Illustrative Financial Statements Signpost Ltd 2011

8/2/2019 Illustrative Financial Statements Signpost Ltd 2011

1/47

Signpost Limited is a best practice annual

report example on how to prepare your fnancial

statements in accordance with the rameworkor dierential reporting or entities applying

NZ GAAP (FRS /SSAP )

IllustrativeFinancial

Statements

Signpost

Limited 2011

kpmg.co.nz


2/47

2

Our aim is that these model financial statements that apply New Zealand GAAP

(FRSs/SSAPs) deals with all presentation issues in as realistic a situation as

practicable. It reflects some of the reporting and disclosure issues that you face in

reporting your own progress and operations to stakeholders.Simon Lee

KPMG National Technical Director

Accounting Advisory Services

Content of publication

BACKGROUND INFORMATIONIntroducing Signpost Limited 2011

Do you qualify for differential reporting?

Framework for differential reporting - Flowchart

Differential reporting exemptions

MODEL FOR DIFFERENTIAL REPORTING

Signpost Limited Annual Report 2011

APPENDICES

KPMG CONTACTS

The information contained in this model annual report is of a general nature and is not intended to address thespecific circumstances of any particular individual or entity. This model generally provides for the minimumdisclosure requirements, but in certain areas additional items are disclosed where their disclosure is necessary

to explain the performance of the entity and relevant to the understanding of the readers. The publication shouldbe used as a guide rather than a definitive statement and must be used in conjunction with the relevant

legislation and financial reporting standards. The information contained in this publication should not be used orrelied upon as a substitute for detailed advice or as a basis for formulating business decisions. The names ofpeople and companies in this model annual report are fictitious. Any resemblance to any person or business is

unintended and purely coincidental.


3/47

Introducing Signpost Limited 2011

About this publication

The purpose of this publication is to assist you in preparing financial statements in accordance with the

Framework for Differential Reporting under NZ GAAP (FRSs/SSAPs). It illustrates one possible format for

financial statements based on a fictitious company, Signpost Limited.

In addition to being a useful tool for companies, we believe that this publication will be a valuable reference in

the preparation of financial statements for many other organisations that fall outside the scope of the Financial

Reporting Act (FRA). Our aim is that these model financial statements apply New Zealands reporting

requirements in as realistic a situation as practicable to assist you in reporting your own position and operations

to stakeholders.

History of financial reporting for small and medium-sized entities (SMEs)

Differential Reporting has been around since 1994 when it was introduced to reduce the burden of disclosureson smaller entities without public accountability. On 19 December 2002 the Accounting Standards Review Board

(ASRB) announced that New Zealand entities would adopt international standards for financial periods beginningon or after 1 January 2007. Entities were allowed to early adopt, implementing New Zealand equivalents to

International Financial Reporting standards (NZ IFRS) from as early as balance dates beginning on or after 1

January 2005. This led to a staggered adoption of NZ IFRS. In responding to this the FRSB, as an interim

measure, issued a Framework for Differential Reporting Entities applying the NZ IFRS regime.

Since these decisions were made there has been extensive debate regarding the financial reporting

requirements for certain small entities. In response, the Government announced that it would commence a

review of financial reporting requirements applicable to small and medium-sized companies. One possible

outcome of this review is the removal of the legislative requirement for small and medium-sized companies and

entities to prepare GAAP-compliant financial reports.

In light of these developments the ASRB decided that certain companies could continue to apply the existing

approved New Zealand Financial Reporting Standards (FRSs) and Statements of Standard Accounting Practice

(SSAPs) and did not have to adopt NZ IFRS for reporting periods beginning on or after 1 January 2007, until

further notice.

During September 2007 the ASRB issued Release 9, Delay of the Mandatory Adoption of New Zealand

equivalents to International Financial Reporting Standards for Certain Small Entities that establishes the criteria

for deferral of adoption (refer Appendix 4). The key point is that certain legislative requirements may subject an

entity to the requirements of the Financial Reporting Act 1993 (FRA) as a reporting entity. Unless the entity is an

exempt company or a company that meets the criteria specified in ASRB Release 9, the entity is not exempt,

and will be required to adopt NZ IFRS.

For other types of entities that are not subject to the FRA, the Financial Reporting Standards Board (FRSB) has

amended the New Zealand Preface to allow some of these entities to choose to delay adopting NZ IFRS. This

means that certain entities such as partnerships, trusts, charities, clubs and societies that are required or choose

to prepare general purpose financial reports will also be able to delay adoption of NZ IFRS.

In July 2009, the International Accounting Standards Board (IASB) issued the IFRS for SMEs, which is a self-

contained standard designed to meet the needs and capabilities of small and medium-sized entities (SMEs).Compared with full IFRSs (and many national GAAPs), the IFRS for SMEs is less complex. New Zealand has not

decided on the adoption of the IFRS for SMEs bat this point.

On 30 September 2009, the Ministry of Economic Development (MED) and the ASRB issued proposals that will

potentially change the statutory financial reporting requirements in New Zealand. These proposals cover all types

of entities large and small, listed and unlisted, business enterprises, public sector entities, charities and other

not-for-profit organisations and are set out two discussion documents:

The MED Discussion Document, The Statutory Framework for Financial Reporting sets out proposals in

relation to which entities should be required to prepare financial statements. The ASRB Discussion Document,

The Proposed Application of Accounting and Assurance Standards Under the Proposed New Statutory

Framework for Financial Reporting sets out the proposals for the accounting and audit requirements for an

entity that is required to prepare financial statements. At the time of writing, a number of the significant

proposals have yet to be concluded on.


4/47

Financial reporting requirements

The obligation for entities to prepare financial statements is generally set out under statutes, case law anddocuments such as constitutions, trust deeds and rules under which an entity was established. These sources

also identify the specific requirements of those obligations. Most entities are required by law to prepare

accounts. Having established that the entity has an obligation to prepare financial statements, the entity

determines if it has an obligation to prepare general purpose financial statements that comply with GAAP.

Appendix 4 has a discussion on general purpose and special purpose financial statements, and the appropriate

accounting standards to consider in order to comply with GAAP.

Generally Accepted Accounting Practice (GAAP)

Generally Accepted Accounting Practice (GAAP) is the term used to describe the basis for preparing general

purpose financial statements. The term includes both the broad concepts and principles to be used inpreparing general purpose financial statements and the specific rules, practices and procedures to be used

when reporting on particular transactions and events. The key aspect of GAAP is compliance with appropriate

financial reporting standards.

From a legal perspective GAAP means compliance with all financial reporting standards applicable to the

entity. The standards constituting GAAP are either NZ IFRS or, if an entity can defer adoption of NZ IFRS,the Financial Reporting Standards (FRS) and Statement of Standard Accounting Practice (SSAP). For ease

of reference we refer to these latter standards as FRSs/SSAPs.

Where the existing FRSs/SSAPs do not address a specific issue, the Explanatory Forward to General

Purpose Financial Reporting provides guidance with respect to other sources of authoritative support for

all entities in the preparation of general purpose financial reports.

Ultimately, it is a matter for professional judgement in the circumstances of the entity as to which sources of

authoritative support should be considered, and how conflicts between sources of authoritative support should be resolved, in determining GAAP. In saying this, it is now generally expected that entities should

consider NZ IFRS in the first instance when FRS/SSAPs do not provide guidance given that these standardsare approved accounting standards in New Zealand.

Keeping up to dateThe content of this publication reflects accounting practice at the time of writing, but accounting practice is

continually evolving. It is therefore necessary for preparers of financial statements, to keep abreast of

accounting developments and their impact on financial statements. This publication should be used in

conjunction with the underlying legislation and financial reporting standards, particularly where a specific

disclosure area is not covered or where there is uncertainty regarding interpretation.

To keep up to date with financial reporting developments you can visit our website:www.kpmg.co.nz.

Entities adopting NZ IFRS that qualify for differential reporting should refer to the Illustrative Financial

Statements ClearCut Limited 2009, which has been prepared in accordance with the Framework for

Differential Reporting for entities applying NZ IFRS.

If you require guidance on preparing and presenting financial statements complying with full reportingrequirements you should refer to KPMGs model annual report Diverse Group Limited, which includes an

Appendix on Preparing for the Conversion to NZ IFRS.

