Singapore of Management and its Subsidiaries Financial Report 2017 Contents 2 Governing Council s statement 3 Independent auditor s report 5 Statements of comprehensive income 6 Statements of financial position 8 Statements of changes in equity 11 Consolidated statement of cash flows 13
Governing Council s statement In the opinion of the Governing Council, the consolidated financial statements of Singapore of Management and its subsidiaries (the ) and the statement of financial position, statement of comprehensive income and statement of changes in equity of Singapore of Management (the ) as set out on pages 5 to 55 are drawn up so as to give a true and fair view of the financial position of the and as at 31 December 2017, and of the financial performance and changes in equity of the and and cash flows of the for the financial year then ended and at the date of this statement there are reasonable grounds to believe that the will be able to pay its debts when they fall due. On behalf of the Governing Council Mr Tan Soo Jin GC Chairman Mr Jen Kwong Hwa Treasurer 28 March 2018 Independent auditor s report To the members of Singapore of Management Independent auditor's report to the members of Singapore of Management Report on the audit of the financial statements Opinion We have audited the financial statements of Singapore of Management (the ) and its subsidiaries (collectively, the ), which comprise the consolidated statement of financial position of the and the statement of financial position of the as at 31 December 2017, and the consolidated statement of comprehensive income, consolidated statement of changes in equity of the and statement of comprehensive income and statement of changes in equity of the and consolidated statement of cash flows of the for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements of the and the statement of the financial position, statement of comprehensive income and statement of changes in equity of the are properly drawn up in accordance with the provisions of the Societies Act, Chapter 311 (the Societies Act), the Charities Act, Chapter 37 and other relevant regulations (the Charities Act and Regulations) and Financial Reporting Standards in Singapore (FRSs) so as to give a true and fair view of the consolidated financial position of the and the financial position of the as at 31 December 2017 and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the and changes in equity of the for the year ended on that date. Basis for opinion We conducted our audit in accordance with Singapore Standards on Auditing (SSAs). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the in accordance with the Accounting and Corporate Regulatory Authority (ACRA) Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (ACRA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information Management is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the financial statements and our auditor s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and the s Governing Council for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Societies Act, the Charities Act and Regulations and FRSs, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets. In preparing the financial statements, management is responsible for assessing the s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the or to cease operations, or has no realistic alternative but to do so. The s Governing Council is responsible for overseeing the s financial reporting process. 02 Singapore of Management and its Subsidiaries Annual Report 2017 03
Independent auditor s report To the members of Singapore of Management Auditor s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Governing Council regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on other legal and regulatory requirements In our opinion the accounting and other records required by the Societies Act and Charities Act to be kept by the have been properly kept in accordance with the provisions of the Societies Act and Charities Act and Regulations. Ernst & Young LLP Public Accountants and Chartered Accountants Statements of comprehensive income Note Continuing operations Income Course, conference and consultancy fees 185,433 185,742 5,407 6,181 Membership fees and services 550 748 607 773 Grant income 3,274 4,070 3,274 4,070 Interest income 1,993 2,188 1,400 982 Rental income 15,994 2,142 15,923 2,142 Dividend income 40,000 corporate service charges to subsidiaries 34,469 34,332 corporate service charges to third party 21,891 31,233 21,891 31,233 Investment income 4 3,819 3,819 Other income 3,096 2,941 2,228 1,552 Total income 236,050 229,064 89,018 121,265 Expenditure Course, conference and consultancy expenditure 93,937 88,006 7,342 8,809 Donations to outside parties 97 3,308 71 87 Administrative expenses 5 114,809 112,392 70,802 73,177 Other losses/(gains) 6 393 (209) 26 (125) Total expenditure 209,236 203,497 78,241 81,948 Excess of income over expenditure before income tax 26,814 25,567 10,777 39,317 Taxation 8 (3,971) (3,122) Excess of income over expenditure after income tax 22,843 22,445 10,777 39,317 Discontinued operations Transfer of control of subsidiary to MOE 9 (267,840) 22,252 Excess of expenditure over