FINANCIAL HIGHLIGHTS AND OUTLOOK
FINANCIAL HIGHLIGHTS AND OUTLOOK
Institute of Chartered Accountants of Jamaica
Contents
pendent auditor’s report
– Auditor’s report – –
Page 32
Independent auditor’s report
To the Members of Institute of Chartered Accountants of Jamaica
I have audited the accompanying financial statements of Institute of Chartered Accountants of Jamaica, which comprise the statement of financial position as at March 31, 2014, and the statement of comprehensive income, statement of changes in reserves and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the requirements of the Public Accountancy Act, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
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ICAJ ANNUAL REPORT 2013/2014
34
Independent auditor’s report (cont’d)
To the Members of Institute of Chartered Accountants of Jamaica
Opinion In my opinion, the financial statements give a true and fair view of the financial position of Institute of Chartered Accountants of Jamaica as at March 31, 2014, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.
Kingston, Jamaica July 8, 2014
Chartered Accountant
Page 34
Institute of Chartered Accountants of Jamaica 35
Statement of financial position At March 31, 2014 (Expressed in Jamaican Dollars, unless otherwise indicated) Note
Assets Non-current assets Property, plant and equipment Investment in equity instruments
Restated 2013 $
2014 $
Restated April 1, 2012 $
4 5
63,749,689 339,456 64,089,145
59,213,363 335,232 59,548,595
57,083,005 502,080 57,585,085
6
147,976
218,355
51,379
7 8 9
7,360,730 2,522,886 8,085,089 19,244,889 37,361,570 101,450,715
4,773,757 2,256,204 2,022,358 21,417,643 30,688,317 90,236,912
7,330,459 3,835,053 22,134,692 33,351,583 90,936,668
10 11
17,175,785 334,736 31,617,715 49,128,236
15,137,234 330,512 31,495,715 46,963,461
13,860,500 497,360 31,353,856 45,711,716
12 13 14 15
1,509,440 10,713,718 155,110 6,376,315 18,754,583
1,451,685 11,599,485 76,355 8,816,879 21,944,404
1,326,435 11,888,433 836,374 11,184,103 25,235,345
Non-current liabilities Long-term loans Deferred tax liability
16 17
16,192,929 45,772 16,238,701
7,371,515 30,428 7,401,943
8,186,911 21,211 8,208,122
Current liabilities Deferred income Payables and accruals Current portion of long-term loans
18 19 16
7,763,700 8,078,195 1,487,300 17,329,195 52,322,479 101,450,715
6,632,625 6,057,181 1,237,298 13,927,104 43,273,451 90,236,912
6,906,900 4,182,729 691,856 11,781,485 45,224,952 90,936,668
Current assets Inventories Membership dues, other receivables and prepayments Taxation recoverable Short-term deposits Cash and cash equivalents Total assets Reserves and liabilities Reserves Accumulated surplus Fair value reserve Capital assets reserve Total reserves Liabilities Funds Administered funds Capital Assets Fund ICAJ Welfare Fund ICAJ/IDB Project Fund Total funds
Total liabilities Total reserves and liabilities
The notes on the accompanying pages 39 to 65 form an integral part of the financial statements. The financial statements were approved and authorised for issue by the Council on July 8, 2014 and signed on its behalf by:
______________________ Dennis Chung President
_______________________ Dennis V. Brown Hon. Treasurer
Institute of Chartered Accountants of Jamaica 36
Statement of comprehensive income Year ended March 31, 2014 (Expressed in Jamaican Dollars, unless otherwise indicated) Note
Revenue Members’ subscription and admission fees Students’ subscription and registration fees Surplus from self-financing activities Finance income Subvention for students Advertising and sponsorship Sale of handbooks, bags and shirts Miscellaneous
2014 $
Restated 2013 $
2e 20 21
Transfer from Capital Assets Fund Gain on disposal of property, plant and equipment Gain on foreign exchange
20,406,307 10,831,229 11,030,625 740,052 2,499,414 317,978 541,545 16,483
17,620,736 10,814,160 5,917,886 872,623 2,841,070 82,976 902,513 149,903
46,383,633 936,267 1,999 995,950
39,201,867 1,006,229 555,084
48,317,849
40,763,180
Administrative and other operating expenses
22
(41,983,985)
(35,632,471)
Donation – ICAJ Welfare Fund
14
(75,000)
(75,000)
Bad debts specific charges
7
(2,623,249)
(1,966,649)
Bad debts recovered
14,893
Loss on disposal of property, plant and equipment
-
62,383 (69,244)
Finance costs
21
(1,233,918)
(1,305,850)
Surplus for the year before taxation
23
2,416,590
1,776,349
Income tax expense
24
Surplus for the year before transfer Interest transferred to designated funds (net of tax) Surplus for the year Other comprehensive income: Items that maybe reclassified subsequently to surplus or deficit: Gain/(loss) on revaluation of equity instruments Total comprehensive income for the year
(15,344) 2,401,246
12, 13, 14, 15
(240,695)
(9,217) 1,767,132 (348,539)
2,160,551
1,418,593
4,224 2,164,775
(166,848) 1,251,745
The notes on the accompanying pages 39 to 65 form an integral part of the financial statements.
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Statement of changes in reserves Year ended March 31, 2014 (Expressed in Jamaican Dollars, unless otherwise indicated)
Note
Balance at March 31, 2012 Reclassification
Accumulated Surplus $ 13,860,500
31
-
Fair Value Reserve $ 497,360 -
Capital Assets Reserve $
Total $
43,242,289
57,600,149
(11,888,433)
(11,888,433)
31,353,856
45,711,716
13,860,500
497,360
Changes in reserves for 2013 Loss on revaluation of equity instruments Surplus for the year
1,418,593
(166,848) -
-
(166,848) 1,418,593
Total comprehensive income for year
1,418,593
(166,848)
-
1,251,745
15,279,093
330,512
Restated balance at March 31, 2012
Transfer
11
(141,859)
-
31,353,856 141,859
-
15,137,234
330,512
Changes in reserves for 2014 Gain on revaluation of equity instruments Surplus for the year
2,160,551
4,224 -
-
4,224 2,160,551
Total comprehensive income for year
2,160,551
4,224
-
2,164,775
17,297,785
334,736
31,495,715
49,128,236
(122,000) 17,175,785
334,736
122,000 31,617,715
49,128,236
Restated balance at March 31, 2013
Transfer Balance at March 31, 2014
11
31,495,715
46,963,461
The notes on the accompanying pages 39 to 65 form an integral part of the financial statements.
