Financial Report The purpose of this publication is to assist users in preparing annual financial reports in accordance with Australian Accounting Standards Reduced Disclosure Requirements. It illustrates one possible format for a not-for-profit, public company - limited by guarantee, which is operating as a typical Independent School. This report may not include all disclosures that are appropriate to your School. RDR School Example Limited is a reporting entity preparing a general purpose financial report in accordance with Australian Accounting Standards Reduced Disclosure Requirements. The company has elected to early adopt Australian Accounting Standards - Reduced Disclosure Requirements on the basis that it is not publicly accountable.
31 December 2012 CONTENTS Financial Report Directors' Report 3 Auditor's Independence Declaration under Section 307C of the Corporations Act 2001 6 Independent Audit Report 7 Directors' Declaration 9 Statement of Comprehensive Income 10 Statement of Financial Position 11 Statement of Changes in Equity 12 Statement of Cash Flows 13 14 Page RDR School Example Limited Financial Report Page 2
Directors' Report 31 December 2012 Your directors present their report on the company (or the School ) for the financial year ended 31 December 2012. 1. General information (a) Directors The names of the directors in office at any time during, or since the end of, the year are: Names Appointed/Resigned Mr. Kyle Watson Appointed 19/11/2002 Mr. Leigh Carter Appointed 1/5/2005 Mr. Thomas White Appointed 27/7/2008 (b) Principal Activities The principal activity of RDR School Example Limited during the financial year was the provision of education to students from Kindergarten to Year 12. No significant change in the nature of these activities occurred during the year. (c) Objectives and Strategy The School's short term objectives are to: Operate an independent non-government school providing education to students from Kindergarten through to Year 12. The School's long term objectives are to: continue providing education to students from Kindergarten through to Year 12 through continual improvements to the School's curriculum and facilities. To achieve these objectives, the School has adopted the following strategies: continue to employ high quality teaching staff to implement the curriculum; and prepare a long term strategic plan which will be reviewed on a regular basis. The School measures its own performance through a number of financial and non-financial benchmarks; including analysis against the authorised yearly budget and 10-year strategic plan. The benchmarks are used by the directors to assess the financial performance and sustainability of the School and whether the School s short-term and long-term objectives are being achieved. 1 1 The directors should disclose how the School measures its performance, including any key performance indicators used by the School. RDR School Example Limited Financial Report Page 3
Directors' Report 31 December 2012 (d) Members guarantee RDR School Example Limited is a company limited by guarantee. In the event of, and for the purpose of winding up of the company, the amount capable of being called up from each member and any person or association who ceased to be a member in the year prior to the winding up is 2. At 31 December 2012 the collective liability of members was 6 (2011: 6). 2. Director Information (a) Information on Directors Mr. Kyle Watson Qualifications Experience Special responsibilities Chair (non-executive) Bachelor of Business, member of the Institute of Chartered Accountants Appointed chair in 2008. Board member since 2002, director or Other Entity Limited Mr Watson is a member of the Finance Committee. Mr. Leigh Carter Director (non-executive) Qualifications Bachelor of Science. Experience Over 15 years experience as director on various board, including 3 listed entities and 4 non-profit organisations. Special responsibilities None. Mr. Thomas White Qualifications Experience Special responsibilities Director (non-executive) B.A, Dip Ed. Director since 2008, Mr White has over 35 years experience in education and 15 years experience as a director for non-profit organisations. None. (b) Meetings of Directors During the financial year, 12 meetings of directors were held. Attendances by each director during the year were as follows: Board of Directors Eligible to attend Number attended Mr Kyle Watson 12 12 Mr Leigh Carter 12 12 Mr Thomas White 12 10 RDR School Example Limited Financial Report Page 4
Directors' Report 31 December 2012 3. Other items (a) Auditor's Independence Declaration The lead auditors independence declaration for the year ended 31 December 2012 has been received and can be found on page 6 of the financial report. Signed in accordance with a resolution of the Board of Directors: Director:... Mr. Leigh Carter Director:... Mr. Thomas White Dated this... day of... 2013 RDR School Example Limited Financial Report Page 5
The Board of Directors RDR School Example Limited 57 Business Street SUBURB NSW 2134 30 March 2012 Dear Board Members Auditor's Independence Declaration under Section 307C of the Corporations Act 2001 In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of RDR School Example Limited. As audit partner for the audit of the financial statements of RDR School Example Limited for the financial year ended 31 December 2012, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely Nexia Court & Co Chartered Accountants [Partner Name] Partner
