disclosure of information in new zealand financial reports grant samkin

Disclosure of Disclosure of InformationInformation

in New Zealand Financial Reportsin New Zealand Financial Reports

Grant SamkinGrant Samkin

Copyright 2003 McGraw-Hill New Zealand LtdPPTs t/a Disclosure of Information in New Zealand Financial Reports by Grant Samkin 2

(1)(1)IntroductionIntroduction


An overviewAn overview

New Zealand companies have New Zealand companies have traditionally poor disclosure traditionally poor disclosure (Lont, 1997):(Lont, 1997): reasons.

Wording in FRS-9:Wording in FRS-9:

permits a level of flexibility.

‘necessary to achieve the objectives of general purpose financial reporting’


(2)(2)Objectives of Objectives of

general purpose general purpose financial reportingfinancial reporting


Objectives of general purpose Objectives of general purpose financial reportingfinancial reporting

FASB objective:FASB objective: the provision of information that is

useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisions.


Objectives of general purpose Objectives of general purpose financial reportingfinancial reporting

NZ Statement of Concept provides NZ Statement of Concept provides information to assist users in:information to assist users in: assessing a reporting entity’s financial

and service performance, financial position and cash flows;

assessing a reporting entity’s compliance with legislation, regulations, common law and contractual arrangements; and

making decisions about providing resources to, or doing business with, the reporting entity.


Users of financial Users of financial informationinformation

Direct or indirect interest in Direct or indirect interest in accounting information.accounting information.

Present and potential:Present and potential: investors employees lenders

suppliers trade creditors customers governments other agencies public.


Type of information & Type of information & form of its presentationform of its presentation

Different users have different Different users have different needs and different degrees of needs and different degrees of access to the information.access to the information.

General nature—general purpose General nature—general purpose financial reports.financial reports.


(3)(3)Legislative Legislative

requirementsrequirements


NZ legislative NZ legislative requirementsrequirements

Financial Reporting Act Financial Reporting Act 19931993:: details the overall financial

reporting framework.

Companies Act 1993Companies Act 1993:: provides the administrative

requirements.


Financial Reporting Act 1993Financial Reporting Act 1993

All entitiesAll entities Entity Entity (s.2):(s.2):

a company, or any issuer.

Issuer Issuer (s.4):(s.4): any party who has made a public

issue of debt or equity securities.


Financial Reporting Act 1993Financial Reporting Act 1993— issuer (s.4)— issuer (s.4)

Registered prospectusRegistered prospectus Listed on NZSEListed on NZSE Life insuranceLife insurance Unit trustsUnit trusts Registered banks Registered banks The CrownThe Crown EXCLUDES:EXCLUDES:

companies with less than 25 shareholders (unless with other reasons).

As long as securities

are allocated to the public.


Financial Reporting Act 1993Financial Reporting Act 1993— GAAP— GAAP

Generally accepted accounting Generally accepted accounting practicespractices Described in:

ED FWD (Explanatory foreword to general

purpose financial reporting); and ED-92 (Preface to financial reporting standards).

The basis on which the reports are prepared.

Comply with GAAP only if they comply with applicable financial reporting standards (s.3).


Financial Reporting Act 1993Financial Reporting Act 1993

Authoritative support for GAAP.

What is the position if there is no applicable New Zealand financial

reporting standard covering a particular situation?

Professional judgment is essential.


Financial Reporting Act 1993Financial Reporting Act 1993— financial statements— financial statements

Statement of financial position,Statement of financial position, statement of financial performance,statement of financial performance, a profit and loss account (non-profit a profit and loss account (non-profit

entities),entities), revenue and appropriation account revenue and appropriation account

(building societies),(building societies), cash flow statement,cash flow statement, statement of accounting policies.statement of accounting policies.

True and fair view.True and fair view.

s.8(1) & 9(1)

s.11


Companies Act 1993Companies Act 1993

All companiesAll companies

Administrative Disclosure• Complete report within

five months of balance date (s.208).

• Annual report should be sent 20 working days before annual meeting (s.209).

• Content requirement of annual reports (s.211).

• Comply with FRA and auditor’s report.

