business The business of the company is to promote the group interests of persons carrying on the business of producing, manufacturing or distributing gramophone records, cassette and other tapes, compact disks and digital video disks in South Africa. The company receives royalty income from the licensees on behalf of the members. The company also derives income from membership levies and sponsorship for the South African Music Awards. The company is dependent on deriving sufficient income to meet its expenditures. Financial position and results of operations The financial position of the company at 31 December 2014 and the results of its operations for the year then ended are set out in the attached financial statements. Going concern The financial statements are prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future activities and that the realisation of assets and settlement of liabilities will occur in the ordinary course of business. The directors expect that the company will receive the financial support from its members and accordingly, the financial statements are prepared on the accounting policies applicable to a going concern. Directors Directors during the year were Abrahams Chairperson T Fraser S Watson amogase T Da Silva esigned E Ndosi S Sithole D du Plessis H Salkow L Stehr J Farber M Sarawan D Sewraj (Appointed A Coleske (Appointed ) Secretary The is no company secretary however, SizweNtsalubaGobodo Inc. attends to all secretarial requirements

7 Directors eport For the year ended 31 December 2014 Business address Postal address 150 Bram Fisher Drive P.O. Box 367 andburg andburg 2125 Auditors SizweNtsalubaGobodo Inc. Business address Postal address 20 Morris Street East P.O. Box 2939 Woodmead Saxonwold

8 Statement of financial position As at 31 December 2014 Notes ASSETS Non-current assets Property, plant and equipment Intangibles Current assets Trade and other receivables Cash and short term deposits Prepayments Total assets FUNDS AND LIABILITIES Accumulated funds Accumulated surplus Current liabilities Trade and other payables Provisions Total funds and liabilities

9 Statement of comprehensive income For the year ended 31 December 2014 Note evenue Other income Operating expenditure Profit before net finance income Net finance income Finance income Finance costs ( ) (831484) Profit after net finance income Net (loss)/profit on SAMA event management 10 ( ) (Loss)/Profit for the year ( ) Other comprehensive income - - Comprehensive (loss)/income for the year ( )

10 Statement of comprehensive income For the year ended 31 December 2014 Description ND etained Income Total Equity Balance at 01 January ( ) Comprehensive profit for the year Balance 01 January Comprehensive Profit for the year - ( ) ( ) Balance 31 December

11 Statement of comprehensive income For the year ended 31 December 2014 Notes Cash (utilized in)/generated from operations 13.1 ( ) Finance income Finance costs ( ) (831484) Net movement in working capital 13.2 ( ) Net cash flows (utilized in)/from operating activities ( ) Cash flows from investing activities Additions to property, plant and equipment & Intangibles (36 321) ( ) Net cash outflow from investing activities (36 321) ( ) Net increase/decrease in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

12 1. Accounting policies Basis of presentation The annual financial statements are prepared on the historical cost basis in accordance with the International Financial eporting Standards (IFS) as issued by the International Accounting Standard Board (IASB). International Financial eporting Standards comply with the South African Companies Act No. 71 of The policies set out below have been consistently applied to all the years presented. 1.2 Statement of compliance The financial statements have been prepared in accordance with the International Financial eporting Standards. 1.3 Basis of preparation The measurement basis used is historical cost, except for financial instruments which are measured at fair value as noted below. 1.4 Critical judgements and estimates made in applying the accounting policies The preparation of financial statements in conformity with International Financial eporting Standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors, including making assumptions concerning future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions are reviewed on an ongoing basis. evisions to accounting estimates are accounted for prospectively. In process of applying the company s accounting policies as set out below, management has made the following judgements that have a significant risk of causing material adjustments to the amounts recognised in the financial statements: Useful lives of plant and equipment and intangible assets The useful lives of plant and equipment and intangible assets are reviewed at each balance sheet date. The useful lives are estimated by management based on historic analysis and other available information. 1.5 Property, Plant and equipment. The cost of an item of furniture, fitting and equipment is recognised as an asset when It is probable that the expected future economic benefits attributable to the assets will flow to the entity; and The cost of the asset can be measured reliably. Property plant and equipment is initially recognised at cost. Cost include costs incurred initially to acquire or construct an item of property plant and equipment and cost incurred subsequently to add to, replace part of, or service it. Furniture, Fitting and equipment are subsequently measured at historical cost less accumulated depreciation and accumulated impairment loss. Property, Plant and Equipment (continued)

