financial accounting ii lecture 44

Financial Accounting II

Lecture 44

Balance Sheetas at December 31, 2004

Note 2004 2003

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorised capital

60,000,000 (2003: 60,000,000)

ordinary shares of Rs. 10 each 600,000 600,000

Issued, subscribed and paid up capital

47,537,080 (2003: 47,537,080)

ordinary shares of Rs. 10 each 3 475,371 475,371

Reserves 4 3,311,625 2,752,625

Unappropriated profit 404,864 404,727

4,191,860 3,632,723

LONG-TERM AND DEFERRED LIABILITIES

Long-term finances and other payables 5 527,390 1,421,551

Liabilities against assets subject to finance lease 6 6,351 1,702

533,741 1,423,253

(Rupees in thousands)

CURRENT LIABILITIES

Current portion of long-term liabilities 7 859,330 96,224

Finances under mark up arrangements - secured 8 234,197 499,115

Creditors, accrued and other liabilities 9 595,213 498,108

Dividends 10 5,960 4,861

Provision for taxation 54,185 -

1,748,885 1,098,308

CONTINGENCIES AND COMMITMENTS 11 - -

6,474,486 6,154,284

Note 2004 2003

ASSETS

FIXED CAPITAL EXPENDITURE

Property, plant and equipment 12 2,937,656 2,782,007

Intangible assets 13 6,385 28,071

Assets subject to finance lease 14 12,155 129,082

Capital work-in-progress 15 344,732 359,589

3,300,928 3,298,749

OTHER LONG-TERM ASSETS

Investments 16 691,176 680,797

Long-term loans and deposits 17 57,565 41,317

748,741 722,114


CURRENT ASSETS

Stores and spares 18 380,556 318,880

Stock-in-trade 19 1,094,329 844,120

Trade debts 20 640,537 577,548

Investments 16 9,067 -

Loans, advances, deposits, prepayments

and other receivables 21 155,442 332,043

Cash and bank balances 22 144,886 98,166

2,424,817 2,170,757

6,474,486 6,191,620

The annexed notes 1 to 32 form an integral part of these finanncial statements

Profit and Loss Accountfor the year ended December 31, 2004

Note 2004 2003

Local sales 6,804,861 6,243,603

Export sales 88,124 49,616

6,892,985 6,293,219

Less: Sales tax and excise duty 898,166 848,992

Commission 7,842 8,038

906,008 857,030

Net Sales 5,986,977 5,436,189

Cost of goods sold 23 (4,678,375) (4,242,476)

Gross profit 1,308,602 1,193,713

(Rupees in thousand)

Administration expenses 24 (347,030) (344,155)

Distribution and marketing expenses 25 (172,561) (165,629)

Other operating expenses 26 (84,699) (70,164)

Other operating income 27 84,398 104,541

Profit from operations 788,710 718,306

Finance cost 28 (139,008) (151,308)

Investment income 29 542,619 469,907

Profit before taxation 1,192,321 1,036,905

Taxation (229,119) (223,392)

Profit after taxation 963,202 813,513

Earnings per share - basic and diluted (Rupees) 32 20.26 17.11

Appropriations have been reflected in the statements of changes in equity.

The annexed notes 1 to 32 form an integral part of these financial statements.

Cash Flow Statementfor the year ended December 31, 2004

Note 2004 2003

Cash flow from operating activities:

Cash generated from operations 30 950,098 1,137,599

Finance cost paid (142,422) (162,918)

Taxes paid (9,543) (61,273)

Payments for accumulating compensated absences (3,951) (5,135)

Retirement and other benefits paid (25,249) (23,415)

Net cash from operating activities 768,933 884,858

Cash flow from investing activities:

Fixed capital expenditure (470,598) (599,824)

Net increase in long-term loans and deposits (1,859) (302)

Sale proceeds of property, plant and equipment 19,406 28,951

Dividend received 535,836 457,554

Investments (49,999) (60,480)

Net cash from/used in investing activities 32,786 (174,101)


Cash flow from financing activities:

Repayment of long-term finances and other payables (60,238) (100,000)

Payment of finance lease liabilities (26,877) (32,712)

Dividend paid (402,966) (331,770)

Net cash used in financing activities (490,081) (464,482)

Net increase in cash and cash equivalents 311,638 246,275

Cash and cash equivalents at the beginning of the year (400,949) (647,224)

Cash and cash equivalents at the end of the year 31 (89,311) (400,949)


Statement of Changes in Equityfor the year ended December 31, 2004

Share Share General Unappropriated TotalCapital Premium Reserve Profit

Balance as on December 31, 2002 475,371 203,589 2,140,036 214 2,819,210 as previously reported

