TRUE MOVE COMPANY LIMITED CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS 31 DECEMBER 2013
Statement of Financial Position As at 31 December 2013 Restated Restated Restated Restated 31 December 31 December 1 January 31 December 31 December 1 January 2013 2012 2012 2013 2012 2012 Notes Baht Baht Baht Baht Baht Baht Assets Current assets Cash and cash equivalents 9 2,270,408,808 2,010,655,654 2,213,016,944 1,439,807,905 978,703,728 1,199,499,646 Restricted cash - - 1,219,889 - - 1,219,889 Short-term investment 909,045 883,612 - - - - Trade and other receivables, net 11 12,266,907,654 11,909,621,049 9,178,947,989 7,703,875,642 8,906,605,904 8,565,941,533 Short-term loans to a subsidiary 28 - - - 2,075,000,000 750,000,000 615,000,000 Inventories, net 12 4,735,837,265 3,722,362,409 1,585,579,028 3,816,191 4,704,688 9,881,855 Claimable value added tax 549,584,411 371,116,723 318,598,726 342,584,170 311,896,944 313,332,503 Other current assets 13 265,772,403 468,717,922 592,451,292 196,873,303 406,068,170 536,133,133 Total current assets 20,089,419,586 18,483,357,369 13,889,813,868 11,761,957,211 11,357,979,434 11,241,008,559 Non-current assets Restricted cash 10 290,000 290,000 1,156,628 - - - Investments in subsidiaries, net 14 - - - 60,774,571 60,774,571 60,774,571 Investment in other company 200,000 400,000 400,000 200,000 400,000 400,000 Property, plant and equipment, net 15 17,629,694,931 26,325,855,290 31,357,039,337 16,647,177,090 25,719,360,738 30,913,459,011 Intangible assets, net 16 606,284,476 3,110,999,968 3,220,088,417 552,051,806 3,053,396,655 3,192,124,467 Other non-current assets 266,942,593 220,120,388 192,573,647 113,092,333 122,616,486 129,777,951 Total non-current assets 18,503,412,000 29,657,665,646 34,771,258,029 17,373,295,800 28,956,548,450 34,296,536,000 Total assets 38,592,831,586 48,141,023,015 48,661,071,897 29,135,253,011 40,314,527,884 45,537,544,559 Director Director The accompanying notes are an integral part of these consolidated and company financial statements. 3
Statement of Financial Position (Cont d) As at 31 December 2013 Restated Restated Restated Restated 31 December 31 December 1 January 31 December 31 December 1 January 2013 2012 2012 2013 2012 2012 Notes Baht Baht Baht Baht Baht Baht Liabilities and shareholders equity Current liabilities Short-term borrowings - financial institutions 18.1 1,680,000,000 650,000,000 - - - - Trade and other payables 17 11,733,969,750 11,692,912,607 10,440,093,738 4,598,439,909 5,571,227,396 7,474,223,504 Current portion of long-term borrowings 18.2 1,027,192,491 150,208,407-1,027,192,491 150,208,407 - Short-term borrowings - related companies 28 6,595,000,000 6,227,000,000 2,600,000,000 6,565,000,000 6,200,000,000 2,600,000,000 Accrued expenses 762,860,841 1,945,693,519 1,369,719,208 536,391,833 1,258,859,126 1,286,379,650 Accrued cost of agreement for operation 744,471,531 1,884,382,269 2,531,500,545 744,471,531 1,884,382,269 2,531,500,545 Unearned service income 440,698,638 655,162,585 812,438,045 440,698,638 655,217,611 820,111,214 Current portion of liability under agreement for operation 19-694,137,380 621,118,714-694,137,380 621,118,714 Other current liabilities 224,595,681 258,301,455 285,337,497 153,066,929 207,052,557 239,308,783 Total current liabilities 23,208,788,932 24,157,798,222 18,660,207,747 14,065,261,331 16,621,084,746 15,572,642,410 Non-current liabilities Long-term borrowings 18.2 7,155,075,658 26,229,385,004 26,295,504,927 7,155,075,658 26,229,385,004 26,295,504,927 Employee benefit obligations 21 196,988,658 158,872,532 162,073,451 116,949,322 108,873,062 157,983,359 Decommissioning liability 26,042,264 24,757,155 22,613,628 26,042,264 24,757,155 22,613,628 Liability under agreement for operation 19-2,931,899,884 3,454,971,405-2,931,899,884 3,454,971,405 Deferred income tax liabilities 20 1,379,653,079 962,665,079 444,177,628 1,379,653,079 962,665,079 444,177,628 Total non-current liabilities 8,757,759,659 30,307,579,654 30,379,341,039 8,677,720,323 30,257,580,184 30,375,250,947 Total liabilities 31,966,548,591 54,465,377,876 49,039,548,786 22,742,981,654 46,878,664,930 45,947,893,357 The accompanying notes are an integral part of these consolidated and company financial statements. 4
