Donaldy Associates Chartered Accountants House of Excellence Annex Adum, Kumasi INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ON THE FINANCIAL STATEMENTS FOR THE Report on the Financial Statements We have audited the accompanying financial statements of Nwabiagya Rural Bank Limited which comprise the statement of financial position as at 31 December, 2014, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year ended and a summary of significant accounting policies and other explanatory notes. Directors Responsibility for the Financial Statements The bank s directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and in the manner required by the Ghana Companies Code, 1963 (Act 179) and the Banking Act, 2004 (Act 673) as amended by the Banking Act 2007 (Act 738). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 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 depend on the auditor s 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, the auditor considers internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, 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 financial statements give a true and fair view of the financial position of Nwabiagya Rural Bank Limited as at 31 December 2014, and its financial performance and cash flows for the year ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Code, 1963 (Act 179) of Ghana and Section 78 of the Banking Act, 2004 (Act 673) and Banking (Amendment) Act 2007 (Act 738) of Ghana. P. O. Box Ks 6608, Kumasi Ghana Tel / Fax: 03220-81721 E-mail: donaldyasso@yahoo.com 1
Report on Other Legal and Regulatory Requirements The Companies Code, 1963 (Act 179) requires that in carrying out our audit, we consider and report to you on the following matters. We confirm that: a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. b) In our opinion, proper books of accounts have been kept by the bank, so far as appears from our examination of those books, and c) The financial position, statement of profit or loss and other comprehensive income and statement of changes in equity are in agreement with the books of accounts. The Banking Act 2004 (Act 673) Section 78(2), requires that we state certain matters in our report. We confirm that: i) The accounts give a true and fair view of the state of affairs of the bank and its results for the period under review. ii) We were able to obtain all the information and explanations required for the efficient performance of our duties as auditors. iii) The bank's transactions were within its powers, and iv) The bank has complied with the provisions of the Banking Act, 2004 (Act 673) as amended by Banking (Amendment) Act 2007 (Act 738). 10th March, 2015 Robert Donaldy (ICAG/P/1113) Donaldy Associates (ICAG/F/2014/100) Chartered Accountants House of Excellence Annex Adum, Kumasi 2
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (NOTES) 2014 2013 GH GH Interest Income (4) 12,564,288.18 10,123,341.85 Interest Expenses (5) (2,744,653.32) (1,498,988.79) Net Interest Income 9,819,634.86 8,624,353.06 Fees & Commission Income (6) 2,321,035.30 1,562,323.33 Other Operating Income (7) - (3,066.67) Total Income 12,140,670.16 10,183,609.72 Operating Expenses (8) (9,724,365.08) (7,405,800.42) Operating Profit Before Credit Impairment Loss 2,416,305.08 2,777,809.30 Credit Impairment Loss (9) (119,938.20) (362,239.00) Profit Before Taxation 2,296,366.88 2,415,570.30 Taxation (10) (243,103.88) (242,460.55) Net Profit For The Year 2,053,263.00 2,173,109.75 Basic Earnings Per Share (Ghana Cedis) (11) 0.126 0.138 3
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER, 2014 2014 2013 (NOTES) GH GH ASSETS Cash and Cash Equivalents (13) 6,572,058.07 5,984,935.24 Short Term Investments (14) 24,045,447.41 17,050,000.00 Loans and Advances to Customers (15) 24,299,384.51 24,381,766.45 Taxation (10) 25,583.21 - Other Assets (16) 5,162,532.82 3,887,052.24 60,105,006.02 51,303,753.93 Investments In Securities (17) 123,682.67 123,683.00 Property, Plant & Equipment (18a) 2,171,704.78 1,965,762.53 2,295,387.45 2,089,445.53 TOTAL ASSETS 62,400,393.47 53,393,199.46 LIABILITIES Customer's Deposits (20) 46,891,333.60 39,596,829.71 Accruals and Other Liabilities (21) 4,080,714.10 3,907,977.71 Taxation (10) - 79,175.39 Borrowings (22) 1,707,657.47 1,404,262.47 TOTAL LIABILITIES 52,679,705.17 44,988,245.28 EQUITY Stated Capital (23i) 1,839,427.71 1,650,909.01 Retained Earnings (23ii) 3,432,809.46 3,211,024.66 Statutory Reserve Fund (24) 2,681,391.30 2,168,075.55 Revaluation Surplus (25) 120,604.00 120,604.00 Development Fund (26) 500,514.00 400,514.00 Scholarship Fund (27) 101,316.00 71,316.00 Staff Pension Fund (28) 364,195.94 210,868.00 Community Development Fund (29) 200,527.00 100,527.00 ICT Development Fund (30) 150,000.00 130,000.00 Risk Management Fund (31) 329,902.89 341,115.96 TOTAL EQUITY 9,720,688.30 8,404,954.18 TOTAL LIABILITIES & EQUITY 62,400,393.47 53,393,199.46 APPROVED BY THE BOARD ON 10TH MARCH, 2015 NANA OWUSU SARFO ANWONA II JOE BIO BOARD CHAIRMAN DIRECTOR 4
