Endeavour TM Superannuation

Transcription

1 Endeavour TM Superannuation Financial statements 30 June 2015 An illustration of annual financial statements for Australian Superannuation Funds in accordance with AASB 1056 Superannuation Entities (AASB 1056)

2 Foreword As the superannuation sector continues to grow, with now over $1.9 trillion in funds under management, there continues to be heightened governance expectations on funds. The annual financial statements are an important element of a superannuation fund s governance; communicating to its stakeholders the current financial position, financial performance and financial risks, and forming the basis for the financial information provided in the APRA reporting forms and the annual report to members. The new accounting standard AASB 1056 Superannuation Entities (AASB 1056), issued by the Australian Accounting Standards Board (AASB) on 5 June 2014, is the most significant change in the presentation, measurement and disclosures of financial statements for superannuation funds in recent history. AASB 1056 is applicable for annual periods commencing on or after 1 July 2016, with early adoption allowed. Endeavour TM Superannuation Fund is designed to assist you in preparing the financial statements of a superannuation entity in accordance with AASB 1056 and other Australian Accounting Standards as applicable, thereby minimising time consuming guess-work around interpreting changes to accounting policies and financial reporting. In June 2014 Ernst & Young released a publication Financial Reporting for Superannuation Entities a move in a new direction, which highlighted the key changes required by AASB 1056 as well as actions which we recommended superannuation entities undertake prior to the effective date of the standard. This edition of Endeavour TM Superannuation Fund includes sample financial statements for an accumulation fund, Endeavour TM Defined Contribution Superannuation Fund, and a combined defined benefit and accumulation fund Endeavour TM Hybrid Superannuation Fund, for the year ending 30 June 2015, prepared in accordance with the early adoption provisions of AASB Where AASB 1056 is silent on accounting treatment and/ or disclosure requirements, the requirements of other applicable Australian Accounting Standards will need to be applied. We hope that you find these financial statements beneficial. Should you require any further assistance or direction, please contact your local EY representative or anyone listed in the back cover of this publication. Maree Pallisco Partner National Superannuation Leader May 2015 EY 1

3 1.0 Introduction This document includes the fictitious financial statements for Endeavour TM Defined Contribution Superannuation Fund and Endeavour TM Hybrid Superannuation Fund. The purpose of these financial statements is to provide practical working models for the preparation of annual financial statements for superannuation entities in accordance with Australian Accounting Standards including the new accounting standard AASB 1056 Superannuation Entities (AASB 1056). Although the illustrative financial statements attempt to show the most relevant disclosure requirements for superannuation entities, they should not be regarded as a comprehensive checklist of accounting requirements. The statements are intended as a guide rather than definitive statements and should be used in conjunction with the relevant legislation and standards. In case of doubt as to the requirements, it is essential to refer to the relevant source. Where necessary appropriate professional advice should be sought concerning individual situations. The example statements in this publication do not address the reporting requirements of Self-Managed Superannuation Funds which report to the Australian Taxation Office (ATO). This financial statement illustrates Australian Accounting Standards that were on issue at 31 December 2014 and that apply to annual reporting periods beginning on or after 1 July With the exception of AASB 1056, standards issued, but not yet effective, as at 31 December 2014 have generally not been early adopted. It is important to note that the illustrative financial statements in this document will require continual updating as new and amended standards and interpretations are issued and/or revised. Specific disclosure requirements apply for standards and interpretations issued but not yet effective (refer to Note 2 of these illustrative financial statements). Furthermore, if the financial year of an entity is other than the calendar year, new and revised standards applied in these illustrative financial statements may not be applicable. We encourage you to confirm with your EY representative that there has been no change in the requirements of AASB Standards and Interpretations between 31 December 2014 and your reporting date. EY 2

4 2.0 Accounting by Superannuation Entities 2.1 AASB 1056 Superannuation Entities The AASB released AASB 1056 on 5 June This standard replaces AAS 25 Financial Reporting by Superannuation Plans (AAS 25) and specifies requirements for the general purpose financial statements of superannuation entities. AASB 1056 is expected to result in significant changes in relation to presentation, measurement and disclosures required in financial statements of superannuation entities compared to previous requirements. The new standard has addressed the perceived shortcomings in AAS 25 and the new requirements in Australian Accounting Standards that arose with the adoption of International Financial Reporting Standards in Australia in Superannuation entities in scope All superannuation entities consisting of defined contribution plans, defined benefit plans, hybrid plans (comprising both defined contribution and defined benefit members), private sector plans, public sector plans, and eligible rollover funds or approved deposit funds are in scope. Pooled superannuation trusts have been excluded. The standard applies to: Timeline General purpose financial statements of each superannuation entity that is a reporting entity Financial statements of a superannuation entity held out to be general purpose financial statements The standard must be applied retrospectively, and therefore comparatives are required to be restated in the financial statement when the standard is first adopted. Superannuation entities will be required to determine the amounts under the new standard as at 1 July 2015 and 30 June 2016 for presentation and disclosure as comparatives in the year of adoption (if adopting on 1 July 2016). Given the changes to measurement, superannuation entities will need to begin gathering the required information prior to the application date. EY 3