income for the year (244,997) 44,697 10,777 39,317 Other comprehensive income: Items that will not be reclassified subsequently to income and expenditure: Funds (utilised)/received (1) 83 Items that may be reclassified subsequently to income and expenditure: Net change in fair value of cash flow hedges (705) 487 Net fair value gains on available-for-sale financial assets 608 Net fair value changes on available-for-sale financial assets reclassified to income and expenditure (4) Foreign currency translation 169 Other comprehensive income for the year, net of tax (537) 1,174 Total comprehensive income for the year (245,534) 45,871 10,777 39,317 Singapore 28 March 2018 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 04 Singapore of Management and its Subsidiaries Annual Report 2017 05
Statements of financial position As at 31 December 2017 Statements of financial position As at 31 December 2017 Note ASSETS NON-CURRENT ASSETS Property, plant and equipment 10 238,744 268,309 233,412 263,454 Investment properties 11 1,291 1,613 1,291 1,613 Investment in subsidiaries 12 3,500 3,500 Available-for-sale investments 13 20,679 Held-to-maturity investments 14 8,500 Total non-current assets 240,035 299,101 238,203 268,567 CURRENT ASSETS Financial assets at fair value through profit or loss 15 51,783 51,783 Trade and other receivables 16 17,367 40,045 38,704 22,466 Prepayments 2,209 3,269 631 648 Grant receivables 2,950 11,996 2,950 1,080 Derivatives 17 127 643 127 Held-to-maturity investments 14 3,522 Cash and bank balances 18 207,239 444,333 98,104 136,064 Total current assets 281,675 503,808 192,299 160,258 TOTAL ASSETS 521,710 802,909 430,502 428,825 Note RESERVES AND FUND BALANCES General fund: Accumulated surplus 442,097 614,932 409,046 398,269 Fair value reserve 27 44 Hedging reserve 17 (73) 632 Foreign currency translation reserve 169 442,193 615,608 409,046 398,269 Education fund: Accumulated surplus 43,539 Fair value reserve 27 34 Endowment fund 24 2,552 23 46,125 College fund 25 25,688 Other restricted funds 26 504 810 Total reserves and fund balances 442,697 688,231 409,046 398,269 TOTAL LIABILITIES, RESERVES AND FUND BALANCES 521,710 802,909 430,502 428,825 LIABILITIES, RESERVES AND FUND BALANCES CURRENT LIABILITIES Derivatives 17 73 Trade and other payables 19 25,709 49,687 10,579 18,381 Income tax payable 4,000 3,325 Course and membership fees received in advance 38,425 46,393 278 317 Grants received in advance 20 2,373 Deferred capital grants 21 1,259 1,761 1,259 1,270 Total current liabilities 69,466 103,539 12,116 19,968 NET CURRENT ASSETS 212,209 400,269 180,183 140,290 Funds managed on behalf of Ministry of Education ( MOE ) 28 6,600 NON-CURRENT LIABILITIES Deferred tax liabilities 22 207 119 Deferred capital grants 21 9,340 11,020 9,340 10,588 Total non-current liabilities 9,547 11,139 9,340 10,588 TOTAL LIABILITIES 79,013 114,678 21,456 30,556 NET ASSETS 442,697 688,231 409,046 398,269 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 06 Singapore of Management and its Subsidiaries Annual Report 2017 07
Statements of changes in equity Accumulated surplus Fair value reserve General fund Hedging reserve Foreign currency reserve Sub-Total Accumulated surplus Education fund Fair value reserve Endowment fund Sub-Total College fund Other restricted funds Total Balance at 1 January 2016 563,301 (515) 145 562,931 63,470 (11) 1,375 64,834 13,165 727 641,657 Excess of income over expenditure for the year 51,631 51,631 (19,428) (29) (19,457) 12,523 44,697 Other comprehensive income for the year 559 487 1,046 45 45 83 1,174 Total comprehensive income for the year 51,631 559 487 52,677 (19,428) 45 (29) (19,412) 12,523 83 45,871 Donation from foundations 703 703 703 Transfer of funds (503) 503 Balance at 31 December 2016 and 1 January 2017 614,932 44 632 615,608 43,539 34 2,552 46,125 25,688 810 688,231 Excess of expenditure over income (172,835) (44) (172,879) (43,539) (34) (2,552) (46,125) (25,688) (305) (244,997) Other comprehensive income for the year (705) 169 (536) (1) (537) Total comprehensive income for the year (172,835) (44) (705) 169 (173,415) (43,539) (34) (2,552) (46,125) (25,688) (306) (245,534) Balance at 31 December 2017 442,097 (73) 169 442,193 504 442,697 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 08 Singapore of Management and its Subsidiaries Annual Report 2017 09
Statements of changes in equity Consolidated statement of cash flows Accumulated surplus Fair value reserve Total $ 000 $ 000 $ 000 Balance at 1 January 2016 358,952 358,952 Excess of income over expenditure for the year, representing total comprehensive income for the year 39,317 39,317 Balance at 31 December 2016 and 1 January 2017 398,269 398,269 Excess of income over expenditure for the year, representing total comprehensive income for the year 10,777 10,777 Balance at 31 December 2017 409,046 409,046 Note $ 000 $ 000 Operating activities Excess of income over expenditure from continuing operations before income tax 26,814 25,567 Transfer of control of subsidiary to MOE 9 (267,840) 22,252 (241,026) 47,819 Adjustments for: Depreciation of property, plant and equipment and investment properties 5 35,062 41,000 (Gain)/loss on disposal of property, plant and equipment 