Statement of Financial Position (Cont d) As at 31 December 2013 Restated Restated Restated Restated 31 December 31 December 1 January 31 December 31 December 1 January 2013 2012 2012 2013 2012 2012 Note Baht Baht Baht Baht Baht Baht Liabilities and shareholders equity (Cont d) Shareholders equity Share capital Authorised share capital 6,518,130,138 Ordinary shares at par value of Baht 10 each 22 (2012: 4,128,130,138 Ordinary shares at par value of Baht 10 each) 65,181,301,380 41,281,301,380 41,281,301,380 65,181,301,380 41,281,301,380 41,281,301,380 Issued and paid-up share capital 6,518,130,138 Ordinary shares paid-up of Baht 10 each (2012: 4,128,130,138 Ordinary shares paid-up of Baht 10 each) 65,181,301,380 41,281,301,380 41,281,301,380 65,181,301,380 41,281,301,380 41,281,301,380 Share premium 22 1,858,400,000 1,858,400,000 1,858,400,000 1,858,400,000 1,858,400,000 1,858,400,000 Deficits (60,452,548,054) (49,503,186,662) (43,557,308,690) (60,647,430,023) (49,703,838,426) (43,550,050,178) Other components of equity 39,129,669 39,129,669 39,129,669 - - - Equity attributable to owners of the parent 6,626,282,995 (6,324,355,613) (378,477,641) 6,392,271,357 (6,564,137,046) (410,348,798) Non-Controlling interests - 752 752 - - - Total shareholders equity 6,626,282,995 (6,324,354,861) (378,476,889) 6,392,271,357 (6,564,137,046) (410,348,798) Total liabilities and shareholders equity 38,592,831,586 48,141,023,015 48,661,071,897 29,135,253,011 40,314,527,884 45,537,544,559 - - - - - - The accompanying notes are an integral part of these consolidated and company financial statements. 5
Statement of Comprehensive Income Restated Restated 2013 2012 2013 2012 Notes Baht Baht Baht Baht Revenues Revenues from mobile and other services 18,070,828,879 28,515,874,707 15,133,419,515 26,323,729,362 Revenues from product sales 17,073,315,342 14,360,447,010 50,819,080 143,293,135 Total revenues 35,144,144,221 42,876,321,717 15,184,238,595 26,467,022,497 Costs Cost of providing services 19,095,159,977 22,409,253,193 18,761,705,048 22,276,394,669 Cost of sales 15,738,839,727 13,373,662,945 39,793,472 118,107,761 Total costs 34,833,999,704 35,782,916,138 18,801,498,520 22,394,502,430 Gross profit (loss) 310,144,517 7,093,405,579 (3,617,259,925) 4,072,520,067 Other income 1,219,060,159 94,237,154 1,162,628,140 35,793,872 Selling expenses (4,740,765,907) (5,204,397,190) (1,214,929,903) (2,687,429,305) Administrative expenses (2,273,159,560) (2,751,011,260) (1,983,812,848) (2,490,374,964) Other expenses 24 (2,069,931,226) (2,019,178,006) (2,062,376,626) (2,016,732,244) Finance costs, net 25 (2,905,872,549) (2,576,068,994) (2,805,160,622) (2,549,078,223) Loss before income tax expense (10,460,524,566) (5,363,012,717) (10,520,911,784) (5,635,300,797) Income tax expenses 26 (464,328,054) (582,865,255) (416,988,000) (518,487,451) Loss for the year (10,924,852,620) (5,945,877,972) (10,937,899,784) (6,153,788,248) Other comprehensive expense: Acturial losses on defined employee benefit plans (24,509,524) - (5,691,813) - Total comprehensive expense for the year (10,949,362,144) (5,945,877,972) (10,943,591,597) (6,153,788,248) Loss attributable to: Owners of the parent (10,924,851,868) (5,945,877,972) (10,937,899,784) (6,153,788,248) Non-controlling interests (752) - - - (10,924,852,620) (5,945,877,972) (10,937,899,784) (6,153,788,248) Total comprehensive expense attributable to: Owners of the parent (10,949,361,392) (5,945,877,972) (10,943,591,597) (6,153,788,248) Non-controlling interests (752) - - - (10,949,362,144) (5,945,877,972) (10,943,591,597) (6,153,788,248) Loss per share 27 Basic loss per share (2.63) (1.44) (2.63) (1.49) The accompanying notes are an integral part of these consolidated and company financial statements. 6
Statement of Changes in Shareholders Equity Attributable to owners of the parent Other components of equity Issued and Share surplus paid-up from business under Total owners of Non-controlling share capital Share premium Deficits common control the parent interest Total Note Baht Baht Baht Baht Baht Baht Baht Opening balance as at 1 January 2012 41,281,301,380 1,858,400,000 (43,113,131,062) 39,129,669 65,699,987 752 65,700,739 Retrospective adjustment due to change in accounting policy (Note 4) - - (444,177,628) - (444,177,628) - (444,177,628) As restated 41,281,301,380 1,858,400,000 (43,557,308,690) 39,129,669 (378,477,641) 752 (378,476,889) Total comprehensive expense for the year - - (5,945,877,972) - (5,945,877,972) - (5,945,877,972) Closing balance as at 31 December 2012 41,281,301,380 1,858,400,000 (49,503,186,662) 39,129,669 (6,324,355,613) 752 (6,324,354,861) Opening balance as at 1 January 2013 41,281,301,380 1,858,400,000 (48,540,521,583) 39,129,669 (5,361,690,534) 752 (5,361,689,782) Retrospective adjustment due to change in accounting policy (Note 4) - - (962,665,079) - (962,665,079) - (962,665,079) As restated 41,281,301,380 1,858,400,000 (49,503,186,662) 39,129,669 (6,324,355,613) 752 (6,324,354,861) Proceeds from shares issued 22 23,900,000,000 - - - 23,900,000,000-23,900,000,000 Total comprehensive expense for the year - - (10,949,361,392) - (10,949,361,392) (752) (10,949,362,144) Closing balance as at 31 December 2013 65,181,301,380 1,858,400,000 (60,452,548,054) 39,129,669 6,626,282,995-6,626,282,995 The accompanying notes are an integral part of these consolidated and company financial statements. 7
