Report of the Armed Forces Canteen Council

Transcription

1 Report of the Armed Forces Canteen Council Presented to the House of Representatives Pursuant to Section 13 of the Armed Forces Canteens Act 1948 For the year ended 31 March 2016 AnnualReportAFCC_2016.indd 1

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3 Contents Directory 2 Introduction 3 Significant Events during the Year 4 Five Year Performance Comparisons 4 Financial Review 5 Distribution of Surplus 5 Outlook 5 Financial Statements Statement of Responsibility 6 Statement of Accounting Policies 7 Statement of Comprehensive Income 9 Statement of Changes in Equity 9 Statement of Financial Position 10 Statement of Cash Flows 11 Notes to the Financial Statements 12 Independent Auditorʼs Report AnnualReportAFCC_2016.indd 1

4 Directory Council Minister of Defence (Chair) Hon Gerry Brownlee Chief Financial Officer New Zealand Defence Force (Deputy Chair) Ms Joanne Devine, CA Deputy Chief of Navy Commodore D. A. Gibbs, RNZN Deputy Chief of Army Brigadier C. J. Parsons, MNZM, DSD Deputy Chief of Air Force Air Commodore M. Brunton, DSD Auditors Audit New Zealand, Wellington Bankers Bank of New Zealand, 50 Manners Street, Wellington Solicitors Morrison Kent, Wellington AnnualReportAFCC_2016.indd 2

5 Introduction Mission The mission of the Armed Forces Canteen Council (AFCC) is: "To provide a first class Canteen Service to meet the needs of the people of the New Zealand Defence Force" History Immediately following the outbreak of the Second World War, it became apparent that some form of canteen service was required to cater for the large intake of troops. The Canteen Board was set up under the Defence Canteen Emergency Regulations on 15 November After the war, the Government decided the Defence Canteen Emergency Regulations should remain in force and, on 26 November 1948, Parliament passed the Armed Forces Canteens Act Initial funding was 106,833, an 11.6 percent share of the assets of the Canteen Board. Equity and the profits distributed to the Services have increased as time has passed, reflecting the expansion of canteen and shop facilities at New Zealand Defence Force establishments, and conservative financial management. AFCC equity is currently $8.80m. Governance The function of the Council is to provide amenities on service establishments for the benefit of members of the armed forces and of other persons employed or residing on Bases or in Camps. The AFCC, being a body corporate, is governed by a Council. The Council is chaired by the Minister of Defence. Other members of the Council are the NZDF Chief Financial Officer serving as the Minister's deputy chair and three Service Deputy Chiefs. Canteen and shop facilities are located at Camps and Bases throughout New Zealand and at Scott Base, Antarctica. From 1 September 2015 the AFCC entered into a management contract with Compass Group New Zealand to operate all canteen services and outlets previously managed and operated by the AFCC AnnualReportAFCC_2016.indd 3

6 Significant Events during the Year Contract for services with Compass New Zealand Group On 8 July 2015 a 10 year contract was signed with Compass Group New Zealand Limited to provide; the retail catering services, provision of convenience, limited superette services, limited duty free services, bar services, laundry and dry cleaning services on the defence force camps and bases. Compass commenced providing these services on 1 September This change followed an extensive review of AFCCʼs current operations and its ability to competitively provide amenities to Camps and Bases on a financially sustainable basis going forward in terms of operating performance and the quality of décor of the cafes. The contract specifies that a minimum annual payment of $200k will be paid by Compass to AFCC for the right to supply the above stated services. There is also the potential for additional payments to be made if Compass meets specified Revenue targets. As at balance date these targets had not been met. This changed the operating model of the AFCC from providing these services in-house to managing the performance of this third party service provider. These services were officially transferred on the 1 September Financial Impact The change in operating model will have four impacts on the financial performance of AFCC: The first is the one-off transaction costs to move to the new operating model. This includes exiting all operational assets including inventory and fixed assets. The costs of transition. The second impact is the certainty of the net income under the new contract with Compass. The contract with Compass transfers the responsibility for upgrading the cafes to a modern state from AFCC reducing the need for capital expenditure and also provides guaranteed net revenue from a minimum of $200k annually with upside if Compass achieve certain revenue targets. The third will be that AFCC no longer extend credit to its customers and the current loan will be managed down as borrowers settle their loans in accordance with the terms agreed. We expect the majority to settle by the end of the 2016 calendar year. Fourthly as the transition to the new operating model was mid-way through the financial year this will explain the years reduction in activity and the deficit of $440k for the year against the budgeted deficit of $580k which reflected that the restructure costs were less than anticipated. Five Year Performance Comparisons 2016 ($m) 2015 ($m) 2014 ($m) 2013 ($m) 2012 ($m) Turnover (Sales) $4.73 $12.34 $11.74 $11.81 $13.19 Cost of sales $3.85 $9.12 $8.71 $8.78 $9.90 Gross Profit $0.88 $3.22 $3.03 $3.03 $3.29 Other Income $0.83 $0.63 $0.62 $0.68 $0.73 Staff Remuneration $1.42 $2.63 $2.58 $2.59 $2.70 Property Charges $0.17 $0.27 $0.34 $0.37 $0.39 Other Overheads $0.56 $0.48 $0.43 $0.49 $0.52 Total Expense $2.15 $3.38 $3.35 $3.45 $3.61 Net Surplus (Deficit) ($0.44) $0.46 $0.30 $0.25 $0.41 Distribution ($0.15) $0.28 $0.18 $1.15 $ AnnualReportAFCC_2016.indd 4