5 2.2 Principle Requirements of the Standard Presentation of financial statements Under AASB 1056 financial information is required to be prepared in a set format regardless of the type of fund. AASB 1056 requires the following format for presenting superannuation entity financial statements. Statement of financial position The new standard requires total liabilities to include defined contribution and defined benefit members accrued benefits and any obligations to employer sponsors. Thus any difference between total assets and total liabilities is to be recognised as equity in the statement of financial position. Superannuation entities must now present: A statement of financial position An income statement A statement of changes in equity/reserves A statement of cash flows A statement of changes in member benefits Notes to the financial statements Equity will commonly arise due to a superannuation entity s reserves and any difference between actual and assumed experience with respect to defined benefit members (surplus or deficit). The standard is also clear that where there is a deficit in relation to defined benefit members, it would not give rise to a receivable for the superannuation entity, unless there is a specific contractual arrangement between the superannuation entity and the employer sponsor. Income statement The income statement is to include the following line items for the period, when applicable: Income, in aggregate or sub classified Expenses, in aggregate or sub classified Net benefits allocated to defined contribution members accounts The net change in defined benefit members liabilities Net result Income tax expense or benefit attributable to net result The income statement: Will only include investment related transactions All contributions and benefits affecting member liabilities have been moved to the statement of changes in member benefits Contribution tax levied will also be reflected in the statement of changes in member benefits whilst the taxes on investments is to be presented in the income statement The net benefits allocated to defined contribution members accounts and net change in defined benefit member liabilities for a reporting period is to be recognised and treated as an allocation from the income statement to the statement of changes in members benefits for that period. A superannuation entity that acts in the capacity of an insurer must disclose separately the insurance premiums, claims expenses, reinsurance expense and the net result from insurance activities either in the income statement or notes to the financial statements. EY 4

6 Statement of changes in equity/reserves As specified in the standard, the interests of members of superannuation entities are liabilities and are not regarded as meeting the definition of an equity instrument as defined in AASB 132 Financial Instruments: Presentation. The AASB noted that while superannuation entities have no equity holders, they often have equity, particularity in the form of reserves, and therefore should present a statement of changes in equity in accordance with AASB 101 Presentation of Financial Statements. The extent of any surplus or deficit of net assets is useful information regarding the entity s capacity to pay defined contribution members and/or financial position (solvency) with respect to defined benefit members entitlements. In situations where a statement of changes in equity may not be material, superannuation entities may use a term such as reserve rather than equity in referring to line items or in naming statements. Statement of changes in members benefits Given the significance of member benefits, a superannuation entity is now required to present information that provides users with a basis for understanding the changes in member benefits. The statement of changes in members benefits is to present opening and closing balances for member liabilities and, the following line items for the period, when applicable: The tax on concessional contributions received is to be presented separately in this statement. Employer contributions Member contributions Taxes on contributions Benefits transferred into the entity from other superannuation entities Benefits to members Insurance premiums charged to defined contribution member accounts Net benefits allocated to defined contribution member accounts Net changes to defined benefit member accrued benefits Amounts allocated to members from reserves EY 5

7 Measurement of assets and liabilities at fair value AAS 25 required a superannuation entity to measure all assets at net market value. In contrast under AASB 1056, all recognised assets and liabilities except member liabilities, tax assets and liabilities, acquired goodwill, insurance assets and liabilities, and employer-sponsor receivables are to be measured at fair value at each reporting date, with the fair value changes being recognised through the income statement. Superannuation entities are required to apply AASB 13 Fair Value Measurement in determining the fair value measurement and accounting for any transaction costs. The AASB has confirmed that fair values should not be adjusted for transaction costs, to facilitate consistency across superannuation entities in relation to transaction costs. The application of AASB 5 Non-Current Assets Held for Sale and Discontinued Operations is therefore prohibited. The adoption of fair value under AASB 13 will result in a significant increase in the disclosure requirements, including a description of valuation methods, assumptions and unobservable inputs used to derive the fair value. Members liabilities Members liabilities are required to be measured as the accrued benefits of members for both defined contribution plans and defined benefit plans and are required to be disclosed in the statement of financial position as a liability. AASB 1056 stipulates that: For defined contribution liabilities, accrued benefits are measured as the member account balances as at the reporting date For defined benefit member liabilities, accrued benefits are measured as the amount of a portfolio of investments that would be needed as at the reporting date to yield future net cash inflows that would be sufficient to meet accrued benefits at that date when they are expected to fall due The above measurement principle for defined benefit member liabilities is specific to superannuation entities. The AASB noted that there is not a consistent approach across the various Australian Accounting Standards to measure different types of liabilities. The AASB also noted that this principle is consistent with the notion that a superannuation entity needs to fund the liability, taking into account the timing and probabilities attached to various factors that reflect the characteristics of the members/beneficiaries such as expected mortality; rates of member turnover, disability and early retirement; salaries and rates of salary adjustments; member choices of available options, such as lump sum or pension options; and any other risks specific to the liability. AASB 1056 requires defined benefit member liabilities to be measured at each reporting date. But, the standard does not specify any particular methodologies that may be employed in measuring defined benefit member liabilities. The AASB acknowledges that in applying the above measurement principle and the concept of materiality, there are a number of approaches to measuring defined benefit liabilities that could be employed which do not involve undertaking a comprehensive actuarial assessment. The standard also states that the investment returns relevant to measuring the liability are those expected on a portfolio of investments that reflects the opportunities available in investment markets and not necessarily the actual investments held by the superannuation entity to meet accrued defined benefit member liabilities. Accordingly the measurement is not dependent on whether the benefits are fully funded, under/over funded or completely unfunded. Net assets attributable to defined benefit members Where the amount of net assets attributable to defined benefit members differs from the amount of defined benefit member liabilities determined in accordance with AASB 1056, the superannuation entity is required to disclose information that provides users with a basis for understanding the nature, causes of and any strategies for addressing the difference between the two amounts. The disclosures would include, for example, information on whether the difference arose as a consequence of applying different assumptions for the purposes of determining funding levels and measuring defined benefit member liabilities. If so, disclosure would be provided of the nature of the differences between the assumptions, and in the case of a difference not wholly explained, the entity s strategy for addressing the difference including the anticipated timeframe over which the difference is expected to be eliminated; and any plans or processes in EY 6