Statement of Changes in Shareholders Equity (Cont d) Issued and paid-up share capital Share premium Deficits Total Note Baht Baht Baht Baht Opening balance as at 1 January 2012 41,281,301,380 1,858,400,000 (43,105,872,550) 33,828,830 Retrospective adjustment due to change in accounting policy (Note 4) - - (444,177,628) (444,177,628) As restated 41,281,301,380 1,858,400,000 (43,550,050,178) (410,348,798) Total comprehensive expense for the year - - (6,153,788,248) (6,153,788,248) Closing balance as at 31 December 2012 41,281,301,380 1,858,400,000 (49,703,838,426) (6,564,137,046) Opening balance as at 1 January 2013 41,281,301,380 1,858,400,000 (48,741,173,347) (5,601,471,967) Retrospective adjustment due to change in accounting policy (Note 4) - - (962,665,079) (962,665,079) As restated 41,281,301,380 1,858,400,000 (49,703,838,426) (6,564,137,046) Proceeds from shares issued 22 23,900,000,000 - - 23,900,000,000 Total comprehensive expense for the year - - (10,943,591,597) (10,943,591,597) Closing balance as at 31 December 2013 65,181,301,380 1,858,400,000 (60,647,430,023) 6,392,271,357 The accompanying notes are an integral part of these consolidated and company financial statements. 8
Statement of Cash Flows Restated Restated 2013 2012 2013 2012 Notes Baht Baht Baht Baht Cash flows from operating activities Loss before income tax (10,460,524,566) (5,363,012,717) (10,520,911,784) (5,635,300,797) Adjustments for: Interest income (26,062,086) (79,365,024) (42,560,386) (105,523,700) Interest expenses 2,543,411,740 2,617,107,952 2,466,810,037 2,611,539,034 Depreciation charges 15 7,202,019,038 4,650,657,566 7,067,488,822 4,560,327,928 Amortisation of debt issuance costs 139,534,508 99,484,037 139,534,508 99,484,037 Amortisation of intangible assets 16 240,573,194 309,080,809 232,318,249 301,971,857 Realised loss on exchange rate from repayment to borrowings 6,317,763-6,317,763 - Unrealised net loss (gain) on exchange rate 77,359,806 (111,080,307) 73,827,927 (111,113,833) Doubtful accounts 23 26,518,480 237,652,803 23,518,011 162,310,249 Impairment charge of mobile network equipment 15 2,056,000,000 1,972,050,000 2,056,000,000 1,972,050,000 Gain on reversal of right and liabilities under agreement for operation 16 (791,179,595) - (791,179,595) - Loss on disposals of fixed asset 13,939,105 182,299,701 6,351,798 181,565,690 Gain from sale of investments in other company (2,161,820) - (2,161,820) - Employee benefit obligations 13,606,602 (3,200,919) 2,384,447 (49,110,297) Changes in operating assets and liabilities - trade and other receivables (195,516,393) (3,195,776,237) 1,303,459,645 (756,298,879) - inventories (1,013,474,856) (2,136,783,381) 888,497 5,177,166 - claimable value added tax (178,467,688) (52,517,996) (30,687,226) 1,435,558 - other current assets (12,904,389) 80,042,984 (6,655,042) 86,374,579 - other non-current assets (46,847,638) (27,546,741) 9,524,153 7,161,464 - trade and other payables 671,175,937 1,212,882,331 (176,526,056) (1,858,736,259) - accrued expenses (2,095,170,440) (38,227,753) (1,633,626,287) (641,188,343) - other current liabilities (248,169,720) (184,311,504) (268,504,600) (197,149,827) - liability under agreement for operation 19 (730,000,000) (730,000,000) (730,000,000) (730,000,000) Cash used in operations (2,810,023,018) (560,564,396) (814,388,939) (95,024,373) Add Interest received 26,117,361 80,521,193 42,411,367 105,696,480 Withholding tax refund 355,300,407 411,967,923 307,835,184 381,789,192 Less Interest paid (2,389,728,493) (2,322,408,841) (2,314,305,557) (2,317,374,170) Income tax paid (withholding tax) (235,312,838) (313,759,898) (126,802,056) (255,889,097) Net cash used in operating activities (5,053,646,581) (2,704,244,019) (2,905,250,001) (2,180,801,968) The accompanying notes are an integral part of these consolidated and company financial statements. 9
