CIMAS Annual Report 2014
Together we make a difference
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CIMAS Medical Aid Society Annual Report 2014
CIMAS Medical Aid Society Annual Report 2014
CONTENTS
Vision, Mission and Objectives
2
Notice of Annual General Meeting
4
Board Members and Group Information
6
Chairman’s Statement
8
Operations Report
14
Financial Highlights
18
Corporate Governance Statement
20
Report of the Independent Auditors
28
Statements of Financial Position
29
Statements of Profit or Loss and Other Comprehensive Income
30
Statements of Changes in Equity
31
Statements of Cash Flows
33
Notes to the Consolidated Financial Statements
34
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CIMAS Medical Aid Society Annual Report 2014
Vision, Mission and Objectives
CIMAS Medical Aid Society Annual Report 2014
Objectives
Vision Champions in the delivery of
To establish a fund to finance, wholly or in part, the medical, dental and allied requirements of its members.
To undertake or assist in the management and/or administration of other medical aid societies, the nature of which is, and whose objectives are similar to its own.
To operate, manage or administer any service, body or institution, which is conducive to the provision of healthcare facilities.
To do all such other things as are incidental or conducive to the attainment of the objectives specified above.
healthcare solutions.
Mission Statement Championing the delivery of accessible, affordable and quality healthcare solutions in the communities we serve.
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CIMAS Medical Aid Society Annual Report 2014
NOTICE OF ANNUAL GENERAL MEETING
CIMAS Medical Aid Society Annual Report 2014
NOTICE OF ANNUAL GENERAL MEETING
NOTICE is hereby given that the Seventieth (70th) Annual General Meeting of Members of CIMAS MEDICAL AID SOCIETY will be held on Wednesday 17 June 2015 at 11.30 a.m. at Royal Harare Golf Club, Fifth Street Extension, Harare to transact the following business:Ordinary Business
Notes
1. 2. 3. 4.
Members or Member Firm representatives are entitled to attend and vote at the Meeting, and appoint proxies, who shall also be members of the Society, to attend and vote in their stead.
Notice Convening Meeting. To confirm the Minutes of the Sixty-Ninth Annual General Meeting held on Wednesday 14 May 2014. To adopt the Annual Report and Audited Financial Statements for the year ended 31 December 2014. To approve the payment of fees to members of the Board for the period 1 January 2014 to 31 December 2014. 5. To elect one (1) member of the Society’s Board; Mr LEM Ngwerume retires by rotation, and being eligible, has offered himself for re-election. 6. To appoint auditors for the ensuing year. Deloitte & Touche, the current auditors, have indicated their willingness to be re-appointed. 7. To consider any other competent business of which proper notice has been given.
Proxy forms should be forwarded to reach the Society not less than 48 hours before the scheduled time of the Meeting. Members may, upon demand, obtain proxy forms, copies of the Annual Report and Financial Statements from any of the Society’s following offices:
Harare Head Office: Cimas House, 9 Jason Moyo Avenue, Harare
Cimas Bulawayo: Suite 4 Medical Centre, Josiah Tongogara Street/8th Avenue, Bulawayo
Cimas Gweru: No.23 Sixth Street, Gweru
Cimas Mutare: Cimas House, 98 Second Street, Mutare
M. T. Chaora GROUP CHIEF EXECUTIVE OFFICER 20 May 2015
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CIMAS Medical Aid Society Annual Report 2014
BOARD MEMBERS
Mordecai P. Mahlangu
Timothy M. Johnson
Mac T. Chaora
Stephen P. Kuipa
Shepherd Ndlovu
Emma Fundira
Elisha N. Mushayakarara
Johnson H. Manyakara
Luke E. M. Ngwerume
Bart Mswaka
Matts M. Valela
CIMAS Medical Aid Society Annual Report 2014
GROUP INFORMATION
CIMAS MEDICAL AID SOCIETY (Incorporated in Zimbabwe)
BUSINESS: The provision of value added healthcare solutions to members, employees and other stakeholders.
