FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED 31 DECEMBER 2014 (Translated into English from the Original Turkish Report)

Transcription

1 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED 31 DECEMBER 2014 (Translated into English from the Original Turkish Report)

2

3

4 INDEX STATEMENT OF FINANCIAL POSITION... 1 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME... 2 STATEMENT OF CHANGES IN EQUITY... 3 STATEMENT OF CASH FLOWS GENERAL INFORMATION BASIS OF PRESENTATION OF FINANCIAL STATEMENTS SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS

5 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014 ASSETS CURRENT ASSETS Notes Cash and cash equivalents 4 1,024,670 1,005,757 Trade receivables 5 2,608,297 1,374,325 Other receivables and current assets 6 1,565,537 1,539,065 Total Current Assets 5,198,504 3,919,147 NON CURRENT ASSETS Other long term receivables 6 10,573,235 8,744,258 Tangible assets 8 3,421,898 3,105,411 Investment property 7 18,584,946 16,557,487 Intangible assets 10 23,620 22,347 Vehicles under operational lease 9 101,334,852 68,166,421 Total Non-Current Assets 133,938,551 96,595,924 TOTAL ASSETS 139,137, ,515,071 LIABILITIES AND EQUITY CURRENT LIABILITIES Notes Bank loans 11 37,439,606 27,842,188 Trade payables 12 2,680,742 2,139,076 Provision for employment termination benefits 14 9,105 4,441 Other payables and expense accruals 13 2,839,706 2,944,883 Total Current Liabilities 42,969,159 32,930,588 NON CURRENT LIABILITIES Bank loans 11 50,912,227 33,761,643 Provision for employment termination benefits 14 22,465 12,539 Deferred tax liabilities 15 2,662,551 1,258,613 Total Non-Current Liabilities 53,597,243 35,032,795 EQUITY Share capital 17 30,000,000 29,600,000 Revaluation fund 13 1,789,177 1,789,177 Retained earnings 10,781,476 1,162,511 Total Equity 42,570,653 32,551,688 TOTAL LIABILITIES AND EQUITY 139,137, ,515,071 KONSOLİDE BİLANÇO The accompanying notes form an integral part of these financial statements. 1

6 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME AS AT 31 DECEMBER 2014 Continuing operations 1 January- 1 January- Notes Revenue 18 53,577,691 25,490,846 Cost of sales 19 ( 35,560,203) ( 12,730,167) Gross profit 18,017,488 12,760,679 Marketing and sales expenses 20 ( 164,984) ( 123,905) Administrative expenses 21 ( 3,715,285) ( 3,252,036) Other gains 22 2,797,571 4,562,346 Other losses 23 ( 245,944) ( 46,865) Income from operating activities 16,688,846 13,900,219 Finance income 24 2,824, ,095 Finance costs 25 ( 8,329,532) ( 10,305,410) Profit before tax 11,183,371 3,741,904 Income tax expense 15 ( 1,564,406) ( 939,031) Current tax expense ( 160,468) ( 127,712) Deferred tax expense ( 1,403,938) ( 811,319) Profit for the period 9,618,965 2,802,873 Other comprehensive income - - Total comprehensive income 9,618,965 2,802,873 KONSOLİDE KAPSAMLI GELİR TABLOSU The accompanying notes form an integral part of these financial statements. 2

7 STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014 Share capital Y a s a Revaluation funds Accumulated (loss) retained earnings A n a O Total shareholders equity Balances as of 1 January ,250,000 1,789,177 ( 1,640,362) 21,398,815 Capital increase 8,350, ,350,000 Total comprehensive income - - 2,802,873 2,802,873 Balances as of 1 December ,600,000 1,789,177 1,162,511 32,551,688 Balances as of 1 January ,600,000 1,789,177 1,162,511 32,551,688 Capital increase 400, ,000 Total comprehensive income - - 9,618,965 9,618,965 Balances as of 31 December ,000,000 1,789,177 10,781,476 42,570,653 KONSOLİDE ÖZKAYNAK DEĞİŞİM TABLOSU The accompanying notes form an integral part of these financial statements. 3

