STATEMENT OF FINANCIAL PEFOMANCE STATEMENT OF FINANCIAL POSITION 64 Note(s) evenue Transfers and subsidies received 2 170 113 000 161 381 000 Other income 3 7 334 714 30 889 326 Total revenue 177 447 714 192 270 326 Expenditure Administrative expenses 4 (5 323 097) (4 729 629) Staff costs 5 (18 339 373) (16 006 646) Marketing costs 6 (121 160 372) (151 859 687) Audit fees 7 (901 128) (966 948) Other operating expenses 8 (8 756 332) (9 157 594) Surplus/(deficit) on disposal of property, plant and equipment 9 1 562 (198 524) Total expenditure (154 478 740) (182 919 028) Surplus from operations 22 968 974 9 351 298 Finance income 10 1 607 775 2 091 772 Surplus for the year 24 576 749 11 443 070 Note(s) ASSETS Current Assets Trade and other receivables 13 1 392 218 964 767 Cash and cash equivalents 14 50 705 981 35 077 873 52 098 199 36 042 640 Non Current Assets Property, plant and equipment 11 1 385 797 1 164 723 Intangible assets 12 794 289 595 320 2 180 086 1 760 043 Total Assets 54 278 285 37 802 683 LIABILITIES Current Liabilities Trade and other payables 15 16 707 310 24 014 395 Provisions 16 687 860 1 481 922 Total Liabilities 17 395 170 25 496 317 Net Assets 36 883 115 12 306 366 NET ASSETS Accumulated surplus 36 883 115 12 306 366
Statement of Changes in Net Assets CASH FLOW STATEMENT 66 Accumulated surplus Total net assets Note(s) Balance at 31 March 2009 863 296 863 296 Surplus for the year 11 443 070 11 443 070 Surplus for the year previously reported 10 745 498 10 745 498 Correction of prior year error 28 697 572 697 572 Balance at 31 March 2010 (as restated) 12 306 366 12 306 366 Surplus for the year 24 576 749 24 576 749 Balance at 31 March 2011 36 883 115 36 883 115 Note(s) CASH FLOWS FOM OPEATING ACTIVITIES Transfers and Subsidies 170 113 000 161 381 000 Cash paid to suppliers and employees (154 666 119) (133 129 353) Cash generated from operations 17 15 446 881 28 251 647 Finance income 1 607 775 2 091 772 17 054 656 30 343 419 CASH FLOWS FOM INVESTING ACTIVITIES Purchase of property, plant and equipment 11 (666 033) (449 024) Proceeds on the sale of property, plant and equipment 11-199 901 Purchase of intangible assets 12 (760 515) (697 193) (1 426 548) (946 316) Increase in cash and cash equivalents 15 628 107 29 397 103 Cash and cash equivalent at the beginning of the year 35 077 874 5 680 771 Cash and cash equivalents at the end of the year 14 50 705 981 35 077 874
ACCOUNTING POLICIES 68 Basis of preparation The annual financial statements have been prepared in accordance with South African Standards of Generally ecognised Accounting Practice (SA Standards of GAP). Financial statements are based upon appropriate policies consistently applied and supported by reasonable and prudent judgements and estimates. The financial statements were prepared on a going concern basis and were also prepared in South African and. There were no events worth reporting after the reporting date. GAP 1 Presentation of financial statements requires entities to provide information on its actual performance against the entity s approved budget. A reconciliation to ensure full compliance with GAP 1 is included as a disclosure note to the financial statements. The annual financial statements have been prepared on the historical cost basis and incorporate the principle accounting policies as set below. These accounting policies are consistent with the previous period. Grants, transfer and other income recognition Grants and donations are recognised as revenue when it is probable that the economic benefits or service potential associated with the transaction will flow to the International Marketing Council of South Africa; the amount of the revenue can be measured reliably; and to the extent that there has been compliance with any restrictions associated with the grant. Donations are measured at the fair value of the consideration received or receivable when the amount of the revenue can be measured reliably. If goods in kind are received without conditions attached, revenue is recognised immediately. If conditions are attached, a liability is recognised, which is reduced and revenue recognised as the conditions are satisfied. Grants comprise Government grant payments received from the Government Communication and Information System (GCIS). Grants are recognised when there is reasonable assurance that the enterprise will comply with the conditions attaching to them, that grants will be received and these grants can be measured reliably. Interest income is accrued on a time proportion basis, taking into account the principal outstanding and the effective interest rate over the period. Property, plant and equipment The cost of an item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits or service potential associated with the item will flow to the entity; and the cost or fair value of the item can be measured reliably. On initial recognition, an item of property, plant and equipment is measured at cost. Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at date of acquisition. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment. ecognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Property, plant and equipment are stated at historic cost less accumulated depreciation and impairment. Depreciation is calculated on a straight line basis to write off the cost of assets to their expected residual values in line with GAP 17 over their useful lives estimated as follows: Item Office furniture Motor vehicles Office equipment Computer equipment Average useful life 10 15 years 5 years 5 10 years 3 5 years The surplus or deficit arising from the derecognition of an item of property, plant and equipment is included in statement of financial performance when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. The basis used to determine gross carrying value of fixed assets is cost. Assets less than 5 000 are expensed in full in the year of acquisition. The gain or loss arising on disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the assets and is recognised in the statement of financial performance. When the recoverable amount higher of net selling price and value in use of an asset has declined below its carrying amount, the carrying amount is reduced to reflect the decline in value. The deficit is charged to the statement of financial performance. Intangible assets An intangible asset is recognised when it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the entity; and the cost or fair value of the asset can be measured reliably. After initial recognition, intangible assets are carried at revalued amount, being fair value at the date of revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. evaluations are made with sufficient regularity such that at the reporting date the carrying amount of the asset does not differ materially from it s fair value. Any increase in the carrying amount of an intangible asset, as a result of a revaluation, is credited directly to a revaluation surplus. The increase is recognised in surplus or deficit to the extent that it reverses a revaluation decrease of the same asset previously recognised in surplus or deficit. Any decrease in the carrying amount of an intangible asset, as a result of a revaluation, is recognised in surplus or deficit in the current period. The decrease is debited to a revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset. An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets. For intangible assets with a definite useful life amortisation is provided on a straight line basis over their useful life. The amortisation period and the amortisation method for intangible assets are reviewed every year end. eassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life. Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets. Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows: Item Computer software Useful life 2 5 years Financial instruments Initial recognition The entity classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities are recognised on the entity s statement of financial position when the International Marketing Council of South Africa becomes party to contractual provisions of the instrument. Financial instruments recognised on the statement of financial position include trade and other receivables, cash and cash equivalents and trade and other payables and other financial assets and liabilities. Trade and other receivables Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method less any impairment. Impairment is determined on a specific basis, whereby each asset is individually assessed for impairment indicators. Appropriate allowances for estimated irrecoverable amounts are recognised in surplus/deficit when there is objective evidence that the asset is impaired.
70 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at amortised cost. Due to the short nature of cash the amortised cost would equal the cash balance. Trade and other payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Surplus or deficit A surplus/deficit from a change in a financial asset or financial liability is recognised as follows: Surplus/deficit on trade and other receivables, cash and cash equivalents are derecognised or impaired Surplus/deficit on trade and other payables, are recognised in surplus or deficit when liabilities are derecognised Derecognition Financial assets Financial assets (or part thereof) are derecognised when the entity realises the rights to benefits specified in the contract, the right expires, or the International Marketing Council of South Africa surrenders or otherwise loses control of the contractual rights that comprise the financial asset. Financial liabilities Financial liabilities (or part thereof) are derecognised when the obligation specified in the contract is discharged, cancelled or expired. Impairment of financial instruments The entity assesses at each reporting period whether a financial asset of the entity is impaired. Impairments are made when there is objective evidence that cash flows from specific financial assets would not materialise. Cash flow values estimated not to materialise are impaired. The amount of the impairment is measured as the difference between the financial asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The amount of the impairment is recognised in the statement of financial performance. Off setting of financial instruments Financial assets and financial liabilities are offset, if a legally enforceable right exists to set off financial assets against financial liabilities and the financial instrument relates to the International Marketing Council of South Africa. Impairment of financial assets At each end of the reporting period the International Marketing Council of South Africa assesses all financial assets, other than those at fair value through surplus or deficit, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired. For amounts due to the entity, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment. Impairment losses are recognised in surplus or deficit. Foreign operations: Foreign currency transactions A foreign currency transaction is recorded, on initial recognition in ands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At each reporting date: Foreign currency monetary items are translated using the closing rate Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction Non monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous annual financial statements are