TEMORA EX SERVICES MEMORIAL CLUB LIMITED

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1 FINANCIAL REPORT

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4 Secretary Manager's Report: Dear Members, This year the Club has reported a loss of 225,546. This is due to the inclusion of significant one off non-cash impairment losses, those losses included the following. 90,424 loss incurred due to the Grand Hotel building being condemned by independent engineers Piccolo Consulting, 79,273 loss following a full review of the club's asset register showed that several items no longer on hand and finally a loss of 50,255 which was incurred from a write down of the deferred tax assets a after the club failed to meet the virtually certain test which simply means the club expect not to pay any tax in to the foreseeable future due to being a non-for profit operation. The kitchen operations went through great change during the year culminating in the arrival of Sue Hitchman as head chef and two qualified chefs arriving on the 457 Visa Scheme, the first being Sir Lankan born Vindana then quickly followed by Elias from the Philippians. The feedback from members and visitors has been amazing and I feel the club has one of the best valued food offerings in town. I am proud to inform the members that the Club has donated in total 55,000 in both Category 1 and 2 ClubGrants funding and a further 35,000 of in-kind donations to the local Temora community. Many local groups have benefited from these donations and this ensures that benefits are received across the entire Temora shire. I must thank the Senior Leadership for their dedication, hard work. Thank you to Julie Heard (Admin), Ben Gibson (Bar/ Gaming), Sue Hitchman (Head Chef), Bridy Moller (Bistro), Craig Murdoch (Greenkeeper), Dani Brabin (Functions Coordinator), Michael Dehlsen (Koreela Park) and Bill & Julie Collins (Goldtera). Thank you to all the staff of the Club for your continued hard work and dedication throughout the year. It is this continued dedication that makes this Club such a great place for our members. Thank you to all the members that continue to patronage the Club, our members are the reason why we are here and your support of the Club, week in and week out ensures that we are able to continue to support the local Temora community. Secretary Manager.

5 CONTENTS Financial Report Page Club Property Declaration 1 Directors' Report 2 Auditor's Independence Declaration 5 Statement of Profit or Loss and Other Comprehensive Income 6 Statement of Financial Position 7 Statement of Changes in Equity 8 Statement of Cash Flows 9 Notes to the Financial Statements 10 Directors' Declaration 23 Independent Auditor's Report 24 Disclaimer 27 Profit and Loss Statement 28 Trading Statements 29

6 CLUB PROPERTY DECLARATION Pursuant to Section 41J(2) of the Registered Clubs Act 1976 the Directors declare that, for the financial year ended 31 December 2016, the classification of the freehold land is as follows: Property Address Current Usage Classification Baker Street, TEMORA NSW 2666 Clubhouse & facilities Core 80 Loftus Street, TEMORA NSW 2666 Motel Non-core 134 Crowley Street, TEMORA NSW 2666 Motel Non-core Corner Crowley and Loftus Street, TEMORA NSW 2666 Hotel Non-core Crowley Street, TEMORA NSW 2666 Investment housing Non-core Crowley Street, TEMORA NSW 2666 Land not used for facilities Non-core Notes to Members Section 41J(2) of the Registered Clubs Act 1976 requires the annual report to specify the core property and noncore property of the Club as at the end of the financial year to which the report relates. Core property is any real property owned or occupied by the Club that comprises: (a) the defined premises of the Club; or (b) any facility provided by the Club for use of its members and their guests; or (c) any other property declared by a resolution passed by a majority of the members present at a general meeting of Ordinary members of the Club to be core property of the Club. Non-core property is any other property other than that referred to above as core property and any property which is declared by the members at a general meeting of ordinary members of the Club not to be core property. The significance of the distinction between core property and non-core property is that the Club cannot dispose of any core property unless: (a) the property has been valued by a registered valuer within the meaning of the Valuers Act 2003; and (b) the disposal has been approved at a general meeting of the ordinary members of the Club at which the majority of the votes cast support the approval; and (c) any sale is by way of public auction or open tender conducted by an independent real estate agent or auctioneer. These disposal provisions and what constitutes a disposal for the purposes of section 41J are to some extent modified by regulations made under the Registered Clubs Act 1976 and by Section 41J itself. For example, the requirements above do not apply to core property that is being leased or licensed for a period not exceeding 10 years on terms that have been the subject of a valuation by a registered valuer. 1