8 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER January- 1 January- Cash flows from operating activıties Note Profit for the period 9,618,965 2,802,873 - Tax expense , ,712 - Deferred tax expense 15 1,403, ,319 - Finance cost 25 6,493,147 4,002,576 - (Profit )/loss from sales of the vehicles under operating lease 128,287 ( 889,058) - Gains on revaluation of investment property 22 ( 2,010,509) ( 3,971,353) - Doubtful receivable expense 5 368, ,489 - Amortization expense from tangible assets 8, 9, 10 1,594,548 1,082,974 -Unused vacation liability 14 4,664 4,441 -Provision for employee termination benefits 14 15,534 16,167 Changes in working capital 17,777,319 4,228,140 - Changes in trade receivables ( 1,602,249) ( 521,130) Changes in other short and long term receivables ( 1,855,449) ( 5,459,216) Changes in trade payables 541, ,774 Changes in other payable and expense accruals ( 105,177) 2,672,706 Income taxes paid ( 160,468) ( 198,312) Employee termination benefits paid 14 ( 5,608) ( 14,640) Cash (used in)/generated from operations 14,590,034 1,292,322 Cash flows from investing activities Purchases of property, plant and equipment 8 ( 363,872) ( 6,335,234) Purhase of vehicles under operating lease 9 ( 59,176,554) ( 39,838,681) Proceeds on sale of vehicles under operating lease 24,343,600 5,291,323 Purchases of investment property 7 ( 16,950) - Purchases of intangible assets 10 ( 12,200) ( 20,546) Net cash used in investment activities ( 35,225,976) ( 40,903,138) Cash flows from financing activities Capital increase ,000 8,350,000 Proceeds from borrowings 56,184,727 63,700,282 Repayment of borrowings ( 29,543,178) ( 27,794,599) Interest paid ( 6,386,694) ( 3,899,596) Cash generated from financing activities 20,654,855 40,356,087 INCREASED IN CASH AND CASH EQUIVALENTS 18, ,271 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 4 1,005, ,486 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 4 1,024,670 1,005,757 The accompanying notes form an integral part of these financial statements. 4

9 1. GENERAL INFORMATION LDR Turizm A.Ş. ( The Company ) has been established on 11 August 2010 in Istanbul, Turkey under the name LDR Turizm Dış Ticaret LTD. ŞTİ. The Company s title has been changed as LDR Turizm A.Ş. with the issuance of the Trade Registry Gazette dated 26 December The Company s address and its principal business center is: Maslak Mahallesi Eski Büyükdere Caddesi No: 7 Kat: 9 Giz 2000 Plaza Sarıyer - İstanbul The brand LİDER FİLO has been registered with certificate no: by Turkish Patent Institute on 16 August 2011 in the name of the shareholder Metin Barokas and allocated to LDR TURIZM A.Ş. Principal activities of the Company are; purchase, sell, obtain, lease, hire, intermediate trade and brokerage of land, sea and air transportain vehicles; tourism agency, establish and operate a liaison office, organize tours and sigtseeing programs, being management of hotels, restaurants, motels, campsites, cafes, discotheques and bars. The Company may establish a representation, distributorship or agency agreement in Turkey and abroad dealing with its business issues, may open branches, rent or lease rights and may buy, sell, rent or lease related real estates. As of 31 December 2014, the number of vehicles under operating lease is 2,488 (31 December 2013: 1,953). As of 31 December 2014, the number of personnel is 53 (31 December 2013: 48 personnel). 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 2.1 The Basis for Presentation Basis of Preparation of Financial Statements and Significant Accounting Policies The Company maintains its books of account and prepares its statutory financial statements in accordance with accounting principles in the Turkish Commercial Code ( TCC) and tax legislation. The accompanying financial statements are based on the statutory records, with adjustments and reclassifications accordance with International Financial Reportind Standards ( IFRS ). Financial statements prepared in accordance with the historical cost except for the revaluation of certain non-current assets. Historical cost is generally based on the fair value of the consideration paid for the assets. Currency in use The financial statements of the Company are presented in the currency of the primary economic environment in which the Company operates (its functional currency). The results and financial position of the Company are expressed in Turkish Lira ( TL ), which is the functional currency of the Company, and the reporting currency for the financial statements. 2.2 Changes in Accounting Policies For the purpose of the determination of the financial position and performance trend of the Company, financial statements have been prepared in comparison with the prior period. As of 31 December 2014, there is no changes for company s accountig policies. 2.3 Changes in the Accounting Estimates and Errors If the application of changes to the accounting estimates affects the financial results of a specific year, the accounting estimate change is applied in that specific year, if they affect the financial results of current and following years; the accounting policy estimate is applied prospectively in the year in which such change is made. The Company did not have any major changes in the accounting estimates during the current year. 5

