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31 FINANCIAL HIGHLIGHTS AND OUTLOOK

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34 Contents pendent auditor s report Auditor s report Page 32

35 Independent auditor s report To the Members of Institute of Chartered Accountants of Jamaica I have audited the accompanying financial statements of Institute of Chartered Accountants of Jamaica, which comprise the statement of financial position as at March 31, 2014, and the statement of comprehensive income, statement of changes in reserves and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the requirements of the Public Accountancy Act, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. Those standards require that I 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 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Page 33 ICAJ ANNUAL REPORT 2013/2014

36 34 Independent auditor s report (cont d) To the Members of Institute of Chartered Accountants of Jamaica Opinion In my opinion, the financial statements give a true and fair view of the financial position of Institute of Chartered Accountants of Jamaica as at March 31, 2014, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Kingston, Jamaica July 8, 2014 Chartered Accountant Page 34

37 Institute of Chartered Accountants of Jamaica 35 Statement of financial position At March 31, 2014 (Expressed in Jamaican Dollars, unless otherwise indicated) Restated Restated Note April 1, 2012 $ $ $ Assets Non-current assets Property, plant and equipment 4 63,749,689 59,213,363 57,083,005 Investment in equity instruments 5 339, , ,080 64,089,145 59,548,595 57,585,085 Current assets Inventories 6 147, ,355 51,379 Membership dues, other receivables and prepayments 7 7,360,730 4,773,757 7,330,459 Taxation recoverable 2,522,886 2,256,204 3,835,053 Short-term deposits 8 8,085,089 2,022,358 - Cash and cash equivalents 9 19,244,889 21,417,643 22,134,692 37,361,570 30,688,317 33,351,583 Total assets 101,450,715 90,236,912 90,936,668 Reserves and liabilities Reserves Accumulated surplus 17,175,785 15,137,234 13,860,500 Fair value reserve , , ,360 Capital assets reserve 11 31,617,715 31,495,715 31,353,856 Total reserves 49,128,236 46,963,461 45,711,716 Liabilities Funds Administered funds 12 1,509,440 1,451,685 1,326,435 Capital Assets Fund 13 10,713,718 11,599,485 11,888,433 ICAJ Welfare Fund ,110 76, ,374 ICAJ/IDB Project Fund 15 6,376,315 8,816,879 11,184,103 Total funds 18,754,583 21,944,404 25,235,345 Non-current liabilities Long-term loans 16 16,192,929 7,371,515 8,186,911 Deferred tax liability 17 45,772 30,428 21,211 16,238,701 7,401,943 8,208,122 Current liabilities Deferred income 18 7,763,700 6,632,625 6,906,900 Payables and accruals 19 8,078,195 6,057,181 4,182,729 Current portion of long-term loans 16 1,487,300 1,237, ,856 17,329,195 13,927,104 11,781,485 Total liabilities 52,322,479 43,273,451 45,224,952 Total reserves and liabilities 101,450,715 90,236,912 90,936,668 The notes on the accompanying pages 39 to 65 form an integral part of the financial statements. The financial statements were approved and authorised for issue by the Council on July 8, 2014 and signed on its behalf by: Dennis Chung President Dennis V. Brown Hon. Treasurer

38 Institute of Chartered Accountants of Jamaica 36 Statement of comprehensive income Year ended March 31, 2014 (Expressed in Jamaican Dollars, unless otherwise indicated) Restated Note $ $ Revenue 2e Members subscription and admission fees 20,406,307 17,620,736 Students subscription and registration fees 10,831,229 10,814,160 Surplus from self-financing activities 20 11,030,625 5,917,886 Finance income , ,623 Subvention for students 2,499,414 2,841,070 Advertising and sponsorship 317,978 82,976 Sale of handbooks, bags and shirts 541, ,513 Miscellaneous 16, ,903 46,383,633 39,201,867 Transfer from Capital Assets Fund 936,267 1,006,229 Gain on disposal of property, plant and equipment 1,999 - Gain on foreign exchange 995, ,084 48,317,849 40,763,180 Administrative and other operating expenses 22 (41,983,985) (35,632,471) Donation ICAJ Welfare Fund 14 (75,000) (75,000) Bad debts specific charges 7 (2,623,249) (1,966,649) Bad debts recovered 14,893 62,383 Loss on disposal of property, plant and equipment - (69,244) Finance costs 21 (1,233,918) (1,305,850) Surplus for the year before taxation 23 2,416,590 1,776,349 Income tax expense 24 (15,344) (9,217) Surplus for the year before transfer 2,401,246 1,767,132 Interest transferred to designated funds (net of tax) 12, 13, 14, 15 (240,695) (348,539) Surplus for the year 2,160,551 1,418,593 Other comprehensive income: Items that maybe reclassified subsequently to surplus or deficit: Gain/(loss) on revaluation of equity instruments 4,224 (166,848) Total comprehensive income for the year 2,164,775 1,251,745 The notes on the accompanying pages 39 to 65 form an integral part of the financial statements. Page 36

39 Institute of Chartered Accountants of Jamaica 37 Statement of changes in reserves Year ended March 31, 2014 (Expressed in Jamaican Dollars, unless otherwise indicated) Note Accumulated Surplus Fair Value Reserve Capital Assets Reserve Total $ $ $ $ Balance at March 31, ,860, ,360 43,242,289 57,600,149 Reclassification (11,888,433) (11,888,433) Restated balance at March 31, ,860, ,360 31,353,856 45,711,716 Changes in reserves for 2013 Loss on revaluation of equity instruments - (166,848) - (166,848) Surplus for the year 1,418, ,418,593 Total comprehensive income for year 1,418,593 (166,848) - 1,251,745 15,279, ,512 31,353,856 46,963,461 Transfer 11 (141,859) - 141,859 - Restated balance at March 31, ,137, ,512 31,495,715 46,963,461 Changes in reserves for 2014 Gain on revaluation of equity instruments - 4,224-4,224 Surplus for the year 2,160, ,160,551 Total comprehensive income for year 2,160,551 4,224-2,164,775 17,297, ,736 31,495,715 49,128,236 Transfer 11 (122,000) - 122,000 - Balance at March 31, ,175, ,736 31,617,715 49,128,236 The notes on the accompanying pages 39 to 65 form an integral part of the financial statements. Page 37 ICAJ ANNUAL REPORT 2013/2014