Independent Audit Report to the members of RDR Example Accounts Ltd Report on the Financial Report We have audited the accompanying financial report of RDR School Example Limited, which comprises the statement of financial position as at 31 December 2012, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration. Directors' Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Our procedures include reading the other information in the Financial Report to determine whether it contains any material inconsistencies with the Financial Report. Our audit did not involve an analysis of the prudence of business decisions made by Directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independent Audit Report to the members of RDR Example Accounts Ltd Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor's Opinion In our opinion the financial report of RDR School Example Limited is in accordance with the Corporations Act 2001, including: (a) (b) giving a true and fair view of the company s financial position as at 31 December 2012 and of its performance for the year ended on that date; and complying with Australian Accounting Standards Reduced Disclosure Requirements (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. Nexia Court & Co Chartered Accountants [Name of Partner] Partner Sydney Dated: RDR School Example Limited Financial Report Page 8
Directors' Declaration The directors of the company declare that: 1. The financial statements and notes, as set out on pages 10 to 31, are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards Reduced Disclosure Requirements (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) give a true and fair view of the financial position as at 31 December 2012 and of the performance for the year ended on that date of the company; 2. In the directors opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by: Director... Mr. Leigh Carter Director... Mr. Thomas White Dated: RDR School Example Limited Financial Report Page 9
Statement of Comprehensive Income Revenue 3(a) 40,007,631 38,331,999 Other income 3(b) 129,200 95,200 Note 2012 2011 40,136,831 38,427,199 Employee benefits expense (20,624,063) (20,488,467) Operating expenses (4,145,047) (3,177,089) Academic and ex/co-curricular expenses (2,747,967) (2,540,565) Depreciation expenses 4,9 (3,988,859) (3,547,200) Maintenance expenses (1,435,207) (1,204,469) Finance expense 4 (291,030) (348,445) Other expenses (1,695,021) (1,505,588) (34,927,194) (32,811,823) Surplus for the year 5,209,637 5,615,376 Other comprehensive income - - Total comprehensive income for the year attributable to members 5,209,637 5,615,376 The accompanying notes form part of these financial statements. RDR School Example Limited Financial Report Page 10
Statement of Financial Position As At 31 December 2012 ASSETS Current assets Cash and cash equivalents 5 4,829,815 1,053,728 Trade and other receivables 6 606,919 932,576 Inventories 7 548,591 532,334 Other current assets 8 662,958 565,729 Total current assets 6,648,283 3,084,367 Non-current assets Property, plant and equipment 9 46,053,257 44,733,915 Total non-current assets 46,053,257 44,733,915 TOTAL ASSETS 52,701,540 47,818,282 LIABILITIES Current liabilities Trade and other payables 10 2,062,070 2,458,369 Borrowings 11 256,840 256,840 Employee benefits 12 1,503,281 1,640,978 Total current liabilities 3,822,191 4,356,187 Non-current liabilities Trade and other payables 10 1,302,331 990,496 Borrowings 11 2,568,200 2,825,040 Employee benefits 12 388,689 236,067 Total non-current liabilities 4,259,220 4,051,603 TOTAL LIABILITIES 8,081,411 8,407,790 NET ASSETS 44,620,129 39,410,492 Note 2012 2011 SCHOOL FUNDS Reserves 13 50,000 95,200 Accumulated funds 44,570,129 39,315,292 TOTAL SCHOOL FUNDS 44,620,129 39,410,492 The accompanying notes form part of these financial statements. RDR School Example Limited Financial Report Page 11
Statement of Changes in Equity Note Retained Earnings Reserves Balance at 1 January 2011 33,795,116-33,795,116 Total comprehensive income for the year Surplus for the year attributable to members 5,615,376-5,615,376 Total comprehensive income for the year attributable to members 5,615,376-5,615,376 Transactions with owners, in their capacity as owners, and other transfers Transfer of building fund donations and interest 13 (95,200) 95,200 - Transfer from the building fund to the School 13 - - - Total transactions with owners and other transfers (95,200) 95,200 - Balance at 31 December 2011 39,315,292 95,200 39,410,492 Total Total comprehensive income for the year Surplus for the year attributable to members 5,209,637-5,209,637 Total comprehensive income for the year attributable to members 5,209,637-5,209,637 Transactions with owners, in their capacity as owners, and other transfers Transfer of building fund donations and interest 13 (138,175) 138,175 - Transfer from the building fund to the School 13 183,375 (183,375) - Total transactions with owners and other transfers 45,200 (45,200) - Balance at 31 December 2012 44,570,129 50,000 44,620,129 The accompanying notes form part of these financial statements. RDR School Example Limited Financial Report Page 12