7 DIRECTORS' REPORT The Directors present their report on Temora Ex Services Memorial Club Limited for the financial year ended 31 December Director's The names of the Directors in office at any time during, or since the end of the year are: Names Position Appointed/Resigned Mr Kenneth Bornen President Appointed: 2015 Mr Bernie Cartwright Senior Vice President Appointed: 2007 Mr Peter Kennedy Vice President Appointed: 2015 Mr Ross Winfield Director Appointed: 2011 Mr Douglas McGuirk Director Appointed: 2010 Mr Brendan Park Director Appointed: 2015 Mr Michael Manning Director Appointed: 2015 Director's meetings During the financial year, 12 meetings of Directors were held. Attendances by each Director during the year were as follows: Number attended Number eligible to attend Mr Kenneth Bornen Mr Bernie Cartwright Mr Peter Kennedy Mr Ross Winfield 9 12 Mr Douglas McGuirk Mr Brendan Park 9 12 Mr Michael Manning Principal activities The principal activities of Temora Ex Services Memorial Club Limited during the financial year were providing facilities and amenities for its members. No significant changes in the nature of the Company's activity occurred during the financial year. Short term objectives The Company's short term objectives are to: Provide and maintain hospitality services to our members; Support the local community; and Be a recognised leader in the provision of hospitality. 2

8 DIRECTORS' REPORT Long term objectives The Company's long term objectives are to: Establish and maintain a strong relationship with the local community; Be sustainable and strive for continuous improvements so far as to offer the best possible outcomes for the Company's members and guest whilst continuing to operate on a not-for-profit basis; and Continue to operate on a not-for-profit basis, preserving any surpluses for the benefit of members. Strategy for achieving the objectives To achieve these objectives, the Company has adopted the following strategies: To improve the club facilities; To attract and retain quality staff; Seek to provide a wide range of entertainment for the local community; and Establish and foster working partnerships with a range of community stakeholders. Members guarantee The Company is incorporated under the Corporations Act 2001 and is a Company Limited by Guarantee. If the Company is wound up, the Constitution states that each member is required to contribute a maximum of 2 each towards meeting any outstanding obligations of the Company. At year end, the total amount that members of the Company are liable to contribute if the Company is wound up is 6,670 (2015: 5,992). Operating results The loss of the Company after providing for income tax amounted to 225,546 (2015: (110,910)). This is primarily due to significant one off expenses including: - Recognising impairment loss of 90,424 on the Grand Hotel as a result of independent valuation undertaken by Xeros Piccolo Consulting Engineers; - Loss on sale of assets totaling 79,273, following a management review of the asset register identifying a number of items no longer on hand. - A 50,255 write down of the deferred tax asset due to not meeting the virtually certain test. The club has not paid income tax for a number of years and is unlikely to do so in the foreseeable future based on previous results and use of the mutuality principle. Review of operations The Company measures its own performance through the use of benchmarks. The benchmarks are used by the Directors to assess the financial sustainability of the Company and whether the Company s short-term and long-term objectives are being achieved. The key financial performance measure is the poker machine turnover which is the main source of revenue for the Club. Significant changes in state of affairs There have been no significant changes in the state of affairs of the Company during the year. Events after the reporting date No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in future financial years. 3

9 DIRECTORS' REPORT Future developments and results Likely developments in the operations of the Company and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the Company. Environmental issues The Company's operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory of Australia. The Smoke-Free Environment Act 2000, Smoke-Free Environment Amendment Regulation 2009, and the Smoke-Free Environment Regulation 2007 ban and regulate smoking in enclosed public places as well as specified public places. Indemnification The Company has paid premiums to insure each of its Director's against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Director of the Company, other than the conduct involving a willful breach of duty in relation to the Company. Auditor's independence declaration The lead auditor's independence declaration in accordance with section 307C of the Corporations Act 2001, for the year ended 31 December 2016 has been received and can be found on page 5 of the financial report. Signed in accordance with a resolution of the Board of Director's: Director:... Mr Kenneth Bornen Director:... Mr Bernie Cartwright Dated 5 May