7 Financial Review As at 31 March 2016, the equity of the Council was $8.80m, a decrease of $291k from last year's total of $9.10m. The equity is comprised of total assets of $8.94m, less total liabilities of $137k. Assets were cash and cash equivalents, short-term bank deposits, accounts receivable, inventory, fixed and intangible assets. Cash and bank deposits increased from $6.13m in 2015 to $8.34m in 2016 an increase of $2.21m. Receivables totalled $508k which have decreased from $1.63m in Inventory decreased by $2.12m from last year, to $Nil by the end of the 2016 financial year. Fixed assets had a book value of $3.5k, which is $318k lower than last yearʼs balance of $321k. All intangible assets have been disposed or fully amortised, with no book value. Investments (shares and deposits in grocery and appliance-buying groups) decreased from $117k to $88k as a result of Foodstuffs shares maturing greater than the value of new shares accruing. Total liabilities including accounts payable decreased by $1.09m from $1.23m to $137k. Distribution of Surplus Distributions are made to Service Welfare Funds to provide amenities and benefits which facilitate Service recruitment, retention and morale. The payment of distributions is in keeping with the role of the AFCC and indirectly rewards the NZDF personnel who support the organisation. There has been no distribution of surplus as AFCC has disclosed a loss for the 2016 financial year following the transition. This is compared to a $276,000 surplus for the year ended The final distribution disclosed of $148,000 from 2015 year ended was not paid out and this has been shown as a negative distribution in the Statement of Comprehensive Revenue and Expense. Outlook The AFCC continues to provide services to people on NZDF Camps and Bases through this new contracted arrangement. Ms Joanne Devine, CA Deputy Chair Armed Forces Canteen Council AnnualReportAFCC_2016.indd 5

8 STATEMENT OF RESPONSIBILITY The Council is responsible for ensuring that the financial statements give a true and fair view of the financial position of the Armed Forces Canteen Council as at 31 March 2016 and its financial performance and cash flows for the year ended on that date. The Council considers that the financial statements as presented have been prepared using the appropriate accounting policies, consistently applied and supported by reasonable judgments and estimates, and that all relevant financial reporting and accounting standards have been followed. The Council believes that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the financial position of the Council and facilitate compliance of the financial statements with generally accepted accounting practice. The Council considers they have taken adequate steps to safeguard the assets of the Council and to prevent and detect fraud and other irregularities. The Council is pleased to present the financial statements for the financial year ended 31 March For and on behalf of the Council Ms Joanne Devine, CA Deputy Chair Armed Forces Canteen Council Brigadier C. J. Parsons, MNZM, DSD Deputy Chief of Army Armed Forces Canteen Council 19 August August AnnualReportAFCC_2016.indd 6

