INTERFERRY, INC. DRAFT Consolidated Financial Statements (Expressed in United States dollars) Year ended December 31, 2015 (Unaudited)

Transcription

1 Consolidated Financial Statements INTERFERRY, INC. - March 24, 2016, 4:03 PM

2 REVIEW ENGAGEMENT REPORT To the Board of Directors of Interferry, Inc. We have reviewed the statement of financial position of Interferry, Inc. as at December 31, 2015 and the consolidated statements of profit and comprehensive income, changes in equity and cash flows for the year then ended. Our review was made in accordance with Canadian generally accepted standards for review engagements and, accordingly, consisted primarily of enquiry, analytical procedures and discussion related to information supplied to us by the Association. A review does not constitute an audit and, consequently, we do not express an audit opinion on these financial statements. Based on our review, nothing has come to our attention that causes us to believe that these consolidated financial statements are not, in all material respects, in accordance with Canadian generally accepted accounting principles. Chartered Professional Accountants Month DD, YYYY Victoria, Canada

3 Consolidated Statement of Financial Position As at December 31, 2015, with comparative information for Assets Current assets: Cash and cash equivalents $ 658,613 $ 514,103 Trade receivable 81,929 9,807 Prepaid expenses and deposits 22,488 - Total current assets 763, ,910 Equipment (note 4) 1,648 - Total assets $ 764,678 $ 523,910 Liabilities Current liabilities: Trade and other payables $ 101,543 $ 19,175 Accrued payroll expenses 186, ,382 Deferred revenue (note 5) 16,265 63,450 Total liabilities 304, ,007 Equity Retained earnings 460, ,903 Total equity 460, ,903 Commitment (note 6) Total liabilities and equity $ 764,678 $ 523,910 The notes on pages 5 to 20 are an integral part of these consolidated financial statements. - March 24, 2016, 4:03 PM 1

4 Consolidated Statement of Profit and Comprehensive Income, with comparative information for Revenue: Conference revenue (note 11) $ 652,880 $ 722,604 Membership revenue 623, ,435 Interest income - 14 Other income 11,080 2,975 Total revenues 1,287, ,028 Expenses: Conference expenses (note 11) 389, ,239 Special Projects (note 10) 3,701 7,652 General and administration (note 12) 453, ,888 European office (note 13) 298,847 - Total expenses 1,145, ,779 Earnings before income taxes 141,909 71,249 Income taxes (note 9) 3,191 - Profit and total comprehensive income for the year $ 138,718 $ 71,249 The notes on pages 5 to 20 are an integral part of these consolidated financial statements. - March 24, 2016, 4:03 PM 2

5 Consolidated Statement of Changes in Equity As at December 31, 2015, with comparative information for 2014 Retained earnings Balance, December 31, 2013 $ 250,654 Comprehensive income for the year 71,249 Balance, December 31, ,903 Comprehensive income for the year 138,718 Balance, December 31, 2015 $ 460,621 The notes on pages 5 to 19 are an integral part of these consolidated financial statements. - March 24, 2016, 4:03 PM 3

6 Consolidated Statement of Cash Flows, with comparative information for Cash provided by (used in): Operating activities: Comprehensive income for the year $ 138,718 $ 71,249 Item not involving cash: Depreciation of equipment ,718 72,030 Changes in non-cash operating working capital: Decrease (increase) in trade receivable (72,122) 17,047 Decrease (increase) in prepaid expenses and deposits (22,488) 7,870 Increase (decrease) in trade and other payables 82,368 (8,945) Increase in accrued payroll expenses 66,867 65,653 Increase (decrease) in deferred revenue (47,185) 2, , ,805 Investing activities: Purchase of equipment (1,648) - Increase in cash and cash equivalents 144, ,805 Cash and cash equivalents, beginning of year 514, ,298 Cash and cash equivalents, end of year $ 658,613 $ 514,103 The notes on pages 5 to 19 are an integral part of these consolidated financial statements. - March 24, 2016, 4:03 PM 4

7 Notes to Consolidated Financial Statements 1. Reporting entity: Interferry, Inc. (the "Association") is incorporated in the State of New York, USA as a non-profit, tax-exempt membership corporation without share capital. Interferry Inc. is also registered in the Province of British Columbia, Canada as an Extraprovincial Society under the Society Act. The address of the Association's registered office is #8-735 Moss Street, Victoria, BC. For Canadian tax purposes, the Association is a tax-exempt non-profit organization. The Association is a worldwide alliance of ferry owners, operators, and associated marine industries, all of whom provide a forum for sharing knowledge and ideas to promote and enhance the unique and special transportation services of the ferry industry. 2. Basis of presentation: (a) Statement of compliance: These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. The consolidated financial statements were authorized for issue by the Board of Directors on May 29, 2016***** UPDATE*****. (b) Basis of measurement: The consolidated financial statements have been prepared on the historical cost basis. No items in the statement of financial position are presented at fair value. (c) Functional and presentation currency: These consolidated financial statements are presented in United States dollars, which is the Association's functional currency. (d) Use of estimates and judgements: The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. - March 24, 2016, 4:03 PM 5