10 AUDITOR'S INDEPENDENCE DECLARATION We declare that, to the best of our knowledge and belief, during the year ended 31 December 2016, there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. Countplus National Audits Pty Ltd Authorised Audit Company Steven J Watson Director Wagga Wagga Dated 5 May

11 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Note Revenue 4 4,723,282 4,422,024 Advertising & marketing (69,151) (83,498) Cleaning expenses (207,200) (209,671) Depreciation and amortisation (448,838) (433,276) Donations (90,464) (96,384) Employee wages and benefits (1,612,194) (1,449,520) Entertainment and activities (251,413) (265,366) Impairment expenses (90,424) (359) Insurance (78,190) (95,644) Interest paid (68,166) (95,240) Other expenses (613,299) (577,247) Loss on sale of assets (79,273) (4,360) Purchases (787,237) (771,441) Poker machine tax (287,333) (257,026) Repairs and maintenance (99,636) (62,682) Utilities (115,755) (136,750) Loss before income tax (175,291) (116,440) Income tax (expense)/benefit 2(a), 5 (50,255) 5,530 Loss for the year (225,546) (110,910) Other comprehensive income for the year - - Total comprehensive loss for the year (225,546) (110,910) The accompanying notes form part of these financial statements. 6

12 STATEMENT OF FINANCIAL POSITION Note ASSETS CURRENT ASSETS Cash and cash equivalents 6 377, ,494 Trade and other receivables 7 57,239 35,082 Inventories 8 67,442 76,392 Other financial assets 9 372, ,992 Other assets 10 4,957 44,943 TOTAL CURRENT ASSETS NON-CURRENT ASSETS 878,856 1,075,903 Intangible assets 11 1,035,465 1,035,465 Deferred tax assets - 50,255 Property, plant and equipment 12 6,826,422 7,102,800 TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES 7,861,887 8,188,520 8,740,743 9,264,423 Trade and other payables , ,663 Borrowings , ,364 Employee benefits , ,930 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES 806, ,957 Borrowings 14 1,133,244 1,484,269 Employee benefits 15 27,918 28,942 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS 1,161,162 1,513,211 1,968,034 2,266,168 6,772,709 6,998,255 EQUITY Retained earnings 6,772,709 6,998,255 TOTAL EQUITY 6,772,709 6,998,255 The accompanying notes form part of these financial statements. 7

13 STATEMENT OF CHANGES IN EQUITY Retained earnings at the beginning of the year 6,998,255 7,109,165 Loss for the year (225,546) (110,910) Retained earnings at the end of the year 6,772,709 6,998,255 The accompanying notes form part of these financial statements. 8

14 STATEMENT OF CASH FLOWS Note CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers 4,730,967 4,478,409 Payments to suppliers and employees (4,237,730) (4,029,163) Interest received 1,894 4,646 Net cash provided by/(used in) operating activities 495, ,892 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of intangible assets - (22,000) Purchase of property, plant and equipment (307,756) (440,247) Sale of financial assets - 350,000 Net cash used by investing activities (307,756) (112,247) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings - 74,246 Repayment of borrowings (390,697) (57,213) Net cash used by financing activities (390,697) 17,033 Net increase/(decrease) in cash and cash equivalents held (203,322) 358,678 Cash and cash equivalents at beginning of year 580, ,816 Cash and cash equivalents at end of financial year 6 377, ,494 The accompanying notes form part of these financial statements. 9