9 STATEMENT OF ACCOUNTING POLICIES FOR THE YEAR ENDED 31 MARCH 2016 REPORTING ENTITY : The reporting entity is the Armed Forces Canteen Council (AFCC). The AFCC is a Public Benefit Entity (PBE) established under the Armed Forces Canteens Act 1948 (the Act). The principal activity is to provide canteen services to the Armed Forces. These financial statements have been prepared to comply with Section 13 of the Act, Generally Accepted Accounting Practice (NZ GAAP) and in accordance with PBE Standards Reduced Disclosure Regime (RDR). The criteria under which the AFCC is eligible to report in accordance with the PBE Standards RDR are that it is not publicly accountable and its expenses fall within the treshold for Tier 2 reporting. These financial statements are the first financial statements presented in accordance with the new PBE Standards RDR. MEASUREMENT BASE : The measurement base adopted is historical cost. The financial statements are presented in New Zealand currency. The functional currency of the AFCC is New Zealand Dollars. ACCOUNTING POLICIES : The following particular accounting policies, which materially affect the measurement of financial results and financial position, have been applied. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The statements have been prepared on a going concern basis. Cash and Cash Equivalents : Cash and cash equivalents include cash on hand, bank accounts and deposits with a maturity of no more than three months from the date of acquisition. Accounts Receivable : Accounts receivable are designated as loans and receivables. They are initially measured at fair value and subsequently measured at their estimated realisable value after providing for a provision for impairment. Impairment is established when there is objective evidence, on a case by case basis, that the AFCC will not be able to collect amounts due according to the original terms of the agreement. All receivables are classified as exchange. Investments : Bank Deposits: Investments in bank deposits are initially measured at cost. After initial recognition investments in bank deposits are measured at historical cost plus actual accrued interest, which represents its fair value. Inventories : Inventories consist of goods held for resale and are valued at the lower of cost using the weighted average method or net realisable value. Financial Assets at Fair Value Through Profit or Loss : Financial assets at fair value through profit or loss are those that are not classified in any of the other categories above. This category encompasses shareholdings that the AFCC holds for strategic purposes in Grocery and Appliance Buying Groups. These investments are subsequently measured at their fair value. As there is no quoted market price or other method to determine their market value, cost is used to approximate their market value. Fixed Assets (Property, Plant and Equipment) : Fixed assets costing more than $200 are capitalised and recorded at cost less accumulated depreciation. All groups of assets forming part of a network which are material in aggregate are capitalised and recorded at cost. Any write-down of an item to its recoverable amount is recognised in the Statement of Comprehensive Revenue and Expense. AFCC does not hold any cash generating assets. Assets are considered cash generating where their primary objective is to generate a commercial return. There are no restrictions on any PPE titles and no PPE is pledged as security for any liabilities. Depreciation : Depreciation is provided on a straight line basis on all fixed assets including leasehold improvements at a rate which will write off the cost of the assets over their estimated useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows: Buildings 10 to 40 Years 2.5% - 10% Computer Equipment 3 to 8 Years 12.5% - 30% Leasehold Improvements 5 to 10 Years 10% - 20% Motor Vehicles 5 to 7 Years 15% - 20% Plant and Equipment 5 to 8 Years 12.5% - 20% Video and DVD tapes 2 Years 50% AnnualReportAFCC_2016.indd 7

10 STATEMENT OF ACCOUNTING POLICIES FOR THE YEAR ENDED 31 MARCH 2016 Intangible Assets : Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bring to use the specific software. Amortisation : The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. The useful life and associated amortisation rate is as follows: Computer Software 3 to 8 Years 12.5% - 30% Financial Instruments : The AFCC is party to financial instruments as part of its normal operations. These financial instruments include cash and cash equivalents, accounts receivable, held to maturity investments and accounts payable. All financial instruments are recognised in the Statement of Financial Position and all revenues and expenses in relation to financial instruments are recognised in the Statement of Comprehensive Revenue and Expense. Statement of Cash Flows. : Cash means cash and cash equivalents and bank accounts. Operating activities include cash and interest received from customers and records the cash payments for goods and services to suppliers and employees, net goods and service tax, interest paid to the bank and distribution of surpluses. Investing activities are those activities relating to the acquisition and disposal of non-current assets. Sales Revenue : The AFCC derives revenue through the sale of goods and services. Such revenue is recognised and recorded when the sale takes place. All sales revenue is classed as exchange revenue. Interest Income : Interest earned on hire purchase agreements is calculated on the daily balances and charged to the agreements monthly. All Interest revenue is classed as exchange revenue. Employee Entitlements : Provision is made for annual leave liability which is calculated on an actual entitlement basis at current rates of pay. A liability and expense are recognised for termination benefits due within 12 months based on contractual obligation. Operating Leases : Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Operating lease expenses are recognised on a systematic basis over the period of the lease. Income Tax : Income tax is not payable pursuant to Section 16 (1) of the Armed Forces Canteens Act Goods and Service Tax (GST) : The financial statements have been prepared so that all components are stated exclusive of GST with the exception of receivables and payables which are stated with GST included. The amount of GST owing to the Inland Revenue Department at balance date, being the difference between Output GST and Input GST, is included in Accounts Payable. CHANGES IN ACCOUNTING POLICIES : There have been no material changes in accounting policies since the date of the last financial statements. All policies have been applied on a basis consistent with the previous year AnnualReportAFCC_2016.indd 8

