Kuwait and Gulf Link Transport Company K.S.C. (Closed) P.O. Box Safat Kuwait, Tel.: , Fax: ,

Transcription

1 1

2 2 and Gulf Link Transport Company K.S.C. (Closed) P.O. Box Safat 13106, Tel.: , Fax: ,

3 His Highness Sheikh Sabah Al Ahmad Al Jaber Al Sabah The Amir of the State of His Highness Sheikh Nawaf Al Ahmad Al Jaber Al Sabah The Crown Prince of the State of His Highness Sheikh Naser Al Mohammad Al Ahmad Al Sabah The Prime Minister of the State of

4 2

5

6 Board of Directors Report Dear Valued Shareholders, We are very pleased to meet you on the occasion of the General Assembly meeting of the & Gulf Link Transport Company, and to present the BOD Annual Report for the financial year ended 31/12/2009. By the grace of God and with your continuous support, we have been successful in achieving significant growth in the size of the company s businesses during 2009, as a result of the decisions taken during the previous General Assembly. Those decisions had a noticeable impact in achieving this progress despite the global economic slowdown in At the beginning of 2010, initial signs of economic recovery have been witnessed that would hopefully pave the way to the return of a robust global economy. This would move us past the financial crisis, as well as enable us to achieve our target growth in line with our future plans. Despite these conditions, the Company managed to gain profits this year, and was able to amortize part of its losses incurred last year. We hope to increase these profits by the end of fiscal year 2010, and to continue implementing the policy adopted by the Company since 2008 to reduce operational costs, restructure its subsidiaries and reschedule its banking facilities in line with the company s long-term plans and projects. It should be noted that operational revenues for the financial year 2009 amounted to 53,241,880, as compared to the amount of 57,495,188 for the financial year The total operational expenses amounted to 38,977,198 for the financial year 2009, as compared to the amount of 42,062,002 for the previous year, resulting in a net profit amounting to 605,617, compared to a loss of 8,337,746 for the year We are confident, after your approval on the Final Statement of Accounts and the Balance Sheet for the financial year 2009, that 2010 will show the fruitful outcome of your decision, through the prospective projects that the Company aspires to carry out with the government agencies and the private sector, as well as the expansion plans for all Group Companies within and outside the State of. This will ultimately increase the company profits, thus benefitting its shareholders. In conclusion, we extend our sincere thanks to all our employees for their relentless efforts and dedication to their work during these challenging times, and we strive to move forward and succeed under the distinguished leadership of His Highness the Amir of, HH The Crown Prince, HH The Prime Minister and the respectful Government. On your behalf, and in the name of the Board of Directors, we pay tribute to all employees of the Ministries and institutions for facilitating all of our businesses. Peace, mercy and blessing of the Almighty may be upon you. Saeed Esmail Dashti Chairman & Managing Director 4

7 Board Members Saeed Esmail Dashti Chairman and Managing Director Hussain Jafar Al Sayegh, Ph.D. Vice Chairman Ali Hussain Al Issa Board Member Jassem Mohammed Nuseib Board Member Adnan Saud Al Rashed Board Member Yaqoub Abdullah AL Wazzan Board Member Ali Esmail Dashti, Ph.D. Board Member 5

8 6 Consolidated financial statements and independent auditors report

9 Contents Pages Independent auditors report 8-9 Consolidated statement of financial position 10 Consolidated statement of income 11 Consolidated statement of comprehensive income 12 Consolidated statement of changes in equity 13 Consolidated statement of cash flows

10 P. O. Box 25578, Safat 13116, Al Jawhara Tower, 6th Floor Khaled Ben Al-Waleed Street, Sharq, Tel Fax Ali Al Hassawi & Partners P.O. Box: Safat Sharq Dasman Complex Block 2 9 Floor Tel. : / Fax : info-kuwait@rodlme.com INDEPENDENT AUDITORS REPORT To the shareholders of and Gulf Link Transport Company K.S.C. (Closed) Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of and Gulf Link Transport Company K.S.C. (Closed) ( the parent company ) and its subsidiaries (together referred to as the group ) which comprise the consolidated statement of financial position as at 31 December 2009, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s responsibility for the consolidated financial statements The parent company s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated 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. Auditors responsibility Our responsibility is to express an opinion on these consolidated 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 whether the consolidated 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 auditors 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 auditors consider 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 management, as well as evaluating the overall presentation of the financial statements. 8