10 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont d) 2.4 New and Revised International Financial Reporting Standards Amendments to IFRSs affecting amounts reported and/or disclosures in the financial statements None. New and Revised IFRSs applied with no material effect on the financial statements Amendments to TFRS 10, 12, Investment Entities 1 TAS 27 (Changings) Amendments to TAS 32 Offsetting Financial Assets and Financial Liabilities 1 (Changings) Amendments to TAS 36 Recoverable Amount Disclosures for Non-Financial (Changings) Assets 1 Amendments to TAS 39 Novation of Derivatives and Continuation of Hedge (Changings) Accounting 1 TFRIC 21 Levies and Taxes 1 Amendments to IAS 21 Effects of Changes in Foreign Exchange Rates 2 1 Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 12 November Amendments to TFRS 10, 12, TAS 27 Investment Entities This amendment with the additional provisions of TFRS 10 provide 'investment entities' (as defined) an exemption from the consolidation of particular subsidiaries and instead require that an investment entity measure the investment in each eligible subsidiary at fair value through profit or loss. Amendments to TAS 32 Offsetting Financial Assets and Financial Liabilities The amendments to TAS 32 clarify existing application issues relating to the offset of financial assets and financial liabilities requirements. Specifically, the amendments clarify the meaning of currently has a legally enforceable right of set-off and simultaneous realization and settlement. Amendments to TAS 36 Recoverable Amount Disclosures for Non-Financial Assets As a consequence of TFRS 13 Fair Value Measurements, there are amendments in the explanations about the measurement of the recoverable amount of an impaired asset. This amendment is limited to non-financial assets and paragraphs 130 and 134 of TAS 36 has been changed. Amendments to TAS 39 Novation of Derivatives and Continuation of Hedge Accounting This amendment to TAS 39 makes it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met. IFRIC 21 Levies and Taxes IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation. 6

11 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont d) 2.4 New and Revised International Financial Reporting Standards (cont d) New and Revised IFRSs applied with no material effect on the financial statements (cont d) Amendments to IAS 21 Effects of Changes in Foreign Exchange Rates Paragraph 39, clause (b) of TAS 21 Effects of Changes in Foreign Exchange Rate Standard has been amended as follows: (b) Income and expenses for each statement of comprehensive income or separate statement of profit or loss presented (i.e. including comparatives) shall be translated at exchange rates at the dates of the transactions.. The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective: IFRS 9 Financial Instruments Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosure Amendments to IAS 19 Defined Benefit Plans: Employee Contributions 1 Annual Improvements to Cycle IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16 and IAS 38, IAS 24, IFRS 9, IAS 37, IAS 39 1 Annual Improvements to Cycle IFRS 3, IFRS 13, IAS 40 1 Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation 2 Amendments to IAS 16 and IAS Agriculture: Bearer Plants 2 41,IAS 1, IAS 17, IAS 23, IAS 36 and IAS 40 Amendments to IFRS 11 and Acquisition of an interest in a joint operation IFRS 1 Annual Improvements to Cycle IFRS 1 3 Amendments to IAS 1 Disclosure Initiative 3 Annual Improvements to Cycle IFRS 5, IFRS 7, IAS 34, IAS 19 3 Amendments to IAS 27 Equity Method in Separate Financial Statements 2 Amendments to IAS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 3 Amendments to IFRS 10, IFRS Investment Entities: Applying the Consolidation 12 and IAS 28 Exception 3 1 Effective for annual periods beginning on or after 30 June Effective for annual periods beginning on or after 31 December Effective for annual periods beginning on or after 1 January IFRS 9 Financial Instruments IFRS 9, issued in November 2009, introduces new requirements for the classification and measurement of financial assets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities. Amendments to IFRS 9 and IFRS 7 : Mandatory Effective Date of IFRS 9 and Transition Disclosure Effective for annual periods beginning on or after 1 January