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ICAJ ANNUAL REPORT 2013/2014
46,963,461
Institute of Chartered Accountants of Jamaica 38
Statement of cash flows Year ended March 31, 2014 (Expressed in Jamaican Dollars, unless otherwise indicated) Note Cash flows from operating activities Surplus for the year before taxation Adjustments for: Depreciation Capital assets contributions (Gain)/loss on disposal of property, plant and equipment Interest and dividend income Interest expense
4 21 21
Decrease/(increase) in inventories (Increase)/decrease in membership dues, other receivables and prepayments Increase/(decrease) in deferred income Increase in payables and accruals
Cash flows from financing activities Contributions received – administered funds Disbursement of awards from administered funds Proceeds from loan Mortgage loan repayment Contributions received – Capital Assets Fund Contributions received – ICAJ Welfare Fund Disbursement from ICAJ Welfare Fund Disbursement from ICAJ/IDB Project Fund Net cash provided by/(used in) financing activities
2,416,590
1,776,349
2,289,803 (936,267) (1,999) (1,133,603) 1,233,918 3,868,442
(114,510) (1,006,229) 69,244 (872,623) 1,305,850 1,158,081 (166,976)
(2,525,597) 1,131,075 2,021,014
2,614,782 (274,275) 1,874,452
4,565,313 (1,233,918) (266,682) 3,064,713
5,206,064 (1,305,850) 1,777,324 (198,475) 5,479,063
4
(6,826,130) 2,000 (6,062,731) 1,058,403 13,824 (11,814,634)
(2,088,592) 3,500 (2,022,358) 790,543 24,000 (3,292,907)
12 12
228,375 (212,993) 10,965,261 (1,893,845) 50,500 78,755 (2,638,886) 6,577,167
236,107 (143,699) 974,158 (1,244,112) 632,244 106,355 (866,374) (2,597,884) (2,903,205)
(2,172,754) 21,417,643 19,244,889
(717,049) 22,134,692 21,417,643
13 14 14 15
Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
2013 $
70,379
Cash generated from operations Interest paid Income taxes refunded Income taxes paid Net cash provided by operating activities Cash flows from investing activities Additions to property, plant and equipment Proceeds from disposal of property, plant and equipment Investment in short-term deposits Interest received Dividends received Net cash used in investing activities
2014 $
9
The notes on the accompanying pages 39 to 65 form an integral part of the financial statements.
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Notes to the financial statements March 31, 2014
The Institute of Chartered Accountants of Jamaica (the Institute) was constituted on January 18, 1965 and on July 6, 1970 became a body corporate under the Public Accountancy Act. The Institute is domiciled in Jamaica with registered offices located at 8 Ruthven Road, Kingston 10, Jamaica. The principal objectives of the Institute are to: a
Promote and increase the knowledge, skills and proficiency of its members and students
b
Regulate the discipline and professional conduct of its members and students
c
Promote and protect the welfare and interest of the Institute and the accounting profession, both in Jamaica and abroad
d
Make provision for the training, education and examination of persons engaging in or intending to engage in the said profession, whether in Jamaica or elsewhere, in private practice or as employees of the Government of Jamaica or by statutory body or industrial or commercial enterprise or any other person who is not an accountant in private practice.
i
Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and have been prepared under the historical cost convention, except for certain financial assets and financial liabilities measured at fair value. The preparation of financial statements in conformity with IFRS, requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Institute’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2(b).
ii
Significant accounting policies, changes in accounting policies and disclosures New and amended standards adopted by the Institute The following standards have been adopted by the Institute for the first time for the financial year beginning on or after 1 April 2013. These standards do not have a material impact on the financial statements of the Institute: Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially re-classifiable to surplus or deficit subsequently (reclassification adjustments). Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset and liability offsetting. This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP.
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Notes to the financial statements March 31, 2014
(cont’d) (cont’d) ii
Significant accounting policies, changes in accounting policies and disclosures (cont’d) IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles. IFRS 13, ‘Fair value measurement’ aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS. The Standard applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements). With some exceptions, the standard requires entities to classify these measurements into a 'fair value hierarchy' based on the nature of the inputs: Level 1 - quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2 - inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 - unobservable inputs for the asset or liability Entities are required to make various disclosures depending upon the nature of the fair value measurement (e.g. whether it is recognised in the financial statements or merely disclosed) and the level in which it is classified. Annual Improvements 2009-2011 Cycle. The improvements in this amendment clarify the requirements of IFRS and eliminate inconsistencies within and between standards. The main standards affected include: IFRS 1 - Permit the repeated application of IFRS 1, borrowing costs on certain qualifying assets IAS 1 - Clarification of the requirements for comparative information IAS 16 - Classification of servicing equipment IAS 32 - Clarify the tax effect of a distribution to holders of equity instruments
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Notes to the financial statements March 31, 2014
(cont’d) (cont’d) ii
Significant accounting policies, changes in accounting policies and disclosures (cont’d) New standards and interpretations not yet adopted The following new standards, interpretations and amendments, which have not been applied in these financial statements, may have an effect on the Institute’s future financial statements: IFRS 7 (Amendment) - Financial Instruments: Disclosures on offsetting asset and liability (effective for annual periods commencing on or after 1 January 2015). This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. IFRS 9 Financial Instruments IFRS 9 introduced new requirements for the classification and measurement of financial assets and the classification and measurement requirements for financial liabilities along with the requirements for recognition and derecognition of financial assets and liabilities. IFRS 9 Financial Instruments will ultimately replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety. Amendments to IFRS 12: Transition guidance The amendments clarify transition guidance and provide additional transition relief, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. IAS 32 (Amendment) - "Financial Instruments: Presentation" (effective for annual periods commencing on or after 1 January 2014) aims to clarify some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position. As a result of diversity in application of the requirements on offsetting, the amendment focused on four main areas: the meaning of 'currently has a legally enforceable right of set-off' the application of simultaneous realisation and settlement the offsetting of collateral amounts the unit of account for applying the offsetting requirements. IAS 36 (Amendment) - Impairment of Assets on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. The amendment is not mandatory for the Institute until 1 January 2014. IAS 12 (amendment) Deferred tax: Recovery of Underlying Assets IAS 12 requires an entity to measure deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The amendment introduces a presumption that recovery will normally be through sale.
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Notes to the financial statements March 31, 2014 (cont’d) (cont’d) ii
Significant accounting policies, changes in accounting policies and disclosures (cont’d) Annual Improvements - 2010 - 2012 and 2011 - 2013 Cycles (effective for annual periods commencing on or after 1 July 2014).The improvements in these amendments clarify the requirements of IFRS and eliminate inconsistencies within and between standards. Management will perform an assessment of the impact of all applicable standards that will apply for financial period ending March 31, 2015.
iii
Measurement bases The financial statements are prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below. Except where otherwise stated, the financial statements are presented in Jamaican Dollars.
The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the amounts and related disclosures reported in the financial statements. These estimates are based on historical experience and management’s best knowledge of current events and actions. Actual results may differ from those estimates and assumptions. There were no critical judgements, apart from those involving estimation, that management has made in the process of applying the Institute’s accounting policies that have a significant effect on the amounts recognised in the financial statements. The estimates and assumptions which have the most significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below. i
Useful lives of property, plant and equipment Depreciation is provided so as to write down the respective assets to their estimated residual values over their expected useful lives and, as such, the selection of the expected useful lives and the estimated residual values of the assets require the use of estimates and judgements. Details of the estimated useful lives are as shown in note 2c.
ii
Impairment An impairment loss is recognised for the amount by which the asset’s or cashgenerating unit’s carrying amount exceeds its recoverable amount. Management estimates expected future cash flows from each asset or cash-generating unit and determines the recoverable amount and the present value of the expected future cash flows [see note 2p]. In the process of measuring expected future cash flows management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may differ from estimates.
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Notes to the financial statements March 31, 2014 (cont’d) (cont’d) iii
Taxation The Institute is required to estimate income tax payable to the Commissioner General of Tax Administration Jamaica on any non-exempt surplus derived from operations [note 24a]. This requires an estimation of the current tax liability together with an assessment of the temporary differences which arise as a consequence of different accounting and taxation treatments. These temporary differences result in deferred tax assets or liabilities which are included in the statement of financial position. Deferred tax assets and liabilities are measured using the enacted tax rate at the end of the reporting period. If the tax eventually payable, or recoverable, differs from the amounts originally estimated then the difference will be accounted for in the year such determination is made. The significant accounting policies that have been used in the preparation of the financial statements are summarised below and have been consistently applied for all the years presented.
i
Property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses [note 2q]. Land is not depreciated.
ii
Depreciation is calculated on the straight-line (SL), or reducing-balance (RB), basis at annual rates to write down the cost of assets to their estimated residual values over the period of their expected useful lives. The annual rates of depreciation in use are: Building (SL) Building extensions and improvements (SL) Certain furniture and equipment (RB) Electronic equipment and other furniture and equipment (SL)
2.5% 10% 15% 10% - 25%
The expected useful lives and estimated residual values are re-assessed at the end of each reporting period and adjusted, if appropriate. The useful life and estimated residual value of the buildings were revised in 2013. iii
Construction-in-progress represents costs incurred to date, including interest on borrowings obtained to finance construction on the building development project [note 2l]. Construction-in-progress is not depreciated until completion.
iv
Repairs and renewals Costs of repairs and renewals which do not enhance the value of existing assets are written off to surplus or deficit as they are incurred.
v
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Gains or losses on disposal of property, plant and equipment are included in surplus or deficit, when they arise.
