EAC Annual Report 2011

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Estate Agents Co-operative Limited andControlled Entity

ABN 52 079 055 637

Financial Statements

For the Year Ended 30 June 2011

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Estate Agents Co-operative Limited and Controlled EntityABN 52 079 055 637

Contents


Page

Financial Statements

Notice of Annual General Meeting 1

Chairman's Report 2011 2

Directors' Report 4

Auditors Independence Declaration under Section 307C of the Corporations Act 2001 7

Statement of Comprehensive Income 8

Statement of Financial Position 9

Statement of Changes in Equity 10

Statement of Cash Flows 12

Notes to the Financial Statements 13

Directors' Declaration 39

Independent Auditor's Report 40

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Estate Agents Co-operative Limited and controlled entityABN 52 079 055 637

Chairman's Report 2011

I am pleased to present the 2011 annual report and report another profitable trading year for the Co-operative.

The trading profit is even more gratifying when one considers that it has been achieved under difficult tradingconditions. Continued uncertainty on world financial markets, uncertainty regarding interest rates, naturaldisasters in the States north as well as subdued building and finance approvals did little to assist the real estatemarket in New South Wales.

Despite all these impediments in the financial year 2010 – 2011 EAC advanced its stated objectives ofcontinuing the profitability of the Co-operative while expanding and enhancing its portfolio of goods and servicesfor members in particular and for the benefit of the real estate industry in general.

This year’s trading profit builds on last year’s result and I can confidently say is as a result of initiatives put inplace over the last two to three years by the EAC Board and Management, including significant restructuring andinvestment in existing as well as new goods and services.

During the last financial year we saw the following developments:

• The decision to fully integrate the realestateworld.com.au (REW) operations into our existing EACinfrastructure. Originally set up as a joint venture initiative with the Real Estate Institute of NSW(REINSW), REW became a wholly owned subsidiary of the Co-operative following the decision ofREINSW to withdraw from this relationship. The integration of REW will further streamline EAC’soperations and achieve significant savings by removing the administrative costs associated withmaintaining it as a separate company.

It is pleasing to note that there are now 1,040 offices subscribing to and placing their listings onrealestateworld.com.au.

• The upgrade of EAC’s Red Square product to a fully web based version with mapping and aComparative Market Analysis (CMA) Report for use with Current Market Information. Red Square Webwill now provide the platform for the delivery of listings, property information and mapping servicesmoving forward. Currently work is being done on a totally new Add List and Red Square Mobile which willprovide a version of Red Square designed specifically for use on today’s smart phones and mobileservices.

• The decision to separate Web Services from the Membership Services division and become its owndivision. This step has been taken as a result of the growth being experienced in membership and theimportance of web and social media services moving forward. As part of this change EAC hasintroduced several new services including new design templates and full email hosting services.

• The implementation of a Disaster Recovery strategy. Recognising the critical need for members to

maintain communication with EAC for all their data requirements it was decided to move EAC’s clientservices infrastructure into a Managed Data Centre operated by a national IT service company, BrennanIT. Brennan now hosts EAC’s servers relating to its member services at its Data Centre in Sydney’s CBDwith replication in its Brisbane Data Centre.

• The implementation of an upgrade to EAC’s Customer Relationship (CRM) software. This upgrade wasundertaken to ensure that EAC’s goal of maintaining appropriate interaction with all itsmembers/customers was achieved.

• The further development of EAC’s Agency Practice Support service. The benefits to members from theintroduction of this service could not have been better exemplified than the work done by it following theintroduction of the new Residential Tenancies legislation. EAC ran a series of informative seminars toensure its members were conversant with the new requirements and their ramifications. This division isalso closely monitoring the proposed introduction of the National Occupational Licensing system whichwould see the introduction of a national real estate licence. Should the proposed national scheme

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Estate Agents Co-operative Limited and controlled entity

ABN 52 079 055 637

Directors' Report


Your directors present their report on the company and its controlled entity, for the financial year ended 30 June2011.

Directors

The names of directors in office at any time during, or since the end of the year are:

D R Whittaker (Chairman)

P A Carmont (Vice Chairman)

W Herrmann

J F Knight

J P Ronis

J R Russell

J F Sercombe

Directors have been in office since the start of the financial year to the date of this report unless otherwisestated.

Principal activities

The principal activities of the Group during the financial year were:

- Information Technology Services covering:

• listing management and aggregation;

• property sales information and mapping;

• property sales reports and statistics;

• website design and hosting.

- realestateworld.com.au website;

- Production of several "Realestateworld.com.au" real estate Publications;

- Real estate forms and stationary;

- Agency practice support services.

No significant change in the nature of these activities occurred during the year.

Review of Operations

The consolidated profit of the Group for the financial year after providing for income tax amounted to$ 658,695 (2010: $ 225,796).

A review of the operations of the Group during the financial year and the results of those operations showshow that it remains in a position to meet the long term objectives previously set by the Board (also refer toChairman’s Report).

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Estate Agents Co-operative Limited and controlled entity

ABN 52 079 055 637

Directors' Report


Following significant restructuring the Directors have continued reviewing expenditure and this, combinedwith expected increased levels of income has resulted in the preparation of a budget which anticipates anincreased operating profit for the financial year 2011/2012.

Dividends

No dividends were paid or declared since the start of the financial year. No recommendation for payment ofdividends has been made.

Significant Changes in State of Affairs

The parent company wound up the activities in its wholly owned subsidiary, realestateworld.com.au PtyLimited at 30 June 2011 but continued to provide the services as a business unit within the parent company.

Events Subsequent to the End of the Reporting Period

The Co-operative sold its property at 274 Miller Road, Villawood NSW 2163 on 9th November 2011 for$1.85m.

Except for the above, no other matters or circumstances have arisen since the end of the financial yearwhich significantly affected or could significantly affect the operations of the Group, the results of thoseoperations or the state of affairs of the Group in future financial years.

