Annual Financial Report

Transcription

1 ACN Annual Financial Report Year ended 30 June 2012

2 CORPORATE INFORMATION DIRECTORS Geoff Marshall (non-executive Chairman) Agim Isai (non-executive director formerly Group Managing Director until 1 June 2012) Paul Lynch (Non-executive director) COMPANY SECRETARY Jeremy Martineau REGISTERED OFFICE & PRINCIPAL BUSINESS OFFICE 365 Montague Road West End Queensland 4101 COUNTRY OF INCORPORATION Australia STOCK EXCHANGE LISTING National Stock Exchange of Australia Limited NSX Code: EBS INTERNET ADDRESS AUSTRALIAN BUSINESS NUMBER ABN

3 CONTENTS Directors Report including Remuneration Report 4 Auditor s Independence Declaration 10 Statement of Comprehensive Income for the year ended 30 June Balance Sheet as at 30 June Statement of Changes in Equity for the year ended 30 June Cash Flow Statement for the year ended 30 June Notes to the Financial Statements for the year ended 30 June Directors Declaration 33 Independent Auditor s Report 34 3

4 DIRECTORS' REPORT INCLUDING REMUNERATION REPORT Your Directors present their report on the Consolidated Entity consisting of e-business Systems Limited and the entities it controlled at the end of, or during, the year ended 30 June DIRECTORS The following persons were directors of during the whole of the financial year, and up to the date of this report, unless otherwise stated: Geoff Marshall (Non-executive Chairman) Geoff has over twenty years corporate experience in Australia, Europe and North America working with organisations including Philips Electronics, British Airways Engineering and Compaq Computers. He has worked with many private and public companies, focusing on business improvement, strategy, financial and business development and growth areas. He is a former partner with Price Waterhouse and has held CEO and general management positions with Healthcare of Australia, Rothmans Holdings and Orica. Agim Isai (non-executive director formerly Group Managing Director until 1 June 2012) Having worked in the IT industry for more than fifteen years, Agim was one of the founding members of Corpnet Computer Solutions (a predecessor of the Company s former wholly-owned subsidiary Corpnet (Australia) Pty Ltd) in He has a diverse range of managerial experience across project management, operations, sales and marketing and held the position of managing director at Corpnet (Australia) Pty Ltd from November He was appointed to the board as group managing director on completion of the merger with Corpnet (Australia) Pty Ltd. Agim holds affiliations with the Australian Institute of Project Management and the Australian Institute of Company Directors. Paul Lynch (Non-executive director) Paul has valuable experience in both senior executive and consultancy capacities in the development and execution of business strategy and in achieving an optimum balance of short-term tactical considerations in strategic decision-making and the implementation of business strategy. In his former role as executive general manager at Suncorp responsible for the integration of Promina, following their merger in a transaction valued at over $7b, he successfully led the team that delivered over $350m of merger benefits ahead of time. His executive experience and his pragmatic approach to getting the job done subsequently led him to establish his own consultancy practice, Tough Problem Consulting, which provides a range of consulting and coaching services to corporate and privately-owned clients. Consultancy advice extends to the development of strategy, tactical agility, project execution, accountability for financial performance, leadership, cultural change, and continuous improvement. COMPANY SECRETARY Jeremy Martineau Jeremy has been the Company secretary of, and the entities it controlled, throughout the year and until the date of this report. He has a background in law and, though no longer practising, remains on the register in both the UK and Australia. Throughout his career he has specialised in company transactional work where he has experience in both project-management and advisory capacities. In Australia he was in legal practice with McCullough Robertson in Brisbane and subsequently worked in a lead advisory capacity with PricewaterhouseCoopers, in their corporate finance & investment banking practice, where he was involved in initiating, structuring and managing a number of transactions (equity investments and company sales) to successful completion. He holds a diploma in entrepreneurship studies and is a member of the Australian Institute of Company Directors. Interests in Shares & Options of the Consolidated Entity As at the date of this report, the interests of the directors, and those who served as directors during the year, in the shares and options of (including in shares held by their respective related entities within the meaning of section 9 of the Corporations Act) are shown in the table below: Director Fully Paid Options Ordinary Shares Geoff Marshall nil nil Agim Isai 16,929,555 nil Paul Lynch nil nil 4