ICAJ ANNUAL REPORT 2013/2014
Institute of Chartered Accountants of Jamaica 44
Notes to the financial statements March 31, 2014
(cont’d)
Inventories are stated at the lower of cost, determined on a first-in, first-out basis, and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Using information available at year-end date, the Institute makes judgements based on experience on the level of provision required to account for potential unsaleable inventories.
Revenue is recognised to the extent that it is probable that the received and receivable for goods and services provided in the normal course of business, net of discounts and GCT. Annual subscription and rental income is recognised in surplus or deficit on a straight line basis over the period. Courses and conference income is recognised in the year of the relevant course or event. Members and student subscriptions are recognised in the accounting period to which the subscriptions relate. These subscriptions are due each year on April 1 and January 1 respectively. To the extent that income is received in advance, it is deferred and recognised in the relevant period for which services for these subscriptions or fees are given. The unearned portions, if any, are shown as deferred income [note 18]. -financing activities are recognised when invoiced. Interest and other income are recognised when earned in accordance with the relevant agreements in place Interest income is recognised on a time-proportionate basis using the e ective interest method. Dividend income is recognised when the right to receive payment is established. Donations or contributions received for the purposes of funding the acquisition, capital assets are credited to the capital assets fund and released to surplus or deficit over the expected useful life of the respective assets in line with the depreciation policy. Donations or contributions received for the acquisition of freehold land or other non-depreciable assets are credited to surplus or deficit in the year of acquisition.
Foreign currency transactions are translated into the functional currency of the Institute, using the exchange rates prevailing at the dates of the transactions. Foreign currency balances at the end of the reporting period are translated at the closing rates of exchange. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognised in surplus or deficit. Non-monetary items measured at historical cost are translated using the exchange rates at the dates of the transactions. Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined.
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Notes to the financial statements March 31, 2014
(cont’d)
A financial instrument is any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument in another entity. Financial assets and financial liabilities are recognised in the Institute’s statement of financial position when it becomes a party to the contractual provisions of the instruments. A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expired. The financial instruments carried in the statement of financial position are: Financial assets: Investment in equity instruments, membership dues and other receivables, short-term deposits and cash and cash equivalents;
s is impaired. income costs or gain/loss on disposal of investment in equity instruments, except for impairment of membership dues and other receivables, which is presented as bad debt provision [note 2i]. Financial liabilities: The Institute’s financial liabilities include payables and long-term loans. These are recognised initially as the proceeds received, net of transaction costs incurred. Financial liabilities are subsequently measured at amortised cost using the effective interest method. Any difference between proceeds (net of transaction costs) and the redemption value is recognised in surplus or deficit over the life of the liabilities.
Management determines the appropriate classification of investments at the time of purchase and re-evaluates such designation on a periodic basis. Investments, comprising quoted equity, are intended to be held for the purposes of generating long-term investment income and are treated as non-current assets. The securities may be sold in response to need for liquidity or changes in market prices. Investments are initially recognised at cost, which includes transaction costs, and subsequently re-measured at fair value based on quoted bid prices. Unrealised gains and losses arising from changes in fair value of these securities are recognised in reserves. When securities are disposed of or impaired, the related accumulated unrealised gains or losses included in reserves are transferred to surplus or deficit.
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Notes to the financial statements March 31, 2014
(cont’d)
All purchases and sales of investment securities are recognised at settlement date. Dividends from investment in equity instruments are recognised in surplus or deficit as part of finance income when the Institute's right to receive payments is established. At each year-end date, an assessment is made as to whether there is objective evidence that an equity instrument is impaired. A significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the asset is impaired. Judgment is used in determining what a significant or prolonged decline is. Impairment charges are recognised in the income statement.
Membership dues and other receivables are classified as loans and receivables. These are initially recognised at original invoice amount (which represents fair value) and subsequently measured at amortised cost less any provision for doubtful debts. A provision for doubtful debt is recognised when there is objective evidence that the full amount due will not be collected, in accordance with the original terms of these receivables. The amount of the write-down is determined as the difference between the carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. Discounting is omitted where the effect of discounting is immaterial.
Short-term deposits consist of investment in deposits with maturity dates greater than three (3) months and up to twelve (12) months.
Cash and cash equivalents consist of cash in hand, deposits held on call with banks, and other short-term highly liquid investments with original maturity dates of three (3) months or less.
Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in surplus or deficit over the period of the borrowings using the effective interest method. Borrowed funds not utilised are invested until they are required and any interest earned during the reporting period is set-off against borrowing costs incurred during the reporting period. Fees paid on the establishment of the loan facilities are recognised as transaction costs of the loan to the extent it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. Borrowing costs comprise primarily interest on the Institute’s borrowings. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset is capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale less any interest earned during the reporting period on borrowed funds. Other borrowing costs are expensed in the period in which they are incurred and are included in ‘finance costs’.
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Notes to the financial statements March 31, 2014 (cont’d)
Income tax on the results for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable surplus for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is accounted for using the financial position liability method, providing for deferred tax on temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the corresponding basis used in the computation of taxable surplus. In principle, deferred tax liabilities are recognised for taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable surplus will be available against which the assets can be realised. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited to surplus or deficit, except when it is related to items credited or charged directly to reserves, in which case the deferred tax is also dealt with in reserves. The Commissioner General of Tax Administration Jamaica has granted the Institute exemption from income tax under the mutuality principle in respect of income derived from transactions with members and students. In consequence, the Institute is only taxable on a proportion of its income after setting-off a proportion of its expenses and capital allowances. As the proportion of capital allowances which can be claimed varies from year to year, it is not practical to ascertain temporary differences arising from variances between depreciation and capital allowances. These have, therefore, been dealt with as reconciling items for taxation purposes. Deferred tax assets and liabilities are off-set when they arise from the same tax authority and when legal right of set-off exists.
Provisions are recognised when there is a present legal or constructive obligation as a result of past events, it is probable that an out-flow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.
i
The Institute provides post employment benefits through a defined contribution plan. A defined contribution plan is a superannuation plan under which the Institute pays fixed contributions into a privately administered fund. The Institute has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. Contributions to the plan are recognised as an expense in the period that relevant employee services are received.
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Notes to the financial statements March 31, 2014 (cont’d)
ii
Employee obligations Employees’ entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to year-end date.
iii
Termination benefits Termination benefits are payable when employment is terminated by the Institute before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Institute recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. The termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the reporting date are discounted to present value.
Property, plant and equipment and other non-current assets, are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
Accumulated surplus includes all current and prior retained surpluses. Fair value reserve comprises gains and losses arising on the revaluation of the investment in equity instruments. Capital assets reserve includes funds appropriated from accumulated surplus for the purposes of funding the acquisition, construction and completion of the Institute’s capital assets.
Certain prior year figures have been restated to conform to current year’s presentation. [Note 31].