Likely Developments and Expected Results of Operations

The likely developments in the operations of the Co-operative and the expected results of those operationsin future financial years are as follows:

• The Board continues to look at ways to develop its suite of goods and services offered tomeet the needs of its members within the real estate industry;

• The Board’s decision to move to new premises as the current premises in Villawood are nolonger suitable to the Co-operative’s operations;

• The Board continues to look towards the area of information technology to deliver servicesthat will benefit members and reduce costs. It looks to working with members to developservices and systems which allow a greater control by members of their business overheadsand at the same time assisting members in meeting their legislative complianceresponsibilities;

• The Board continues to develop the Agency Practice Support Services to support the needsof its members.

Environmental Regulation

The Group's operations are not regulated by any significant environmental regulations under a law of theCommonwealth or of a state or territory of Australia.

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Statement of Comprehensive Income


Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

Revenue 2 7,690,727 8,129,341 7,624,966 8,095,912

Other income 2 524,688 94,482 523,562 94,482

Raw materials and consumablesused (190,651) (386,556) (190,651) (386,556)

Employee benefits expense (3,292,095) (3,166,494) (3,289,201) (3,164,784)

Depreciation and amortisation (227,371) (246,236) (227,371) (246,236)

Administrative expenses (3,976,673) (4,142,209) (4,046,543) (4,082,815)

Finance costs (44,995) (56,532) (44,995) (56,532)

Profit before income tax 483,630 225,796 349,767 253,471

Income tax expense 4 175,065 - 175,935 -

Profit for the year 658,695 225,796 525,702 253,471

Other comprehensiveincome/(loss):

Net loss on revaluation of land andbuilding (370,000) (50,000) (370,000) (50,000)

Reversal of previous revaluation ondisposal of land and building (299,049) - (299,049) -

Income tax relating to components ofother comprehensive income 200,715 - 200,715 -

Other comprehensiveincome/(loss) for the year, net oftax (468,334) (50,000) (468,334) (50,000)

Total comprehensive income forthe year 190,361 175,796 57,368 203,471

Total comprehensive incomeattributable to:

Members of the parent entity 190,361 175,796 57,368 203,471

The accompanying notes form part of these financial statements8

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Statement of Financial Position

As At 30 June 2011

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 6 282,129 76,048 266,276 58,822

Trade and other receivables 7 1,296,550 1,175,235 1,441,617 1,430,921

Inventories 8 51,746 57,736 51,746 57,736

Other current assets 9 48,512 40,309 46,627 40,309

TOTAL CURRENT ASSETS 1,678,937 1,349,328 1,806,266 1,587,788

NON-CURRENT ASSETS

Financial assets 10 - - - 31,053

Property, plant and equipment 12 1,780,260 2,497,244 1,780,260 2,497,244

Deferred tax 15 386,447 - 378,857 -

TOTAL NON-CURRENT ASSETS 2,166,707 2,497,244 2,159,117 2,528,297

TOTAL ASSETS 3,845,644 3,846,572 3,965,383 4,116,085

LIABILITIES

CURRENT LIABILITIES

Trade and other payables 13 1,652,840 1,531,987 1,620,123 1,507,591

Borrowings 14 60,778 430,467 60,778 430,467

Provisions 16 224,990 276,039 224,990 276,039

TOTAL CURRENT LIABILITIES 1,938,608 2,238,493 1,905,891 2,214,097

NON-CURRENT LIABILITIES

Borrowings 14 130,781 46,374 130,781 46,374

Deferred tax 15 47,895 - 47,895 -

Long-term provisions 16 46,672 33,151 46,672 33,151

TOTAL NON-CURRENT LIABILITIES 225,348 79,525 225,348 79,525

TOTAL LIABILITIES 2,163,956 2,318,018 2,131,239 2,293,622

NET ASSETS 1,681,688 1,528,554 1,834,144 1,822,463

EQUITY

Reserves 17 1,482,229 2,199,172 1,482,229 2,199,172

Retained earnings/(Accumulatedlosses) 199,459 (670,616) 351,915 (376,708)

TOTAL EQUITY 1,681,688 1,528,556 1,834,144 1,822,464


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Statement of Changes in Equity


Parent

2011

Note

RetainedEarnings

(AccumulatedLosses)

$

CapitalProfits

Reserve

$

AssetRevaluation

Surplus

$

ShareRedemption

Reserve

$

Total

$

Balance at 1 July 2010 (173,788) 1,153,637 580,086 216,840 1,776,775

Comprehensive Income

Profit attributable to membersof the parent entity 525,702 - - - 525,702

Other comprehensive incomefor the year - - (468,334) - (468,334)

Total comprehensive incomefor the year 525,702 - (468,334) - 57,368

Balance at 30 June 2011 351,915 1,153,637 111,752 216,840 1,834,144

2010

Balance at 1 July 2009 (630,179) 1,153,637 878,695 216,840 1,618,993

Retrospective adjustment uponchange in accounting policy 20 202,921 - (248,609) - (45,688)

Comprehensive income

Profit attributable to membersof the parent entity 253,470 - - - 253,470



Balance at 30 June 2010 (173,788) 1,153,637 580,086 216,840 1,776,775


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Statement of Changes in Equity


Consolidated

2011

Note

RetainedEarnings

(AccumulatedLosses)

$

CapitalProfits

Reserve

$

AssetRevaluation

Surplus

$

ShareRedemption

Reserve

$

Total

$

Balance at 1 July 2010 (459,231) 1,153,636 580,087 216,840 1,491,332

Comprehensive income

Profit attributable to members 658,695 - - - 658,695



Balance at 30 June 2011 199,459 1,153,636 111,753 216,840 1,681,688

2010

Balance at 1 July 2009 (896,408) 1,153,636 878,696 216,840 1,352,764

Retrospective adjustment uponchange in accounting policy 20 211,381 - (248,609) - (37,228)