11 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, the consolidated financial statements present fairly, in all material respects, the financial position of the group as at 31 December 2009, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on other legal and regulatory requirements We further report that we have obtained the information and explanations that we required for the purpose of our audit and the consolidated financial statements include the information required by the Commercial Companies Law of 1960, as amended, and the parent company s articles and memorandum of association. In our opinion, proper books of account have been kept by the parent company, an inventory count was carried out in accordance with recognized procedures and the accounting information given in the board of directors report agrees with the books of account. We have not become aware of any contravention, during the year ended 31 December 2009, of the Commercial Companies Law of 1960, as amended, or of the parent company s articles and memorandum of association, that would materially affect the group s activities or its consolidated financial position. Qais M. Al-Nisf License No. 38-A Moore Stephens Al Nisf & Partners Member of Moore Stephens International Ali A.Al- Hasawi Licence No.30-A Rödl Middle East Burgan International Accountants : 31 March

12 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries Consolidated Statement of financial position As at 31 December 2009 Assets Notes Non-current assets Property, plant and equipment 5 119,550, ,583,281 Intangible assets 852,810 1,028,622 Investment in associates 6 16,482,411 15,776,242 Investment in unconsolidated subsidiaries 7 4,590,078 3,966,889 Investment properties 8 9,538,050 9,561,136 Available for sale investments 9 2,384,793 5,613,158 Project in progress 635, , ,034, ,004,704 Current assets Inventories 1,598, ,044 Trade and other receivables 10 25,673,564 29,912,281 Due from related parties 11 16,948,767 19,406,338 Investments at fair value through statement of income 12 21,231,881 13,466,521 Cash and bank balances 13 7,201,563 6,413,649 72,654,162 69,990,833 Total assets 226,688, ,995,537 Equity and liabilities Equity Share capital 14 26,427,300 26,427,300 Share premium 15 30,306,818 30,306,818 Statutory reserve 16 8,045,578 8,045,578 Voluntary reserve 17 8,045,578 8,045,578 Treasury shares 18 (771,856) (632,618) Foreign currency translation reserve (790,022) (606,877) Employee stock option reserve 1,000,241 1,000,241 Fair value reserve (2,930,556) (1,448,939) Retained earnings / (accumulated losses) 49,528 (556,089) Equity attributable to owners of the parent company 69,382,609 70,580,992 Minority interest 3,732,775 4,089,152 Total equity 73,115,384 74,670,144 Liabilities Non-current liabilities Provision for staff indemnity 1,937,885 1,829,076 Non-current portion of term loans 19 72,198,632 74,183,999 Non-current portion of Murabaha payable 20 3,624,687 6,736,756 77,761,204 82,749,831 Current liabilities Current portion of term loans 19 37,146,529 28,556,721 Current portion of Murabaha payable 20 8,527,617 4,361,045 Trade and other payables 21 24,653,575 26,155,060 Due to related parties 11 3,206,862 6,398,728 Bank overdrafts 22 2,277,253 17,104,008 75,811,836 82,575,562 Total liabilities 153,573, ,325,393 Total equity and liabilities 226,688, ,995,537 The notes on pages 16 to 43 form an integral part of these consolidated financial statements. Saeed Ismail Dashti Chairman and Managing Director Hussain J. Al-Sayegh Ph.D. Vice Chairman 10

