The Institute of Certified Public Secretaries of Kenya (ICPSK) ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014

Transcription

1 The Institute of Certified Public Secretaries of Kenya (ICPSK) ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014

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3 THE INSTITUTE OF CERTIFIED PUBLIC SECRETARIES OF KENYA THE INSTITUTE OF CERTIFIED PUBLIC SECRETARIES OF KENYA ANNUAL REPORT AND FINANCIAL STATEMENTS 2014

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5 THE INSTITUTE OF CERTIFIED PUBLIC SECRETARIES OF KENYA ANNUAL REPORT AND FINANCIAL STATEMENTS 2014

6 THE INSTITUTE OF CERTIFIED PUBLIC SECRETARIES OF KENYA ANNUAL REPORT AND FINANCIAL STATEMENTS 2014

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27 THE INSTITUTE OF CERTIFIED PUBLIC SECRETARIES OF KENYA ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2014

28 The Institute of Certified Public Secretaries of Kenya Annual report and financial statements For the year ended 31st December 2014 CONTENTS PAGE Institutional information 1 Report of the council 2 Statement of council's responsibilities 3 Report of the independent auditor 4 Financial statements Consolidated statement of comprehensive income 5 Consolidated statement of financial position 6 Institute's statement of financial position 7 Consolidated and Institute's statement of changes in members' funds 8 Consolidated statement of cash flows 9 Notes Supplementary information Consolidated schedule of administrative and establishment expenditure Appendix I Institute's statement of comprehensive income Appendix II Schedule of Institute's income Appendix III Schedule of Institute's expenditure Appendix IV

29 The Institute of Certified Public Secretaries of Kenya Institutional information For the year ended 31st December 2014 Council members CS. Dr. Nicholas K. Letting - Chairperson CS. Nkirote Mworia-Njiru - Vice chairperson CS. Pius M. Nduatih - Member CS. Patrick S. Mutemi - Member CS. Waweru G. Mathenge - Member CS. Calvin M. Nyachoti - Member CS. Beatrice Meso - Member CS. Bernice W. Gachegu - Member CS. Dennis B. Aroka - Member CS. Nelly Matheka - Member CS. Tom O. Omariba - Member Chief Executive and Secretary CS. John K. Mburugu Registered office The Institute of Certified Public Secretaries of Kenya CPS Governance Centre Upper Hill Kilimanjaro Road P.O. Box Nairobi. Independent auditor RSM Ashvir Certified Public Accountants 1st Floor, Pacis Centre Slip Road, off Waiyaki Way, Westlands P.O. Box Nairobi, Kenya. Principal bankers Kenya Commercial Bank Limited Capital Hill Branch P.O Box Nairobi, Kenya. Subsidiary Institutional Consultant Limited CPS Governance Centre Upper Hill Kilimanjaro Road P.O. Box Nairobi, Kenya. 1

30 The Institute of Certified Public Secretaries of Kenya Report of the Council For the year ended 31st December 2014 The council submit their report together with the audited consolidated financial statements for the year ended 31st December 2014, which disclose the state of affairs of the institute and of the group. Incorporation The Institute of Certified Public Secretaries of Kenya ('The Institute') was established on 1st November 1989 under the Certified Public Secretaries of Kenya Act, Cap 534 and became operational on 9th August Mandate The Institute's mission is to promote the practice of good governance and leadership through competence development of members and dissemination of knowledge and best practice to stakeholders. The Institute's vision is to be a world class professional body and centre of excellence in governance. The subsidiary's principal activity is provision of managerial advisory and consultancy services on problems relating to personnel recruitment. Results The net group surplus for the year of Shs 8,920,047 (2013: Shs 4,756,278) has been transferred to members fund. Council members The council members who held office during the year and to the date of this report are set out on page 1. Auditor The Institute's auditor, RSM Ashvir, has expressed its willingness to continue in office. By order of the council.. Secretary Nairobi

31 THE INSTITUTE OF CERTIFIED PUBLIC SECRETARIES OF KENYA ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2014

32 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF THE INSTITUTE OF CERTIFIED PUBLIC SECRETARIES OF KENYA Report on the financial statements We have audited the accompanying financial statements of the Institute of Certified Public Secretaries of Kenya ('the Institute') and its subsidiary (together, the group), set out on pages 5 to 24, which comprise consolidated and Institute statement of financial position as at 31st December 2014, consolidated statement of comprehensive income, statement of changes in members' fund and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Council's responsibility for the financial statements The Council is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as the council determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depended on our professional judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we considered the internal control relevant to the Institute's preparation and fair presentation of the financial statements in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the Institute's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the council, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying financial statements give a true and fair view of the state of financial affairs of the group and of the Institute as at 31st December 2014 and of the financial performance and cash flows of the group for the year then ended in accordance with International Financial Reporting Standards. The engagement partner responsible for the audit resulting in this independent auditor's report was CPA Ashif Kassam, Practising Certificate No Certified Public Accountants Nairobi /2015 4