• Dated and signed by two directors of the board.


(4)(4)The New Zealand The New Zealand

financial reporting financial reporting frameworkframework


The New Zealand financial The New Zealand financial reporting frameworkreporting framework

Statement of concept for general Statement of concept for general purpose financial reporting;purpose financial reporting;

framework for differential reporting;framework for differential reporting; explanatory foreword to general explanatory foreword to general

purpose financial reporting;purpose financial reporting; FRS-1 ‘Disclosure of Accounting FRS-1 ‘Disclosure of Accounting

Policies’; andPolicies’; and FRS-2 ‘Presentation of Financial FRS-2 ‘Presentation of Financial

Reports’.Reports’.


Structure of financial reports Structure of financial reports (FRS-2)(FRS-2)

• Objectives of an entity

• Highlights and historical summaries

• Earnings per share

• Value added statement

Financial reportFinancial report

Supplementaryinformation

Financialstatements

Non-financialstatements

Statement of:

• Financial performance

• Movements in equity

• Financial position

• Cash flows

• Statement of service performance


The New Zealand financial The New Zealand financial reporting frameworkreporting framework

Financial report notes:Financial report notes: provide additional explanatory and

background information about the composition of futures.

Comparative information:Comparative information: prior figures.


Disclosure of accounting Disclosure of accounting policy (FRS-1)policy (FRS-1)

Bases, rules and procedures adopted in

preparing and presenting financial reports (s.4.1)



Relationship between accounting concepts, accounting bases, rules and procedures, and

accounting policies.

Accounting concepts

Accounting bases, rules and procedures

Accounting policies



Information to disclose:Information to disclose: entity reporting and statutory base under

which the financial reports are prepared; a statement of the measurement system

adopted; a statement of the accounting policies

adopted; and a statement of the changes in accounting

policies, or if there have been no changes, a statement to that effect.


Statement of accounting Statement of accounting policiespolicies

XYZ LimitedStatement of accounting policies for the year ended 31 December 2004

The financial report of XYZ Limited has been prepared in accordance with the NZ Companies Act 1993 and Financial Reporting Act 1993 (FRS-1 5.5(a)).

Basis of preparationBasis of preparationThe financial report has been prepared on the historical cost basis modified to include the valuation of land and buildings. The reporting currency is NZ dollars (FRS-1 5.5(b)).


Statement of accounting Statement of accounting policiespolicies

Specific accounting policiesSpecific accounting policiesThe specific accounting policies used in the preparation of the financial report are as follows: (FRS-1 5.5(c)).

(a) Basis of consolidationThe consolidated financial statements include the parent entity and its subsidiaries. Subsidiaries are consolidated using the purchase method. On consolidation all significant inter-entity transactions are eliminated.

(b) InventoriesInventories are stated at the lower of cost, determined on an average basis, and net realisable value.


Structure of financial reportsStructure of financial reports

FRS-2

Financial reports

Supplementary information

Financial statements

Non-financial statements

Statement of

accounting policies

Statement of financial

performance

Statement of mvts in

equity

Statement of

financial position

Statement of cash flows

FRS-9 and other specific accounting requirements

FRS-1 FRS-10


(5)(5)The statement of The statement of

financial financial performanceperformance


The statement of The statement of financial performancefinancial performance

Purpose:Purpose: provides information on the performance

of entity during a reporting period.

Net surplus Net surplus (deficit):(deficit): revenues, and expenses.


The statement of The statement of financial performancefinancial performance

Income statement:Income statement: internal reporting purpose; and a mass of information (detailed).

Statement of financial performance:Statement of financial performance: external reporting purpose; and only information that is necessary and

useful to make investment and credit decisions.