The on-line versions are regularly updated for the latest developments. If you require any assistance with

financial reporting or transitioning to NZ IFRS, please call your KPMG contact or email KPMG's Accounting

Advisory Services [email protected].
http://www.kpmg.co.nz/http://www.kpmg.co.nz/http://www.kpmg.co.nz/mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.kpmg.co.nz/


5/47

The Signpost story

Signpost Limited (Signpost) is a reporting entity as defined in the FRA and qualifies under ASRB Release 9 to

defer adoption of NZ IFRS. Signpost has decided to produce financial statements that have been prepared in

accordance with NZ GAAP, applying FRSs and SSAPs. Signpost is a privately owned company registeredunder the Companies Act 1993 and operates as a sign post manufacturer based in Hamilton.

In focusing on the preparation of these financial statements, we have recognised that primary stakeholders(e.g. shareholders and banks) like to receive clear and concise information. With this in mind we have

assumed that Signpost is taking advantage of most of the differential reporting exemptions available to it.

Additional disclosures may be included to provide useful information to the users of financial statements and

to follow best practice established by that specific industry.

Abbreviations

The following abbreviations are used in these model financial statements:

ASRB Accounting Standards Review Board

C93 Companies Act 1993FRA Financial Reporting Act 1993

FRS Financial Reporting Standards

GAAP Generally Accepted Accounting Practice

IAS International Accounting Standards

IASB International Accounting Standards Board

IFRS International Financial Reporting Standards

MED Ministry of Economic Development

NZ IAS New Zealand equivalents to International Accounting Standards

NZ IFRS New Zealand equivalents to International Financial Reporting Standards

NZ IFRIC New Zealand equivalents to International Financial Reporting Interpretations

Committee

NZ SIC New Zealand equivalents to Standing Interpretations Committee

SSAP Statement of Standard Accounting Practice


6/47

Do you qualify for differential reporting?

The Financial Reporting Standards Board (FRSB) issued a Framework for Differential Reporting in 1994

(Framework). This has been amended over the years, most recently in 2005 when the size criteria were

increased. The Framework allows a reporting entity to be exempted from specific requirements of FRSs/SSAPs.The basic principle of differential reporting is that compliance with FRSs/ SSAPs should be required only whenthe benefit exceeds the costs of compliance with the standards.

Do you meet the requirements?

An entity qualifies for differential reporting exemptions if it does not have public accountability and either all of its

owners are members of its governing body at balance date (non-separation criterion) or the entity is not large

(size criterion) as defined by the Framework.

What makes an entity publicly accountable?

An entity has public accountability if it was an issuer, as defined in the FRA at any time during the current or

preceding reporting period. An entity is also publicly accountable if it has the coercive power to tax, rate or levyto obtain public funds.

For example, a golf club that charges its members a fee does not have coercive power. It is the member's

decision to become a member of the golf club and they would not have to pay the fee if they chose to leave the

golf club. On the other hand, City Council rates and Government taxes are charged irrespective to usage and

services offered by such entities and they are therefore publicly accountable.

When an entity's parent or ultimate controlling entity has the coercive power to tax, rate or levy to obtain public

funds, the entity is not permitted to use a lack of separation between the owners and the governing body as a

basis for qualifying for differential reporting exemptions. Such entities may qualify for differential reporting

exemptions only on the basis of size. This is because it may not be appropriate that entities such as localauthority trading enterprises, crown entities, state-owned enterprises and government departments should be

permitted to use the lack of separation criteria as the public have a beneficial interest in the entities and in many

cases, the public indirectly provides funds to such entities through taxes, rates or levies.

However, an entity does not have public accountability solely because it receives public funds from another

entity that has the coercive power to tax, rate or levy to obtain public funds. For example, a museum that

receives a government grant is not public accountable. A group is not considered to be publicly accountable

solely by reasonof a subsidiary or associate being publicly accountable. However, when the parent of the groupis an issuer, the entire group is an issuer and is deemed to be publicly accountable.

How is it possible to identify that owners are also governors?

Where every owner is also a member of the governing body, the owners are assumed to have access to anyinformation they require and the separation test is passed.

Where the owner is not a natural person, e.g. the owner is a trust or company, and has appointed arepresentative to the governing body of the entity, that representative is considered to be the owner for the

purposes of the Framework. For example, if the holding company appoints a director to the board of itssubsidiary then there is no separation between the owner and the governing body. In the example of a wholly

owned subsidiary, the directors appointed by the holding company are considered to be the owners of thesubsidiary.

The true owners of trusts are the beneficiaries. Therefore, in order for the non-separation criterion to be met,the beneficiaries should also be trustees. The settler of a trust will sometimes have the right to appoint the

trustees; therefore the settler will also meet the definition of an owner and should be on the governing body.

This means that in most cases the trust will not satisfy the 'non-separation' criterion. A trust will generally only

qualify for differential reporting exemptions if it is not publicly accountable and is small. This non-separation

test is applied at balance date.


7/47

How is the size criterion applied?

An entity is classified as 'small' if it does not exceed any two of the following three size thresholds:

Total revenue of $20 million; Total assets of $10 million; and 50 employees.The size criterion must be met for two consecutive balance dates (or one if it is the entity's first balance date).

Where the reporting entity is a group, the size criterion is applied to the group comprising the parent and all its

subsidiaries.

In trying to assess whether an entity meets the size criterion, the Framework provides guidance as to how the

three size thresholds should be calculated:

Total revenue is the annualized gross income, which includes both revenue and gains, reported in theentity's statement of financial performance for the current period;

Total assets include all assets, including intangible assets, recorded in the entity's balance sheet at theend of the current reporting period;

Total employees comprise the number of full-time equivalent persons in the paid employment of theentity, calculated on an annual basis.

Disclosure

If an entity qualifies for differential reporting, it is required to disclose an accounting policy stating how it meets

the Framework criteria and the differential reporting exemptions that it has adopted.


8/47

8

Framework for differential reporting - Flowchart


9/47

9

Differential reporting exemptions

The following is a listing of New Zealand financial reporting standards as well as the measurement, recognition

and disclosure exemptions available within the Framework for Differential Reporting.

Full exemption

FRS-10 Statement of Cash Flows

SSAP-23 Financial Reporting for Segments

FRS-31 Disclosure of Information about Financial Instruments

FRS-41Disclosing the impact of adopting New Zealand Equivalents to International Financial

reporting Standards (applicable to issuers only)

No exemption

FRS-1 Disclosure of Accounting Policies

FRS-2 Presentation of Financial Reports

(except requirements relating to statement of cash flows if applicable)

FRS-5 Events after Balance Date

SSAP-6 Materiality in Financial Statements

FRS-7 Extraordinary Items and Fundamental Errors

FRS-20 Accounting for Shares Issued Under a Dividend Election Plan

SSAP-25 Accounting for Interest in Joint Ventures and Partnerships

FRS-26 Accounting for Defeasance of Debt

FRS-27 Right of Set-off

FRS-32 Financial Reporting by Superannuation Schemes

FRS-33 Disclosure of Information by Financial Institutions

FRS-34 Life Insurance Business

FRS-35 Financial Reporting of Insurance Activities

FRS-36 Accounting for Acquisitions Resulting in Combinations of Entities or Operations

FRS-37 Consolidating Investments in Subsidiaries

FRS-38 Accounting for Investments in Associates

FRS-39 Summary Financial Reports

FRS-40Transitional Arrangements for the Early Adoption of the New Zealand equivalent to IAS 19

Employee Benefits


10/47

10

Partial exemption

FRS-3 Accounting for Property, Plant and Equipment

The same rates of depreciation can be used for financial reporting as for income tax

purposes, except when assets have been revalued. The entity is not required to capitaliseborrowing costs and where this exemption is taken the entity must expense all borrowing

costs as incurred. Specific exemptions in disclosure are denoted with an asterisk in the

standard.

FRS-4 Accounting for Inventories

There is no requirements to sub-classify inventory into categories such as raw materials,

work-in-progress and finished goods.