33 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST DECEMBER Note Shs Shs Income 4 56,089,088 42,412,760 Administrative expenses (42,710,685) (34,725,034) Establishment expenses (3,573,479) (3,488,566) Surplus before tax 5 9,804,924 4,199,160 Tax (expense)/credit 6 (884,877) 557,118 Surplus for the year 8,920,047 4,756,278 5

34 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31ST DECEMBER Note Shs Shs Members' funds Accumulated surplus 10,854,399 3,364,020 Institute premises fund 11,548,864 10,546,299 Research fund 1,939,949 1,512,846 Total members' fund 24,343,212 15,423,165 Non-current liabilities Deferred life membership subscriptions 7 2,557,791 2,876,211 Deferred income - capital grant 8 16,240,000 16,646,000 18,797,791 19,522,211 43,141,003 34,945,376 REPRESENTED BY Non-current assets Property, plant and equipment 10(a) 25,653,290 26,522,690 Deferred income tax 9 255,815 1,140,692 25,909,105 27,663,382 Current assets Inventories 12 25, ,573 Trade and other receivables 13(a) 17,159,325 17,287,719 Current tax recoverable 700, ,849 Cash at bank and in hand 14(a) 14,278,904 1,540,778 32,163,692 19,575,919 Current liabilities Deferred life membership subscriptions 7 698, ,670 Deferred income - capital grant 8 406, ,000 Trade and other payables 15(a) 13,826,874 11,181,255 14,931,794 12,293,925 Net current assets 17,231,898 7,281,994 43,141,003 34,945,376 The financial statements on pages 5 to 24 were authorised for issue by the Council on and were signed on its behalf by:. Secretary.. Council member 6

35 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 INSTITUTE STATEMENT OF FINANCIAL POSITION AT 31ST DECEMBER Note Shs Shs Members' funds Accumulated surplus 8,845,686 3,300,019 Institute premises fund 11,548,864 10,546,299 Research fund 1,939,949 1,512,846 Total members' funds 22,334,499 15,359,164 Non-current liabilities Deferred life membership subscriptions 7 2,557,791 2,876,211 Deferred Income - capital Grant 8 16,240,000 16,646,000 18,797,791 19,522,211 41,132,290 34,881,375 REPRESENTED BY Non-current assets Property, plant and equipment 10(b) 25,589,671 26,434,162 Investment in subsidiary 11 1,000,000 1,000,000 26,589,671 27,434,162 Current assets Inventories 12 25, ,573 Trade and other receivables 13(b) 16,594,570 18,007,621 Cash at bank and in hand 14(b) 12,016, ,102 28,636,214 19,092,296 Current liabilities Deferred life membership subscriptions 7 698, ,670 Deferred Income - capital Grant 8 406, ,000 Trade and other payables 15(b) 12,988,675 10,532,413 14,093,595 11,645,083 Net current assets 14,542,619 7,447,213 41,132,290 34,881,375 The financial statements on pages 5 to 24 were authorised for issue by the council on and were signed on its behalf by:.. Secretary.. Council Member 7

36 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS FUNDS FOR THE YEAR ENDED 31ST DECEMBER 2014 Institute Accumulated premises Research Surplus fund fund Total Note Shs Shs Shs Shs At 1st January ,243,722 8,318,092 1,105,073 10,666,887 Surplus for the year 4,756, ,756,278 Transfer to Institute's premises fund (2,600,000) 2,600, Transfer to Research fund (407,773) - 407,773 - Depreciation 371,793 (371,793) - - At 31st December ,364,020 10,546,299 1,512,846 15,423,165 At 1st January ,364,020 10,546,299 1,512,846 15,423,165 Surplus for the year 8,920, ,920,047 Transfer to Institute's premises fund (1,300,000) 1,300, Transfer to Research fund (427,103) - 427,103 - Depreciation 297,435 (297,435) - - At 31st December ,854,399 11,548,864 1,939,949 24,343,212 INSTITUTE STATEMENT OF CHANGES IN MEMBERS FUNDS FOR THE YEAR ENDED 31ST DECEMBER 2014 Institute Accumulated premises Research Surplus fund fund Total Shs Shs Shs Shs At 1st January 2013 (370,222) 8,318,092 1,105,073 9,052,943 Surplus for the year 6,306, ,306,221 Transfer to Institute premises fund (2,600,000) 2,600, Transfer to Research fund (407,773) - 407,773 - Depreciation 371,793 (371,793) - - At 31st December ,300,019 10,546,299 1,512,846 15,359,164 At 1st January ,300,019 10,546,299 1,512,846 15,359,164 Surplus for the year 6,975, ,975,335 Transfer to Institute premises fund (1,300,000) 1,300, Transfer to Research fund (427,103) - 427,103 - Depreciation 297,435 (297,435) - - At 31st December ,845,686 11,548,864 1,939,949 22,334,499 The Institute premises fund represents contributions by members towards the acquisition of premises for the Institute. Every year the fund is reduced by the depreciation charge on the building (note 10). The Research fund represents the transfer of 2% of annual subscriptions by members towards research activities carried out by the Institute. 8