Income statement for Income statement for internal reporting purposesinternal reporting purposes

XYZ LimitedXYZ LimitedIncome statement for the year ended 31 December 2004Income statement for the year ended 31 December 2004

$

Sales 934 095Cost of Sales 504 949Gross profit 429 146Other revenue 4 793Expenses: 391 339 Administrative expenses 109 394 Selling expenses 255 198 Financial expenses 26 747Profit for the year 42 600Taxation 12 780Profit after taxation 29 820


Statement of financial Statement of financial performance (FRS-2)performance (FRS-2)

XYZ LimitedXYZ LimitedStatement of financial performance for the year ended 31 Statement of financial performance for the year ended 31 December 2004December 2004

Notes 2004 2003$ $

Operating revenue 1 938 888 xxxOperating expenses 896 288 xxxOperating surplus before taxation 2 42 600 xxxTaxation 3 12 780 xxxOperating surplus after taxation 29 820 xxxExtraordinary item 4 - 2 300 xxxNet surplus for the year 27 520 xxx


Statement of financial Statement of financial performance disclosureperformance disclosure

FRS-2:FRS-2: requires disclosure of material components

of net surplus (deficit); does not require individual revenue and

expense items to be disclosed.

FRS-9 ‘Information to be Disclosed FRS-9 ‘Information to be Disclosed in Financial Statements’:in Financial Statements’: details a number of revenue and expense

items whose disclosure is mandatory.



Revenue items:Revenue items: total operating revenue (s. 6.6); dividends received (s.6.9); interest received (s.6.9); any material items (s.6.7); and

size, incidence, and nature.



Expense items Expense items (s. 6.13):(s. 6.13): diminution in the value of assets, amortisation of goodwill, amortisation of other intangibles, bad and doubtful debts*, auditors’ remuneration*, directors’ fees*, donations, interest expense, cost of leasing and renting, and material items—size, incidence and nature (s. 6.11).

* denote that separate

disclosure of the components

is required



Discontinued operationsDiscontinued operations Separate disclosure from continuing

operations: operating revenue, operating surplus (deficit).

Reason:the results from continuing activities form the base which past and future financial performance is assessed.


Statement of financial statement Statement of financial statement (continuing and discontinued (continuing and discontinued

operations)operations)XYZ LimitedXYZ LimitedStatement of financial performance for the year ended 31/12/2004Statement of financial performance for the year ended 31/12/2004

Continuing activities Notes 2004 2003Revenue 1 xxx xxxExpenses xxx xxxOperating surplus from continuing activities 2 xxx xxxDiscontinued activities Revenue 1 xxx xxxExpenses xxx xxxOperating surplus from discontinued activities 2 xxx xxxOperating surplus before taxation 2 xxx xxxTaxation 3 xxx xxxOperating surplus after taxation xxx xxxExtraordinary items 4 xxx xxxSurplus for the year xxx xxx


Notes to statement of Notes to statement of financial performancefinancial performance

1.1. Operating revenueOperating revenue 2004 2003$ $

Operating revenue comprises the following:

Sales 934 095 886 775Dividend revenue 3 800 -Interest revenue 993 -

938 888 886 775


Notes to statement of Notes to statement of financial performancefinancial performance

2.2. Operating surplus before taxationOperating surplus before taxation 20042003

Has been arrived at after taking into account: $ $

Amortisation of goodwill FRS-9, 6.13(b)xxx xxxBad and doubtful debts FRS-9, 6.13(d) xxx xxx

Bad debts FRS-9, 6.13(d)(i) xxx xxxProvision for doubtful debts FRS-9, 6.13(d)(ii) xxx xxx

Depreciation FRS-3, 11.3(c) xxx xxxDirectors’ fees and remuneration FRS-9, 6.13(f) & ED-91 xxx xxxDonations FRS-0, 6.13(g) & Co’s Act 93 s.211xxx xxxAuditors’ remuneration FRS-0, 6.13(e) & Co’s Act 93 s.211 xxx xxx

Audit fee FRS-9, 6.13(e)(i) xxx xxxOther services FRS-9, 6.13(e)(iii) xxx xxx

Impairment of value of investments FRS-9, 6.13(a)xxx xxxResearch and development expenses FRS-13, 5.19(b) xxx xxx


Director and directors’ Director and directors’ remunerationremuneration

DirectorDirector


Directors’ remunerationDirectors’ remuneration

Includes Includes (ED-91, 4.10):(ED-91, 4.10): salaries, bonuses, fees, commissions,

expense allowances, perquisites, personal benefits, equity instruments and post-employment benefits;

remuneration determined by entity or any other entity;

remuneration regardless of source; total remuneration received in connection

with services provided as an employee for the reporting period.


