Financial Statements 31 December 2014 Together with Directors and Independent Auditor s Reports

Transcription

1 Together with Directors and Independent Auditor s Reports

2 Contents Page 1 Directors and Other Corporate Information 2 2 Directors Report 3 3 Statement of Directors Responsibilities 7 4 Audit Committee s Report 8 5 Independent Auditor s Report 9 6 Statement of Financial Position 10 7 Statement of Comprehensive Income 11 8 Statement of Changes in Equity 12 9 Statement of Cash Flows Notes to the Financial Statement Other Financial Information 46 1

3 Directors and Other Corporate Information Champion Breweries Plc Directors: Chief Senas J. Ukpanah, OFR (Chairman) Mr. Sharm Kulkarni (Managing Director) Mr. Boudewijn N. Haarsma Mr. Hendrikus van Lokven Mr. Didier Leleu (represented by Mr. Asue Ighodalo as his alternate) Mr. A.K Mirchandani (represented by Mr. Ashok Manghnani as his alternate) Mr. Thompson S.B. Owoka Alhaji Shuaibu A. Ottan Mr. Samuel O. Onukwue Company Secretary: Tosan Atle Aiboni Registered Office: Industrial Layout Aka Offot, PMB 1106 Uyo Akwa Ibom State Nigeria Registration No: RC: Independent Auditors: KPMG Professional Services KPMG Tower Bishop Aboyade Cole Street Victoria Island Lagos 2

4 Directors Report For the year ended 31 December 2014 The Directors present their report together with the Company's audited financial statements and independent auditor's report for the year ended 31 December Principal activity The principal activity of the Company is to carry on the business of brewing and marketing of Champion Lager Beer as well as contract brewing and packaging services. Operating results The following is a summary of the Company s operating results: Revenue 3,302,383 2,233,259 Profit/(loss) from operating activities 25,511 (543,902) Loss before taxation 1,071,765 1,730,432 Taxation 317, ,407 Loss for the year 754,523 1,178,025 Other comprehensive loss net of tax 39, Total comprehensive loss for the year 793,945 1,178,386 Dividend The directors do not recommend any dividend for the year (2013: Nil). Directors and their interests The names of Directors at the date of this report and those who have held office during the year under review as well as their interest in the shares of the Company as recorded in the Register kept in compliance with Section 275 of the Companies and Allied Matters Act Cap C 20 Laws of the Federation of Nigeria 2004 are as follows: Ordinary shares of 50k each Chief Senas J. Ukpanah, OFR (Chairman) 1,000 1,000 Mr. Sharm Kulkarni - - Mr. Boudewijn N. Haarsma - - Mr. Hendrikus van Lokven - - Mr. Didier Leleu (represented by Mr. Asue Ighodalo as his alternate) - - Mr. A.K Mirchandani (represented by Mr. Ashok Manghnani as his alternate) - - Mr. Thompson S.B. Owoka 1,000, ,000 Alhaji Shuaibu A. Ottan - - Mr. Samuel O. Onukwue - - 3

5 Other than as disclosed above, the Directors and their alternates are not aware of any disclosable interests/transaction in the share capital of the Company as at 31 December 2014 or at the date of this report. Contracts No Director has notified the Company of any disclosable interest in the contracts awarded by or involving the Company as required under Section 277 of the Companies and Allied Matters Act, CAP C20 LFN Issue of shares During the year, the Company issued 6,300,000,000 ordinary shares as rights issues to existing shareholders. Further information regarding the rights issue is provided in Notes 16 and 17 of these financial statements. Donations The Company made donations amounting to N1.8 million during the year (2013: N2.4 million). In accordance with Section 38(2) of the Companies and Allied Matters Act, 1990 the Company did not make any donation or give gifts to any political party, political association or for any political purpose during the year (2013: Nil). Property, plant and equipment Changes in property, plant and equipment during the year is disclosed in Note 11. In the opinion of the Directors, the fair value of Company's assets are not lower than the value shown in the financial statements. Business review and future development The Company intends to carry on fulfilling the objects as indicated in its Memorandum and Articles of Association. Corporate social responsibility The Company has adopted a comprehensive approach to corporate social responsibility based on the understanding that improved quality of life in the community where it operates would in turn impact positively on the Company's performance. Corporate governance The Directors are committed in ensuring that best practices in corporate governance are observed in all areas of the Company s business. The Company s policies on corporate governance are continually reviewed with focus on high ethical standards of transparency, integrity, accountability and honesty. The Board continues to formulate policies aimed at creating a well-positioned Company that is keen on constantly harmonizing the interests of various stakeholders to the business. Distribution of the Company's products The Company s products are sold by distributors in different parts of the country. The list of names of such distributors is available at the Commercial Department of the Company at Industrial Layout, Aka Offot, Uyo, Akwa-Ibom State. 4