Comprehensive Income

Profit attributable to members 225,796 - - - 225,796



Balance at 30 June 2010 (459,231) 1,153,636 580,087 216,840 1,491,332


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Statement of Cash Flows


Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

CASH FLOWS FROMOPERATING ACTIVITIES

Receipts from trading activitiesand subscriptions 8,580,551 8,240,083 8,611,621 8,133,044

Payments to suppliers andemployees (8,215,946) (7,837,899) (8,245,643) (7,728,262)

Interest received 751 845 751 845

Finance costs (44,995) (56,531) (44,995) (56,532)

Net cash provided by (used in)operating activities 320,361 346,498 321,734 349,095

CASH FLOWS FROMINVESTING ACTIVITIES

Proceeds from sale of plant andequipment 508,773 5,000 508,773 5,000

Payments for sale of property,plant and equipment (337,771) (36,843) (337,771) (36,843)

Net cash provided by (used in)investing activities 171,002 (31,843) 171,002 (31,843)

CASH FLOWS FROMFINANCING ACTIVITIES

Proceeds from issue of shares 1,240 1,780 1,240 1,780

Proceeds from borrowings 97,981 - 97,981 -

Repayment of borrowings - (42,395) - (42,395)

Net cash provided by (used in)financing activities 99,221 (40,615) 99,221 (40,615)

Net increase (decrease) in cashand cash equivalents held 590,584 274,040 591,957 276,637

Cash and cash equivalents atbeginning of financial year (308,455) (582,495) (325,681) (602,318)

Cash and cash equivalents at endof financial year 6 282,129 (308,455) 266,276 (325,681)


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Notes to the Financial Statements


These consolidated financial statements and notes represent those of Estate Agents Co-operative Limitedand controlled entity and controlled entity (the Group).

1 Summary of Significant Accounting Policies

Basis of preparation

Estate Agents Co-operative Limited and controlled entity has elected to early adopt the pronouncementsAASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010 -2: Amendments toAustralian Accounting Standards arising from Reduced Disclosure Requirements for the annual reportingperiod beginning 1 July 2010.

The financial statements are general purpose financial statements that have been prepared in accordancewith Australian Accounting Standards - Reduced Disclosure Requirements of the Australian AccountingStandards Board, the Corporations Act 2001, Co-operatives Act 1992 and Co-operatives Regulation 2005.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result infinancial statements containing relevant and reliable information about transactions, events and conditions.Material accounting policies adopted in the preparation of the financial statements are presented below andhave been consistently applied unless otherwise stated.

The financial statements have been prepared on an accruals basis and are based on historical costsmodified, where applicable, by the measurement at fair value of selected non-current assets, financialassets and financial liabilities.

Accounting Policies

(a) Principles of consolidation

The consolidated financial statements incorporate the assets, liabilities and results of entitiescontrolled by Estate Agents Co-operative Limited at reporting date. A controlled entity is any entityover which Estate Agents Co-operative Limited has the power to govern the financial and operatingpolicies so as to obtain benefits from its activities. Control will generally exist when the parent owns,directly or indirectly through subsidiaries, more than half of the voting power of an entity. In assessingthe power to govern, the existence and effect of holdings of actual and potential voting rights are alsoconsidered.

Where controlled entities have entered or left the Group during the year, the financial performance ofthose entities are included only for the period that they were controlled. A list of controlled entities iscontained in Note 11 to the financial statements.

In preparing the consolidated financial statements, all inter-group balances and transactions betweenentities in the Group have been eliminated on consolidation. Accounting policies of subsidiaries havebeen changed where necessary to ensure consistency with those adopted by the parent entity.

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1 Summary of Significant Accounting Policies continued

(b) Income tax

The income tax expense (revenue) for the year comprises current income tax expense (income) anddeferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable incomecalculated using applicable income tax rates enacted, or substantially enacted, as at the end of thereporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to bepaid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liabilitybalances during the year as well as unused tax losses.

Current and deferred income tax expense (income) is charged or credited outside profit or loss whenthe tax relates to items that are recognised outside profit or loss.

Deferred tax assets and liabilities are ascertained based on temporary differences arising betweenthe tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferredtax assets also result where amounts have been fully expensed but future tax deductions areavailable. No deferred income tax will be recognised from the initial recognition of an asset or liability,excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to theperiod when the asset is realised or the liability is settled, based on tax rates enacted or substantivelyenacted at the end of the reporting year. Their measurement also reflects the manner in whichmanagement expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only tothe extent that it is probable that future taxable profit will be available against which the benefits of thedeferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates,and joint ventures, deferred tax assets and liabilities are not recognised where the timing of thereversal of the temporary difference can be controlled and it is not probable that the reversal willoccur in the foreseeable future.

Current assets and liabilities are offset where a legally enforceable right of set-off exists and it isintended that net settlement or simultaneous realisation and settlement of the respective asset andliability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxationauthority on either the same taxable entity or different taxable entities where it is intended that netsettlement or simultaneous realisation and settlement of the respective asset and liability will occur infuture periods in which significant amounts of deferred tax assets or liabilities are expected to berecovered or settled.

(c) Inventories

Inventories are measured at the lower of cost and net realisable value.

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(d) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value as indicated less, whereapplicable, any accumulated depreciation and impairment losses.

Property

Freehold land and buildings are shown at their fair value (being the amount for which an asset couldbe exchanged between knowledgeable willing parties in an arm's length transaction), based onperiodic, but at least triennial, valuations by external independent valuers, less subsequentdepreciation for buildings.

In the periods when the freehold land and buildings are not subject to an independent valuation, thedirectors conduct directors' valuations to ensure the land and buildings carrying amount is notmaterially different to the fair value.