11 STATEMENT OF COMPREHENSIVE REVENUE AND EXPENSE FOR THE YEAR ENDED 31 MARCH 2016 NOTES $ $ Revenue Sales revenue 4,734,252 12,339,253 Cost of sales 3,848,123 9,121,144 Gross surplus 886,129 3,218,109 Other revenue 1 829, ,596 Expenses Employee costs 2 1,424,203 2,633,697 Property charges 3 170, ,703 Interest Other expenses 4 560, ,157 Total expenses 2,155,046 3,384,022 Surplus/(deficit) (439,861) 459,683 Less distributions/(cancellation of intended distribution) 5 (148,000) 276,000 Net surplus/(deficit) after distributions (291,861) 183,683 Other comprehensive revenue and expense - - Total comprehensive revenue and expense (291,861) 183,683 STATEMENT OF CHANGES IN NET ASSETS / EQUITY FOR THE YEAR ENDED 31 MARCH $ $ Equity at beginning of year 9,095,633 8,911,950 Total comprehensive revenue and expense (291,861) 183,683 Equity at end of year 8,803,772 9,095,633 The Statement of Accounting Policies and accompanying notes form part of these financial statements AnnualReportAFCC_2016.indd 9

12 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2016 NOTES $ $ EQUITY 8,803,772 9,095,633 Represented by: CURRENT ASSETS Cash and cash equivalents 6 2,960, ,395 Short term bank deposits 7 5,380,000 5,745,700 Accounts receivable 8 378,027 1,414,336 Accrued Receivables 108,954 - Inventory - 2,124,790 Investments 9 18,367 45,792 8,845,937 9,713,013 NON-CURRENT ASSETS Accounts receivable 8 21, ,298 Investments 9 69,752 71,231 Property, plant and equipment 10 3, ,448 Intangible assets 11-1,635 TOTAL ASSETS 8,940,318 10,326,625 CURRENT LIABILITIES Payables (from exchange transactions) , ,447 Payables (from non-exhange transactions) 12 26,589 17,545 Distribution payable 5-276,000 TOTAL LIABILITIES 136,546 1,230,992 NET ASSETS 8,803,772 9,095,633 The Statement of Accounting Policies and accompanying notes form part of these financial statements AnnualReportAFCC_2016.indd 10

13 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2016 Cash flows from operating activities NOTES $ $ Cash was provided from: Receipts from customers 6,149,842 12,490,982 Interest received 317, ,629 Dividend Received 2,275 - Net goods and service tax (12,516) 13,570 6,456,939 12,960,181 Cash was disbursed to: Payments to suppliers (2,921,194) (9,612,910) Payments to employees (1,630,859) (2,630,859) Distribution of surplus (128,000) (182,500) Interest paid (46) (465) (4,680,099) (12,426,734) Net cash inflow from operating activities 13 1,776, ,447 Cash flows from investing activities Cash was provided from: Proceeds from sale of fixed assets 406,749 23,540 Proceeds on redemption of investments 28,904 21,570 Net proceeds from term deposit maturities 16,602,557 8,154,866 17,038,210 8,199,976 Cash was disbursed to: Net purchases of term deposits (16,236,857) (8,594,251) Purchase of fixed assets - (126,414) Purchase of investments - (6,514) (16,236,857) (8,727,179) Net cash outflow from investing activities 801,353 (527,203) Net increase in cash held 2,578,193 6,244 Opening cash brought forward 382, ,151 Ending cash carried forward 6 2,960, ,395 The Net goods and services tax component of operating activities reflects the net GST paid to and received from the Inland Revenue Department. The Statement of Accounting Policies and accompanying notes form part of these financial statements AnnualReportAFCC_2016.indd 11