13 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries Consolidated statement of income Notes Revenue 53,241,880 57,495,188 Cost of sales (38,977,198) (42,062,002) Gross profit 14,264,682 15,433,186 Share of results of associates 6 852, ,954 Gain on sale of associates - 1,431,355 Gain on sale of share of subsidiaries - 2,068,537 Profit / (loss) on sale of available for sale investments 312,362 (2,962,259) Unrealized gain on investments at fair value through statement of income 12 7,534,569 7,001,035 Change in fair value of investment properties 8 (57,821) 139,039 Loss on disposal of property, plant and equipment (3,283,095) (1,956,766) Profit on sale of investment properties - 432,581 Impairment loss on available for sale investments 9 (254,758) (2,307,829) Impairment loss of investment in joint venture - (115,546) Other income 1,843,798 1,381,547 Provision for doubtful debts 10 (3,489,275) (5,500,000) General and administrative expenses 23 (8,687,420) (11,545,015) Finance costs (7,860,991) (11,531,173) Profit / (loss) for the year from continuing operations 1,174,464 (7,825,354) Loss for the year from discontinued operations 24 (395,487) (85,946) Profit / (loss) for the year before contribution to Foundation for the Advancement of Sciences (KFAS), National Labour Support Tax (NLST), Zakat and Board of directors remuneration 778,977 (7,911,300) Contribution to KFAS (37,576) - NLST (19,474) - Zakat (79,104) - Board of directors remuneration (50,000) - Profit / (loss) for the year 592,823 (7,911,300) Attributable to: Owners of the parent company 605,617 (8,337,746) Minority interest (12,794) 426, ,823 (7,911,300) Earnings / (loss) per share attributable to owners of the parent company (Basic and diluted) (fils) (34.835) The notes on pages 16 to 43 form an integral part of these consolidated financial statements. 11

14 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries Consolidated Statement of comprehensive income Profit / (loss) for the year 592,823 (7,911,300) Other comprehensive income / (expense) Exchange differences on translation of foreign operations (526,728) (57,844) Net change in fair value of available for sale investments (2,040,611) (2,489,649) Net losses on available for sale investments transferred to consolidated statement of income 558,994 2,307,829 Other comprehensive expense for the year (2,008,345) (239,664) Total comprehensive expense for the year (1,415,522) (8,150,964) Attributable to Owners of the parent company (1,059,145) (8,577,410) Minority interest (356,377) 426,446 Total comprehensive expense for the year (1,415,522) (8,150,964) The notes on pages 16 to 43 form an integral part of these consolidated financial statements. 12

15 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries Consolidated statement of Changes in equity Share capital Share premium Statutory reserve Voluntary reserve Treasury shares Foreign Employee currency stock option translation reserve reserve Fair value reserve Equity Retained attributable earnings / to owners of (accumulated the parent losses) company Minority interest Total equity Balance at 31 December ,328,692 26,241,079 8,045,578 8,045,578 (540,543) (549,033) 1,000,241 (1,267,119) 17,946,002 79,250,475 4,062,662 83,313,137 Total comprehensive ( expenses) / income for the year (57,844) - (181,820) (8,337,746) (8,577,410) 426,446 (8,150,964) Increase of share capital 4,065,739 4,065, ,131,478-8,131,478 Issue of bonus shares ,032, (2,032,869) Dividends paid for (8,131,476) (8,131,476) - (8,131,476) Purchase of treasury shares (92,075) (92,075) - (92,075) Net movement on minority interests (399,956) (399,956) Balance at 31 December ,427,300 30,306,818 8,045,578 8,045,578 (632,618) (606,877) 1,000,241 (1,448,939) (556,089) 70,580,992 4,089,152 74,670,144 Balance at 31 December ,427,300 30,306,818 8,045,578 8,045,578 (632,618) (606,877) 1,000,241 (1,448,939) (556,089) 70,580,992 4,089,152 74,670,144 Total comprehensive (expenses) / income for the year (183,145) - (1,481,617) 605,617 (1,059,145) (356,377) (1,415,522) Purchase of treasury shares (139,238) (139,238) - (139,238) Balance at 31 December ,427,300 30,306,818 8,045,578 8,045,578 (771,856) (790,022) 1,000,241 (2,930,556) 49,528 69,382,609 3,732,775 73,115,384 The notes on pages 16 to 43 form an integral part of these consolidated financial statements. 13