SSAP-12 Accounting for Income Tax

The accounting policy adopted for income tax must be disclosed in all instances. This is one

of the few standards that allows an entity qualifying for differential reporting a choice with

regard to recognition and measurement. An entity may choose to adopt either the liability

method or the taxes payable method. The selection of either method has no impact on

which disclosure exemptions an entity chooses to elect. However, if an entity voluntarily

makes disclosures from which it is exempt, they must be in accordance with SSAP-12.FRS-13 Accounting or Research and Development Activities

All research and development costs can be recognised as an expense during the period in

which they were incurred.

FRS-14 Accounting or Construction Contracts

Profit on all construction contracts may be recognised on a completed contract method or a

percentage of completion method. If the percentage of completion is used, all the

recognition and measurement requirements must be completed with, but there is still a

choice regarding disclosure requirements of FRS-14. However, if an entity voluntarily

makes disclosures from which it is exempt, they must be in accordance with FRS-14.

FRS-15 Provisions, Contingent Liabilities and Contingent Assets

Entities are not required to disclose additional provisions made in the period, amounts used

during the period and the increase during the period in the discounted amount arising the

passage of time and the effect of any change in the discount rate.

SSAP-17 Accounting or Investment Properties and Properties Intended for Sale

Entities are not required to account for investment properties and properties intended for

sale according to SSAP-17, but have the option of using the principles embodies in SSAP-28

instead. However, this exemption is not available if investment property revaluations or

development margins are recognised.

SSAP-18 Accounting for Leases and Hire Purchase Contracts

Finance charges relating to finance leases do not have to be disclosed separately in the

statement of financial performance Entities are not required to comply with all disclosure

requirements except that they may disclose lease liabilities for finance leases and

aggregate commitments for non-cancelable operating leases by classifying them into

current and non-current amounts.

FRS-19 Accounting for Goods and Services Tax

There is a choice regarding the recognition of revenue and expense items inclusive or

exclusive of GST, provided that the method is applied consistently to all revenue and

expense items disclosed in the statement of accounting policies.

FRS-21 Accounting for the Effect of Changes in Foreign Currency Exchange Rates

The net exchange difference does not have to be separately disclosed in the statement of

financial performance. In addition, transactions measured in a foreign currency do not have

to be translated using the exchange rate that applied at the transaction date or a rate

approximating that rate. If this exemption is applied, transactions settled in the accounting

period must be translated at the settlement rate and transactions unsettled at balance date

must be translated at the closing rate.


11/47

11

Partial exemption (continued)

SSAP-21 Accounting for the Effects of Changes in Foreign Currency Exchange Rates

The net exchange difference included in the statement of financial performance does not

have to be disclosed.

SSAP-22 Related Party DisclosuresThe identity of each related party, the nature of each relationship and the types of

transactions involved are only required to be disclosed if there have been material

transactions with related parties at any time during the reporting period.

FRS-24 Interim Financial Statements

Specific exemptions are denoted with an asterisk in the standard. In addition, differential

reporting exemptions available under specific financial reporting standards may be applied.

FRS-30Reporting Share Ownership Arrangements including Employee Share Ownership Plans

(ESOP)

Qualifying entities with one or more ESOP are exempt from disclosing abbreviated

statements of financial position and financial performance on each ESOP.

FRS-42 Prospective Financial Statements

Qualifying entities are not required to prepare a cash flow statement.


12/47

12

This page is left blank intentionally.


13/47

13


14/47

Signpost Limited

Annual Report for the year ended 31 March 2011

14

Report contents Page No.

Compilation Report 15

Approval of Annual Report 17

Company Directory 18

Statement of Financial Performance 19

Statement of Movement in Equity 20

Balance Sheet 21

Statement of Accounting Policies 23

Notes to the Financial Statements 28


15/47

Signpost Limited


15

Compilation Report

Report to the Directors of Signpost Limited

Scope

On the basis of information you provided we have compiled, in accordance with Service Engagement

Standard No. 2: Compilation of Financial Information, the annual report of Signpost Limited for the year ended

31 March 2011. This has been prepared in accordance with New Zealand generally accepted accounting

practice as described in the statement of accounting policies.

Responsibilities

You are solely responsible for the information contained in the annual report and have determined that New

Zealand generally accepted accounting practice is appropriate to meet your needs and for the purpose that

the financial statements were prepared. The annual report is prepared solely for your benefit. We do not

accept responsibility to any other person for the contents of the annual report.Disclaimer of liability

We have compiled the annual report of Signpost Limited for the year ended 31 March 2011 in accordance

with the limited procedures agreed in our letter of engagement dated 1 May 2010.

Our procedures use accounting expertise to undertake the compilation of the annual report from information

you provided. The compilation is limited primarily to the collecting, classifying and summarising of financial

information supplied by the client. Our procedures do not involve the verification or validation procedures. No

audit or review has been performed and accordingly no assurance is expressed. We have not attempted to

verify the accuracy or completeness of the information and therefore neither we nor any of our employees

accept any responsibility for the accuracy of the information from which the annual report has been prepared.

This annual report has been prepared at the request of and for the purpose of our client only and neither wenor any of our employees accept any responsibility on any ground whatsoever, including liability in

negligence, to any other person.

KPMG

Wellington

Dated: 15 June 2011


16/47

Signpost Limited


16

Note Reference Explanatory note1 Companies Act

1993

Financial ReportingAct 1993

FRS 5 Events AfterBalance Date

Section 211(1)(k) of the Companies Act 1993 as well as Section 10(1)(b) of the Financial

Reporting Act 1993 requires the annual report to be signed and dated on behalf of theBoard by two Directors unless there is only one Director. Section 13(1)(b) of the FinancialReporting Act 1993 contains the same requirement in respect of the Group financial

statements.

Although many companies place these signatures at the bottom of the Statement ofFinancial Position, this is not a requirement of the Financial Reporting Act. This approvalmay be made anywhere in the annual report. Signing and dating the financial statementsimplies that the financial statements have been authorised for issue to meet therequirements of FRS 5, Events After Balance Date, paragraph 6.1.


17/47

Signpost Limited


17

Approval of Annual Report

The Directors are pleased to present the annual reports including the financial statements of Signpost Limited

for the year ended 31 March 2011.

For and on behalf of the Board of Directors1

AB Smith CD Brown

AB Smith CD Brown

Director Director

15 June 2011 15 June 2011


18/47

Signpost Limited


18

Company Directory2

As at 31 March 2011

Nature of Business Sign post manufacturer

Registered office Cobham Drive

Hamilton

Incorporation Number 99 0724 00

IRD Number 62-101-888

Directors AB Smith

CD Brown

Shareholders AB Smith 350,000

CD Brown 350,000

AB Smith, CD Brown and EF Weston jointly as

Trustees for ABC Family Trust50,000

Ordinary Shares 750,000

Accountant KPMGKPMG Centre

85 Alexandra Street

Hamilton

Bankers First Banking Corporation

Solicitors Grade A Associates

Note 2This information is provided for illustrative purposes only. There is no legislative requirement to include a company directory.


19/47

Signpost Limited


19

Statement of Financial PerformanceReferences

FRS-2 5.2(a),

FRA s8(1)(b)

For the year ended 31 March 2011 FRS-2 5.17

Note 2011 2010

$ $

Sales revenue 1 1,827,643 1,798,204

Cost of goods sold 426,549 464,600

Total gross surplus 2 1,401,094 1,333,604

Expenses

Operating 3 579,361 600,893

Administration 4 142,708 145,900

Finance 5 109,134 102,762

Non-cash items 6 199,380 188,012

1,030,583 1,037,567

Net business surplus 370,511 296,037

Other income

Sundry income 7 63,253 41,314

Operating surplus before shareholders remuneration 433,764 337,351

Shareholders remuneration 26 127,000 90,000

Operating surplus before tax 306,764 247,351 FRS-2 6.7, 6.13(a)

Tax expense 8 96,631 47,209 FRS-2 6.12

Net surplus for the year 210,133 200,142 FRS-2 6.3

These statements are to be read in conjunction with notes to the financial statement and are subject to the compilation report on page 15 of this repor


20/47

Signpost Limited


20

Statement of Movements in Equity ReferencesFRS-2 5.2(b), 7.2For the year ended 31 March 2011

FRS-2 5.17

Note 2011 2010

$ $

Net surplus for the year 210,133 200,142 FRS-2 7.3(a)(i)