14 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Other Revenue $ $ Interest income 426, ,629 Commission 134,775 30,718 Rental from houses 47,760 48,393 Pay plan fees 22,829 33,095 Unused provision for impaired accounts receivable 10,663 51,402 Dividend received 2,275 3,271 Gain on disposal of assets 168,858 - Other 15,603 3, , , Employee Costs Salaries and Wages 1,102,799 2,533,347 Defined Contribution plan employer contributions 34,196 57,901 Termination Benefits 261,014 - Other Costs 26,194 42,449 1,424,203 2,633,697 Employer contributions to defined contribution plans include contributions to KiwiSaver. 3. Property Charges Depreciation and amortisation 69, ,373 Loss on disposal of assets 12,340 - Rental, concession fees and power 64,205 88,019 Repairs and maintenance 9,497 40,485 Motor vehicle expenses 15,257 32, , , Other Expenses Audit fees 33,856 33,476 Change in provision for impairment 46,436 22,234 Council Fees - 4,460 Operating leases 20,413 49,187 Professional Fees 291,136 69,552 Sundry 168, , , , Distribution of Surplus Distributions to the NZDF Single Services Welfare Funds pursuant to section 14 of the Armed Forces Canteens Act Interim distributions payable: Army Central Welfare Fund - 82,206 RNZ Navy Central Fund - 45, ,000 The proposed distribution from 2014/15 was not paid out and this has been shown as a negative distribution in the Statement of Comprehensive Revenue and Expense. Army Central Welfare Fund (95,517) 95,517 RNZ Navy Central Welfare Fund (52,483) 52,483 (148,000) 148,000 Total Distributions (148,000) 276, AnnualReportAFCC_2016.indd 12

15 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Cash and Cash Equivalents $ $ Cash ,369 Bank 252,489 43,221 Deposits with Grocery Groups - 3,919 Deposit with the Bank 2,707, ,886 2,960, ,395 The carrying value of cash at bank and short-term deposits with maturities less than three months approximates their fair value. 7. Short Term Bank Deposits Deposits placed with the Bank of New Zealand are for short term periods pending working capital and capital expenditure requirements. The carrying amounts of term deposits with maturities greater than three months and less than twelve months approximate their fair value. 5,380,000 5,745, Accounts Receivable Receivables are made up of: Current portion 320,207 1,491,082 Overdue 243, ,381 Less provision for impairment (165,029) (190,829) 399,156 1,633,634 Accounts receivable due within one year 378,027 1,414,336 Accounts receivable due after one year 21, , ,156 1,633,634 The carrying value of receivables approximate their fair value. The Ageing profile of receivables at the 2016 year end is detailed below: Gross Impairment Net Not Past Due 320, ,207 Past Due 1-30 days 7,947-7,947 Past Due days 7,994-7,994 Past Due days 4,486-4,486 Past Due over 90 days 223,551 (165,029) 58,522 Total 564,185 (165,029) 399,156 The Ageing profile of receivables at the 2015 year end is detailed below: Gross Impairment Net Not Past Due 1,491,082-1,491,082 Past Due 1-30 days 27,955-27,955 Past Due days 31,022-31,022 Past Due days 4,866-4,866 Past Due over 90 days 269,538 (190,829) 78,709 Total 1,824,463 (190,829) 1,633,634 Provision for impairment of receivables Opening Balance 190, ,075 Additional provisions made during the year 24,534 34,947 Unused amounts reversed during the year (12,263) (59,113) Receivables written off during the year (38,071) (50,080) Closing Balance 165, ,829 Collateral over impaired receivables is held to the extent that a fixed charge is retained over any goods sold on hire purchase until the final payment is made AnnualReportAFCC_2016.indd 13