recognised in surplus or deficit in the period in which they arise. When a surplus/deficit on a non monetary item is recognised directly in net assets, any exchange component of that surplus/deficit is recognised directly in net assets. When a gain or loss on a non monetary item is recognised in statement of financial performance, any exchange component of that surplus/deficit is recognised in surplus or deficit. Cash flows arising from transactions in a foreign currency are recorded in ands by applying to the foreign currency amount the exchange rate between the and and the foreign currency at the date of the cash flow. Foreign operations are an integral part of the International Marketing Council of South Africa and has foreign operations in the United Kingdom and United States of America. No income is generated in those operations, but only expenditure is translated in South African and at the rate of exchange ruling at the transaction date. Employee benefits Short term employee benefits The cost of short term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted. The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non accumulating absences, when the absence occurs. The expected cost of surplus sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance. Payments to defined contribution retirement benefit plans are charged to the income statement in the year to which they relate. The International Marketing Council of South Africa contributes 7.5% of basic salary for each employee with Liberty pension administrators. Taxation The International Marketing Council of South Africa is exempted from tax by the South African evenue Services (SAS in terms of section 10(1)(ca)(1) of income Tax Act, Act 58 of 1962 as amended. Provisions and contingencies Provisions are recognised when the International Marketing Council of South Africa has a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; and a reliable estimate can be made of the obligation. The amount of a provision is the best estimate of the expenditure expected to be required to settle the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision. Provisions are not recognised for future operating deficits. If an entity has a contract that is onerous, the present obligation net of recoveries under the contract shall be recognised and measured as a provision. Comparative figures Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year. Cash flow For purpose of the cash flow statement, cash includes cash on hand and deposits held on call with banks. Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. Finance leases lessee Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease. The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.
72 Operating leases lessee Operating lease payments are recognised as an expense on a straight line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability. This liability is not discounted. Any contingent rents are expensed in the period they are incurred. Impairment The International Marketing Council of South Africa assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the entity estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the entity also: Tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period Tests goodwill acquired in a business combination for impairment annually If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost, less any accumulated depreciation or amortisation, is recognised immediately in surplus or deficit. Any impairment loss of a revalued asset is treated as a revaluation decrease. An impairment loss is recognised for cash generating units if the recoverable amount of the unit is less than the carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order: First, to reduce the carrying amount of any goodwill allocated to the cash generating unit Then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in surplus or deficit. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase. New standards and interpretations The entity has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the entity s accounting periods beginning on or after 01 April 2010 or later periods: GAP 18: Segment reporting establishes principles for reporting financial information by segments. This standard is not expected to have any impact on the financial statement of the entity. GAP 21: Impairment of non cash generating asset prescribes the procedures that an entity applies to determine whether a non cash generating asset is impaired and to ensure that impairment losses are recognised. The standard also specifies when an entity would reverse an impairment loss and prescribes disclosure. GAP 23: evenue from non exchange transaction (Taxes and Transfers) - prescribes requirements for financial reporting of revenue arising from non exchanged transactions, other than non exchanged transactions that give rise to an entity combination. The standard deals with issues that need to be considered in recognising and measuring revenue from non exchange transactions, including the identification of contributions from owners. This standard is expected to have impact on the net surplus and net assets value is currently realised over the useful life of assets. GAP 23 requires deferred grant to be realised once the entity satisfies the condition attached to the grant, e.g. once the building is fully constructed. GAP 24: Presentation of budget information in financial statement - requires a comparison of budget amount and the actual amount arising from execution of the budget to be included in the statements of the entities which are required to, or elect to, make publicly available their approved budget(s) and for which they are, therefore, held, publicly accountable. The