Revaluation of assets 176,102 13,884FRS-2 7.3(a)(ii),

FRS-3 11.8(a)

Total recognised revenues and expenses 386,235 214,026 FRS-2 7.3(a)

Dividend declared 10 (50,000) (30,000) FRS-2 7.3(b)

Movements in equity for the year 336,235 184,026

Equity at beginning of year 1,107,155 923,129

Equity at end of year 10 1,443,390 1,107,155 FRS-2 7.2

These statements are to be read in conjunction with notes to the financial statement and are subject to the compilation report on page 15 of this repor


21/47

Signpost Limited


21

Balance SheetReferences

FRS-2 5.2(c.), 8.1,

FRA S8(1)(a)

As at 31 March 2011FRS-2 5.17

Note 2011 2010

$ $

Equity 10 1,443,390 1,107,155FRS-2 8.5(a)(v),

FRS-9 8.17

Current assets FRS-2 8.5(a)(i)

Cash and bank balances 11 26,849 - FRS-9 8.2(c)

Accounts receivable 12 347,373 312,335 FRS-9 8.2(a)

Loan to director 13 12,000 12,000 FRS-9 8.2(a)(ii)

Inventories 14 201,108 218,049 FRS-4 5.29(b)(i)

Shareholders current accounts 20 299,299 463,700

Total current assets 886,629 1,006,084

Non-current assets FRS-2 8.5(a)(ii)

Property, plant and equipment 15 1,658,421 1,492,518

Goodwill 16 40,000 60,000 FRS-9 8.2(f)

Investments 17 545,839 478,819 FRS-9 8.2(b)

Loan to director 13 60,000 72,000 FRS-9 8.2(a)(ii)

Total non-current assets 2,304,260 2,103,337

Total assets 3,190,889 3,109,421

Current liabilities FRS-2 8.5(a)(iii)

Bank balances 11 - 17,764

Accounts payable 18 125,061 114,421 FRS-9 8.10(b)

GST payable 38,355 56,376

Dividends payable 10 50,000 30,000 FRS-9 8.10(d)

Current portion of finance lease liabilities 19 40,450 40,450

Shareholders current accounts 20 76,760 41,245

Tax payable 8 11,058 13,784

Current portion of loans 21 281,496 211,832

Provisions 22 14,417 -

Total current liabilities 637,597 525,872

Non-current liabilities FRS-2 8.5(a)(iv)Non-current portion of finance lease liabilities 19 39,285 79,735

Non-current portion of loans 21 1,027,365 1,396,659

Provisions 22 43,252 -

Total non-current liabilities 1,109,902 1,476,394

Total liabilities 1,747,499 2,002,266

Net assets 1,443,390 1,107,155

These statements are to be read in conjunction with the notes to the financial statements and subject to the compilation report on page 15 of this repo


22/47

Signpost Limited


22

This page is left blank intentionally.


23/47

Signpost Limited


23

Statement of accounting policies

For the year ended 31 March 2011

Reference

FRS-1 5.1, 5.5(

Basis of preparation FRS-2 5.2(f), 5.1

Signpost Limited is a company domiciled in New Zealand and registered under the Companies Act 1993.

The Company is a reporting entity for the purposes of the Financial Reporting Act 1993 and its financial

statements comply with that Act.

The financial statements comprise statements of: financial performance; movements in equity; balance

sheet; accounting policies; as well as the notes to these statements.

The financial statements have been prepared in accordance with generally accepted accounting practice

in New Zealand. They comply with approved Financial Reporting Standards (FRSs) and Statements of

Standard Accounting Practice (SSAPs) as appropriate for entities that qualify for and apply differential

reporting concessions. The financial statements have been prepared on the basis of historical cost

except that land and buildings are stated at valuation.

FRS-1 5.5(

FRS-1 5.5(

Differential Reporting FRS-1 5.19(a),(b

In terms of the framework for differential reporting an entity is exempt from certain financial reporting

standards if it satisfies the criteria laid down in the framework; such an entity is called a qualifying entity.

The Company is an entity qualifying for differential reporting exemptions as it has no public accountability

and is not large in terms of the criteria set out in the Differential Reporting Framework. All available

differential reporting exemptions allowed under the framework for differential reporting have been

adopted, except for:

FRS 9 Information to be disclosed in the financial statements, where some additional disclosureshave been made.Receivables

Receivables are stated at estimated realisable value after providing against debts where collection is

doubtful. Bad debts are written off during the period in which they are identified.

Investment in shares

Non-current investments in unlisted shares are stated at the lower of cost and market value. Investments

in listed shares are stated at market value. Dividend income is recognised in the statement of financial

performance when received.

Inventories FRS-4 5.29(

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated

selling price in the ordinary course of business, less the estimated costs of completion and selling

expenses. Cost is based on the first-in first-out principle and includes expenditure incurred in acquiring the

inventories and bringing them to their existing condition and location. In the case of manufactured

inventories and work-in-progress, cost includes an appropriate share of overheads based on normal

operating capacity.


24/47

Signpost Limited


24

Note Reference Explanatory Note

1 FRS-3 11.6 When a class of property, plant and equipment is no longer revalued the fact that the class ofitems is no longer accounted for under modified historical cost and the basis upon which theclass is now accounted for, must be disclosed.


25/47

Signpost Limited


25



References

Property, plant and equipment FRS-3 5.3, 5.22, 5.35

Items of property, plant and equipment are stated at cost less accumulated depreciation and

impairment losses. Where an item of property, plant or equipment is disposed of, the gain or loss

recognised in the statement of financial performance is calculated as the difference between the sale

price and the carrying amount of the asset.

Land and buildings are stated at valuation as determined by an independent registered valuer. Land

and buildings are revalued at least every five years, and more frequently if necessary to ensure

carrying amounts are not materially different from fair value as at balance date. The basis of valuation

of the land and buildings is highest and best use.

Depreciation FRS-3 11.1(b)(c)

Depreciation is charged at the same rate as is allowed by the Income Tax Act 2004. The following

rates have been used: FRS-3 8.1

Fixtures, fittings and equipment 9% - 24% diminishing value FRS-3 2.2(a)

Office furniture 18% - 40% diminishing value

Leased motor vehicles 15% straight line

Leasehold improvements 6.6% - 18% straight line

Plant and machinery 11% - 18% diminishing value

Buildings 3% straight line

Land is not depreciated.

Leases

Leases or hire purchase contracts where the Company assumes substantially all the risks and rewards

of ownership are classified as finance leases. Assets acquired by way of finance lease are stated

initially at an amount equal to the lower of fair value and present value of the future minimum lease

payments, and are depreciated using the same rates for the applicable categories set out above.

Minimum lease payments are apportioned between interest expense and reduction of the outstanding

liability.The interest expense component of finance lease payments is recognised in the statement of

financial performance using the effective interest rate method.Other leases are classified as operating leases. Payments made under operating leases are

recognised in the statement of financial performance on a straight-line basis over the term of the

lease. Lease incentives are recognised in the statement of financial performance over the lease termas an integral part of the lease expense.

SSAP-18 5.1,5.2

SSAP-18 5.4


26/47

Signpost Limited


26

Note Reference Explanatory Note

1 Some differential reporting entities may choose to report income taxes on a comprehensivebasis taking account of all timing differences. In these circumstances the following taxationpolicy should be included: "Income tax expense is recognised on the operating surplus before

taxation adjusted for permanent differences between taxable and accounting income. Deferredtax is calculated using the comprehensive basis under the liability method.

2 SSAP-12 5.14 This method involves recognising the tax effect of all timing differences between accountingand taxable income as a deferred tax asset or liability in the statement of financial position. Thefuture tax benefit or provision for deferred tax is stated at the income tax rates prevailing atbalance date. Future tax benefits are not recognised unless realisation of the asset is virtually

certain."