37 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31ST DECEMBER Note Shs Shs Cash flows from operating activities Surplus for the year 8,920,047 4,756,278 Adjustments for: Tax expense/(credit) 6 884,877 (557,118) Depreciation of property, plant and equipment 10(a) 1,248,359 1,334,504 Life membership subscriptions amortised (756,170) (754,670) Amortisation of capital grant 8 (406,000) (406,000) Life membership subscription received 430, ,000 Operating surplus before working capital changes 10,321,113 4,762,994 Decrease/(increase) in: Inventories 138, ,274 Trade and other receivables 128,394 (1,940,220) Increase/(decrease) in: Trade and other payables 2,645,619 (3,934,170) Cash generated from/(used in) operations 13,233,456 (994,122) Tax paid (116,371) (208,110) Net cash generated from/(used in) operating activities 13,117,085 (1,202,232) Cash flows from investing activities Purchase of property, plant and equipment 10(a) (378,959) (574,000) Net cash used in investing activities (378,959) (574,000) Net increase/(decrease) in cash and cash equivalents 12,738,126 (1,776,232) Cash and cash equivalents at 1st January 1,540,778 3,317,010 Cash and cash equivalents at 31st December 14(a) 14,278,904 1,540,778 9

38 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES 1. Accounting policies The significant accounting policies adopted in the preparation of these group financial statements are set out below: a) Basis of preparation The financial statements are prepared on a going concern basis and in compliance with International Financial Reporting Standards (IFRS). They are presented in Kenya Shillings, which is also the functional currency. The financial statements comprise a consolidated statement of comprehensive income, consolidated and Institute statement of financial position, consolidated and Institute statement of changes in members funds, consolidated statement of cash flows and notes. Income and expenses are recognised in the consolidated statement of comprehensive income. The preparation of financial statements in conformity with International Financial Reporting Standards requires the use of estimates and assumptions. It also requires the Council to exercise its judgement in the process of applying the accounting policies adopted by the Institute and the group. Although such estimates and assumptions are based on the Council's best knowledge of the information available, actual results may differ from those estimates. The judgements and estimates are reviewed at the end of each reporting period, and any revisions to such estimates are recognised in the year in which the revision is made. The areas involving the judgements of most significance to the financial statements, and the sources of estimation uncertainty that have a significant risk of resulting in a material adjustment within the next financial year, are disclosed in Note 3. b) New and revised standards i) Adoption of new and revised standards All new and revised standards and interpretations that have become effective for the first time in the financial year beginning 1st January 2014 have been adopted bythe Institute. Of those, the following have had an effect on the institute's financial statements: - IFRS 9 - Financial Instruments will eventually replace IAS 39 - Financial Instruments, Recognition and Measurement. The effective date is not currently determined. The chapters published to date cover recognition, derecognition, classification and measurement of financial assets and financial liabilities, and hedge accounting. Most gains or losses on financial assets measured at fair value will then be recognised in profit or loss, but the Institute will be able to make an irrevocable election to present changes in fair value of investments in equity instruments in other comprehensive income. ii) New and revised standards and interpretations which have been issued but are not yet effective The Institute has not applied the following revised standards and interpretations that have been published but are not yet effective for the year beginning 1st January Amendments to IAS 19 titled Defined Benefit Plans: Employee Contributions (issued in November 2013) The amendments, applicable retrospectively to annual periods beginning on or after 1 July 2014, clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In particular, contributions that are independent of the number of years of service can be recognised as a reduction in the service cost in the period in which the related service is rendered (instead of attributing them to the periods of service). Amendments to IAS 27 titled Equity Method in Separate Financial Statements (issued in August 2014) The amendments, applicable to annual periods beginning on or after 1 July 2016, reinstate the equity method option allowing entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. 10