Statement of Cash Flows Cash from operating activities: Receipts from student fees and sale of goods 38,132,505 34,439,917 Receipts from recurrent grants 5,123,883 4,743,856 Receipts from non-recurrent grants 903,584 2,731,696 Receipts for the building fund 129,200 99,200 Payments to suppliers and employees (34,947,140) (32,339,536) Interest received 290,126 204,388 Interest paid (291,030) (348,444) Net cash from operating activities 9,341,128 9,531,077 Note 2012 2011 Cash flows from investing activities: Proceeds from sale of plant and equipment - 26,248 Acquisition of property, plant and equipment (5,308,201) (6,102,151) Net cash from investing activities (5,308,201) (6,075,903) Cash flows from financing activities: Repayment of borrowings (256,840) (3,180,840) Net cash from financing activities (256,840) (3,180,840) Net cash increase in cash and cash equivalents 3,776,087 274,334 Cash and cash equivalents at beginning of year 1,053,728 779,394 Cash and cash equivalents at end of year 5 4,829,815 1,053,728 The accompanying notes form part of these financial statements. RDR School Example Limited Financial Report Page 13
1 Reporting Entity RDR School Example Limited (the company or the School ) is a company domiciled in Australia. The address of the School s registered office is 57 Business Street, Suburb Sydney, NSW, 2134. The School operates a non-government school providing education from Kindergarten through to Year 12. The financial report covers RDR School Example Limited as an individual entity and was authorised for issue on 30 March 2013 by the directors of the company. The company has the power to amend and reissue the financial report. 2 Summary of Significant Accounting Policies (a) Basis of Preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards - Reduced Disclosure Requirements and Interpretations of the Australian Accounting Standards Board and the Corporations Act 2001. The School is a not-for-profit entity for financial reporting purposes under Australian Accounting Standards. Australian Accounting Standards set out accounting policies that the Australia Accounting Standards Board (AASB) has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless otherwise stated. The financial statements, except for the cash flow information, have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by measurement at fair value of selected non-current assets, financial assets and financial liabilities. 1 1 This note needs to be modified by Schools to identify those assets and liabilities that are measured at fair value. RDR Example School Limited does not carry non-current assets, financial assets or financial liabilities at fair value. The School has elected to early adopt the following pronouncements: In the previous year the School elected to early adopt AASB 1053 Application of Tiers of Australian Accounting Standard and AASB 2010-2 Amendments to Australian Accounting Standard arising from Reduced Disclosure Requirements. As a consequence, the School has also adopted AASB 2011-2 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project Reduced Disclosure Requirements and AASB 2011-6 Amendments to Australian Accounting Standards Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation Reduced Disclosure Requirements. This is because the reduced disclosure requirements in AASB 2011-2 and AASB 2011-6 relate to Australian Accounting Standards that mandatorily apply to annual reporting periods beginning after 1 July 2011. The adoption of these standards allowed the School to remove a number of disclosures. RDR School Example Limited Financial Report Page 14
2 Summary of Significant Accounting Policies (continued) (i) Presentation currency These financial statements are presented in Australian dollars which is the School s functional currency. (ii) Significant accounting judgements, estimates and assumptions The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results could differ from those estimates and may have impact on future periods. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Significant accounting judgements, estimates and assumptions are described below: Provision for employee benefits Provisions for employee benefits payable after 12 months from the reporting date are based on future wage and salary levels, experience of employee departures and periods of service, as discussed in Note 2(l). The amount of these provisions would change should any of these factors change in the next 12 months. Provision for impairment of trade receivables The value of the provision for impairment of receivables is estimated by considering the ageing of receivables, communication with the debtors and prior history. (b) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of discounts, bursary concessions and scholarships. The School recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the School's activities as described below. All revenue is stated net of the amount of goods and services tax (GST). (i) Tuition fees Income from tuition fees is recognised when the fee in respect of the provision of educational services provided is receivable. Fees are recognised in the statement of comprehensive income net of concessions allowed and are separately shown in Note 3. (ii) Interest revenue Interest income is accrued on a time basis, based on the principal outstanding and at the effective interest rate applicable. RDR School Example Limited Financial Report Page 15