standard also requires disclosure of an explanation of the reason of the reasons for material differences between the budget and actual amounts. The disclosure of budget amounts arising from execution of the budget can enhance the users of the financial statements undertanding of the operations of the entity and can be used as performance measurement indicator. GAP 25: Employee benefits prescribes the accounting and disclosure for employee benefits. The standard requires an entity to recognise a liability when an employee has provided service in an exchange for employee benefits to be paid in the future; and expense when the entity consumes the economic benefits or services potential arising from service provided by an employee in exchange for employee benefits. GAP 26: Impairment of cash generating assets prescribes procedures that an entity applies to determine whether a cash generating asset is impaired and to ensure that impairment losses are recognised. The standard also specifies when an entity should reverse an impairment and prescribes disclosures. GAP 105: Transfer of functions between entities under common controlprescribes procedures that the entity applies to determine whether an acquirer and a transferor that prepares and presents financial statements under the accrual basis of accounting shall apply this standard to a transaction or event that meets the definition of a transfer of functions. (Issued November 2010) GAP 106: Transfer of functions between entities not under common control prescribes procedures that the entity that presents financial statements under the accruals basis of accounting shall apply this standard to a transaction or other events that meet the definition of a transfer function. (Issued November 2010) GAP 107: Mergers prescribes procedures that the entity applies to determine whether a combined entity and combining entities that prepares and presents financial statements under accrual basis of accounting shall apply this standard to a transaction that meets the definition of a merger where no acquirer can be identified. (Issued November 2010) The entity will adopt the standards, interpretations and amendments where applicable to the entity on their effective date. Management expects that the adoption of the standards listed above will have no material impact on the annual financial statements in the period of initial application. Unauthorised expenditure Unauthorised expenditure means overspending of a vote or a main division within a vote; and expenditure not in accordance with the purpose of a vote or, in the case of a main division, not in accordance with the purpose of the main division. All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance. Fruitless and wasteful expenditure Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.
74 Irregular expenditure Irregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including (a) this Act (b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act (c) any provincial legislation providing for procurement procedures in that provincial government National Treasury practice note no. 4 of 2008/2009 which was issued in terms of sections 76(1) to 76(4) of the PFMA requires the following (effective from 1 April 2008). Irregular expenditure that was incurred and identified during the current financial and which was condoned before year end and/or before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure register. In such an instance, no further action is also required with the exception of updating the note to the financial statements. Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned. Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount as debt impairment and disclose such in the relevant note to the financial statements. The irregular expenditure register must also be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto must remain against the relevant programme/expenditure item, be disclosed as such in the note to the financial statements and updated accordingly in the irregular expenditure register. esearch and development expenditure esearch costs are charged against operating surplus as incurred. Development costs are recognised as an expense in the period in which they are incurred unless the following criteria are met: The product or process is clearly defined and the costs attributable to the process or product can be separately identified and measured reliably The technical feasibility of the product or process can be demonstrated The existence of a market or, if to be used internally rather than sold, its usefulness to the entity can be demonstrated Adequate resources exist, or their availability can be demonstrated, to complete the project and then market or use the product or process The asset must be separately identifiable Where development costs are deferred, they are written off on a straight line basis over the life of the process or product, subject to a maximum of five years. The amortisation begins from the commencement of the commercial production of the product or use of the process to which they relate. Significant accounting estimates and judgement In preparing the financial statements management is required to make estimates and assumptions that affect the amounts represented in the financial statements and related disclosures. Use of information and the application of the judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. Estimates Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions is included in note 16 of the annual financial statements. Property, plant and equipment Management has made certain estimates with regards to the determination of estimated useful lives and residual values of items of property, plant and equipment included in note 11 of the annual financial statements. Judgements Leases Management has applied judgment to classify all lease agreements that the company is party to as operating leases if the lease do not transfer substantially all risks and rewards of ownership to the company, or the other recognition criteria is met in terms of IAS 17 to classify leases as operating leases. Impairment of trade receivables Management has applied judgment in estimating the extent of any impairment deemed necessary on the gross carrying value of trade receivables and have impaired all accounts in arrears for a period longer than normal expected trading terms.