13 If a replacement cost is recognised in the carrying amount of an item of property plant and equipment, the carrying amount of the replaced part is derecognised. Depreciation is recorded by a charge to operating profit computed on a straight-line basis so as to allocate the cost of the asset, including capitalised leased assets, over their expected useful lives. The estimated useful lives, residual values and depreciation method are reviewed annually with the effect of any changes accounted for prospectively. The expected useful lives are as follows: Class Average useful life Furniture and fittings 3 years Office equipment 3 years Field equipment 2 years The carrying amount of an item of property, plant and equipment shall be derecognized on disposal; or when no future economic benefits are expected from its use or disposal. The gain or loss arising on the disposal or retirement of an item of equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Depreciation is calculated on historical cost using the straight-line method over the estimated useful lives of the assets. The recorded value of these depreciated assets is periodically compared to the anticipated recoverable amount if the assets were to be sold. Where an asset s recorded value has declined below the recoverable amount and the decline is expected to be of a permanent nature, the decline is recognised as an expense. 1.6 Intangible assets The cost of an item of an intangible asset is recognised as an asset when: It is probable that the expected future economic benefit attributable to the asset will flow to the entity; and The cost of the assets can be measured reliably An intangible asset shall be measured initially at cost. Intangible assets are subsequently measured at cost less any accumulated amortization and any impairment losses. The amortisation period and the amortisation method for intangibles assets are reviewed at each reporting date. The amortisation is provided to write-down the intangible assets on a straight-line basis as follow: Software 2 years The carrying amount of an intangible asset shall be derecognized on disposal; or when no future economic benefits are expected from its use or disposal. The gain or loss arising on the disposal or retirement of an item of intangible asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

14 1.7 Financial instruments Financial assets Financial assets are recognised on trade date and are initially measured at fair value net of transaction costs, except for those fin assets classified as at fair value through profit and loss which are measured at fair value. Financial assets are classified into the following categories: financial assets as at fair value through profit or loss, held to maturity investments, available for sale, and loans and receivables. The classification depends on the nature and purpose of the financial asset and is determined at the time of initial recognition. The company s financial assets are comprised of loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those classified by the company as at fair value through profit and loss or available for sale. Financial assets classified as loans and receivables are carried at amortized cost, with interest revenue recognized in the income statement. The company s financial assets which are classified as loans and receivables comprises of loans to related parties, trade and other receivables and cash and cash equivalents. (i) Accounts receivable Accounts receivable are recognized initially at fair value and subsequently measured at amortised cost after allowing for provision for impairment. A provision for impairment is raised when there is objective evidence that the company will not be able to collect all amounts due according to original terms. (ii) Cash and short term deposits Cash and cash equivalents comprise balances with banks, monies in call accounts and short-term assets. (iii) Loans to related parties Accounts receivable are recognized initially at fair value and subsequently measured at amortised cost Financial Liabilities Financial liabilities are recognised on the statement of financial position when the company becomes a party to the contractual provisions of the instrument. Financial liabilities are initially recognised at their fair value plus, transaction costs that are directly attributable to their acquisition. Financial liabilities issued by the company, are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. (i) Trade payables Trade and other payables are stated at nominal value, which approximates fair value. (ii) Offsetting of financial instruments Financial assets and liabilities are offset and the net amount reported in statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or, realise the asset and settle the liability simultaneously.

