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Annual Financial Statements for the year ended 28 February 2015 Data Prime Solutions (Pty) Ltd Financial Reporting Software Developers www.draftworx.com info@dataprime.co.za 011 021 0016 / 011 201 2204
INDEX The reports and statements set out below comprise the annual financial statements presented to the shareholders: General Information 2 Report of the Independent Reviewer 3 Directors' Responsibilities and Approval 4 Directors' Report 5 Statement of Financial Position 6 Statement of Comprehensive Income 7 Statement of Changes in Equity 8 Statement of Cash Flows 9 Accounting Policies 10-13 Notes to the Annual Financial Statements 14-19 Supplementary information: Detailed Income Statement 20 Schedules 21 1
GENERAL INFORMATION COUNTRY OF INCORPORATION AND DOMICILE South Africa NATURE OF BUSINESS AND PRINCIPAL ACTIVITIES Demonstrations DIRECTORS A Pearson (Appointed 1 February 2015) N Jeffery (Resigned 31 January 2015) BANKERS XYZ Limited ACCOUNTING OFFICER ABC Auditors (Pty) Ltd 1234 Ocean Drive Durban 1234 COMPANY SECRETARY A Joans 1234 Ocean Drive Durban 1234 2
1. INDEPENDENT REVIEWER S REPORT To the Shareholders of IFRS SME Demo Company Proprietary Limited We have reviewed the annual financial statements of IFRS SME Demo Company Proprietary Limited set out on pages 6 to 19 that comprise the statement of financial position as at 28 February 2015, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information. Directors' Responsibility for the Financial Statements The company s directors are responsible for the preparation and fair presentation of these financial statements in accordance with the International Financial Reporting Standards for Small and Medium-sized Entities and in the manner required by the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of the annual financial statements that are free from material misstatement, whether due to fraud or error. Independent Reviewer's Responsibility Our responsibility is to express a conclusion on the annual financial statements based on our review. We conducted our review in accordance with International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. ISRE 2400 (Revised) requires us to conclude whether anything has come to our attention that causes us to believe that the annual financial statements, taken as a whole, are not prepared in all material respects in accordance with the applicable financial reporting framework. This Standard also requires us to comply with relevant ethical requirements. A review of financial statements in accordance with ISRE 2400 (Revised) is a limited assurance engagement. The independent reviewer performs procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying analytical procedures, and evaluates the evidence obtained. The procedures performed in a review engagement are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these annual financial statements. 2. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the annual financial statements of IFRS SME Demo Company Proprietary Limited are not prepared, in all material respects, in accordance with International Financial Reporting Standards for Small and Medium-sized Entities issued by the International Accounting Standards Board and the requirements of the Companies Act of South Africa. 3. ABC Auditors (Pty) Ltd 31 July 2015 1234 Ocean Drive Per: Durban Accounting Officer 1234 3
DIRECTORS' RESPONSIBILITIES AND APPROVAL The directors are required by the South African Companies Act to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements satisfy the financial reporting standards as to form and content and present fairly the statement of financial position, results of operations and business of the company, and explain the transactions and financial position of the business of the company at the end of the financial year. The annual financial statements are based upon appropriate accounting policies consistently applied throughout the company and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highest ethical standards in ensuring the company's business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The going-concern basis has been adopted in preparing the financial statements. Based on forecasts and available cash resources the directors have no reason to believe that the company will not be a going concern in the foreseeable future. The financial statements support the viability of the company. The independent reviewers are responsible for independently reviewing and reporting on the company's annual financial statements. The independent reviewer's report is presented on page 3. 1. The annual financial statements as set out on pages 6 to 19 were approved by the board on 31 July 2015 and were signed on their behalf by: A. Pearson N. Jeffery A Pearson N Jeffery 4