Effect of change in accounting policy (note 11.1)Final dividend for the year endedDecember 31, 2002 declared subsequentto year end - - - 332,760 332,760

Balance as on December 31, 2002as restated 475,371 203,589 2,140,036 332,974 3,151,970


Final dividend for the year endedDecember 31, 2002 Rs. 7.00 per share - - - (332,760) (332,760)

Net profit for the year 813,513 813,513

Transferred from profit and loss account 409,000 (409,000) -

Balance as on December 31, 2003 as restated 475,371 203,589 2,549,036 404,727 3,632,723

Final dividend for the year endedDecember 31, 2003 Rs. 8.50 per share - - - (404,065) (404,065)

Net profit for the year - - - 963,202 963,202

Transferred from profit and loss account - - 559,000 (559,000) -

Balance as on December 31, 2004 475,371 203,589 3,108,036 404,864 4,191,860


• Share capital classified under the following sub-heads, namely:Issued, subscribed and paid up capital,

distinguishing in respect of each class between:-

(a) shares allotted for consideration paid in cash;

(b) shares allotted for consideration other than cash, showing separately shares issued against property and others (to be specified); and

(c) shares allotted as bonus shares.

Disclosure Requirements of Share Capital

• If the share capital is divided into different classes of shares, namely ordinary, preference etc. For each separate class of share capital, the following is disclosed:a) Authorized Capital

Number of Shares.Nominal value.

b) Paid up CapitalNumber of Shares.Nominal value.

Disclosure Requirements of Share Capital

• Lessee should in addition to meeting the requirements of IAS 32 Financial Instruments: Disclosure and Presentation, make following disclosures for finance leases:

a. For each class of asset, the net carrying amount at the balance sheet date.

Finance Lease - Disclosures

b. A reconciliation between the total of future minimum lease payments at the balance sheet date, and their present value. In addition, an entity shall disclose the total future minimum lease payments and their present value, for each of the following periods:- not later than one year,- later than one year and not later than five years- later than five years


c. Contingent rents recognised as expense in the period.

d. The total of future minimum sublease payments expected to be received under a non-cancelable sublease at the balance sheet date.


e. A general description of the lessee’s material leasing arrangements including but not limited to, the following:

i. The basis on which contingent rent payable is determined;

ii. The existence and terms of renewal or purchase options and escalation clauses


iii. Restrictions imposed by lease arrangements, such as those concerning dividends, additional debt, and future leasing.

• In addition, the requirements for disclosure in accordance with IAS 16 (Property Plant and Equipment), IAS 36 (Impairment of Assets), IAS 40 (Investment Property) and IAS 41 (Agriculture) apply to lessees for assets leased under finance lease.


• If an entity declares dividends to holders of equity instruments after the balance sheet date, the entity shall not recognise those dividends as a liability at the balance sheet date.

Dividends - IAS 10

• If dividends are declared after the balance sheet date but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the balance sheet date because they do not meet the criteria of a present obligation according to IAS 37. Such dividends are disclosed in the notes in accordance with IAS 1 Presentation of Financial Statements.

Dividends – IAS 10

A reconciliation of the carrying amount at the beginning and end of the period.

Comparative figures are not required for reconciliation.

Disclosure Requirements – Fixed Assets

The financial statements should also disclose.The existence and amount of

restrictions on title, and property plant and equipment pledged as security

The accounting policy for estimated costs of restoring site of items of property plant and equipment


The reconciliation of carrying amount at the beginning and at the end of the period.


The amount of expenditures on account of property, plant and equipment in the course of construction

The amount of commitments for the acquisition of property, plant ant equipment.


• The financial statements should also disclose: If an intangible asset is amortized over a

period of more than 20 years the reason why the presumption of useful life was rebutted.

Description, carrying amount and remaining amortization period of any individual asset that is material to financial statements.

Disclosure Requirements - Intangibles

• The financial statements should disclose the following for each class of intangible assets, distinguishing between internally generated assets and other assets: The useful lives or the amortization rates

used. The amortization method used. The gross carrying amount and the

accumulated amortization at the beginning and at the end of the period.


For intangible assets acquired by way of Government grants:The fair value initially recognizedThe carrying amountWhether they are carried at bench mark

(cost less acc amortization) or the allowed alternative treatment (revalued amount less acc amortization)


The existence of intangible assets whose title is restricted and the carrying amount intangible assets pledged as security for liabilities.

The amount of commitments for acquisition of intangible assets.


financial accounting ii lecture 44

Documents

net cash

finance lease66

operating activities768

liabilitiesshare capital

finance cost28139

finance lease1412

operating expenses2684

operating income2784