15 Impairment of Financial Assets At each reporting date, the company assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are recognised if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. 1.8 Derecognition 1.9 evenue All financial assets and liabilities are derecognised on trade date, which is when the company commits to selling a financial asset or redeeming financial liability. The company derecognises a financial asset when and only when: The contractual right to the cash flows arising from the financial asset have expired or have been forfeited by the company, or It transfers the financial asset, including substantially all the risks and rewards of ownership of the asset, or It transfers the financial asset, neither retaining nor transferring substantially all the risks and rewards of ownership of the asset, but no longer retains control of the asset. evenue from a transaction shall be recognised when the below criteria has been met The amount of revenue can be reliably measured. and It is probable that the future economic benefits associated with the transaction will flow into the entity (a) Membership levies Membership levies are brought to account when they are due. The members are getting invoiced in relation to the (manufacturing) production reports that they submit to ISA. (b) oyalty income oyalty income is brought into account on an accrual basis. Interest earned on royalties received, not yet paid, accrue as part of royalties payable. ecording Industry of South Africa collects revenue on behalf of the member and it is only entitled to the 15% and the 85% is a distribution to members. The distribution is not a fixed percentage it depends with the director s discretion South African Musical Awards (SAMA) income and expenses SAMA income and expenses are accounted for in the year the awards are staged. Income and Expenses received/incurred in the year prior to the SAMA s are accrued as revenue received in advance/pre-paid expenses. SAMA income includes all sponsorships amount in relation the SAMA event management Finance income Finance income arising from the use by other entity assets yielding interest shall be recognised on the basis set out below It is probable that the economic benefit associated with the transaction will flow into the entity and The amount of income can be reliably measured ecognition Finance income shall be recognised using the effective interest rate

16 1.22 Employee benefits (a) Short term employee benefits The cost of short term employee benefits are recognised in the period in which the service is rendered and are not discounted except in the case of non-accumulated absences, which is recognised when the absence occurs Taxation The receipts by or accruals to the company are exempt from Income tax in terms of Section 10 (1) (d) (iv) (bb) of the Act. 2 Capital The company is limited by guarantee and accordingly no shares have been issued. Members of the company have bound themselves to a guarantee of 10 each. 3. Property, plant and equipment Furniture and fittings Office equipment Field Equipment Total 2014 At 31 December 2013 Cost Accumulated depreciation (221151) (535371) (293357) ( ) Opening net book value Movements for the year: Additions Current depreciation (93620) (13644) - (107264) At 31 December 2014 Cost Accumulated depreciation (314771) (549015) (293357) ( ) Closing net book value

17 Property, plant and equipment Furniture and fittings Office equipment Field Equipment Total 2013 At 31 December 2012 Cost Accumulated depreciation (176595) (524699) (293357) (994651) Opening net book value Movements for the year: Additions Disposals - - Current depreciation (44556) (10672) - (55228) At 31 December 2013 Cost Accumulated depreciation (221151) (535371) (293357) ( ) Closing net book value Intangible Assets Software Cost Accumulated amortisation (611877) (586795) econciliation of carrying value Carrying value at the beginning 2014 Additions Amortisation Carrying value at the end. Software Software (25 082) (28 248)

18 Trade and Other receivables Trade eceivables Provision for doubtful debts (78255) (401226) Sundry Trade and Other Payables License fees Trade creditors Accruals Sundry Vat payable Intercompany payable-av Provisions Leave pay provisions econciliation 2014 Opening balance Utilised aised Closing balance Leave Pay Provision ( ) Opening balance Utilised aised Closing balance Leave Pay Provision ( )

19 8. evenue evenue for the company comprises of the following: Member s levies - Physical sales Digital sales oyalties Income oyalties Income ISA is acting as an agent and it thereby collect revenue on behalf of its members. ISA is then entitled to the 15% and it has to distribute the 85% to the members. The 85% is not fixed it depends with the directors discretion. 9. Other income Sundry income Civil Settlement Total SAMA event management SAMA Income SAMA Expenses Net (Loss)/ Profit on SAMA event management ( ) Net profit before tax Is stated after taking the following into account: Audit fee - current year Depreciation Staff cost Lease Commitments Operating Lease There is a commitment in respect of future rentals on leased premises - payable within one year payable between 2 and 5 years Total