40 Institute of Chartered Accountants of Jamaica 38 Statement of cash flows Year ended March 31, 2014 (Expressed in Jamaican Dollars, unless otherwise indicated) Note $ $ Cash flows from operating activities Surplus for the year before taxation 2,416,590 1,776,349 Adjustments for: Depreciation 4 2,289,803 (114,510) Capital assets contributions (936,267) (1,006,229) (Gain)/loss on disposal of property, plant and equipment (1,999) 69,244 Interest and dividend income 21 (1,133,603) (872,623) Interest expense 21 1,233,918 1,305,850 3,868,442 1,158,081 Decrease/(increase) in inventories 70,379 (166,976) (Increase)/decrease in membership dues, other receivables and prepayments (2,525,597) 2,614,782 Increase/(decrease) in deferred income 1,131,075 (274,275) Increase in payables and accruals 2,021,014 1,874,452 Cash generated from operations 4,565,313 5,206,064 Interest paid (1,233,918) (1,305,850) Income taxes refunded - 1,777,324 Income taxes paid (266,682) (198,475) Net cash provided by operating activities 3,064,713 5,479,063 Cash flows from investing activities Additions to property, plant and equipment 4 (6,826,130) (2,088,592) Proceeds from disposal of property, plant and equipment 2,000 3,500 Investment in short-term deposits (6,062,731) (2,022,358) Interest received 1,058, ,543 Dividends received 13,824 24,000 Net cash used in investing activities (11,814,634) (3,292,907) Cash flows from financing activities Contributions received administered funds , ,107 Disbursement of awards from administered funds 12 (212,993) (143,699) Proceeds from loan 10,965, ,158 Mortgage loan repayment (1,893,845) (1,244,112) Contributions received Capital Assets Fund 13 50, ,244 Contributions received ICAJ Welfare Fund 14 78, ,355 Disbursement from ICAJ Welfare Fund 14 - (866,374) Disbursement from ICAJ/IDB Project Fund 15 (2,638,886) (2,597,884) Net cash provided by/(used in) financing activities 6,577,167 (2,903,205) Net decrease in cash and cash equivalents (2,172,754) (717,049) Cash and cash equivalents at beginning of year 21,417,643 22,134,692 Cash and cash equivalents at end of year 9 19,244,889 21,417,643 The notes on the accompanying pages 39 to 65 form an integral part of the financial statements. Page 38

41 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, The Institute of Chartered Accountants of Jamaica (the Institute) was constituted on January 18, 1965 and on July 6, 1970 became a body corporate under the Public Accountancy Act. The Institute is domiciled in Jamaica with registered offices located at 8 Ruthven Road, Kingston 10, Jamaica. The principal objectives of the Institute are to: a b c d Promote and increase the knowledge, skills and proficiency of its members and students Regulate the discipline and professional conduct of its members and students Promote and protect the welfare and interest of the Institute and the accounting profession, both in Jamaica and abroad Make provision for the training, education and examination of persons engaging in or intending to engage in the said profession, whether in Jamaica or elsewhere, in private practice or as employees of the Government of Jamaica or by statutory body or industrial or commercial enterprise or any other person who is not an accountant in private practice. i Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and have been prepared under the historical cost convention, except for certain financial assets and financial liabilities measured at fair value. The preparation of financial statements in conformity with IFRS, requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Institute s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2(b). ii Significant accounting policies, changes in accounting policies and disclosures New and amended standards adopted by the Institute The following standards have been adopted by the Institute for the first time for the financial year beginning on or after 1 April These standards do not have a material impact on the financial statements of the Institute: Amendment to IAS 1, Financial statement presentation regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially re-classifiable to surplus or deficit subsequently (reclassification adjustments). Amendment to IFRS 7, Financial instruments: Disclosures, on asset and liability offsetting. This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. Page 39 ICAJ ANNUAL REPORT 2013/2014

42 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) (cont d) ii Significant accounting policies, changes in accounting policies and disclosures (cont d) IFRS 12, Disclosures of interests in other entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles. IFRS 13, Fair value measurement aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS. The Standard applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements). With some exceptions, the standard requires entities to classify these measurements into a 'fair value hierarchy' based on the nature of the inputs: Level 1 - quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2 - inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 - unobservable inputs for the asset or liability Entities are required to make various disclosures depending upon the nature of the fair value measurement (e.g. whether it is recognised in the financial statements or merely disclosed) and the level in which it is classified. Annual Improvements Cycle. The improvements in this amendment clarify the requirements of IFRS and eliminate inconsistencies within and between standards. The main standards affected include: IFRS 1 - Permit the repeated application of IFRS 1, borrowing costs on certain qualifying assets IAS 1 - Clarification of the requirements for comparative information IAS 16 - Classification of servicing equipment IAS 32 - Clarify the tax effect of a distribution to holders of equity instruments Page 40

43 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) (cont d) ii Significant accounting policies, changes in accounting policies and disclosures (cont d) New standards and interpretations not yet adopted The following new standards, interpretations and amendments, which have not been applied in these financial statements, may have an effect on the Institute s future financial statements: IFRS 7 (Amendment) - Financial Instruments: Disclosures on offsetting asset and liability (effective for annual periods commencing on or after 1 January 2015). This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. IFRS 9 Financial Instruments IFRS 9 introduced new requirements for the classification and measurement of financial assets and the classification and measurement requirements for financial liabilities along with the requirements for recognition and derecognition of financial assets and liabilities. IFRS 9 Financial Instruments will ultimately replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety. Amendments to IFRS 12: Transition guidance The amendments clarify transition guidance and provide additional transition relief, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. IAS 32 (Amendment) - "Financial Instruments: Presentation" (effective for annual periods commencing on or after 1 January 2014) aims to clarify some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position. As a result of diversity in application of the requirements on offsetting, the amendment focused on four main areas: the meaning of 'currently has a legally enforceable right of set-off' the application of simultaneous realisation and settlement the offsetting of collateral amounts the unit of account for applying the offsetting requirements. IAS 36 (Amendment) - Impairment of Assets on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. The amendment is not mandatory for the Institute until 1 January IAS 12 (amendment) Deferred tax: Recovery of Underlying Assets IAS 12 requires an entity to measure deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The amendment introduces a presumption that recovery will normally be through sale. Page 41 ICAJ ANNUAL REPORT 2013/2014

44 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) (cont d) ii Significant accounting policies, changes in accounting policies and disclosures (cont d) Annual Improvements and Cycles (effective for annual periods commencing on or after 1 July 2014).The improvements in these amendments clarify the requirements of IFRS and eliminate inconsistencies within and between standards. Management will perform an assessment of the impact of all applicable standards that will apply for financial period ending March 31, iii Measurement bases The financial statements are prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below. Except where otherwise stated, the financial statements are presented in Jamaican Dollars. The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the amounts and related disclosures reported in the financial statements. These estimates are based on historical experience and management s best knowledge of current events and actions. Actual results may differ from those estimates and assumptions. There were no critical judgements, apart from those involving estimation, that management has made in the process of applying the Institute s accounting policies that have a significant effect on the amounts recognised in the financial statements. The estimates and assumptions which have the most significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below. i Useful lives of property, plant and equipment Depreciation is provided so as to write down the respective assets to their estimated residual values over their expected useful lives and, as such, the selection of the expected useful lives and the estimated residual values of the assets require the use of estimates and judgements. Details of the estimated useful lives are as shown in note 2c. ii Impairment An impairment loss is recognised for the amount by which the asset s or cashgenerating unit s carrying amount exceeds its recoverable amount. Management estimates expected future cash flows from each asset or cash-generating unit and determines the recoverable amount and the present value of the expected future cash flows [see note 2p]. In the process of measuring expected future cash flows management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may differ from estimates. Page 42

