TRUE MOVE COMPANY LIMITED CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS 31 DECEMBER 2012

Transcription

1 TRUE MOVE COMPANY LIMITED CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS 31 DECEMBER 2012

2

3

4 Statements of Financial Position As at 31 December 2012 and Notes Baht Baht Baht Baht Assets Current assets Cash and cash equivalents 7 2,010,655,654 2,213,016, ,703,728 1,199,499,646 Restricted cash 8-1,219,889-1,219,889 Short-term investment 883, Trade and other receivables 9 11,909,621,049 9,178,947,989 8,906,605,904 8,565,941,533 Short-term loans to related companies ,000, ,000,000 Inventories, net 10 3,722,362,409 1,585,579,028 4,704,688 9,881,855 Claimable value added tax 371,116, ,598, ,896, ,332,503 Other current assets ,717, ,451, ,068, ,133,133 Total current assets 18,483,357,369 13,889,813,868 11,357,979,434 11,241,008,559 Non-current assets Restricted cash 8 290,000 1,156, Investments in subsidiaries ,774,571 60,774,571 Investment in other company 400, , , ,000 Property, plant and equipment, net 13 26,325,855,290 31,357,039,337 25,719,360,738 30,913,459,011 Intangible assets, net 14 3,110,999,968 3,220,088,417 3,053,396,655 3,192,124,467 Other non-current assets 220,120, ,573, ,616, ,777,951 Total non-current assets 29,657,665,646 34,771,258,029 28,956,548,450 34,296,536,000 Total assets 48,141,023,015 48,661,071,897 40,314,527,884 45,537,544,559 Director Director The accompanying notes are an integral part of these consolidated financial statements. 3

5 Statements of Financial Position (Cont d) As at 31 December 2012 and Notes Baht Baht Baht Baht Liabilities and shareholders equity Current liabilities Short-term borrowing - financial institutions ,000, Trade and other payables 15 11,692,912,607 10,440,093,738 5,571,227,396 7,474,223,504 Current portion of long-term borrowings ,208, ,208,407 - Short-term borrowing - related companies 25 6,227,000,000 2,600,000,000 6,200,000,000 2,600,000,000 Accrued expenses 1,945,693,519 1,369,719,208 1,258,859,126 1,286,379,650 Accrued regulatory cost 1,884,382,269 2,531,500,545 1,884,382,269 2,531,500,545 Unearned service income 655,162, ,438, ,217, ,111,214 Current portion of liability under agreement for operation ,137, ,118, ,137, ,118,714 Other current liabilities 258,301, ,337, ,052, ,308,783 Total current liabilities 24,157,798,222 18,660,207,747 16,621,084,746 15,572,642,410 Non-current liabilities Long-term borrowings 16 26,229,385,004 26,295,504,927 26,229,385,004 26,295,504,927 Employee benefit obligations ,872, ,073, ,873, ,983,359 Decommissioning liability 24,757,155 22,613,628 24,757,155 22,613,628 Liability under agreement for operation 17 2,931,899,884 3,454,971,405 2,931,899,884 3,454,971,405 Total non-current liabilities 29,344,914,575 29,935,163,411 29,294,915,105 29,931,073,319 Total liabilities 53,502,712,797 48,595,371,158 45,915,999,851 45,503,715,729 The accompanying notes are an integral part of these consolidated financial statements. 4