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Institute of Chartered Accountants of Jamaica 49
Notes to the financial statements March 31, 2014
i
Financial assets by categories The categories of financial assets included in the statement of financial position are as follows: 2014 2013 $ $ Financial assets measured at fair value Non-current assets Investment in equity instruments (note 5) Financial assets measured at amortised cost Current assets Loans and receivables (including cash and cash equivalents) (notes 7, 8 and 9) Total
ii
339,456
335,232
33,951,140 34,290,596
27,684,853 28,020,085
Financial liabilities by categories The categories of financial liabilities included in the statement of financial position are as follows: 2014 2013 $ $ Financial liabilities measured at amortised cost Non-current liabilities Long-term loans Current liabilities Payables and accruals Current portion of long-term loans Total
16,192,929
7,371,515
8,078,195 1,487,300 25,758,424
6,057,181 1,237,298 14,665,994
An amendment to IFRS 7 introduced new requirements relating to the disclosure of financial instruments that are measured at fair value. The amendment requires that, as of January 1, 2010, financial instruments measured at fair value be disclosed by levels using the fair value measurement hierarchy. The hierarchy comprises three (3) levels as follows: Level 1 includes those instruments which are measured based on quoted prices in active markets for identical assets or liabilities. Level 2 includes those instruments which are measured using inputs other than quoted prices within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3 includes those instruments which are measured using valuation techniques that include inputs for the instrument that are not based on observable market data (unobservable inputs). The Institute’s investment in equity quoted on the Jamaica Stock Exchange falls into the Level 1 tier of the fair value measurement hierarchy. The Institute uses the bid price at the end of the reporting period, as the quoted market price in valuing these assets.
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ICAJ ANNUAL REPORT 2013/2014
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Notes to the financial statements March 31, 2014 Freehold Land & Buildings $
Construction Computers, -InFurniture & Progress Equipment $ $
Total $
Gross carrying amount at April 1, 2013 Additions Disposal
49,355,333 531,492 -
13,200,828 6,080,129 -
12,044,170 214,509 (50,000)
74,600,331 6,826,130 (50,000)
Gross carrying amount at March 31, 2014
49,886,825
19,280,957
12,208,679
81,376,461
Depreciation at April 1, 2013 Depreciation eliminated on disposal Charge for the year
(6,255,309) (1,260,228)
-
(9,131,659) (15,386,968) 49,999 49,999 (1,029,575) (2,289,803)
Depreciation at March 31, 2014
(7,515,537)
-
(10,111,235) (17,626,772)
Carrying amount at March 31, 2014
42,371,288
19,280,957
Freehold Land & Buildings $
2,097,444
Construction Computers, -InFurniture & Progress Equipment $ $
63,749,689
Total $
Gross carrying amount at April 1, 2012 Additions Disposal
49,612,567 (257,234)
12,017,591 1,183,237 -
15,080,616 905,355 (3,941,801)
76,710,774 2,088,592 (4,199,035)
Gross carrying amount at March 31, 2013
49,355,333
13,200,828
12,044,170
74,600,331
Depreciation at April 1, 2012 Depreciation eliminated on disposal Adjustment Charge for the year
(7,762,933) 247,842 2,500,279 (1,240,497)
-
(11,864,836) (19,627,769) 3,878,449 4,126,291 2,500,279 (1,145,272) (2,385,769)
Depreciation at March 31, 2013
(6,255,309)
-
(9,131,659) (15,386,968)
Carrying amount at March 31, 2013
43,100,024
13,200,828
2,912,511
59,213,363
Included in gross carrying amount is a sum of $8,054,897 (2013 - $6,752,630), representing the cost of equipment which are fully depreciated, but are still in use. Buildings were valued on June 12, 2012 by Langford and Brown, independent chartered surveyors, on an open market value basis for mortgage loan, at $118,000,000. Management is of the opinion that the current open market value of buildings is in excess of the carrying amount at year end and there is no impairment. During the previous year, management re-assessed the expected useful lives of buildings which were being depreciated at 4% per annum. This resulted in a change in the depreciation rate to 2.5% per annum and depreciation adjustment of $2,500,279. Construction-in-progress represents construction costs and professional fees incurred to date on the building development project [note 27]. During the year, net borrowing costs amounting to $582,327 (2013 - $NIL), representing borrowing costs incurred on a loan obtained to finance the construction less interest income earned on unspent loan funds were capitalised.
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Institute of Chartered Accountants of Jamaica 51
Notes to the financial statements March 31, 2014 (cont’d)
Land and buildings were used as collateral to secure the loan received from Jamaica National Building Society [note 16]. At March 31, 2014, there were no contracts for capital expenditure not provided for in these financial statements.
2014 $
2013 $
Quoted equity at fair value: National Commercial Bank Jamaica Limited – 19,200 ordinary shares (2013 – 19,200) Historical cost of quoted investment
339,456
335,232
4,720
4,720
Fair value has been determined by reference to the quoted bid prices at the end of the reporting period. The method and valuation techniques used to measure fair value are unchanged compared to the previous year.
2014 $ Oxford shirts branded with ICAJ logo Medallions branded with ICAJ and ACCA logos Unbranded laptop backpacks Less: Provision for slow moving inventories Total
9,532 147,976 69,000 226,508 78,532 147,976
2013 $ 14,979 218,355 129,000 362,334 143,979 218,355
In 2014, a total of $492,435 (2013 - $765,745) of inventories was included as an expense in surplus or deficit. This includes an amount of $63,947 (2013 - $65,446), resulting from write-back of inventories.
2014 $ Members’ subscription Students’ subscription and graduate fees Professional associations Room rental Banquet and seminars Less: Allowance for impairment of amounts receivable Interest Deposits Other Prepayments Total
Page 51
248,335 3,705,145 125,587 475,072 2,053,200 6,607,339 (1,025,423) 5,581,916 183,088 353,434 502,724 6,621,162 739,568 7,360,730
2013 $ 101,992 3,452,674 27,089 109,245 175,136 3,866,136 (673,262) 3,192,874 121,712 353,434 576,832 4,244,852 528,905 4,773,757
ICAJ ANNUAL REPORT 2013/2014
Institute of Chartered Accountants of Jamaica 52
Notes to the financial statements March 31, 2014 Membership dues, other receivables and prepayments (cont’d) All membership dues and other receivables are short-term and the carrying value is considered a reasonable approximation of fair value. Membership dues and other receivables have been reviewed for indication of impairment. Certain receivables were found to be impaired and the appropriate provision has been made. The impaired receivables are due primarily from students who are likely to be suspended for overdue subscriptions. In addition, some unimpaired subscriptions and other receivables are past due at the end of the reporting period. The age of these past due but not impaired receivables is as follows: 2014 2013 $ $ Not more than three (3) months More than three (3) months but not more than six (6) months More than six (6) months Total
5,333,231
3,126,369
193,060 55,625 5,581,916
41,417 25,088 3,192,874
No collateral or debt enhancements have been requested as security for receivables that are either past due or impaired. The movement in the provision for impairment is as follows:
Balance at beginning of year Receivables recovered during the year Increase in provision during the year Receivables written off during the year Balance at end of year
2014 $
2013 $
673,262 (27,660) 2,650,909 (2,271,088) 1,025,423
354,679 (62,383) 1,966,649 (1,585,683) 673,262
Management considers the credit quality of membership dues and other receivables that are neither past due nor impaired to be good, as based on historical information and experience, management does not expect the counterparties to default on their obligations.
Interest rate % p.a. Corporate Bond BOJ variable rate CD Total
5.85 7.0
2014 $ 2,111,089 5,974,000 8,085,089
2013 $ 2,022,358 2,022,358
i.
Corporate Bond is invested with a licensed financial institution for a period of twelve (12) months.
ii.