15 NOTES TO THE FINANCIAL STATEMENTS The financial report covers Temora Ex Services Memorial Club Limited as an individual entity. Temora Ex Services Memorial Club Limited is a not-for-profit Company Limited by Guarantee, incorporated and domiciled in Australia. The functional and presentation currency of Temora Ex Services Memorial Club Limited is Australian dollars (AUD) and all amounts have been rounded to the nearest dollar. The financial report was authorised for issue by the Directors on 5 May Comparatives are consistent with prior years, unless otherwise stated. 1 BASIS OF PREPARATION The financial statements are general purpose financial statements that have been prepared in accordance with the Australian Accounting Standards - Reduced Disclosure Requirements, Corporations Act 2001 and Corporations Regulations The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Significant accounting policies adopted in the preparation of these financial statements are presented below and are consistent with prior reporting periods unless otherwise stated. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Income Tax The mutuality principle has been applied to the calculation of the Company's income tax. The Company has estimated that the assessable portion of mutual income represented by results of trading attributable to nonmembers of the Company is 11.20% (2015: 10.79%). Temora Ex Services Memorial Club Limited does not recognise deferred tax assets as the Company has been in a tax loss position for a number of years and does not meet the virtually certain test. The tax expense recognised in the statement of profit or loss and other comprehensive income comprises of current income tax expense plus deferred tax expense. Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (loss) for the year and is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates and laws that have been enacted or substantively enacted by the end of the reporting period. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred tax is not provided for the following: The initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). Taxable temporary differences arising on the initial recognition of goodwill. Temporary differences related to investment in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future. 10

16 NOTES TO THE FINANCIAL STATEMENTS 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (b) Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to the Company 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 or 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. Lease payments for operating leases, where substantially all of the risks and benefits remain with the lessor, are charged as expenses on a straight-line basis over the life of the lease term. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. (c) Revenue and other income Revenue is recognised when the amount of the revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the Company and specific criteria relating to the type of revenue as noted below, has been satisfied. Revenue is measured at the fair value of the consideration received or receivable and is presented net of returns, discounts and rebates. All revenue is stated net of the amount of goods and services tax (GST). Bar sales Revenue derived through bar sales is recognised on transfer of goods to the patron as this is deemed to be the point in time when all the risks and rewards associated with the goods are transferred and there is no longer any ownership or effective control over the inventory. Poker machine takings Poker machine takings are recognised as revenue when received and shown in the statement of profit or loss and other comprehensive income as a net amount. Interest revenue Interest is recognised using the effective interest method. Hotel and motel accommodation Revenue in relation to the rendering of accommodation services is recognised when the services have been provided. Subscriptions Revenue from the provision of membership subscriptions is recognised on a straight line basis over the financial year in which the membership was received. Gain on disposal of non-current assets When a non-current asset is disposed, the gain or loss is calculated by comparing proceeds received with its carrying amount and is taken to profit or loss. 11

17 NOTES TO THE FINANCIAL STATEMENTS 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (c) Revenue and other income Other income Other income is recognised on an accruals basis when the Company is entitled to it. (d) Goods and services tax (GST) Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the statement of financial position. Cash flows in the statement of cash flows are included on an inclusive basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (e) Inventories Inventories for bar stock are measured at the lower of cost and net realisable value. Cost of inventory is determined using the individual item basis which is inclusive of freight and delivery charges and is net of any rebates and discounts received. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the costs necessary to make the sale. Net realisable value is estimated using the most reliable evidence available at the reporting date and inventory is written off in the statement of profit or loss and other comprehensive income when deemed to be damaged or obsolete. (f) Property, plant and equipment Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment. Items of property, plant and equipment acquired for nil or nominal consideration is recorded at the acquisition date cost. Costs include purchase price, other directly attributable costs and the initial estimate of the costs of dismantling and restoring the asset, where applicable. Depreciation Property, plant and equipment, excluding freehold land, is depreciated on a straight-line basis and diminishing value basis over the assets useful life to the Company, commencing when the asset is ready for use. 12