DIRECTORS' REPORT The directors present their report for the year ended 28 February 2015. 1. Review of activities Main business and operations The principal activity of the company is demonstrations and there were no major changes herein during the year. The operating results and statement of financial position of the company are fully set out in the attached financial statements and do not in our opinion require any further comment. 2. Going concern The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. 3. Events after reporting date All events subsequent to the date of the annual financial statements and for which the applicable financial reporting framework require adjustment or disclosure have been adjusted or disclosed. The directors are not aware of any matter or circumstance arising since the end of the financial year to the date of this report that could have a material effect of the financial position of the company. 4. Directors The directors of the company during the year and to the date of this report are as follows: A Pearson (Appointed 1 February 2015) N Jeffery (Resigned 31 January 2015) 5. Shareholders There have been no changes in ownership and the shareholders remain: N Jeffery 50 A Pearson 50 % 6. Auditors ABC Auditors (Pty) Ltd were the auditors for the year under review. 5
1. IFRS SME DEMO COMPANY PROPRIETARY LIMITED Annual Financial Statements as at 28 February 2015 Statement of Financial Position Figures in R Note(s) 2015 2014 Assets Non-Current Assets Property, plant and equipment 3 30,847,176 21,889,404 Current Assets Inventories 4 25,158,794 24,154,465 Trade and other receivables 5 64,486,309 20,012,456 89,645,103 44,166,921 Total Assets 120,492,279 66,056,325 2. Equity and Liabilities Equity Issued capital 6 100 100 Retained earnings 36,110,378 12,754,536 36,110,478 12,754,636 Non-Current Liabilities Borrowings 7 22,897,564 10,250,165 Current Liabilities Trade and other payables 8 30,841,995 27,587,171 Current taxation liability 14,000,000 5,000,000 Loan from shareholder 9 5,496,189 7,254,968 Current portion of long term liabilities 7 3,000,000 1,500,000 Bank overdraft 10 8,146,053 1,709,385 61,484,237 43,051,524 Total Equity and Liabilities 120,492,279 66,056,325 6
Statement of Comprehensive Income Figures in R Note(s) 2015 2014 Revenue 11 226,000,189 200,124,564 Cost of sales 12 (139,760,103) (134,083,458) Gross profit 86,240,086 66,041,106 Operating costs (27,315,748) (24,361,910) Operating profit 13 58,924,338 41,679,196 Finance costs (1,568,496) (1,248,560) Profit before taxation 57,355,842 40,430,636 Taxation expense 14 (14,000,000) (5,000,000) Profit for the year 43,355,842 35,430,636 7
Statement of Changes in Equity Figures in R Share capital Retained earnings Total Balance at 1 March 2013 100 (2,676,100) (2,676,000) Total comprehensive income for the year Profit for the year 35,430,636 35,430,636 Total comprehensive income for the year - 35,430,636 35,430,636 Dividends (20,000,000) (20,000,000) Balance at 28 February 2014 100 12,754,536 12,754,636 Balance at 1 March 2014 100 12,754,536 12,754,636 Total comprehensive income for the year Profit for the year 43,355,842 43,355,842 Total comprehensive income for the year - 43,355,842 43,355,842 Dividends (20,000,000) (20,000,000) Balance at 28 February 2015 100 36,110,378 36,110,478 Note 6 8
Statement of Cash Flows Figures in R Note(s) 2015 2014 Cash flows from operating activities Profit for the year 43,355,842 35,430,636 Adjustments for: Finance costs 1,568,496 1,248,560 Income tax 14,000,000 5,000,000 Depreciation of Property, plant and equipment 581,895 248,985 Operating cash flow before working capital changes 59,506,233 41,928,181 Working capital changes Increase in inventories (1,004,329) (11,139,181) Increase in trade and other receivables (44,473,853) (12,504,888) (Increase)/decrease in short-term loans (1,758,779) 400,643 Increase/(decrease) in trade and other payables 3,254,824 (4,563,765) Cash generated by operating activities 15,524,096 14,120,990 Finance costs (1,568,496) (1,248,560) Income tax paid (5,000,000) - Net cash from operating activities 8,955,600 12,872,430 Cash flows from investing activities Property, plant and equipment acquired 3 (10,000,000) (2,000,000) Proceeds on disposals of property, plant and equipment 460,333 746,578 Net cash utilised in investing activities (9,539,667) (1,253,422) Cash flows from financing activities Loans raised 14,147,399 6,201,203 Dividends paid (20,000,000) (20,000,000) Net cash utilised in financing activities (5,852,601) (13,798,797) Decrease in cash and cash equivalents (6,436,668) (2,179,789) Cash and cash equivalents at beginning of the year (1,709,385) 470,404 Cash and cash equivalents at end of the year 10 (8,146,053) (1,709,385) 9