20 13. Notes to the cash flow statement 13.1 Cash generated from / ( utilized in) operations Net surplus / for the year ( ) Depreciation of property, plant and equipment Finance income ( ) (978689) Finance cost Movement in provisions ( ) Movement in working capital Decrease in accounts receivable Prepayments ( ) - (Decrease)/Increase in accounts payable ( ) Net Movement in working capital ( ) etirement benefit information The company provides retirement benefits for all its permanent employees through a defined contribution fund administered by Alexander Forbes. A defined contribution is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contribution if the fund does not hold sufficient assets to pay all employees service in the current and prior year periods. 15. elated Parties 2014 Nature of elationship Transactions Balance receivable (payable) at year-end Terms SAMPA Common members (61 593) (61 593) isa Audio Visual Common members (44 890) ( ) Payable on presentation Unsecured interest free loan

21 2013 Nature of elationship Transactions Balance receivable (payable) at year-end Terms SAMPA Common members isa Audio Visual Common members (30 985) ( ) Payable on presentation Unsecured interest free loan 16. Financial instruments Classification of financial assets and liabilities 2014 Financial Assets Current Assets eceivables at Amortised cost Carrying Amount Fair Value '000 '000 '000 Trade and other receivables Provision for doubtful debts (78) (78) (78) Cash and short term deposits Total Financial assets Financial Liabilities Payables at Amortised Cost Carrying Amount Fair Value Current liabilities Trade and other payables (26183) (26183) (26183) Vat Payable (96) (96) (96) Total (26 279) (26 279) (26 279) Non-Financial Liabilities Current liabilities Payables at Amortised Cost Carrying Amount Fair Value Provisions The company does not have any commitments or contingencies

22 Financial Instruments Classification of financial assets and liabilities 2013 Financial Assets Current Assets eceivables at amortised cost Carrying Amount Fair Value '000 '000 '000 Trade and other receivables Provision for doubtful debts (401) (401) (401) Cash and short term deposits Total Financial assets Financial Liabilities Payables at Amortised Cost Carrying Amount Fair Value Current liabilities Trade and other payables (28722) (28722) (28722) Vat Payable (111) (111) (111) Total (28 833) (28 833) (28 833) Non-Financial Liabilities Current liabilities Payables at Amortised Cost Carrying Amount Fair Value Provisions Contractual Cash flows The table below indicates the gross undiscounted cash flows on the company s financial assets (excluding impairment) and financial liabilities on the basis of their earliest possible contractual maturity Amortised cost Less than 1 year 1 2 years 2-5 years More than 5 years Inflow Cash and short term deposits Trade and other receivables Out flow Trade and other payables ( ) ( ) Vat payable (96425) (96425) - - -

23 2013 Inflow Less than 1 More than Amortised cost year 1 2 years 2-5 years 5 years Cash and short term deposits Trade and other receivables Out flow Trade and other payables ( ) ( ) Vat payable (111176) (111176) Credit risk The company limits its treasury counter-party exposure by only dealing with well-established financial institutions with high credit ratings assigned by international credit-rating agencies. The company does not expect any treasury counter-parties to fail to meet their obligations, given their high credit rating. Credit risk Credit risk with respect to accounts receivable is limited given that the company has many members who comprise the main balance of the receivables. Trade receivables have been adequately assessed for impairment The maximum exposure to credit risk of trade receivables by type of customer is: Compact Disc Technologies Various The ageing of the company s external trade receivable is as follows 31 December December 2013 Gross Impairment Gross Impairment Current Past due Days Past due Days (78337) Past due Days (109833) (256460) Past due > 120 Days (78256) (401226) Total (78 256) ( ) 17. Commitment and Contingencies