6 Employment and employees (a) Employment of physically-challenged persons: It is the policy of the Company that there should be no discrimination in considering applications for employment including those from physically-challenged persons. All employees whether or not disabled are given equal opportunities to develop their experience and knowledge and to qualify for promotion in furtherance of their careers. A total of 2 physically-challenged persons were in employment by the Company during the year (2013: 2) (b) Health, safety at work and welfare of employees The Company maintains a well-equipped clinic (within the brewery), which provide medical services to all its employees. Cases of serious nature are referred to designated hospitals whose services are retained by the Company through its Health Management Organization. Such hospitals are located in areas within convenient reach of employees. The Company being mindful of the scourge and impact of the HIV/AIDS epidemic on productivity has rolled-out a comprehensive HIV/AIDS programme for its employees during the year under review. The Company has in collaboration with local NGOs also carried out HIV /AIDS awareness campaigns in the workplace as well as malaria prevention and management seminars for her employees. The Company maintains a canteen where employees on duty are served free meals. Safety regulations are in place in all locations of the Company and employees are well informed about compliance with such regulations. The Company operates retirement benefit schemes for all qualified employees in accordance with the Pensions Reform Act The Company also operates defined benefit and long service award schemes for the benefit of all qualified employees. (c) Employee consultation and training: The Company is committed to keeping employees fully informed as far as possible regarding the Company s performance and progress and seeking their views wherever practicable on matters, which particularly affect them as employees. Training is carried out at various levels through both in-house and external courses. Management, professional and technical expertise are the Company s major assets and investment in developing such skills continues. The Company s expanding skills base has extended the range of training provided and broadened the opportunities for career development within the organization. 5

7 Champioll Breweries Pie Financial SJaiemenrs - 31 December 2014 Together with Directors and Independent Audilor's Reports Independent auditors In accordance with Section 357(2) of the Companies and Allied Matters Act, Cap. C20, Laws of the Federation of Nigeria, 2004, KPMG Professional Services have indicated their willingness to continue in office as Independent Auditors to the Company. By Order of the Board Compa '.)I Secretary FRC/20 l 4/NBA/ February 20 I 5 J J ) 6

8 L u L- Champion Breweries Pie Financial Statements-31December2014 Together with Directors' and Independent Auditor's Reports Statement of Directors' Responsibilities for tlie year ended 31 December 2014 The Directors accept responsibility for the preparation of the annual financial statements set out on pages I 0 to 45 that give a true and fair view in accordance with the International Financial Reporting Standards (1FRS) and in the manner required by the Companies and Allied Matters Act of Nigeria and the Financial Reporting Council of Nigeria Act, The Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act of Nigeria and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. The Directors have made an assessment of the Company's ability to continue as a going concern and have no reason to believe the Company will not remain a going concern in the year ahead. SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY: _l ChiefSenas J. Uk:panab, OFR (Chainnan) FRC/2013/CrPMN/ February 20 I 5 Sharm Kulkarni (Managing Director) FRC/2013/IODN/ February J 7