12 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont d) 2.4 New and Revised International Financial Reporting Standards (cont d) New and revised IFRSs in issue but not yet effective (cont d) Amendments to IAS 19 Defined Benefit Plans: Employee Contributions This amendment clarifies the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions, can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service is rendered. Annual Improvements to Cycle IFRS 2: Amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition' IFRS 3: Require contingent consideration that is classified as an asset or a liability to be measured at fair value at each reporting date. IFRS 8: Requires disclosure of the judgements made by management in applying the aggregation criteria to operating segments, clarify reconciliations of segment assets only required if segment assets are reported regularly. IFRS 13: Clarify that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and payables on an undiscounted basis (amends basis for conclusions only). IAS 16 and IAS 38: Clarify that the gross amount of property, plant and equipment is adjusted in a manner consistent with a revaluation of the carrying amount IAS 24: Clarify how payments to entities providing management services are to be disclosed. Annual Improvements to Cycle IFRS 3: Clarify that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. IFRS 13: Clarify the scope of the portfolio exception in paragraph 52. IAS 40: Clarifying the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property. Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation This amendment clarifies that that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment, and introduces a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate, which can only be overcome in limited circumstances where the intangible asset is expressed as a measure of revenue, or when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. The amendment also adds guidance that expected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of technological or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset. 8

13 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont d) 2.4 New and Revised International Financial Reporting Standards (cont d) New and revised IFRSs in issue but not yet effective (cont d) Amendments to IAS 16 and IAS 41, IAS 1, IAS 17, IAS 23, IAS 36 and IAS 40 Agriculture: Bearer Plants This amendment include bearer plants within the scope of IAS 16 rather than IAS 41, allowing such assets to be accounted for a property, plant and equipment and measured after initial recognition on a cost or revaluation basis in accordance with IAS 16. The amendment also introduces a definition of 'bearer plants' as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales, and clarifies that produce growing on bearer plants remains within the scope of IAS 41. Changes in IAS 16 and IAS 41 cause the changes in related parts of IAS 1, IAS 17, IAS 23, IAS 36 AND IAS 40. Amendments to IFRS 11 and IFRS 1 Accounting for Acquisition of Interests in Joint operations This amendment requires an acquirer of an interest in a joint operation in which the activity constitutes a business to: apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conflict with the guidance in IFRS 11 disclose the information required by IFRS 3 and other IFRSs for business combinations. Changes in IFRS 11 cause the changes in related parts of IFRS 1. Annual Improvements to Cycle IFRS 1: Clarify which versions of IFRSs can be used on initial adoption (amends basis for conclusions only). Amendments to IAS 1 Disclosure Initiative This amendment addresses perceived impediments to preparers exercising their judgement in presenting their financial reports. Annual Improvements Cycle IFRS 5: Adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued. IFRS 7: Additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset, and clarification on offsetting disclosures in condensed interim financial statements IAS 34: Clarify the meaning of 'elsewhere in the interim report' and require a cross-reference 9

14 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont d) 2.4 New and Revised International Financial Reporting Standards (cont d) New and revised IFRSs in issue but not yet effective (cont d) Changes in Annual Improvements to cycle cause the changes in standard of IAS 19 for related parts. Amendments to IAS 27 Equity Method in Separate Financial Statements This amendment permits investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in separate financial statements. Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture This amendment clarifies the treatment of the sale or contribution of assets from an investor to its associate or joint venture Amendments to IFRS 10, 12, IAS 28 Investment Entities: Applying the Consolidation Exception This amendment addresses issues that have arisen in the context of applying the consolidation exception for investment entities by clarifying the following points: The exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value. A subsidiary that provides services related to the parent s investment activities should not be consolidated if the subsidiary itself is an investment entity. When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries. An investment entity measuring all of its subsidiaries at fair value provides the disclosures relating to investment entities required by IFRS 12. The Company evaluates the effects of these standards on the consolidated financial statements. 10