Increases in the carrying amount arising on revaluation of land and buildings are credited to arevaluation surplus in equity. Decreases that offset previous increases of the same asset are chargedagainst fair value reserves directly in equity; all other decreases are charged to the statement ofcomprehensive income.

Any accumulated depreciation at the date of revaluation is eliminated against the gross carryingamount of the asset and the net amount is restated to the revalued amount of the asset.

Plant and equipment

Plant and equipment are measured on the cost basis less depreciation and impairment losses.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not inexcess of the recoverable amount from these assets. The recoverable amount is assessed on thebasis of the expected net cash flows that will be received from the asset's employment andsubsequent disposal. The expected net cash flows have been discounted to their present values indetermining recoverable amounts.

Subsequent costs are included in the property, plant and equipment's carrying value or recognised asa separate asset when it is probable that future economic benefits associated with the item will berealised and the cost of the item can be measured reliably. All other repairs and maintenance arerecognised in profit or loss.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, butexcluding freehold land, is depreciated on a straight-line basis over the asset's useful life to the Groupcommencing from the time the asset is held ready for use. Depreciation is recognised in thestatement of comprehensive income.

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(d) Property, plant and equipment continued

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset Depreciation Rate

Buildings 2.5%

Plant and Equipment 5% - 40%

Computer Equipment 12.5% - 40%

Computer Software 12.5% - 40%

Other Property, Plant and Equipment 5% - 40%

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end ofeach reporting period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset'scarrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount.These gains or losses are included in the statement of comprehensive income. When revaluedassets are sold, amounts included in the revaluation surplus relating to that asset are transferred toretained earnings.

(e) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of theasset, but not the legal ownership that are transferred to entities in the Group, are classified asfinance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equalto the fair value of the leased property or the present value of the minimum lease payments, includingany guaranteed residual values. Lease payments are allocated between the reduction of the leaseliability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful livesor the lease term.

Lease payments for operating leases, where substantially all of the risks and benefits remain with thelessor, are charged as expenses on a straight-line basis over the lease term.

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(f) Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to thecontractual provisions of the instrument. For financial assets, this is the equivalent to the date that thecompany commits itself to either the purchase or sale of the asset (i.e. trade date accounting isadopted).

Financial instruments are initially measured at fair value plus transactions costs, except where theinstrument is classified 'at fair value through profit or loss' in which case transaction costs areexpensed to profit or loss immediately.

Classification and subsequent measurement

Financial instruments are subsequently measured at either fair value, amortised cost using theeffective interest rate method, or cost. Fair value represents the amount for which an asset could beexchanged or a liability settled, between knowledgeable, willing parties in arm's length transaction.Where available, quoted prices in an active market are used to determine fair value. In othercircumstances, valuation techniques are adopted.

Amortised cost is calculated as:

(a) the amount at which the financial asset or financial liability is measured at initial recognition;

(b) less principal repayments;

(c) plus or minus the cumulative amortisation of the difference, if any, between the amountinitially recognised and the maturity amount calculated using the effective interest method;and

(d) less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevantperiod and is equivalent to the rate that exactly discounts estimated future cash payments or receipts(including fees, transaction costs and other premiums or discounts) through the expected life (orwhen this cannot be reliably predicted, the contractual term) of the financial instrument to the netcarrying amount of the financial asset or financial liability. Revisions to expected future net cash flowswill necessitate an adjustment to the carrying value with a consequential recognition of an income orexpense in profit or loss.

The classification of financial instruments depends on the purpose for which the investments wereacquired. Management determines the classification of its investments at initial recognition and at theend of each reporting period for held-to-maturity assets.

The Group does not designate any interests in subsidiaries, associates or joint venture entities asbeing subject to the requirements of accounting standards specifically applicable to financialinstruments.

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(f) Financial instruments continued

(i) Financial assets at fair value through profit or loss

Financial assets are classified at ‘fair value through profit or loss’ when they are held for trading forthe purpose of short-term profit taking, derivatives not held for hedging purposes, or when they aredesignated as such to avoid an accounting mismatch or to enable performance evaluation where agroup of financial assets is managed by key management personnel on a fair value basis inaccordance with a documented risk management or investment strategy. Such assets aresubsequently measured at fair value with changes in carrying value being included in profit or loss.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market and are subsequently measured at amortised cost .

Loans and receivables are included in current assets, except for those which are not expected tomature within 12 months after the end of the reporting period.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixedor determinable payments, and it is the Group's intention to hold these investments to maturity. Theyare subsequently measured at amortised cost.

Held-to-maturity investments are included in non-current assets, except for those which are expectedto be realised within 12 months after the end of the reporting period, which will be classified as currentassets.

If during the period the Group sold or reclassified more than an insignificant amount of the held-to-maturity investments before maturity, the entire held-to-maturity investments category would betainted and reclassified as available-for-sale.

The Group did not hold any held-to-maturity investments in the current or comparative financial year.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either not suitable to beclassified into other categories of financial assets due to their nature, or they are designated as suchby management. They comprise investments in the equity of other entities where there is neither afixed maturity nor fixed or determinable payments.

Available-for-sale financial assets are included in non-current assets, except for those which areexpected to be realised within 12 months after the end of the reporting period.

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(f) Financial instruments continued

(v) Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured atamortised cost. Fees payable on the establishment of loan facilities are recognised as transactioncosts of the loan.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defersettlement of the liability for at least 12 months after the reporting date.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniquesare applied to determine the fair value for all unlisted securities, including recent arm's lengthtransactions, reference to similar instruments and option pricing models.

Impairment

At the end of each reporting period, the Group assess whether there is objective evidence that afinancial asset has been impaired. In the case of available-for-sale financial instruments, a significantor prolonged decline in the value of the instrument is considered to indicate that an impairment hasarisen. Impairment losses are recognised in the statement of comprehensive income.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or theasset is transferred to another party whereby the entity no longer has any significant continuinginvolvement in the risks and benefits associated with the asset. Financial liabilities are derecognisedwhere the related obligations are either discharged, cancelled or expired. The difference between thecarrying value of the financial liability extinguished or transferred to another party and the fair value ofconsideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised instatement of comprehensive income.