45 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) (cont d) iii Taxation The Institute is required to estimate income tax payable to the Commissioner General of Tax Administration Jamaica on any non-exempt surplus derived from operations [note 24a]. This requires an estimation of the current tax liability together with an assessment of the temporary differences which arise as a consequence of different accounting and taxation treatments. These temporary differences result in deferred tax assets or liabilities which are included in the statement of financial position. Deferred tax assets and liabilities are measured using the enacted tax rate at the end of the reporting period. If the tax eventually payable, or recoverable, differs from the amounts originally estimated then the difference will be accounted for in the year such determination is made. The significant accounting policies that have been used in the preparation of the financial statements are summarised below and have been consistently applied for all the years presented. i ii Property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses [note 2q]. Land is not depreciated. Depreciation is calculated on the straight-line (SL), or reducing-balance (RB), basis at annual rates to write down the cost of assets to their estimated residual values over the period of their expected useful lives. The annual rates of depreciation in use are: Building (SL) 2.5% Building extensions and improvements (SL) 10% Certain furniture and equipment (RB) 15% Electronic equipment and other furniture and equipment (SL) 10% - 25% The expected useful lives and estimated residual values are re-assessed at the end of each reporting period and adjusted, if appropriate. The useful life and estimated residual value of the buildings were revised in iii Construction-in-progress represents costs incurred to date, including interest on borrowings obtained to finance construction on the building development project [note 2l]. Construction-in-progress is not depreciated until completion. iv Repairs and renewals Costs of repairs and renewals which do not enhance the value of existing assets are written off to surplus or deficit as they are incurred. v Gains or losses on disposal of property, plant and equipment are included in surplus or deficit, when they arise. Page 43 ICAJ ANNUAL REPORT 2013/2014

46 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) Inventories are stated at the lower of cost, determined on a first-in, first-out basis, and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Using information available at year-end date, the Institute makes judgements based on experience on the level of provision required to account for potential unsaleable inventories. Revenue is recognised to the extent that it is probable that the received and receivable for goods and services provided in the normal course of business, net of discounts and GCT. Annual subscription and rental income is recognised in surplus or deficit on a straight line basis over the period. Courses and conference income is recognised in the year of the relevant course or event. Members and student subscriptions are recognised in the accounting period to which the subscriptions relate. These subscriptions are due each year on April 1 and January 1 respectively. To the extent that income is received in advance, it is deferred and recognised in the relevant period for which services for these subscriptions or fees are given. The unearned portions, if any, are shown as deferred income [note 18]. -financing activities are recognised when invoiced. Interest and other income are recognised when earned in accordance with the relevant agreements in place Interest income is recognised on a time-proportionate basis using the eective interest method. Dividend income is recognised when the right to receive payment is established. Donations or contributions received for the purposes of funding the acquisition, capital assets are credited to the capital assets fund and released to surplus or deficit over the expected useful life of the respective assets in line with the depreciation policy. Donations or contributions received for the acquisition of freehold land or other non-depreciable assets are credited to surplus or deficit in the year of acquisition. Foreign currency transactions are translated into the functional currency of the Institute, using the exchange rates prevailing at the dates of the transactions. Foreign currency balances at the end of the reporting period are translated at the closing rates of exchange. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognised in surplus or deficit. Non-monetary items measured at historical cost are translated using the exchange rates at the dates of the transactions. Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined. Page 44

47 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) A financial instrument is any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument in another entity. Financial assets and financial liabilities are recognised in the Institute s statement of financial position when it becomes a party to the contractual provisions of the instruments. A financial asset is 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 expired. The financial instruments carried in the statement of financial position are: Financial assets: Investment in equity instruments, membership dues and other receivables, short-term deposits and cash and cash equivalents; s is impaired. incomecosts or gain/loss on disposal of investment in equity instruments, except for impairment of membership dues and other receivables, which is presented as bad debt provision [note 2i]. Financial liabilities: The Institute s financial liabilities include payables and long-term loans. These are recognised initially as the proceeds received, net of transaction costs incurred. Financial liabilities are subsequently measured at amortised cost using the effective interest method. Any difference between proceeds (net of transaction costs) and the redemption value is recognised in surplus or deficit over the life of the liabilities. Management determines the appropriate classification of investments at the time of purchase and re-evaluates such designation on a periodic basis. Investments, comprising quoted equity, are intended to be held for the purposes of generating long-term investment income and are treated as non-current assets. The securities may be sold in response to need for liquidity or changes in market prices. Investments are initially recognised at cost, which includes transaction costs, and subsequently re-measured at fair value based on quoted bid prices. Unrealised gains and losses arising from changes in fair value of these securities are recognised in reserves. When securities are disposed of or impaired, the related accumulated unrealised gains or losses included in reserves are transferred to surplus or deficit. Page 45 ICAJ ANNUAL REPORT 2013/2014

48 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) All purchases and sales of investment securities are recognised at settlement date. Dividends from investment in equity instruments are recognised in surplus or deficit as part of finance income when the Institute's right to receive payments is established. At each year-end date, an assessment is made as to whether there is objective evidence that an equity instrument is impaired. A significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the asset is impaired. Judgment is used in determining what a significant or prolonged decline is. Impairment charges are recognised in the income statement. Membership dues and other receivables are classified as loans and receivables. These are initially recognised at original invoice amount (which represents fair value) and subsequently measured at amortised cost less any provision for doubtful debts. A provision for doubtful debt is recognised when there is objective evidence that the full amount due will not be collected, in accordance with the original terms of these receivables. The amount of the write-down is determined as the difference between the carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. Discounting is omitted where the effect of discounting is immaterial. Short-term deposits consist of investment in deposits with maturity dates greater than three (3) months and up to twelve (12) months. Cash and cash equivalents consist of cash in hand, deposits held on call with banks, and other short-term highly liquid investments with original maturity dates of three (3) months or less. Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in surplus or deficit over the period of the borrowings using the effective interest method. Borrowed funds not utilised are invested until they are required and any interest earned during the reporting period is set-off against borrowing costs incurred during the reporting period. Fees paid on the establishment of the loan facilities are recognised as transaction costs of the loan to the extent it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. Borrowing costs comprise primarily interest on the Institute s borrowings. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset is capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale less any interest earned during the reporting period on borrowed funds. Other borrowing costs are expensed in the period in which they are incurred and are included in finance costs. Page 46

49 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) Income tax on the results for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable surplus for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is accounted for using the financial position liability method, providing for deferred tax on temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the corresponding basis used in the computation of taxable surplus. In principle, deferred tax liabilities are recognised for taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable surplus will be available against which the assets can be realised. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited to surplus or deficit, except when it is related to items credited or charged directly to reserves, in which case the deferred tax is also dealt with in reserves. The Commissioner General of Tax Administration Jamaica has granted the Institute exemption from income tax under the mutuality principle in respect of income derived from transactions with members and students. In consequence, the Institute is only taxable on a proportion of its income after setting-off a proportion of its expenses and capital allowances. As the proportion of capital allowances which can be claimed varies from year to year, it is not practical to ascertain temporary differences arising from variances between depreciation and capital allowances. These have, therefore, been dealt with as reconciling items for taxation purposes. Deferred tax assets and liabilities are off-set when they arise from the same tax authority and when legal right of set-off exists. Provisions are recognised when there is a present legal or constructive obligation as a result of past events, it is probable that an out-flow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. i The Institute provides post employment benefits through a defined contribution plan. A defined contribution plan is a superannuation plan under which the Institute pays fixed contributions into a privately administered fund. The Institute has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. Contributions to the plan are recognised as an expense in the period that relevant employee services are received. Page 47 ICAJ ANNUAL REPORT 2013/2014