Directors’ remunerationDirectors’ remuneration

Excludes Excludes (ED-91, 4.10)(ED-91, 4.10):: reimbursement of valid

company expenses; dividends received; interest on funds advanced to

the entity; accrued sick leave or long

service leave *.

* Not earned until the leave is taken.


Disclosure of directors’ Disclosure of directors’ remuneration (ED-91, 6.1)remuneration (ED-91, 6.1)

For each director: Amount of directors’ fees; other remuneration; remuneration as an employee.

Principles and policy for determining the remuneration, including basis of measurement for non-monetary remuneration.

Description of the nature and material details of remuneration that is not included in the amount(s) disclosed.



7.7. Directors’ remunerationDirectors’ remunerationDirectors of the company during the year and their remuneration and other benefits paid were as follows:

2004 2003AS Smith $ $Fees 85 600 xxxSalary and other benefits 34 900 xxxTotal directors’ remuneration 120 500 xxx

JL LanceFees 47 800 xxxSalary and other benefits 62 400 xxxTotal directors’ remuneration 110 200 xxx

Total directors’ remuneration 230 700 xxx



8.8. Employees’ remunerationEmployees’ remuneration(s.211 of Companies Act 1993)

Remuneration and other benefits of $100 000 per annum or more received by employees in their capacity as employees:

Number of employees

$100,000 – $109,999 0$110,000 – $119,999 1$120,000 – $129,999 1


Companies Act 1993Companies Act 1993Disclosure requirementsDisclosure requirements

Narrative:Narrative:-a description of the state of the company’s affairs;

-changes in the nature of the business and its subsidiaries;

-a description of changes made to accounting policies;

-names of directors.

Numeric:Numeric:1total remuneration and other benefits by each director;

2number of employees earn more than $100 000 in brackets of $10 000;

3donations received by the company;

4amount of audit fees and other services.


(6)(6)The statement of The statement of

movements in movements in equityequity


The statement of The statement of movements in equitymovements in equity

Combines information about the net Combines information about the net surplus (from performance statement) surplus (from performance statement) with other aspects of the entity’s with other aspects of the entity’s performance (statement of movements in performance (statement of movements in equity):equity): ‘Total recognised revenues and expenses’.

Reconciles equity at the beginning of the Reconciles equity at the beginning of the period with equity at the end of the period.period with equity at the end of the period.


The statement of The statement of movements in equity (FRS-2)movements in equity (FRS-2)

Total recognised revenues and expenses:Total recognised revenues and expenses:i. net surplus (deficit);

ii. increase (decrease) in revaluation reserves;

iii. currency translation differences;

iv. total minority interest in (ii) and (iii). Distribution to owners.Distribution to owners. Contributions by owners.Contributions by owners. Minority interest in contribution by and Minority interest in contribution by and

distributions to owners.distributions to owners.


The statement of The statement of movements in equitymovements in equity

Statement of movements in equity for the year ended Statement of movements in equity for the year ended 31 December 200431 December 2004

Notes 2004 2003

Net surplus for the year xxx xxxOther recognised revenue and expensesIncrease in revaluation reserve 8 xxx xxxTotal recognised revenue and expenses xxx xxxContributions by owners 9 xxx xxxDistributions to owners 10 xxx xxxMovements in equity for the year xxx xxxEquity at beginning of the period 11 xxx xxxEquity at end of the period 11 xxx xxx


Notes to statement of Notes to statement of movements in equitymovements in equity

10.10. Distribution to ownersDistribution to owners 2004 2003

Dividends and interestOrdinary shares xxx xxxPreference shares xxx xxxConvertible notes xxx xxx

xxx xxx

Share buy-backAcquisition of Y ordinary shares xxx xxx

xxx xxx


(7)(7)The statement of The statement of financial positionfinancial position


The statement of The statement of financial positionfinancial position

A photograph of A photograph of the assets and the assets and liabilities at a point liabilities at a point in time.in time.

Asset – Liabilities = EquityAsset – Liabilities = Equity The relationship of these The relationship of these

elements to each other at a elements to each other at a particular date.particular date.