5 PRINCIPAL ACTIVITY The principal activity of the Consolidated Entity during the year was the provision of a range of independent business technology management and technical consulting services to both enterprise customers and SMBs across various business sectors. During the year the Company divested its shareholding in its three subsidiaries such that, at the end of the year, it no longer held any interest in any other company. The main subsidiary, and only operating company in the group, was sold to Logicalis Australia Pty Limited for cash with completion of the transaction taking place on 1 June; the other two subsidiaries, Spheritec Pty Ltd and SafeWorld Australia & New Zealand Pty Ltd were both sold for a nominal sum on 31 May The board announced an intention for residual cash to be distributed to shareholders in anticipation of a resolution being put to shareholders at the AGM for voluntary (solvent) winding-up of the Company. There were otherwise no significant changes in the nature of the Consolidated Entity s principal activities during the financial period. REVIEW & RESULTS OF OPERATIONS The net profit after tax of the Consolidated Entity for the period ended 30 June 2012 was $1,250,837 (2011: $110,659). DIVIDENDS PAID OR RECOMMENDED The Directors declared a dividend of $1,278,568 during the financial period (2011: $nil). which was paid after 30 June. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the group during the financial year were as follows: - the sale of the Company s former subsidiaries as noted above; and - the announcement of the proposal to wind up the Company for consideration by shareholders at the AGM. AFTER BALANCE DATE EVENTS There are no significant matters or circumstances that have arisen since the end of the financial period that have significantly affected or may significantly affect the operations of the Consolidated Entity, the results of those operations or the state of affairs of the Consolidated Entity, in future financial years other than payment of the dividend that was provided for at year end of $1,278,568 (fully franked). It should be noted, however, that, following the sale of its former subsidiaries, the Company no longer has any business operations and is expected to be placed in voluntary (solvent) liquidation at the AGM. FUTURE DEVELOPMENTS, PROSPECTS & BUSINESS STRATEGIES Apart from the proposed winding-up of the company there are no developments of which the directors are aware which could be expected to affect the results of the company s operations in subsequent financial years other than information which the directors believe comment on or disclosure of, would prejudice the interests of the company. ENVIRONMENTAL ISSUES There has been no matter either during or since the end of the financial period, which in the opinion of the directors would give rise to any conflict with the provisions of existing environmental regulation. DIRECTORS MEETINGS The number of meetings of directors held during the year and the number of meetings attended by each director was as follows: Directors Meetings Geoff Marshall Agim Isai Paul Lynch A B Number of meetings attended Number of meetings held during the time the director held office during the year A OPTIONS As at 30 June 2012 there were no options on issue. During the year ended 30 June 2012 no shares were issued following the exercise of options. B 5

6 REMUNERATION REPORT - AUDITED This report details the nature and amount of remuneration for directors and key management personnel of the Company. Remuneration Policy The performance of the Company depends upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives. Remuneration Committee The board does not have a remuneration and nomination committee. The full board is responsible for determining and reviewing compensation arrangements for the directors and the executive team. The board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emoluments in a variety of forms including cash and fringe benefits. It is intended that the manner of payments chosen will be optimal for the recipient without creating undue cost for the Company. Remuneration Structure It is the Company s objective to provide maximum stakeholder benefit from the retention of a high quality board and executive team by remunerating directors and other key management personnel fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the board considers the nature and amount of executive directors and officers emoluments alongside the Company s financial and operational performance. The expected outcomes of the remuneration structure are the retention and motivation of key executives, the attraction of quality management to the Company and performance incentives that allow executives to share the rewards of the success of the Company. In accordance with best practice corporate governance, the structure of executive and non-executive director remuneration is separate and distinct. Non-Executive Director Remuneration The board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. If a non-executive director performs extra services, which in the opinion of the directors are outside the scope of the ordinary duties of the director, the Company may remunerate that director by payment of a fixed sum determined by the directors in addition to or instead of the remuneration referred to above. Non-executive directors are entitled to be paid travel and other expenses properly incurred by them in attending directors or general meetings of the Company or otherwise in connection with the business of the Company. The remuneration of non-executive directors for the year ended 30 June 2012 is detailed in this remuneration report. Executive Directors & Senior Management Remuneration The Company aims to reward executive directors and senior management with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to: o o o o Reward executives for Company and individual performance against targets set by reference to appropriate benchmarks; Align the interests of executives with those of shareholders; Link reward with the strategic goals and performance of the Company; and Ensure total remuneration is competitive by market standards. The remuneration of the executive directors and senior management may be fixed by the board from time to time. As noted above, the board s policy is to align executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering long-term incentives. The level of fixed remuneration is set so as to provide a base level of remuneration that is both appropriate to the position and competitive in the market. Fixed remuneration is reviewed annually by the board, and the process consists of a review of company-wide and individual performance, relevant comparative remuneration in the market and internal, and where appropriate, external advice on policies and practices. 6