6 Statements of Financial Position (Cont d) As at 31 December 2012 and Note Baht Baht Baht Baht Liabilities and shareholders equity (Cont d) Shareholders equity Share capital Authorised share capital Ordinary shares, 4,128,130,138 shares of par Baht 10 each 19 41,281,301,380 41,281,301,380 41,281,301,380 41,281,301,380 Issued and paid-up share capital Ordinary shares, 4,128,130,138 shares of paid-up Baht 10 each 41,281,301,380 41,281,301,380 41,281,301,380 41,281,301,380 Share premium 19 1,858,400,000 1,858,400,000 1,858,400,000 1,858,400,000 Deficits (48,540,521,583) (43,113,131,062) (48,741,173,347) (43,105,872,550) Other components of equity 39,129,669 39,129, Equity attributable to owners of the parent (5,361,690,534) 65,699,987 (5,601,471,967) 33,828,830 Non-Controlling interests Total shareholders equity (deficit) (5,361,689,782) 65,700,739 (5,601,471,967) 33,828,830 Total liabilities and shareholders equity 48,141,023,015 48,661,071,897 40,314,527,884 45,537,544,559 50,113,073,015 48,661,071,897 42,286,577,884 45,537,544, The accompanying notes are an integral part of these consolidated financial statements. 5

7 Statements of Comprehensive Income Notes Baht Baht Baht Baht Revenues Revenues from mobile phone and other services 28,515,874,707 31,075,379,967 26,323,729,362 30,111,275,883 Revenues from product sales 14,360,447,010 6,049,840, ,293, ,469,196 Total revenues 42,876,321,717 37,125,220,007 26,467,022,497 30,301,745,079 Costs Cost of providing services 22,409,253,193 22,473,657,335 22,276,394,669 22,400,126,704 Cost of sales 13,373,662,945 5,567,346, ,107, ,019,149 Total costs 35,782,916,138 28,041,003,846 22,394,502,430 22,596,145,853 Gross profit 7,093,405,579 9,084,216,161 4,072,520,067 7,705,599,226 Other income 94,237,154 44,755,904 35,793,872 37,859,697 Selling expenses (5,204,397,190) (4,294,607,405) (2,687,429,305) (3,475,881,102) Administrative expenses (2,751,011,260) (2,813,848,904) (2,490,374,964) (2,389,619,755) Other expenses 21 (2,019,178,006) (78,548,163) (2,016,732,244) (65,890,346) Finance costs, net 22 (2,576,068,994) (5,295,289,462) (2,549,078,223) (5,298,678,034) Loss before income tax expense (5,363,012,717) (3,353,321,869) (5,635,300,797) (3,486,610,314) Income tax expense 23 (64,377,804) (20,754,275) - - Loss for the year (5,427,390,521) (3,374,076,144) (5,635,300,797) (3,486,610,314) Other comprehensive expense: Actuarial losses on defined employee benefit plans - (11,062,174) - (11,310,104) Total comprehensive expense for the year (5,427,390,521) (3,385,138,318) (5,635,300,797) (3,497,920,418) Loss attributable to: Owner of the parent (5,427,390,521) (3,491,558,312) (5,635,300,797) (3,486,610,314) Non-controlling interests - 117,482, (5,427,390,521) (3,374,076,144) (5,635,300,797) (3,486,610,314) Total comprehensive expense attributable to: Owner of the parent (5,427,390,521) (3,502,620,486) (5,635,300,797) (3,497,920,418) Non-controlling interests - 117,482, Loss per share 24 (5,427,390,521) (3,385,138,318) (5,635,300,797) (3,497,920,418) Loss for the year (1.31) (0.90) (1.37) (0.90) The accompanying notes are an integral part of these consolidated financial statements. 6