6 (25) 63 Loss on disposal of available-for-sale investments 4 Amortisation of premium for held-to-maturity investments 101 Impairment loss on available-for-sale investments 842 Impairment loss on trade and other receivables 16 145 67 Interest income (1,993) (5,367) Investment income, net 4 (1,419) (1,054) Dividend income 4 (238) Fair value changes arising from financial assets at fair value through profit or loss 4 (2,162) Fair value changes arising from foreign exchange contracts 11 (26) Amortisation of deferred capital grant 20,21 (1,259) (7,146) Grants received, net 5,512 Other restricted funds utilised (50) (135) Unrealised foreign exchange gain/(loss) 20 (230) Foreign currency translation difference 169 Loss on transfer of control of subsidiary to MOE 9 267,840 Operating cash flows before movements in working capital 55,075 81,450 Trade and other receivables and grant receivables (15,528) (29,093) Prepayments (1,091) 603 Trade and other payables 5,196 1,040 Course, boarding and membership fees received in advance 591 4,061 Cash flows from operations 44,243 58,061 Income tax paid (3,208) (5,911) Net cash flows from operating activities 41,035 52,150 The accompanying accounting policies and explanatory notes form an integral part of the financial statements 10 Singapore of Management and its Subsidiaries Annual Report 2017 11
Consolidated statement of cash flows 1. General information Note $ 000 $ 000 Investing activities Purchase of property, plant and equipment 10 (8,336) (9,993) Proceeds from disposal of property, plant and equipment 26 686 Purchase of available-for-sale investments (1,576) Proceeds from disposal of available-for-sale investments 111 Proceeds from redemption of held-to-maturity investments 6,000 Purchase of financial assets at fair value through profit or loss (48,369) Investment income received 1,155 Interest received 2,070 5,566 Withdrawal/(placement) of fixed deposits 51,482 (10,218) Net cash flows used in investing activities (3,127) (8,269) Financing activities Other restricted funds received 49 218 Education funds received 703 Net cash flows from financing activities 49 921 Net increase in cash and cash equivalents 37,957 44,802 Effect of exchange rate changes on cash and cash equivalents (17) (12) Cash and cash equivalents at beginning of year (1) 140,059 261,762 Cash and cash equivalents at end of year 18 177,999 306,552 Singapore of Management (the ) is registered in Singapore, as a society under the Societies Act, Chapter 311 and as a charity under the Charities Act, Chapter 37. The registered office and principal place of operations is located at 461 Clementi Road, Singapore 599491. The principal activities of the comprise the provision of membership services to its members and the conduct of short seminars and customised in-company training. It also functions as a Corporate Services Centre providing support services to its subsidiaries. The principal activities of subsidiaries are disclosed in Note 12 to the financial statements. 2. Summary of significant accounting policies 2.1 Basis of preparation The consolidated financial statements of the have been prepared in accordance with the provisions of the Singapore Societies Act, Chapter 311 and Singapore Financial Reporting Standards ( FRS ). The financial statements have been prepared in accordance with the historical cost basis except as disclosed in the accounting policies below. The financial statements are presented in Singapore Dollars (SGD or $) and all values in the tables are rounded to the nearest thousand ($ 000), except when otherwise indicated. 2.2 Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the has adopted all the new and revised standards which are effective for annual financial periods beginning on or after 1 January 2017. The adoption of these standards did not have any effect on the financial performance or position of the and the. 2.3 Standards issued but not yet effective The has not adopted the following standards applicable to the that have been issued but not yet effective: Description Effective for annual periods beginning on or after FRS 109 Financial Instruments 1 January 2018 FRS 115 Revenue from Contracts with Customers 1 January 2018 Amendments to FRS 115: Clarifications to FRS 115 Revenue from Contracts with Customers 1 January 2018 FRS 116 Leases 1 January 2019 Except for FRS 109, FRS 115 and FRS 116, the Governing Council expects that the adoption of the other standards above will have no material impact on the financial statements in the period of initial application. The accompanying accounting policies and explanatory notes form an integral part of the financial statements. (1) Cash and cash equivalents at beginning of year 2017 excludes SUSS's balance. 12 Singapore of Management and its Subsidiaries Annual Report 2017 13