8 place for employer-sponsors to seek to be paid some or all of a surplus or to reduce the level of their contributions in the future. Insurance arrangements The impact on financial statements of insurance arrangements in place by superannuation entities for their members varies depending on the nature of those arrangements. Some superannuation entities act only as agents for external insurers, while other superannuation entities act in the capacity of insurers and, therefore, take on insurance risks. A superannuation entity acting in the capacity of an insurer should: Recognise liabilities and assets arising from its insurance and reinsurance arrangements Measure liabilities and assets arising from insurance and reinsurance arrangements using the approach to measuring defined benefit member liabilities If reinsurance assets are impaired, reduce the carrying amount of those assets and recognise the impairment in the income statement When a superannuation entity is acting only as an agent for an external insurer, the impacts on the financial statements could include: Premium cash inflows collected from members and premium cash outflows paid to insurers in the statement of cash flows and Premiums charged to member accounts and insurance benefits paid to members via the superannuation entity in the statement of changes in member benefits Employer-sponsor receivables AASB 1056 clarifies that an asset related to an employer sponsor receivable is recognised to the extent there is a difference between a defined benefit member liability and the fair value of the assets available to meet that liability and the fund has a contractual right to funding. The receivable needs to meet the definition and recognition criteria for an asset in the Framework for Preparation and Presentation of Financial Statements. A specific contractual arrangement or statutory arrangement in place between the superannuation entity and the relevant employer-sponsor(s) in relation to funding defined benefit member liabilities may give rise to an asset as mentioned above. Disaggregated information A superannuation entity is to disclose disaggregated information when it is necessary to explain the risks and benefit arrangements relating to different categories of members. When a superannuation entity has multiple defined benefit plans, judgment needs to be applied to determine the most relevant levels of aggregation at which to disclose information, particularly where the information differs from plan to plan. A superannuation entity that has material member liabilities relating to different types of members, such as defined contribution members and defined benefit members, would need to consider separately presenting: a) Line items in the statement of financial position for each of the different membership types in respect of member liabilities; and b) Either a single statement of changes in member benefits with columns or notes showing the amounts relating to different membership types/plans. Consolidated financial statements There have been various deliberations with respect to preparation of consolidated financial statements by superannuation entities. AASB 10 Consolidated Financial Statements (AASB 10) as amended by AASB Amendments to Australian Accounting Standards Investment Entities (AASB ) was effective for reporting periods beginning on or after 1 January 2014, with early adoption allowed. If a superannuation entity qualifies as an investment entity under AASB , it would be required to account for its subsidiaries at fair value through the income statement, except for any subsidiaries that provide services relating to its investment activities, which would need to be consolidated. There are a number of conditions that must be met by the superannuation entities to be classified as an investment entity and these conditions will be required to be assessed on a case by case basis. EY 7