Statement of Cash Flows (Cont d) Restated Restated 2013 2012 2013 2012 Notes Baht Baht Baht Baht Cash flows from investing activities Decrease in restricted cash - 2,086,517-1,219,889 Purchases of intangible assets (2,366,870) (74,571,290) (1,821,720) (47,483,784) Purchases of non-network assets (465,208,592) (342,370,962) (54,692,263) (107,122,602) Purchases of network equipment (1,152,047,957) (1,720,146,578) (1,152,047,957) (1,712,358,510) Purchases of short-term investment - (883,612) - - Proceeds from disposals of equipment 492,886 361,192,322 385,850 361,174,725 Proceeds from sale of investments in other company 2,361,820-2,361,820 - Loans repayment received from related companies 28-2,250,000,000 1,490,000,000 2,870,000,000 Loans made to related companies 28 - (2,250,000,000) (2,815,000,000) (3,005,000,000) Net cash used in investing activities (1,616,768,713) (1,774,693,603) (2,530,814,270) (1,639,570,282) Cash flows from financing activities Proceeds from issue of ordinary shares 22 23,900,000,000-23,900,000,000 - Proceeds from short-term borrowings from financial institutions 18.1 2,880,000,000 650,000,000 - - Repayments to short-term borrowings from financial institutions 18.1 (1,850,000,000) - - - Proceeds from short-term borrowings from related companies 28 6,018,000,000 4,699,000,000 6,015,000,000 4,670,000,000 Repayments to short-term borrowings from related companies 28 (5,650,000,000) (1,072,000,000) (5,650,000,000) (1,070,000,000) Proceeds from long-term borrowings from financial institutions 18.2 150,000,000-150,000,000 - Repayments to long-term borrowings from financial institutions 18.2 (18,360,303,086) - (18,360,303,086) - Repayments to US Dollar notes (157,342,955) - (157,342,955) - Net cash generated from financing activities 6,930,353,959 4,277,000,000 5,897,353,959 3,600,000,000 Net increase (decrease) in cash and cash equivalents 259,938,665 (201,937,622) 461,289,688 (220,372,250) Cash and cash equivalents at the beginning of the year 2,010,655,654 2,213,016,944 978,703,728 1,199,499,646 Effect of exchange rate change on cash (185,511) (423,668) (185,511) (423,668) Cash and cash equivalents at the end of the year 2,270,408,808 2,010,655,654 1,439,807,905 978,703,728 Non-cash transactions Significant non-cash transactions for the years ended 31 December 2013 and 2012 comprise: 2013 2012 2013 2012 Million Baht Million Baht Million Baht Million Baht Acquisitions of property and equipment which have not been paid 332.17 1,210.11 172.03 1,162.20 The accompanying notes are an integral part of these consolidated and company financial statements. 10
Notes to the and Financial Statements 1 General information ( the ) is incorporated and resident in Thailand. The address of the s registered office is as follows: 18 True Tower, Ratchadapisek Road, Huai Khwang District, Bangkok 10310. The principal business operations of the Group are summarised as follows: a) The operations of a 1800 MHz mobile telecommunications business in Thailand under the right to operate and provide services under the digital PCN (Personal Communication Network) 1800 system, dated June 20, 1996 as amended on 23 February 2000 and 8 September 2000, granted by CAT Telecom Public Limited ( CAT ). The agreement covered a 17 years period from 20 June 1996 to 15 September 2013. On 16 August 2013, the National Broadcasting and Telecommunications Commission ( NBTC ) (formerly, the National and Telecommunications Commission NTC ) endorsed and officially announced the regulation in respect of protection of mobile customers using mobile service on networks whose concessions expire. The regulation allows the to continue providing mobile service on the 1800 MHz spectrum for a one-year period after the expiry of the concession; b) Trading and providing services for telecommunication equipment; c) Content provider; and d) Providing international telephone service or International Direct Dialing (IDD) services. The consolidated and company financial statements for the year ended 31 December 2013 were authorised for issue by the s Board of Director on 26 February 2014. 2 Financial position The Group has continuously incurred loss from operations. In addition, the Agreement to operate digital PCN 1800 Mobile phone service, which is the Group s core business, has expired and the Group is allowed by the NBTC to continue providing the service for another year. The management believes that beyond the extension date, the Group will be able to identify other sources of revenue. In addition, the parent company of the Group has increased the capital in 2013 and confirmed its intention to continue providing appropriate financial assistance and support to enable the Group to meet all obligations as they fall due. The preparation of the financial statements is based on accounting principles applicable to going concern basis. 