9 I ~'~ f I I ~ ~ ~ll\~ Industrial Layout, Aka Offot, P.M , Uyo, Akwa lbom State, Nigeria. info@championbreweries.com www. championbreweries.com CHAMPION BREWERIES PLC Audit Committee's Report RC To the Members of Champion Breweries Pie In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act, Cap. C20, Laws of the Federation of Nigeria, 2004, we, the Members of the Audit Committee of Champion Breweries Pie, having carried out our statutory functions under the Act, hereby report that: a) The scope and planning of both the external and internal audit for the year ended 31 December 2014 are satisfactory. The internal audit programmes reinforce the Company's internal control system; b) Having reviewed the independent auditors' memorandum of recommendations on accounting procedures and internal controls, we are satisfied with management's responses thereon; c) The accounting and reporting policies for the year ended 31 December 2014 are in accordance with legal requirements and agreed ethical practices. The External Auditors confirmed, having received full cooperation from the Company's Management, that the scope of their work was not restricted in any way. MR. KUFR I A TE FRC/2013/CIBN/ Chairman of the Audit Committee Dated this 11th day of February 2015 Members of the Audit Committee Mr. Kufre lnyangete Mrs. Helen Umanah Mr. Thompson S. B. Owoka Mr. Samuel 0. Onukwue Chairman Member " " Directors: chief senas J. Opkpanalirn=R jchalnnan), ~u ikam1 (Managing birecfur) (indlanr,t'.s.8. OWoka, B. N. Haarsma (Dutch}, D. Leleu (French), H. van Lokven (Dutch},}, A.K. Mirchandani (US), Mr. Samuel 0. Onukwe, Alhajl. S.A. Ottan

10 INDEPENDENT AUDITOR S REPORT To the Members of Champion Breweries Plc Report on the Financial Statements We have audited the accompanying financial statements of Champion Breweries Plc ( the Company ), which comprise the statement of financial position as at 31 December 2014, the statement of comprehensive income, statement of changes in equity, statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory information, as set out on pages 10 to 45. Directors' Responsibility for the Financial Statements The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards, in the manner required by the Companies and Allied Matters Act of Nigeria and the Financial Reporting Council Act of Nigeria, 2011, and for such internal control as Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility 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 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 of the financial statements that give a true and fair view 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 management, 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. Opinion In our opinion, these financial statements give a true and fair view of the financial position of Champion Breweries Plc ( the Company ) as at 31 December 2014, and of the Company s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards in the manner required by the Companies and Allied Matters Act of Nigeria and the Financial Reporting Council of Nigeria Act, Report on Other Legal and Regulatory Requirements Compliance with the Requirements of Schedule 6 of the Companies and Allied Matters Act of Nigeria In our opinion, proper books of account have been kept by the Company, so far as appears from our examination of those books and the statement of financial position and the statement of comprehensive income are in agreement with the books of account. Signed: Goodluck C. Obi, FCA FRC/ICAN/2012/ For: KPMG Professional Services Chartered Accountants February 2015 Lagos Nigeria.

11 t..... 'L G Q_,, c... v ll- ~ L J.,, Statement of Financial Position As aj 31 December Assets Champion Breweries Pie Financial Statemenf.s - 31 December 20 I 4 Together with Directors' and Jndependem Auditor's Reports Notes N'OOO N'OOO Property plant and equipment I l 6,844,330 7,239,6 13 Intangible assets 12 6,878 I 1,741 Defened tax assets 19 1,202, ,948 Non-current assets 8,053,408 8,125,302 Inventories ,631 Trade and other receivables , ,441 Prepayments ,197 Cash and cash equivalents ,145 Current assets l,012,41 4 Total assets , 137,716 '-.:/ JJ J...;..<...:.,!. Equ.ity Share capital 16 3,600, ,000 Share premium 17 8,251, ,184 Other reserves 3,701,612 3,701,612 Accumulated loss ( ) (8,889, I 82) Total equity 5, ( 4,608,386) Liabilities Employee benefits ,021 62,827 Non-current liabilities 143,021 62,827 Deposit for shares 15 1, 164,569 1,164,569 Trade and other payable 20 2,414,360 12,518,706 Current liabilities 3,578,929 13,683,275 Total Liabilities 3,721,950 13,746,102 Total equity and Liabiljtfos 9,592,381 9,137,716 These linanciul statements were appro\'cd by the Board of Directors (BOD) on 11 fcbruary 2015 and signed on behalf of the BOD by the J ).J J- C. '"..::, L t c..."' v,,,., :- => -----~~ ,} Add;tio"~ Cltief Seoas J. Ukpanah, OFR (Chairman) FRC/20 I 3/ClPMN/ Sharm Kulkarni (l\.tanagiog Director) FRC/20 lj!iodn/ ~---=--,...:~ ') Stephen Jacob (Financial Controller) The notes on pages 14 to 45 are an integral part oflhese financial statements. 10