9 Compliance with principles and requirements in other Australian Accounting Standards AASB 1056 clarifies that when the recognition, measurement and disclosure principles and requirement in this standard address the same items or events as the recognition, measurement and disclosure principles and requirements in other Australian Accounting Standards, a superannuation entity need not apply those other Australian Accounting Standards. However, when a superannuation entity applies the recognition and measurement principles and requirements in other Australian Accounting Standard, AASB 1056 clarifies that the entity would also apply any relevant disclosure principles and requirements contained in those other Standards unless they are specifically modified by this Standard. Australian Accounting Standards that contain disclosure principles and requirements, some or all of which a superannuation entity would apply, when relevant, include but are not limited to the following: AASB 7 Financial Instruments: Disclosures AASB 10 Consolidated Financial Statements as amended by AASB Amendments to Australian Accounting Standards Investment Entities AASB 12 Disclosure of Interests in Other Entities AASB 13 Fair Value Measurement AASB 101 Presentation of Financial Statements AASB 107 Statement of Cash Flows AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors AASB 110 Events after the Reporting Period AASB 112 Income Taxes AASB 118 Revenue AASB 124 Related Party Disclosures When a superannuation entity applies other Australian Accounting Standards, the entity also applies relevant Australian Interpretations listed in AASB 1048 Interpretation of Standards. Compliance with International Financial Reporting Standards The existing presentation, measurement and disclosure requirements in AASB 1056 are not in accordance with International Financial Reporting Standards (IFRS) and accordingly, financial statements prepared by superannuation plans under AASB 1056 will not be in compliance with IFRS. Hence, superannuation funds are unable to make an explicit and unreserved statement of compliance with IFRS. EY 8

10 3.0 Taxation Considerations Foreign Currency Hedging Transactions In December 2014 the Australian Taxation Office (ATO) released Taxation Ruling TR 2014/7 in relation to the source of foreign currency hedge gains and losses and the implications on the availability of foreign income tax offsets. The ATO takes the view that the source of each foreign currency hedging gain or loss should be the place where the transaction is formed as determined by looking at the office through which the counterparty (as the party accepting the offer) is acting. In this regard, the availability of foreign income tax offsets may be limited where foreign currency hedging losses have a foreign source. The ruling applies for years of income commencing on or after 1 July Trustees should confirm that their custodians are determining the source of fund s foreign currency hedging gains and losses and their compliance with TR 2014/7. ATO audit activity The ATO has actively been undertaking a range of reviews of the compliance obligations of superannuation funds, including the availability of foreign income tax offsets and franking credits, as well as the taxation of foreign investments (including limited partnerships). The ATO has also continued to implement a practice of administering the tax system in real time through the use of reportable tax position schedules and pre-lodgement compliance reviews. The ATO has emphasised its expectation that trustees have strong corporate governance and tax risk management systems in place so that material tax issues are considered and reported to board members. Foreign Account Tax Compliance Act (FATCA) legislation The FATCA legislation was enacted in March 2010 and became effective on 1 January This US legislation is designed to prevent US tax residents from avoiding tax on their world-wide income by not declaring such income to the US Internal Revenue Service (IRS). It does so by requiring institutions defined as foreign financial institutions (FFIs) to comply with certain requirements including the provision of information to the IRS. The Australian Government has negotiated an intergovernmental agreement (IGA) with the US designed to reduce the withholding tax and compliance burden of the FATCA legislation on Australian financial institutions. Under the IGA, Australian complying superannuation funds and their wholly-owned entities are excluded from the definition of FFI under the FATCA legislation. While complying superannuation funds should be exempt under the IGA, Trustees should ensure that all withholding tax forms in respect of foreign investments are appropriately completed so that withholding tax is not inadvertently applied in respect of their investments. EY 9

11 4.0 Content and References This edition contains the following sets of example financial statements: Endeavour TM Defined Contribution Superannuation Fund financial statements for the year ended 30 June 2015 of a defined contribution fund and Endeavour TM Hybrid Superannuation Fund financial statements for the year ended 30 June 2015 of a combined defined contribution and defined benefit fund. These reports illustrate financial statements produced in accordance with AASB 1056, and other applicable accounting standards. References to the sources included in these financial statements are: Prefixed Australian Accounting Standards AASB/AAS AASB Interpretation AASB Int International Financial Reporting Standards IFRS International Financial Reporting Interpretations Committee IFRIC Superannuation Industry (Supervision) Act 1993 SIS Other EY Publications of Relevance In addition to this publication, EY has released the following example financial statements which may also be of use to you: Endeavour TM (International) Limited - Financial report 31 December 2014 Endeavour TM Managed Investment Scheme - Financial report 30 June 2014 Endeavour TM (International) Limited is an example financial statement for a listed company in Australia, and may be useful for trustees required to prepare general purpose financial statements for trustee companies. The disclosures for a listed company are more onerous than that required by a proprietary company however it is still a useful resource for trustees to review relevant disclosures applicable to their organisations. Endeavour TM Managed Investment Scheme is an example financial statement for an investment fund in Australia, and may be useful for trustees required to prepare general purpose financial statements for pooled superannuation trusts. Caveat The names of people and entities included in these illustrative financial statements are fictitious and have been created for the purpose of illustration only. Any resemblance to any person or business is purely coincidental. This financial statement is illustrative only and does not attempt to show all possible accounting and disclosure requirements. Although the illustrative financial statement attempts to show the most likely disclosure requirements for superannuation funds, it should not be regarded as a comprehensive checklist of disclosure requirements. In the case of any doubt as to the requirements, it is essential to refer to the relevant source and, where necessary, to seek appropriate professional advice. EY 10