8 3. Significant accounting policies: The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements unless otherwise indicated. (a) Basis of consolidation: The Association has consolidated the assets, liabilities and equity of its subsidiary after the elimination of inter-entity transactions and balances. The consolidated financial statements include the accounts of the Association, and its subsidiary. Subsidiaries are those entities controlled by the Association. The financial statements of the subsidiary entity are included in the consolidated financial statements from the date that control commenced until the date that control ceased. The subsidiary holdings of the Association at December 31, 2015 include The European Ferry Company of which it owns a 99% interest. (b) Foreign currency transactions: Transactions in foreign currencies are translated to the functional currency of the Association at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. (c) Revenue recognition: Membership and conference revenues are measured at fair value of consideration received or receivable and recognized as revenue in the year that they are earned and collection is reasonably assured. - March 24, 2016, 4:03 PM 6

9 3. Significant accounting policies (continued): (d) Financial instruments: Non-derivative financial assets: The Association initially recognizes loans and receivables and deposits on the date that they are originated. All other financial assets are recognized initially on the trade date at which the Association becomes a party to the contractual provisions of the instrument. The Association derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Association has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. The Association has the following non-derivative financial assets: loans and receivables. Loans and receivables: Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise cash and cash equivalents and trade and other receivables. Cash and cash equivalents comprise cash balances with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Association's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. - March 24, 2016, 4:03 PM 7

10 3. Significant accounting policies (continued): (d) Financial instruments (continued): Non-derivative financial liabilities: Financial liabilities are recognized initially on the trade date at which the Association becomes a party to the contractual provisions of the instrument. The Association derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Association has the following non-derivative financial liabilities: payables. trade and other Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method. (e) Equipment: (i) Recognition and measurement: Items of equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When parts of an item of equipment have different useful lives, they are accounted for as separate items (major components) of equipment. Gains and losses on disposal of an item of equipment are determined by comparing the proceeds from disposal with the carrying amount of equipment and are recognized net within profit or loss. (ii) Subsequent costs: The cost of replacing a part of an item of equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Association, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of equipment are recognized in profit or loss as incurred. - March 24, 2016, 4:03 PM 8

11 3. Significant accounting policies (continued): (e) Equipment (continued): (iii) Depreciation: Depreciation is calculated over the depreciable amount, which is the cost of an asset less its residual value. Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of equipment. The estimated useful lives for the current and comparative periods are as follows: Furniture and fixtures Computer 5 years 3 years Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. (f) Impairment: (i) Financial assets (including receivables): A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. - March 24, 2016, 4:03 PM 9

12 3. Significant accounting policies (continued): (f) Impairment (continued): (i) Financial assets (including receivables) (continued): An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation if no impairment loss had been recognized. (ii) Non-financial assets: The carrying amounts of the Association's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. An impairment loss is recognized if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation if no impairment loss had been recognized. - March 24, 2016, 4:03 PM 10

13 3. Significant accounting policies (continued): (g) Income taxes: Income taxes are recognized in the statement of comprehensive income, except where they relate to items recognized directly in equity, in which case the related taxes are recognized in equity. Deferred tax assets and liabilities are recognized based on the difference between the tax and accounting values of assets and liabilities and are calculated using enacted or substantively enacted tax rates for the periods in which the differences are expected to reverse. The effect of tax rate changes is recognized in profit or loss or equity, as applicable, in the period of substantive enactment. Current taxes receivable or payable are estimated on taxable income for the current year at the statutory tax rates enacted or substantively enacted. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits of the relevant entity or group of entities, in a particular jurisdiction, will be available against which the assets can be utilized. - March 24, 2016, 4:03 PM 11

14 3. Significant accounting policies (continued): (h) New standards and interpretations not yet adopted: A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended December 31, 2015, and have not been applied in preparing these financial statements. The following is expected to potentially impact the financial statements of the Association: In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments ( IFRS 9 ), which reflects all phases of the financial instruments project and replaces IAS 39, Financial Instruments: Recognition and Measurement ( IAS 39 ) and all previous versions of IFRS 9. The new standard introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. The extent of the impact of adoption has not yet been determined. In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers establishing a comprehensive framework for revenue recognition. The standard replaces IAS 18, Revenue and IAS 11, Construction Contracts and related interpretations and is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The extent of the impact to the Association has not yet been determined. In January 2016, the IASB issued IFRS 16, Leases, which will replace IFRS 17, Leases. The new standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted for entities that apply IFRS 15. The extent of the impact to the Association has not yet been determined. - March 24, 2016, 4:03 PM 12