8 Statements of Changes in Shareholders Equity Attributable to owners of the parent Other components of equity Issued and Share surplus fully paid-up from business under Total owners of Non-controlling share capital Share premium Deficit common control the parent interest Total Baht Baht Baht Baht Baht Baht Baht Opening balance as at 1 January ,281,254,160 1,858,400,000 (39,469,969,587) - (330,315,427) 752 (330,314,675) Retrospective adjustments from change in accounting policy - - (140,540,989) - (140,540,989) (1,118,906) (141,659,895) Retrospective adjustments from business under common control ,000,000 22,000,000 (38,459,022) (16,459,022) As restated 37,281,254,160 1,858,400,000 (39,610,510,576) 22,000,000 (448,856,416) (39,577,176) (488,433,592) Additional shares (Note 19) 4,000,047, ,000,047,220-4,000,047,220 Transfer non-controlling interest before acquisition of business under common control ,904,240 77,904,240 (77,904,240) - Acquisition business under common control (60,774,571) (60,774,571) - (60,774,571) Actuarial losses on defined employee benefit plans - - (11,062,174) - (11,062,174) - (11,062,174) Total comprehensive income (expense) for the year - - (3,491,558,312) - (3,491,558,312) 117,482,168 (3,374,076,144) Closing balance as at 31 December ,281,301,380 1,858,400,000 (43,113,131,062) 39,129,669 65,699, ,700,739 Opening balance as at 1 January ,281,301,380 1,858,400,000 (43,113,131,062) 39,129,669 65,699, ,700,739 Total comprehensive expense for the year - - (5,427,390,521) - (5,427,390,521) - (5,427,390,521) Closing balance as at 31 December ,281,301,380 1,858,400,000 (48,540,521,583) 39,129,669 (5,361,690,534) 752 (5,361,689,782) The accompanying notes are an integral part of these consolidated financial statements. 7

9 Statements of Changes in Shareholders Equity (Cont d) Issued and fully paid up - share capital Share premium Deficit Total Baht Baht Baht Baht Opening balance as at 1 January ,281,254,160 1,858,400,000 (39,469,969,587) (330,315,427) Retrospective adjustments from change in accounting policy - - (137,982,545) (137,982,545) As restated 37,281,254,160 1,858,400,000 (39,607,952,132) (468,297,972) Additional shares (Note 19) 4,000,047, ,000,047,220 Actuarial losses on defined employee benefit plans - - (11,310,104) (11,310,104) Total comprehensive expense for the year - - (3,486,610,314) (3,486,610,314) Closing balance as at 31 December ,281,301,380 1,858,400,000 (43,105,872,550) 33,828,830 Opening balance as at 1 January ,281,301,380 1,858,400,000 (43,105,872,550) 33,828,830 Total comprehensive expense for the year - - (5,635,300,797) (5,635,300,797) Closing balance as at 31 December ,281,301,380 1,858,400,000 (48,741,173,347) (5,601,471,967) The accompanying notes are an integral part of these consolidated financial statements. 8

10 Statements of Cash Flows Notes Baht Baht Baht Baht Cash flows from operating activities Loss before income tax expense (5,363,012,717) (3,353,321,869) (5,635,300,797) (3,486,610,314) Adjustments for: Interest income (79,365,024) (62,854,927) (105,523,700) (60,007,048) Interest expenses 2,617,107,952 5,703,234,368 2,611,539,034 5,703,234,369 Depreciation charges 13 4,650,657,566 4,180,609,777 4,560,327,928 4,104,759,028 Amortisation of debt issuance costs 99,484, ,672,891 99,484, ,672,891 Amortisation of intangible assets ,080, ,263, ,971, ,243,043 Realised net gain on exchange rate - (5,034,821,441) - (5,034,821,441) Realised net loss on exchange rate from repayment to borrowings - 3,416,410,915-3,416,410,915 Unrealised net gain on exchange rate (111,080,307) (41,943,491) (111,113,833) (42,213,589) Doubtful accounts ,652, ,762, ,310, ,018,582 Impairment charge of mobile network equipment 13 1,972,050,000-1,972,050,000 - Write-off and loss on disposals of fixed asset 182,299,701 25,373, ,565,690 16,741,699 Employee benefit obligations 18 (3,200,919) 19,269,640 (49,110,297) 18,608,968 Changes in operating assets and liabilities - trade and other receivables (3,195,776,237) (2,177,379,046) (756,298,879) (1,701,533,932) - inventories (2,136,783,381) 1,014,061,626 5,177,166 78,569,123 - claimable value added tax (52,517,996) (103,939,214) 1,435,558 (110,834,838) - other current assets 80,042,984 (95,532,091) 86,374,579 (86,615,404) - other non-current assets (27,546,741) (17,989,608) 7,161,464 1,312,883 - trade and other payables 1,212,882,331 (2,577,217,040) (1,858,736,259) (1,324,299,798) - accrued expenses (38,227,753) 575,042,784 (641,188,343) 274,915,111 - other current liabilities (184,311,504) 329,228,108 (197,149,827) 312,785,527 - liability under minimum payment of agreement for operation 17 (730,000,000) (679,000,000) (730,000,000) (679,000,000) Cash (used in) generated from operations (560,564,396) 2,300,930,482 (95,024,373) 2,251,335,775 Add Interest received 80,521,193 63,999, ,696,480 57,055,908 Withholding tax refund 411,967, ,222, ,789, ,134,475 Less Interest paid (2,322,408,841) (5,632,864,643) (2,317,374,170) (5,632,864,643) Income tax paid (withholding tax) (313,759,898) (369,451,625) (255,889,097) (307,938,197) Net cash used in operating activities (2,704,244,019) (3,308,163,976) (2,180,801,968) (3,370,276,682) The accompanying notes are an integral part of these consolidated financial statements. 9