2 Summary of Significant Accounting Policies (continued) (iii) Grant revenue Grant revenue is recognised when the School obtains control or right to receive the grant, it is probable that the economic benefits gained from the grant will flow to the School, and the amount of the grant can be measured reliably. Grants received on the condition that specified services are delivered, or conditions are fulfilled, are initially recognised as a liability and revenue is recognised as services are performed or conditions fulfilled. (iv) Donations and bequests Donations and bequests are recognised as revenue when the School gains control or right to receive, economic benefits are probable, and the amount of the donation or bequest can be measured reliably. (v) Other revenue Revenue from other sources is recognised when the fee in respect of other products or services provided is receivable. (c) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. (d) Trade and other receivables Fee and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment (doubtful debts). Trade receivables are due for settlement no more than 90-days from the date of recognition. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written-off. A provision for impairment is established when there is objective evidence that the School will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the statement of comprehensive income. (e) Inventories Inventories comprise goods for resale and 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 necessary to make the sale. RDR School Example Limited Financial Report Page 16
2 Summary of Significant Accounting Policies (continued) (f) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and any impairment losses. (i) Property, Plant and equipment Items of property, plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event that the carrying amount of plant and equipment is greater than its estimated recoverable amount, the carrying amount is written down immediately to its estimated recoverable amount and impairment losses are recognised in profit or loss. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 2(i) for details of impairment). The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. (ii) Depreciation The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives to the School commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of asset Depreciation rate Buildings 5% Furniture and equipment 20%-33% The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses on disposals are determined by comparing proceeds with the asset's carrying amount. These gains and losses are included in the statement of comprehensive income. (g) Leases Leases are classified as finance or operating leases. A lease that transfers substantially all of the benefits and risks incidental to the ownership of property is classified as a finance lease. At the inception of a finance lease, an asset and an obligation are recorded at an amount equal to the lesser of the present value of the minimum lease payments and the property's fair value at the beginning of the lease. Assets recorded under finance leases are amortised on a straight-line basis over the term of the lease that is the estimated useful lives of the assets. All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the lease term. RDR School Example Limited Financial Report Page 17
2 Summary of Significant Accounting Policies (continued) Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. (h) Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the School becomes a party to the contractual provisions of the instrument. For financial assets, this is the equivalent to the date that the School commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transactions costs, except where the instrument is classified 'at fair value through profit or loss' in which case transaction costs are expensed to profit or loss immediately. Classification and subsequent measurement Financial instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method, or cost. The subsequent measurement depends on the classification of the financial instrument as described below. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as: the amount at which the financial asset or financial liability is measured at initial recognition; less principal repayments; plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and less any reduction for impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. The classification of financial instruments depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and at the end of each reporting period for held-to-maturity assets. RDR School Example Limited Financial Report Page 18