Accounting Policies 1. General information IFRS SME Demo Company Proprietary Limited is a private company incorporated in South Africa. 2. Summary of significant accounting policies These annual financial statements have been prepared in accordance with the International Financial Reporting Standards for Small and Medium-sized Entities issued by the International Accounting Standards Board. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements have been prepared under the historical cost convention and are presented in South African Rands. 2.1 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and/or services in the ordinary course of the company's activities. Revenue is shown net of value-added tax, returns, and discounts. The company recognises revenue when: the amount of revenue can be reliably measured; it is probable that future economic benefits will flow to the entity; and specific criteria have been met for each of the company's activities, as described below: Sales of goods retail Sales of goods are recognised when an entity sells a product to the customer as control passes to the customer on the day the transaction takes place. Retail sales are usually in cash or by credit card. 2.2 Income taxation The taxation expense for the year comprises current and deferred taxation. Taxation is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income. The current income taxation charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date. Deferred taxation is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and their corresponding taxation bases (known as temporary differences). Deferred taxation liabilities are recognised for all temporary differences that are expected to increase taxable profit in the future. Deferred taxation assets are recognised for all temporary differences that are expected to reduce taxable profit in the future, and any unused taxation losses or unused taxation credits. Deferred taxation assets are measured at the highest amount that, on the basis of current or estimated future taxable profit, is more likely than not to be recovered. The net carrying amount of deferred taxation assets is reviewed at each reporting date and is adjusted to reflect the current assessment of future taxable profits. Any adjustments are recognised in profit or loss. 10
Accounting Policies Deferred taxation is calculated at the tax rates that are expected to apply to the taxable profit (tax loss) of the periods in which it expects the deferred taxation asset to be realised or the deferred taxation liability to be settled, on the basis of tax rates that have been enacted or substantively enacted by the end of the reporting period. 2.3 Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. 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. Depreciation is charged so as to allocate the cost of assets less their residual values over their estimated useful lives, using the straight-line method. The following rates are used for the depreciation of property, plant and equipment: Land and buildings 0.00% Plant and equipment 20.00% 2.4 Impairment of non-current assets At each balance sheet date, the carrying amounts of tangible and intangible assets and investments in associates are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If the fair value less costs to sell of an asset (or group of assets) is estimated to be less than its carrying amount, the carrying amount of the asset (or group of assets) is reduced to its fair value less costs to sell. An impairment loss is recognised immediately in profit or loss. If an impairment loss subsequently reverses, the carrying amount of the asset (or group of assets) is increased to the revised estimate of its fair value less costs to sell, but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset (group of assets) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. 2.5 Inventories Inventories are valued at the lower of cost and net realisable value. The cost of inventories comprise all costs of purchases, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on the following bases: When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the relative revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. 11