15 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont d) 2.5 Comparative information and restatement of prior period financial statements Financial statements of the Company have been prepared comparatively with the prior period in order to give information about financial position and performance. If the presentation or classification of the financial statements is changed, in order to maintain consistency, financial statements of the prior periods are also reclassified in line with the related changes. 3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Revenue Rental income from operating leases is recognized on a straight-line basis over the term of the lease period. Start-up costs incurred in an operating lease leased asset's carrying amount is added to the straight-line method over the lease term in accordance with accepted. Income derived from a service contract, the contract is considered as a reference to the stage of completion. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. 3.2 Tangible Assets and Vehicles Under Operating Lease Property, plant and equipment are carried at cost less accumulated depreciation and any accumulated impairment losses. Excluding land and constructions in progress, depreciation is recognized so as to write off the cost or valuation of assets less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. In the case of operating lease business, the ownership of the leased vehicle remains with the lessor. Vehicles under operating lease are shown as a separate line in the balance sheet. At the end of the periods, the difference between book value and residual value of vehicles under operating lease are depreciated according to IAS 16. Depreciation is calculated on a pro rata basis based on the contract periods of vehicles after deducting the residual value. The depreciation is calculated based on the difference between the cost of the asset less its residual value, which is determined as the expected market value at the end of the leasing period. The residual values are determined based on estimates and assumptions made during the preparation of financial statements. Realization of the residual values is dependent on the Company s future ability to market the vehicles under the prevailing market conditions. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. 11

16 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.3 Leasing The Company as lessee A significant portion of the risks and rewards of ownership of the lease as lessee, are classified as finance leases. All other leases are classified as operating leases. Finance lease receivables are recorded equal to the amount of The Company's net investment in the leasing. Finance lease income is allocated to accounting periods to provide periodic rate of return fixed to The Company s net investment in finance lease. Rental income from operating lease is accounted with straight-line method during the period of the relevant lease. Initial direct costs incurred in during realization and negotiation are added to the cost of the leased asset and amortized with straight-line method during lease period. 3.4 Borrowing Cost Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Since the Company does not have any qualifying assets, all borrowing costs are recognized in the statement of income/ (loss) in the period in which they are incurred. 3.5 Investment Property Investment properties are properties held to earn rentals and/or for capital appreciation, including property under construction for such purposes. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. Gains or losses arising from changes in the fair values of investment properties are included in the profit or loss in the year in which they arise. An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from disposal. Any gain or loss arising on derecognition of the property is included in profit or loss in the period in which the property is derecognized. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the Company accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. No assets held under operating lease have been classified as investment properties. 12

17 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.6 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and it excludes items that are never taxable or deductible. The Company s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which is used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items that are recognized outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognized outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over cost. 13

18 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.7 Termination and Retirement Benefits Under Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Company. Such payments are considered as being part of defined retirement benefit plan as per International Accounting Standard No. 19 Employee Benefits ( IAS 19 ). The retirement benefit obligation recognized in the statement of financial position represents the present value of the defined benefit obligation. 3.8 Financial Assets Financial investments are recognized and derecognized on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets as at fair value through profit or loss, available-for-sale financial assets and loans and receivables. Effective interest method The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition. Income is recognized on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL. Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less any impairment. Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which their maturities are three months or less from date of acquisition and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. 3.9 Financial Liabilities Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. 14

19 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) 3.9 Financial Liabilities (cont d) Other financial liabilities Other financial liabilities are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition Provision Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably Critical Accounting Estimates and Reviews Financial statements in accordance with IFRS in the preparation of company management, the balance sheet date, the assets and liability amounts, contingent liabilities and commitments, and reporting for the period of income and expense that will affect the assumptions and estimates is required to make. Actual results could differ from those estimates. These estimates are reviewed periodically and adjustments are required in cases where the earnings are reflected in the period they occur. Topics that include the amounts reported significant management estimates include: Impairment of assets, provision for doubtful receivables, the useful life of tangible fixed assets and deferred tax assets. Fleet business Considering the Company's core business segment, vehicles under operating lease are the most important assets as of the balance sheet. The Company does not have any contract between the manufacturers of the vehicles for the purpose of buyback of the vehicles, which are in the Company's operating lease, at the end of the rental period. For this reason sale prices of the vehicles under operating lease determined by the second hand market at the end of the contract period. Therefore, the residual values are based on estimates. The residual values of the vehicles under operating leases are revised each year and realization of the residual values is dependent on the Company s future ability to market the vehicles under the prevailing market conditions. Doubtful receivables The Company calculated a provision for overdue and risky receivables as of balance sheet date considering the guarantees received. 15