50 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) ii Employee obligations Employees entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to year-end date. iii Termination benefits Termination benefits are payable when employment is terminated by the Institute before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Institute recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. The termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the reporting date are discounted to present value. Property, plant and equipment and other non-current assets, are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset s net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Accumulated surplus includes all current and prior retained surpluses. Fair value reserve comprises gains and losses arising on the revaluation of the investment in equity instruments. Capital assets reserve includes funds appropriated from accumulated surplus for the purposes of funding the acquisition, construction and completion of the Institute s capital assets. Certain prior year figures have been restated to conform to current year s presentation. [Note 31]. Page 48

51 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, i Financial assets by categories The categories of financial assets included in the statement of financial position are as follows: $ $ Financial assets measured at fair value Non-current assets Investment in equity instruments (note 5) 339, ,232 Financial assets measured at amortised cost Current assets Loans and receivables (including cash and cash equivalents) (notes 7, 8 and 9) 33,951,140 27,684,853 Total 34,290,596 28,020,085 ii Financial liabilities by categories The categories of financial liabilities included in the statement of financial position are as follows: $ $ Financial liabilities measured at amortised cost Non-current liabilities Long-term loans 16,192,929 7,371,515 Current liabilities Payables and accruals 8,078,195 6,057,181 Current portion of long-term loans 1,487,300 1,237,298 Total 25,758,424 14,665,994 An amendment to IFRS 7 introduced new requirements relating to the disclosure of financial instruments that are measured at fair value. The amendment requires that, as of January 1, 2010, financial instruments measured at fair value be disclosed by levels using the fair value measurement hierarchy. The hierarchy comprises three (3) levels as follows: Level 1 includes those instruments which are measured based on quoted prices in active markets for identical assets or liabilities. Level 2 includes those instruments which are measured using inputs other than quoted prices within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3 includes those instruments which are measured using valuation techniques that include inputs for the instrument that are not based on observable market data (unobservable inputs). The Institute s investment in equity quoted on the Jamaica Stock Exchange falls into the Level 1 tier of the fair value measurement hierarchy. The Institute uses the bid price at the end of the reporting period, as the quoted market price in valuing these assets. Page 49 ICAJ ANNUAL REPORT 2013/2014

52 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, Freehold Construction Computers, Land & -In- Furniture & Buildings Progress Equipment Total $ $ $ $ Gross carrying amount at April 1, ,355,333 13,200,828 12,044,170 74,600,331 Additions 531,492 6,080, ,509 6,826,130 Disposal - - (50,000) (50,000) Gross carrying amount at March 31, ,886,825 19,280,957 12,208,679 81,376,461 Depreciation at April 1, 2013 (6,255,309) - (9,131,659) (15,386,968) Depreciation eliminated on disposal ,999 49,999 Charge for the year (1,260,228) - (1,029,575) (2,289,803) Depreciation at March 31, 2014 (7,515,537) - (10,111,235) (17,626,772) Carrying amount at March 31, ,371,288 19,280,957 2,097,444 63,749,689 Freehold Construction Computers, Land & -In- Furniture & Buildings Progress Equipment Total $ $ $ $ Gross carrying amount at April 1, ,612,567 12,017,591 15,080,616 76,710,774 Additions - 1,183, ,355 2,088,592 Disposal (257,234) - (3,941,801) (4,199,035) Gross carrying amount at March 31, ,355,333 13,200,828 12,044,170 74,600,331 Depreciation at April 1, 2012 (7,762,933) - (11,864,836) (19,627,769) Depreciation eliminated on disposal 247,842-3,878,449 4,126,291 Adjustment 2,500, ,500,279 Charge for the year (1,240,497) - (1,145,272) (2,385,769) Depreciation at March 31, 2013 (6,255,309) - (9,131,659) (15,386,968) Carrying amount at March 31, ,100,024 13,200,828 2,912,511 59,213,363 Included in gross carrying amount is a sum of $8,054,897 ( $6,752,630), representing the cost of equipment which are fully depreciated, but are still in use. Buildings were valued on June 12, 2012 by Langford and Brown, independent chartered surveyors, on an open market value basis for mortgage loan, at $118,000,000. Management is of the opinion that the current open market value of buildings is in excess of the carrying amount at year end and there is no impairment. During the previous year, management re-assessed the expected useful lives of buildings which were being depreciated at 4% per annum. This resulted in a change in the depreciation rate to 2.5% per annum and depreciation adjustment of $2,500,279. Construction-in-progress represents construction costs and professional fees incurred to date on the building development project [note 27]. During the year, net borrowing costs amounting to $582,327 ( $NIL), representing borrowing costs incurred on a loan obtained to finance the construction less interest income earned on unspent loan funds were capitalised. Page 50

53 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, (cont d) Land and buildings were used as collateral to secure the loan received from Jamaica National Building Society [note 16]. At March 31, 2014, there were no contracts for capital expenditure not provided for in these financial statements $ $ Quoted equity at fair value: National Commercial Bank Jamaica Limited 19,200 ordinary shares ( ,200) 339, ,232 Historical cost of quoted investment 4,720 4,720 Fair value has been determined by reference to the quoted bid prices at the end of the reporting period. The method and valuation techniques used to measure fair value are unchanged compared to the previous year $ $ Oxford shirts branded with ICAJ logo 9,532 14,979 Medallions branded with ICAJ and ACCA logos 147, ,355 Unbranded laptop backpacks 69, , , ,334 Less: Provision for slow moving inventories 78, ,979 Total 147, ,355 In 2014, a total of $492,435 ( $765,745) of inventories was included as an expense in surplus or deficit. This includes an amount of $63,947 ( $65,446), resulting from write-back of inventories $ $ Members subscription 248, ,992 Students subscription and graduate fees 3,705,145 3,452,674 Professional associations 125,587 27,089 Room rental 475, ,245 Banquet and seminars 2,053, ,136 6,607,339 3,866,136 Less: Allowance for impairment of amounts receivable (1,025,423) (673,262) 5,581,916 3,192,874 Interest 183, ,712 Deposits 353, ,434 Other 502, ,832 6,621,162 4,244,852 Prepayments 739, ,905 Total 7,360,730 4,773,757 Page 51 ICAJ ANNUAL REPORT 2013/2014

54 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, Membership dues, other receivables and prepayments (cont d) All membership dues and other receivables are short-term and the carrying value is considered a reasonable approximation of fair value. Membership dues and other receivables have been reviewed for indication of impairment. Certain receivables were found to be impaired and the appropriate provision has been made. The impaired receivables are due primarily from students who are likely to be suspended for overdue subscriptions. In addition, some unimpaired subscriptions and other receivables are past due at the end of the reporting period. The age of these past due but not impaired receivables is as follows: $ $ Not more than three (3) months 5,333,231 3,126,369 More than three (3) months but not more than six (6) months 193,060 41,417 More than six (6) months 55,625 25,088 Total 5,581,916 3,192,874 No collateral or debt enhancements have been requested as security for receivables that are either past due or impaired. The movement in the provision for impairment is as follows: $ $ Balance at beginning of year 673, ,679 Receivables recovered during the year (27,660) (62,383) Increase in provision during the year 2,650,909 1,966,649 Receivables written off during the year (2,271,088) (1,585,683) Balance at end of year 1,025, ,262 Management considers the credit quality of membership dues and other receivables that are neither past due nor impaired to be good, as based on historical information and experience, management does not expect the counterparties to default on their obligations. Interest rate % p.a. $ $ Corporate Bond ,111,089 2,022,358 BOJ variable rate CD 7.0 5,974,000 - Total 8,085,089 2,022,358 i. Corporate Bond is invested with a licensed financial institution for a period of twelve (12) months. ii. BOJ variable rate CD is invested for a period of twelve (12) months, maturing on December 11, Interest is receivable quarterly, at the rate of 0.25% point above the benchmark rate for each quarterly interest payment. The carrying value of short-term deposits is considered a reasonable approximation of fair value. Page 52