12 Endeavour TM Defined Contribution Superannuation Fund Financial Statements for the year ended 30 June 2015 EY 11

13 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Table of Contents Statement of Financial Position Income Statement Statement of Changes in Member Benefits Statement of Changes in Reserves Statement of Cash Flows Notes to the Financial Statements Operation of the Fund Summary of significant accounting policies Membership Member liabilities Fair value of financial instruments Investment properties Receivables Property, plant and equipment Payables Changes in fair value of investments Funding arrangements Reserves Income tax Operating expenses Auditors remuneration Cash flow statement reconciliation Segment information Related party disclosures Financial risk management objectives and policies Insurance Commitments and contingent liabilities Significant events after balance date Trustee Statement Independent Report by the Approved Auditor to the Trustee Page EY 12

14 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Statement of Financial Position As at 30 June 2015 Note $ 000 $ 000 Assets Cash and cash equivalents ,059 56,304 Receivables 7 5,302 3,082 Other interest bearing securities 5 201, ,534 Australian equities 5 266, ,401 International equities 5 142, ,895 Units in unit trusts 5 262, ,531 Pooled superannuation trusts 5 60,036 33,234 Insurance policies - investment linked 5 119, ,146 Private equity 5 250, ,001 Derivative assets Investment properties 6 109,126 34,248 Property, plant and equipment Deferred tax assets 13 1,446 22,020 Total assets 1,529,058 1,334,738 Liabilities Benefits payable (321) (309) Payables 9 (5,120) (7,575) Income tax payable (10,543) (9,878) Derivative liabilities 5 (126) (15) Deferred tax liabilities 13 (3,902) (1,044) Total liabilities excluding member benefits (20,012) (18,821) Net assets available for member benefits 1,509,046 1,315,917 Member benefits Allocated to members 4 (1,503,234) (1,310,401) Unallocated to members 4 (1,542) (2,570) Total member liabilities (1,504,776) (1,312,971) Net assets 4,270 2,946 AASB1056.8(a) AASB AASB AASB AASB (b) Equity Investment reserve 12 (465) (460) Operational risk reserve 12 (3,805) (2,486) Total equity (4,270) (2,946) Commentary: AASB 1056 requires total liabilities to include members accrued benefits and any obligations to employer sponsors. The standard specifies that members liabilities are not equity as they do not meet the definition of an equity instrument under paragraph 11 of AASB 132 Financial Instruments: Presentation. As such superannuation entities have no equity holders but have equity in the form of reserves. Members liabilities is the total amount of member account balances as at the reporting date and the amount of net assets attributed to the members which has not yet been allocated to those members at the end of the period. AASB 1056 has new disclosure requirements for funds that act in the capacity of an insurer. The Endeavour Defined Contribution Superannuation Fund (Fund) is acting only as an agent in respect of the insurance arrangements it has in place for members. The insurance arrangements do not give rise to insurance liabilities and assets to the Fund and therefore no disclosure have been made in the statement of financial position. Refer to the Endeavour Hybrid Superannuation Fund illustrative financial statements presented within this publication for an example of a fund that acts in the capacity of an insurer. Assets and liabilities are presented based on liquidity. The above statement of financial position should be read in conjunction with the accompanying notes. EY 13

15 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Income Statement Note $ 000 $ 000 Superannuation activities Interest 18,928 15,502 Dividend revenue 30,246 12,225 Distributions from unit trusts and pooled superannuation trusts 26,715 11,778 Net rentals from investment property 2,832 2,352 Changes in assets measured at fair value 10 32,889 24,850 AASB1056.8(b) AASB AASB Total superannuation activities income 111,610 66,707 AASB1056.9(a) Investment expenses (7,247) (3,517) Administration expenses (5,380) (4,344) Operating expenses 14 (5,922) (6,850) Total expenses (18,549) (14,711) AASB1056.9(b) Net result from superannuation activities 93,061 51,996 Profit from operating activities 93,061 51,996 Less: Net benefits allocated to members accounts (80,141) (75,353) AASB1056.9(c) Profit/(loss) before income tax 12,920 (23,357) Income tax expense / (benefit) 13 11,596 (24,803) Profit after income tax 1,324 1,446 AASB1056.9(e) AASB1056.9(f) Commentary: AASB 1056 treats contributions and benefits paid to members as affecting members liabilities and not as income or expense. Therefore, the income statement will only include investment related transactions and these other transactions will be included in the new statement of changes in member benefits. AASB 1056 has new disclosure requirements for funds that act in the capacity of an insurer. The Endeavour Defined Contribution Superannuation Fund is acting as an agent (rather than insurer) in respect of the insurance arrangements it has in place for members. The insurance arrangements do not give rise to insurance gains or losses as the amount deducted from members accounts is the amount paid directly to the insurer. The insurance premiums are disclosed in the statement of changes in member benefits. Refer to the Endeavour Hybrid Superannuation Fund illustrative financial statements presented within this publication for an example of a fund that acts in the capacity of an insurer. The net benefits allocated to members accounts represents the allocation of the operating profit or (loss) for the period to members accounts. This amount is included in the statement of changes in member benefits. The income tax expense/ (benefit) presented in the income statement does not include taxes levied on concessional contributions, including the contribution surcharge and excess contribution tax. These taxes are included in the statement of changes in member benefits. The above income statement should be read in conjunction with the accompanying notes. EY 14