15 4. Equipment: Furniture and fixtures Computer Total Cost Balance at December 31, 2014 $ 532 $ 8,439 $ 8,971 Additions 292 1,356 1,648 Balance at December 31, 2015 $ 824 $ 9,795 $ 10,619 Depreciation Balance at December 31, 2014 $ 532 $ 8,439 $ 8,971 Balance at December 31, 2015 $ 532 $ 8,439 $ 8,971 Carrying amounts Balance at December 31, Deferred revenue: Deferred revenue consists of membership dues paid in advance which will be recognized in Commitment: A subsidiary of the Association has signed a lease agreement for a company vehicle. The future minimum lease payments are as follows: 2016 $ 13, , ,292 $ 34,826 - March 24, 2016, 4:03 PM 13

16 7. Financial instruments: Overview: The Association has exposure to the following risks from its use of financial instruments: credit risk liquidity risk currency risk interest rate risk This note presents information about the Association's exposure to each of the above risks, the Association's objectives, policies and processes for measuring and managing risk, and the Association's management of capital. Further quantitative disclosures are included throughout these financial statements. Credit risk: Credit risk is the risk of financial loss to the Association if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Association's receivables from customers and cash and cash equivalents. Credit risk exposure: The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Trade receivable $ 81,929 $ 9,807 Cash and cash equivalents 658, ,103 $ 740,542 $ 523,910 At December 31, 2015, trade receivable has been outstanding for an average of 127 days ( days). - March 24, 2016, 4:03 PM 14

17 7. Financial instruments (continued): Liquidity risk: Liquidity risk is the risk that the Association will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Association's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Association's reputation. Typically the Association ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Conference cancellation insurance is purchased each year to protect from such situations. The following are the contractual maturities of financial liabilities, including estimated interest payments: Carrying Contractual 6 months amount cash flows or less months years Non-derivative financial liabilities: Trade and other payables $ 287,792 $ 287,792 $ 287,792 $ - $ - Currency risk: The Association is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Association. The currencies in which these transactions primarily are denominated are the Canadian dollar and Euro. - March 24, 2016, 4:03 PM 15

18 7. Financial instruments (continued): Currency risk exposure: The Association's exposure to foreign currency risk was as follows based on notional amounts: Canadian dollar Euro USD Cash and cash equivalents $ 754 $ 67,173 $ 590,686 Trade receivable 7,966 32,914 10,226 Trade and other payables (6,502) (64,218) - Accrued payroll expenses (176,151) (10,098) - Net exposure $ (173,933) $ 25,771 $ 600,912 Sensitivity analysis: A strengthening of the US dollar, as indicated below, against the Canadian dollar and the Euro at December 31 would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Association considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. December 31, 2015 Equity Profit or loss Canadian dollar - (10 percent strengthening of USD) $ 17,393 $ 17,393 Euro (10 percent strengthening of USD) (2,577) (2,577) $ 14,816 $ 14,816 A weakening of the US dollar against the above currencies at December 31 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. Currency risk management strategies: The Association incurs approximately $450,000 of operating expenses in Canadian dollars. The Association manages this currency exposure by converting US dollars to meet these expenses evenly through the year. When the Association operates the annual conference in a location with a currency other than the US dollar, the Association manages this exposure by attempting to receive sponsorship funds in the local currency. - March 24, 2016, 4:03 PM 16

19 7. Financial instruments (continued): Interest rate risk: The Association is not exposed to significant interest rate risk. Capital management: The Association defines its capital as the amounts included in its retained earnings. The Association's objective when managing capital is to safeguard its ability to sustain itself as a going concern so that it can continue to provide benefits and services to its members and stakeholders. The Association monitors its financial performance against an annual budget. Surpluses from unspent operational activities are accumulated under retained earnings. In the event that revenues decline, the Association will budget for reduced operational expenditures. There were no changes in the Association's approach to capital management during the year. The Association is not subject to externally imposed capital requirements. Fair value hierarchy: Fair value determination is classified within a three-level hierarchy, based on observability of significant inputs to the measurement, as follows: Level 1: Level 2: Level 3: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Unobservable inputs for the asset or liability. The fair value determination of cash and cash equivalents is classified at level 1 of the hierarchy. - March 24, 2016, 4:03 PM 17