BOJ variable rate CD is invested for a period of twelve (12) months, maturing on December 11, 2014. Interest is receivable quarterly, at the rate of 0.25% point above the benchmark rate for each quarterly interest payment.
The carrying value of short-term deposits is considered a reasonable approximation of fair value.
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Notes to the financial statements March 31, 2014 Interest Rate % p.a. Short-term deposits US$ Short-term deposits (US$17,689 (2013 - US$39,483)) Sterling savings account (£7,259 (2013 - £12,801)) US$ savings accounts (US$4,715 (2013 – US$9,736)) J$ current accounts Cash in hand
2014 $
4.5 - 6
10,183,353
9,268,303
1.4
1,927,971
3,866,782
0.1
1,302,228
1,895,165
0.2 - 0.35
513,892 4,393,282 924,163 19,244,889
953,533 5,391,900 41,960 21,417,643
Total
Included in cash and cash equivalents are amounts held for the following: 2014 Note $ Administered funds Capital assets fund ICAJ Welfare fund ICAJ/IDB Project fund
2013 $
12 13 14 15
Total
1,509,440 3,601,290 155,110 5,717,565 10,983,405
2013 $ 1,451,685 3,428,790 76,355 8,158,129 13,114,959
Short-term deposits at the end of the reporting period represent amounts invested with licensed financial institutions with maturity dates of three (3) months or less. The carrying value of cash and cash equivalents is considered a reasonable approximation of fair value.
Fair value reserve represents net unrealised gains on the revaluation of investment in equity instruments [note 5].
This represents funds appropriated from accumulated surplus to be utilised to fund the Institute’s building development project in accordance with Council’s approval. Council is authorised to exercise discretion and transfer an amount not exceeding 10% of surplus for the year to the capital assets reserve. The movement on the account during the year is as follows: 2014 $ Balance at beginning of year Transfer from accumulated surplus Balance at end of year
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31,495,715 122,000 31,617,715
2013 $ 31,353,856 141,859 31,495,715
ICAJ ANNUAL REPORT 2013/2014
Institute of Chartered Accountants of Jamaica 54
Notes to the financial statements March 31, 2014 Balance at Net interest Balance at April 1, for the year Receipts Disbursements March 31, 2013 2014 $ $ $ $ $ a. Education Fund
544,133
15,780
-
-
559,913
b. Company Law Reform Fund
298,373
8,652
-
-
307,025
c. Deloitte & Touche Awards Fund
22,090
640
-
-
22,730
d. Jasper Burnett Award Fund
70,058
2,032
-
-
72,090
e. Sushil Jain Award Fund
26,665
1,167
40,000
(12,853)
54,979
222,252
6,445
-
g. Joslyn E. Lowrie Award Fund
19,910
458
-
(8,214)
12,154
h. Library Grant
63,112
1,831
-
-
64,943
185,092 1,451,685
5,368 42,373
188,375 228,375
f. Raphael E. Gordon Award Fund
i. Outreach Projects Total
-
228,697
(191,926) (212,993)
186,909 1,509,440
The above funds represent donations received and other funds designated to finance specific activities. An amount of $42,373 (2013 - $32,842) was transferred from surplus or deficit for the year in respect of net interest earned on cash held for these funds, which are included with the Institute’s cash resources [note 9].
Capital Assets Fund represents direct contributions received from members and other donors to finance the Institute’s capital assets development project [note 27]. Previously, such contributions were recognised in capital assets reserve and treated as part of the Institute’s equity. It is now determined that the amounts should be recognised as a fund maintained for capital assets development project and has been reclassified to a specially designated fund accordingly. On completion of each phase of the capital assets project an amount equivalent to depreciation of the relevant assets will be transferred to surplus or deficit. The movement on the account during the reporting period is as follows: 2014 2013 $ $ Balance at beginning of year Contributions received during the year Net interest received during the year Transfer to surplus or deficit Balance at end of year
11,599,485 50,500 (936,267) 10,713,718
11,888,433 632,244 85,037 (1,006,229) 11,599,485
The above balance is represented by bank balances maintained by the Institute on behalf of the Fund [note 9].
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Notes to the financial statements March 31, 2014
ICAJ Welfare Fund (the Fund) was incorporated as a company limited by guarantee and not having share capital. The Fund commenced operation on May 11, 2010, for the purpose of promoting the welfare, including assisting with relief of poverty, distress and illness of all members (past and present) of the Institute of Chartered Accountants of Jamaica. By resolution of the Board of Directors, financial statements for the first period of operation will cover the period ended March 31, 2012. The Fund balance comprises donations received on its behalf and not yet paid over [note 9]. The movement on the account during the year is as follows: 2014 2013 $ $ Balance at beginning of year Add: Donation from the Institute during the year Donation from other donors during the year Less: Transfer to ICAJ Welfare Fund’s bank account Balance at end of year
76,355 75,000 3,755 155,110
836,374 75,000 31,355 (866,374) 76,355
By resolution of the members of ICAJ, approved at the Annual General Meeting on July 27, 2011, Council may exercise discretion and donate an amount, not exceeding 10% of each year’s surplus to the Fund. During the year, the Institute made a donation of $75,000 (2013 - $75,000) to the Fund. The above balance is represented by bank balances maintained by the Institute on behalf of the Fund [note 9].
In March 2003, the Institute signed an Agreement for a grant of US$665,000 from the InterAmerican Development Bank (IDB) to finance the Improving the Application of and Compliance with International Financial Reporting and Auditing Standards Project. Under the Agreement, the Institute was required to provide counterpart contributions totalling US$350,000 in cash and kind over the life of the Project. The Project was initially for a period of thirty-six (36) months and consisted of four (4) main components: a.
Conduct of an independent assessment of accounting and auditing in Jamaica in accordance with the Reports on the Observance of Standards and Codes (ROSC) program;
b.
Assistance in the Standards (IFRS);
c.
Building adequate mechanisms for the enforcement of IFRS and International Standards on Auditing (ISA); and
d.
Establishing systems and processes that sustain the implementation of IFRS and ISA.
implementation
of
International
Financial
Reporting
The Project activities commenced and the Institute began receiving Grant funds from IDB in April 2004. The Project was completed on November 24, 2008. In accordance with the grant agreement, funds remaining at the end of the project will be used by the Institute to support the sustainability of the project.
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ICAJ ANNUAL REPORT 2013/2014
Institute of Chartered Accountants of Jamaica 56
Notes to the financial statements March 31, 2014 i. Fund balance at the end of the reporting period comprises: 2014 $ Balance at beginning of year Interest earned during the year Project cost incurred during the year
8,816,879 198,322 (2,638,886) 6,376,315
Balance at end of year
2013 $ 11,184,103 230,660 (2,597,884) 8,816,879
ii. In February 2011, the Institute entered into a contractual arrangement with Northern Caribbean University for the provision of a Database Solution that will assist with the dissemination of IFRS, in continuance of the project. The agreed development cost is US$52,000; at the end of the reporting period a total of US$40,000 (2013 - US$30,000) was paid and recovered from ICAJ/IDB Project funds. iii. On December 2, 2013, the Institute entered into a contractual arrangement with International Financial Reporting Standards Foundation to provide members with non-exclusive right to access the eIFRS service. The contract is renewable annually and access is available through the Institute’s secure membership database. In the inaugural year of the contract, costs totalling J$1,778,386 were financed through the ICAJ/IDB Project Fund. The above balance is represented by bank balances maintained by the Institute on behalf of the funds [note 9].
a) Jamaica National Building Society (JNBS) b) Jamaica National Building Society (JNBS) c) JN Finance Limited Less: Current portion Balance at end of year
Interest rate % p.a.