2. Summary of significant accounting policies (cont d) 2.3 Standards issued but not yet effective (cont d) The nature of the impending changes in accounting period on adoption of FRS 109, FRS 115 and FRS 116 are described below: FRS 115 Revenue from Contracts with Customers FRS 115 establishes a five-step model to account for revenue arising from contracts with customers, and introduces new contract cost guidance. Under FRS 115, revenue is recognised at an amount that reflects the consideration which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard is effective for annual periods beginning on or after 1 January 2018. The is currently assessing the potential impact of the new standard. Management s preliminary assessment is that FRS 115 will not have a material impact to the as it does not provide services in bundled packages that affect different revenue amounts in the financial statements and the point of recognition is over the duration of programmes. FRS 109 Financial Instruments FRS 109 introduces new requirements for classification and measurement of financial assets, impairment of financial assets and hedge accounting. Financial assets are classified according to their contractual cash flow characteristics and the business model under which they are held. The impairment requirements in FRS 109 are based on an expected credit loss model and replace the FRS 39 incurred loss model. The intends to continue to hold its investments in quoted equity and debt securities at fair value through profit or loss (FVTPL). The does not expect any significant impact arising from these changes. The currently designates only the intrinsic value of an option as hedging instrument for one of its hedge relationships and accounts for the fair value changes in time value of option in profit or loss. FRS 109 requires fair value changes in time value of options not designated as hedging instrument to be accounted as cost of hedging. Cost of hedging are required to be deferred in other comprehensive income and recognised in the profit or loss depending on the nature of the hedge item, whether it is transaction related or time-period related. Upon adoption of FRS 109, the will defer the recognition of time value of options in other comprehensive income retrospectively and expects an increase in opening retained earnings. Transition The plans to adopt the new standard on the required effective date without restating prior periods information and recognises any difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period at the date of the initial application in the opening retained earnings. FRS 116 Leases FRS 116 requires lessees to recognise most leases on balance sheets to reflect the rights to use the leased assets and the associated obligations for lease payments as well as the corresponding interest expense and depreciation charges. The standard includes two recognition exemption for lessees leases of low value assets and shortterm leases. The new standard is effective for annual periods beginning on or after 1 January 2019. 2. Summary of significant accounting policies (cont d) 2.4 Basis of consolidation The consolidated financial statements comprise the financial statements of the and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the. Consistent accounting policies are applied to like transactions and events in similar circumstances. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full. Subsidiaries are consolidated from the date of acquisition, being the date on which the obtains control, and continue to be consolidated until the date that such control ceases. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the loses control over a subsidiary, it: de-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost; de-recognises the carrying amount of any non-controlling interest; de-recognises the cumulative translation differences recorded in equity; recognises the fair value of the consideration received; recognises the fair value of any investment retained; recognises any surplus or deficit in the statement of comprehensive income; re-classifies the s share of components previously recognised in other comprehensive income to income and expenditure or accumulated surplus, as appropriate. 2.5 Foreign currency The financial statements are presented in Singapore Dollars, which is also the s functional currency. Each entity in the determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are measured in the respective functional currencies of the and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in income and expenditure. The is currently assessing the impact of the new standard and plans to adopt the new standard on the required effective date. 14 Singapore of Management and its Subsidiaries Annual Report 2017 15
2. Summary of significant accounting policies (cont d) 2.6 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment other than leasehold land and buildings are measured at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows: Leasehold land, building and improvements 2% to 10% Office equipment, furniture and fittings (excluding artifacts and paintings) 25% Motor vehicles 20% Computers 33.33% The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on de-recognition of the asset is included in income and expenditure in the year the asset is derecognised. 