16 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries Consolidated Statement of cash flows Note OPERATING ACTIVITIES Profit / (loss) for the year 592,823 (7,911,300) Adjustments for: Depreciation and amortisation 17,406,369 16,474,938 Finance costs 7,860,991 11,531,173 Share of results of associates (852,413) (205,954) Gains on sale of associates - (1,431,355) Gain on sale share of subsidiaries - (2,068,537) (Profit) / loss on sale of available for sale investments (312,362) 2,962,259 Unrealized gain on investments at fair value through statement of income (7,534,569) (7,001,035) Change in fair value of investment properties 57,821 (139,039) Profit on sale of investment properties - (432,581) Loss on disposal of property, plant and equipment 3,283,095 1,956,766 Impairment loss on available for sale investments 254,758 2,307,829 Impairment in value of joint venture - 115,546 Allowance for doubtful debts 3,489,275 5,500,000 Provision for obsolete and slow moving inventory 150,000 - Provision for / (reversal of ) staff indemnity 204,128 (212,804) 24,599,916 21,445,906 Movements in working capital: Increase in inventories (956,343) (609,705) Decrease / (increase) in trade and other receivables 749,442 (5,619,690) Decrease / (increase) in due from related parties 2,457,571 (2,627,993) (Decrease) / increase in trade and other payables (1,538,386) 2,722,405 Decrease in due to related parties (3,191,866) - Cash generated from operations 22,120,334 15,310,923 Staff indemnity paid (95,319) (26,609) Net cash generated by operating activities 22,025,015 15,284,314 INVESTING ACTIVITIES Net movement in available for sale investments 1,804,352 (2,270,482) Purchase of investments at fair value through statement of income (230,791) - Investment in unconsolidated subsidiaries (623,189) (614,799) Purchase of treasury shares (139,238) (92,075) Project in progress (160,114) (475,376) Purchase of property, plant and equipment (15,497,696) (17,552,465) Purchase of intangible assets - (175,419) Proceeds from disposal of property, plant and equipment 9,016,695 6,820,980 Purchase of investment properties (34,735) (3,926,293) Proceeds from disposal of investment properties - 10,598,908 Net cash used in investing activities (5,864,716) (7,687,021) 14

17 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries Consolidated Statement of cash flows (Continued) Note FINANCING ACTIVITIES Proceeds from issue of shares - 8,131,478 Dividends paid - (8,131,476) Net proceeds / (repayment) of term loan 6,604,441 (3,618,117) Net proceeds / (repayment) of Murabaha payable 1,054,503 (3,008,255) Finance costs paid (7,860,991) (11,531,173) Minority interest (343,583) 26,490 Net cash used in financing activities (545,630) (18,131,053) Net increase / (decrease) in cash and cash equivalents 15,614,669 (10,533,760) Cash and cash equivalents at beginning of the year (10,690,359) (156,599) Cash and cash equivalents at end of the year 13 4,924,310 (10,690,359) The notes on pages 16 to 43 form an integral part of these consolidated financial statements. 15

18 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 1. GENERAL INFORMATION and Gulf Link Transport Company K.S.C (Closed) ( the parent company ) is a closed shareholding company incorporated on 1 May 1982 in accordance with the Commercial Company Law in the State of and is listed on the Stock Exchange. The group comprises the parent company and its subsidiaries. Details of the subsidiaries (together referred to as the group ) are set out in Note 7. Principal activities as defined in the parent company s Articles of Association are: - General cargo & stevedoring service at sea ports - Container terminal operator - General cargo transport & handling services - Container transport & handling services - Heavy equipment lease services - Heavy lift transport services - Light vehicle lease services - International overland passenger services - Shipping lines agency services - Customs clearance services - Fuel haulage services - Municipal services - Cleaning services - Garbage collection and transportation services - Skilled and semi skilled manpower services - Investment through fund managers The address of the parent company s registered office is P.O. Box, 24565, Safat 13106, State of. These consolidated financial statements of the group for the year ended 31 December 2009 were authorized for issue in accordance with a resolution of the parent company s Board of Directors on 31 March The shareholders general assembly has the power to amend these consolidated financial statements after issuance. 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) 2.1 Standards and Interpretations adopted by the group The following new and revised Standards and Interpretations have been adopted by the group for the annual period beginning 1 January 2009: IAS 1 (revised) Presentation of Financial Statements - effective 1 January The revised standard has introduced terminology changes (including revised titles for the financial statements) and changes in the format and content of the financial statements. The group has elected to present the Statement of comprehensive income in two statements: the Statement of Income and a Statement of comprehensive income. The revised standard requires changes in equity arising from transactions with owners in their capacity as owners (i.e.owner changes in income) to be presented in the statement of changes in equity. All other changes in equity (i.e. non-owner changes in equity) are required to be presented 16