7 In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the board, having regard to the overall performance of the Company and the performance of the individual during the year. No bonuses of cash or equity instruments were provided for or paid in the 2012 financial year. The remuneration of the executive directors and senior management for the year ended 30 June 2012 is detailed in this remuneration report. (a) Details of Directors & Other Key Management Personnel Directors Geoff Marshall Non-executive Chairman Agim Isai Non-executive director formerly Group Managing Director untiil 1 June 2012 Paul Lynch Non-executive director (b) Remuneration of Directors & Other Key Management Personnel 2012 Short-term Post Employment Longterm Equity Total Performance Related % % consist -ing of equity Base Salary & fees Cash bonus Noncash benefits Superannuation Long service leave Share based payment Directors $ $ $ $ $ $ $ Geoff Marshall 60, , Agim Isai 1 191,204-8,743 18,265 3, , Paul Lynch 36, , ,204-8,743 18,265 3, , Agim Isai resigned as Group Managing Director 1 June 2012 and remains on the Board as a Non-executive director). The remuneration in this table reflects his remuneration as Group Managing Director up to 1 June 2012 and as a non-executive director up to 30 June Short-term Post Employment Longterm Equity Total Performance Related % % consist -ing of equity Base Salary & fees Cash bonus Noncash benefits Superannuation Long service leave Share based payment Directors $ $ $ $ $ $ $ Geoff Marshall 60, , Agim Isai 239, , , Paul Lynch 30, , David Glavonjic , , , Key Management Personnel Scott Hartwell 2 118, , , , , , Resigned effective 31 July Resigned effective 30 November 2010 No termination benefits were paid for the year ended 30 June 2012 (2011: $nil) 7

8 (c) Shares and Options Granted During the Year Ended 30 June 2012 No shares in the Company were granted as compensation to directors and key management personnel during the reporting period. No remuneration options have been granted during the financial year. (d) Additional Information The factors that are considered to affect shareholder return since the Consolidated Entity s listing on the NSX are summarised below: Measures $ $ $ $ $ Share price at end of financial year Earnings/(loss) per share (cents) (2.12) (4.20) Profit/(loss) for the financial year 1,250, , ,040 (1,580,980) (1,838,553) Revenue for the financial year 17,334,317 18,087,670 21,104,356 12,965, ,501 Key Management Personnel remuneration 317, , , , ,050 The board considers the Consolidated Entity s performance in the above matters when setting remuneration. (e) Service Agreements In the prior year the Group Managing Directors remuneration and other terms of employment were formalised in a service agreement. Under this agreement the Group Managing Directors base pay was $224,000 and had provision for a termination payment of 3 months. Following the disposal of Corpnet (Australia) Pty Ltd on 1 June 2012 the Group Managing Director s employment arrangements have been solely with Corpnet (Australia) Pty Ltd and no longer with e-business Systems Ltd. No termination payments were provided for or paid as a result of this change. No other key management personnel were employed under a service agreement. (f) Remuneration Consultants The Company has not engaged any remuneration consultants in the 2012 year END REMUNERATION REPORT AUDITED INDEMNIFICATION & INSURANCE OF DIRECTORS, OFFICERS & AUDITOR Each director and the company secretary of the Company has the right of access to all relevant information. The Company has entered into deeds of access and indemnity with and for the benefit of all officers (directors, company secretary & chief financial officer) and has also taken out directors & officers insurance. The nature of the liabilities covered and amount of the premium paid are not disclosed because, under general principles of insurance, disclosure might vitiate the policy. The Corporations Act does not require disclosure of the information in these circumstances. The Company has not indemnified its auditor. PROCEEDINGS ON BEHALF OF CONSOLIDATED ENTITY No person has applied for leave of court to bring proceedings on behalf of the Consolidated Entity or intervene in any proceedings to which the Consolidated Entity is a party for the purposes of taking responsibility on behalf of the Consolidated Entity for all or any part of those proceedings. The Consolidated Entity was not a party to any such proceedings during the year. 8