2 Summary of Significant Accounting Policies (continued) (i) Financial assets at fair value through profit or loss Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting year. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the School's intention to hold these investments to maturity. They are subsequently measured at amortised cost. Held-to-maturity investments are included in non-current assets, except for those which are expected to be realised within 12 months after the end of the reporting period, which will be classified as current assets. If during the period the School sold or reclassified more than an insignificant amount of the held-to-maturity investments before maturity, the entire held-to-maturity investments category would be tainted and reclassified as available-for-sale. (iv) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. Available-for-sale financial assets are included in non-current assets, except for those which are expected to be sold within 12 months after the end of the reporting period. RDR School Example Limited Financial Report Page 19
2 Summary of Significant Accounting Policies (continued) (v) Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Fees payable on the establishment of loan facilities are recognised as transaction costs of the loan. Borrowings are classified as current liabilities unless the School has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine fair value for all unlisted securities, including recent arm's length transactions, reference to similar instruments and option pricing models. Impairment of financial assets Objective evidence that a financial asset is impaired includes default by a debtor, evidence that the debtor is likely to enter bankruptcy or adverse economic conditions in the stock exchange. At the end of each reporting period, the School assesses whether there is objective evidence that a financial asset has been impaired through the occurrence of a loss event. In the case of available for sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to indicate that an impairment has arisen. Where a subsequent event causes the amount of the impairment loss to decrease (e.g. payment received), the reduction in the allowance account (provision for impairment of receivables) is taken through profit and loss. However, any reversal in the value of an impaired available for sale asset is taken through other comprehensive income rather than profit and loss. Impairment losses are recognised through an allowance account for loans and receivables in the statement of comprehensive income. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. When available-for-sale investments are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss. RDR School Example Limited Financial Report Page 20
2 Summary of Significant Accounting Policies (continued) (i) Impairment of non-financial assets At each reporting date, the School assesses whether there is an indication that an asset may be impaired. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset s fair value less costs to sell and value in use, to the asset s carrying amount. Any excess of the asset s carrying amount over its recoverable amount is recognised immediately in profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the entity estimates the recoverable amount of the cash-generating unit to which it belongs. (j) Trade and other payables Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the School during the reporting period which remain unpaid. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. Trade and other payables are unsecured. (k) Borrowing costs Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings costs are expensed. Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. (l) Employee Benefits Provision is made for the School s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may not satisfy vesting requirements. Those cash outflows are discounted using market yields on Federal government bonds with terms to maturity that match the expected timing of cash flows. (m) Provisions Provisions are recognised when the School has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions recognised represent the best estimate of the amounts required to settle the obligation at the end of the reporting period. RDR School Example Limited Financial Report Page 21
2 Summary of Significant Accounting Policies (continued) (n) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (o) Income tax The School is exempt from income tax under Division 50 of the Income Tax Assessment Act 1997. (p) Economic Dependency The School is dependent on the ongoing receipt of grants from the Federal and State Governments to ensure the continuance of its education services. The disclosure of the new IFRS standards and interpretations not applied is not required under the RDR Framework. RDR School Example Limited Financial Report Page 22
3 Revenue and other income (a) Revenue from operating activities Tuition Fees 33,441,160 30,605,640 Sale of goods and services 764,644 661,038 Recurrent - federal government grants 3,044,612 2,883,722 Recurrent - state government grants 1,523,463 1,343,874 Recurrent - other grants 90,000 85,000 Non-recurrent - Building Education Revolution grants 1 821,440 2,483,360 Interest received 290,126 204,388 Other operating revenue 32,186 64,977 Note 2012 2011 40,007,631 38,331,999 1 Non-recurrent grants received in the current and previous period are one-off with no expectation of future receipts. The grants were received under the Federal Government s Building the Education Revolution programme and were used in the construction of the Multi-Purpose Centre. (b) Other income Donations received building fund 13 129,200 95,200 4 Expenses Net surplus includes the following specific expenses: Defined contribution superannuation plan expense 1,702,904 1,691,708 Depreciation and amortisation expense 3,988,859 3,547,200 Finance costs commercial bills 291,030 348,445 Operating lease rental expense 1,125,593 1,032,816 Net loss on disposal of property, plant & equipment - 6,498 2012 2011 RDR School Example Limited Financial Report Page 23