20 3. SIGNIFICANT ACCOUNTING POLICIES(cont d) 3.11 Critical Accounting Estimates and Reviews (cont d) Useful lives of tangible assets Tangible and intangible assets are amortized with the useful lives which have been determined by company management. The estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Deferred Tax Assets Deferred tax is calculated on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which is used in the computation of taxable profit. Currently, deferred tax asset calculated by using carried tax losses and deductible temproary differences and all of calculated deffered tax asset will be deductible from taxable gains in furureinvestigation is done by considering all positive and negative evidence,all calculated deferred tax assets or sum part of that will be existed in the future or not. During this investigation, the potential of creating profit in the future, accumulated losses in the recent years, history of carried losses and other tax reductions that have a limitations lifetime, limitations of deferred tax assets movement, cancellation of current taxable provisional differences, tax planning strategies and type of profits which is subject to deduction of deferred tax assets are considered. As a result of all investigation of these assets, if it is observed that, taxable profit is able to meet the available deferred tax assets totally or partially, available deferred tax asset s related part is considered as deferred tax asset. The Company did not calculate deferred tax assets in accordance with the precautionary principle. 4. CASH AND CASH EQUIVALANTS Cash on hand 10,294 7,780 Cash at banks 621, ,079 Demand deposits 621, ,079 Other current assets 393, ,898 1,024,670 1,005,757 As of 31 December 2014, The Company does not have any restricted cash (31 Aralık 2013: None). 16

21 5. TRADE RECEIVABLES Current trade receivables 31 December # 31 December Trade receivables 2,484,570 1,416,011 Notes Receivable 676, ,461 Trade receivables from related parties (Note: 26) 1,747 4,014 Allowance for doubtful receivables (-) (554,502) (251,161) 2,608,297 1,374,325 As of 31 December 2014, the Company s neither past due nor impaired receivable balance is TL 2,608,297 (2013: TL 1,374,325). The provision is made for all remaining balance. As of balance sheet date, the average credit period for neither past due nor impaired receivable 23 days (31 December 2013: 20 days). The movement of the provision for doubtful receivables is as follows: Movement of Allowance for Doubtful Receivables 1 January- 1 January Balance at beginning of the year (251,161) (80,520) Amounts written off during the year (368,277) (240,489) Amounts recovered during the year 64,936 69,848 Closing balance (554,502) (251,161) 6. OTHER SHORT-TERM AND LONG-TERM RECEIVABLES Other Current Assets Prepaid rent 1,169, ,141 Income accruals 228, ,856 Business advances given 130, ,936 Guarantee and deposits given 21,987 17,608 Other 15,807 5,524 1,565,537 1,539,065 17

22 6. OTHER SHORT-TERM AND LONG-TERM RECEIVABLES (cont d) Other Non-Current Assets VAT carried forward 10,573,235 8,744, INVESTMENT PROPERTIES 10,573,235 8,744,258 Cost value 1 January- 1 January- 31 December December 2013 Opening balance as of 1 January 16,557,487 - Purchases 16,950 - Revaluation funds 2,010,509 - Tranfers from Plants, Property and Equipment (Note: 8) - 16,557,487 Closing balance as of 31 December 18,584,946 16,557,487 As of 1 January 2013, the Company reclassified buildings as investment property. All of the Company's investment properties are consist of buildings. The Company s rental income from investment properties is TL 572,023 (Note:22) (2013: TL 317,279) and there is no operating expense for these investment properties. There are mortgages respectively amounted to TL 6,500,000 and TL 6,500,000.over the Company s investment properties to secure the loans. The fair value of the Company s investment property as at 31 December 2014 has been arrived at on the basis of a valuation carried out by independent valuers not related to the Company. Alan Taşınmaz Değerleme ve Danışmanlık A.Ş. are members of the CMB, and they have appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The fair value was determined based on the market comparable approach that reflects recent transaction prices for similar properties. In estimating the fair value of the properties, the highest and best use of the properties is their current use. There has been no change to the valuation technique during the year. Details of the Company s investment properties and information about the fair value hierarchy as at 31 December 2014 are as follows: Fair value as of the balance sheet date 31 December Level TL Buildings 18,584,946 18,584, December Level TL Buildings 16,557,487 16,557,487 18