3 Accounting policies The principal accounting policies applied in the preparation of these consolidated and company financial statements are set out below: 3.1 Basis of preparation The consolidated and company financial statements have been prepared in accordance with Thai generally accepted accounting principles under the Accounting Act B.E. 2543, being those Thai Financial Reporting Standards issued under the Accounting Professions Act B.E. 2547. The consolidated and company financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with Thai generally accepted accounting principles requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement on complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5. An English version of the consolidated and company financial statements has been prepared from the statutory financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language statutory financial statements shall prevail. 11
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.2 Revised accounting standards, revised financial reporting standards, and related interpretations 1) New/revised accounting standards which are effective on 1 January 2013 and are relevant and have an impact to the are: TAS 12 TAS 21 (Revised 2009) TFRS 8 Income Taxes The Effects of Changes in Foreign Exchange Rates Operating Segments TAS 12 requires tax expenses to be recognised for current and deferred tax. New accounting policy of income taxes is provided in Note 3.13 and the impact to the Financial statements are described in Note 4. TAS 21 (Revised 2009) requires the to determine the functional currency which is the currency of the primary economic environment in which the entity operates. The assessed and concluded that Thai Baht is the s functional currency. As a consequence, applying TAS 21 (Revised 2009) has no impact to assets, liabilities and retained earnings. New accounting policy is described in Note 3.4. TFRS 8 requires the operating segment to be described in the same manner as internal reporting used by the chief operating decision-maker. New accounting policy is described in Note 3.17. The impact to the in applying TFRS 8 is only on a disclosure. Segment reporting as previously disclosed in the financial statements for the year ended 31 December 2012 is consistent with the internal reporting provided to the chief operating decision-maker. Accordingly, there is no impact to the disclosure of segment information in this financial statement. 2) Revised accounting standards, revised financial reporting standards, and related interpretations that are not yet effective and have not been early adopted by the Group: a) Revised accounting standards and revised financial reporting standards effective for the periods beginning on or after 1 January 2014 TAS 1 (Revised 2012) Presentation of financial statements TAS 7 (Revised 2012) Statement of Cash Flows TAS 12 (Revised 2012) Income taxes TAS 17 (Revised 2012) Lease TAS 18 (Revised 2012) Revenue TAS 19 (Revised 2012) Employee Benefits TAS 21 (Revised 2012) The Effects of Changes in Foreign Exchange Rates TAS 24 (Revised 2012) Related party disclosures TAS 28 (Revised 2012) Investments in Associates TAS 31 (Revised 2012) Interest in Joint Ventures TAS 34 (Revised 2012) Interim financial reporting TAS 36 (Revised 2012) Impairment of Assets TAS 38 (Revised 2012) Intangible Assets TFRS 2 (Revised 2012) Share-based payment TFRS 3 (Revised 2012) Business Combinations TFRS 5 (Revised 2012) Non-current assets held for sale and discontinued operations TFRS 8 (Revised 2012) Operating Segments TAS 1 (revised 2012) clarifies that conversion features that are at the holder s discretion do not impact the classification of the liability component of the convertible instrument. TAS 1 also explains that, for each component of equity, an entity may present the breakdown of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. This standard has no impact to the Group. 12