18 NOTES TO THE FINANCIAL STATEMENTS 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (f) Property, plant and equipment The depreciation rates used for each class of depreciable asset are shown below: Fixed asset class Freehold Land Depreciation rate Buildings 2.5% - 40% Plant and Equipment 5% - 50% At the end of each annual reporting period, the depreciation method, useful life and residual value of each asset is reviewed. Any revisions are accounted for prospectively as a change in estimate. (g) Financial instruments Financial instruments are recognised initially using trade date accounting, i.e. on the date that the Company becomes party to the contractual provisions of the instrument. On initial recognition, all financial instruments are measured at fair value plus transaction costs (except for instruments measured at fair value through profit or loss where transaction costs are expensed as incurred). Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers but also incorporate other types of contractual monetary assets. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value is recognised in profit or loss. The Company s trade and other receivables fall into this category of financial instruments. Significant receivables are considered for impairment on an individual asset basis when they are past due at the reporting date or when objective evidence is received that a specific counterparty will default. The amount of the impairment is the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. In some circumstances, the Company renegotiates repayment terms with customers which may lead to changes in the timing of the payments, the Company does not necessarily consider the balance to be impaired, however assessment is made on a case-by-case basis. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets: acquired principally for the purpose of selling in the near future designated by the entity to be carried at fair value through profit or loss upon initial recognition or which are derivatives not qualifying for hedge accounting. The Company has a managed investment scheme which is designated as financial assets at fair value through profit or loss. Assets included within this category are carried in the statement of financial position at fair value with changes in fair value recognised in finance income or expenses in profit or loss. Nil 13

19 NOTES TO THE FINANCIAL STATEMENTS 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (g) Financial instruments Financial liabilities The Company s financial liabilities include borrowings, trade and other payables (including finance lease liabilities), which are measured at amortised cost using the effective interest rate method. Impairment of financial assets At the end of the reporting period the Company assesses whether there is any objective evidence that a financial asset or group of financial assets is impaired. Financial assets at amortised cost If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the financial assets original effective interest rate. Impairment on loans and receivables is reduced through the use of an allowance accounts, all other impairment losses on financial assets at amortised cost are taken directly to the asset. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. (h) Impairment of non-financial assets At the end of each reporting period the Company determines whether there is any evidence of an impairment indicator for non-financial assets. The recoverable amount of an asset is the higher of the fair value less costs of disposal and the value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cashgenerating unit. Where the recoverable amount is less than the carrying amount, an impairment loss is recognised in profit or loss. Reversal indicators are considered in subsequent periods for all assets which have suffered an impairment loss. (i) Intangible Assets Goodwill Goodwill has been recognised for the acquisition of the Goldtera Motor Inn and the Koreela Park Motor Inn. Goodwill is not amortised but is tested for impairment annually by the Directors. When determining whether there is any evidence of an impairment indicator for the goodwill assets, the Directors consider the sales volume of the cash generating units, past and current trends, and perform an analysis of the industry outlook. Poker machine licenses Each of the six poker machine entitlements purchased has been recognised, recorded at either cost or deemed cost and has an indefinite useful life. 14

20 NOTES TO THE FINANCIAL STATEMENTS 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (i) Intangible Assets Poker machine licenses At the end of each reporting period the Company determines whether there is any evidence of impairment indicators by comparing the cost reported for each individual poker machine license with the market values for the area. In the event the cost reported exceeds the market values, the licenses are immediately reduced to their recoverable amount by recognising an impairment through the statement of profit or loss and other comprehensive income. (j) Cash and cash equivalents Cash and cash equivalents comprises cash on hand and cash at bank which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (k) Employee benefits Provision is made for the Company's liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be wholly settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits expected to be settled more than one year after the end of the reporting period have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy vesting requirements. (l) Provisions Provisions are recognised when the Company 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. Provisions are measured at the present value of management's best estimate of the outflow required to settle the obligation at the end of the reporting period. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the unwinding of the discount is taken to finance costs in the statement of profit or loss and other comprehensive income. Provisions recognised represent the best estimate of the amounts required to settle the obligation at the end of the reporting period. 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The Director's make estimates and judgements during the preparation of these financial statements regarding assumptions about current and future events affecting transactions and balances. These estimates and judgements are based on the best information available at the time of preparing the financial statements, however as additional information is known then the actual results may differ from the estimates. The significant estimates and judgements made have been described below. Key estimates - impairment of property, plant and equipment The Company assesses impairment at the end of each reporting period by evaluating conditions specific to the Company that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. 15