27/47

Signpost Limited


27



References

Goodwill

Goodwill arising on the acquisition of a business represents the excess of the purchase consideration

over the fairvalue of the identifiable net assets acquired. Goodwill is amortised to the statement offinancial performance on a straight line basis over the period during which benefits are expected to be

derived - a period of 5 years.Taxation

The income tax expense recognised in the statement of financial performance is the estimated

income tax payable in the current year, adjusted for any differences between the estimated and actual

income tax payable in prior years.SSAP-12 5.14(a)

Foreign currencies

Foreign currency transactions are translated to New Zealand Dollars (NZD) at the exchange rates ruling

at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at

the balance date are translated to NZD at the foreign exchange rate ruling at the date. Foreign

exchange differences arising on their translation are recognised in the statement of financial

performance.

FRS-21 7.1(a)FRS-21 5.3(a)FRS-21 5.4(a)

Goods and services tax FRS-19 2.2

All amounts are shown exclusive of Goods and Services Tax (GST), except for receivables and

payables which are shown inclusive of GST.

Onerous contracts FRS-15 10.4

Where the benefits expected to be derived from a contract are lower than the unavoidable costs of

meeting the Company's obligation under the contract, a provision is recognised. The provision is

stated at the present value of the future net cash outflows expected to be incurred in respect of the

contract.

Dividends

Provisions for dividends are recognised in the period that they are authorised and approved.FRS-5 5.5

Changes in accounting policy FRS-1 5.5(d),5.11

The accounting policies adopted are consistent with those of the previous year. 5.12,5.14


28/47

Signpost Limited


28

Notes to the financial statements References2011 2010

Note $ $

1 Operating revenue

Sales revenue Traffic signage 1,343,024 1,416,687 FRS-9 6.7

Sales revenue Commercial signage 484,619 381,517 FRS-9 6.7

Total sales revenue 1,827,643 1,798,204

Sundry income 7 63,253 41,314 FRS-9 6.7

1,890,896 1,839,518 FRS-9 6.6

2 Gross surplus

Traffic signage

Sales revenue 1,343,024 1,416,687

Cost of goods sold

Opening stock 165,354 155,599

Purchases 286,954 375,698

452,308 531,297

Less Closing stock 135,982 165,354

316,326 365,943

Gross surplus - Traffic signage 1,026,698 1,050,744

Commercial signage

Sales revenue 484,619 381,517

Cost of goods sold

Opening stock 52,695 38,763

Purchases 122,654 112,589

175,349 151,352

Less Closing stock 65,126 52,695

110,223 98,657

Gross surplus Commercial signage 374,396 282,860

Total gross surplus 1,401,094 1,333,604


29/47

Signpost Limited


29

Notes to the financial statements References

2011 2010

$ $

3 Operating expenses

Accident compensation 4,709 7,578

Accommodation 6,089 5,434

Advertising 2,423 3,486

Consultancy 29,115 11,408

Consumables 53,618 65,309

Contract services 124,235 127,445

Electricity 2,382 2,273

Low value assets 1,626 531

Motor vehicle expenses 5,310 4,305

Motor vehicle lease 16,975 16,974

Repairs and maintenance 9,234 11,286

Salaries and wages 314,106 327,656

Travel 9,539 17,208

579,361 600,893

4 Administration expenses

Accounting 4,843 6,738

Audit fees 2,500 2,500

Bank charges 945 1,172

Body corporate fees 4,713 6,284

Conference 115 1,466

Directors fees 60,000 50,000

Entertainment - deductible 940 788

Entertainment - non-deductible 1,057 887

Fringe Benefit Tax 1,499 1,558

General expenses 1,318 1,375

GST on fringe benefits 265 340

Insurance 21,766 25,630

Legal - deductible 187 3,340

Printing and stationery 2,074 542

Postage and freight 2,747 2,009

Rent 17,911 17,559

Staff training 2,451 4,984

Telecommunications 17,377 18,728

142,708 145,900


30/47

Signpost Limited


30


$ $

5 Finance expenses

Interest secured bank loan 91,469 81,426

Interest finance lease 6,997 9,828 SSAP-18.4.37(e)

Interest other 10,668 11,508

109,134 102,762

6 Non-cash items Note

Depreciation property, plant and equipment 15 175,877 174,512

Impairment - property plant and equipment 15 3,200 -

Loss on disposal of fixed assets 303 -

Depreciation recovered - (6,500)

Amortisation of goodwill 16 20,000 20,000

199,380 188,012

7 Sundry income

Realised gain on foreign exchange 10,000 6,500

Gain on disposal of fixed assets - 10,000

Miscellaneous income 272 116

Dividends received 4,977 5,039

Interest received 48,004 19,659

63,253 41,314

8 Tax

Operating surplus before tax 306,764 247,351

Imputation credits received 2,451 1,660

309,215 249,011

Adjustments for permanent differences

Impairment of goodwill 20,000 20,000

Capital gain on disposal of fixed assets - (10,000)

Entertainment - non-deductible 1,057 887

Losses brought forward - (97,000)

Taxable income 330,272 162,898

Income tax 99,082 48,869

Imputation credits claimed (2,451) (1,660)

Tax expense 96,631 47,209

Resident withholding tax paid (20,573) (8,425)

Provisional tax paid (65,000) (25,000)

Income tax payable 11,058 13,784


31/47

Signpost Limited


31


2011 2010

$ $

9 Imputation credits

Balance at beginning of year 61,942 15,983

Terminal tax paid 13,784 19,874

Provisional tax paid 65,000 25,000

Resident withholding tax paid 20,573 8,425

Imputation credits attached to dividends received 2,451 1,660

101,808 54,959

Tax refunded (1,277) -

Imputation credits attached to dividends paid (15,000) (9,000)

Balance at end of year 147,473 61,942

The closing balance represents imputation credits available to be attached to any future

dividend distributions from the Companys reserves, subject to certain shareholder continuity

provisions. This account is not reflected in the Companys financial statements.

10 Equity

Paid in capital 750,000 750,000

Retained earnings 503,404 343,271

Asset revaluation reserve 189,986 13,8841,443,390 1,107,155

The Company has 750,000 fully paid shares on issue (2010: 750,000). All shares have equal

voting rights and upon winding up rank equally with regard to the Companys residual assets.

Movement in retained earnings


Net surplus for the year 210,133 200,142

Dividends declared (50,000) (30,000)


Asset revaluation reserve

Property, plant & equipment 150,000 -

Shares in listed company 39,986 13,884

189,986 13,884


32/47

Signpost Limited


32


2011 2010

$ $

11 Cash and cash bank balances

First Banking Corporation Ready Money Account 26,849 -

First Banking Corporation Cheque Account - (17,764)

26,849 (17,764)

The bank overdraft is unsecured. Interest in incurred at 9.45% per annum up to $30,000 and

at 18.76% thereafter.

12 Accounts receivable

Trade receivables 336,490 299,520

Prepayments 10,883 12,815

347,373 312,335

13 Loan to directorFRS-9 8.2(a)(ii)

AB Smith 72,000 84,000

Current portion 12,000 12,000

Non-current portion 60,000 72,000

72,000 84,000

The loan to Director, AB Smith, bears interest of 8 per cent per annum and is repayable in

monthly installments of $1,000. The loan is secured by a first mortgage registered over ABSmiths residence. FRS-9 8.6

14 Inventories

Stock on hand 175,982 195,354

Work in progress 25,126 22,695

201,108 218,049

Certain inventory items are subject to retention of title clauses.FRS-4 5.29(d)

FRS-9 8.8


33/47

Signpost Limited


33


15 Property, plant and equipmentFRS-3 11.3(a)(c.)(d)

2011 CostDepn

Charge

Impairment

losses

Acc Dep &

Impairment

Carrying

value

$ $ $ $ $

Land (at revaluation) 340,000 - - - 340,000 FRS-9 8.2(d)

Buildings (at revaluation) 410,000 9,891 - - 410,000 FRS-9 8.2(e)

Plant and machinery 1,034,000 118,610 - 378,750 655,250 FRS-3 11.3(a)

Plant and machinery (not in

use)21,500 3,225 3,200 6,425 15,075 FRS-3 11.3(b)(i)

Plant and machinery (WIP) 69,058 - - - 69,058 FRS-3 11.3(b)(ii)

Leasehold improvements 40,153 6,023 - 18,069 22,084 FRS-3 11.3(a)

Motor vehicles (leased) 151,850 22,778 - 68,333 83,517 SSAP-18 5.15(a)Fixtures, fittings and

equipment77,304 9,470 - 27,587 49,717 FRS-3 11.3(a)