(g) Impairment of Assets

At the end of each reporting period, the Group assesses whether there is any indication that an assetmay be impaired. The assessment will include considering external sources of information andinternal sources of information and dividends received from subsidiaries, associates or jointlycontrolled entities deemed to be out of pre-acquisition profits. If such an indication exists, animpairment test is carried out on the asset by comparing the recoverable amount of the asset, beingthe higher of the asset's fair value less costs to sell and value in use to the asset's carrying value.Any excess of the asset's carrying value over its recoverable amount is expensed to the statement ofcomprehensive income.

Where it is not possible to estimate the recoverable amount of an individual asset, the Groupestimates the recoverable amount of the cash-generating unit to which the asset belongs.

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(h) Employee benefits

Provision is made for the company's liability for employee benefits arising from services rendered byemployees to the end of the reporting period. Employee benefits that are expected to be settled withinone year have been measured at the amounts expected to be paid when the liability is settled.Employee benefits payable later than one year have been measured at the present value of theestimated future cash outflows to be made for those benefits. In determining the liability,consideration is given to employee wage increases and the probability that the employee may satisfyvesting requirements. Those cashflows are discounted using market yields on national governmentbonds with terms to maturity that match the expected timing of cashflows.

(i) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of pastevents, for which it is probable that an outflow of economic benefits will result and that outflow can bereliably measured.

Provisions are measured using the best estimate of the amounts required to settle the obligation atthe end of the reporting period.

(j) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-termhighly liquid investments with original maturities of three months or less, and bank overdrafts. Bankoverdrafts are shown within short-term borrowings in current liabilities on the statement of financialposition.

(k) Revenue and other income

Revenue is measured at the fair value of the consideration received or receivable after taking intoaccount any trade discounts and volume rebates allowed. Any consideration deferred is treated asthe provision of finance and is discounted at a rate of interest that is generally accepted in the marketfor similar arrangements. The difference between the amount initially recognised and the amountultimately received is interest revenue.

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to thetransfer of significant risks and rewards of ownership of the goods and the cessation of allinvolvement in those goods.

Interest revenue is recognised using the effective interest rate method, which for floating rate financialassets is the rate inherent in the instrument.

All revenue is stated net of the amount of goods and services tax (GST).

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(l) Trade and other payables

Trade and other payables represent the liability outstanding at the end of the reporting period forgoods and services received by the Group during the reporting period which remain unpaid. Thebalance is recognised as a current liability with the amounts normally paid within 30 days ofrecognition of the liability.

(m) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amountof GST incurred is not recoverable from the Australian Taxation Office. In these circumstances theGST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

The net amount of GST payable to ATO is included as part of payables in the statement of financialposition.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GSTcomponent of investing and financing activities, which are disclosed as operating cash flows which ispayable to the ATO. The GST component of financing and investing activities which is recoverablefrom or payable to, the ATO is classified as part of operating cash flows. Accordingly, investing andfinancing cash flows are presented in the statement of cash flows net of the GST that is recoverablefrom, or payable to, the ATO.

(n) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform tochanges in presentation for the current financial year.

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2 Revenue and Other Income

Consolidated Parent

2011

$

2010

$

2011

$

2010

$

Sales revenue

- Provision of services 7,182,534 7,580,907 7,116,773 7,547,478

- Member subscriptions 441,100 463,242 441,100 463,242

7,623,634 8,044,149 7,557,873 8,010,720

Other revenue

- Stationery and merchandise income 66,342 84,347 66,342 84,347

- Interest received 751 845 751 845

67,093 85,192 67,093 85,192

Total Revenue 7,690,727 8,129,341 7,624,966 8,095,912

Other Income

Commissions 37,500 19,091 37,500 19,091

Rental income 39,361 21,900 39,361 21,900

Discounts and rebates received (12,573) (16,038) (12,573) (16,038)

Training and compliance servicefees 53,396 28,920 53,396 28,920

Gain on disposal of non-currentinvestments - 6,127 - 6,127

Gain on sale of property, plant andequipment 350,437 5,000 350,437 5,000

Sundry income 56,567 29,481 55,441 29,481

Total other income 524,688 94,482 523,562 94,482

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3 Profit Before Income Tax

(a) Expenses

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

Cost of sales 190,651 386,556 190,651 386,556

Finance Costs:

- interest expenses onfinancial liabilities not at fairvalue through profit or loss 44,995 56,532 44,995 56,532

Other expenses:

Bad and doubtful debts:

- Trade and other receivables 7(a) 250 41,652 126,218 41,652

(b) Significant Revenue and Expenses

The following significant expense items are relevant in explaining the financial performance:

- Write-off of receivable fromsubsidiary - - 94,915 -

- Write off of investment fromsubsidiary - - 31,053 -

- - 125,968 -

4 Income Tax Expense

(a) The components of tax expense comprise:

Current tax - - - -

Deferred tax 175,065 - 175,935 -

175,065 - 175,935 -

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4 Income Tax Expense continued

(b) The prima facie tax on profit from ordinary activities before income tax is reconciled to the income taxexpense as follows:

Consolidated Parent

2011

$

2010

$

2011

$

2010

$

Prima facie tax payable onprofit from ordinary activitiesbefore income tax at 30%(2010: 30%)

- economic entity 104,935 76,041 104,935 76,041

Add:

Tax effect of:

- non-deductible depreciationand amortisation 68,211 148,198 68,211 148,198

- other non-allowable items 302,843 203,486 302,843 203,486

475,989 427,725 475,989 427,725

Less:

Tax effect of:

- other deductible items 335,897 328,199 335,897 328,199

Recoupment of prior year taxlosses not previously broughtto account 140,092 99,526 140,092 99,526

Income tax attributable toentity - - - -

The applicable weightedaverage effective tax rates areas follows: %- %- %- %-

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4 Income Tax Expense continued

(c) Tax effects relating to each component of other comprehensive income

Before-taxAmount

$

2011

Tax(Expense)

Benefit

$

Net-of-taxAmount

$

Before-taxAmount

$

2010

Tax(Expense)

Benefit

$

Net-of-taxAmount

$

Consolidated

Realised loss on sale ofinvestments (299,049) 89,714 (209,335) - - -

Net loss on revaluation ofland and buildings (370,000) 111,001 (258,999) (50,000) - (50,000)

(669,049) 200,715 (468,334) (50,000) - (50,000)

Parent

Realised loss on sale ofinvestments (299,049) 89,714 (209,335) - - -

Net loss on revaluation ofland and buildings (370,000) 111,001 (258,999) (50,000) - (50,000)

(669,049) 200,715 (468,334) (50,000) - (50,000)

5 Key Management Personnel Compensation

The total remuneration paid to key management personnel (KMP) of the Group during the year is $ 877,461(2010: $ 807,814).

Other KMP transactions:

For details of other transactions with KMP, refer to Note 19: Related Party Transactions.

6 Cash and Cash Equivalents

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

CURRENT

Cash at bank and in hand 262,607 56,526 246,754 39,300

Short-term bank deposits 19,522 19,522 19,522 19,522

282,129 76,048 266,276 58,822

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6 Cash and Cash Equivalents continued

Reconciliation of cash and cash equivalents

Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows isreconciled to items in the statement of financial position as follows:

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

Cash and cash equivalents 282,129 76,048 266,276 58,822

Bank overdraft 14 - (384,503) - (384,503)

282,129 (308,455) 266,276 (325,681)

7 Trade and Other Receivables

CURRENT

Trade receivables 1,306,443 1,087,220 1,360,728 1,124,607

Provision for impairment ofreceivables 7(a) (35,103) (52,248) (15,103) (29,248)

1,271,340 1,034,972 1,345,625 1,095,359

Related party receivables 19(b) - - 167,351 198,028

Other receivables 25,210 140,263 (71,359) 137,534

1,296,550 1,175,235 1,441,617 1,430,921

(a) Provision for impairment of receivables

Movement in provision for impairment of receivables is as follows:

Opening Balance 52,248 73,256 29,248 48,256

Charge for the year (16,895) 20,644 112,073 22,644

Amounts written off (250) (41,652) (126,218) (41,652)

Balance at end of the year 35,103 52,248 15,103 29,248

(b) Financial assets classified as loans and receivables

Trade and other receivables

- Total current 1,296,550 1,175,235 1,441,617 1,430,921

- Total non-current - - - -

Financial assets 22 1,296,550 1,175,235 1,441,617 1,430,921

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8 Inventories

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

CURRENT

Merchandise - at cost 51,746 57,736 51,746 57,736

9 Other Assets

CURRENT

Prepayments 44,245 36,464 42,360 36,464

Share Capital Unpaid 4,267 3,845 4,267 3,845

48,512 40,309 46,627 40,309

10 Financial Assets

NON-CURRENT

Available for sale financial assets - - - 31,053

11 Controlled Entities

Controlled Entities Consolidated

Subsidiary of Estate Agents Co-operative Limited:

realestateworld.com.au Pty Limited.

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12 Property, Plant and Equipment

Consolidated Parent

2011

$

2010

$

2011

$

2010

$

LAND AND BUILDINGS

Building

Miller Road at directors' valuation 2011 1,850,000 2,220,000 1,850,000 2,220,000

Wollongong at independent valuation 2010 - 500,000 - 500,000

Accumulated depreciation (755,961) (759,385) (755,961) (759,385)

1,094,039 1,960,615 1,094,039 1,960,615

PLANT AND EQUIPMENT

Plant and equipment

At cost 633,436 547,647 633,436 547,647


325,854 273,129 325,854 273,129

Furniture, fixture and fittings

At cost 198,681 200,176 198,681 200,176


71,613 76,274 71,613 76,274

Motor vehicles

At cost 109,720 35,712 109,720 35,712

Under lease 135,944 155,407 135,944 155,407


109,341 18,490 109,341 18,490

Office equipment

At cost 76,802 75,317 76,802 75,317


2,768 2,091 2,768 2,091

Computer equipment

At cost 2,265,245 2,230,582 2,265,245 2,230,582

Accumulated depreciation (2,126,443) (2,063,937) (2,126,443) (2,063,937)

138,802 166,645 138,802 166,645

Computer software

At cost 112,593 103,046 112,593 103,046

Under lease 56,324 - 56,324 -


37,843 - 37,843 -

Total plant and equipment 686,221 536,629 686,221 536,629

Total property, plant and equipment 1,780,260 2,497,244 1,780,260 2,497,244

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12 Property, Plant and Equipment continued

(a) Movements in Carrying Amounts

Movement in the carrying amounts for each class of property, plant and equipment between thebeginning and the end of the current financial year:

Parent and Consolidated

Buildings

$

Plant andEquipment

$

Furniture, Fixtures

andFittings

$

MotorVehicles

$

OfficeEquipment

$

ComputerEquipment

$

ComputerSoftware

$

Total

$

Balance at thebeginning of year 1,960,615 273,129 76,274 18,490 2,091 166,645 - 2,497,244

Additions - 94,096 4,500 130,993 1,485 40,826 65,871 337,771

Disposals - writtendown value (156,719) (1,417) - - - - - (158,136)

Reversal of previousrevaluation upondisposal (299,048) - - - - - - (299,048)

Depreciationexpense (40,809) (39,954) (9,161) (40,142) (808) (68,669) (28,028) (227,571)

Revaluationdecrease recognisedin equity (370,000) - - - - - - (370,000)

Balance at 30 June2011 1,094,039 325,854 71,613 109,341 2,768 138,802 37,843 1,780,260

(b) Asset revaluations

The consolidated group's land and buildings were revalued at 30 June 2010 and 2009 by independentvaluers. Valuations were made on the basis of open market value. The revaluation surplus/deficit wascredited/debited to an asset revaluation reserve in equity.