19 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) (continued) 2.1 Standards and Interpretations adopted by the group (Continued) separately in the statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. As the change in accounting policy only impacts presentation aspects, there is no impact on the reported results or financial position of the group. IFRS 7 Financial Instruments - Disclosures (amendment) effective 1 January The amendment requires enhanced disclosures about fair value measurement and liquidity risk. Measurements related to items at fair value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments. The amended standard also requires disclosing a reconciliation between the beginning and ending balance for level 3 fair value measurements, as well as significant transfers between levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. The group has elected not to provide comparative information for these expanded disclosures in the current year in accordance with the transitional reliefs offered in these amendments. As the change in accounting policy only results in additional disclosures, there is no impact on the results of the group. IFRS 8 Operating Segments - effective 1 January The new standard which replaced IAS 14 Segment Reporting requires a management approach for segment reporting under which segment information is presented on the same basis as that used for internal reporting purposes. This has not resulted in any change in the group s reportable segments and had no impact on the reported results or financial position of the group. IAS 40 (revised 2008) Investment Property - effective 1 January The revised standard has included within its scope investment property in the course of construction. The revised standard had no impact on the previously or currently reported results of the group. IAS 23 Borrowing Costs (Revised 2007) effective 1 January The revised standard requires the capitalisation of borrowing costs to the extent they are directly attributable to the acquisition, production or construction of qualifying assets that need a substantial period of time to get ready for their intended use or sale. The adoption of the revised standard had no impact on the financial position or the reported results of the group. 2.2 Standards and Interpretations in issue not yet effective IAS 27 (revised), Consolidated and Separate Financial Statements IAS 39 (revised), Financial Instruments: Recognition and Measurement IFRS 3 (revised), Business Combinations IFRS 5 (revised), Non-current Assets Held for Sale and Discontinued Operation IAS 1 (amendment), Presentation of financial statements Effective for annual periods beginning on or after 1 July 2009 Effective for annual periods beginning on or after 1 July 2009 and later Effective for annual periods beginning on or after 1 July 2009 Effective for annual periods beginning on or after 1 July 2009 Effective for annual periods beginning on or after 1 July

20 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) (Continued) 2.2 Standards and Interpretations in issue not yet effective (Continued) IFRIC 17 Distributions of Noncash Assets to Owners IAS 24 (amendment), Related Party Transactions IFRS 9 Financial Instruments Annual improvements 2009 Effective for annual periods beginning on or after 1 July 2009 Effective for annual periods beginning on or after 1 January 2011 Effective for annual periods beginning on or after 1 January 2013 Effective for annual periods beginning on or after 1 July 2009 and later The directors anticipate that the adoption of these Standards, amendments and interpretations in future periods will have no material financial impact on the consolidated financial statements of the group in the period of initial application. 3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Statement of compliance The consolidated financial statements of the group have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ( IASB ), IFRIC interpretations as issued by the International Financial Reporting Interpretations Committee ( IFRIC ) and applicable requirements of Ministerial Order No.18 of Basis of preparation These consolidated financial statements are presented in i Dinars ( ) and are prepared under the historical cost convention, except for investments at fair value through statement of income, available for sale investments and investment properties that are stated at fair value. 3.3 Basis of consolidation Subsidiaries are all entities over which the parent company has the power to control the financial and operating policies. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Equity and net income attributable to minority interests are shown separately in the consolidated statement of financial position, consolidated statement of income and consolidated statement of comprehensive income, respectively. Intercompany balances and transactions, including intercompany profits and unrealized profits and losses are eliminated on consolidation. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the group. The minority interests are measured by the proportion of the pre-acquisition carrying amounts of the identifiable assets and liabilities of the subsidiaries. 18