BOARD MEMBERS Mr. M. P. Mahlangu
Chairman
Mr. T. M. Johnson
Deputy Chairman
Mr. M. T. Chaora
Group Chief Executive Officer
Mr. S. P. Kuipa Mr. S. Ndlovu Mrs. E. Fundira Mr. E. N. Mushayakarara
Passed on February 2015
Mr. J. Manyakara Mr. L. E. M. Ngwerume Mr. B. Mswaka Mr. M. M. Valela Mr. E. M. Makonese
SECRETARY: Mr. M. E. Chitakunye
AUDITORS: Deloitte & Touche West Block Borrowdale Office Park Borrowdale Road Borrowdale Harare
REGISTERED OFFICE: CIMAS House Corner Jason Moyo Avenue/Harare Street, Harare
Retired June 2014
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CIMAS Medical Aid Society Annual Report 2014
CHAIRMAN’S STATEMENT
Dear Member The country continues to suffer the effects of an underperforming economy. The negative impact on the medical industry is unavoidable as company closures have become common place and the traditional market of the Society is threatened by restricted membership growth. by
Industry
liquidity
remains
challenges,
constrained unsustainable
cost structures and a heavy debt burden. Global trends unfortunately do not favour Zimbabwe, with falling commodity prices and more competitive offshore manufacturing. Our economic fortunes are unlikely to change unless we adopt and implement long-term policies to encourage domestic and foreign investment.
CIMAS Medical Aid Society Annual Report 2014
CHAIRMAN’S STATEMENT (continued)
It gives me great pleasure, however, to present our annual results for the year ended 31 December 2014. The Society posted a relatively solid performance despite a deteriorating operating environment. Financial Results and Operations Report Group turnover grew by 6% to US$117 million. Medical Aid membership growth has been only 1% to 203,481 members compared to 201,504 members last year. Our membership seems static, largely because we have lost some long standing individuals and firms who can no longer afford to pay their contributions as they face viability challenges. Patronage at our Cimas Healthcare facilities increased by 13% as the “one stop shop� status of the facilities is proving to be very popular. Attendances at Cimas Medical Laboratories were flat relative to last year. The Group posted a surplus of US$4.3 million compared to US$5.5 million in the prior year. Current year performance was weighed down by significant write-downs in respect of non performing contribution receivables as certain member firms had not serviced their accounts for lengthy periods. Nonmedical aid activities contributed 68% to the surplus (2013: 62%). The surplus generated in the year has grown our claims reserves (liquid reserves) to 8.7 weeks from 8.1 weeks at the close of the previous financial year. It remains a strategic objective of your Society to achieve the 12 weeks claims reserves as per best practice. We have set a target of achieving this optimal level within the next 3 years. We are pleased to report that we are fully compliant with the regulatory capital requirement (solvency ratio) of 25% of annual medical aid contributions. Accumulated reserves at 31 December 2014 were US$31.5 million being a solvency ratio of 31% (2013: US$27.2 million being a solvency ratio of 28%).
Industry Matters The position regarding the lack of an agreed common tariff reached a new low. In terms of the Government General Notice 159 of 2014 gazetted on 23 May 2014 the Minister of Health and Child Care approved increases in consultation, private hospital and associated unit fees. The increases ranged from 5% for private hospital fees to 75% for general practitioner (GP) consultations. We communicated with you when this issue arose to clarify our position. Essentially, through the Association of Healthcare Funders of Zimbabwe (AHFoZ), the medical aid societies sought to engage both the Ministry and the service providers to explain the rather obvious position that medical societies could not afford to pay the new tariffs without increasing membership contributions, which members would find difficult to pay. We are fully aware of the reality that in the current economic environment the majority of our members cannot afford an increase in membership contributions. In October 2014 AHFoZ increased its tariffs by 20% for GPs and 2,5% for private hospitals. This gesture of compromise, unfortunately, was neither acknowledged nor reciprocated by the service providers. Dialogue is continuing with service providers and the Ministry of Health and Child Care. AHFoZ has relentlessly emphasized the affordability challenges health funders face in meeting the gazetted tariffs and the persistent demands for fee increases from service providers. Furthermore, health funders are of the view that such increases lack merit at a time when available economic data confirms that the country is experiencing deflation. The Society believes that fees charged by service providers are unsustainable and will only serve to erode the capacity that your Society has built in the post dollarization era. Your contributions remained constant throughout the year, pegged at 2013 levels, as no increases were effected. The practical reality is that our members face mounting shortfalls. Increasingly we have had to finance members who have elected to seek treatment abroad in instances where specialist services are available in the country but our members cannot afford them. We are currently engaging service providers to explore the implementation of best practice in the structuring and the funding of medical practices to improve costs and patient outcomes.