12 Statement of Comprehensive Income For the year ended 31 December Champion Breweries Plc Notes Revenue 5 3,302,383 2,233,259 Cost of sales (2,662,451) (2,207,324) Gross profit 639,932 25,935 Other income 6 104, ,378 Selling and distribution expenses (185,658) (97,328) Administrative expenses (532,893) (635,887) Profit/(loss) from operating activities 25,511 (543,902) Finance income 7(a) 200,351 - Finance cost 7(b) (1,287,645) (1,186,530) Net finance cost (1,087,294) (1,186,530) Loss before minimum tax (1,061,783) (1,730,432) Minimum tax (9,982) - Loss before tax 8 (1,071,765) (1,730,432) Taxation 9 317, ,407 Loss for the year (754,523) (1,178,025) Other comprehensive loss Items that will never be reclassified to profit or loss Actuarial loss on defined benefit obligation 18(d) (50,432) (516) Tax on defined benefit actuarial loss 18(d) 11, Other comprehensive loss for the year net of tax (39,422) (361) Total comprehensive loss for the year (793,945) (1,178,386) Loss per share Basic and diluted loss per share (kobo) The notes on pages 14 to 45 are an integral part of these financial statements. 11

13 Statement of Changes in Equity For the year ended 31 December 2014 Share capital Share premium Accumulat ed loss Other reserves* Total equity N '000 N '000 N '000 N '000 N '000 Balance as at 1 January , ,184 (7,710,796) 3,701,612 (3,430,000) Total comprehensive loss for the year Loss for the year - - (1,178,025) - (1,178,025) Other comprehensive loss - - (361) - (361) Total comprehensive loss - - (1,178,386) - (1,178,386) Balance at 31 December , ,184 (8,889,182) 3,701,612 (4,608,386) Balance at 1 January , ,184 (8,889,182) 3,701,612 (4,608,386) Total comprehensive loss for the year Loss for the year - - (754,523) - (754,523) Other comprehensive loss - - (39,422) - (39,422) Total comprehensive loss - - (793,945) - (793,945) Transactions with owners recorded directly in equity Rights issue of ordinary shares (Note 16) 3,150,000 8,122, ,272,762 Total transaction with owners recorded directly in equity 3,150,000 8,122, ,272,762 Balance at 31 December ,600,000 8,251,946 (9,683,127) 3,701,612 5,870,431 * Other reserves represents reserves recognised as part of the Company s election to apply optional exemption to use previous revaluations of certain items of property plant and equipment as deemed cost at 1 January 2011, the date of transition to IFRS. The notes on pages 14 to 45 are an integral part of these financial statements. 12

14 Statement of Cash Flows For the year ended 31 December Champion Breweries Plc Notes Cash flows from operating activities Loss for the year (754,523) (1,178,025) Adjustment for: Net finance cost 7 1,087,294 1,186,530 Taxation 9 (317,242) (552,407) Defined benefits expense/(credit) 18(c) 12,235 (2,057) Long service awards expense 18(c) 36,257 6,460 Depreciation 11(a) 848, ,737 Amortisation 12(a) 4,863 2,851 Write-off of property plant and equipment 11(a) 24,797 - (Gain)/loss on disposal of property plant and equipment (489) 108, , ,153 Changes in: Inventories (48,655) (69,752) Trade and other receivables (46,011) (225,962) Prepayment (14,741) 196,507 Trade and other payables* (Less accrued interest charges (Note7(b)) 225, ,846 Cash generated from operating activities 1,057,659 1,091,792 Defined benefits paid 18(a)(i) (7,814) (5,087) Long service awards paid 18(a)(ii) (10,916) - VAT paid (30,811) (28,643) Net cash generated from operating activities 1,008,118 1,058,062 Cash flows from investing activities Interest received 7(a) 200,351 - Proceeds from sale of property plant and equipment 533 6,409 Acquisition of property, plant and equipment 11(e) (478,043) (925,090) Acquisition of intangible assets 12 - (14,592) Net cash used in investing activities (277,159) (933,273) Cash flows from financing activities Net proceeds from issue of share capital 17 11,272,762 - Repayment of amounts due to related party (11,586,569) - Net cash generated from financing activities (313,807) - Net increase in cash and cash equivalents 417, ,789 Cash and cash equivalents, beginning of year 119,145 (5,644) Cash and cash equivalents, end of year 536, ,145 * The effects of repayment of amounts due to related party and Value Added Tax (VAT) paid shown separately above have been considered in the deriving the change in trade and other payables. The notes on pages 14 to 45 are an integral part of these financial statements. 13