2014 $
2013 $
15 13 2.85
7,358,475 10,000,000 321,754 17,680,229 (1,487,300) 16,192,929
8,175,854 432,959 8,608,813 (1,237,298) 7,371,515
a) In September 2009, the Institute received a loan of $10 Million, from Jamaica National Building Society (JNBS) to partially finance construction of the ground floor of the Institute’s building development project. The loan is collaterised by a first mortgage on the Institute’s property at 8 Ruthven Road, Kingston 10, and is repayable over a period of 120 months [note 4]. Repayment commenced October 2009. Instalments are due at the end of each month and interest is calculated on the reducing balance. At the end of the reporting period, the Institute was in full compliance with the terms of the financing agreement. b) In May 2013, the Institute accepted an offer of finance from Jamaica National Building Society (JNBS) for an additional loan of $15 million to continue the building development project. This additional loan is collaterised by a second mortgage on the Institute’s property at 8 Ruthven Road, Kingston 10, and is repayable over a period of 180 months [note 4]. In July 2013, $10 million was drawn down, with a deferral of the balance for a later date. Instalments are due at the end of each month and interest is calculated on the reducing balance. At the end of the reporting period, the Institute had paid up interest accrued on the $10 million, however, repayment of principal had not commenced.
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Institute of Chartered Accountants of Jamaica 57
Notes to the financial statements March 31, 2014 c) Since 2012, the Institute has been financing insurance premium under an agreement with JN Finance Limited for a period of nine (9) months. At the end of the reporting period, the Institute was in full compliance with the terms of the financing agreement.
Deferred income tax is calculated using a tax rate of 25%. The movement in the deferred income tax balance is as follows:
Liability at beginning of year Deferred tax charge [note 24b] Liability at end of year
2014 $
2013 $
30,428 15,344 45,772
21,211 9,217 30,428
Deferred income tax balance arose on interest receivable.
Students’ subscriptions are due and payable on January 1 of each year. Deferred income relates to the portion of such subscriptions to be recognised as income in the subsequent financial year.
Subscriptions to professional associations (US$19,845 (2013 – US$19,092)) Prepaid members’ subscriptions Payroll liabilities Audit fees General Consumption Tax (GCT) Payables Accruals Due to contractor – R&S Construction Retention – construction contract Other Total
2014 $
2013 $
2,120,023 624,780 1,154,006 377,000 262,210 613,110 277,017 547,703 485,882 1,616,464 8,078,195
1,887,991 559,039 793,235 419,750 379,871 385,797 1,631,498 6,057,181
All amounts are short-term and the carrying value is considered a reasonable approximation of fair value.
Seminars Graduations Awards Banquet Room rental Total
Page 57
Gross income
Expenses
$
$
15,622,825 540,848 3,544,119 3,577,375 23,285,167
6,571,449 754,511 2,638,379 2,290,203 12,254,542
Surplus/ (deficit) 2014 $ 9,051,376 (213,663) 905,740 1,287,172 11,030,625
Surplus/ (deficit) 2013 $ 5,737,033 (352,578) 336,578 196,853 5,917,886
ICAJ ANNUAL REPORT 2013/2014
Institute of Chartered Accountants of Jamaica 58
Notes to the financial statements March 31, 2014 Finance income may be analysed as follows:
Interest income from cash and cash equivalents Interest income from short-term deposits Total interest income from financial assets not at fair value through surplus or deficit Less: Interest earned on unspent mortgage loan Dividend income from investment in equity instruments Finance income
2014 $
2013 $
668,245 451,534
774,397 74,226
1,119,779 (393,551) 726,228
848,623 848,623
13,824 740,052
24,000 872,623
2014 $
2013 $
Finance cost comprises:
Interest expense Less: Borrowing cost on mortgage loan capitalised Finance cost
2,209,796 (975,878) 1,233,918
1,305,850 1,305,850
2014 $
2013 $
Total Administrative and other operating expenses:
Employee benefits (note 25) Depreciation - current year (note 4) - adjustment (note 4) Advertising and public relations Legal and professional fees Property taxes Student affairs and awards Travelling and entertainment Subscriptions to professional associations Communication and technology Utilities Cost of sales – handbooks, bags and shirts Newsletters and annual report Other expenses Total
20,609,652 2,289,803 2,007,269 102,600 216,500 759,495 3,065,767 3,367,968 940,211 2,760,832 492,435 644,006 4,727,447 41,983,985
Surplus for the year before taxation is stated after charging/(crediting): 2014 $ Key management compensation: Executive remuneration (note 25) Council members’ remuneration (note 28) Depreciation - current year (note 4) - adjustment (note 4) Auditor’s remuneration
5,429,645 NIL 2,289,803 377,000
18,355,232 2,385,769 (2,500,279) 2,073,323 24,000 82,000 732,647 2,021,090 2,895,838 961,631 2,538,930 765,745 693,500 4,603,045 35,632,471
2013 $ 3,456,496 NIL 2,385,769 (2,500,279) 362,000
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Institute of Chartered Accountants of Jamaica 59
Notes to the financial statements March 31, 2014 a
The Commissioner General of Tax Administration Jamaica has granted the Institute exemption from income tax under the mutuality principle in respect of income derived from transactions with members and students. The Institute is subject to income tax on investment income and on surplus arising from services to the extent that they relate to transactions with non-members.
b
Income tax has been computed at the rate of 25% on non-exempt income, adjusted for tax purposes, and comprises: 2014 2013 $ $ Deferred tax charge (note 17)
15,344 15,344
Total c
Subject to the agreement of the Commissioner General of Tax Administration Jamaica, losses of approximately $2.6 million (2013 - $1.7 million) are available to be set off against future taxable profits. These losses, if not utilised, will be carried forward indefinitely. However, effective January 1, 2014 losses utilised in any one year is restricted to fifty percent (50%) of the chargeable income.
d
Reconciliation of theoretical tax charge to actual tax charge:
Surplus for the year before taxation Income tax thereon at 25% Income tax consequence of the following: Expenses not deductible for tax purposes Income not chargeable to tax Dividend income not chargeable to tax Foreign exchange gain not chargeable to tax Expenses not claimed against accounting surplus Reduction in effective tax rate Income tax expense
Salaries and related expenses Pension (note 26) Health insurance Training and other benefits Total (note 22)
2014 $
2013 $
2,416,590
1,776,349
604,148
444,087
10,032,945 (10,278,622) (248,987) (94,140) 15,344
Salaries and related expenses Pension Medical and other benefits Total
9,097,683 (9,298,145) (1,824) (138,771) (88,510) (5,303) 9,217
2014 $
2013 $
18,955,075 616,528 796,600 241,449 20,609,652
16,360,975 498,882 830,911 664,464 18,355,232
Included in employee benefits is executive remuneration as follows: 2014 $
Page 59
9,217 9,217
4,516,265 142,519 770,861 5,429,645
2013 $ 2,802,248 654,248 3,456,496
The number of employees at year end was twelve (12) (2013 –REPORT thirteen (13)). ICAJ ANNUAL 2013/2014
Institute of Chartered Accountants of Jamaica 60
Notes to the financial statements March 31, 2014 The Institute operates a defined-contribution pension plan for its employees, which is administered by a life assurance organisation. The plan was established in financial year ended March 31, 1999 and is funded by contributions from employees and employer. The Institute contributes at a rate of five percent (5%) of pensionable salaries, while employees contribute at a mandatory rate of five percent (5%) but may make voluntary contributions not exceeding an additional five percent (5%). Pension benefits are based on contributions plus accumulated interest/ accordingly, the Institute’s liability is restricted to its contributions. The Institute’s contribution to the plan during the year amounted to $616,528 (2013 $498,882) [note 25].