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.2 Revised accounting standards, revised financial reporting standards, and related interpretations (Cont d) a) Revised accounting standards and revised financial reporting standards effective for the periods beginning on or after 1 January 2014 (Cont d) TAS 7 (revised 2012) clarifies that only expenditures that result in a recognized asset in the statement of financial position are eligible for classification as investing activities. This standard has no impact to the Group. TAS 12 (revised 2012) amends an exception to the existing principle for the measurement of deferred tax assets or liabilities on investment property measured at fair value. TAS 12 currently requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. This amendment therefore adds the rebuttable presumption that the carrying amount of an investment property measured at fair value is entirely recovered through sale. As the result of the amendment, TSIC 21 Income tax recovery of revalued non-depreciable assets is incorporated in to TAS 12 (revised 2012). This standard has no impact to the Group. TAS 18 (revised 2012) removes the appendix to TAS 18. This standard has no impact to the Group. TAS 19 (revised2012) deletes the transition provisions of the current TAS 19. This standard has no impact to the Group. TAS 24 (revised 2012) removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. It also clarifies and simplifies the definition of related parties. This standard has no impact to the Group. TAS 34 (revised 2012) emphasises the existing disclosure principles for significant event and transactions. Additional requirements cover disclosure of changes in fair value measurements (if significant), and the need to update relevant information from the most recent annual report. This standard has no impact to the Group. TFRS 8 (revised 2012) clarifies that an entity is required to disclose a measure of segment assets only if the measure is regularly reported to the chief operating decision-maker. This standard has no impact to the Group. b) Interpretations of Thai Financial Reporting Interpretations Committee (TFRIC) and Thai Standard Interpretations Committee (TSIC) effective for the periods beginning on or after 1 January 2014 TFRIC 1 TFRIC 4 TFRIC 5 TFRIC 7 TFRIC 10 TFRIC 12 TFRIC 13 TFRIC 17 TFRIC 18 TSIC 15 TSIC 27 TSIC 29 TSIC 32 Changes in existing decommissioning, restoration and similar liabilities Determining whether an Arrangement contains a Lease Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds Applying the Restatement Approach under TAS 29 Financial Reporting in Hyperinflationary Economies Interim Financial Reporting and Impairment Service Concession Arrangements Customer Loyalty Programmes Distributions of non-cash assets to owners Transfers of assets from customers Operating leases - Incentives Evaluating the substance of transactions in the legal form of a lease Service Concession Arrangements: Disclosure Intangible assets - Web Site Costs 13
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.2 Revised accounting standards, revised financial reporting standards, and related interpretations (Cont d) b) Interpretations of Thai Financial Reporting Interpretations Committee (TFRIC) and Thai Standard Interpretations Committee (TSIC) effective for the periods beginning on or after 1 January 2014 (Cont d) TFRIC 1 provides guidance on accounting for changes in the measurement of an existing decommissioning, restoration and similar liability that results from changes in estimated timing or amount of the outflow of resources embodying economic benefits required to settle the obligation, or a change in the discount rate. This interpretation has no impact to the Group. TFRIC 4 requires the determination of whether an arrangement is or contains a lease to be based on the substance of the arrangement. It requires an assessment of whether: (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and (b) the arrangement conveys a right to use the asset. TFRIC 4 is not relevant to the Group s operations. TFRIC 12 applies to public-to-private service concession arrangements whereby a private sector operator participates in the development, financing, operation and maintenance of infrastructure for public sector services. TFRIC12 is not relevant to the Group' s operations. TFRIC 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a multiple-element arrangement, and the consideration received or receivable from the customer is allocated between the components of the arrangement using fair values. The Group has applied TFRIC 13. The management is currently assessing the impact