11 Statements of Cash Flows (Cont d) Notes Baht Baht Baht Baht Cash flows from investing activities Decrease in restricted cash 2,086,517 42,811,543 1,219,889 42,815,777 Purchases of intangible assets (74,571,290) (35,656,352) (47,483,784) (34,087,261) Purchases of non-network assets (342,370,962) (316,336,554) (107,122,602) (185,701,491) Purchases of network equipment (1,720,146,578) (2,431,136,810) (1,712,358,510) (2,431,046,810) Purchases of short-term investment (883,612) Proceeds from disposals of equipment 361,192,322 94, ,174,725 77,176 Cash invested in share to subsidiaries 12 - (60,774,571) - (60,774,571) Loans settlements received from related companies 25 2,250,000,000 57,600,000 2,870,000, ,000,000 Loans made to related companies 25 (2,250,000,000) (37,300,000) (3,005,000,000) (890,000,000) Net cash used in investing activities (1,774,693,603) (2,780,697,937) (1,639,570,282) (3,283,717,180) Cash flows from financing activities Proceeds from short-term borrowings from financial institutions 650,000, Proceeds from short-term borrowings from related company 25 4,699,000,000 2,600,000,000 4,670,000,000 2,600,000,000 Repayment to short-term borrowings from related company 25 (1,072,000,000) - (1,070,000,000) - Proceeds from long-term borrowing - 25,781,126,166-25,781,126,166 Repayment to long-term borrowings - (1,449,162,900) - (1,449,162,900) Payment to buyback US Dollar notes - (23,793,856,740) - (23,793,856,740) Proceeds from additional share capital - 4,000,047,220-4,000,047,220 Net cash generated from financing activities 4,277,000,000 7,138,153,746 3,600,000,000 7,138,153,746 Net (decrease) increase in cash and cash equivalents (201,937,622) 1,049,291,833 (220,372,250) 484,159,884 Cash and cash equivalents at the beginning of the year 2,213,016,944 1,162,836,545 1,199,499, ,451,196 Effect of exchange rate change on cash (423,668) 888,566 (423,668) 888,566 Cash and cash equivalents at the end of the year 2,010,655,654 2,213,016, ,703,728 1,199,499,646 2,010,655,654 2,213,016, ,703,728 1,199,499,646 Non-cash transactions Significant non-cash transactions for the years ended 31 December 2012 and 2011 comprise: Million Baht Million Baht Million Baht Million Baht Acquisitions of property and equipment which have not been paid 1, , , , The accompanying notes are an integral part of these consolidated financial statements. 10