16 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Investments Shares and Deposits in Grocery and Appliance g Buying Groups Groups $ $ $ $ - Current portion 18,367 18,367 45,792 45,792 - Non current portion 69,752 69,752 71,231 71,231 Total Investments 88,119 88, , ,023 The carrying value of investments approximates their fair value 10. Fixed Assets Current year Opening Opening Closing Closing Cost Cost Cost Additions AdditionsDisposals Disposals Cost Cost $ $ $ $ $ $ $ $ Buildings 103, , ,396 17,396 86,107 86,107 Leasehold Improvements 276, , , ,078 2,002 2,002 Computer equipment 228, , , , Motor Vehicles 507, , , , Plant and equipment 1,230,797 1,230, ,230,797 1,230, Video and DVD tapes 30,340 30, ,340 30, ,376,626 2,376, ,288,517 2,288,517 88,109 88,109 Accumulated depreciation Opening Opening Depreciation Depreciation Depn on Depn on Closing Closing Accum Accum Depn Depn Disposals Disposals Accum Accum Depn Depn $ $ $ $ $ $ $ $ Buildings 98,148 98,148 1,855 1,855 17,396 17,396 82,607 82,607 Leasehold Improvements 276, , , ,078 2,002 2,002 Computer equipment 200, ,825 10,523 10, , , Motor Vehicles 366, ,401 37,363 37, , , Plant and equipment 1,083,384 1,083,384 18,214 18,2141,101,599 1,101, Video and DVD tapes 30,340 30, ,340 30, ,055,178 2,055,178 67,956 67,9562,038,526 2,038,526 84,609 84,609 Current year Opening Opening Closing Closing Book value Book Value Book Value Book Value Book Value $ $ $ $ Buildings 5,355 5,355 3,500 3,500 Leasehold Improvements Computer equipment 28,005 28, Motor Vehicles 140, , Plant and equipment 147, , Video and DVD tapes , ,448 3,500 3,500 Previous year Opening Opening Closing Closing Cost Cost Cost Additions AdditionsDisposals Disposals Cost Cost $ $ $ $ $ $ $ $ Buildings 103, , , ,503 Leasehold Improvements 288, , ,561 12, , ,080 Computer equipment 237, ,508 19,614 19,614 28,292 28, , ,830 Motor Vehicles 508, ,161 72,046 72,046 73,131 73, , ,076 Plant and equipment 1,250,682 1,250,682 34,754 34,754 54,639 54,639 1,230,797 1,230,797 Video and DVD tapes 47,034 47, ,694 16,694 30,340 30,340 2,435,529 2,435, , , , ,317 2,376,626 2,376,626 Accumulated depreciation Opening Opening Depreciation Depreciation Depn on Depn on Closing Closing Accum Accum Depn Depn Disposals Disposals Accum Accum Depn Depn $ $ $ $ $ $ $ $ Buildings 96,297 96,297 1,851 1, ,148 98,148 Leasehold Improvements 288, , ,561 12, , ,080 Computer equipment 205, ,869 22,821 22,821 27,865 27, , ,825 Motor Vehicles 409, ,030 30,502 30,502 73,131 73, , ,401 Plant and equipment 1,082,345 1,082,345 53,296 53,296 52,257 52,257 1,083,384 1,083,384 Video and DVD tapes 47,034 47, ,694 16,694 30,340 30,340 2,129,216 2,129, , , , ,508 2,055,178 2,055, AnnualReportAFCC_2016.indd 14

17 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Fixed Assets (continued) Previous Year - Book value Opening Opening Closing Closing Book Value Book Value Book Value Book Value $ $ $ $ Buildings 7,206 7,206 5,355 5,355 Leasehold Improvements Computer equipment 31,639 31,639 28,005 28,005 Motor Vehicles 99,131 99, , ,675 Plant and equipment 168, , , ,413 Video and DVD tapes , , , , Intangible Assets Current year Opening Opening Closing Closing Cost Cost Cost Additions AdditionsDisposals Disposals Cost Cost $ $ $ $ $ $ $ $ Computer software 234, , , , , , , , Accumulated amortisation Opening OpeningAmortisation Amortisation Amort Amort on on Closing Closing Accum Accum Amort Amort Disposals Disposals Accum Accum Amort Amort $ $ $ $ $ $ $ $ Computer software 233, ,073 1,395 1, , , , ,073 1,395 1, , , Carrying value Opening Opening Closing Closing Carry Carry Value Value Carry Carry Value Value $ $ $ $ Computer software 1,635 1, Previous year Opening Opening Closing Closing Cost Cost Cost Additions AdditionsDisposals Disposals Cost Cost $ $ $ $ $ $ $ $ Computer software 248, , ,475 13, , , , , ,475 13, , ,708 Accumulated amortisation Opening OpeningAmortisation Amortisation Amort Amort on on Closing Closing Accum Accum Amort Amort Disposals Disposals Accum Accum Amort Amort $ $ $ $ $ $ $ $ Computer software 221, ,915 24,633 24,633 13,475 13, , , , ,915 24,633 24,633 13,475 13, , ,073 Carrying value Opening Opening Closing Closing Carry Carry Value Value Carry Carry Value Value $ $ $ $ Computer software 26,268 26,268 1,635 1, Payables $ $ $ $ Payables under exchange transactions Trade creditors , ,433 Accrued liabilities 56,368 56, , ,460 Employee entitlements 52,898 52, , , , , , ,447 Payables under non-exchange transactions Taxes payable (GST) 26,589 26,589 17,545 17,545 26,589 26,589 17,545 17,545 Total Payables 136, , , ,992 The carrying value of payables approximates their value. fair value AnnualReportAFCC_2016.indd 15