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS 76 2. TANSFES AND SUBSIDIES ECEIVED National Departments (Grants) 170 113 000 161 381 000 3. OTHE INCOME Credit from onerous contract - 976 026 Credits from media bookings 2 974 872 - Insurance claims - 59 263 Partnership income 4 000 000 29 500 000 Other income 58 677 354 037 International tracking research credits 301 165-7 334 714 30 889 326 4. ADMINISTATIVE EXPENSES General administration 1 647 620 1 049 200 Telephone 237 929 362 200 Consultants 1 494 453 1 220 332 Legal fees 579 351 269 375 Entertainment 311 566 445 647 Printing and stationery 525 503 421 322 Venues and facilities 219 563 434 075 Bank charges 114 726 55 780 Deficit on foreign exchange differences 192 386 471 698 5 323 097 4 729 629 5. STAFF COSTS Basic salaries 15 436 241 14 842 717 Performance awards 794 027 - Leave payments 364 751 30 197 Other non pensionable allowance 546 429 340 500 Medical 280 235 211 571 UIF 35 133 30 813 Pension 882 557 550 848 18 339 373 16 006 646 6. MAKETING COSTS E marketing 7 232 661 5 876 200 2010 mobilisation (Committed funds 2009/10) 7 520 746 - Brand knowledge and performance (research) 4 021 723 5 122 585 Stakeholder and partner alignment management 31 464 645 3 523 610 Brand strategy development and management 47 555 165 116 206 490 eputation management 23 365 432 21 130 802 121 160 372 151 859 687 7. AUDIT FEES External audit 901 128 966 948 8. OTHE OPEATING EXPENSES Assets expensed 406 718 395 225 Staff training and development 46 219 120 260 Other operating expenses 3 127 443 3 676 708 Internal audit fees 277 816 484 315 Other maintenance, repairs and running costs 21 362 63 493 Depreciation on property, plant and equipment 444 959 394 809 Depreciation on intangible assets 561 546 109 654 entals in respect of operating leases Buildings 2 142 474 1 861 689 Photocopiers 1 151 286 827 847 Courier and delivery charges 18 789 681 654 Security 12 344 30 198 Travel and subsistence 545 376 511 742 8 756 332 9 157 594 9. SUPLUS/(DEFICIT) ON DISPOSAL OF POPETY, PLANT AND EQUIPMENT Book value of assets transferred to CC now GCIS - 198 524 Net on fixed assets reconciliation (1 562) - (1 562) 198 524 10. FINANCE INCOME Interest revenue Cash and bank deposits 1 607 775 2 091 772
78 11. POPETY, PLANT AND EQUIPMENT Cost / Valuation Accumulated depreciation Carrying value Cost / Valuation Accumulated depreciation Carrying value Motor vehicles 122 008 (103 706) 18 302 122 008 (79 305) 42 703 Computer equipment 1 434 923 (1 152 325) 282 598 1 203 868 (987 182) 216 686 Office furniture and fittings 951 144 (426 608) 524 536 757 304 (339 787) 417 517 Office equipment 1 086 792 (526 431) 560 361 845 754 (357 937) 487 817 Total 3 594 867 (2 209 070) 1 385 797 2 928 934 (1 764 211) 1 164 723 econciliation of property, plant and equipment 2011 Opening balance Additions Depreciation Total Motor vehicles 42 703 - (24 401) 18 302 Computer equipment 216 686 231 055 (165 143) 282 598 Office furniture and fittings 417 517 193 840 (86 821) 524 536 Office equipment 487 817 241 138 (168 594) 560 361 Total 1 164 723 666 033 (444 959) 1 385 797 econciliation of property, plant and equipment 2010 Opening balance Additions Disposals Other changes, movements Depreciation Motor vehicles 67 105 - - - (24 402) 42 703 Computer equipment 389 616 98 335 (37 146) (31 110) (203 009) 216 686 Office furniture and fittings 428 135 63 998 (2 897) (460) (71 259) 417 517 Office equipment 493 736 286 691 (159 858) (36 999) (95 753) 487 817 Total 1 378 592 449 024 (199 901) (68 569) (394 423) 1 164 723 Total 12. INTANGIBLE ASSETS Cost / Valuation Accumulated amortisation Carrying value Cost / Valuation Accumulated amortisation Carrying value Computer software 1 808 227 (1 013 938) 794 289 1 047 712 (452 392) 595 320 econciliation of intangible assets 2011 Opening balance Additions Amortisation Total Computer software 595 320 760 515 (561 546) 794 289 econciliation of intangible assets 2010 Opening balance Additions Other changes, movements Amortisation Computer software 7 782 697 193 (1) (109 654) 595 320 13. TADE AND OTHE ECEIVABLES Trade receivable 82 986 - Deposits 406 190 494 087 Other receivables 849 771 376 461 Prepayments 53 271 94 219 Total 1 392 218 964 767 Trade receivables are non interest bearing and are generally repayable between 30 and 90 days. There were no impairments of trade receivables raised at 31 March 2011 (2010 Nil). The accounting authority has assessed individual and collective impairment of trade receivables and the balances are fully recoverable, therefore no impairment of trade receivables raised. The ageing of trade recievables were not disclosed as the amounts at year end are immaterial. 14. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of: Cash and balances with banks 50 694 981 35 003 600 Bank balances (Partnership Bank Account) 5 000 68 273 Cash shown as petty cash 6 000 6 000 50 705 981 35 077 873 Cash and cash equivalents earn interest at floating rates based on daily bank deposit rates. The fair value of cash and short term deposits is 50 705 981 (2010 : 35 077 873).
