Financial statements presentation and disclosure NCAA Case study

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Information about Financial statements presentation and disclosure NCAA Case study
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Published on March 11, 2014

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Registered Auditing & Accounting Firm operating from Arusha Tanzania. We are member firm of AGN International, a worldwide association of separate and independent accounting and consulting firms serving business organizations throughout the world.

FINANCIAL STATEMENTS – PRESENTATION AND DISCLOSURE IAS 1 – Financial statements presentation, IAS 8 – Accounting policies, changes in accounting Policies, estimates and Errors, IAS 24 – Related party disclosures and TFRS 1 – Directors’ report

INTRODUCTION  This presentation aimed to assist participants in better understanding what is general purpose financial statements, contents and standard governing its preparations.  We will start by looking financial statements prepared in accordance with IAS 1 – Presentation of Financial Statements including disclosure required by IAS 8 – Accounting policies and Errors and IAS 24 Related party disclosures  At end of IAS 1, we will look to another report published with financial statements – directors’ report which is governed by Tanzania Financial Accounting Standard 1 – Directors’ report issued by NBAA VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 2

How to read IFRS 2012  IFRS official pronouncements issued 1 January 2012 has two books – Part A and Part B.  Part A – is the stand alone IFRSs and IASs without accompanying documents such as basis of conclusion.  Part B – contain other accompanying documents including basis of conclusion. If you are having problem understanding a standard in Part A, then go to Part B to find what was basis of that standard  Any reference to IFRS or IAS in this presentation is referring to Part A.VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 3

IAS 1 – Presentation of Financial Statements The objective of IAS 1 is to describe the basis for presentation of general purpose financial statements. General purpose financial statements are financial reports prepared to meet need of different groups such as directors (decision making), TRA (tax assessment), Ministry of Tourism (Assess performance of tourism industry)etc Definitions skipped VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 4

Purpose of general purpose financial statements We prepare financial statements to show:  Financial position (assets and liabilities)  Financial performance (revenue – expenses) and  Cash flows (inflow and out flow of cash) VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 5

Features of general purpose financial statements  Fair presentation and compliance  Going concern  Accrual basis  Materiality and aggregation  Offsetting  Frequency of reporting  Comparative  Consistence VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 6

Complete set of financial statements  A statement of financial position;  A statement of comprehensive income;  A statement of changes in equity;  A statement of cash flows;  Notes and other explanatory information;  A statement of financial position as at the beginning of the earliest comparative period. An entity may use titles for the statements other than those used.  Refer Page 17 of NCAA 2012 FS  Refer 16  Refer page18  Page 19  Page 20 - 49 VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 7

Remember the followings  If you have prior year adjustment or changes in accounting policy – two years comparative shall be required  Titles do not matter – balance/statement of financial position  Single statement - Statement of profit or loss with other comprehensive income OR Statement of profit or loss AND Other comprehensive statements separately.  If NCAA financial statements comply with IFRSs, an explicit statement of compliance shall be made refer Page 20, Para 2.1  Frequency of reporting is normally 12 months. If financial statements’ reporting period is longer or shorter than 12 months, reason shall be disclosed  Comparative figures both number and narrative shall be disclosed. VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 8

An Entity shall clearly identify each financial statement and the notes by showing  The name of reporting entity  Distinction between an individual entity and a group of entities  The date of the end of the reporting period Or period covered by the set of financial statements or notes  The presentation currency  The level of rounding used in presenting amounts in the financial statements VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 9

An Entity shall clearly identify each financial statement and the notes by showing (Cont.) NGORONGORO CONSERVATION AREA AUTHORITY (NCAA)1 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE2 YEAR ENDED 30 JUNE 20123 2012 2011 Notes TZS4 TZS5 Revenue Tour income 8 57,801,798,518 48,416,421,388 Other income 9 718,586,149 626,604,328 1 Name of the entity 2 Name of financial statement 3 Reporting date or period covered by the financial statements 4 Presentation currency 55 Level or rounding (whole number) VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 10

Statement of financial position As a minimum statement of financial position shall include a) Property, plant and equipment b) Investment property c) Intangible assets d) Financial assets (excluding (e),(h) and (i) e) Investments accounted using equity method f) Biological assets g) Inventories h) Cash and cash equivalents i) The total assets classified as held for sale VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 11

Statement of financial position (Continue.)  Trade and other payables  Provisions  Financial liabilities (excluding shown under (k) and (l)  Tax liabilities and assets for current liabilities, as per IAS 12  Deferred tax liabilities and assets as per IAS 12  Liabilities included in disposal group classified as held for sale as per IFRS 5  Issued capital and reserves attributed to owners of the parent  Deferred tax liabilities or assets should not be classified as current liabilities or assets VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 12