12 Notes to the and Financial Statements 1 General information True Move Limited ( the ) is incorporated and resident in Thailand. The address of the s registered office is as follows: 18 True Tower, Ratchadapisek Road, Huai Khwang District, Bangkok The principal business operations of the Group are summarised as follows: a) The operations of a 1800 MHz mobile telecommunications business in Thailand under the right to operate and provide services under the digital PCN 1800 system, dated June 20, 1996 as amended on 23 February 2000 and 8 September 2000, granted by CAT Telecom Public Limited ( CAT ). The agreement covered a 17 years period from 20 June 1996 to15 September 2013; b) Trading and providing services for telecommunication equipment; c) Content provider; and d) Providing international telephone service or International Direct Dialing (IDD) services. 2 Financial position For the year ended 31 December 2012, the Group incurred consolidated net loss of Baht 5, million. As at 31 December 2012, consolidated total current liabilities exceed consolidated total current assets by Baht 5, million. However, the parent company, Real Future Limited, has confirmed its intention to continue to provide financial support to the to enable it to meet its obligations as they fall due. Accordingly, the s management has prepared these financial statements on a going concern basis. 3 Accounting policies The principal accounting policies applied in the preparation of these consolidated and company financial statements are set out below: 3.1 Basis of preparation The consolidated and company financial statements have been prepared in accordance with Thai generally accepted accounting principles under the Accounting Act of B.E. 2543, being those Thai Financial Reporting Standards issued under the Accounting Professions Act B.E The consolidated and company financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with Thai generally accepted accounting principles requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement on complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4. An English version of the consolidated and company financial statements have been prepared from the statutory financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language statutory financial statements shall prevail. 11

13 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.2 New accounting standards, new financial reporting standard, new interpretations and amendments to accounting standard New accounting standards, new financial reporting standard, new interpretations and amendments to accounting standard that are not yet effective and have not been early adopted by the Group: Effective for the periods beginning on or after 1 January 2013 TAS 12 TAS 20 TAS 21 (Revised 2009) TFRS 8 TSIC 10 TSIC 21 TSIC 25 Income taxes Accounting for Government Grants and Disclosure of Government Assistance The Effects of Changes in Foreign Exchange Rates Operating Segments Government Assistance - No Specific Relation to Operating Activities Income Taxes - Recovery of Revalued Non-Depreciable Assets Income Taxes - Changes in the Tax Status of an Entity or its Shareholders TAS 12 deals only with taxes on income, comprising current and deferred tax. Current tax expense for a period is based on the taxable and deductible amounts that will be shown on the tax return for the current year. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the statement of financial position date. Deferred tax accounting is based on the temporary differences between the tax base of an asset or liability and its carrying amount in the financial statements. TSIC 21 clarifies that deferred tax liability or asset that arises from the revaluation of a non-depreciable asset in accordance with TAS 16 shall be measured on the basis of the tax consequences that would follow from recovery of the carry amount of that asset through sale, regardless of the basis of measuring the carrying amount of that asset. TSIC 25 clarifies that a change in the tax status of an entity or its shareholders does not give rise to increases or decreases in amounts recognised outside profit or loss. The current and deferred tax consequences of a change in tax status shall be included in profit or loss for the period, unless those consequences related to transactions and events that result, in the same or different period, in a direct credit or charge to the recognised amount of equity or in amounts recognised in other comprehensive income. Those tax consequences shall be charged directly to equity or other comprehensive income, respectively. The Group is assessing the impact of deferred tax. TFRS 8 requires a management approach under which segment information is presented on the same basis that used for internal reporting purpose as provided to the chief operating decision makers. The Group is assessing the impact on disclosure. TAS 20 applies in accounting for, and in the disclosure of, government grants and in the disclosure of other forms of government assistance. Government grants are recognised when there is reasonable assurance that the entity will comply with conditions related to them and that the grants will be received. Grants related to income are recognised in profit or loss over periods necessary to match them with the related costs that they are intended to compensate. Grants related to assets are either offset against the carrying amount of the relevant asset or presented as deferred income in the statement of financial position. TSIC 10 clarifies on TAS 20 that government assistance to entities meets the definition of government grants in TAS 20, even if there are no conditions specifically relating to the operating activities of the entity other than the requirement to operate in certain regions or industry sectors. Such grants shall therefore not be credited directly to shareholders interests. The standard and interpretation are not relevant to the Group s operations. 12