Accounting Policies 2.6 Trade and other receivables Trade receivables are recognised initially at the transaction price. They are subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables. 2.7 Cash and cash equivalents Cash and cash equivalents includes cash on hand, demand deposits and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown under current liabilities on the statement of financial position. 2.8 Share capital Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis. 2.9 Borrowings Borrowings are recognised initially at the transaction price (that is, the present value of cash payable to the bank, including transaction costs). Borrowings are subsequently stated at amortised cost. Interest expense is recognised on the basis of the effective interest method and is included in finance costs. Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. 2.10 Employee benefit obligations 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. Defined contribution plans Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. 12
Accounting Policies 2.11 Trade payables Trade payables are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method. 2.12 Borrowing costs Borrowing costs are recognised on the basis of the effective interest method and is included in finance costs. 2.13 Key sources of estimation uncertainty Income taxes The company is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. 13
Notes to the Annual Financial Statements Figures in R 2015 2014 3. Property, plant and equipment Owned assets Cost Accumulated depreciation 2015 Carrying value Cost Accumulated depreciation 2014 Carrying value Land and buildings 20,000,000-20,000,000 20,000,000-20,000,000 Plant and equipment 35,894,654 (25,047,478) 10,847,176 26,354,987 (24,465,583) 1,889,404 55,894,654 (25,047,478) 30,847,176 46,354,987 (24,465,583) 21,889,404 The carrying amounts of property, plant and equipment can be reconciled as follows: Owned assets Carrying value at beginning of year Additions Disposals Depreciation 2015 Carrying value at end of year Land and buildings 20,000,000 - - - 20,000,000 Plant and equipment 1,889,404 10,000,000 (460,333) (581,895) 10,847,176 21,889,404 10,000,000 (460,333) (581,895) 30,847,176 3.1 Carrying value at beginning of year Additions Disposals Depreciation Owned assets 2014 Carrying value at end of year Land and buildings 20,000,000 - - - 20,000,000 Plant and equipment 884,967 2,000,000 (746,578) (248,985) 1,889,404 20,884,967 2,000,000 (746,578) (248,985) 21,889,404 Plant and equipment is pledged as security for various instalment sales agreements, refer note 7. Land and buildings Erf 24, Durban. this property is pledged as security for a mortgage bond, refer note 7. -Acquired on 21/07/2012 for 15,000,000 15,000,000 -Costs of additions or improvements 5,000,000 5,000,000 20,000,000 20,000,000 14
Notes to the Annual Financial Statements Figures in R 2015 2014 4. Inventories Inventories comprise: Merchandise 25,158,794 24,154,465 There have been no impairments to the value of inventory 5. Trade and other receivables Trade debtors 64,484,309 20,012,456 Prepaid expenses 5,000-64,489,309 20,012,456 Impairment loss (3,000) - 64,486,309 20,012,456 5.1 Items included in trade and other receivables not classified as financial instruments Prepaid expenses 5,000 - Trade and other receivables net of non-financial instruments (refer note 15) 64,481,309 20,012,456 The entity recognised an impairment loss of R 3,000 (2014: R0) against trade receivables due to default by customers. 6. Share capital Authorised 1,000 Ordinary shares of R1 each 1,000 1,000 Issued 100 Ordinary shares of R1 each 100 100 15
Notes to the Annual Financial Statements Figures in R 2015 2014 7. Borrowings Secured Mortgage bond 15,000,000 10,000,000 The bond with ABSA Bank is secured over land and buildings, refer note 3. It bears interest at prime minus 1% with monthly repayments of R150,000 (2014: R100,000). Instalment sale agreements 10,897,564 1,750,165 The instalment sale agreements with ABSA are secured by a general pledge over all moveable assets. They bear interest at an average rate of prime plus 2.1% (2014: 0.2%) with monthly repayments of R100,000 (2014: R21,000). 25,897,564 11,750,165 Repayable within one year, transferred to current liabilities (3,000,000) (1,500,000) 22,897,564 10,250,165 8. Trade and other payables Trade creditors 29,964,015 26,816,692 Value Added Tax 877,980 770,479 30,841,995 27,587,171 8.1 Items included in trade and other payables not classified as financial instruments Value Added Tax 877,980 770,479 Trade and other payables net of non-financial instruments (refer note 15) 29,964,015 26,816,692 9. Loan from shareholder Burger family trust 5,496,189 7,254,968 The loan is unsecured, interest free, and no fixed terms of repayment have been negotiated 10. Cash and cash equivalents Overdraft Bank overdraft 8,146,053 1,709,385 16