21 NOTES TO THE FINANCIAL STATEMENTS 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Key estimates - impairment of goodwill In accordance with AASB 136 Impairment of Assets, the Company is required to estimate the recoverable amount of goodwill at each reporting period. Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate and using a terminal value to incorporate expectations of growth thereafter. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management s expectations of: growth in EBITDA, calculated as adjusted operating profit before depreciation and amortisation; timing and quantum of future capital expenditure; long-term growth rates; and the selection of discount rates to reflect the risks involved. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Company s impairment evaluation and hence results. Key estimates - provisions As described in the accounting policies, provisions are measured at management s best estimate of the expenditure required to settle the obligation at the end of the reporting period. These estimates are made taking into account a range of possible outcomes and will vary as further information is obtained. Key judgments - deferred tax assets Determining income tax provisions involves judgment on the tax treatment of certain transactions. Deferred tax is recognised on tax losses not yet used and on temporary differences where it is probable that there will be taxable revenue against which these can be offset. Management has made judgments as to the probability of future taxable revenues being generated against which tax losses will be available for offset based on budgets, current and future expected economic conditions. As a result a deferred tax asset has not been recognised due to not meeting the virtually certain test. The club has not paid income tax for a number of years and is unlikely to do so in the foreseeable future based on previous results and carried forward tax losses. 16

22 NOTES TO THE FINANCIAL STATEMENTS 4 REVENUE AND OTHER INCOME Accommodation income 753, ,021 Bar and restaurant sales 1,386,367 1,333,222 Commissions 68,398 81,366 Functions, rooms and equipment hire 190, ,454 Golden gift income 111, ,551 Members subscriptions 12,363 25,123 Other income 128,616 90,575 Poker machine income - net 2,053,302 1,829,955 Rent received 17,997 17,757 4,723,282 4,422,024 Comparative figures have been updated to reflect revenue excluding associated expenses and taxes. 5 INCOME TAX EXPENSE Mutuality principle Sales revenue Mutual income 3,454,308 3,119,495 Fully taxable income 841, ,209 Non-taxable (exempt income) 427, ,320 4,723,282 4,422,024 Taxable income Non-member's income 427, ,320 Fully taxable income 841, ,209 1,268,974 1,302,529 Allowable expenses Non-member's expenses (396,970) (362,482) Fully deductible expenses (1,082,049) (928,430) (1,479,019) (1,290,912) Taxable profit/(loss) (210,045) 11,617 Available tax losses from the prior year (167,518) (179,135) Carried forward tax losses - not recognised (377,563) (167,518) Income tax (expense)/benefit - not recognised (50,255) 5,530 17

23 NOTES TO THE FINANCIAL STATEMENTS 6 CASH AND CASH EQUIVALENTS Cash on hand 75,800 70,650 Cash at bank 301, ,844 7 TRADE AND OTHER RECEIVABLES 377, ,494 CURRENT Trade receivables 15,036 9,383 GST receivable 9,297 9,016 Other receivables 32,906 16,683 8 INVENTORIES 57,239 35,082 CURRENT Stock on hand - at cost 67,442 76,392 9 OTHER FINANCIAL ASSETS 67,442 76,392 CURRENT North investment - at fair value through profit and loss 372, , OTHER ASSETS 372, ,992 CURRENT Prepayments 4,957 44, INTANGIBLE ASSETS 4,957 44,943 NON-CURRENT Goodwill 810, ,000 Poker machine licenses 225, ,465 1,035,465 1,035,465 18