14 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.2 New accounting standards, new financial reporting standard, new interpretations and amendments to accounting standard (Cont d) New accounting standards, new financial reporting standard, new interpretations and amendments to accounting standard that are not yet effective and have not been early adopted by the Group: (Cont d) TAS 21 (revised 2009) requires an entity to determine its functional currency which is the currency of the primary economic environment in which the entity operates. Currency other than functional currency of an entity is foreign currency. Foreign currency transactions are required to be translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from translation at year-end exchange rate of monetary items denominated in foreign currency are recognised in profit or loss. The standard permits the presentation currency of a reporting entity to be any currencies. The results and financial positions of all the Group entities that have a functional currency different from the presentation currency are translated in the presentation currency as follows: (a) assets and liabilities are translated at the closing rate at the date of that statement of financial position; (b) income and expenses are translated at the exchange rate at the date of the transactions; and (c) all resulting exchange differences are recognised in the statement of comprehensive income. The standard is not relevant to the Group s operations. Effective for the periods beginning on or after 1 January 2014 TFRIC 4 TFRIC 12 TFRIC 13 TSIC 29 Determining whether an Arrangement contains a Lease Service Concession Arrangements Customer Loyalty Programmes Service Concession Arrangements: Disclosure TFRIC 4 requires the determination of whether an arrangement is or contains a lease to be based on the substance of the arrangement. It requires an assessment of whether: (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and (b) the arrangement conveys a right to use the asset. TFRIC 4 is not relevant to the Group s operations. TFRIC 12 deals with public-to-private service concession arrangements for the delivery of public services. It applies only to concession agreements where the use of the infrastructure is controlled by the grantor. This interpretation requires two different accounting treatments, depending on the specific terms of the concession agreement. When the operator builds infrastructure and has an unconditional contractual right to receive cash or another financial asset from the grantor, that right is treated as a financial asset. When the operator builds infrastructure and receives a right (a licence) to charge users of the public service, that right is treated as an intangible asset. TFRIC 12 is not relevant to the Group s operations. TFRIC 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a multiple-element arrangement, and the consideration received or receivable from the customer is allocated between the components of the arrangement using fair values. The management is currently assessing the impact of applying this interpretation. TSIC 29 contains disclosure requirements in respect of public-to-private service arrangements. 13

15 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.2 New accounting standards, new financial reporting standard, new interpretations and amendments to accounting standard (Cont d) During 2011 the adopted the new and revised accounting standard (TAS 19: Employee benefits and TAS 16 (Revise 2009): Property, plant and equipment). The effect of the adoption of the new and revised accounting standards are presented as follows: Baht Baht Increase in deficits of decommissioning cost at 1 January ,918,258 9,918,258 Increase in deficits of employee benefit obligations 130,622, ,064,287 Increase in deficits at 1 January ,540, ,982, Group Accounting - Investments in subsidiaries (1) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. Investment in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss. Intercompany transactions, balances and unrealised gains or loss on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. A list of Group s principal subsidiaries are set out in Note