39 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) b) New and revised standards (continued) ii) New and revised standards and interpretations which have been issued but are not yet effective (continued) Amendment to IFRS 13 (Annual Improvements to IFRSs Cycle, issued in December 2013) - The amendment, applicable to annual periods beginning on or after 1 July 2014, clarifies that the portfolio exception in IFRS 13 - allowing an entity to measure the fair value of a group of financial assets and financial liabilities on a net basis - applies to all contracts (including non-financial) within the scope of IAS 39 / IFRS 9.technique. They are effective for annual periods beginning on or after 1 January Amendments to IAS 16 and IAS 38 titled Clarification of Acceptable Methods of Depreciation and Amortisation (issued in May 2014) The amendments add guidance and clarify that (i) the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated byan activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset, and (ii) revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset; however, this presumption can be rebutted in certain limited circumstances. They are prospectively effective for annual periods beginning on or after 1 January IFRS 15 Revenue from Contracts with Customers (issued in May 2014) - The new standard, effective for annual periods beginning on or after 1 January 2017, replaces IAS 11, IAS 18 and their interpretations (SIC-31 and IFRIC 13, 15 and 18). It establishes a single and comprehensive framework for revenue recognition to apply consistently across transactions, industries and capital markets, with a core principle (based on a five-step model to be applied to all contracts with customers), enhanced disclosures, and new or improved guidance. IFRS 9 Financial Instruments (issued in July 2014) This standard will replace IAS 39 (and all the previous versions of IFRS 9) effective for annual periods beginning on or after 1 January It contains requirements for the classification and measurement of financial assets and financial liabilities, impairment, hedge accounting and derecognition: o IFRS 9 requires all recognised financial assets to be subsequently measured at amortised cost or fair value (through profit or loss or through other comprehensive income), depending on their classification by reference to the business model within which they are held and their contractual cash flow characteristics. o For financial liabilities, the most significant effect of IFRS 9 relates to cases where the fair value option is taken: the amount of change in fair value of a financial liability designated as at fair value through profit or loss that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income (rather than in profit or loss), unless this creates an accounting mismatch. o For the impairment of financial assets, IFRS 9 introduces an expected credit loss model based on the concept of providing for expected losses at inception of a contract; it will no longer be necessary for there to be objective evidence of impairment before a credit loss is recognised. o The derecognition provisions are carried over almost unchanged from IAS 39. The Council have assessed the potential impact of the above and expect that they will not have a significant impact on the institute's financial statements for c) Revenue recognition Subscription income is recognised in the period in which it is earned except for life membership subscription which is amortised over 10 years. The amortised amount is recognised in the consolidated statement of comprehensive income and the balance is recognised as deferred subscription in the consolidated and Institute's statement of financial position. 11

40 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 1. Accounting policies (continued) c) Revenue recognition (continued) Rental income is recognised on a straight line basis over the period of lease. Sponsorship income and other grants are recognised when received. Dividend income is recognised when the right to receive the payment is established. Consulting and seminars income is recognised when services are rendered. d) Income tax Income tax expense is the aggregate amount charged/(credited) in respect of current tax and deferred tax in determining the surplus for the year. Tax is recognised in the income statement except when it relates to items recognised in other comprehensive income, in which case it is also recognised in other comprehensive income, or to items recognised directly in members funds, in which case it is also recognised directly in members funds. Current tax Current tax is the amount of income tax payable on the taxable surplus for the year, and any adjustment to tax payable in respect of prior years, determined in accordance with the Kenyan Income Tax Act. Deferred income tax Deferred tax is determined for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, using tax rates and laws enacted or substantively enacted at the balance sheet date and expected to apply when the asset is recovered or the liability is settled. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Institute and group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets or liabilities. Deferred tax liabilities are recognised for all taxable temporary differences except those arising on the initial recognition of an asset or liability, other than through a business combination, that at the time of the transaction affects neither the accounting nor taxable profit or loss. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Recognised and unrecognised deferred tax assets are reassessed at the end of each reporting period and, if appropriate, the recognised amount is adjusted to reflect the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. e) Grants Capital grant - grants for the acquisition of the Institute premises are treated as deferred income and credited to income over expected useful lives of the Institute premises. Revenue grant - grants received to compensate expenses, losses or for the purpose of giving immediate operational support are credited to the income statement in the period in which the revenue expenditure to which they relate is charged. 12