21 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.4 Property, plant and equipment Property, plant and equipment except free hold land are stated at cost less accumulated depreciation and any accumulated impairment losses. Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Depreciation is calculated based on the estimated useful lives of the applicable assets on a straight-line basis commencing when the assets are ready for their intended use. The estimated useful lives, residual values and depreciation methods are reviewed at each year end, with the effect of any changes in estimate accounted for on prospective basis. Maintenance and repairs, replacements and improvements of minor importance are expensed as incurred. Significant improvements and replacements of assets are capitalised. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in consolidated statement of income in the period in which they occur. 3.5 Intangible assets Intangible assets are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of the intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and tested for impairment whenever there is an indication that the intangible asset may be impaired. Intangible assets with indefinite useful lives are not amortised but tested for impairment annually and whenever there is an indication that the intangible asset may be impaired. If the carrying value of the intangible asset is more than the recoverable amount, the intangible asset is considered impaired and is written down to its recoverable amount. The excess of carrying value over recoverable amount is recognised in the consolidated statement of income. 3.6 Impairment of tangible and intangible assets At each financial position date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their 19

22 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.6 Impairment of tangible and intangible assets (continued) present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the consolidated statement of income. Where an impairment loss subsequently reverses, the carrying amount of the asset (cashgenerating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the consolidated statement of income. 3.7 Investments in associates An associate is an entity over which the group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The group s investment in associate is accounted for under the equity method of accounting, i.e. on the financial position at cost plus post-acquisition changes in the group s share of the net assets of the associate, less any impairment in value and the consolidated statement of income reflects the group s share of the results of operations of the associate. Any excess of the cost of acquisition over the group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the consolidated statement of income. Distributions received from the associate reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the group s share in the associate arising from changes in the associate s equity. The group s share of those changes is recognised directly in equity; fair value reserve or foreign currency translation reserve as appropriate. When the group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions with associate are eliminated to the extent of the group s share in the associate. Unrealised losses are also eliminated unless the transactions provide evidence of impairment in the asset transferred. An assessment for impairment of 20

23 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.7 Investments in associates (continued) investments in associates is performed when there is an indication that the asset has been impaired, or that impairment losses recognised in prior years no longer exist. The associate s financial statements are prepared either to the parent company s reporting date or to a date not earlier than three months of the parent company s reporting date using consistent accounting policies. Where practicable, adjustments are made for the effect of significant transactions or other events that occurred between the reporting date of the associates and the parent company s reporting date. 3.8 Investment properties Investment in properties are initially recorded at cost. After initial recognition, investment properties are re-measured and carried at fair value on an individual basis based on an annual external valuation by an independent real estate assessor. Any gain or loss arising either from a re-measurement at fair value or sale is included in the consolidated statement of income. 3.9 Business combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the group s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated statement of income. The interest of minority shareholders in the acquiree is initially measured at the minority s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised Financial instruments Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Financial assets and financial liabilities are initially measured at fair value plus transaction costs, except for those financial assets and financial liabilities carried at fair value through statement of income, which are initially measured at fair value. Financial assets and financial liabilities are measured subsequently as described below. 21

24 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial assets Financial assets are classified into the following specified categories: investments at fair value through statement of income (FVTSI), available for sale investments and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. (a) Investments at fair value through statement of income ( FVTSI ) Investments are classified as at FVTSI where the financial asset is either held for trading or it is designated as at FVTSI. A financial asset is classified as held for trading if: (i) it has been acquired principally for the purpose of selling in the near future; or (ii) it is a part of an identified portfolio of financial instruments that the group manages together and has a recent actual pattern of short-term profit-taking; or (iii) it is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held for trading may be designated as at FVTSI upon initial recognition if: (i) such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or (ii) the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the group s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or (iii) it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTSI. Financial assets at FVTSI are stated at fair value, with any resultant gain or loss recognised in the consolidated statement of income. The net gain or loss recognised in the consolidated statement of income incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in note 27. (b) Available for sale investments (AFS) The group s investments in equity securities are classified as available for sale investments and are stated at fair value. Fair value is determined in the manner described in note 27. Gains and losses arising from changes in fair value are recognised in other comprehensive income and reported within fair value reserve in equity with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in the consolidated statement of income. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from the equity reserve to consolidated statement of income and presented as a reclassification adjustment within other comprehensive income. (c) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition those are measured at amortised cost using the effective interest method, less provision for impairment. The groups trade and most other receivables fall into this category of financial assets. 22