16 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Statement of Changes in Member Benefits Note $ 000 $ 000 Opening balance of member benefits 1,310,401 1,113,352 Contributions: AASB1056.8(e) AASB Employer 149, ,474 AASB (a) Member 18,239 15,359 AASB (b) Transfer from other superannuation plans 12,219 10,239 AASB (d) Government co-contributions 1,670 1,520 Income tax on contributions (22,441) (22,040) AASB (c) Net after tax contributions 158, ,552 Benefits to members/beneficiaries (45,284) (29,316) AASB (e) Insurance premiums charged to members' accounts (1,230) (1,100) AASB (f) Death and disability benefits credited to members' accounts Amounts allocated to members from reserves - - AASB (i) Benefits allocated to members' accounts, comprising: Net investment income 92,873 87,937 Administration fees (12,732) (12,584) AASB (g) Closing balance of members benefits 1,503,234 1,310,401 Commentary: The statement of changes in member benefits is a new statement required by AASB AASB 1056 states that contributions, rollovers and other inward transfers and benefits paid to members affect member liabilities and therefore are not in the nature of income or expense. These items are excluded from the income statement and are reflected separately in the statement of changes in member benefits. The income tax on contributions includes the taxes levied on concessional contributions, contribution surcharge and excess contribution tax. Benefits allocated to member accounts represents the allocation of the operating profit or (loss) for the period to members accounts. The above statement of changes in member benefits should be read in conjunction with the accompanying notes EY 15

17 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Statement of Changes in Reserves Investment reserve Operational risk reserve Total equity $ 000 $ 000 $ 000 AASB1056.8(c) Opening balance as at 1 July ,486 2,946 Net transfers to/from reserves Profit/ (loss) 5 1,319 1,324 Closing balance as at 30 June ,805 4,270 Investment reserve Operational risk reserve Total equity $ 000 $ 000 $ 000 Opening balance as at 1 July ,050 1,500 Net transfers to/from reserves Profit/ (loss) 10 1,436 1,446 Closing balance as at 30 June ,486 2,946 Commentary: The statement of reserves is a new statement required by AASB This statement may also be referred to as the statement of changes in equity. The standard specifies that members liabilities are not equity as they do not meet the definition of an equity instrument under paragraph 11 of AASB 132 Financial Instruments: Presentation. As such superannuation entities do not have any equity holders. However they do have equity in the form of reserves (refer to Note 13) which should be presented in the statement of changes in reserves in accordance with AASB 101 Presentation of Financial Statements. The above statement changes in reserves should be read in conjunction with the accompanying notes. EY 16

18 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Statement of Cash Flows Note $ 000 $ 000 Cash flows from operating activities Interest from cash deposits and cash equivalents Interest from other interest bearing securities 17,403 18,433 Distributions from unit trusts and pooled superannuation trusts 26,715 24,696 Dividends 30,715 12,225 Net rentals from investment property 2,038 1,969 Insurance premiums (inwards) Administration expenses (5,380) (4,593) Investment expenses (7,247) (3,517) Reinsurance premiums (outward) (1,230) (1,100) Other expenses (5,922) (6,850) Income tax paid (13,484) (16,734) Net cash inflows from operating activities 16 44,608 25,239 AASB (d) AASB AASB (a) AASB AASB AASB Cash flows from investing activities AASB ,21 Proceeds from sales of shares 40,155 18,459 Proceeds from sales of units in unit trusts 31,874 - Purchases of units in unit trusts and pooled superannuation trusts (40,466) (43,349) Purchases of shares (69,125) (88,617) Purchases in direct property (66,795) - Purchases of other assets (43) (15) Net cash outflows from investing activities (104,400) (113,522) Cash flows from financing activities Employer contributions 149, ,474 Member contributions 18,329 15,359 Transfers from other superannuation plans received 12,219 10,239 Government co-contributions received 1,670 1,520 Benefits paid to members (45,284) (29,316) Income tax paid on contributions received (22,441) (22,040) Net cash inflows from financing activities 113, ,236 Net increase in cash 53,755 33,953 Cash at the beginning of the financial period 56,304 22,351 Cash at the end of the financial period ,059 56,304 AASB , 21 The above statement of cash flows should be read in conjunction with the accompanying notes. EY 17