41 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 1. Accounting policies (continued) f) Institute premises fund and Research fund Contribution by members towards the Institute's premises and payments for research activities are charged directly to members fund rather than through the consolidated statement of comprehensive income. g) Property, plant and equipment All categories of property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. 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 Institute and the cost of the item can be measured reliably. Repairs and maintenance are charged to the consolidated statement of comprehensive income in the year in which they are incurred. Depreciation is calculated using the reducing balance method to write down the cost of each asset to its residual value over its estimated useful life using the following annual rates: Rate - % Lease hold land Over the period of the lease Buildings 20 Computers Library books 12.5 Furniture, fittings & equipment 12.5 The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Long term leases of land are classified as part of property, plant and equipment and are measured at cost less any accumulated amortisation. h) Financial instruments Classification: The Institute classifies its financial instruments into the following categories: i) Loans and receivables are recognised initially using the trade date accounting which is the date the Institute commits itself to the purchase or sale. Subsequently, loans and receivables are carried at amortised cost using the effective interest method; and ii) Financial liabilities measured at amortised cost which comprise all financial liabilities except those financial liabilities at fair value through profit or loss (consolidated statement of comprehensive income). Financial instruments held during the year were classified as follows: - Trade and other receivables were classified as 'loans and receivables'. - Trade and other liabilities were classified as financial liabilities. 13

42 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 1. Accounting policies (continued) h) Financial instruments (continued) Recognition and measurement i) Financial assets All financial assets are recognised initially using the trade date accounting which is the date the institute commits itself to the purchase or sale. Financial assets carried at fair value through profit or loss (consolidated statement of comprehensive income) are initially recognised at fair value and the transaction costs are expensed in the statement of comprehensive income. All other categories of financial assets are recorded at the fair value of the consideration given plus the transaction cost. Subsequently, held-to-maturity investments and loans and receivables are carried at amortised cost using the effective interest method, while all other financial assets are carried at their fair values, without deduction for transaction costs that may be incurred on sale. Amortised cost is the amount at which the financial asset or liability is measured on initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility. The Institute assesses at each balance sheet whether there is objective evidence that a financial asset is impaired. If any such evidence exists, an impairment loss is recognised. Impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the present value of the expected future cash flows, discounted using the asset's effective interest rate. Changes in the carrying values and impairment losses of loans and receivables are recognised in the consolidated statement of comprehensive income. Trade and other receivables not collectible are written off against the related provision. Subsequent recoveries of amounts previously written off are credited to the consolidated statement of comprehensive income in the year of recovery. ii) Financial liabilities All financial liabilities are recognised initially at fair value of the consideration given plus the transaction cost with the exception of financial liabilities carried at fair value through profit or loss (consolidated statement of comprehensive income), which are initially recognised at fair value and the transaction costs are expensed in the consolidated statement of comprehensive income. Subsequently, all financial liabilities are carried at amortised cost using the effective interest method except for financial liabilities through profit or loss (consolidated statement of comprehensive income) which are carried at fair value. Trade and other liabilities are classified as financial liabilities by the Council and are carried at amortised cost. Presentation: All financial assets are classified as non-current except financial assets at fair value through profit or loss (consolidated statement of comprehensive income), those with maturities of less than 12 months from the balance sheet date, those which the Council have the express intention of holding for less than 12 months from the balance sheet date or those that are required to be sold to raise operating capital, in which case they are classified as current assets. 14

43 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 1. Accounting policies (continued) h) Financial instruments (continued) Presentation (continued) All financial liabilities are classified as non-current except financial liabilities at fair value through profit or loss (consolidated statement of comprehensive income), those expected to be settled in the institute's normal operating cycle, those payable or expected to be paid within 12 months of the balance sheet date and those which the Institute does not have an unconditional right to defer settlement for at least 12 months after the balance sheet date. Derecognition: Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Institute has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised only when the obligation specified in the contract is discharged or cancelled or expires. Offsetting Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. i) Investment in subsidiary Subsidiary is an entity controlled by the Institute. The Institute controls an entity when it is exposed to or has rights to variable returns from its involvement with the entity and has an ability to affect those returns through its power over the entity. Investment in subsidiary is carried at cost less any accumulated impairment losses. j) Inventories Inventories are stated at the lower of cost and net realisable value. k) Retirement benefit obligations The Institute operates a defined contribution retirement benefits scheme for its employees, the assets of which are held in a separate trustee administered guaranteed scheme. A defined contribution plan is a plan under which the Institute pays fixed contributions into a separate fund, and has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current or prior periods. The Institute's contributions are charged to the income statement in the year to which they relate. The Institute and the employees also contribute to the National Social Security Fund, a national defined contribution scheme. Contributions are determined by local statute and the Institute's contributions are charged to the income statement in the year to which they relate. l) Employee entitlements The estimated monetary liability for employees' accrued annual leave entitlement at the balance sheet date is recognised as an employment cost accrual. 15