Capital expenditure, originally estimated at approximately $55 million, in respect of the building development project (note 4) was previously approved by the members. The project was further broken down into ground and upper levels. At the end of the reporting period, actual expenditure amounted to $55.8 million. In 2012, construction on the first phase (ground level) of the project was completed and the related costs of $36.5 million were capitalised. The balance of $19.3 million in construction-in-progress represents cost incurred to date on the upper levels. At end of the reporting period, the estimated costs to complete the upper floor was $5.8 million. There are no capital commitments at the end of the reporting period. Cost incurred in completing the upper levels will be capitalised on completion.
The members of the Council are volunteers. No member of the Council has received payment in respect of services to the Institute, other than by way of reimbursement of incidental expenses incurred in providing such services. The members of Council and the Executive Director are referred to as “key management personnel” [note 23].
The Institute’s activities expose it to a variety of financial risks in respect of its financial instruments: market risk (currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The Institute seeks to manage these risks by close monitoring of each class of its financial instruments, as follows: a
Market risk i
Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Institute is exposed to currency risk due to fluctuations in exchange rates on transactions and balances that are denominated in currencies other than the Jamaica dollar. Foreign currency bank accounts are maintained from foreign currency receipts, at levels which will meet foreign currency obligations. At the end of the reporting period, the Institute had net foreign currency assets of £7,259 (2013 - £12,801) and US$4,361 (2013 – US$30,304), which were subject to foreign exchange rate changes as follows:
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Institute of Chartered Accountants of Jamaica 61
Notes to the financial statements March 31, 2014 .
Risk management objectives and policies (cont’d) a Market risk (cont’d) i
Currency risk (cont’d) Concentrations of currency risk
Financial assets - Other receivables - Cash and bank balances Financial liabilities - Payables and accruals Net foreign currency assets
2014 US$
2014 £
2013 US$
2013 £
1,802 22,404 24,206
7,259 7,259
177 49,219 49,396
12,801 12,801
(19,845) 4,361
7,259
(19,092) 30,304
12,801
The above assets/(liabilities) are receivable/(payable) in United States dollars (US$) and Pound Sterling (£). Exchange rates applicable at the end of the reporting period are J$108.99 to US$1 (2013 – J$97.93 to US$1) and J$179.38 to £1 (2013 – J$148.04 to £1). Foreign currency sensitivity Due to the nature of the Institute’s operations and the very short-term nature of balances denominated in currencies other than the Jamaican dollar, there is no material impact on the results of the Institute’s operations as a result of changes in exchange rates. ii
Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Institute’s cash and cash equivalents are subject to interest rate risk. However, the Institute attempts to manage this risk by monitoring its interest-bearing instruments closely and procuring the most advantageous rates under contracts with interest rates that are fixed for the life of the contract, where possible. The Institute invests excess cash in short-term deposits and maintains interestearning bank accounts with licensed financial institutions. Short-term deposits are invested for periods of three (3) to twelve (12) months at fixed interest rates and are not affected by fluctuations in market interest rates up to the dates of maturity. Interest rates on interest-earning bank accounts are not fixed but are subject to fluctuations based on prevailing market rates [note 9]. Interest rate sensitivity As interest rates on the Institute’s short-term deposits and long-term loans are fixed up to maturity and interest earned from the Institute’s interest-earning bank accounts is immaterial, there would be no material impact on the results of the Institute’s operations as a result of fluctuations in interest rates.
iii Other price risk Other price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Institute’s financial instruments are substantially independent of changes in market prices as they are short term in nature.
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ICAJ ANNUAL REPORT 2013/2014
Institute of Chartered Accountants of Jamaica 62
Notes to the financial statements March 31, 2014 .
Risk management objectives and policies (cont’d) b Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Institute faces credit risk in respect of its receivables, cash at bank and short-term deposits held with financial institutions. It is the Institute’s policy to deal only with credit worthy financial institutions and other counterparties, to control credit risk. Credit risk for receivables is controlled by activities under the provisions of the ByeLaws of the Institute, where necessary. Credit risk for cash at bank and short-term deposits is managed by maintaining these balances with licensed financial institutions considered to be stable and creditworthy. Savings and current accounts held with commercial banks are insured under the Jamaica Deposit Insurance Scheme (JDIS). However, for amounts held with commercial banks at the end of the reporting period, a total of $2,400,000 (2013 - $2,400,000) is insured under the JDIS. The Institute is not exposed to any significant credit risk to any single counterparty or group of counterparties. The majority of the Institute’s counterparties are members or member firms which are not considered to be a credit risk to the Institute. The Institute does not require collateral or other credit enhancements in respect of its receivables as it considers its debtors creditworthy and do not expect them to default on their obligations. c
Liquidity risk Liquidity risk is the risk that the Institute will encounter difficulty in raising funds to meet its commitments associated with financial instruments. The Institute manages its liquidity risk by maintaining an appropriate level of resources in liquid or near liquid form. The Institute maintains cash and short-term deposits for up to 90-day periods to meet its liquidity requirements.
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Institute of Chartered Accountants of Jamaica 63
Notes to the financial statements March 31, 2014 .
Risk management objectives and policies (cont’d) c Liquidity risk (cont’d) The Institute’s financial liabilities comprise long-term loans and payables. These amounts are due as follows: Current Within 3 Months 4 to 12 Months 2014 2013 2014 2013 $ $ $ $ Long-term loans – current portion Payables and accruals Total
597,479 7,592,313 8,189,792
514,622 6,057,181 6,571,803
889,821 485,882 1,375,703
722,676 722,676
Non-Current 2 to 5 Years Over 5 Years 2014 2013 2014 2013 $ $ $ $ Long-term loans Total
6,791,805 6,791,805
4,736,117 4,736,117
9,401,124 9,401,124
2,635,398 2,365,398
The Institute considers its capital to be its accumulated surplus and reserves. The Council’s financial objective is to generate a targeted operating surplus, in order to strengthen and provide for the future continuity of the Institute, taking into account the various competitive risks. The Council regularly reviews the financial position of the Institute at meetings. The Institute is not subject to any externally imposed capital requirements.