15 Notes to the financial statement For the year ended 31 December 2014 Page 1. Reporting entity Basis of preparation Significant accounting policies Determination of fair values Revenue Other income Finance income and finance cost Loss before tax Taxation Basic and diluted loss per share Property, plant and equipment Intangible assets Inventories Trade and other receivables Deposit for shares Share capital Share premium Employee benefits Deferred taxation Trade and other payables Related parties Financial risk management and financial instruments Contingent liabilities Events after reporting date 45 14

16 1. Reporting entity Champion Breweries Plc (the Company ), which is a company domiciled in Nigeria, was incorporated on 31 July 1974 and converted to a public limited company in The address of the Company s registered office is Industrial Layout, Aka Uffot, Uyo, Akwa Ibom State, Nigeria, from where brewing activities are carried out. The major shareholders include The Raysun Nigeria Limited, Asset Management Nominee and Akwa Ibom State Government whose shareholdings are 57.9%, 13.4% and 10% respectively. The principal activity of the Company is to carry on the business of brewing and marketing of Champion lager beer as well as contract brewing and packaging services. 2. Basis of preparation a. Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements were authorised for issue by the Board of Directors on 11 February 2015 and will be submitted to the shareholders for adoption on May b. Basis of measurement The financial statements have been prepared on the historical cost basis except for defined benefit obligations which are based on actuarial valuation and inventory, which are stated at the lower of cost and net realisable value. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. c. Functional and presentation currency These financial statements are presented in Naira, which is the Company s functional currency. All financial information presented in Naira has been rounded to the nearest thousands, except when otherwise indicated. d. Use of estimates and judgments The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: Note 18 Measurement of defined benefit obligations and long service awards Note 19 Deferred tax assets and liabilities Note 22 Financial risk management and financial instruments Note 23 Contingent liabilities 15

17 e. Going concern basis of accounting At the Board of Directors meeting held on 16 May 2014, the Directors approved a rights issue of 6.3 billion ordinary shares of 50 kobo at N1.85 to existing shareholders. The rights issue was fully subscribed having obtained necessary regulatory pre-approval. The net proceeds from the rights issue has been utilised in settling the Company's interest-bearing liabilities which is expected to contribute to an improvement in profitability. f. Measurement of fair values A number of the Company's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Significant valuation issues are reported to the Audit Committee. When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the charge has occurred. Further information about the assumptions made in measuring fair value is included in financial risk management and financial instruments (Note 22). 3. Significant accounting policies The significant accounting policies set out below have been applied consistently to all periods presented in these financial statements, unless otherwise indicated. a. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the 16

18 fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated. b. Financial instruments i. Non-derivative financial assets The Company s non-derivative financial assets are classified as loans and receivables and cash and cash equivalent. The Company initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. Loans and receivables comprise trade and other receivables. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value. ii. Non-derivative financial liabilities All financial liabilities are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. The Company classifies non-derivative financial liabilities into the other financial liabilities category. The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. The Company has the following other financial liabilities: loans and borrowings, bank overdrafts and trade and other payables. Bank overdrafts that are repayable on demand 17

19 and form an integral part of the Company s cash management are included as a component of cash and cash equivalents for the statement of cash flows. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method. iii. Share capital Ordinary shares are classified as equity. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the share premium reserve. All ordinary shares rank equally with regard to the Company's residual assets. Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. iv. Deposit for shares The company received deposits for shares to be issued at a future date. At the time of receipt of these funds, and at every reporting period thereafter during which such funds are outstanding and not refunded or converted to shares, and while the company has the discretion to either issue shares or refund the money, it is classified as a financial liability measured at amortised cost. At such time as the company issues the shares, this is converted to equity. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. c. Property, plant and equipment i. Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the assets to a working condition for their intended use. Returnable bottles, crates and containers in circulation are recorded within property, plant and equipment at cost net of accumulated depreciation less any impairment losses. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss. 18