19 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Notes to the Financial Statements 1. Operation of the Fund Endeavour TM Defined Contribution Superannuation Fund ( the Fund ) was initially established by a Trust Deed dated 30 July 1992 to provide benefits for the employees of Endeavour TM Limited and its related companies. Subsequent to obtaining public offer status the Fund accepts contributions from a range of employers. The Fund is domiciled in Australia and the address of the Fund s registered office is 8 Endeavour Street, Endeavour Hills, Victoria AASB1056.8(f) AASB AASB The Fund is a defined contribution fund whereby contributions of the employers and the employees are made in accordance with the terms of the Trust Deed. The members accounts are credited or debited each year with contributions and their proportionate share of the net investment income, expenses and income tax expense of the Fund. The trustee of the Fund is Endeavour TM Trustee Pty Ltd (the Trustee ) and it is the holder of a public offer class Registrable Superannuation Entity Licence (licence no L ). In accordance with amendments to the Superannuation Industry (Supervision) Act 1993 the Fund was registered with the Australian Prudential Regulation Authority on 30 April 2006 (registration no. R ). 2. Summary of significant accounting policies Commentary The accounting policies presented below for the Fund are for illustrative purposes. Therefore, these accounting policies should only be used as guidance. In practice the disclosure may need to be more detailed, and should be tailored to a Fund s specific policies. The styles and formats illustrated are not mandatory. Other styles and formats may be equally appropriate if they meet the requirements of AASB 1056 and other applicable accounting standards. (a) Basis of preparation The financial statements are a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, and other authoritative pronouncements of the Australian Accounting Standards Board, the Superannuation Industry (Supervision) Act 1993 and regulations and the provisions of the Trust Deed. The financial statements are presented in Australian Dollars and all values are rounded to the nearest $ 000 except where otherwise indicated. AASB (a) AASB (a) AASB AASB AASB (d),(e) The Fund is a not-for profit entity for the purpose of preparing financial statements. AASB The financial statements were approved by the Board of Directors of the trustee, Endeavour TM Trustee Pty Ltd on 29 September AASB EY 18

20 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Notes to the Financial Statements 2. Summary of significant accounting policies (continued) (b ) Adoption of AASB 1056 The Trustee of the Fund has elected to early adopt AASB 1056 Superannuation Entities (AASB 1056) which is applicable for annual reporting periods beginning on or after 1 July 2016, with early adoption allowed. AASB The adoption of AASB 1056 has resulted in: Changes to the presentation format of the financial statements; Changes to the measurement of assets and liabilities from net market value to fair value, excluding member liabilities, tax assets and liabilities, acquired goodwill, insurance assets and liabilities, and employer-sponsor receivables; Additional disclosure requirements for assets and liabilities held at fair value as required by AASB 13 Fair Value Measurement; Member benefits recognised as liabilities rather than equity; and Contributions, rollovers and other inward transfers and benefits paid to members are not in the nature of income or expenses, and are presented in the statement of changes in member benefits. In accordance with the transitional provisions of AASB1056, the Fund has applied the new accounting Standard retrospectively from the start of the comparative period. The adoption of AASB 1056 had the following impact on the statement of financial position at the transition date of 1 July 2014 for the year ended 30 June 2014: AASB As previously reported as at 30 June Transition adjustment Restated total as at 30 June Description 000 Financial instruments Change in measurement from net market value to fair value: Australian equities 239, ,401 International equities 108, ,895 Units in unit trusts 256, ,531 Private equity 241, ,001 Sub total 845,948 1, ,828 Member benefits Member benefits recognised as liabilities rather than equity: Member liabilities - 1,312,971 1,312,971 Equity Member benefits recognised as liabilities rather than equity: Member benefits 1,312,971 (1,312,971) - EY 19

21 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Notes to the Financial Statements 2. Summary of significant accounting policies (continued) (b) Adoption of AASB 1056 (continued) The adoption of AASB 1056 had the following impact on the income statement at the transition date of 1 July 2014 for the year ended 30 June 2014: At 30 June 2014 Transition adjustment 000 Restated total as at 30 June 2014 Description 000 Profit before income tax previously reported 193, ,852 Change in measurement from net market value to fair value: Changes in assets measured at fair value 1,880 1,880 Contributions, rollovers and other inward transfers and benefits paid to members are transferred to the statement of changes in member benefits: Employee contributions -146, ,474 Members contributions -15,359-15,359 Transfers from other superannuation funds -10,239-10,239 Government co-contributions -1,520-1,520 Benefits paid to members/beneficiaries 29,316 29,316 Insurance premiums 1,100 1,100 Death and disability benefits Profit from operating activities 193, ,856 51,996 Benefits allocated to members accounts -75,353-75,353 Profit/(loss) before income tax 193, ,209-23,357 Income tax expense/(benefit) -46,561-46,561 Tax effect of change in measurement from net market value to fair value at 15% -282 Income tax on contributions transferred to the statement of changes in member benefits 22,040 Sub-total -46,561 21,758-24,803 Profit after income tax 240, ,967 1,446 (c) New accounting standards and interpretations The Fund applied for the first time certain standards and amendments which are effective for annual periods beginning on or after 1 July The nature of each new standard and/or amendment is described below. Apart from AASB 1056, the adoption of these standards and amendments has not had any significant financial impact on the financial statements. AASB , 31 AASB Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities Adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132. Interpretation 21 Levies Confirms that a liability to pay a levy is only recognised when the activity that triggers the payment occurs. AASB Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets Requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. AASB Amendments to Australian Accounting Standards Novation of Derivatives and Continuation of Hedge Accounting [AASB 139] Amends AASB 139 to permit the continuation of hedge accounting in specified circumstances where a derivative, which has been designated as a hedging instrument. EY 20