Donations are received for the purposes of funding the construction and completion of the Institute’s building development project and acquisition of other capital assets, including outfitting the resource centre. These are credited to capital assets fund and released to surplus or deficit over the economic life of the respective assets, in line with the depreciation policy. Previously, such donations were included in capital assets reserve and treated as part of the Institute’s equity. It is now determined that the amounts should be included in a specially designated fund and accordingly, the accumulated donations and the net interest received arising from the investment of the funds have been re-classified from equity to the capital assets fund. On completion of each phase of the capital assets project, an amount equivalent to depreciation of the relevant assets will be released to surplus or deficit. The financial statements for the years ended March 31, 2013 and 2012 (the immediately preceding comparative periods) have been restated to reflect the impact of the reclassification. The financial effects of the re-classification are set out as follows:
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ICAJ ANNUAL REPORT 2013/2014
Institute of Chartered Accountants of Jamaica 64
Notes to the financial statements March 31, 2014 a
’d) Impact of re-classification of capital contributions on statement of financial position as at March 31: As previously Effect of rereported classification 2013 2013
$ Assets Non-current assets Property, plant and equipment Investment in equity instruments
$
Restated
Effect of reclassification 2012
Restated
2013
As previously reported 2012
$
$
$
$
2012
59,213,363
-
59,213,363 57,083,005
-
57,083,005
335,232 59,548,595
-
335,232 502,080 59,548,595 57,585,085
-
502,080 57,585,085
218,355
-
218,355
51,379
-
51,379
4,773,757 2,256,204 2,022,358
-
4,773,757 2,256,204 2,022,358
7,330,459 3,835,053 -
-
7,330,459 3,835,053 -
Total assets
21,417,643 30,688,317 90,236,912
-
21,417,643 22,134,692 30,688,317 33,351,583 90,236,912 90,936,668
-
22,134,692 33,351,583 90,936,668
Reserves Accumulated surplus Fair value reserve Capital assets reserve Total reserves
15,137,234 330,512 43,095,200 58,562,946
(11,599,485) (11,599,485)
15,137,234 330,512 31,495,715 46,963,461
13,860,500 497,360 43,242,289 57,600,149
(11,888,433) (11,888,433)
13,860,500 497,360 31,353,856 45,711,716
Liabilities Funds Administered funds Capital Assets Fund ICAJ Welfare Fund ICAJ/IDB Project Fund Total funds
1,451,685 76,355 8,816,879 10,344,919
11,599,485 11,599,485
1,451,685 11,599,485 76,355 8,816,879 21,944,404
1,326,435 836,374 11,184,103 13,346,912
11,888,433 11,888,433
1,326,435 11,888,433 836,374 11,184,103 25,235,345
7,371,515 30,428 7,401,943
-
7,371,515 30,428 7,401,943
8,186,911 21,211 8,208,122
-
8,186,911 21,211 8,208,122
6,632,625 6,057,181
-
6,632,625 6,057,181
6,906,900 4,182,729
-
6,906,900 4,182,729
1,237,298 13,927,104 31,673,966
-
1,237,298 691,856 13,927,104 11,781,485 43,273,451 33,336,519
-
691,856 11,781,485 45,224,952
90,236,912
-
90,236,912 90,936,668
-
90,936,668
Current assets Inventories Membership dues, other receivables and prepayments Taxation recoverable Short-term deposits Cash and cash equivalents
Non-current liabilities Long-term loans Deferred tax liability Current liabilities Deferred income Payables and accruals Current portion of longterm loans Total liabilities Total reserves and liabilities
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Institute of Chartered Accountants of Jamaica 65
Notes to the financial statements March 31, 2014 b
ions (cont’d) Impact of re-classification of capital contributions on statement of comprehensive income for year ended March 31, 2013 As previously Effect of reRestated stated classification 2013 2013 2013 $ $ $
Revenue Members’ subscription and admission fees Students’ subscription and registration fees Surplus from self-financing activities Finance income Subvention for students Advertising and sponsorship Sale of handbooks, bags and shirts Miscellaneous
17,620,736 10,814,160 5,917,886 872,623 2,841,070 82,976 902,513 149,903
Transfer from Capital Assets Fund Gain on foreign exchange
39,201,867 555,084
1,006,229 -
39,201,867 1,006,229 555,084
39,756,951
1,006,229
40,763,180
Administrative and other operating expenses Donation – ICAJ Welfare Fund Bad debts specific charges Bad debts recovered Loss on disposal of property, plant and equipment Finance costs Surplus for the year before taxation and transfer Income tax expense Surplus for the year before transfer Interest transferred to designated funds Surplus for the year Other comprehensive income: Items that maybe reclassified subsequently to surplus or deficit: Increase in capital contributions Loss on revaluation of equity instruments Total comprehensive income for the year
Page 65
-
17,620,736 10,814,160 5,917,886 872,623 2,841,070 82,976 902,513 149,903
(35,632,471)
-
(35,632,471)
(75,000)
-
(75,000)
(1,966,649)
-
(1,966,649)
62,383
-
62,383
(69,244)
-
(69,244)
(1,305,850)
-
(1,305,850)
770,120
1,006,229
(9,217) 760,903 (348,539) 412,364
717,281 (166,848) 962,797
1,776,349 (9,217)
1,006,229 1,006,229
(717,281) 288,948
1,767,132 (348,539) 1,418,593
(166,848) 1,251,745
ICAJ ANNUAL REPORT 2013/2014
66
Additional information – Auditor’s report
To the Council of Institute of Chartered Accountants of Jamaica On Additional Information The additional information presented on the following pages has been taken from the accounting records of the Institute of Chartered Accountants of Jamaica and has been subjected to the tests and other auditing procedures applied in my examination of its financial statements for the year ended March 31, 2014. In my opinion, the said information is fairly presented in all material respects in relation to the financial statements taken as a whole although it is not necessary for a fair presentation of the state of the Institute’s affairs as at March 31, 2014 or of the results of its operations or its cash flows for the year then ended.
Chartered Accountant
Kingston, Jamaica July 8, 2014
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Institute of Chartered Accountants of Jamaica 67
Additional information Supporting schedule of expenses Year ended March 31, 2014 2014 $ Administrative and other operating expenses Meeting expenses Salaries and other staff costs Water Property taxes Insurance Legal and other professional fees Audit fees - current year - prior year General and office expenses Travelling and entertainment Advertising and public relations Subscriptions to professional associations Repairs and maintenance Depreciation: building - current year - adjustment Depreciation: computer, furniture and equipment Printing, stationery and computer supplies Communication and technology Electricity Postage and delivery Cleaning and sanitation Security services Library services Student affairs and awards Newsletters and annual report Cost of sales – handbooks, bags and shirts Bank charges
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694,176 20,609,652 316,602 216,500 905,226 102,600 377,000 (28,875) 563,491 3,065,767 2,007,269 3,367,968 459,346 1,260,228 1,029,575 254,885 940,211 2,444,230 92,695 398,500 211,728 12,855 759,495 644,006 492,435 786,420 41,983,985
2013 $ 409,835 18,355,232 313,810 82,000 638,767 24,000 390,875 (1,050) 482,978 2,021,090 2,073,323 2,895,838 773,075 1,240,497 (2,500,279) 1,145,272 437,375 961,631 2,225,120 173,466 275,986 186,066 37,399 732,647 693,500 765,745 798,273 35,632,471
ICAJ ANNUAL REPORT 2013/2014
Institute of Chartered Accountants of Jamaica 68
Additional information Detailed statement of surplus/(deficit) from selffinancing activities Year ended March 31, 2014
Seminar Graduations $
$
Awards Banquet
Room Rental
$
$
Total 2014 $
Total 2013 $
Income Fees – Members 10,259,302 Non-members 4,676,828 Room rental Sponsorship 686,695 Graduates’ contribution ACCA contribution
157,597 25,751 97,500 260,000
1,675,536 693,562 1,175,021 -
12,092,435 11,096,648 5,370,390 3,713,437 3,577,375 3,577,375 1,469,063 1,887,467 40,676 97,500 91,014 260,000 400,000
Total income
15,622,825
540,848
3,544,119
3,577,375 23,285,167 16,810,838
473,468 -
203,100 10,000
1,102,797 150,000
229,913 2,356,540 172,161 1,257,047
388,043 22,910 16,667
1,328,466 -
1,910,909 -
17,083 -
37,316 -
133,411 38,000 6,571,449
96,708 754,511
19,800 2,638,379
9,051,376
(213,663)
Less: Expenses Advertising and public relations Entertainment Share of profit – ACCA/ICAC Catering charges Printing and stationery Presenters’ expenses Parking, equipment and facilities rental Electricity Security services Staff travelling and subsistence Transportation Other costs Total expenses Surplus/(deficit) for year (note 20)
905,740
1,779,365 160,000
1,636,974 399,000
18,898 -
229,913 4,073,049 213,969 1,273,714
361,087 4,007,066 217,068 749,677
297,790 938,838 373,856
2,263,098 938,838 373,856
2,387,141 350,368 225,105
-
608,651 310,112 455,440 38,000 22,000 205,381 302,089 227,354 2,290,203 12,254,542 10,892,952 1,287,172 11,030,625
5,917,886
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ICAJ ANNUAL REPORT 2013/2014