55 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, Interest Rate % p.a. $ $ Short-term deposits ,183,353 9,268,303 US$ Short-term deposits (US$17,689 ( US$39,483)) 1.4 1,927,971 3,866,782 Sterling savings account ( 7,259 ( ,801)) 0.1 1,302,228 1,895,165 US$ savings accounts (US$4,715 (2013 US$9,736)) , ,533 J$ current accounts 4,393,282 5,391,900 Cash in hand 924,163 41,960 Total 19,244,889 21,417,643 Included in cash and cash equivalents are amounts held for the following: Note $ $ Administered funds 12 1,509,440 1,451,685 Capital assets fund 13 3,601,290 3,428,790 ICAJ Welfare fund ,110 76,355 ICAJ/IDB Project fund 15 5,717,565 8,158,129 Total 10,983,405 13,114,959 Short-term deposits at the end of the reporting period represent amounts invested with licensed financial institutions with maturity dates of three (3) months or less. The carrying value of cash and cash equivalents is considered a reasonable approximation of fair value. Fair value reserve represents net unrealised gains on the revaluation of investment in equity instruments [note 5]. This represents funds appropriated from accumulated surplus to be utilised to fund the Institute s building development project in accordance with Council s approval. Council is authorised to exercise discretion and transfer an amount not exceeding 10% of surplus for the year to the capital assets reserve. The movement on the account during the year is as follows: $ $ Balance at beginning of year 31,495,715 31,353,856 Transfer from accumulated surplus 122, ,859 Balance at end of year 31,617,715 31,495,715 Page 53 ICAJ ANNUAL REPORT 2013/2014

56 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, Balance at Net interest Balance at April 1, for the year Receipts Disbursements March 31, $ $ $ $ $ a. Education Fund 544,133 15, ,913 b. Company Law Reform Fund 298,373 8, ,025 c. Deloitte & Touche Awards Fund 22, ,730 d. Jasper Burnett Award Fund 70,058 2, ,090 e. Sushil Jain Award Fund 26,665 1,167 40,000 (12,853) 54,979 f. Raphael E. Gordon Award Fund 222,252 6, ,697 g. Joslyn E. Lowrie Award Fund 19, (8,214) 12,154 h. Library Grant 63,112 1, ,943 i. Outreach Projects 185,092 5, ,375 (191,926) 186,909 Total 1,451,685 42, ,375 (212,993) 1,509,440 The above funds represent donations received and other funds designated to finance specific activities. An amount of $42,373 ( $32,842) was transferred from surplus or deficit for the year in respect of net interest earned on cash held for these funds, which are included with the Institute s cash resources [note 9]. Capital Assets Fund represents direct contributions received from members and other donors to finance the Institute s capital assets development project [note 27]. Previously, such contributions were recognised in capital assets reserve and treated as part of the Institute s equity. It is now determined that the amounts should be recognised as a fund maintained for capital assets development project and has been reclassified to a specially designated fund accordingly. On completion of each phase of the capital assets project an amount equivalent to depreciation of the relevant assets will be transferred to surplus or deficit. The movement on the account during the reporting period is as follows: $ $ Balance at beginning of year 11,599,485 11,888,433 Contributions received during the year 50, ,244 Net interest received during the year - 85,037 Transfer to surplus or deficit (936,267) (1,006,229) Balance at end of year 10,713,718 11,599,485 The above balance is represented by bank balances maintained by the Institute on behalf of the Fund [note 9]. Page 54

57 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, ICAJ Welfare Fund (the Fund) was incorporated as a company limited by guarantee and not having share capital. The Fund commenced operation on May 11, 2010, for the purpose of promoting the welfare, including assisting with relief of poverty, distress and illness of all members (past and present) of the Institute of Chartered Accountants of Jamaica. By resolution of the Board of Directors, financial statements for the first period of operation will cover the period ended March 31, The Fund balance comprises donations received on its behalf and not yet paid over [note 9]. The movement on the account during the year is as follows: $ $ Balance at beginning of year 76, ,374 Add: Donation from the Institute during the year 75,000 75,000 Donation from other donors during the year 3,755 31,355 Less: Transfer to ICAJ Welfare Fund s bank account - (866,374) Balance at end of year 155,110 76,355 By resolution of the members of ICAJ, approved at the Annual General Meeting on July 27, 2011, Council may exercise discretion and donate an amount, not exceeding 10% of each year s surplus to the Fund. During the year, the Institute made a donation of $75,000 ( $75,000) to the Fund. The above balance is represented by bank balances maintained by the Institute on behalf of the Fund [note 9]. In March 2003, the Institute signed an Agreement for a grant of US$665,000 from the Inter- American Development Bank (IDB) to finance the Improving the Application of and Compliance with International Financial Reporting and Auditing Standards Project. Under the Agreement, the Institute was required to provide counterpart contributions totalling US$350,000 in cash and kind over the life of the Project. The Project was initially for a period of thirty-six (36) months and consisted of four (4) main components: a. Conduct of an independent assessment of accounting and auditing in Jamaica in accordance with the Reports on the Observance of Standards and Codes (ROSC) program; b. Assistance in the implementation of International Financial Reporting Standards (IFRS); c. Building adequate mechanisms for the enforcement of IFRS and International Standards on Auditing (ISA); and d. Establishing systems and processes that sustain the implementation of IFRS and ISA. The Project activities commenced and the Institute began receiving Grant funds from IDB in April The Project was completed on November 24, In accordance with the grant agreement, funds remaining at the end of the project will be used by the Institute to support the sustainability of the project. Page 55 ICAJ ANNUAL REPORT 2013/2014