Office furniture 40,000 5,880 - 26,280 13,720 FRS-3 11.3(a)

Total as at 31 March 2011 2,183,865 175,877 3,200 525,444 1,658,421

2010 CostDepn

Charge

Impairment

losses

Acc Dep &

Impairment

Carrying

value

$ $ $ $ $

Land (at revaluation) 310,000 - - - 310,000 FRS-9 8.2(d)

Buildings (at revaluation) 329,700 9,891 - 19,782 309,918 FRS-9 8.2(e)

Plant and machinery 934,500 119,149 - 259,324 675,176 FRS-3 11.3(a)

Plant and machinery (not in

use)- - - - -

Plant and machinery (WIP) - - - - -

Leasehold improvements 40,153 6,023 - 12,046 28,107 FRS-3 11.3(a)

Motor vehicles (leased) 151,850 22,778 - 45,555 106,295 SSAP-18 5.15(a)

Fixtures, fittings and

equipment61,539 8,271 - 18,177 43,422 FRS-3 11.3(a)

Office furniture 40,000 8,400 - 20,400 19,600 FRS-3 11.3(a)

Total as at 31 March 2010 1,867,742 174,512 - 375,284 1,492,518

Due to damage to a new item of plant and machinery, which is now not currently in use, an

impairment loss of $3,200 has been recognised in the statement of financial performance towrite down the carrying value of the asset.

2011 2010

$ $

Amount by which land and buildings have been revalued above

historical cost:

Land 30,000 -

FRS-3 11.4(a)

Buildings 120,000 -

Land and buildings were valued on 31 March 2011 by Mr Cloud, a valuer registered with the

New Zealand Institute of Valuers, at $750,000. The valuations placed on land and buildings

were based on highest and best use.

FRS-3 11.4(c)(d)(e)


34/47

Signpost Limited


34


$ $

16 Goodwill

Goodwill at cost 100,000 100,000

Accumulated amortisation at beginning of year (40,000) (20,000)


Amortisation expense - current year (20,000) (20,000)


17 Other investments FRS-9 8.2(b)(v)

Shares in listed company (at valuation) Quantity

Slee Group Limited 10,000 124,360 79,156

Gibbs Holdings New Zealand Limited 8,800 60,019 38,203

184,379 117,359

Shares in unlisted companies (at cost)

Rowe (NZ) Management Limited 195,500 251,220 251,220

Limbo Transport Company Limited 120,128 110,240 110,240

361,460 361,460

545,839 478,819

18 Accounts payable

Trade creditors 96,021 86,451 FRS-9 8.10(a)

Other payables 29,040 27,970

125,061 114,421

Included in trade creditors is an amount of $5,174 ($US4,139) (2010: $6,406 ($US4,804))

which is unhedged. FRS-21 7.1(e)(i)

19 Finance lease liabilities

ABC Finance Motor vehicles

Total minimum lease payments 90,898 145,424

Less future lease finance charges (11,163) (25,239)

Net finance lease liability 79,735 120,185 SSAP-18 4.36

Classified as follows:



79,735 120,185

The motor vehicles obtained through the finance lease serves as security over this liability. FRS-9 8.13


35/47

Signpost Limited


35


2011 2010

$ $

20 Shareholders current accounts

A B Smith

Balance at beginning of year (463,700) (357,148)

Funds introduced 76,805 -

Directors salary remuneration 107,000 80,000


(249,895) (252,148)

Less outgoings

Drawings 20,033 121,366

Cash distributions 5,173 68,704

Donations 3,982 550

Interest payable on current account 20,216 20,932

49,404 211,552

Balance at end of year (299,299) (463,700)

C D Brown


Funds introduced 26,529 -

Directors salary remuneration 20,000 10,000


94,175 41,821

Less outgoings

Drawings 20,348 24,175

20,348 24,175


ABC Family Trust

Balance at beginning of year 23,599 -

Funds introduced 8,749 35,249

32,348 35,249

Less outgoings

Cash distribution 29,415 11,650

29,415 11,650


Total shareholders' current accounts (222,539) (422,455)

Classified as follows:

Current assets (299,299) (463,700)

Current liabilities 76,760 41,245

(222,539) (422,455)


36/47

Signpost Limited


36


2011 2010

$ $

21 Loans

Loan from director

CD Brown 324,000 350,000



324,000 350,000 FRS-9 8.10(b)(iii)

The loan from Director, CD Brown, has an interest rate charge of 3% per annum and is

repayable by 31 August 2013.Secured bank loanCurrent portion 107,496 111,832

Non-current portion 877,365 1,146,659

984,861 1,258,491 FRS-9 8.10(e)

The secured bank loan is secured by a floating charge over the assets of the Company and

interest is incurred at 7.45% per annum. The maturity date of the loan is 30 November 2018.FRS-9 8.13

Total current portion 281,496 211,832

Total non-current portion 1,027,365 1,396,659

1,308,861 1,608,491

22 Provisions

Balance at the beginning of the year - - FRS-15 11.1

Balance at the end of the year 57,669 - FRS-15 11.1

Current 14,417 -

Non-current 43,252 -

57,669 -

When the Company commenced trading on 1 February 2006, it entered into a 7-year non-

cancellable operating lease over premises in Factory Street. As a result of extensive growth,the business has relocated to new premises during the year. The premises in Factory Street

have been sublet, but due to market conditions the rental income achieved is much lower

than the rental expense being incurred. The net obligation under the lease agreements has

been provided for. The liability will be incurred over the next 4 years.

FRS-15 11.2(a)


37/47

Signpost Limited


37


2011 2010

$ $23 Operating lease commitments

SSAP-18 5.17

Lease commitments under non-cancellable

operating leases are as follows:



34,748 38,115

24 Capital commitmentsFRS-9 8.16

The Company has committed to and contracted for $288,000 (2010:$100,000) of future

capital expenditure which has not been accounted for in the financial statements.

25 ContingenciesFRS-15 11.3

Litigation is in process against the Company by a competitor disputing the validity of a sales

contract with a customer. The competitor is seeking damages of $50,000. The Directors are

of the opinion that the Company can successfully defend the claim.

26 Related partiesSSAP-22 5.1(a),(b)

The Company made a loan to one of the Directors, AB Smith, and received a loan from the

other Director, CD Brown. The details of these loans are disclosed in notes 13 and 21.

Remuneration of $127,000 (2010: $90,000) has been paid to the shareholders as employees

of the Company. Directors fees total $60,000 (2010: $50,000)

Transactions with shareholders through the shareholders current accounts are disclosed in

note 20.

The Company leases property from a trust of which CD Browns children are beneficiaries.

The operating lease was entered into on a commercial basis.

27 Subsequent eventsFRS-5 5.5,5.6,5.7(b)

Subsequent to balance date, on 25 May 2011, the Directors declared an additional dividend of

$37,500. In accordance with FRS-5 Events After Balance Date, the dividend has not been

recognised in the financial statements.

Subsequent to balance date market movements have resulted in a $3,000 drop in the market

value of shares held in the listed company. As the decrease in value is a non-adjustable event,the decrease in value has not been recognised in this year's financial statements.

FRS-5 5.3, 6.5(a)(b)


38/47

38

Appendices Page No

Appendix 1: Statutory information 39

Appendix 2: Differential reporting accounting policies 40

Appendix 3: Supplementary schedules 41

Appendix 4: Financial reporting requirements 42

Appendix 5: ASRB Release 9 43

Appendix 6: Implementing NZ IFRSs 46


39/47

39

Appendix 1 References

Statutory information1For the year ended 31 March 2011

Entries recorded in the Interests Register C93 S 211(1)(e)

Directors' salary remunerationAuthorised salary remuneration to Directors for the 2011 financial year was as follows:

AB Smith $107,000; CD Brown $20,000.Directors' indemnity and insuranceThe Company has insured its directors against liabilities to other parties (except to the Company

or a related party of the Company) that may arise from their positions as directors. The insurance

does not cover liabilities arising from criminal actions.

TransactionsThe Company rents a property from a trust of which CD Browns children are beneficiaries. The

rental for 2011 was $17,911 and increases two percent per annum.