13 Trade and Other Payables

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

CURRENT

Unsecured liabilities

Trade payables 734,993 747,177 728,068 738,910

Employee benefits 278,835 299,054 278,835 299,054

EAC zone advertising account 103,565 - 103,565 -

Members share capital 92,860 86,880 92,860 86,880

Sundry payables and accruedexpenses 442,587 398,876 416,795 382,747

1,652,840 1,531,987 1,620,123 1,507,591

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13 Trade and Other Payables continued

(a) Financial liabilities at amortised cost classified as trade and other payables

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

Trade and other payables:

- total current 1,652,839 1,531,986 1,620,123 1,507,590

- total non-current - - - -

1,652,839 1,531,986 1,620,123 1,507,590

Less: annual leaveentitlements (278,835) (299,054) (278,835) (299,054)

Financial liabilities as trade andother payables 22 1,374,004 1,232,932 1,341,288 1,208,536

14 Borrowings

CURRENT

Bank overdraft - 384,503 - 384,503

Lease liability - secured 18 60,778 45,964 60,778 45,964

Total current borrowings 60,778 430,467 60,778 430,467

NON-CURRENT

Lease liability - secured 18 96,691 13,524 96,691 13,524

Paid up capital 34,090 32,850 34,090 32,850

Total non-current borrowings 130,781 46,374 130,781 46,374

Total borrowings 191,559 476,840 191,559 476,840

(a) Total current and non-current secured liabilities

Bank overdraft - 384,503 - 384,503

Finance lease obligations 157,469 59,488 157,469 59,488

Other financial liabilities 34,090 32,850 34,090 32,850

191,559 476,841 191,559 476,841

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14 Borrowings continued

The carrying amounts of non-current assets pledged as security are:

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

- freehold land andbuildings 1,094,039 1,960,615 1,094,039 1,960,615

- leased plant andequipment 73,071 18,489 73,071 18,489

1,167,110 1,979,104 1,167,110 1,979,104

(b) The bank overdrafts of the entity and subsidiaries are secured by a registered first mortgage overcertain freehold properties of controlled entities.

Lease liabilities are secured by the underlying leased assets.

15 Tax

CURRENT

Income tax payable - - - -

Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions fordeductibility set out in Note 1 (b) occur:

- tax losses:

- operating losses 787,898 896,247 684,198 824,290

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15 Tax continued

OpeningBalance

$

Chargedto Income

$

Chargeddirectly to

Equity

$

Changesin TaxRate

$

ExchangeDifferences

$

ClosingBalance

$

Consolidated

Deferred tax assets

Property, plant and equipment

- other PPE - 14,356 - - - 14,356

Provisions - 15,962 - - - 15,962

Provisions - employee benefits - 182,473 - - - 182,473

Other deferred tax - 19,384 - - - 19,384

Balance at 30 June 2010 - 232,175 - - - 232,175


- other PPE 14,356 173,442 - - - 187,798

Provisions 15,962 (1,774) - - - 14,188

Provisions - employee benefits 182,473 (17,324) - - - 165,149

Other deferred tax 19,384 (72) - - - 19,312

Balance at 30 June 2011 232,175 154,272 - - - 386,447

OpeningBalance

$

Chargedto Income

$

Chargeddirectly to

Equity

$

Changesin TaxRate

$

ExchangeDifference

s

$

ClosingBalance

$

Parent

Deferred tax assets


- other PPE - 14,356 - - - 14,356

Provisions - 14,402 - - - 14,402

Provisions - employee benefits - 182,473 - - - 182,473

Other deferred tax - 12,484 - - - 12,484

Balance at 30 June 2010 - 223,715 - - - 223,715


- other PPE 14,356 173,443 - - - 187,799

Provisions 14,402 3,319 - - - 17,721

Provisions - employee benefits 182,473 (17,324) - - - 165,149

Other deferred tax 12,484 (4,296) - - - 8,188

Balance at 30 June 2011 223,715 155,142 - - - 378,857

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15 Tax continued

OpeningBalance

$

Chargedto Income

$

Chargeddirectly to

Equity

$

Changesin TaxRate

$

ExchangeDifference

s

$

ClosingBalance

$

Consolidated

Deferred tax liability


- other PPE - 20,793 - - - 20,793

Revaluation, net of relateddepreciation 248,609 - - - - 248,609

Balance at 30 June 2010 248,609 20,793 - - - 269,402


- other PPE 20,793 (20,793) - - - -

Revaluation, net of relateddepreciation 248,609 - (200,714) - - 47,895

Balance at 30 June 2011 269,402 (20,793) (200,714) - - 47,895

OpeningBalance

$

Chargedto Income

$

Chargeddirectly to

Equity

$

Changesin TaxRate

$

ExchangeDifference

s

$

ClosingBalance

$

Parent

Deferred tax liability


- other PPE - 20,793 - - - 20,793

Revaluation, net of relateddepreciation - - 248,609 - - 248,609

Balance at 30 June 2010 - 20,793 248,609 - - 269,402


- other PPE 20,793 (20,793) - - - -

Revaluation, net of relateddepreciation 248,609 - (200,714) - - 47,895

Balance at 30 June 2011 269,402 (20,793) (200,714) - - 47,895

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16 Provisions

Consolidated

Long termemployeebenefits

$

Total

$

Non-current

Opening balance at 1 July 2010 309,190 309,190

Reversed during the period (37,528) (37,528)

Balance at 30 June 2011 271,662 271,662

Parent

Long termemployeebenefits

$

Total

$

Non-current

Opening balance at 1 July 2010 309,190 309,190

Reversed during the period (37,528) (37,528)

Balance at 30 June 2011 271,662 271,662

Analysis of total provisions

Consolidated Parent

2011

$

2010

$

2011

$

2010

$

Current 224,990 276,039 224,990 276,039

Non-current 46,672 33,151 46,672 33,151

271,662 309,190 271,662 309,190

Provision for long-term employee benefits

A provision has been recognised for employee benefits relating to long service leave for employees. Incalculating the present value of future cash flows in respect of long service leave, the probability of longservice leave being taken is based upon historical data. The measurement and recognition criteria foremployee benefits has been included in Note 1(h).