2.7 Investment properties Investment properties are properties that are owned by the that are held to earn rentals or for capital appreciation, or both, rather than for use in the production or supply of goods or services, or for administrative purposes, or in the ordinary course of business. Investment properties comprise completed investment properties and properties that are being constructed or developed for future use as investment properties. Properties held under operating leases are classified as investment properties when the definition of an investment property is met. Investment properties are initially recorded at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment losses. Depreciation is computed on a straight-line basis over the estimated useful life of the investment property. The depreciation rate is 2%. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in income and expenditure in the year of retirement or disposal. 2. Summary of significant accounting policies (cont d) 2.8 Impairment of non-financial assets The assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when an annual impairment testing for an asset is required, the makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cash-generating unit s fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in income and expenditure. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in income and expenditure unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. 2.9 Subsidiaries A subsidiary is an investee that is controlled by the. The controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. In the s financial statements, investments in subsidiaries are accounted for at cost less impairment losses. The consolidated financial statements incorporate the financial statements of the and enterprises controlled by the (its subsidiaries). 2.10 Financial instruments Financial assets Initial recognition and measurement Financial assets are recognised when, and only when, the becomes a party to the contractual provisions of the financial instrument. The determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit and loss, directly attributable transaction costs. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: (i) Loans and receivables Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in income and expenditure when the loans and receivables are derecognised or impaired, as well as through the amortisation process. 16 Singapore of Management and its Subsidiaries Annual Report 2017 17
2. Summary of significant accounting policies (cont d) 2.10 Financial instruments (cont d) 2. Summary of significant accounting policies (cont d) 2.10 Financial instruments (cont d) Financial assets (cont d) Financial assets (cont d) Subsequent measurement (cont d) De-recognition (ii) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the. Derivatives, including separated embedded derivatives are also classified as held for trading. A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in income and expenditure. Financial liabilities (iii) Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in income and expenditure. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income. Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in income and expenditure. These embedded derivatives are measured at fair value with changes in fair value recognised in income and expenditure. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required. Available-for-sale financial assets Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions. After initial recognition, available-for-sale financial assets are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in income and expenditure. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to income and expenditure as a reclassification adjustment when the financial asset is de-recognised. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss. (c) Initial recognition and measurement Financial liabilities are recognised when, and only when, the becomes a party to the contractual provisions of the financial instrument. The determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value plus in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs. Subsequent measurement After initial recognition, financial liabilities that are not carried at fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in income and expenditure when the liabilities are de-recognised, and through the amortisation process. De-recognition A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in income and expenditure. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is presented in the balance sheets, when and only when, there is a currently enforceable legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. (iv) Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in income and expenditure when the held-to-maturity investments are derecognised or impaired, and through the amortisation process. 18 Singapore of Management and its Subsidiaries Annual Report 2017 19