23 8. PROPERTY, PLANT AND EQUIPMENT Leasehold Improvements Construction in Progress(*) Other tangible fixed assets Buildings Furniture Total Cost Value Opening balance as of 1 January ,744 9,900 2,966,102 6,452 3,151,198 Additions - 40,207 11, ,519 4, ,872 Closing balance as of 31 December ,951 21,097 3,273,621 11,401 3,515,070 Accumulated Depreciation Opening balance as of 1 January , ,787 Charge of the year - 39,681 5,563-2,141 47,385 Closing balance as of 31 December ,185 6,223-2,764 93,172 Carrying value as of 31 December ,766-14,874-3,273,621-8,637 3,421,898 (*) The Company s purchase of construction in progress in the year 2014 and 2013 is related to the purchase of an office from Torun Center which is located in Istanbul- Mecidiyeköy where former Ali Sami Yen Stadium was built. Since Torun Center was under construction as of the reporting period, The Company recorded this purchase under construction in progress. After completion of the construction of Torun Center, the mentioned property will be classified under Investment Property or buildings depending on the Company s purpose of use. 19

24 8. PROPERTY, PLANT AND EQUIPMENT (cont d) Leasehold Improvements Construction in Progress Other tangible fixed assets Buildings Furniture Total Cost Value Opening balance as of 1 January ,497,563 86, ,584,334 Additions 3,264,244 89,436 9,000 2,966,102 6,452 6,335,234 Revaluation fund 3,971, ,971,353 Transfer to intangible assets (Note: 10) - (6,563) (6,563) Transfer to investment property (Note:7) (16,733,160) (16,733,160) Transfers - (900) Closing balance as of 31 December ,744 9,900 2,966,102 6,452 3,151,198 Accumulated Depreciation Opening balance as of 1 January ,673 23, ,759 Charge of the year - 22, ,776 Transfers - (30) Transfer to intangible assets (Note: 10) - (1,075) (1,075) Transfer to investment property (Note: 7) (175,673) (175,673) Closing balance as of 31 December , ,787 Carrying value as of 31 December ,240-9,240-2,966,102-5,829 3,105,411 Useful lives property, plan and equipment has been shown below: Buildings Plant, machienery and equipment Leasehold improvements Other tangible fixed assets Useful lives 50 years 5 Years 5 Years 5 Years 20

25 9. VEHICLES UNDER OPERATING LEASE Vehicles under operating lease Cost Value Opening balance as of 1 January ,041,386 Additions 59,176,554 Disposals (25,473,153) Closing balance as of 31 December ,744,787 Accumulated Amortization (*) Opening balance as of 1 January ,874,965 Charge of the year 1,536,236 Disposals (1,001,266) Closing balance as of 31 December ,409,935 Net book value as of 31 December ,334,852 Vehicles under operating lease Cost Value Opening balance as of 1 January ,496,779 Additions 39,838,681 Disposals (6,294,074) Closing balance as of 31 December ,041,386 Accumulated Amortization Opening balance as of 1 January ,711,263 Charge of the year 1,055,511 Disposals (1,891,809) Closing balance as of 31 December ,874,965 Net book value as of 31 December ,166,421 (*) Depreciation period for vehicles under operating lease is 3 years. Depreciation is calculated at cost less residual values and charged to cost of sales. There are mortgages amounting TL 97,670,013 over the Company s vehicles under lease to secure the loans 21