Statement of profit or loss and other comprehensive income Line items  Revenue;  Finance costs;  Share of the profit or loss of associates and joint ventures - equity method  Tax expense;  Total amount comprising the total of: ◦ the post-tax profit or loss of discontinued operations ◦ the post-tax gain or loss on disposal - discontinued operation;  Profit or loss after tax;  Each component of other comprehensive income – by nature  Share of the other comprehensive income of associates and joint ventures -equity method  Total comprehensive income. VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 13

Information to be presented in other comprehensive income Include (refer page 16) changes in revaluation surplus on property plant and equipment and intangible assets gains and losses arising from translating the financial statements of a foreign operation gains and losses on re-measuring available-for-sale financial assets or liabilities the effective portion of gains and losses on hedging instruments in a cash flow hedge. VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 14

Statement of changes in equity I am referring you to page 18  Total comprehensive income separately attributable to owners of the parent and to non-controlling interests;  Effects of retrospective application or retrospective restatement recognized during the year  Reconciliation opening and closing balances, separately disclosing changes resulting from:  profit or loss;  each item of other comprehensive income; and  transactions with owners in their capacity as owners, showing contributions, distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 15

Statement of changes in equity - elaboration Profit for the year 2,624,256,1631 4,927,753,778 Other Comprehensive Income: Items that may be reclassified subsequently to profit or loss: Gain on fluctuation of foreign exchange rates 234,074,833 746,736,991 Increase in fair value of Government Trophies 47,737,405 93,152,482 Items that will not be reclassified to profit or loss 2 Gain on disposal of interest in joint venture 50,000,000 - Income tax relating to components of other comprehensive income 20 (99,543,672) - Total Comprehensive Income for the year 2,856,524,729 5,767,643,251 General Reserve Revaluation Reserve Retained Income Total TZS TZS TZS TZS At 01 July 2011 50,000,000 3,803,946,130 10,434,288,090 14,288,234,220 Treasury Dividend (1,000,000,000)3 (1,000,000,000) Profit for the year - 2,856,524,7294 2,856,524,729 Transfer to retained earnings (50,000,000) - 50,000,000 - As at 30 June 2012 - 3,803,946,130 12,340,812,819 16,144,758,949 1 Should shown separate in SCE 2 Each item of other comprehensive income should be shown in statement of changes in equity 3 Transaction with owners 4 Not correct VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 16

Cash flows statements  Refer page 19 of NCAA Financials  Covered under IAS 7 to be presented separately VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 17

NOTES •Continuation of IAS 1 – Financial statements presentation •IAS 8 – Accounting policies and correction of errors •IAS 24 – Related party disclosures •Remember heading is NOTES and not NOTES TO….

The Notes shall  Present information about the basis of preparation of the financial statements and the specific accounting policies (Page 20 -28)  Disclosure information required by IFRSs not disclosed anywhere refer Notes 20 (IAS 12), Note 21 (IFRS5), Note 25 (IAS37, IAS 19), Note 24 (IAS 24), Note 33 (IAS 17)etc.  Provide information that is not presented elsewhere in the financial statements, but relevant for understanding of any of them –Notes 10, Note 12???, Note 13, Note 16???? VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 19

Index to notes  General information – Page 20  Application of new and revised International Financial Reporting Standards (IFRSs)  Significant accounting policies  Critical accounting judgements and key sources of estimation uncertainty  Revenue  Segment information  Investment income  Other gains and losses  Finance costs  Income taxes relating to continuing operations  Discontinued operations  Assets classified as held for sale VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 20

Index to notes (continue)  Profit for the year from continuing operations  Earnings per share  Property, plant and equipment  Investment property  Goodwill  Other intangible assets  Subsidiaries  Investments in associates  Joint ventures  Other financial assets  Other assets  Inventories  Trade and other receivables  Finance lease receivables  Amounts due from (to) customers under construction contracts  Issued capital  Reserves  Retained earnings and dividends  Non-controlling interests VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 21

Index to notes (continue) VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz Borrowings Convertible notes Other financial liabilities Provisions Other liabilities Trade and other payables Obligations under finance leases Retirement benefit plans Financial instruments Deferred revenue Share-based payments Related party transactions Business combinations Disposal of subsidiary Cash and cash equivalents Non-cash transactions Operating lease arrangements Commitments for expenditure Contingent liabilities and contingent assets Events after the reporting period Approval of financial statements 22