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17 Reserves

(a) Capital profit reserve

The capital profit reserve records gains on sale of properties purchased prior to 19 September 1985.

(b) Asset revaluation reserve

The asset revaluation reserve records revaluation of non current assets.

(c) Share redemption reserve

The share redemption reserve records the entrance fees received by members prior to 1979.

18 Capital and Leasing Commitments

(a) Finance lease and Hire Purchase Commitments

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

Payable - minimum leasepayments:

- no later than 1 year 74,027 46,431 74,027 46,431

- between 1 year and 5 years 105,788 13,640 105,788 13,640

Minimum lease payments 179,815 60,071 179,815 60,071

Less: finance changes (22,346) (583) (22,346) (583)

minimum lease payments 14 157,469 59,488 157,469 59,488

Commercial hire purchase in place for motor vehicle and computer equipment have a term between 3 and 5years. The motor vehicle and computer equipment are being leased with lease payment paid monthly.

19 Related Party Transactions

(a) Key management personnel

Any person(s) having authority and responsibility for planning, directing and controlling the activities ofthe entity, directly or indirectly, including any director (whether executive or otherwise) of that entity isconsidered key management personnel.

For details of disclosures relating to key management personnel, refer to Note 5: Key ManagementPersonnel Compensation.

(b) Transactions with related parties

Transactions between related parties are on normal commercial terms and conditions no morefavourable than those available to other parties unless otherwise stated.

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19 Related Party Transactions continued

The following transactions occurred with related parties:

(i) Trade and other receivables

Loans to subsidiary

- beginning of the year - - 198,028 -

- loans advanced - - - 198,028

- reimbursement received - - (30,677) -

- end of the year 7 - - 167,351 198,028

Unsecured loans are made to subsidiary on an arm's length basis.

20 Change in Accounting Policy

The consolidated group changed its accounting policy for the financial year ending 30 June 2011 in respectof recognition and measurement criteria resulting from the change from special purpose to general purposefinancial reporting. Retrospective adjustments have been made to comparative information whereapplicable. Refer to accounting policy note 1 (b).

The aggregate effect of the change in accounting policy on the annual financial statements for the yearended 30 June 2011 is as follows:

PreviousPolicy

$

2011Adjustments

$

RevisedPolicy

$

PreviousPolicy

$

2010Adjustments

$

RevisedPolicy

$

Economic Entity

Statement ofcomprehensiveincome

Income tax expense - (175,065) (175,065) - (211,381) (211,381)

Profit after tax 483,630 175,065 658,695 225,796 211,381 437,177

Statement offinancial position

Deferred tax asset - 154,272 154,272 - 232,175 232,175

Deferred tax liability - (221,508) (221,508) - 269,403 269,403

Asset revaluationreserve 312,468 (200,715) 111,753 828,695 (248,609) 580,086

Retained earnings (670,612) 211,381 (459,231) (896,408) 211,381 (685,027)

Parent Entity

Statement ofcomprehensiveincome

Income tax expense - (175,935) (175,935) - (202,921) (202,921)

Profit after tax 349,767 175,935 525,702 253,471 202,921 456,392

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20 Change in Accounting Policy continued

PreviousPolicy

$

2011Adjustments

$

RevisedPolicy

$

PreviousPolicy

$

2010Adjustments

$

RevisedPolicy

$

Statement offinancial position

Deferred tax asset - 155,142 155,142 - 223,715 223,715

Deferred tax liability - (221,508) (221,508) - 269,403 269,403

Asset revaluationreserve 312,468 (200,715) 111,753 828,695 (248,609) 580,086

Retained earnings (376,709) 202,921 (173,788) (630,179) 202,921 (427,258)

21 Events after the end of the Reporting Period

On 9 November 2011 the Co-operative sold its property at 274 Miller Road Villawood NSW 2163 for theconsideration of $1.85m.

The carrying value of the property has been adjusted to reflect the value in the 2011 financial report.

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22 Financial Risk Management

The Group's financial instruments consist mainly of deposits with banks, accounts receivable and payable,and overdrafts, and loans to subsidiary.

The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed inthe accounting policies to these financial statements, are as follows:

Consolidated Parent

Note

2011

$

2010

$

2011

$

2010

$

Financial Assets

Cash and cash equivalents 6 282,129 76,048 266,276 58,822

Loans and receivables 7(b) 1,296,550 1,175,235 1,441,617 1,430,921

Available-for-sale financial assets:

at cost

- Other financial assets 10 - - - 31,053

Total available-for-sale financialassets - - - 31,053

Total financial assets 1,578,679 1,251,283 1,707,893 1,520,796

Financial Liabilities

Financial liabilities at amortised cost

- Trade and other payables 13 1,374,004 1,232,932 1,341,288 1,208,536

- Borrowings 14 191,559 476,840 191,559 476,840

Total financial liabilities 1,565,563 1,709,772 1,532,847 1,685,376

23 Company Details

The registered office of and principal place of business of the company is:

Estate Agents Cooperative Limited

274 Miller Road

Villawood NSW 2163

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EAC Annual Report 2011

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