24 NOTES TO THE FINANCIAL STATEMENTS 12 PROPERTY, PLANT AND EQUIPMENT NON-CURRENT Freehold land At cost 953, ,000 Buildings At cost 5,978,652 6,098,101 Accumulated depreciation and impairment (1,358,941) (1,297,246) 4,619,711 4,800,855 Plant and equipment At cost 2,980,279 3,528,384 Accumulated depreciation (1,726,568) (2,179,439) 1,253,711 1,348,945 6,826,422 7,102,800 (a) Movements in Carrying Amounts Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year: Land Buildings Plant and Equipment Total Year ended 31 December 2016 Balance at the beginning of year Additions Disposals Depreciation expense and impairment 953,000 4,800,855 1,348,945 7,102, , , ,810 - (126,013) (69,337) (195,350) - (178,660) (270,178) (448,838) Balance at the end of the year 953,000 4,619,711 1,253,711 6,826,422 19

25 NOTES TO THE FINANCIAL STATEMENTS 13 TRADE AND OTHER PAYABLES CURRENT Trade payables 398, ,808 Other payables 15,132 30, BORROWINGS 413, ,663 CURRENT Bally finance 4,990 - Aristocrat lease liability 81, ,644 Bank loan - ANZ 135, , , ,364 NON-CURRENT Aristocrat lease liability 69, ,189 Bank loan - ANZ 1,063,670 1,338,080 Bank loan - ANZ 1,133,244 1,484,269 The bank loan provided by the Australia and New Zealand Banking Group Limited (ANZ) is secured by a registered first mortgage over freehold properties owned by the Company. 134 Crowley Street, Temora 'Koreela Park Motor Inn' 139 Baker Street, Temora 'Goldtera Motor Inn' 85 Loftus Street, Temora 121 Crowley Street, Temora 123 Crowley Street, Temora Crowley Street, Temora Covenants imposed by the bank require combined Valuation of Securities to not be less than 3,400,000. Capped rate and floating interest rates were 3.09% as at 3 January Capped rate maximum was 3.50%. 20

26 NOTES TO THE FINANCIAL STATEMENTS 15 EMPLOYEE BENEFITS CURRENT Annual leave 106,364 95,159 Long service leave 63,935 40, , ,930 NON-CURRENT Long service leave 27,918 28,942 27,918 28, KEY MANAGEMENT PERSONNEL DISCLOSURES The total remuneration paid to key management personnel of the Company was in the range of 0-150,000 (2015: 0-150,000). Other key management personnel transactions For details of other transactions with key management personnel, refer to Note 17: Related Party Transactions. 17 RELATED PARTIES Entities the Company exercises control over The Temora Ex Services Memorial Club Limited was deemed to have the power and authority to exercise control over its subsidiary Clubs. The subsidiary Clubs operating during the year were as follows: - Temora Ex Services Memorial Club Limited: Women's Bowling Club; - Temora Ex Services Memorial Club Limited: Anglers Club; and - Temora Ex Services Memorial Club Limited: Men's Bowling Club. Key management personnel Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether executive or otherwise) of that entity are considered key management personnel. Key management personnel of the Company are as follows: - Mr Kenneth Bornen (President) - Mr Bernie Cartwright (Snr Vice President) - Mr Peter Kennedy (Vice President) - Mr Doug McGuirk (Director) - Mr Ross Winfield (Director) - Mr Michael Manning (Director) - Mr Brendan Park (Director) - Mr Michael Boland (Secretary Manager) 21

27 NOTES TO THE FINANCIAL STATEMENTS 17 RELATED PARTIES Key management personnel For details of remuneration disclosures relating to key management personnel, refer to Note 16: Key Management Personnel Disclosures. Other transactions with KMP and their related entities are shown below. Other related parties Other related parties include close family members of key management personnel and entities that are controlled or significantly influenced by those key management personnel or their close family members. Transactions with other related parties and entities are shown below. Transactions with related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred with related parties: The president received 6,600 for his position on the Board; The senior vice president received 2,052 for his position on the Board; The vice president received 2,052 for his position on the Board; The Directors received 2,052 each for their position on the Board; and The son of a Director as an employee of the Club (Motel) was paid 48,877 in salaries and wages. 18 CONTINGENCIES In the opinion of the Directors, the Company did not have any contingencies at 31 December 2016 (31 December 2015:None). 19 EVENTS OCCURRING AFTER THE REPORTING DATE No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. 20 COMPANY DETAILS The registered office and principal place of business of the Company is: Temora Ex Services Memorial Club Limited 130 Baker Street TEMORA NSW