Loans to and from DirectorsThe Company made a loan to AB Smith, which is secured by a mortgage over her residential

property. The loan is repayable by 28 February 2016. The Company also received loans from CD

Brown repayable by 31 August 2013.

Directors' Fees C93 S211(1)(f),(i)

The directors' fees remuneration for the 2011 financial year was as follows:

AB Smith $30,000; CD Brown $30,000.Executive Employees' Remuneration C93 S211(1)(g)

One employee received remuneration in $100,000 to $109,000 bracket during the current year.

Donations C93 S211(1)(h)

The Company donated $3,982 to various charitable organisations during the year.

Auditors' Remuneration C93 S211(1)(j)

The following amounts were payable to the auditors of the Company KPMG during the year:--

Audit Fees $2,500 Other services $3,972

Note 1In preparing the annual report of Signpost Limited it has been assumed that a unanimous shareholderresolution was passed in accordance with section 211(3) of the Companies Act 1993. This allows an entity togain an exemption from paragraphs (a) and (e) to (j) of section 211(1) of this Act. The above is an example of the

disclosure requirements required by section 211, assuming the section 211(3) resolution has not been passed.


40/47

40

Appendix 2

Differential reporting accounting policies

FRS-1 requires entities qualifying for differential reporting to disclose an accounting policy that states the following:

the criteria that establishes the entity as a qualifying entity for differential reporting; either:

the entity has taken advantage of all differential reporting exemptions; financial reporting standards where the entity base not take advantage of differential reporting

exemptions; or

financial reporting standards where differential reporting exemptions have been applied.In complying with the requirements of FRS-1, we also recommend that the entity briefly explains what differential

reporting is. The following are alternatives to note (A) of the accounting policies adopted by Signpost Limited

regarding the criteria for qualifying for differential reporting exemptions under the Framework for Differential

Reporting.

Accounting policies - Differential Reporting

Alternative 1

The Company is a qualifying entity by virtue of the fact that it has no public accountability and is small as defined

by the Framework for Differential Reporting.

All available differential reporting exemptions allowed under the Framework for Differential Reporting have been

adopted except for (state the FRS or SSAP for which the differential reporting exemption has not been taken).

Alternative 2

The Company is a qualifying entity by virtue of the fact that is has no public accountability and is small as defined

by the Framework for Differential Reporting. Differential reporting exemptions have been applied in relation to:

FRS-4 Accounting for Inventories FRS-10 Statement of Cash Flows SSAP-12 Accounting for Income Tax SSAP-22 Related Party Transactions


41/47

41

Appendix 3

Supplementary schedules

The following supplementary schedules can accompany a set of financial statements and may represent useful

financial information for stakeholders and other user of the financial statements.

Statement of Sources and Application of Cash Statement of Property, Plant & EquipmentHowever, they are not specifically required by any of the financial reporting standards and are not necessarily

attached as an integral part of a usual set of financial statements. The content and format of these

supplementary schedules can vary between reporting entities and therefore sample statements have not been

included in this publication.


42/47

42

Appendix 4

Financial reporting requirements

General purpose financial statements are financial statements provided to meet the information needs of external

users who are unable to require, or contract for, the preparation of special reports to meet their specific informationneeds. It is generally accepted that general purpose financial statements are prepared and presented in accordance

with GAAP.

Special purpose financial statements are tailored to meet the specific information needs of a particular person, group

of people or organisation. Such users can specify the accounting policies to be applied, the format of the financial

statements and other material to be included in a special purpose financial report. If an entity has no obligation to

present general purpose financial statements in accordance with GAAP, and all the members of the entity are in

agreement, it may be appropriate to prepare special purpose financial statements. There is no requirement for special

purpose financial statements to comply with GAAP. Rather, any special purpose financial statements should specify

the accounting policies applied in preparing the financial statements.

All companies must prepare financial statements that meet the requirements of the Financial Reporting Act 1993.

Unless they qualify as an exempt company, companies are required to prepare financial statements in accordance with

GAAP, as defined by the Act (FRA, section 3). FRA, Section 12 requires an exempt company to prepare financial

statements that are in the form prescribed by the Governor-General by Order of Council.

Other entities may not be governed by legislation that specifies that the financial statements must be prepared in

accordance with GAAP. In this situation, the entities should consider whether there are any relevant requirements in

their founding documents e.g. the constitution. If the constitution is silent, the entities will need to decide whether to

prepare GAAP compliant financial statements. The requirement to prepare general purpose financial reports and

adherence to GAAP is a question to be answered on a case by case basis.

The reporting entities that have to comply with GAAP need to consider the standards that are generally developed by

the New Zealand Institute of Chartered Accountants and approved by the ASRB. These standards are either:

the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) ; or if an entity can defer adoption of NZ IFRS, the Financial Reporting Standards (FRS) and Statement of Standard

Accounting Practice (SSAP) that were developed pre-2003.

The flowchart below describes the possible financial reporting requirements.


43/47

43

Appendix 5

ASRB Release 9

ISSUED SEPTEMBER 2007

Delay of the Mandatory Adoption of New Zealand Equivalents to InternationalFinancial Reporting Standards for Certain Small Entities

Issued by the Accounting Standards Review Board

INTRODUCTION

1 In December 2002, the Accounting Standards Review Board (the Board) announced that it had decided that New Zealandentities would be required to apply International Financial Reporting Standards (IFRSs), issued by the International

Accounting Standards Board (IASB), for periods commencing on or after 1 January 2007. Early adoption is permitted for

periods commencing on or after 1 January 2005. Many countries around the world, including Australia and the European

Union, have also adopted IFRSs or are in the process of doing so.

2 Since that announcement, the Board has reviewed and approved the New Zealand equivalents to IFRSs (NZ IFRSs),developed by the Financial Reporting Standards Board (FRSB) of the New Zealand Institute of Chartered Accountants, in

accordance with procedures outlined in ASRB Release 8 The Role of the Accounting Standards Review Board and the

Nature of Approved Financial Reporting Standards.

3 To date in New Zealand, NZ IFRSs have largely been adopted by large issuers, subsidiaries of overseas companiescomplying with IFRSs and the public sector. Generally, small entities have yet to begin the process of adopting NZ IFRSs.

In the meantime, the applicability of IFRSs to small entities has been the subject of significant debate: internationally, with

the IASBs publication of an Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities; in Australia, with

revisions to the financial reporting regime for small proprietary companies; and in New Zealand, with the extensive

consultation meetings recently conducted by the FRSB on financial reporting by small and medium-sized entities.

4 In addition, in September 2007, the Minister of Commerce advised the ASRB and FRSB that a government review of the

financial reporting requirements applying to small and medium-sized companies under the Financial Reporting Act 1993will commence in mid-2010.

5 As a consequence, the Board has decided that the mandatory adoption of NZ IFRSs should be delayed for certain smallentities that meet specified criteria. The purpose of the Release is to announce the Boards decision and to further explain

the reasons for that decision.

REVIEW OF THE REPORTING REQUIREMENTS FOR SMALL AND MEDIUM-SIZED COMPANIES

6 The Financial Reporting Act 1993 (the Act) requires companies, other than exempt companies, to prepare financialstatements that comply with generally accepted accounting practice (GAAP). To comply with GAAP, as defined by the Act,

those financial statements must comply with applicable financial reporting standards.

7 As noted in paragraph 4 above, the Minister of Commerce has advised the ASRB and FRSB that a review of the financial

reporting requirements applying to small and medium-sized companies under the Act will be commencing in mid-2010.

8 One issue that this review may well consider is whether New Zealand should adopt a similar financial reporting regime ascurrently exists in Australia for small and medium-sized companies. Under the Australian Corporations Act 2001, small

proprietary companies are not required to prepare financial statements, unless directed to do so.1 Recently, the size

thresholds to qualify as a small proprietary company were substantially increased.2


44/47

44

9 One possible outcome of the review could be that many small and medium-sized companies would no longer have alegislative requirement to prepare GAAP-compliant financial statements. This possibility calls into question whether these

companies should be required to adopt NZ IFRSs now. Of particular concern are those companies that currently prepare

GAAP-compliant financial statements solely because of the legislative requirement to do so. If that requirement were to

be removed in a few years time, the costs of changing from existing financial reporting standards to NZ IFRSs now are

likely to outweigh the benefits.