18 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Reconciliation of reported net surplus with cash flows from operating activities $ $ Net surplus (439,861) 459,683 Add non cash items: Depreciation and amortisation 69, ,373 Add/(less) items classified as investing of financing activities: Net Losses/(Gains) on Disposal of PPE (156,518) - Distribution reversal 148,000 Total non-cash transactions 60, ,373 Add movements in working capital items: Decrease in receivables 1,125,524 3,996 Decrease in inventory 2,124,790 84,404 Increase/ (decrease) in payables (1,094,446) 148,991 Net working capital movements 2,155, ,391 Distribution of surplus - (276,000) Net cash inflow from operating activities 1,776, , Operating Lease Commitments Commitments relating to Head Office premise Not later than one year 4,661 39,925 Later than one year and not later than five years - - Total Commitment 4,661 39, Council Member Remuneration Service Members of Council are not paid any Remuneration. The total value of remuneration paid to the Independent Council Member was only in 2014/15, he is no longer on council. Independent Council Member - 4, Key Management Personnel Compensation and Remuneration of Employees Key management comprises members of the Council and Chief Executive. The Chief Executive position was made redundant in September Service Members of Council are not paid any remuneration. Salary and other short term employee benefits 188, ,639 Number of Employees Full time Equilavent Contingent Liabilities and Assets The Council has no material contingent liabilities or assets (Nil in 2015). 18. Financial Instruments (a) Fair values Fair values of financial instruments is equivalent to the amount disclosed in the Balance Sheet. This includes instruments such as cash and cash equivalents, short term deposits, investments, accounts receivable and accounts payable. (b) Credit risk Credit risk is the risk that a third party will not be able to meet its obligations to the Council. In the normal course of its business the Council incurs credit risk from cash and short term deposits with the bank, investments and accounts receivable. The Council places its cash and deposits with its authorised bank which has a high credit rating. Accounts receivable are subject to credit evaluations and collateral where possible. There is no significant concentration of credit risk AnnualReportAFCC_2016.indd 16

19 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Financial Instruments (continued) (c) Interest rate risk. Interest rate risk is the risk that interest rates will change, increasing or decreasing the cost of borrowing or lending. The interest rate risk on the Councils borrowings is limited to the corporate rate set by the bank on its overdraft. The interest rate risk on investments and accounts receivable will fluctuate, due to the changes in market interest rates. The Council does not consider there is any significant interest exposure on its borrowing or lending. 19. Related Party Transactions The New Zealand Defence Force (NZDF) is considered a related party to the AFCC. Senior members of the NZDF serve on the Council as defined under s4 of the Armed Forces Canteens Act The NZDF provides facilities to the AFCC to conduct its operations in accordance with Defence Force Order 03/2007. During the year members of Council and key management, as part of normal customer relationship, were involved in minor purchases from the AFCC. 20. Adjustments arising on transition to the new PBE accounting standards Reclassification adjustments There has been no reclassifications in the financial statements resulting from the transition to the new PBE accounting standards. Recognition and measurement adjustments There have been no recognition and measurement adjustments resulting from the transition to the new PBE accounting standards. 21. Cash Generating Assets An assessment of the fixed assets held by AFCC has been performed. The buildings were tenanted for which rental income is received. These tenants are not Defence force personnel. 22. Events after Balance date There were no significant events after the balance date AnnualReportAFCC_2016.indd 17

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