2. Summary of significant accounting policies (cont d) 2.11 Impairment of financial assets 2. Summary of significant accounting policies (cont d) 2.11 Impairment of financial assets (cont d) The assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. Financial assets carried at amortised cost For financial assets carried at amortised cost, the first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment. Available-for-sale financial assets (cont d) In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in income and expenditure. Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increases can be objectively related to an event occurring after the impairment loss was recognised in income and expenditure, the impairment loss is reversed in income and expenditure. If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in the statement of comprehensive income. When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in income and expenditure. Available-for-sale financial assets In the case of equity investments classified as available-for-sale, objective evidence of impairment include (i) significant financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the fair value of the investment below its costs. If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in income and expenditure, is transferred from other comprehensive income and recognised in income and expenditure. Reversals of impairment losses in respect of equity instruments are not recognised in income and expenditure; increase in their fair value after impairment are recognised directly in other comprehensive income. 2.12 Cash and cash equivalents Cash and cash equivalents comprise of cash at bank and on hand, fixed deposits, highly liquid investments are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. 2.13 Hedge accounting The designates certain hedging instruments which include forward foreign exchange contracts as cash flow hedges. At the inception of a hedging relationship, the formally designates and documents the hedging relationship to which the wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument s fair value in offsetting the exposure to changes in the hedged item s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. Hedges which meet the strict criteria for hedge accounting are accounted for as follows: Cash flow hedges The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in income and expenditure in other expenses. The uses forward currency contracts as hedges of its exposure to foreign currency risk in forecasted transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognised in finance costs. Amounts recognised as other comprehensive income are transferred to income and expenditure when the hedged transaction affects income and expenditure, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability. 20 Singapore of Management and its Subsidiaries Annual Report 2017 21
2. Summary of significant accounting policies (cont d) 2.14 Government grants 2. Summary of significant accounting policies (cont d) 2.16 Revenue recognition (cont d) Government grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to statement of comprehensive income over the expected useful life of the relevant asset by equal annual instalments. Where loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as additional government grant. 2.15 Leases As lessee Finance leases which transfer to the substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to income and expenditure. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. (c) (d) (e) (f) (g) Rendering of services Revenue from the rendering of services that are of a short duration is recognised when the services are completed. Non-endowed donations Non-endowed donations are recognised in the financial year they are received. Interest income Interest income is recognised on an accrual basis, by reference to the principal outstanding and at the effective interest rate applicable. Dividend income Dividend income is recognised when the shareholders rights to receive payment have been established. Rental income Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in income and expenditure on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. As lessor Leases where the does not transfer substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.16(g). Contingent rents are recognised as revenue in the period in which they are earned. 2.16 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the and the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. Course, conference and consultancy fees Course, conference and consultancy fees are recognised over the duration of the programs. Membership fees Membership fees are recognised on a straight-line basis over the membership term. 2.17 Employee benefits 2.18 Taxes Rental income is recognised on a straight-line basis over the term of the lease. Defined contribution plan Payments to defined contribution plans are charged as an expense as they fall due. Payments made to state-managed, such as the Singapore Central Provident Fund, are dealt with as payments to defined contribution plans where the s and s obligations under the plans are equivalent to those arising in a defined contribution plan. Employee leave entitlement Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to the end of the reporting period. Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the end of the reporting period, where the operates and generates taxable income. Current income taxes are recognised in income and expenditure except to the extent that the tax relates to items recognised outside income and expenditure, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. 22 Singapore of Management and its Subsidiaries Annual Report 2017 23