58 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, i. Fund balance at the end of the reporting period comprises: $ $ Balance at beginning of year 8,816,879 11,184,103 Interest earned during the year 198, ,660 Project cost incurred during the year (2,638,886) (2,597,884) Balance at end of year 6,376,315 8,816,879 ii. In February 2011, the Institute entered into a contractual arrangement with Northern Caribbean University for the provision of a Database Solution that will assist with the dissemination of IFRS, in continuance of the project. The agreed development cost is US$52,000; at the end of the reporting period a total of US$40,000 ( US$30,000) was paid and recovered from ICAJ/IDB Project funds. iii. On December 2, 2013, the Institute entered into a contractual arrangement with International Financial Reporting Standards Foundation to provide members with non-exclusive right to access the eifrs service. The contract is renewable annually and access is available through the Institute s secure membership database. In the inaugural year of the contract, costs totalling J$1,778,386 were financed through the ICAJ/IDB Project Fund. The above balance is represented by bank balances maintained by the Institute on behalf of the funds [note 9]. Interest rate % p.a $ 2013 $ a) Jamaica National Building Society (JNBS) 15 7,358,475 8,175,854 b) Jamaica National Building Society (JNBS) 13 10,000,000 - c) JN Finance Limited , ,959 17,680,229 8,608,813 Less: Current portion (1,487,300) (1,237,298) Balance at end of year 16,192,929 7,371,515 a) In September 2009, the Institute received a loan of $10 Million, from Jamaica National Building Society (JNBS) to partially finance construction of the ground floor of the Institute s building development project. The loan is collaterised by a first mortgage on the Institute s property at 8 Ruthven Road, Kingston 10, and is repayable over a period of 120 months [note 4]. Repayment commenced October Instalments are due at the end of each month and interest is calculated on the reducing balance. At the end of the reporting period, the Institute was in full compliance with the terms of the financing agreement. b) In May 2013, the Institute accepted an offer of finance from Jamaica National Building Society (JNBS) for an additional loan of $15 million to continue the building development project. This additional loan is collaterised by a second mortgage on the Institute s property at 8 Ruthven Road, Kingston 10, and is repayable over a period of 180 months [note 4]. In July 2013, $10 million was drawn down, with a deferral of the balance for a later date. Instalments are due at the end of each month and interest is calculated on the reducing balance. At the end of the reporting period, the Institute had paid up interest accrued on the $10 million, however, repayment of principal had not commenced. Page 56

59 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, c) Since 2012, the Institute has been financing insurance premium under an agreement with JN Finance Limited for a period of nine (9) months. At the end of the reporting period, the Institute was in full compliance with the terms of the financing agreement. Deferred income tax is calculated using a tax rate of 25%. The movement in the deferred income tax balance is as follows: $ $ Liability at beginning of year 30,428 21,211 Deferred tax charge [note 24b] 15,344 9,217 Liability at end of year 45,772 30,428 Deferred income tax balance arose on interest receivable. Students subscriptions are due and payable on January 1 of each year. Deferred income relates to the portion of such subscriptions to be recognised as income in the subsequent financial year $ $ Subscriptions to professional associations (US$19,845 (2013 US$19,092)) 2,120,023 1,887,991 Prepaid members subscriptions 624, ,039 Payroll liabilities 1,154, ,235 Audit fees 377, ,750 General Consumption Tax (GCT) 262,210 - Payables 613, ,871 Accruals 277, ,797 Due to contractor R&S Construction 547,703 - Retention construction contract 485,882 - Other 1,616,464 1,631,498 Total 8,078,195 6,057,181 All amounts are short-term and the carrying value is considered a reasonable approximation of fair value. Gross Surplus/ Surplus/ income Expenses (deficit) (deficit) $ $ $ $ Seminars 15,622,825 6,571,449 9,051,376 5,737,033 Graduations 540, ,511 (213,663) (352,578) Awards Banquet 3,544,119 2,638, , ,578 Room rental 3,577,375 2,290,203 1,287, ,853 Total 23,285,167 12,254,542 11,030,625 5,917,886 Page 57 ICAJ ANNUAL REPORT 2013/2014

60 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, Finance income may be analysed as follows: $ $ Interest income from cash and cash equivalents 668, ,397 Interest income from short-term deposits 451,534 74,226 Total interest income from financial assets not at fair value through surplus or deficit 1,119, ,623 Less: Interest earned on unspent mortgage loan (393,551) - 726, ,623 Dividend income from investment in equity instruments 13,824 24,000 Finance income 740, ,623 Finance cost comprises: $ $ Interest expense 2,209,796 1,305,850 Less: Borrowing cost on mortgage loan capitalised (975,878) - Finance cost 1,233,918 1,305,850 Total Administrative and other operating expenses: $ $ Employee benefits (note 25) 20,609,652 18,355,232 Depreciation - current year (note 4) 2,289,803 2,385,769 - adjustment (note 4) - (2,500,279) Advertising and public relations 2,007,269 2,073,323 Legal and professional fees 102,600 24,000 Property taxes 216,500 82,000 Student affairs and awards 759, ,647 Travelling and entertainment 3,065,767 2,021,090 Subscriptions to professional associations 3,367,968 2,895,838 Communication and technology 940, ,631 Utilities 2,760,832 2,538,930 Cost of sales handbooks, bags and shirts 492, ,745 Newsletters and annual report 644, ,500 Other expenses 4,727,447 4,603,045 Total 41,983,985 35,632,471 Surplus for the year before taxation is stated after charging/(crediting): $ $ Key management compensation: Executive remuneration (note 25) 5,429,645 3,456,496 Council members remuneration (note 28) NIL NIL Depreciation - current year (note 4) 2,289,803 2,385,769 - adjustment (note 4) - (2,500,279) Auditor s remuneration 377, ,000 Page 58

61 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, a The Commissioner General of Tax Administration Jamaica has granted the Institute exemption from income tax under the mutuality principle in respect of income derived from transactions with members and students. The Institute is subject to income tax on investment income and on surplus arising from services to the extent that they relate to transactions with non-members. b Income tax has been computed at the rate of 25% on non-exempt income, adjusted for tax purposes, and comprises: $ $ Deferred tax charge (note 17) 15,344 9,217 Total 15,344 9,217 c Subject to the agreement of the Commissioner General of Tax Administration Jamaica, losses of approximately $2.6 million ( $1.7 million) are available to be set off against future taxable profits. These losses, if not utilised, will be carried forward indefinitely. However, effective January 1, 2014 losses utilised in any one year is restricted to fifty percent (50%) of the chargeable income. d Reconciliation of theoretical tax charge to actual tax charge: $ $ Surplus for the year before taxation 2,416,590 1,776,349 Income tax thereon at 25% 604, ,087 Income tax consequence of the following: Expenses not deductible for tax purposes 10,032,945 9,097,683 Income not chargeable to tax (10,278,622) (9,298,145) Dividend income not chargeable to tax - (1,824) Foreign exchange gain not chargeable to tax (248,987) (138,771) Expenses not claimed against accounting surplus (94,140) (88,510) Reduction in effective tax rate - (5,303) Income tax expense 15,344 9, $ $ Salaries and related expenses 18,955,075 16,360,975 Pension (note 26) 616, ,882 Health insurance 796, ,911 Training and other benefits 241, ,464 Total (note 22) 20,609,652 18,355,232 Included in employee benefits is executive remuneration as follows: $ $ Salaries and related expenses 4,516,265 2,802,248 Pension 142,519 - Medical and other benefits 770, ,248 Total 5,429,645 3,456,496 Page 59 The number of employees at year end was twelve ICAJ (12) ANNUAL (2013 REPORT thirteen (13)). 2013/2014