9 NON-AUDIT SERVICES BDO East Coast Partnership (formerly PKF East Coast Practice) continues in office in accordance with section 327 of the Corporations Act The Consolidated Entity may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor s expertise and experience with the Consolidated Entity are important. Details of the amounts paid or payable to the auditor for non-audit services provided during the year are set out below. The board of directors has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: all non-audit services have been reviewed to ensure they do not impact the impartiality and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity: Remuneration for Other Services: BDO East Coast Partnership (formerly PKF East Coast Practice) - Tax compliance services 32,378 ROUNDING OF AMOUNTS Amounts in the directors report have been rounded to the nearest one dollar $ 32,378 AUDITOR S INDEPENDENCE DECLARATION A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 10. Signed in accordance with a resolution of the directors Chairman Brisbane 17 September

10 Tel: Fax: Level 10, 1 Margaret St Sydney NSW 2000 Australia DECLARATION OF INDEPENDENCE BY KIM COLYER TO THE DIRECTORS OF e-business SYSTEMS LIMITED As lead auditor of e-business Systems Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. This declaration is in respect e-business Systems Limited and the entities it controlled during the period. K L Colyer Partner BDO East Coast Partnership Brisbane, 17 September 2012 BDO East Coast Partnership ABN is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN , an Australian company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO international Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent members firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each state or Territory other than Tasmania. 10

11 Statement of Comprehensive Income For the Year Ended 30 June 2012 Consolidated Note $ $ Revenue 2 17,334,317 18,087,670 Cost of sales (14,978,793) (15,343,088) Gross profit 2,355,524 2,744,582 Other expenses from ordinary activities Administration expenses (1,862,992) (1,880,861) Marketing expenses (179,862) (182,435) Occupancy expenses (296,232) (312,240) Other (260,107) (220,554) Finance costs expense (10,680) (25,639) Gain on disposal of subsidiaries 24 1,605,967 - Profit before income tax 1,351, ,853 Income tax benefit/(expense) 3 (100,781) (12,194) Profit after income tax benefit/(expense) 1,250, ,659 Other comprehensive income - - Total comprehensive income 1,250, ,659 Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) The statement of comprehensive income should be read in conjunction with the notes to the financial statements 11

12 Balance Sheet As at 30 June 2012 Consolidated Note $ $ CURRENT ASSETS Cash and cash equivalents 16 2,577, ,127 Trade and other receivables 4 18,814 3,523,152 Inventories 5-85,865 Other current assets 6-49,338 TOTAL CURRENT ASSETS 2,596,177 4,387,482 NON-CURRENT ASSETS Property, plant and equipment 8-171,788 Intangible assets 7-462,843 Deferred tax assets 3-178,152 TOTAL NON-CURRENT ASSETS - 812,783 TOTAL ASSETS 2,596,177 5,200,265 CURRENT LIABILITIES Trade and other payables 9 231,004 3,676,074 Interest bearing loans and borrowings ,964 Income tax payable 46,124 - Provisions 11 1,278, ,610 TOTAL CURRENT LIABILITIES 1,555,696 4,092,648 NON-CURRENT LIABILITIES Interest bearing loans and borrowings 10-27,577 Provisions 11-11,828 TOTAL NON-CURRENT LIABILITIES - 39,405 TOTAL LIABILITIES 1,555,696 4,132,053 NET ASSETS 1,040,481 1,068,212 EQUITY Share capital 12 1,412,265 1,412,265 Accumulated losses (371,784) (344,053) TOTAL EQUITY 1,040,481 1,068,212 The balance sheet should be read in conjunction with the notes to the financial statements 12

13 Statement of Changes in Equity For the Year Ended 30 June 2012 Share Capital Consolidated Accumulated Losses Total $ $ $ Balance at 1 July ,412,265 (454,712) 957,553 Comprehensive income Profit after income tax - 110, ,659 Other comprehensive income Balance at 30 June ,412,265 (344,053) 1,068,212 Balance at 1 July ,412,265 (344,053) 1,068,212 Transactions with owners in their capacity as owners Dividends - (1,278,568) (1,278,568) Comprehensive income Profit after income tax - 1,250,837 1,250,837 Other comprehensive income Balance at 30 June ,412,265 (371,784) 1,040,481 The statement of changes in equity should be read in conjunction with the notes to the financial statements 13

14 Cash Flow Statement For the Year Ended 30 June 2012 Consolidated Note $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 20,891,312 19,144,733 Payments to suppliers and employees (20,835,965) (19,204,058) Interest received 14,377 8,399 Finance costs (10,680) (25,639) Income tax (paid)/ received - 51,764 Net cash provided by/ (used in) operating activities 16 59,044 (24,801) CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant & equipment (51,953) (24,097) Payments for intangible assets (3,780) (128,895) Net proceeds from sale of subsidiaries 24 1,985,143 - Net cash provided by/(used in) investing activities 1,929,410 (152,992) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (140,218) (97,300) Net cash used in financing activities (140,218) (97,300) Net increase/(decrease) in cash held 1,848,236 (275,093) Cash at the beginning of the financial year 729,127 1,004,220 Cash at the end of the financial year 2,577, ,127 The cash flow statement should be read in conjunction with the notes to the financial statements 14