28 DIRECTORS' DECLARATION The Directors of the Company declare that: 1. The financial statements and notes, as set out on pages 6 to 22, are in accordance with the Corporations Act 2001, Corporations Regulations 2001 and the accounting policies outlined in Note 2 of the financial statements, and: a. comply with Australian Accounting Standards - Reduced Disclosure Requirements; and b. give a true and fair view of the financial position as at 31 December 2016 and of the performance of the Company for the year ended on that date. 2. In the Directors opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Director... Mr Kenneth Bornen Director... Mr Bernie Cartwright Dated 5 May

29 INDEPENDENT AUDIT REPORT Report on the Audit of the Financial Report Opinion We have audited the financial report of Temora Ex Services Memorial Club Limited (the Company), which comprises the statement of financial position as at 31 December 2016, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the Directors' declaration. In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Company's financial position as at 31 December 2016 and of its financial performance for the year then ended; and (b) complying with Australian Accounting Standards - Reduced Disclosure Requirements and the Corporations Regulations Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the Directors of the Company, would be in the same terms if given to the Directors as at the time of this independent auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Directors for the Financial Report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards - Reduced Disclosure Requirements and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. 24

30 INDEPENDENT AUDITOR'S REPORT Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. Conclude on the appropriateness of the Directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Director's regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 25

31 INDEPENDENT AUDITOR'S REPORT Auditor's Responsibilities for the Audit of the Financial Report (continued) From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Countplus National Audits Pty Ltd Authorised Audit Company Steven J Watson Director Wagga Wagga Dated 5 May

32 DISCLAIMER The additional financial data presented on pages is in accordance with the books and records of the Company which have been subjected to the auditing procedures applied in our statutory audit of the Company for the year ended 31 December It should be appreciated that our statutory audit did not cover all details of the additional financial data. Accordingly, we do not express an opinion on such financial data and we give no warranty of accuracy or reliability in respect of the data provided. Neither the firm nor any member or employee of the firm undertakes responsibility in any way whatsoever to any person (other than Temora Ex Services Memorial Club Limited) in respect of such data, including any errors of omissions therein however caused. Countplus National Audits Pty Ltd Authorised Audit Company Steven J Watson Director Wagga Wagga Dated 5 May

33 PROFIT AND LOSS STATEMENT Income Accommodation income 753, ,021 Bar and restaurant sales 1,386,367 1,333,222 Commissions 68,398 81,366 Functions, rooms and equipment hire 190, ,454 Golden gift income 111, ,551 Members subscriptions 12,363 25,123 Other income 128,616 90,575 Poker machine income - net 2,053,302 1,829,955 Rent received 17,997 17,757 4,723,282 4,422,024 Less: Expenses Advertising and marketing 69,151 83,498 Bonus points 56,698 77,734 Business insurance 51,888 70,619 Cleaning 176, ,624 Cost of finance 68,166 95,240 Depreciation 448, ,276 Donations 90,464 96,384 Electricity and gas 115, ,750 Entertainment 98,134 55,133 Foxtel 25,890 25,528 Golden gift 78,030 80,594 Goldtera expenses 19,457 14,317 Impairment expense 90, Koreela expenses 42,929 39,547 Loss on sale of assets 79,273 4,360 Other expenses 402, ,086 Payroll tax 36,606 32,052 Poker machine tax 287, ,026 Purchases 787, ,441 Rates and water charges 54,614 49,641 Repairs and maintenance 101,404 62,437 Subscriptions 36,867 38,789 Superannuation 142, ,424 Vouchers 68,515 69,509 Wages and salaries 1,469,279 1,323,096 4,898,573 4,538,464 Loss before income tax (175,291) (116,440) 28