Useful in assessing:Useful in assessing: the entity’s ability to generate cash and

provide services in the future; future borrowing needs, and how future

surpluses and cash flows may be distributed among those with an interest in the entity; and

how successful the entity is likely to be in raising future finance.



FRS-2, 8.1:FRS-2, 8.1:

the statement of financial position shall include assets and liabilities, and shall display the entity’s resource structure (by major classes of asset) and its financing structure (by major classes of liabilities and equity).



FRS-2, 8.5FRS-2, 8.5

Separate disclosure of: current assets, non-current assets, current liabilities, non-current liabilities, equity.

Major components of assets and

liabilities in the broad

order of their liquidity.


The statement of The statement of financial position — structurefinancial position — structure

XYZ LimitedXYZ LimitedStatement of financial position as at 31 March 2004Statement of financial position as at 31 March 2004

Notes 2004 2003$ $

Non-current assets 12 xxx xxxCurrent assets 13 xxx xxxTotal assets xxx xxx

Non-current liabilities 14 xxx xxxCurrent liabilities 15 xxx xxxTotal liabilities xxx xxx

Net assets xxx xxx

Equity 11 xxx xxx


AssetsAssets

Statement of Concepts, para 7.7:Statement of Concepts, para 7.7:

service potential or future economic benefits controlled by the entity as a result of past transactions or other past events.


FRS-9, 8.2:FRS-9, 8.2: receivables; investments; bank balances, deposits, and cash; land; buildings; intangibles

be disclosed as current and/or non-current assets.

AssetsAssets


Assets —Assets —receivablesreceivables

FRS-9, 8.2(a)FRS-9, 8.2(a)Separately disclose: trade receivables; loans to and other receivables from

directors; and inter-entity receivables (associates and

other related parties).


Assets —Assets —receivablesreceivables

12.12. ReceivablesReceivables 2004 2003

$ $

Trade receivables FRS-9, 8.2(a)(i) xxx xxx

Loans to directors FRS-9, 8.2(a)(ii) xxx xxx

Subsidiaries FRS-9, 8.2(a)(iii) xxx xxx

Associates FRS-9, 8.2(a)(iv) xxx xxx

xxx xxx


Assets —Assets —lloans to directorsoans to directors

FRS-9, 8.6 and ED-91, 7.1:FRS-9, 8.6 and ED-91, 7.1: amount outstanding at beginning; loans advanced during the year; loans repaid; interest paid and payable; write-down or provision for doubtful debts; amount outstanding at reporting date; terms and conditions of the loan; and description of the relationship between the

director and any director-related entities.


Assets —Assets —loans to directorsloans to directors

13.13. Loans to directorsLoans to directors 2004 2003

Mr A SmithBalance 1 April 2003 xxx xxxAdvances during the year xxx xxxBalance 31 March 2004 xxx xxxInterest on the loan is payable at 4 per cent per annum.The loan is repayable in full on 15 November 2009.

Mr Y JonesBalance 1 April 2003 xxx xxxAdvances during the year xxx xxx

xxx xxxRepayment made during the year xxx xxxBalance 31 March 2004 xxx xxxInterest on the loan is payable at 8 per cent per annum.The loan is repayable in equal instalments ending on 12 October 2012.


Assets —Assets —inventoriesinventories

14.14. InventoriesInventories 2004 2003

$ $

Raw materials FRS-4, 5.29(b)(ii) xxx xxx

Consumable stores FRS-4, 5.29(b)(ii) xxx xxx

Work in progress FRS-4, 5.29(b)(ii) xxx xxx

Finished goods FRS-4, 5.29(b)(ii) xxx xxx

Total Inventory FRS-4, 5.29(b)(i) xxx xxx

Inventories to the value of $xxx (2003 $xxx) are subject to a retention of title clause FRS-4, 5.29(d)


Assets —Assets —property, plant and equipmentproperty, plant and equipment

FRS-3 ‘Accounting for Property, FRS-3 ‘Accounting for Property, Plant and Equipment’Plant and Equipment’ Land and buildings:

fair value, and basis of valuation.