of applying this interpretation. TSIC27 provides guidance on evaluating the substance of transactions in the legal form of a lease between the entity and the investor whether a series of transactions is linked and should be accounted for as one transaction and whether the arrangement meets the definition of a lease under TAS17 Leases. The accounting shall reflect the substance of the arrangement. This interpretation has no impact to the Group TSIC 29 contains disclosure requirements in respect of public-to-private service arrangements. This interpretation has no impact to the Group. TSIC 32 provides guidance on the internal expenditure on the development and operation of the entity web site for internal or external access. The entity shall comply with the requirements described in TAS38 Intangible Assets. This interpretation has no impact to the Group. c) New accounting standard which is effective for the periods beginning on or after 1 January 2016 TFRS 4 Insurance Contracts TFRS 4 applies to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds. TFRS 4 is not relevant to the Group s operations. 14
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.3 Group Accounting - Investments in subsidiaries (1) Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. Investment in subsidiaries are accounted for at cost less impairment (if any). Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss. Intercompany transactions, balances and unrealised gains or loss on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. A list of Group s principal subsidiaries is set out in Note 14. (2) Transactions and non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. 15
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.4 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Thai Baht, which is the company s functional and the group s presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognised in profit and loss, any exchange component of that gain or loss is recognised in profit and loss. (c) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; Income and expenses for each statement of comprehensive income are translated at average exchange rates; and All resulting exchange differences are recognised as a separate component of equity. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. 3.5 Cash and cash equivalents In the consolidated and company statement of cash flows, cash and cash equivalents includes cash in hand and deposits held at call with banks. 3.6 Trade accounts receivable Trade accounts receivable are carried at the original invoice amount and subsequently measured at the remaining amount less any allowance for doubtful receivables based on a review of all outstanding amounts at the year-end. The amount of the allowance is the difference between the carrying amount of the receivable and the amount expected to be collectible. Bad debts are written-off during the year in which they are identified and recognised in profit or loss within administrative expenses. The Group adopted the following policies for cash cards. Cash cards are purchased from a related company and sold to another related company and other dealers, at their face-value. Cash cards are recorded in inventory at their face-value, which is the estimated fair value of the cards. Net of sale and cost of cash card is reflected in the statement of comprehensive income. The related receivables and payables are reflected gross in the statement of financial position. The Group receives the commission income from cash cards sold. 16
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.7 Inventories Inventories are stated at the lower of cost and net realisable value, except cash cards are stated at the face-value of cards. Cost is determined by the moving weighted average method. The cost of purchase comprises both the purchase price and costs directly attributable to the acquisition of the inventory, such as import duties and transportation charges, less all attributable discounts, allowances or rebates. Net realisable value is the estimate of the selling price in the ordinary course of business, less applicable variable selling expenses. Allowance is made, where necessary, for obsolete, slow-moving and defective inventories. The Group follows separate accounting policies for their inventory of cash cards and top up cards as set out in Note 3.6. 3.8 Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. 