44 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 1. Accounting policies (continued) m) Cash and cash equivalents Cash and cash equivalents include cash in hand and demand and term deposits, with maturities of three months or less from the date of acquisition, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. n) Comparative Where necessary comparative figures have been adjusted to conform with changes in presentation in the current year. 2. Risk management objectives and policies a) Financial risk management The group's activities expose it to a financial risks including credit, liquidity and market risks. The group's overall risk management policies are set out by the council and implemented by the management, and focus on the unpredictability of changes in the business environment and seek to minimise the potential adverse effects of such risks on the group's performance by setting acceptable levels of risk. The group does not hedge against any risks. i) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk mainly arises from financial assets, and is managed on a institute-wide basis. The group or Institute does not grade the credit quality of financial assets that are neither past due nor impaired. Credit risk on financial assets with banking institutions is managed by dealing with institutions with good credit ratings and placing limits on deposits that can be held with each institution. Credit risk on subscription receivables are managed by collecting subscriptions at the beginning of the year and following on delayed payments during the year. The credit history is determined by taking into account the financial position, past experience and other relevant factors. (a) The credit exposure of the Group as at the consolidated statement of financial position date is as follows: Fully Past due but Past due and performing not impaired impaired Total 31st December 2014 Shs Shs Shs Shs Trade and other receivables 17,159,325-13,461,716 30,621,041 Cash at bank 14,278, ,278,904 31,438,229-13,461,716 44,899,945 Fully Past due but Past due and performing not impaired impaired Total 31st December 2013 Shs Shs Shs Shs Trade and other receivables 17,287,719-8,281,070 25,568,789 Cash at bank 1,540, ,540,778 18,828,497-8,281,070 27,109,567 16

45 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 2. Risk management objectives and policies (continued) a) Financial risk management (continued) i) Credit risk (continued) (b) The credit exposure of the Institute as at the statement of financial position date is as follows: Fully Past due but Past due and performing not impaired impaired Total Year ended 31st December 2014 Shs Shs Shs Shs Trade and other receivables 16,594,570-12,685,399 29,279,969 Cash at bank 12,016, ,016,401 28,610,971-12,685,399 41,296,370 Fully Past due but Past due and performing not impaired impaired Total Year ended 31st December 2013 Shs Shs Shs Shs Trade and other receivables 18,007,621-7,681,153 25,688,774 Cash at bank 921, ,102 18,928,723-7,681,153 26,609,876 The carrying amount of net receivables approximate their fair value. The Institute does not hold any collateral against the past due or impaired receivables. The management continues to actively follow up past due and impaired receivables. ii) Liquidity risk Liquidity risk is the risk that the group will encounter difficulty in meeting obligations associated with financial liabilities. The Council has developed a risk management framework for the management of the Institute's short, medium and long-term liquidity requirements thereby ensuring that all financial liabilities are settled as they fall due. The Institute manages liquidity risk by continuously reviewing forecasts and actual cash flows. (a) The table below summarises the maturity analysis for financial liabilities to their remaining contractual maturities for the group: Less than Between Between Over one month 1-3 months 3-12 months 1 year Shs Shs Shs Shs Year ended 31st December 2014 Deferred life membership subscriptions 58, , ,948 2,557,791 Deferred Income - capital grant 33,833 67, ,500 16,240,000 Trade and other payables 1,508, ,000 11,858,197-1,600, ,396 12,628,645 18,797,791 Less than Between Between Over one month 1-3 months 3-12 months 1 year Shs Shs Shs Shs Year ended 31st December 2013 Deferred life membership subscriptions 58, , ,113 2,876,211 Deferred Income - capital grant 33,833 67, ,500 16,646,000 Trade and other payables ,181,255-92, ,335 11,956,868 19,522,211 17