All other fixed assets: cost less accumulated depreciation or fair

value; basis of depreciation / valuation; securities for liabilities?



15.15. Property, plant and equipmentProperty, plant and equipment 2004 2003

Freehold land FRS-9, 8.2(d)

At valuation FRS-3, 11.3(a) xxx xxx

Land is revalued every three years (FRS-3, 11.4(b)). Land shown at valuation was revalued to $xxx by A smith MIV, on 13 October 2003 (FRS-3, 11.4(c) & (d)) on the basis of faire value (FRS-3, 11.4(e)).

Buildings FRS-9, 8.2(e)

At cost FRS-3, 11.3(a) xxx xxx

Accumulated depreciation xxx xxx

xxx xxx

Buildings shown at cost have fair values that approximate cost, which were based on a general review of market conditions since date of purchase (FRS-9, 8.4). Land & buildings have been mortgaged in respect of the term loan (FRS-9, 8.8).



15.15. Property, plant and equipmentProperty, plant and equipment 2004 2003

Plant and machineryAt cost FRS-3, 11.3(a) xxx xxxAccumulated depreciation FRS-3, 11.3(a) xxx xxx

xxx xxxMotor vehiclesAt cost FRS-3, 11.3(a) xxx xxxAccumulated depreciation FRS-3, 11.3(a) xxx xxx

xxx xxxTotal assets xxx xxx

Depreciation is calculated on the straight-line basis (FRS-3, 11.1(b)) at the following rate (FRS-3, 11.1(c)):- Building2 % per annum- Plant and machinery 15% per annum- Motor vehicles 25% per annum


Assets —Assets —intangiblesintangibles

Includes:Includes: patents, trademarks, brand, mastheads, copyright, record masters, and goodwill.

Excludes:Excludes: internal generated goodwill and brands.



Goodwill:Goodwill: the excess of the cost of acquisition of a

company over the fair value of any net assets required.

FRS-9, 8.2(f):FRS-9, 8.2(f): goodwill to be separately disclosed from

other identifiable intangible assets.



16.16. IntangiblesIntangibles 2004 2003

$ $

Brands

At cost FRS-9, 8.2(f)(ii) xxx xxx

Accumulated amortisation xxx xxx

xxx xxx

Trademark

At cost FRS-9, 8.2(f)(ii) xxx xxx


xxx xxx

Total intangible assets xxx xxx

Brands and trademarks are amortised over a period of 10 years.



17.17. GoodwillGoodwill2004 2003

$ $(FRS-9, 8.2(f)(i))

On acquisition of subsidiaries – at cost xxx xxx


xxx xxx

Goodwill is amortised over a period of 10 years.


Assets —Assets —investmentsinvestments

Includes:Includes: subsidiaries, associates, government, local body, and secured loans.

FRS-9, 8.3:FRS-9, 8.3: where an investment is publicly traded, the market

valuation of the investment at the date of the statement of financial position to be disclosed.


Assets —Assets —investmentsinvestments

18.18. InvestmentsInvestments 2004 2003

Investment in equity shares xxx xxx

Listed – at cost xxx xxx

Unlisted – at cost xxx xxx

Investment in debentures – at cost xxx xxx

Investment in government stock xxx xxx

xxx xxx

The debentures are unsecured and redeemable on 31 March 2009. Interest at the rate of 8 per cent is paid on the debentures.

The market value of listed investments at 31 March 2004 is $xxx (2003 $xxx).


LiabilitiesLiabilities

Statement of Concepts, para Statement of Concepts, para 7.10:7.10:

the future sacrifices of service potential or of future economic benefits that the entity is presently obliged to make to other entities as a result of past transactions or other past events.


FRS-9, 8.10:FRS-9, 8.10: trade creditors; accounts payable; employee entitlements; dividends payable; secured loans, including bank

overdrafts; and unsecured loans

be disclosed as current and/or non-current liabilities.

LiabilitiesLiabilities


Liabilities —Liabilities —payablespayables

FRS-9, 8.10FRS-9, 8.10Separately disclose: inter-entity payables; associates or other equity accounted

entities; payables to directors; and other related parties.