25 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of financial assets Financial assets, other than those at FVTSI, are assessed for indicators of impairment at each statement of financial position date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For unlisted shares classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counter party will default. Receivables that are not considered to be individually impaired are reviewed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the consolidated statement of income. When an AFS investment is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to consolidated statement of income in the period. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the consolidated statement of income to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity securities, impairment losses previously recognised through the consolidated statement of income are not reversed through the consolidated statement of income. Any increase in fair value subsequent to an impairment loss is recognised directly in equity. 23

26 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial liabilities The Group s financial liabilities include borrowings and trade and other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest method Inventories Spare parts are not intended for resale and are valued at cost after making allowance for any obsolete or slow moving items. Cost is determined on a weighted average basis. All other inventory items are valued at the lower of purchased cost or net realisable value using the weighted average method after making provision for any slow moving and obsolete stocks. Purchase cost includes the purchase price, import duties, transportation, handling and other direct costs Related party transactions Related parties consist of subsidiaries, associates, joint ventures, directors, executive officers, their close family members and companies of which they are principal owners. All related party transactions are conducted on an arm s length basis and are approved by the parent company s management Cash and cash equivalents Cash and cash equivalents include cash on hand, current accounts with banks and shortterm deposits with an original maturity of three months or less net of bank overdrafts Equity, reserves and dividend payments Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium. Foreign currency translation differences arising on the translation of the group s foreign entities are included in the foreign currency translation reserve. Gains and losses on certain financial instruments are included in fair value reserve for available for sale investments. Retained earnings include all current and prior period retained profits. Dividends are recognised as a liability in the group s consolidated financial statements in the period in which the dividends are approved by the shareholders Treasury shares Treasury shares consist of the group s own shares that have been issued, subsequently reacquired by the group and not yet reissued, sold or cancelled. No gain or loss is recognized in the consolidated statement of income on the purchase, sale, issue or cancellation of the treasury shares. Consideration paid or received is directly recognized in equity. When the treasury shares are sold, gains are credited to a separate account in shareholders equity (treasury shares reserve) which is not distributable. Any realized losses are charged to the same account to the extent of the credit balance on that account. Any excess losses are charged to retained earnings and then to reserves. 24

27 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.15 Treasury shares (continued) Gains realized subsequently on the sale of treasury shares are first used to offset any previously recorded losses in the order of reserves, retained earnings and treasury shares reserve account. No cash dividends are paid on these shares. The issue of bonus shares increases the number of treasury shares proportionately and reduces the average cost per share without affecting the total cost of treasury shares Share-based payments Equity-settled share-based payments to employees are measured at the fair value of the equity instrument at the grant date. The fair value of the employee services received in exchange for the grant of options or shares is recognised as an expense, together with a corresponding increase in equity. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or shares on the date of grant have been calculated using the Black Scholes model. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the group s estimate of shares that will eventually vest Provision for staff indemnity Provision is made for amounts payable to employees under the i Labour Law and employment contracts. This liability, which is unfunded, represents the amount payable to each employee as a result of involuntary termination on the financial position date, and approximates the present value of the final obligation Interest bearing borrowings Interest bearing borrowings are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the consolidated statement of income over the period of the borrowings on an effective interest basis Provisions A provision is recognized in the consolidated statement of financial position when the group has a legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. 25

28 and Gulf Link Transport Company K.S.C. (Closed) and its Subsidiaries 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.20 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Revenue from services rendered is recognized in the consolidated statement of income in proportion to the stage of completion of the transaction at the financial position date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due or associated costs. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount. Dividend income from investments is recognised when the shareholder s right to receive payment has been established. Rental income is recognised on a straight-line basis over the term of the relevant lease Foreign currency translation The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in i Dinar ( ), which is the functional currency of the parent company and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each financial position date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the financial position date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in consolidated statement of income in the period in which they arise. For the purpose of presenting consolidated financial statements, the assets and liabilities of the group s foreign operations are expressed in i Dinar ( ) using exchange rates prevailing at the financial position date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the group s foreign currency translation reserve. Such exchange differences are recognised in consolidated statement of income in the period in which the foreign operation is disposed of Borrowing costs Borrowing costs primarily comprise interest on the group s borrowings. Borrowing costs 26