80 15. TADE AND OTHE PAYABLES Trade creditors 9 928 855 15 437 211 Accruals 6 686 572 7 999 045 Sundry 91 883 578 139 Total 16 707 310 24 014 395 Trade payables are non interest bearing and are normally settled on 30 90 day terms. All other payables are non interest bearing and have an average term of three months. 16. POVISIONS econciliation of provisions 2011 Opening Balance Provisions made during the year Unused amounts reversed during the year Salary and related expense provision (Bonus) 794 027 - (794 027) - Other - onerous contract 687 895 687 860 (687 895) 687 860 1 481 922 687 860 (1 481 922) 687 860 econciliation of provisions 2010 Provision for onerous contract 1 663 886 687 895 (1 663 886) 687 895 Salary and related expense provision (Leave) 430 785 - (430 785) - Salary and related expense provision (Bonus) 291 280 794 027 (291 280) 794 027 2 385 951 1 481 922 (2 385 951) 1 481 922 17. CASH GENEATED FOM OPEATIONS Surplus before taxation 24 576 749 11 443 070 Adjustments for: Depreciation on property, plant and equipment 444 959 394 423 (Deficit) /surplus on sale of property, plant and equipment - 198 524 Amortisation of intangible assets 561 546 109 654 Fixed assets movement - (129 957) Finance income (1 607 775) (2 091 772) Movements in provisions (794 062) (560 529) Other non cash items (prior year) - (697 572) Changes in working capital: Trade and other receivables (427 451) 3 032 952 Trade and other payables (7 307 085) 16 552 854 15 446 881 28 251 647 Total 18. OPEATING LEASE AANGEMENTS Operating leases as lessee (expense) Minimum lease payments due Up to 1 year 2 635 701 1 478 843 1 to 5 years 3 006 816 1 055 441 Total 5 642 517 2 534 284 Operating lease payments represent rentals/payable by the International Marketing Council of South Africa for its office properties and the lease of photocopy machines. Leases are negotiated for an average term of three years and rentals are fixed for an average of three years. No contingent rent is payable. 19. SENIO MANAGEMENT EMOLUMENTS 2011 Salary Bonus and Performance Payments Expense Allowance Pension Contributions Medical Aid Contributions Chief Executive Officer 1 731 123-60 000 129 834 20 511 1 941 468 Director: Strategic Marketing & Communications 806 546-194 129 62 285-1 062 960 Director: Operations 973 591 123 585-73 019-1 170 195 Director: Finance 823 202-44 000 61 740 21 741 950 683 Director: Stakeholder elations 799 073 107 943 22 000 59 930 28 894 1 017 840 5 133 535 231 528 320 129 386 808 71 146 6 143 146 Bonus and Performance payments for 31 March 2010 were actually paid in May 2010. The provision for bonus was raised in 2009/10 financial year. The above is the actual bonus and performance payment to senior management. No bonuses paid to the senior management for the period ended 31 March 2011. 2010 Salary Bonus and Performance Payments Expense Allowance Pension Contributions Medical Aid/Other Benefits Chief Executive Officer (01 April 2008 to 31 May 2009) 268 750 - - - - 268 750 Acting Chief Executive Officer 2 654 005 - - - - 2 654 005 Chief Operations Officer 911 018 - - 68 326-979 344 Chief Financial Officer 833 316-48 000 62 499 30 888 974 703 Stakeholder elations Director 818 768-22 000 61 407 28 977 931 152 5 485 857-70 000 192 232 59 865 5 807 954 Total Total
82 elationships 20. ELATED PATIES Government Communication and Information System (GCIS) Department of Trade and Industry Department of International elations and Cooperation Paul Bannister South African Tourism Department of Art and Culture Department of Basic Education Department of Sports and ecreation Nature of elationship Funding GCIS is responsible for the International Marketing Council of South Africa Strategic Partner on trade related activities Strategic Partner on trade related activities A Board member who provided consulting work for the International Marketing Council of South Africa through Ignite Strategies. He was appointed an Acting CEO from 01 April 2009 to 31 March 2010 Strategic Partner on tourism related activities Strategic Partner on specific campaigns Strategic Partner on specific campaigns Strategic Partner on specific campaigns Parties are considered to be related if one party has the ability to control over the other party or to exercise significant influence or joint control over the other party in making financial and operational decision. A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. The International Marketing Council of South Africa is 100% controlled by its shareholders, the government, represented by the Government Communication Information System. The International Marketing Council of South Africa is