46 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 2. Risk management objectives and policies (continued) a) Financial risk management (continued) ii) Liquidity risk (continued) (b)the table below summarises the maturity analysis for financial liabilities to their remaining contractual maturities for the Institute. Less than Between Between Over one month 1-3 months 3-12 months 1 year Shs Shs Shs Shs Year ended 31st December 2014 Deferred life membership subscriptions 58, , ,948 2,557,791 Deferred income - capital grant 33,833 67, ,500 16,240,000 Trade and other payables 670, ,000 11,858, , ,396 12,628,645 18,797,791 Less than Between Between Over one month 1-3 months 3-12 months 1 year Shs Shs Shs Shs Year ended 31st December 2013 Deferred life membership 58, , ,113 2,876,211 Deferred subscriptions income - capital grant 33,833 67, ,500 16,646,000 Trade and other payables ,532,413-92, ,335 11,308,026 19,522,211 iii) Market risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market price and comprises three types of risks: currency risk, interest rate risk and other price risk. The Institute does not have borrowings or foreign currency denominated monetary assets and liabilities and is therefore not exposed to market risk. 3. Significant judgements and key sources of estimation and uncertainty In the process of applying the accounting policies adopted by the group, the Council makes certain judgements and estimates that may affect the carrying values of assets and liabilities in the next financial period. Such judgements and estimates are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. The Council evaluates these at each financial reporting date to ensure that they are still reasonable under the prevailing circumstances based on the information available. a) Significant judgements made in applying the institute's accounting policies There are no significant judgements that have been made in preparation of the separate financial statements. b) Key sources of estimation uncertainty Key assumptions about the future and other sources of estimation uncertainty made that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year include: Impairment losses Estimates made in determining the impairment losses on receivables. Such estimates include the determination of the net realisable value or the recoverable amount of the asset. 18

47 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) Income Shs Shs Membership subscriptions fees 21,355,170 22,070,343 Premises fund 1,300,000 2,600,000 Members' functions 21,490,091 6,482,930 Consultancy 2,735,255 2,309,484 Institute journal 552, ,400 ICPSK COG award 7,187,000 6,873,500 Bad debts recovered 320,000 1,151,750 Amortisation of capital grant 406, ,000 Exchange gain 23,988 - Interest income 419, ,453 Other income 300,509 92, Surplus before tax Items charged The following items have been charged in arriving at surplus before tax : 56,089,088 42,412,760 Depreciation of property, plant and equipment 1,248,359 1,334,504 Employee benefits expense 15,002,378 12,910,689 Auditors' remuneration Current year 491, ,350 Under provision in prior year 80, , Tax expense/(credit) Current tax - - Deferred tax expense/(credit) (Note 9) 884,877 (557,118) Tax expense/(credit) 884,877 (557,118) The tax on the group's surplus before income tax differs from the theoretical amount that would arise using the corporation tax rate as follows: Surplus before tax 9,804,924 4,199,160 Tax calculated at a tax rate of 30% 2,941,477 1,259,748 Tax effect of: Income not subject to tax (14,367,773) (11,972,343) Expenses not deductible for tax purposes 12,311,173 10,155,477 Tax expense/(credit) 884,877 (557,118) No provision has been made for taxation. The Institute has applied for a tax exemption certificate from the Kenya Revenue Authority; the receipt of which is still pending. 7. Deferred life membership subscriptions Group/Institute At 1st January 3,582,881 3,947,551 Received during the year 430, ,000 Release to income (756,170) (754,670) At 31st December 3,256,711 3,582,881 Non-current portion 2,557,791 2,876,211 Current portion 698, ,670 At 31st December 3,256,711 3,582,881 The deferred life membership subscriptions are credited to income over a period of ten years. 19

48 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 8. Deferred income - capital grant Group/Institute Shs Shs At 1st January 17,052,000 17,458,000 Released to income (406,000) (406,000) At 31st December 16,646,000 17,052,000 Non-current portion 16,240,000 16,646,000 Current portion 406, ,000 At 31st December 16,646,000 17,052,000 Deferred income - Capital grant represent the unamortised portions of a grant received in 2006 for the acquisition of the operating leased prepayment and building in upper Hill, Nairobi which serves as the Institute's business premises, The grant is amortised over a 50 years period on straight line basis which is equivalent to the term of the operating lease. 9. Deferred income tax Group The deferred tax assets are the tax effects of expected future income tax benefits relating to tax losses carried forward which will be utilised against future taxable profits. The following are the deferred tax assets recognised by the group: Shs Shs At start of year 1,140, ,574 (Charge)/credit to income statement (Note 6) (884,877) 557,118 At end of year 255,815 1,140,692 Deferred tax assets and liabilities, deferred tax charge in the income statement are attributable to the following items: Credit/(charge) At 1st January to income At 31st December Year ended 31st December statement 2014 Shs Shs Shs Deferred tax asset Property plant and equipments 1,705 (1,705) - Provision for leave days 25,500-25,500 Provision for staff bonus 51,000 (51,000) - Provision for bad debts 179,975 50, ,315 Tax losses carried forward 882,512 (882,512) - 1,140,692 (884,877) 255,815 Credit/(charge) At 1st January to income At 31st December Year ended 31st December statement 2013 Shs Shs Shs Deferred tax asset Property plant and equipments 7,689 (5,984) 1,705 Provision for leave days 25,500-25,500 Provision for staff bonus 51,000-51,000 Provision for bad debts 187,475 (7,500) 179,975 Tax losses carried forward 311, , , , ,118 1,140,692 20