62 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, The Institute operates a defined-contribution pension plan for its employees, which is administered by a life assurance organisation. The plan was established in financial year ended March 31, 1999 and is funded by contributions from employees and employer. The Institute contributes at a rate of five percent (5%) of pensionable salaries, while employees contribute at a mandatory rate of five percent (5%) but may make voluntary contributions not exceeding an additional five percent (5%). Pension benefits are based on contributions plus accumulated interest/ accordingly, the Institute s liability is restricted to its contributions. The Institute s contribution to the plan during the year amounted to $616,528 ( $498,882) [note 25]. Capital expenditure, originally estimated at approximately $55 million, in respect of the building development project (note 4) was previously approved by the members. The project was further broken down into ground and upper levels. At the end of the reporting period, actual expenditure amounted to $55.8 million. In 2012, construction on the first phase (ground level) of the project was completed and the related costs of $36.5 million were capitalised. The balance of $19.3 million in construction-in-progress represents cost incurred to date on the upper levels. At end of the reporting period, the estimated costs to complete the upper floor was $5.8 million. There are no capital commitments at the end of the reporting period. Cost incurred in completing the upper levels will be capitalised on completion. The members of the Council are volunteers. No member of the Council has received payment in respect of services to the Institute, other than by way of reimbursement of incidental expenses incurred in providing such services. The members of Council and the Executive Director are referred to as key management personnel [note 23]. The Institute s activities expose it to a variety of financial risks in respect of its financial instruments: market risk (currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The Institute seeks to manage these risks by close monitoring of each class of its financial instruments, as follows: a Market risk i Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Institute is exposed to currency risk due to fluctuations in exchange rates on transactions and balances that are denominated in currencies other than the Jamaica dollar. Foreign currency bank accounts are maintained from foreign currency receipts, at levels which will meet foreign currency obligations. At the end of the reporting period, the Institute had net foreign currency assets of 7,259 ( ,801) and US$4,361 (2013 US$30,304), which were subject to foreign exchange rate changes as follows: Page 60

63 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, Risk management objectives and policies (cont d) a Market risk (cont d) i Currency risk (cont d) Concentrations of currency risk US$ US$ Financial assets - Other receivables 1, Cash and bank balances 22,404 7,259 49,219 12,801 24,206 7,259 49,396 12,801 Financial liabilities - Payables and accruals (19,845) - (19,092) - Net foreign currency assets 4,361 7,259 30,304 12,801 The above assets/(liabilities) are receivable/(payable) in United States dollars (US$) and Pound Sterling ( ). Exchange rates applicable at the end of the reporting period are J$ to US$1 (2013 J$97.93 to US$1) and J$ to 1 (2013 J$ to 1). Foreign currency sensitivity Due to the nature of the Institute s operations and the very short-term nature of balances denominated in currencies other than the Jamaican dollar, there is no material impact on the results of the Institute s operations as a result of changes in exchange rates. ii Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Institute s cash and cash equivalents are subject to interest rate risk. However, the Institute attempts to manage this risk by monitoring its interest-bearing instruments closely and procuring the most advantageous rates under contracts with interest rates that are fixed for the life of the contract, where possible. The Institute invests excess cash in short-term deposits and maintains interestearning bank accounts with licensed financial institutions. Short-term deposits are invested for periods of three (3) to twelve (12) months at fixed interest rates and are not affected by fluctuations in market interest rates up to the dates of maturity. Interest rates on interest-earning bank accounts are not fixed but are subject to fluctuations based on prevailing market rates [note 9]. Interest rate sensitivity As interest rates on the Institute s short-term deposits and long-term loans are fixed up to maturity and interest earned from the Institute s interest-earning bank accounts is immaterial, there would be no material impact on the results of the Institute s operations as a result of fluctuations in interest rates. iii Other price risk Other price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Institute s financial instruments are substantially independent of changes in market prices as they are short term in nature. Page 61 ICAJ ANNUAL REPORT 2013/2014

64 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, Risk management objectives and policies (cont d) b Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Institute faces credit risk in respect of its receivables, cash at bank and short-term deposits held with financial institutions. It is the Institute s policy to deal only with credit worthy financial institutions and other counterparties, to control credit risk. Credit risk for receivables is controlled by activities under the provisions of the Bye- Laws of the Institute, where necessary. Credit risk for cash at bank and short-term deposits is managed by maintaining these balances with licensed financial institutions considered to be stable and creditworthy. Savings and current accounts held with commercial banks are insured under the Jamaica Deposit Insurance Scheme (JDIS). However, for amounts held with commercial banks at the end of the reporting period, a total of $2,400,000 ( $2,400,000) is insured under the JDIS. The Institute is not exposed to any significant credit risk to any single counterparty or group of counterparties. The majority of the Institute s counterparties are members or member firms which are not considered to be a credit risk to the Institute. The Institute does not require collateral or other credit enhancements in respect of its receivables as it considers its debtors creditworthy and do not expect them to default on their obligations. c Liquidity risk Liquidity risk is the risk that the Institute will encounter difficulty in raising funds to meet its commitments associated with financial instruments. The Institute manages its liquidity risk by maintaining an appropriate level of resources in liquid or near liquid form. The Institute maintains cash and short-term deposits for up to 90-day periods to meet its liquidity requirements. Page 62

65 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, Risk management objectives and policies (cont d) c Liquidity risk (cont d) The Institute s financial liabilities comprise long-term loans and payables. These amounts are due as follows: Current Within 3 Months 4 to 12 Months $ $ $ $ Long-term loans current portion 597, , , ,676 Payables and accruals 7,592,313 6,057, ,882 - Total 8,189,792 6,571,803 1,375, ,676 Non-Current 2 to 5 Years Over 5 Years $ $ $ $ Long-term loans 6,791,805 4,736,117 9,401,124 2,635,398 Total 6,791,805 4,736,117 9,401,124 2,365,398 The Institute considers its capital to be its accumulated surplus and reserves. The Council s financial objective is to generate a targeted operating surplus, in order to strengthen and provide for the future continuity of the Institute, taking into account the various competitive risks. The Council regularly reviews the financial position of the Institute at meetings. The Institute is not subject to any externally imposed capital requirements. Donations are received for the purposes of funding the construction and completion of the Institute s building development project and acquisition of other capital assets, including outfitting the resource centre. These are credited to capital assets fund and released to surplus or deficit over the economic life of the respective assets, in line with the depreciation policy. Previously, such donations were included in capital assets reserve and treated as part of the Institute s equity. It is now determined that the amounts should be included in a specially designated fund and accordingly, the accumulated donations and the net interest received arising from the investment of the funds have been re-classified from equity to the capital assets fund. On completion of each phase of the capital assets project, an amount equivalent to depreciation of the relevant assets will be released to surplus or deficit. The financial statements for the years ended March 31, 2013 and 2012 (the immediately preceding comparative periods) have been restated to reflect the impact of the reclassification. The financial effects of the re-classification are set out as follows: Page 63 ICAJ ANNUAL REPORT 2013/2014