STATEMENT OF CASH FLOWS 2014 2013 GH GH OPERATING ACTIVITIES Profit Before Tax 2,296,366.88 2,415,570.30 Adjusted for: Depreciation 213,527.50 219,441.12 Credit Impairment Loss 119,938.20 362,239.00 Loss on Disposal - 3,066.67 Operating profit before working capital changes 2,629,832.58 3,000,317.09 Change in Loans and Advances to Customers (37,556.26) (2,485,118.39) Change in Other Assets (1,275,480.58) (201,784.53) Change in Customer's Savings and Deposits 7,294,503.89 4,495,414.45 Change in Accruals & Other Liabilities (227,263.28) 425,057.38 Cash Generated from Operations 8,384,036.35 5,233,886.00 Income Tax Paid (347,862.48) (178,734.72) Net Cash Flow From Operating Activities 8,036,173.87 5,055,151.28 INVESTING ACTIVITIES Purchase of Property, Plant & Equipment (419,469.75) (650,773.25) Proceeds from Vehicle Disposal - 13,000.00 Risk Management Fund (11,213.07) 197,002.72 Net Cash Flow Used In Investing Activities (430,682.82) (440,770.53) FINANCING ACTIVITIES Dividend Paid (468,162.45) (519,156.26) Borrowings 303,395.00 839,527.86 Pension Fund Payments to Retired Staff (46,672.06) - Ordinary Shares Issued 188,518.70 113,854.90 Net Cash Flow (Used In)/From Financing Activities (22,920.81) 434,226.50 INCREASE IN CASH AND CASH EQUIVALENTS 7,582,570.24 5,048,607.25 ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS DURING THE YEAR Cash and Cash Equivalents as at 1 January 23,034,935.24 17,986,327.99 Increase in Cash and Cash Equivalents 7,582,570.24 5,048,607.25 Cash and Cash Equivalents as at 31 December 30,617,505.48 23,034,935.24 ANALYSIS OF CASH AND CASH EQUIVALENTS - 31 DECEMBER Cash Balance 2,383,587.82 1,915,487.25 Investments (Short Term) 24,045,447.41 17,050,000.00 Balances with Other Banks 4,188,470.25 4,069,447.99 30,617,505.48 23,034,935.24 5
ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS 1 CORPORATE INFORMATION Nwabiagya Rural Bank Limited is a Bank incorporated in Ghana. The Bank provides rural banking and related services. The address of the registered office of the Bank is Nwabiagya Rural Bank Limited building, Barekese, P.O. Box B. 170, Bantama - Kumasi. 2 Basis of Preparation a) Statement of Compliance The financial statements of Nwabiagya Rural Bank Limited have been prepared in accordance with International Financial Reporting Standards (IFRS) and under the historical cost convention except as disclosed in the accounting policies below. b) Use of Estimates and Judgement The preparation of financial statements in conformity with IFRS requires management to make judgement, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and the associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgement about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. c) Functional and Presentational Currency The financial statements are presented in Ghana Cedis (GH ), which is the Bank's functional and presentational currency. d) Significant Accounting Policies The significant accounting policies adopted by the Bank which have been used in preparing these financial statements are as follows: e) Revenue Recognition i) Interest Income and Expense Interest Income and expenses are recognised in the statement of profit and loss and other comprehensive income for all financial instruments measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial assest or a financial liability and of allocating the interest income or interest expense over the the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instruments, when appropriate, a shorter period to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the instrument. When a financial asset or a group of similar financial assets have been written down as a result of impairment, interest income is recognised using the rate of interest to discount the future cash flows for the purpose of measuring the impairment loss. Interest income and expenses on financial assets and liabilities held at fair value through profit or loss is recognised in the income statement in the period they arise. 6
ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS ii) Fees & Commission Fees and commission income and expenses that are an integral part to the effective interest rate on financial instruments are included in the measurement of the effective interest rate. Fees and commission relating to specific services are recognised as revenue when the related services are performed. ii) Other Operating Income Other Income comprises gains or losses arising on fair value changes in trading assets and liabilities and derecognised available for sale financial assets. f) Financial Assets and Financial Liabilities i) Categorisation of Financial Assets and Financial Liabilities The Bank classifies its financial assets in the following categories: financial assets held at fair value through profit or loss; loans and receivable; available-for-sale financial assets; and held-to-maturity investments. Financial liabilities are classified as either held at fair value through profit or loss, or amortised cost. Management determines the categorisation of its financial assets and financial liabilities at initial recognition. ii) Financial Assets and Financial Liabilities at Fair Value through Profit or Loss Financial asset or liability at fair value through profit or loss is a financial asset or financial liability that meets either of the following conditions: a) Held for trading A financial asset or financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing in the near future; or part of a portfolio of identified instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. b) Designated at fair value through profit or loss Upon initial recognition as financial asset or financial liability, it is designated by the Bank at fair value through profit or loss except for investments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured. iii) Loans and Advances Loans and Advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. g) Property, Plant and Equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. 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 Bank and the cost can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. 7
ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the greater of its value in use and fair value less cost to sell. Impairment losses are recognised in the Income Statement. Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The current annual depreciation rates for each class of property, plant and equipment are as follows: Buildings 2% Motor Vehicles 20% Office Equipment 20% Furniture & Fittings 20% Computers & Accessories 25% Depreciation methods, residual values and useful lives are reassessed at each financial year. Gains and losses on disposal of property, plant and equipment are included in the income statement. h) Taxation The Bank provides for income taxes at the current tax rates on the taxable profits of the Bank. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years. No provision is made for deferred tax. i) Employee Benefits i) Post Employment Benefits a) Social Security and National Insurance Trust (SSNIT) Under a National Deferred Benefit Pension Scheme, the Bank contributes 13% of employee's basic salary to SSNIT for employee pensions. The Bank's obligation is limited to the relevant contributions, which were settled on due dates. The pension liabilities and obligations, however, rest with SSNIT. b) Provident Fund The Bank has a provident Fund Scheme for all employees who have completed probation with the Bank. Employees contribute 5% of their basic salary to the Fund whilst the Bank contributes 7.5%. The obligation under the plan is limited to the relevant contribution and these are settled on due dates. j) Provisions Provisions are recognised when the Bank has a present legal or constructive obligation as a result of past events; it is more likely that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where the obligation is expected to be settled over a period of years, the provision is discounted using a discount rate appropriate to the nature of the provision. k) Dividend Dividend approved is treated as an appropriation of profits in the year of approval, whilst dividend proposed is disclosed as a note to the financial statements. 8
ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS l) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the amount initially recognised (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method. Borrowings are classified as non-current liabilities where the Bank has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date. Borrowings cost relating to an acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. All other borrowing costs should be expensed as incurred. m) Post Balance Sheet Events Events subsequent to the balance sheet date are reflected in the financial statement only to the extent that they relate to the year under consideration and the effect is material. n) Cash and Cash Equivalents Cash and cash equivalents include cash, non-restricted balances with ARB Apex Bank Limited and other Banks. 9