5 Cash and Cash Equivalents CURRENT Cash at bank 7,500 5,500 Cash on hand 3,772,315 953,028 Short-term deposits 1,000,000 - Building fund 1 50,000 95,200 2012 2011 4,829,815 1,053,728 1 The School operates a deductible gift recipient building fund. Cash and cash equivalents relating the Building fund are not available to meet operating expenses of the School and must be used in relation to the acquisition, construction or maintenance of School buildings. Refer to Note 13. 6 Trade and Other Receivables CURRENT Note Trade receivables 506,079 694,451 Less: Provision for impairment of trade receivables 6(a) (277,100) (352,568) 2012 2011 228,979 341,883 Other receivables 123,173 104,295 Net GST receivable 254,767 486,398 606,919 932,576 (a) Provision for impairment of receivables Provision for impairment at beginning of year (352,568) (367,989) - Impairment losses recognised in the year (347,000) (265,890) - Written off against receivables in the year 422,468 281,311 Provision for impairment at end of year (277,100) (352,568) 7 Inventories CURRENT 2012 2011 Inventories at cost 548,591 532,334 Inventories recognised as expense during the year amounted to 565,340 (2011:656,450). Write-downs of inventories to net realisable value recognised as an expense during the year amounted to 10,000 (2011:7,500). The expense has been included in other expenses in Statement of Comprehensive Income. RDR School Example Limited Financial Report Page 24
8 Other Assets CURRENT 2012 2011 Prepayments 662,958 565,729 9 Property Plant and Equipment NON CURRENT Capital works in progress At cost 2012 2011-5,495,451 Freehold land, buildings and improvements At cost 2 66,950,452 57,393,129 Accumulated depreciation (23,067,080) (19,893,775) 43,883,372 37,499,354 Furniture and equipment At cost 6,505,247 5,258,909 Accumulated depreciation (4,335,362) (3,519,799) Movement in carrying value Capital Works in Progress Land and buildings 2,169,885 1,739,110 46,053,257 44,733,915 Furniture and Equipment Current Year 1 Balance at the beginning of year 5,495,451 37,499,354 1,739,110 44,733,915 Additions - 4,061,872 1,246,329 5,308,201 Transfers (5,495,451) 5,495,451 - - Depreciation - (3,173,305) (815,554) (3,988,859) Carrying amount at the end of year - 43,883,372 2,169,885 46,053,257 Total RDR School Example Limited Financial Report Page 25
1 Note: the comparative movements in carrying amounts note can be excluded under the RDR Framework. 2 School Example Limited carries all land and buildings at historical cost. Where the School has revalued, AASB116.77 requires disclosure of: a) the effective date of the revaluation; b) whether an independent valuer was involved; c) the methods and significant assumptions applied in estimating the items' fair values; d) the extent to which the items' fair values were determined directly by reference to observable prices in an active market or recent market transactions on arm's length terms or were estimated using other valuation techniques; and e) the revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance to shareholders. An example note disclosure for School s that revalue Land & Buildings: Revaluation of land and buildings The School engages Valuers & Co, independent accredited valuers, to determine the fair value of its land and buildings. Fair value is determined directly by reference to market-based evidence, which is the amount for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm s length transaction as at the valuation date. The effective date of the revaluation was 31 December 2010. Based on updated information provided by Valuers & Co in the current year, the directors have determined that the carrying amount does not differ materially from that which would be determined using fair value at reporting date. RDR School Example Limited Financial Report Page 26
10 Trade and Other Payables CURRENT Trade payables 442,842 1,035,023 Tuition fees received in advance 947,413 1,000,818 Other creditors and accruals 671,815 422,528 2012 2011 2,062,070 2,458,369 NON-CURRENT Tuition fees received in advance 1,208,336 855,130 Other deposits 93,995 135,366 1,302,331 990,496 11 Borrowings CURRENT 1 Note 2012 2011 Secured liabilities - Commercial bills 11(a) 256,840 256,840 NON-CURRENT Secured liabilities - Commercial bills 11(a) 2,568,200 2,825,040 (a) Commercial bill facility A commercial bill line of 4,000,000 (2011: 4,000,000) was available to the School at the end of the financial year. At year end the outstanding balance of this facility is noted above. The commercial bill line is secured by a fixed and floating charge over all assets of the School. 1 Schools should take care in classifying liabilities between current and non-current. AASB101.69 treats a liability as current when: a) it expects to settle the liability in its normal operating cycle; b) it holds the liability primarily for the purpose of trading; c) the liability is due to be settled within twelve months after the reporting period; or d) it does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Paragraph (d) commonly results in liabilities being classified as current, regardless of expectation of repayment. This can be complex and we recommend management analyse the terms of loan agreements to identify repayment or review clauses that could impact the classification. RDR School Example Limited Financial Report Page 27