22 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Notes to the Financial Statements 2. Summary of significant accounting policies (continued) (c) New accounting standards and interpretations (continued) AASB Amendments to Australian Accounting Standards Investment Entities These amendments require an investment entity to measure unconsolidated subsidiaries at fair value through profit or loss in its consolidated and separate financial statements. These amendments also introduce new disclosure requirements for investment entities to AASB 12 and AASB 127. AASB 1031 Materiality The revised AASB 1031 is an interim standard that cross-references to other Standards and the Framework (issued December 2013) that contain guidance on materiality. AASB Amendments to Australian Accounting Standards Conceptual Framework, Materiality and Financial Instruments Makes amendments to a number Standards and Interpretations amendments arising from the issuance of AASB CF amendments to particular Australian Accounting Standards to delete references to AASB 1031 makes amendments to a number of Australian Accounting Standards, including incorporating Chapter 6 Hedge Accounting into AASB 9 Financial Instruments. AASB Amendments to Australian Accounting Standards- Part A Makes annual amendments to a number of accounting standards to clarify the definition: AASB 2 - Clarifies the definition of 'vesting conditions' and 'market condition' and introduces the definition of 'performance condition' and 'service condition'. AASB 3 - Clarifies the classification requirements for contingent consideration in a business combination by removing all references to AASB 137. AASB 8 - Requires entities to disclose factors used to identify the entity's reportable segments when operating segments have been aggregated. An entity is also required to provide a reconciliation of total reportable segments' asset to the entity's total assets. AASB 116 & AASB Clarifies that the determination of accumulated depreciation does not depend on the selection of the valuation technique and that it is calculated as the difference between the gross and net carrying amounts. AASB Defines a management entity providing KMP services as a related party of the reporting entity. The amendments added an exemption from the detailed disclosure requirements in paragraph 17 of AASB 124 for KMP services provided by a management entity. Payments made to a management entity in respect of KMP services should be separately disclosed. AASB 13 - Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all contracts within the scope of AASB 139 or AASB 9, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in AASB 132. AASB Clarifies that judgment is needed to determine whether an acquisition of investment property is solely the acquisition of an investment property or whether it is the acquisition of a group of assets or a business combination in the scope of AASB 3 that includes an investment property. That judgment is based on guidance in AASB 3. Commentary For illustrative purposes, the Fund has listed disclosures of all new and amended standards and interpretations that are effective from 1 July 2014, regardless of whether these have any impact on the Fund s financial statements. However, an alternative that Funds should consider would be to only list and address those that actually have an impact on the Fund s financial position, performance and/or disclosures. EY 21

23 ENDEAVOUR TM DEFINED CONTRIBUTION SUPERANNUATION FUND Notes to the Financial Statements 2. Summary of significant accounting policies (continued) (c) New accounting standards and interpretations (continued) Accounting Standards and Interpretations issued but not yet effective AASB (d),(e) Certain Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet effective and have not been adopted by the Fund for the annual reporting period ended 30 June The impact of these standards and interpretations has been assessed and to the extent applicable to the Fund are outlined in the table below. Standards and Interpretations that are not expected to have a material impact on the Fund have not been included. Reference Title Summary Application date of standard Impact on Fund financial report Application date for Fund AASB108.30,31 Commentary Please refer to your local EY contact for the most up to date table relevant to your reporting period. Other Significant Accounting Policies (d) Consolidation The Fund is an investment entity and, as such, does not consolidate the entities it controls. Instead, interests in subsidiaries are classified as fair value through profit or loss and measured at fair value. Refer to Note 2(u) for further details. Commentary In the preparation of the Endeavour Defined Contribution Superannuation Fund it is assumed that AASB10 has already been adopted by the Fund for the financial year commencing 1 July 2013, together with AASB Amendments to Australian Accounting Standards Investment Entities. The AASB amendment provides exception from consolidation for funds that meet the investment entity criteria. Each superannuation fund must perform an assessment to confirm if the individual superannuation fund can adopt the investment entity status thereby allowing the exemption from consolidating its subsidiaries. Refer to your local EY contact to assist with any queries on application of AASB 10 to your superannuation entity. (e) Financial assets and liabilities (a) Classification AASB 7.B5(a) The Fund classifies its financial assets and financial liabilities into the categories below in accordance with AASB 139. Financial assets and liabilities held for trading: These assets are acquired principally for the purpose of generating a profit from short-term fluctuation in price. All derivatives are classified as held for trading. Derivative financial instruments entered into by the Fund do not meet the hedge accounting criteria as defined by AASB 139. Consequently hedge accounting is not applied by the Fund. Financial instruments designated at fair value through profit or loss upon initial recognition: These financial assets are designated on the basis that they are part of a group of financial assets which are managed and have their performance evaluated on a fair value basis in accordance with risk management and investment strategies of the Fund. EY 22