15 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the material accounting policies adopted by the Consolidated Entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. Introduction is incorporated and domiciled in Australia and is a public company limited by shares listed on the National Stock Exchange Limited (NSX). The financial statements for the Consolidated Entity are for the year ended 30 June Operations and principal activities The principal activity of the Consolidated Entity during the period was the provision of a range of independent business technology management and technical consulting services to both enterprise customers and SMBs across various business sectors. Scope of financial statements The financial statements consist of and the entities it controlled at the end of, or during, the year ended 30 June Currency The financial report is presented in Australian dollars and rounded to the nearest one dollar. Authorisation of financial report The financial report was authorised for issue on 17 September 2012 by the directors. The directors have the power to amend this financial report after issue if required. Basis of Preparation a. Statement of compliance with International Financial Reporting Standards This general purpose financial report complies with Australian Accounting Standards as applicable under the liquidation basis of preparation. Compliance with Australian Accounting Standards ensures that the financial report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). b. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001 as they apply on a liquidation basis. The consolidated entity is a for-profit entity for the purpose of preparing the financial statements. Liquidation basis of preparation During the 2009 financial year, completed a merger with Corpnet (Australia) Pty Ltd. This took place on 11 November 2008 consequent upon shareholder approval at the AGM held on that date. Corpnet (Australia) Pty Ltd accordingly became a controlled entity and wholly-owned subsidiary of e-business Systems Ltd on 11 November Details of the merger were provided to shareholders in the merger circular dated 10 October The combination was, in accordance with accounting standards, accounted for as a reverse acquisition as if Corpnet (Australia) Pty Ltd had acquired the whole of the issued share capital of. Although the financial reports were issued in the name of the legal parent - the activities of the group were principally a continuation of those of the legal subsidiary, Corpnet (Australia) Pty Ltd, because on completion of the transaction the former shareholders in that company came to hold the majority of the issued ordinary share capital of the legal parent. 15

16 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) c. Basis of preparation (Continued) On 1 May 2012 entered into an agreement ( Share Purchase Agreement ) with Logicalis Australia Pty Ltd ( Logicalis ) to dispose of it shares in Corpnet. On 1 June 2012 the disposal of Corpnet was completed. The investments in Safeworld Australia & New Zealand Pty Ltd and Spheritec Pty Ltd were also disposed of by on 31 May As noted above the activities of the group were principally a continuation of those of the legal subsidiary, Corpnet (Australia) Pty Ltd. Following these disposals it is the directors intention, subject to shareholder approval, to distribute the remaining funds and to liquidate. Due to the intention to liquidate, the directors have determined that the going concern basis of preparation (as applied in previous years) is no longer appropriate. Accordingly the financial statements are not prepared on a going concern basis. The directors have applied the requirements of paragraph 25 of AASB 101 Presentation of Financial Statements which states that When the financial report is not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial report is prepared and the reason why the entity is not regarded as a going concern. These accounts have been prepared on a liquidation basis as, following the sale of its subsidiaries, the directors intend to put a resolution to shareholders for voluntary (solvent) winding-up of at the AGM. Impact of adopting the liquidation basis of preparation on measurement, classification of assets and liabilities, and disclosures in the financial report Under the liquidation basis of preparation, assets and liabilities are measured at their liquidation value. The liquidation value of assets is their net realisable value. Net realisable value is based on the proceeds receivable on disposal less restructure and liquidation costs as detailed in the accounting policies noted below. The liquidation value of liabilities is their expected settlement amount as detailed in the accounting policies noted below. Any gains or losses resulting from measuring assets and liabilities to the liquidation value are recognised in profit or loss. Under the liquidation basis of accounting, all assets and liabilities are classified as current. In adopting the liquidation basis, the directors have continued to apply the disclosure requirements of Australian Accounting Standards, to the extent they are relevant to the liquidation basis, and have modified them where this is considered appropriate. In particular, the financial report does not include all of the disclosures required by the following standards on the basis that the disclosures are not considered relevant for decision-making by users as described below: AASB 5 Non-current Assets Held for Sale and Discontinued Operations Given that the entire EBS group is considered discontinued, the disclosures under AASB 5 that separate between continuing and discontinuing operations are not considered relevant to users. AASB 7 Financial Instruments: Disclosures The information on exposures to financial risks are not considered relevant to users given that the financial risk exposures are not representative of the risks that will exist going forward. AASB 101 Presentation of Financial Statements Information on capital management is not considered relevant for users to understand what is managed as capital given the disclosures around the basis of preparation change from going concern to liquidation. The accounting policies adopted are consistent with those of the previous financial year except for changes specified related to the adoption of the liquidation basis of preparation. Comparative information has not been restated, and is measured and presented on a going concern basis. Significant accounting estimates, judgements and assumptions. The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in below: 16