10 Therefore, the Board decided that the mandatory adoption of NZ IFRSs should be delayed for certain small companies thatmeet specified criteria.

ASRB DECISION

11 The Board has decided that companies, which satisfy allof the following criteria, are permitted to continue to apply theexisting approved New Zealand Financial Reporting Standards (FRSs) and, therefore, are not required to apply NZ IFRSs

for periods beginning on or after 1 January 2007, until further notice:

(a) The company is not an issuer, as defined by the Act, in either the current or preceding accounting period;

(b) The company is not required by section 19 of the Act to file its financial statements with the Registrar of Companies3;

and

(c) The company is not large, as defined by section 19A4 of the Act.

12 Companies that are required to prepare financial statements in accordance with GAAP and that meet the above criteriawill continue to have a choice between two sets of standards, the existing FRSs or NZ IFRSs.

ANNOUNCEMENT OF APPLICATION DATE OF NZ IFRSs

13 When the government review is completed, it will be established which, if any, of the companies affected by the abovedecision will continue to have a legislative requirement to prepare financial statements that comply with GAAP. At that

time, the Board intends to determine the date upon which any such companies will be required to adopt NZ IFRSs.

Furthermore, the Board intends that there will be a minimum of one year between the date of the announcement of that

decision and the earliest mandatory date of transition to NZ IFRSs.

14 However, the Boards intentions set out in paragraph 13 are subject to the government review being completed within areasonable period of time. The existing Financial Reporting Standards are not being maintained and, therefore, there may

become a point when continuing to apply those standards is no longer appropriate.

EFFECT ON OTHER TYPES OF ENTITIES

15 The Board is responsible for reviewing and, if it thinks fit, approving financial reporting standards submitted to it forapplication to the financial statements of entities subject to the Act. These entities include issuers, companies, local

authorities, crown entities, state sector bodies and any other entity that is required by another enactment to comply with

the Act as if it were a reporting entity. For entities subject to the Act, the delay of the mandatory adoption of NZ IFRSs

applies only to companies that meet the criteria in paragraph 11. Hence, all entities subject to the Act, other than exempt

companies and companies that meet the criteria in paragraph 11, will be required to adopt NZ IFRSs for periods beginning

on or after 1 January 2007.

16 In addition to entities subject to the Act, there also are many other types of entities that are not subject to the Act.Examples include sole traders, partnerships, trusts, charities, clubs, societies and associations. Some of these other types

of entities may be required to (e.g. by requirements established in their founding documents or in contractual

arrangements with third parties), or choose to, prepare general purpose financial statements in accordance with GAAP.

17 Although the Board has no statutory mandate over these entities, the Board is conscious that its decisions affect theseentities, through its role in approving financial reporting standards. The Board is aware also that the Ministry of Economic

Development (MED) is considering the financial reporting regime for charities. It is not yet known what the outcome of

this work will be, nor when any legislative change in the financial reporting requirements for charities would come into

effect. However, one possible outcome of this work is that, as with companies, some small charities that currently

prepare GAAP-compliant financial statements may no longer need to do so in a few years time. If that were to occur, it

calls into question the benefits of adopting NZ IFRSs now. Therefore, the Board supports the proposals of the FRSB to

extend the delay of the mandatory adoption of NZ IFRSs to other small entities, as explained below.


45/47

45

18 The New Zealand Preface, issued by the FRSB, explains the meaning of GAAP for entities that are not subject to the Actand that prepare general purpose financial statements. The Board understands that, as a consequence of the Boards

decision to delay the mandatory adoption of NZ IFRSs for some companies, the FRSB has decided that the mandatory

adoption of NZ IFRSs also will be delayed for some other entities that are not subject to the Act and that prepare general

purpose financial statements. Specifically, the FRSB has decided that this delay will apply to entities that are not publicly

accountable and are not large, as defined in the Framework for Differential Reporting. The Board understands that the

New Zealand Prefacewill be amended to reflect the decisions of the Board and the FRSB.

Warwick E. Hunt

Chairman

Accounting Standards Review Board

September 2007

Notes1) Such a company may be directed to prepare financial statements by shareholders with at least five percent of the

votes (under section 293 of the Corporations Act 2001) or by the Australian Securities and Investments Commission

(under section 294).

2) A proprietary company is a small proprietary company for a financial year if it satisfies at least two of the following

thresholds:

the consolidated gross operating revenue for the financial year of the company and the entities it controls (if any)is less than A$25 million; the value of the consolidated gross assets at the end of the financial year of the company and the entities it

controls (if any) is less than A$12.5 million;

the company and the entities it controls (if any) have fewer than 50 employees at the end of the financial year.3) In general, section 19 of the Act requires a company to file its financial statements if it is:

an overseas company or a subsidiary of an overseas company; or large and 25% of its voting power is held by overseas shareholders (entities or individuals).

4) A company is defined as large if it meets any two of the following three size thresholds:

as at balance date, the total assets (including intangible assets) of the company and its subsidiaries (if any)exceeds $10 million;

the total turnover of the company and its subsidiaries (if any) exceeds $20 million; as at balance date, the company and its subsidiaries (if any) have 50 or more full-time equivalent employees.


46/47

46

Appendix 6

Implementing NZ IFRS'sImplementing NZ IFRSs Preparation and planning makes it easy!

When you first report under NZ IFRSs, your financial report must comply with it fully (or as applicable under theDifferential Reporting Framework). Generally this will include:

Two statements of comprehensive income covering the current and comparative periods Two statements of cash flows (if required) covering the current and comparative periods Three statements of financial position covering:

The end of the current period The end of the comparative period The start of the comparative period

Entities are advised to conduct a detailed review to understand the impact that the adoption of NZ IFRSs may have on

their financial statements, reportable results, and on the current financial systems and processes used.

Non financial impacts that entities must consider on implementing NZ IFRSs

In general entities have to comply with new standards, and increased disclosures under the NZ IFRS regime, additional

related party disclosures are required under NZ IAS 24, and new standards such as Revenue (NZ IAS 18), IntangibleAssets (NZ IAS 38), Impairment of Assets (NZ IAS 36), and Financial Instruments (NZ IAS 32 and NZ IAS 39) to name a

few, need to be adhered to. Besides impacts on financial statements, entities must also consider non-financial impacts

to their business operations, for example:

Impact on systems

Disclosure of cost of sales, and expenses by either function or nature of expenses is now required, entities may have

to change the manner in which various expenses are classified and captured by financial systems so that appropriate

disclosures can be made in accordance with NZ IFRSs. In addition most New Zealand entities are well acquainted

with foreign currency and hedging products, such as forward contracts, interest and currency swaps. Entities may

need to use new tools or update their current financial system capability in order to track, account for, and recognise

fair value changes for these products.

Managerial bonuses and other remunerative options

Entities need to consider the impact of implementing NZ IFRSs to performance based bonus schemes, as profits

presented under NZ IFRSs may be significantly different from those calculated under current FRSs/SSAPs. Moreoverliabilities for share-based options provided to employees needs recognition under NZ IFRS 2, this represents a

significant change as previously these were accounted for on a cash basis.

Impact on bank covenants

The implementation of NZ IFRSs may increase or decrease the value of assets and liabilities presented in the balance

sheet, entities need to consider if this impacts any existing bank covenants.

KPMG implementation tools and NZ IFRS specialists

KPMGs methodology and tools are based around a four-phased conversion process that covers raising awareness of

NZ IFRS within your organisation, assessing the likely impacts of NZ IFRS, and designing and implementing the

accounting systems, processes and communication changes needed to achieve successful conversion.

Our specialist Accounting Advisory Services team in New Zealand provides:

A framework and technology for working through a conversion to NZ IFRS thats already been proven. The benefit of access to the decisions made by others in your position in New Zealand and around the world. Access, right here in New Zealand, to specialist NZ IFRS project management skills, NZ IFRS technical expertise,

and NZ IFRS training skills.


47/47

Date post:	05-Apr-2018
Category:	Documents
Upload:	6ofus
View:	223 times
Download:	0 times

Illustrative Financial Statements Signpost Ltd 2011

Documents