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CIMAS Medical Aid Society Annual Report 2014
CHAIRMAN’S STATEMENT (continued)
Whilst your Society was granted its operating licence for the 2015 year, repeated threats to cancel or withdraw licences for all health funders not complying with the ‘’gazetted tariffs’’ have been received. Your Society believes that we may need to seek legal recourse if the situation deteriorates, although this is a course of action we would like to avoid.
Human Resources The staff attrition rate for the year of 2.5% was comparable to the previous year. We continue to retain most of our critical skills, which is testimony to the viability of our competitive remuneration and staff benefits measures. I am happy to report that one of our Divisions (Healthcare) has actually experienced an increase in staff numbers due to its growth programme. This is commendable, given the fact that most corporates are actually downsizing because of the economic challenges that the country is experiencing. During the year under review, Mr. Mafingei W. Nyamwanza, who was the Managing Director of our Medical Services Division, retired after a distinguished career with the Society spanning 12 years. We wish him well in his retirement.
Health Education Fund The Health Education Fund was established in 2007 to provide financial and material support for the training of medical personnel. The aim is to create capacity in the healthcare sector and reduce scarcity of critical skills. Going forward, increased emphasis will be placed on areas of specialist training in various medical disciplines. The specialist training programme has already seen the Society sponsor the training of a clinical haematologist. During the year, the Society sponsored seven medical students, five pharmacy students and three medical laboratory students. As part of our plans to complement the direct sponsoring of students, the Society has also embarked on initiatives to build capacity at our local tertiary institutions to enable them to train medical specialists. To this end, the Society started off by donating equipment worth US$120,000 to the University of Zimbabwe’s College of Health Sciences to establish the country’s first Optometry Training Unit. The unit fills a gap not only in optometry training, which was not previously available in Zimbabwe, but also in the provision of optometry services at public health sector charges, which are less than private sector charges.
Towards the end of the year we took delivery of our fully kitted leased air ambulance. We believe that this is a significant milestone as Zimbabwe will now have a dedicated air ambulance.
CIMAS Medical Aid Society Annual Report 2014
CHAIRMAN’S STATEMENT (continued)
Exgratia Awards
New Initiatives
The Society continues to render financial assistance to members who encounter unexpected medical care costs that are in excess of their annual medical aid limits, where such members cannot afford the required shortfalls. A total of 121 awards with a value of US$121,413 were approved in the year recently ended, compared to 238 awards with a value of US$238,499 in the prior year.
A new clinic was opened in December 2014 at Simon Muzenda Street in Harare. The new clinic is open for twenty four hours and this has proved to be a much needed service for members. Towards the end of the year we took delivery of our fully kitted leased air ambulance. We believe that this is a significant milestone as Zimbabwe will now have a dedicated air ambulance.
Review of Member Benefits and Contributions
New Offices for the Society
The membership of your Society has been restricted to around 200,000 over the last few years. During the same period, we have witnessed service provider costs increasing drastically. Membership contributions were not increased in 2014. The Society is also witnessing a high claims costs pattern on the individual member packages. The medical aid fund does not presently command the critical mass of membership enjoyed in previous years that would facilitate subsidies, typical of medical aid fund models. The Society therefore will be obliged to review contributions and benefits of all individual member packages in order to keep the fund viable for all members. This review will most likely result in new and more appropriate member packages.
The current Jason Moyo Avenue office complex has become unsuitable for our business. Members are experiencing great difficulty in negotiating traffic and accessing parking as the area has become very congested. Our Mount Pleasant satellite office was established to curb the effect of the downtown location of the main office. We believe that a more accessible location with more parking will better serve our members and also rationalize occupancy costs. We are therefore looking into the relocation of our offices for the convenience of our members. Members will be kept abreast of any developments.
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CIMAS Medical Aid Society Annual Report 2014
CHAIRMAN’S STATEMENT (continued)
Members of the Board It is with great sadness that we note the passing of Mr. Elisha N. Mushayakarara in February 2015. He had been a Board member since 1 March 1994 and served on many Board Committees over the years. At the time of his passing he was a member of the Finance Committee and a director of the subsidiary Healthguard International (Pty) Limited. His wisdom will be greatly missed.
Our priority remains delivering complete,
affordable and sustainable quality healthcare solutions for the benefit of you, our members.