20 ii. Subsequent costs Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred. iii. Depreciation Items of property, plant and equipment are depreciated from the date they are available for use. Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line basis over their estimated useful lives. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term in which case the assets are depreciated over the useful life. Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. Capital work-in-progress is not depreciated. The attributable cost of each asset is transferred to the relevant asset category immediately the asset is available for use and depreciated accordingly. The estimated useful lives of all items of property plant and equipment are as shown below: Leasehold land Buildings Plant & machinery Furniture, fitting and equipment Motor vehicles: Cars and trucks Forklifts Returnable packaging materials: Bottles Crates Lease period 15 to 40 years 5 to 30 years 3 to 5 years 5 years 5 years 5 years 8 years Capital work-in-progress is not depreciated. The attributable cost of each asset is transferred to the relevant asset category immediately the asset is available for use and depreciated accordingly. d. Intangible assets Intangible assets consists of software and have finite useful lives which are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straight line basis over an estimated useful life of three (3) years. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. e. Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to 19

21 their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimated costs necessary to make the sale. Allowance is made for obsolete, slow-moving or defective items where appropriate. f. Impairment i. Non-derivative financial assets A financial asset not classified as at fair value through profit or loss, is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor will enter bankruptcy, adverse changes in the payment status of debtors, economic conditions that correlate with defaults or the disappearance of an active market for a security. Financial assets measured at amortised cost The Company considers evidence of impairment for financial assets measured at amortised cost (loans and receivables) at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. ii. Non-derivative financial assets The carrying amounts of the Company s non-financial assets, other than inventories are 20

22 reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. Indefinite-lived intangible assets are tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amounts of the assets in the CGU (group of CGUs) on a pro rata basis. Impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. g. Employee benefits i. Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. ii. Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees. iii. Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on Federal Government bonds, that have maturity dates approximating the terms of the Company s obligations and that are denominated in the currency (Naira) in which the benefits are expected to be paid. 21

23 The calculation is performed annually by a qualified actuary using the projected unit credit method. The Company recognises all actuarial gains and losses arising from defined benefit plans immediately in Other Comprehensive Income and all expenses related to defined benefit plans in employee benefit expense in profit or loss. The effect of any curtailment is recognised in full in profit or loss immediately the curtailment occurs. Although the scheme is not funded, the Company ensures that adequate arrangements are in place to meet its obligations under the scheme. iv. Other long-term employee benefits The Company s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on Federal Government bonds, that have maturity dates approximating the terms of the Company s obligations and that are denominated in the currency in which the benefits are expected to be paid. The calculation is performed using the projected unit credit method. Any actuarial gains and losses are recognised in profit or loss in the period in which they arise. v. Termination benefits The Company s net obligation in respect of long-term employee benefits other than Termination benefits are recognised as an expense when the Company is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value. h. Provision and contingent liabilities Provision A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Contingent liabilities A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company, or a present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability. 22

24 Contingent liabilities are only disclosed and not recognized as liabilities in the statement of financial position. If the likelihood of an outflow of resources is remote, the possible obligation is neither a provision nor a contingent liability and no disclosure is made. i. Revenue Revenue from the sale of goods and rendering of services in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of value added tax, returns, trade discounts and volume rebates. Revenue is recognised when significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised. j. Finance income and finance costs Finance income comprises interest income on bank deposits. Finance costs comprise interest expense on borrowings, bank overdrafts and impairment losses recognised on financial assets (other than trade receivables). Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. k. Taxation Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. i. Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. ii. Deferred tax Deferred tax is recognised in profit or loss account except to the extent that it relates to a transaction that is recognised directly in equity. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the amount will be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a 23

25 legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: The initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss. Differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. Temporary differences arising on the initial recognition of goodwill. iii. Tax exposures In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. iv. Minimum taxation Minimum tax payable is calculated using the tax rate applicable based on certain parameters stipulated in the Nigerian tax law. Any amount by which this minimum amount payable exceeds company income tax is shown as minimum tax expense and presented separately in the statement comprehensive income. l. Earnings per share The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares. m. Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company s other components. All operating segments operating results are reviewed regularly by the Company's Board of Directors to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Company's Board of Directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, office expenses as well as income and deferred tax assets and liabilities. n. Leases 24