26 10. INTANGIBLE FIXED ASSETS Other intangible assets Cost Value Opening balance as of 1 January ,109 Additions 12,200 Closing balance as of 31 December ,309 Accumulated Amortization Opening balance as of 1 January ,762 Charge of the year 10,927 Closing balance as of 31 December ,689 Carrying value as of 31 December ,620 Other intangible assets Cost Value Opening balance as of 1 January Additions 20,546 Transfer from tangible assets (Note: 8) 6,563 Closing balance as of 31 December ,109 Accumulated Amortization Opening balance as of 1 January Transfer from tangible assets (Note: 8) 1,075 Charge of the year 3,687 Closing balance as of 31 December ,762 Carrying value as of 31 December ,347 Useful lives of other intangible assets is shown below: Other intangible assets Useful lives 3 years 11. BANK LOANS Short term bank borrowings 37,439,606 27,842,188 Long term bank borrowings 50,912,227 33,761,643 Total borrowings 88,351,833 61,603,831 22

27 11. BANK LOANS (cont d) The borrowings are repayable as follows: To be paid within 1 year 37,439,606 27,842,188 To be paid between 1-2 years 26,841,592 20,497,081 To be paid between 2-3 years 22,084,239 11,981,833 To be paid between 3-4 years 1,986, ,519 To be paid between 4-5 years - 436,210 88,351,833 61,603,831 The loan is secured by mortgages of TL 97,670,013 over the Company s vehicles under operating lease. Moreover, there are total mortgages of TL 13,000,000 on investment properties, amountimg to TL 6,500,000 and TL 6,500,000, respectively. Weighted Average 31 December 2014 Currency Type Effective Interest Rate Current Non-current TL 12.61% 18,206,426 27,219,562 EUR 4.7% 19,233,180 23,692,665 37,439,606 50,912,227 Weighted Average 31 December 2013 Currency Type Effective Interest Rate Current Non-current TL 12.72% 9,584,724 5,169,447 EUR 5.13% 18,257,464 28,592,196 27,842,188 33,761,643 23

28 12. TRADE PAYABLES Short term trade payables Payables arising from purchase of vehicles 2,364,869 1,771,953 Notes payables 175, ,483 Deposits received 53,914 - Trade payables to related parties (Note: 26) 3,887 - Other trade payables 82,766 81,640 2,680,742 2,139,076 As of 31 December 2014, the average credit period for trade payables is 26 days (31 December 2013: 18 days). 13. OTHER PAYABLES AND EXPENSE ACCRUALS Other current liabilities Deferred revenue 242,071 11,208 Advances received 222, ,687 Taxes and dues payable 112,303 70,471 Social security premiums payable 39,645 31,453 Other prepaid expense 27,210 2,351 Other liabilities 2,195,485 2,663,713 2,839,706 2,944, PROVISION FOR EMPLOYEMENT TERMINATION BENEFIT Short term provision for employment termination benefits have been shown below: Unused vacation liability 9,105 4,441 9,105 4,441 24

29 14. PROVISION FOR EMPLOYEMENT TERMINATION BENEFIT (cont d) Provision for Employement Termination Benefit Under Turkish Labor Law, the Company is required to pay employment termination benefits to each employee who has qualified. Also, employees are required to be paid their provisions for employment termination benefits who retired by gaining right to receive provisions for employment termination benefits according to current 506 numbered Social Insurance Law s 6 March 1981 dated, 2422 numbered, 25 August 1999 dated and 4447 numbered with 60 th article that has been changed. Some transition provisions related to the pre-retirement service term was excluded from the law since the related law was changed as of 23 May As of 31 December 2014, the amount payable consists of one month s salary limited to a maximum of TL 3, (31 December 2013: TL 3,254.44). The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of employees. IAS 19 requires actuarial valuation methods to be developed to estimate the enterprise s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability: The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at 31 December 2014, the provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The provisions at the respective balance sheet dates have been calculated assuming an annual inflation rate of 6% and a discount rate of 9%, resulting in a real discount rate of approximately 2.83 % (31 December 2013: 3.78). The anticipated rate of forfeitures is considered. As the maximum liability is revised semiannually, the maximum amount of TL 3, effective from 1 January 2015 has been taken into consideration in calculation of provision from employment termination benefits (1 January 2014: 3,428.22). 1 January- 1 January Provision at 1 January 12,539 11,012 Service cost 15,061 15,924 Interest cost Termination benefits paid (5,608) (14,640) Provision at 31 December 22,465 12,539 25