a schedule 3A public entity as outlined in the Public Finance Management Act. 2011 2011 elated party transactions GCIS Transfers 170 113 000 161 381 000 GCIS - esearch 907 758 2 688 331 Department of Trade and Industry 837 527 8 462 000 Ignite Strategies (Incl. ACEO salary) - 2 654 005 Department of International elations and Cooperation (DICO) 3 528 993-175 387 278 175 185 336 elated party balances Amounts included in trade receivable regarding related parties GCIS International Tracker esearch 303 397 - GCIS Communication esources Centre (CC) Cost 120 127 45 861 423 524 45 861 There were no related party transactions between International Marketing Council of South Africa with: South African Tourism, Department of Arts and Culture, Department of Basic Education and Department of Sport and ecreation. 21. OTHE DISCLOSUE NOTES Financial Instruments Fair values At 31 March 2011, the carrying values of cash and cash equivalents, trade and other receivables, trade and other payables, approximate their fair values due to short term maturities of these assets and liabilities as disclosed below. Carrying amount Fair value Financial assets Cash and cash equivalents 50 705 981 35 077 873 50 705 981 35 077 873 Trade and other receivables 1 392 218 964 767 1 392 218 964 767 Financial liabilities Trade and other payables 16 707 310 24 014 395 16 707 310 24 014 395 Financial risk management objectives and policies The main business risks faced by the entity in respect of its principal non derivative financial instruments are interest rate risk, credit risk, currency risk and liquidity risk. The Board of Trustees review and agree policies for managing these risks. These policies have remained unchanged since the beginning of 2010. The entity maintains a conservative policy regarding exposure to these risks. Interest rate risk The entity s exposure to the risk of changes in market interest rates relates primarily to the entity s cash and cash equivalents with floating interest rates. Cash and cash equivalents attract interest at rates that vary with prime. The entity policy is to manage interest rate risk so that fluctuations in variable rates do not have a material impact on the surplus/(deficit) of the entity. Fluctuating interest rates impact on the value of short term cash investments and financing activities, giving rise to interest rate risk. The entity is not exposed to significant interest rate risk as the entity does not have any external funding, other than cash and cash equivalents with the bank. The following table sets out the carrying amount, by maturity, of the entity s financial instruments that are exposed to interest rate risk: Within 1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years 2011 Cash and cash equivalents 50 705 981 - - - - - 50 705 981 2010 Cash and cash equivalents 35 077 873 - - - - - 35 077 873 Interest on financial instruments classified as floating rates is repriced at intervals of less than one year. The entity does not have any fixed rate financial instruments as all financial instruments are linked to the South African prime overdraft rate. Total
84 Interest rate risk table The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the entity s profit before taxation. There is no impact on the entity s equity. Increase/(decrease) in interest rate Effect on Surplus % 2011 Cash and cash equivalents (0.5%) (253 530) Cash and cash equivalents (0.5%) (253 530) 2010 Cash and cash equivalents 1% 350 779 Cash and cash equivalents (1%) (350 779) Cash and cash equivalents 0.5% 175 389 Cash and cash equivalents (0.5%) (175 389) Credit risk The largest concentration of credit exposure within the entity relates to cash and cash equivalents held with banks and trade and other receivables. The entity places significant amounts of funds with recognised financial institutions (banks) with strong credit ratings and does not consider the credit risk exposure to be significant. It is the entity s policy that all customers who wish to trade on credit terms, are subject to credit verification procedures. The receivable balances are monitored on an ongoing basis and if the entity becomes aware of deterioration in a customer s credit worthiness, the customer s credit terms are reassessed by management. Liquidity risk The entity s risk to liquidity is a result of the funds available to cover future commitments. The entity manages liquidity risk through an ongoing review of future commitments and credit facilities. Cash flow forecasts are prepared and adequate utilised borrowing facilities are monitored. The table below summarises the maturity profile of the entity s financial liabilities at 31 March 2011, based on contractual undiscounted payments. The entity aims to have sufficient committed borrowing facilities to cover its estimated peak borrowing requirements for at least the next twelve months. Currency risk The entity undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise which are managed utilising forward exchange contracts were appropriate. The entity retranslates monetary assets and liabilities denominated in foreign currencies at the rate of exchange in effect at the reporting date. All surplus or (deficit) on change in currency exchange rates are recorded in the statement of financial position. 