20 7. Financial instruments (continued): Fair values versus carrying amounts: The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows: 2015 Carrying amount Assets carried at amortized cost: Cash and cash equivalents $ 658,613 Loans and receivables 81,929 $ 740,542 Liabilities carried at amortized cost: Trade and other payables $ 287,792 - March 24, 2016, 4:03 PM 18

21 8. Related party transactions: Key management personnel compensation for executive management consisted of short term benefits totaling $353,487 including a bonus of $176,408. The bonus is based on the following formula approved by the Board of Directors: Total staff bonuses is calculated as 100% of the first $25,000 of annual profits. Profit above $25,000 is split equally between bonuses and accumulated surplus. The bonus to be allocated 65% to the CEO and 35% to the Coordinator. Profit for the purpose of the bonus calculation shall be defined as annual net income, minus foreign exchange gain/loss, minus non-recurring costs. The bonus for the current year has been calculated as follows: Annual net income before bonus $ 315,126 $ 187,047 Add back foreign exchange loss 7,240 19,549 Add back non-recurring expenses 5, , ,596 Less first $25,000 of annual profits 25,000 25, , ,596 Less 50% of annual profits above $25, ,408 90,798 Add back first $25,000 of annual profits 25,000 25,000 Total bonus $ 176,408 $ 115,798 - March 24, 2016, 4:03 PM 19

22 9. Income taxes: Current income tax expense of $3,191 relates to the taxable income of the Association's European subsidiary. 10. Special project activity: Salary and wages $ 3,701 $ 6,033 Contract services - 1,619 $ 3,701 $ 7,652 - March 24, 2016, 4:03 PM 20

23 11. Conference revenues and expenses: The following revenues were earned in relation to the conference: Revenues Delegate registration fees $ 288,286 $ 308,810 Sponsorship 364, ,794 The following expenses were incurred in relation to the conference: $ 652,880 $ 722,604 Expenses Audio visual $ 20,335 $ 24,069 Bank charges and credit card 11,905 13,314 Catering 172, ,508 Conference site 8,334 4,670 Entertainment/decorations 23 25,618 Insurance 5,740 6,073 Lanyards, badges and bags - 3,689 Marketing 24,098 32,007 Postage, courier Printing, reproduction 3,957 3,581 Speakers 3,850 4,649 Sponsor costs 7,295 18,334 Tours - partner programs 47,405 - Tours - pre/post - 62,756 Transportation charters 7,243 12,668 Travel 9,673 2,852 Volunteer and contract services 18,887 11,906 Conference salary and wages 48,187 68,861 Goods and services tax and value added tax expense - 4,400 $ 389,816 $ 453,239 Profit $ 263,064 $ 269,365 - March 24, 2016, 4:03 PM 21

24 12. General and administration expenses: Loss on foreign exchange $ 7,240 $ 19,549 Accounting and legal 24,860 25,191 Depreciation of equipment Bank charges 6,654 4,901 Credit card fees 1,987 1,758 Dues, licenses, subscriptions 12,478 13,201 Graphic design and printing Marketing and communications 20,256 21,481 Meetings Office rent and supplies 8,086 8,574 Phone, fax, internet 4,024 3,953 Postage, courier 1, Salary and wages 125, ,314 Board of directors 13,638 14,803 Director insurance 1,348 1,609 Hospitality 1, Training and education 1, Travel 41,844 49,807 Employee bonuses 176, ,798 Bad debt 4,172 - $ 453,072 $ 386,888 - March 24, 2016, 4:03 PM 22

25 13. European Office: Accounting and legal $ 21,993 $ - Bank charges (676) - Dues, subscriptions, licenses Meetings 3,884 - Office supplies and rent 23,009 - Phone, fax, internet 1,995 - Postage and courier Administration and payroll services 3,922 - Training 21,417 - Hospitality Salary and benefits 191,085 - Travel 20,682 - Special projects 11,103 - $ 298,847 $ Wages: Wages have been allocated as follows: Conference wages $ 48,187 $ 68,861 Special project wages 3,701 6,033 General and administration wages 125, ,314 General and administration bonus 176, ,798 European office wages 191,085 - $ 544,572 $ 294, Acquisition of European office: On September 30, 2015, Interferry acquired a majority share position in the European Ferry Company. The European Ferry Company is Interferry's European office for the purpose of conducting business in relation to the European region. Interferry purchased 99 of the 100 shares outstanding of the European Ferry Company for the amount of $6,773. On the date of acquisition the European Ferry Company held $79,476 of assets and $72,555 of liabilities. - March 24, 2016, 4:03 PM 23