12 Employee benefits CURRENT Provision for annual leave 174,914 162,838 Provision for long service leave 1,328,367 1,478,140 2012 2011 1,503,281 1,640,978 NON-CURRENT Provision for long service leave 388,689 236,067 The current provision for employee benefits includes accrued annual leave and long service leave. For long service leave it covers all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The amount of the provision presented as current is the amount the School does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the School does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months. Long-service leave obligations expected to be settled after 12 months 340,000 330,000 13 Reserves School Building Fund Reserve The School operates a deductible gift recipient building fund. The building fund receives voluntary tax deductible donations from parents and friends which are available for the acquisition, construction or maintenance of School buildings. The School recognises all building fund donations and interest in the profit or loss for the period and tracks the balance of the building fund in a separate reserve. The table below reconciles the movement in the Reserve in the period. Opening balance at beginning of the period 95,200 - Add: Donations received in the period 129,200 95,200 Add: Interest received/receivable in the period 8,975 - Less: Contribution to the School for maintenance of school buildings (183,375) - Closing balance at end of the period 50,000 95,200 2012 2011 1 Note: RDR School Example Limited operates the DGR fund under the School company. It is common for Schools to establish separate entities (e.g. Foundations) to operate the DGR funds. For Schools preparing General Purpose Financial Reports (including Reduced Disclosure Regime), consideration needs to be given to whether these separate entities need to be consolidated with the School under the Australian Accounting Standards and the revised AASB 10 Consolidated Financial Statements. RDR School Example Limited Financial Report Page 28
14 Commitments (a) Capital commitments The School did not have any committed obligations at 31 December 2012. In 2011 the School had a committed obligation in relation to improvements to buildings. The School was committed to pay approximately 650,000. (b) Non-Cancellable Operating Lease Commitments Operating leases contracted for but not recognised in the financial statements: Payable - minimum lease payments: not later than 12 months 1,130,000 1,125,000 later than 12 months but not later than five years 1,130,000 2,260,000 later than five years - - 2,260,000 3,385,000 The School leases IT equipment and photocopiers under non-cancellable operating leases with three-year lease terms. Increases in lease commitments may occur in line with the consumer price index (CPI). RDR School Example Limited Financial Report Page 29
15 Contingent Assets and Liabilities (a) Contingent Assets Bequests with a probate value of 300,000 (2011: Nil) have not been included in the financial statements, as no notification of impending distribution has been received. (b) Contingent Liabilities The School has received government grants for capital works in the current and previous periods that may require partial repayments if the related assets are disposed or cease to be used for approved purposes. The potential repayment at 31 December 2012 is 3,304,800 (2011: 2,483,360). 1 The directors are of the opinion that provision is not required in respect of this matter, as it is not probable that a future sacrifice of future economic benefits will be required. 1 The possibility of an outflow to repay the Government grants is likely to be remote and therefore the contingent liability disclosure could be omitted. We have included the contingent liability in RDR School Example Limited as guidance only. 16 Key Management Personnel Compensation Any person(s) having authority and responsibility for planning, directing and controlling the activities of the School, directly or indirectly, including any director of the company is considered key management personnel (KMP). The totals of remuneration paid to KMP of the company during the year are as follows: Total compensation paid or payable 1,372,349 1,311,531 2012 2011 These totals include recurring remuneration payments and the payment of entitlements on cessation of employment 17 Other Related Party Transactions Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other persons unless otherwise stated. During the year a company controlled by Kyle Watson, a director, provided Architectural services to the School for 25,000 (2011: nil). RDR School Example Limited Financial Report Page 30
18 Events After the Reporting Period The directors are not aware of any significant events since the end of the reporting period. RDR School Example Limited Financial Report Page 31