22. COMMITMENTS Authorised and approved expenditure 2010 mobilisation 1 635 873 8 935 731 Other commitments - 220 887 Brand strategy development and management 8 595 627 - eputation management 1 652 378 - Brand knowledge and performance management 54 077 - Stakeholder and partner alignment 4 542 375 - Organisational development 74 073 - Administration and operations costs 256 898 - Capex 235 210-17 046 511 9 156 618 In the prior year, an amount of 9 156 million was committed for 2010 mobilisation activities for the 2010 FIFA World Cup TM. Out of this amount, only 7 520 745 was spent by 31 March 2011. The remaining amount of 1 635 873 has been included with the current year committed amount, 15 410 638. The total committed amount is 17 046 511. On demand Less than 3 months 3 to 12 months 1 to 5 years Total 2011 Trade and other payables - 16 707 310 - - 16 707 310 2010 Trade and other payables - 24 014 395 - - 24 014 395
86 23. ETENTION OF FUNDS The activities are related to the payoff line which was supposed to have been spent in the current year but due to the cancellation of the payoff line, these expenses were not incurred. Project linked to payoff line Media globally for launch campaign 6 000 000 - Collateral (i.e. stationery, banners, signage) 500 000 - Launch audio visual production 250 000 - International launch events 2 500 000 - Embassy toolkits 800 000-10 050 000 - An amount of 24 576 751 as a surplus for 31 March 2011 financial year will be utilised in the coming year. 24. CONTINGENT LIABILITIES There are no contingent liabilities for the current financial year. 25. ECONCILIATION BETWEEN BUDGET AND CASH FLOW STATEMENT Operating Finance Investment Total Actual amount as presented in the budget statement 170 113 000 - - 170 113 000 Basis differences (154 666 119) 1 607 775 (1 426 548) (154 479 992) Actual amount in the cash flow statement 154 484 893 1 607 775 (1 426 548) 15 628 107 The International Marketing Council of South Africa entered into a contract in March 2007 with a service provider, for the supply of photocopier machines. The machines broke down continuously, which adversely affected the operations of the International Marketing Council of South Africa. The International Marketing Council of South Africa entered into discussion with the service provider to nullify the contract, but no consensus was reached and service provider cited the contract terms making it impossible to cancel the contract. The machines are no longer in use and further talks to utilise them did not bear fruit. The International Marketing Council of South Africa has obtained a legal opinion advising against proceeding with a legal case as the chances of success are considered to be minimum. This has been classified as an onerous contract. The fruitless and wasteful expenditure for the current year is: Onerous contract to the value of 678 841 Trip by a senior official from Tanzania to consult for the International Marketing Council of South Africa, the project was cancelled after the consultant arrived in Tanzania, to the value of 48 994 The postponement of a tender pitch after a bidder had travelled to South Africa to the value of 23 599 27. IEGULA EXPENDITUE Opening balance 786 264 - Add: Irregular expenditure current year 2 043 709 786 264 2 829 973 786 264 The irregular expenditure relates to the contravention of policies and procedures of supply chain management by the former employees on the purchase of the 2010 FIFA World Cup TM tickets. The deposit for the tickets for an amount of 786 264 was paid in March 2010 and was disclosed in the financial statements. The investigation, which resulted in the dismissal of two employees was instituted by the International Marketing Council of South Africa after suspecting irregularities. 26. FUITLESS AND WASTEFUL EXPENDITUE Fruitless and wasteful expenditure opening balance - 416 682 Fruitless and wasteful expenditure prior year - 600 224 Fruitless and wasteful expenditure current year 751 433-751 433 1 016 906