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 Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over the estimated useful lives, as follows: Years Buildings 40 Building improvements 20 Office equipment, furniture and fixtures 8 Power supply and computer equipment 5 Motor vehicles 5 Network equipment 10-25 Site preparation cost 15-20 The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Mobile phone network equipment under agreement for operation represents cost of certain equipment and other assets, which have been transferred to the CAT, presented under network equipment. Mobile phone network equipment under agreement for operation is amortised as an expense on the straight-line method over the shorter of estimated useful lives of equipment or the remaining operation period. The asset s carrying amount is written-down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount (Note 3.10). Gains or losses on disposals are determined by comparing the proceeds with the carrying amounts and are recognised within Other (losses)/gains - net in profit or loss. 17
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.9 Intangible assets 3.9.1 Computer software Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: it is technically feasible to complete the software product so that it will be available for use; management intends to complete the software product and use or sell it; there is an ability to use or sell the software product; it can be demonstrated how the software product will generate probable future economic benefits; adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and the expenditure attributable to the software product during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Computer software development costs recognised as assets are amortised using the straight-line method over their estimated useful lives, which does not exceed 10 years. 3.9.2 Right to operate Under the s agreement for operation, the must pay annual fees to the grantor based on either fixed percentages of relevant revenues or at the minimum fee amounts stipulated in the agreement whichever is higher. The right to operate represents the present value of the minimum fees payable over the operation period. The right to operate is presented in the consolidated statement of financial position as an intangible asset and is amortised using the straight-line method over the operation periods. Amortisation of right to operate is included in Cost of providing services. The right to operate is not re-valued subsequent to initial recognition but is reviewed annually for impairment. 3.9.3 Other intangible assets Expenditure on acquired license is capitalised and amortised using the straight - line method over their useful lives, generally over 5 years. Intangible assets are not revalued. 3.10 Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the assets exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. 18
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.11 Leases - where a Group company is the lessee Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. The Group leases certain property, plant and equipment. Leases of property, plant or equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to profit or loss over the lease period so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant or equipment acquired under finance leases is depreciated over the shorter period of the useful life of the asset and the lease term. 3.12 Borrowings Borrowings are recognised initially at the fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective yield method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of reporting date. 3.13 Current and deferred income taxes The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of reporting period in the countries where the s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 19
Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.13 Current and deferred income taxes (Cont d) Deferred income tax is recognised, using the liability method, on temporary differences arising from differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 3.14 Employee benefits Pension obligations Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past-service costs. The defined benefit obligation is calculated by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using market yield of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in profit or loss, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period. For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. 20