17 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Basis of preparation (Continued) The preparation of financial statements requires estimates and assumptions concerning the application of accounting policies to be made by the Group. Estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Liquidation value and liquidation expenses Under the liquidation basis of accounting, assets and liabilities are measured at liquidation value. The liquidation value of assets and liabilities is the estimated value for which assets are realised and liabilities settled. e. Principles of Consolidation The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by e- Business Systems Limited at the end of the reporting period. A controlled entity is any entity over which e- Business Systems Limited has the ability and right to govern the financial and operating policies so as to obtain benefits from the entity s activities. Where controlled entities have entered or left the Group during the year, the financial performance of those entities is included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 22 to the financial statements. In preparing the consolidated financial statements, all inter-group balances and transactions between entities in the consolidated group have been eliminated in full on consolidation. Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are reported separately within the equity section of the consolidated statement of financial position and statement of comprehensive income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date. When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Business combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed as incurred. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. 17

18 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) f. Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the statement of comprehensive income is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to other comprehensive income or equity instead of the profit or loss when the tax relates to items that are credited or charged directly to other comprehensive income or equity respectively. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists or where the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. g. Inventories Inventories are measured at the lower of cost and net realisable value. h. Work in Progress Work in progress is valued at cost plus profit recognised to date less any provision for anticipated future losses. Cost includes both variable and fixed costs relating to specific contracts and those costs that are attributable to the contract activity in general and that can be allocated on a reasonable basis. Project profits are recognised on the stage of completion basis and measured using the proportion of costs incurred to date as compared to expected actual costs. Where losses are anticipated, they are provided for in full. Project revenue has been recognised on the basis of the terms of the contract adjusted for any variations or claims allowable under the contract. 18

19 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) i. Property, Plant & Equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Plant & Equipment Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit and loss during the financial period in which they are incurred. Depreciation The depreciable amount of all plant & equipment is depreciated on a straight-line basis over the asset s useful life to the consolidated group starting from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of the unexpired period of the lease and the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Plant & Equipment Depreciation Rate Leasehold improvements 4 5% Plant and equipment 5 33% The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in profit and loss. j. Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset (but not the legal ownership) are transferred to entities in the consolidated group are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property and the present value of the minimum lease payments including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives and the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight line basis in the periods in which they are incurred. 19

20 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) k. Financial Instruments Initial Recognition & Measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the Company commits itself to either the purchase or the sale of the asset (ie trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified at fair value through profit or loss, in which case transaction costs are expensed to profit or loss immediately. Classification & Subsequent Measurement Financial instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as: o o o o The amount at which the financial asset or financial liability is measured at initial recognition; Less principal repayments; Plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and Less any reduction for impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or, when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. Financial Assets at Fair Value Through Profit or Loss Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss. Loans & Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Financial Liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. l. Impairment of Assets At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset s fair value less costs to sell and value in use, is compared to the asset s carrying value. Any excess of the asset s carrying value over its recoverable amount is expensed to the profit and loss. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. 20

21 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) m. Intangibles Software Costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees' time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years. n. Employee Benefits Provision is made for the group s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows. o. Provisions Provisions are recognised when the Consolidated Entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. p. Cash & Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet. q. Finance Costs Finance costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation of ancillary costs incurred in connection with arrangements of borrowings and finance charges in respect of finance leases. Interest payments in respect of financial instruments classified as liabilities are included in finance costs. Loan establishment costs are offset against financial liabilities under the effective interest rate method and amortised over the term of the facility to which they relate. r. Revenue & Other Income Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods. Interest revenue is recognised using the effective interest rate method which, for floating rate financial assets, is the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established. Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at reporting date and where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable. All revenue is stated net of the amount of goods and services tax (GST). 21