Liabilities —Liabilities —payablespayables

19.19. PayablesPayables 20042003

$ $

Accounts payable FRS-9, 8.10(a)xxx xxx

Employee entitlements FRS-9, 8.10(c) xxx xxx

Directors FRS-9, 8.10(b)(iii) xxx xxx

Subsidiaries FRS-9, 8.10(b)(i) xxx xxx

xxx xxx


Liabilities —Liabilities —borrowingsborrowings

Includes:Includes: secured loans, unsecured loans, and bank overdrafts.

FRS-9, 8.11:FRS-9, 8.11: interest rate charged, repayment terms, priorities, existence of any conversion features, and amounts of unamortised premium or discounts of

non-current liabilities.


Liabilities —Liabilities —borrowingsborrowings

20.20. Term liabilitiesTerm liabilities 2004 2003

$ $

Mortgage loan xxx xxx

The loan is secured by way of a mortgage bond over the company’s land and buildings. Interest is charged at the rate of 12 per cent per annum. The loan is repayable in full on 15 December 2007.


Liabilities —Liabilities —capital expenditure commitmentscapital expenditure commitments

FRS-9, 8.16:FRS-9, 8.16: amounts committed for future capital

expenditure and not yet recognised as liabilities must be disclosed; and

disclosed by way of supporting notes.


Liabilities —Liabilities —exceptional risksexceptional risks

FRS-9, 8.14FRS-9, 8.14 Disclosure of any information from

which it is possible to evaluate exceptional risks of operating.

Example: risk of foreign currency fluctuations, or dependence on a small number of

suppliers or customers.


EquityEquity

Equity can be viewed as the residual interest in the assets of the entity after deducting liabilities.

FRS-9, 8.19:FRS-9, 8.19: ‘components of equity shall be

disclosed separately if separate disclosure is necessary to achieve the objectives of financial reporting’.


Equity — paid in capitalEquity — paid in capital FRS-9, 8.22FRS-9, 8.22

For each class of shares: number of shares and to the extent to which

the share are yet to be paid up, rights attached, and redemption features.

Capital not capable of being called upon, except in the event of the winding up of a company.

Share warrants (options). Calls in arrears. Cumulative preferred dividends in arrears.


Equity —Equity —paid in capitalpaid in capital

21.21. Paid in capitalPaid in capital 2004 2003

xxx (2003 xxx) ordinary shares – fully paid xxx xxxxxx (2003 xxx) ordinary shares to X cents xxx xxxxxx (2003 xxx) 5% redeemable preference shares xxx xxxTotal paid in capital xxx xxx

Capital that may be called up in the event of winding up the entity consist of xxx ordinary shares at X cents.

Shares issued and bought back during the yearX ordinary shares were issued to finance expansion. X ordinary shares considered surplus to requirements were bought back during the year.

Options in relation to unissued sharesPreference shareholders have the option to acquire 5 ordinary shares for every 10 preference shares for $2.30 per share before 31 December 2008. There are X unissued ordinary shares on which options are outstanding at 31 March 2004.


Equity — reservesEquity — reserves

FRS-2, 7.7:FRS-2, 7.7: when a transfer between reserves occurs, note

disclosure is required.

SSAP-17, 5.9 (e) & (f):SSAP-17, 5.9 (e) & (f): property revaluation reserve to be shown

separately from other reserves; any movements in the property revaluation

reserve to be disclosed.

FRS-21:FRS-21: movements in the foreign currency translation

reserve to be separately disclosed.


Equity — reservesEquity — reserves

22.22. ReservesReserves 2004 2003

Revaluation reserveBalance at beginning of year xxx xxxRevaluation surplus during the year xxx xxx

xxx xxx Transfer to retained earnings xxx xxxBalance at end of year xxx xxx

Retained earningsBalance at beginning of year xxx xxxSurplus for the year xxx xxx

xxx xxxTransfer from revaluation reserve xxx xxx

xxx xxxDividends paid xxx xxxBalance at end of year xxx xxx

Total reserve xxx xxx


End-of-book questionEnd-of-book questionReview questionsReview questionsReview problemsReview problems

Challenging questionsChallenging questions

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