49 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 10. Property, plant and equipment (a) Group Furniture, Leasehold Motor Computer fittings & Library land Buildings vehicles equipment equipment books Total At 31st December 2012 Shs Shs Shs Shs Shs Shs Shs Cost or valuation 27,600,000 7,112,644 93,011 1,368,177 2,259, ,301 38,736,129 Accumulated depreciation (3,402,732) (5,253,679) (53,773) (1,095,524) (1,394,541) (252,686) (11,452,935) Net carrying value 24,197,268 1,858,965 39, , ,455 49,615 27,283,194 Year ended 31st December 2013 Opening carrying value 24,197,268 1,858,965 39, , ,455 49,615 27,283,194 Additions , ,000 Depreciation charge (563,264) (371,793) (9,810) (273,155) (110,089) (6,393) (1,334,504) Closing carrying value 23,634,004 1,487,172 29, , ,366 43,222 26,522,690 At 31st December 2013 Cost or valuation 27,600,000 7,112,644 93,011 1,942,177 2,259, ,301 39,310,129 Accumulated depreciation (3,965,996) (5,625,472) (63,583) (1,368,679) (1,504,630) (259,079) (12,787,439) Net carrying value 23,634,004 1,487,172 29, , ,366 43,222 26,522,690 Year ended 31st December 2014 Opening carrying value 23,634,004 1,487,172 29, , ,366 43,222 26,522,690 Additions , , ,959 Depreciation charge (563,264) (297,435) (7,357) (259,997) (114,711) (5,595) (1,248,359) Closing carrying value 23,070,740 1,189,737 22, , ,155 37,627 25,653,290 At 31st December 2014 Cost or valuation 27,600,000 7,112,644 93,011 2,162,636 2,418, ,301 39,689,088 Accumulated depreciation (4,529,260) (5,922,907) (70,940) (1,628,676) (1,619,341) (264,674) (14,035,798) Net carrying value 23,070,740 1,189,737 22, , ,155 37,627 25,653,290 21

50 The Institute of Certified Public Secretaries of Kenya Financial statements For the year ended 31st December 2014 NOTES (CONTINUED) 10. Property, plant and equipment (continued) (b) Institute Furniture, Leasehold Motor Computer fittings & Library land Buildings vehicles equipment equipment books Total Shs Shs Shs Shs Shs Shs Shs At 31st December 2012 Cost or valuation 27,600,000 7,112,644 93,011 1,231,698 2,200, ,301 38,540,155 Accumulated depreciation (3,402,732) (5,253,679) (53,773) (1,010,492) (1,343,636) (251,155) (11,315,467) Net carrying value 24,197,268 1,858,965 39, , ,865 51,146 27,224,688 Year ended 31st December 2013 Opening carrying value 24,197,268 1,858,965 39, , ,865 51,146 27,224,688 Additions , ,000 Depreciation charge (563,264) (371,793) (9,810) (244,158) (107,108) (6,393) (1,302,526) Closing carrying value 23,634,004 1,487,172 29, , ,757 44,753 26,434,162 At 31st December 2013 Cost or valuation 27,600,000 7,112,644 93,011 1,743,698 2,200, ,301 39,052,155 Accumulated depreciation (3,965,996) (5,625,472) (63,583) (1,254,650) (1,450,744) (257,548) (12,617,993) Net carrying value 23,634,004 1,487,172 29, , ,757 44,753 26,434,162 Year ended 31st December 2014 Opening carrying value 23,634,004 1,487,172 29, , ,757 44,753 26,434,162 Additions , , ,959 Depreciation charge (563,264) (297,435) (7,357) (236,266) (113,533) (5,595) (1,223,450) Closing carrying value 23,070,740 1,189,737 22, , ,724 39,158 25,589,671 At 31st December 2014 Cost or valuation 27,600,000 7,112,644 93,011 1,964,157 2,359, ,301 39,431,114 Accumulated depreciation (4,529,260) (5,922,907) (70,940) (1,490,916) (1,564,277) (263,143) (13,841,443) Net carrying value 23,070,740 1,189,737 22, , ,724 39,158 25,589,671 22