66 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, d) a Impact of re-classification of capital contributions on statement of financial position as at March 31: As previously reported 2013 Effect of reclassification 2013 Restated 2013 As previously reported 2012 Effect of reclassification 2012 Restated 2012 $ $ $ $ $ $ Assets Non-current assets Property, plant and equipment 59,213,363-59,213,363 57,083,005-57,083,005 Investment in equity instruments 335, , , ,080 59,548,595-59,548,595 57,585,085-57,585,085 Current assets Inventories 218, ,355 51,379-51,379 Membership dues, other receivables and prepayments 4,773,757-4,773,757 7,330,459-7,330,459 Taxation recoverable 2,256,204-2,256,204 3,835,053-3,835,053 Short-term deposits 2,022,358-2,022, Cash and cash equivalents 21,417,643-21,417,643 22,134,692-22,134,692 30,688,317-30,688,317 33,351,583-33,351,583 Total assets 90,236,912-90,236,912 90,936,668-90,936,668 Reserves Accumulated surplus 15,137,234-15,137,234 13,860,500-13,860,500 Fair value reserve 330, , , ,360 Capital assets reserve 43,095,200 (11,599,485) 31,495,715 43,242,289 (11,888,433) 31,353,856 Total reserves 58,562,946 (11,599,485) 46,963,461 57,600,149 (11,888,433) 45,711,716 Liabilities Funds Administered funds 1,451,685-1,451,685 1,326,435-1,326,435 Capital Assets Fund - 11,599,485 11,599,485-11,888,433 11,888,433 ICAJ Welfare Fund 76,355-76, , ,374 ICAJ/IDB Project Fund 8,816,879-8,816,879 11,184,103-11,184,103 Total funds 10,344,919 11,599,485 21,944,404 13,346,912 11,888,433 25,235,345 Non-current liabilities Long-term loans 7,371,515-7,371,515 8,186,911-8,186,911 Deferred tax liability 30,428-30,428 21,211-21,211 7,401,943-7,401,943 8,208,122-8,208,122 Current liabilities Deferred income 6,632,625-6,632,625 6,906,900-6,906,900 Payables and accruals 6,057,181-6,057,181 4,182,729-4,182,729 Current portion of longterm loans 1,237,298-1,237, , ,856 13,927,104-13,927,104 11,781,485-11,781,485 Total liabilities 31,673,966-43,273,451 33,336,519-45,224,952 Total reserves and liabilities 90,236,912-90,236,912 90,936,668-90,936,668 Page 64

67 Institute of Chartered Accountants of Jamaica Notes to the financial statements March 31, ions (cont d) b Impact of re-classification of capital contributions on statement of comprehensive income for year ended March 31, 2013 As previously stated 2013 Effect of reclassification 2013 Restated 2013 $ $ $ Revenue Members subscription and admission fees 17,620,736-17,620,736 Students subscription and registration fees 10,814,160 10,814,160 Surplus from self-financing activities 5,917,886-5,917,886 Finance income 872, ,623 Subvention for students 2,841,070-2,841,070 Advertising and sponsorship 82,976 82,976 Sale of handbooks, bags and shirts 902, ,513 Miscellaneous 149, ,903 39,201,867-39,201,867 Transfer from Capital Assets Fund - 1,006,229 1,006,229 Gain on foreign exchange 555, ,084 39,756,951 1,006,229 40,763,180 Administrative and other operating expenses (35,632,471) - (35,632,471) Donation ICAJ Welfare Fund (75,000) - (75,000) Bad debts specific charges (1,966,649) - (1,966,649) Bad debts recovered 62,383-62,383 Loss on disposal of property, plant and equipment (69,244) - (69,244) Finance costs (1,305,850) - (1,305,850) Surplus for the year before taxation and transfer 770,120 1,006,229 1,776,349 Income tax expense (9,217) (9,217) Surplus for the year before transfer 760,903 1,006,229 1,767,132 Interest transferred to designated funds (348,539) - (348,539) Surplus for the year 412,364 1,006,229 1,418,593 Other comprehensive income: Items that maybe reclassified subsequently to surplus or deficit: Increase in capital contributions 717,281 (717,281) - Loss on revaluation of equity instruments (166,848) - (166,848) Total comprehensive income for the year 962, ,948 1,251,745 Page 65 ICAJ ANNUAL REPORT 2013/2014

68 66 Additional information Auditor s report To the Council of Institute of Chartered Accountants of Jamaica On Additional Information The additional information presented on the following pages has been taken from the accounting records of the Institute of Chartered Accountants of Jamaica and has been subjected to the tests and other auditing procedures applied in my examination of its financial statements for the year ended March 31, In my opinion, the said information is fairly presented in all material respects in relation to the financial statements taken as a whole although it is not necessary for a fair presentation of the state of the Institute s affairs as at March 31, 2014 or of the results of its operations or its cash flows for the year then ended. Chartered Accountant Kingston, Jamaica July 8, 2014 Page 66

69 Institute of Chartered Accountants of Jamaica Additional information Supporting schedule of expenses Year ended March 31, $ $ Administrative and other operating expenses Meeting expenses 694, ,835 Salaries and other staff costs 20,609,652 18,355,232 Water 316, ,810 Property taxes 216,500 82,000 Insurance 905, ,767 Legal and other professional fees 102,600 24,000 Audit fees - current year 377, ,875 - prior year (28,875) (1,050) General and office expenses 563, ,978 Travelling and entertainment 3,065,767 2,021,090 Advertising and public relations 2,007,269 2,073,323 Subscriptions to professional associations 3,367,968 2,895,838 Repairs and maintenance 459, ,075 Depreciation: building - current year 1,260,228 1,240,497 - adjustment - (2,500,279) Depreciation: computer, furniture and equipment 1,029,575 1,145,272 Printing, stationery and computer supplies 254, ,375 Communication and technology 940, ,631 Electricity 2,444,230 2,225,120 Postage and delivery 92, ,466 Cleaning and sanitation 398, ,986 Security services 211, ,066 Library services 12,855 37,399 Student affairs and awards 759, ,647 Newsletters and annual report 644, ,500 Cost of sales handbooks, bags and shirts 492, ,745 Bank charges 786, ,273 41,983,985 35,632,471 Page 67 ICAJ ANNUAL REPORT 2013/2014

70 Institute of Chartered Accountants of Jamaica Additional information Detailed statement of surplus/(deficit) from selffinancing activities Year ended March 31, Awards Room Seminar Graduations Banquet Rental Total Total $ $ $ $ $ $ Income Fees Members 10,259, ,597 1,675,536-12,092,435 11,096,648 Non-members 4,676, ,562-5,370,390 3,713,437 Room rental ,577,375 3,577,375 1,469,063 Sponsorship 686,695 25,751 1,175,021-1,887,467 40,676 Graduates contribution - 97, ,500 91,014 ACCA contribution - 260, , ,000 Total income 15,622, ,848 3,544,119 3,577,375 23,285,167 16,810,838 Less: Expenses Advertising and public relations 473, ,100 1,102,797-1,779,365 1,636,974 Entertainment - 10, , , ,000 Share of profit ACCA/ICAC 229, , ,087 Catering charges 2,356, ,043 1,328,466-4,073,049 4,007,066 Printing and stationery 172,161 22,910-18, , ,068 Presenters expenses 1,257,047 16, ,273, ,677 Parking, equipment and facilities rental 1,910,909 17,083 37, ,790 2,263,098 2,387,141 Electricity , , ,368 Security services , , ,105 Staff travelling and subsistence 133,411-19, , , ,112 Transportation 38, ,000 22,000 Other costs - 96, , , ,354 Total expenses 6,571, ,511 2,638,379 2,290,203 12,254,542 10,892,952 Surplus/(deficit) for year (note 20) 9,051,376 (213,663) 905,740 1,287,172 11,030,625 5,917,886 Page 68

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