16 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.3 Group Accounting - Investments in subsidiaries (Cont d) (2) Transactions and non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. 3.4 Foreign currency translation Items included in the financial statements of each of the Group s entities are measured using Thai Baht. The consolidated financial statements are presented in Thai Baht. Foreign currency transactions are translated into Thai Baht using the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated into Thai Baht at the exchange rate prevailing at the statement of financial position date. Gains and losses resulting from the settlement of foreign currency transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the profit or loss. Translation differences on investments in debt securities and other monetary financial assets measured at fair value are included in foreign exchange gains and losses. Translation differences on non-monetary items such as investments in equity securities held for trading are reported as part of the fair value gain or loss. Translation differences on available-for-sale investments in equity securities are included in the revaluation reserve in equity. 3.5 Cash and cash equivalents In the consolidated and company statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. 3.6 Trade accounts receivable Trade accounts receivable are carried at the original invoice amount and subsequently measured at the remaining amount less any allowance for doubtful receivables based on a review of all outstanding amounts at the year-end. The amount of the allowance is the difference between the carrying amount of the receivable and the amount expected to be collectible. Bad debts are written-off during the year in which they are identified and recognised in profit or loss under administrative expenses. The Group adopted the following policies for cash cards. Cash cards are purchased from a related party and sold to another related party and other dealers, at their face-value. Cash cards are recorded in inventory at their face-value, which is the estimated fair value of the card. Top up cards are recorded in inventory at the cost to produce the card. The sales and cost of cash card is reflected net in the statement of comprehensive income. The receivables and payables are reflected gross in the statement of financial position. The Group receives the commission income from cash card sold. 15

17 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.7 Inventories Inventories are stated at the lower of cost and net realisable value, except cash cards are stated at the face value of card. Cost is determined by the moving weighted average method. The cost of purchase comprises both the purchase price and costs directly attributable to the acquisition of the inventory, such as import duties and transportation charges, less all attributable discounts, allowances or rebates. Net realisable value is the estimate of the selling price in the ordinary course of business, less applicable variable selling expenses. Allowance is made, where necessary, for obsolete, slow-moving and defective inventories. The Group follows separate accounting policies for their inventory of Cash Cards and Top Up Cards are set out in Note Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost to their residual values over the estimated useful lives as follows: Years Buildings 40 Building improvements 20 Office equipment, furniture and fixtures 8 Power supply and computer equipment 5 Motor vehicles 5 Network equipment Site preparation cost The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Mobile phone network equipment under agreement for operation represents cost of certain equipment and other assets, which have been transferred to the CAT, presented under network equipment. Mobile phone network equipment under agreement for operation is amortised as an expense on the straight-line method over the shorter of estimated useful lives of equipment or the remaining operation period. The asset s carrying amount is written-down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount (Note 3.10). Gains or losses on disposals are determined by comparing proceeds with carrying amounts and are recognised within Other (losses)/gains - net in profit or loss. 16

18 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.9 Intangible assets Computer software Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: it is technically feasible to complete the software product so that it will be available for use; management intends to complete the software product and use or sell it; there is an ability to use or sell the software product; it can be demonstrated how the software product will generate probable future economic benefits; adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and the expenditure attributable to the software product during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Computer software development costs recognised as assets are amortised over their estimated useful lives, which does not exceed 10 years Right to operate Under the s agreement for operation, the must pay annual fees to the grantor based on either fixed percentages of relevant revenues or at the minimum fee amounts stipulated in the agreement whichever is higher. The right to operate represents the present value of the minimum fees payable over the operation period. The right to operate is presented in the consolidated statement of financial position as an intangible asset and is amortised using the straight-line method over the operation periods. Amortisation of right to operate is included in Cost of providing services. The right to operate is not re-valued subsequent to initial recognition but is reviewed annually for impairment Other intangible assets Expenditure on acquired license is capitalised and amortised using the straight-line method over their useful lives, generally over 5 years. Intangible assets are not revalued Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the assets exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. 17

19 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.11 Leases - where a Group company is the lessee Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. The Group leases certain property, plant and equipment. Leases of property, plant or equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to profit or loss over the lease period so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant or equipment acquired under finance leases is depreciated over the shorter period of the useful life of the asset and the lease term Borrowings Borrowings are recognised initially at the fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective yield method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of reporting date Provisions Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 18