Notes to the Annual Financial Statements Figures in R 2015 2014 11. Revenue An analysis of revenue is as follows: Sale of goods 226,000,189 200,124,564 12. Cost of Sales Opening stock 24,154,465 13,015,284 Purchases 140,764,432 145,222,639 Closing stock (25,158,794) (24,154,465) 139,760,103 134,083,458 13. Operating profit Operating profit is arrived at after taking into account the following items: Depreciation and impairments Owned assets Plant and equipment 581,895 248,985 Operating lease charges Equipment 3,059,496 2,781,360 14. Income taxation expense Current taxation 14,000,000 5,000,000 Income taxation for the year 14,000,000 5,000,000 Reconciliation of rate of taxation % % South African normal taxation rate 28.00% 28.00% Adjusted for: Permanent differences (3.59%) (15.63%) Net reduction (3.59%) (15.63%) Effective rate of taxation 24.41% 12.37% 17
Notes to the Annual Financial Statements Figures in R 2015 2014 15. Financial instruments 15.1 The company has classified its financial assets in the following categories: 2015 Current financial assets Fair value through profit loss Debt instruments at amortised cost Equity instruments Trade and other receivables (refer note 5) - 64,481,309-64,481,309 Total 2014 Current financial assets Trade and other receivables (refer note 5) - 20,012,456-20,012,456 The company has classified its financial liabilities in the following categories Loan Fair value commitments through at cost less profit loss impairment 2015 Non-current financial liabilities Amortised cost Borrowings (refer note 7) - - 22,897,564 22,897,564 Total Current financial liabilities Trade and other payables (refer note 8) - - 29,964,015 29,964,015 Loan from shareholder (refer note 9) - - 5,496,189 5,496,189 Current portion of long term liabilities (refer note 7) - - 3,000,000 3,000,000 Bank overdraft (refer note 10) - - 8,146,053 8,146,053 2014 Non-current financial liabilities Borrowings (refer note 7) - - 10,250,165 10,250,165 Current financial liabilities Trade and other payables (refer note 8) - - 26,816,692 26,816,692 Loan from shareholder (refer note 9) - - 7,254,968 7,254,968 Current portion of long term liabilities (refer note 7) - - 1,500,000 1,500,000 Bank overdraft (refer note 10) - - 1,709,385 1,709,385 18
Notes to the Annual Financial Statements Figures in R 2015 2014 15.2 Liquidity risk The company is exposed to liquidity risk on financial liabilities. It manages its funds conservatively by maintaining a comfortable level of cash and cash equivalents in order to meet continuous operational need. Various banking facilities and credit lines have also been arranged with different banks in order to fund any emergency liquidity requirements. Summary quantitative data 2015 Less than 1 year Between 1 and 5 years Over 5 years Undated Loans from shareholders (refer note 9) - - - 5,496,189 Borrowings (refer note 7) 3,000,000 15,000,000 7,897,564 - Trade and other payables (refer note 8) 29,964,015 - - - Bank overdraft (refer note 10) 8,146,053 - - - 2014 Loans from shareholders (refer note 9) - - - 7,254,968 Borrowings (refer note 7) 1,500,000 8,000,000 2,250,165 - Trade and other payables (refer note 8) 26,816,692 - - - Bank overdraft (refer note 10) 1,709,385 - - - 19
1. IFRS SME DEMO COMPANY PROPRIETARY LIMITED Detailed Income Statement Figures in R 2015 2014 Gross Revenue Sales 226,000,189 200,124,564 226,000,189 200,124,564 Cost of Sales Opening stock 24,154,465 13,015,284 Purchases 140,764,432 145,222,639 Closing stock (25,158,794) (24,154,465) 139,760,103 134,083,458 Gross Profit 86,240,086 66,041,106 2. Expenditure Accounting fees 150,546 180,685 Advertising 385,546 354,848 Bad debts 3,000 - Bank charges 452,024 415,680 Cleaning 2,045,468 1,864,796 Commission paid 150,324 364,865 Depreciation - Tangible assets 581,895 248,985 Finance costs 1,568,496 1,248,560 Lease rental on operating lease 3,059,496 2,781,360 Petrol and oil 546,810 458,602 Salaries 19,685,760 17,441,600 Travel - local 254,879 250,489 28,884,244 25,610,470 Profit before taxation 57,355,842 40,430,636 Taxation (14,000,000) (5,000,000) Profit for the year 43,355,842 35,430,636 20
Schedules Figures in R 2015