Comparative Information  Enhancing the inter-period comparability of information  allowing the assessment of trends in financial information for predictive purposes.  Details of a legal dispute whose outcome was uncertain at the end of the immediately preceding reporting  Comparative narrative and descriptive information relevant to  Accounting policy applied retrospectively or retrospective restatement of items or reclassifies items then present statements of financial position as at:  the end of the current period,  the end of the previous period  the beginning of the earliest comparative period VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 23

Accrual basis of accounting  Prepare its financial statements, except for cash flow information, using the accrual basis of accounting.  Recognizes items as assets, liabilities, equity, income and expenses when they satisfy the definitions and recognition criteria VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 24

Judgements Disclosures an entity makes are:  the nature of the assumption or other estimation uncertainty;  the sensitivity of carrying amounts to the methods, assumptions and estimates underlying their calculation, including the reasons for the sensitivity;  the expected resolution of an uncertainty and the range of reasonably possible outcomes within the next financial year in respect of the carrying amounts of the assets and liabilities affected; and  an explanation of changes made to past assumptions concerning those assets and liabilities, if the uncertainty remains unresolved.  budget information or forecasts not required VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 25

Other disclosures  disclose the amount of dividends proposed or declared before the financial statements were authorized for issue but not recognized as a distribution to owners during the period, and the related amount per share;  the amount of any cumulative preference dividends not recognized.  puttable financial instruments classified as equity instruments. VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 26

Information not required by IFRS Financial review by management that describes and explains the main features of the entity’s financial performance and financial position, and the principal uncertainties it faces may include:  The main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity’s response to those changes and their effect, and the entity’s policy for investment to maintain and enhance financial performance, including its dividend policy;  The entity’s sources of funding and its targeted ratio of liabilities to equity;  The entity’s resources not recognised in the statement of financial position in accordance IFRSs.  Reports and statements such as environmental reports and value added statements, particularly in industries in which environmental factors are significant and when employees are regarded as an important user group. VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 27

VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 28

IAS 24 – Related party disclosures This standard requires disclosure of Relation between a parent and its subsidiaries Key management personnel compensation in total and each of the following categories: Short-term employee benefits Post-employment benefits Other long term benefits Termination benefits; and Share-based payment If any entity has related party transaction during the period, disclose relationship, information about transactions and outstanding balances VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 29

Government related entities A reporting entity is exempt from related partly disclosures arising from (a) Government who own the entity (b) Another entity that is related because of the same Government – TANAPA, Tourist Board etc VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 30

VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 31

TFRS 1- Directors report •Directors report, •corporate governance and social responsibility reporting Directors’ reporting is the require of national laws i.e. Companies Act for limited companies and Establishment Act for government entities.

Introduction  Directors’ report is not a requirement of International financial reporting standards hence it is not covered by any IFRS. However, directors’ report is required by Companies Act 2002 and all Establishment Act that created a Government Agency eg NCAA Act.  To guide on directors’ report, during its 146th meeting held on 15th October 2009, the NBAA Governing Board has approved the issuance of Tanzania Financial Reporting Standard (TFRS) No. 1- Directors’ Report  This standard replaces TFAS 12 on Directors’ Report that was issued by the Board on 1stJuly  2001. The standard becomes operative for financial statements covering accounting periods  beginning on or after 1st January 2010.Below is the detailed Accounting Standard on the Directors’ Report VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 33

Contents of directors’ report  Operating legal mandate  Company’s vision and mission  Principal activities  Composition of board members showing name, position, age, profession, nationality, appointment/resignation date  Corporate governance structure statement, members of various committees of the board, to whom they report, number of meeting held  Capital structure  Management set up/organization structure  Shareholders number and name of who hold directorship VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 34

Contents of directors’ report (Cont)  Solvency (going concern)  Results and dividend  Discussion on performance in relation to last year performance  Employees welfare  Gender parity – number of employees classified by gender  Related part transactions  Political and charitable donations  Corporate social responsibilities  Statement of directors’ responsibilities VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 35

Other corporate reporting Disclosures outside TFAS 1 allowed are those related to corporate governance reporting which include:  Statement on the organization’s contribution to large economic – projects with high employment creation, promotion of local suppliers (MKUKUTA), Climate Change Activities etc. Value Added Statement may assist to show value created  Disclosure of detailed environment policy which clearly state procedures for monitoring and evaluation  Disclose of hire policy which discourage discrimination on sex, tribe, age and promote employees safety  Disclosure of ant bribery policy VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 36

Other corporate reporting (Cont.) Performance discussion could include  KPIs review  Five years financial statements  Charts and graphs VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 37

Thank you  Questions and Answers  Interactive session VA Business Assurance Services info@vabusiness.co.tz www.vabusiness.co.tz 38

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