20 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.14 Employee benefits Provident fund The Group operates a provident fund, being a defined contribution plan. The assets of which are held in a separate trustee-administered fund. The provident fund is funded by payments from employees and by the relevant Group of companies. The Group s contributions to provident fund are charged to the statement of income in the period to which the contributions relate. Legal severance pay The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using market yield of government bonds that are denominated in the currency in which the benefits will be paid. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise Income tax The company calculates income tax in accordance with the Revenue Code and records income tax on an accrual basis. The Group does not recognise income taxes payable or receivable in future periods in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The principal temporary differences arise from depreciation on property, plant and equipment, unearned service revenue, allowance for doubtful, provisions for pensions and other post retirement benefits and tax losses carried forward and, in relation to acquisitions, on the difference between the fair values of the net assets acquired and their tax base Revenue recognition Revenue comprises the fair value of consideration received or receivable for the sales of goods and services in the ordinary course of the Group s activities. Revenue is shown net of value-added tax, rebates and discounts, and after eliminating sales within the Group. Revenue from mobile phone services are recognised when services are rendered to customers based on the actual airtime minutes. Revenue from interconnection charge services, is recognised on an accrual basis at the rates stipulated in the agreements of incoming calls, SMS and MMS from other operators who signed interconnection charge contract with the. The sells Top Up Cards which are generic cards that require the customer to periodically add money in order to recharge, and are used by the customer to access services on our network. The recognises revenue from the Top Up Cards using the actual airtime minutes corresponding to such cards when used by the customers. 19

21 Notes to the and Financial Statements 3 Accounting policies (Cont d) 3.16 Revenue recognition (Cont d) The Group sells Cash Cards, which are non-rechargeable cards with a pre-determined face-value, that allow the customer to access a variety of services providing by the True Group, such as accessing our network, online games, internet, personal communication telephone (PCT). The Group recognises commissions from distributing the Cash Cards to a sister company of True Corporation Public Limited. Where a customer accesses our network, the recognises revenue using the actual airtime minutes. The sales and costs of Cash Cards is reflected net in the statement of comprehensive income. The related receivables and payables are reflected gross in the statement of financial position. Revenue from sales of mobile phone handsets and related equipment is recognised upon delivery of the handsets and equipment and customer acceptance. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. 4 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. a) Estimated impairment of property, plant and equipment and intangible assets The Group tests annually whether property, plant and equipment and intangible assets have suffered any impairment, in accordance with accounting policy stated in Note The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. b) Allowance for doubtful accounts The Group records an allowance for doubtful accounts which is equivalent to the estimated collection losses that may be incurred in the collection of all receivables. The estimated losses are based on historical collection experience combined with a review of all outstanding receivables at the statement of financial position date. The allowance for doubtful account might be changed. c) Useful life of property, plant and equipment and intangible assets The Group s property, plant and equipment are deal with telecommunication network and computer system network. The annual depreciation charge is sensitive to the estimated useful lives and residual values allocated to each type of asset. Useful lives and residual values are assessed annually and change when necessary to reflect current situation on their remaining useful lives in light of technological change, prospective economic utilisation and physical condition of the assets concerned. d) Borrowings The fair values are based on discounted cash flows using a discount rate based upon the borrowing rate which the directors expect would be available to the Group at the statement of financial position date. The change in the discount rate would impact the fair value of the borrowings. 20

22 Notes to the and Financial Statements 4 Critical accounting estimates and judgements (Cont d) e) Employee benefit The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will have an impact on the carrying amount of pension obligations. The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Group considers the market yield of high-quality government bonds that are denominated in the currency in which the benefits will be paid. 5 Capital risk management The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may issue new shares, issued new debenture to refinance debts or sell assets to reduce debt. 6 Financial risk management 6.1 Financial risk factors The Group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group s financial performance. Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board of Directors. The Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments, and investment excess liquidity Foreign exchange rate risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollars. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. Purchases of property, equipment and network equipment and borrowing are mainly made in foreign currencies. 21