CIMAS Medical Aid Society Annual Report 2014
CHAIRMAN’S STATEMENT (continued)
Outlook We do not anticipate the trading environment, going forward, to be significantly different from what we have seen in recent years. Our business will continue to be challenged by the attrition prevailing in the private sector in the form of job losses and company closures. However, we have continued to make good progress in delivering our long-term strategy by building firm foundations for the future with our substantial investments in information technology and new healthcare facilities and services. Our priority remains delivering complete, affordable and sustainable quality healthcare solutions for the benefit of you, our members. We will continue to increase our presence and scope in the health value chain and to work with partners to improve the cost and patient outcomes. In 2015 we will be opening at least three new clinics and a dental unit.  
Appreciation I wish to express special thanks to the management team led by Mr Mac Chaora and all our employees for their dedication and efforts to keep the Society going in a testing and difficult year and for striving to ensure that member needs are catered for. I also extend my gratitude to all members of the Board for their wise counsel and strategic insight. My appreciation also goes out to you, our members, for keeping your faith in the Society in these turbulent times and for supporting our health facilities. I am grateful as well to other stakeholders, including our service providers, regulators and partners for your ongoing support.
Mordecai P. Mahlangu CHAIRMAN OF THE BOARD OF DIRECTORS 20 May 2015
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CIMAS Medical Aid Society Annual Report 2014
OPERATIONS REPORT
CIMAS Medical Aid Society Annual Report 2014
OPERATIONS REPORT (continued)
Medical Aid Division The medical aid sector was faced with its own distinct challenges in addition to those posed by the macroeconomic environment. These included amongst many other things, the impasse between healthcare funders and health service providers, high medical aid utilization rate and the perennial issue of shortfalls. Membership increased marginally by 0,9% from 201 504 at end of last year to close the year at 203,481.
The Group’s turnovers were earned by the products as shown in the graphic below
2014
The credit environment deteriorated and affordability challenges faced by members in remitting medical aid contributions manifested as contributions were generally being received after our cut off. Average contributions also dropped from US$45 to US$43 by the end of the year.
184
180
177
171
160
16.7%
GLOBAL TRAVEL
0.3%
COVER
DELUXE
0.3%
STUDYMATE
0.0%
Basicare
0.4%
PRIMARY
1.2%
GENERAL
9.8%
PRIVATE HOSPITAL
70%
MEDEXEC
17%
GLOBAL TRAVEL
0%
203
202
191
71.4%
MEDEXEC
Membership Statistics 200
PRIVATE HOSPITAL
2013
Thousands
140 120 100 80
60 40 20 0
2009
2010
Basicare PRIMARY GENERAL PRIVATE HOSPITAL
2011
2012
2013
COVER
DELUXE
1%
STUDYMATE
0%
Basicare
1%
PRIMARY
1%
GENERAL
10%
2014
MEDEXEC SPECIAL SCHEMES TOTAL ANNUAL MEMBERSHIP
Whilst revenues for this business segment grew by 7%, massive difficulty was encountered in collecting amounts outstanding from contribution debtors, the result of which was a write down of US$2.7 million (2013:US$ 0,6 million). The traditional market of the Society, being corporate bodies is affected by the poor macroeconomic environment which has seen most corporates filing for liquidation or judicial management. The accompanying job losses hinder growth prospects of the Society. Over 10,000 beneficiaries were resigned at the end of the year on account of nonpayment of contributions for periods exceeding 90 days.
We are pursuing the negotiation of a common tariff for health service providers to bring harmony to the healthcare industry. Presently the Society is paying according to the AHFoZ tariff and in line with the level of contributions. On the other hand health service providers have continued to charge with reference to the gazetted tariffs awarded to them in May 2014 by the Minister of Health and Child Care resulting in our members incurring huge shortfalls. The claims loss ratio improved to 86% from the 90% reported in prior year. Whilst it may still be early days, this may be an indication of the efficiency brought about by the new medical aid administration system. The Society is still striving to attain the best practice of 80%.
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CIMAS Medical Aid Society Annual Report 2014
OPERATIONS REPORT (continued)
CIMAS Medical Aid Society Annual Report 2014
OPERATIONS REPORT (continued)
Medical Aid Administration
Healthcare Services
The new medical aid administration system became fully functional during the course of the year. It is unfortunate though that most of the Funds targeted for administration are facing viability challenges and thus CIMAS Fund remains the key customer for this entity.
Attendances increased 13% over the previous 12 months (2013: 8%). Revenues grew by 21% (2013: 18%) and surpluses responded in line with turnover. Our Clinics have proved to be quite popular with our members. Our involvement in this area is meant to complement other service providers to support the incapacitated public health infrastructure.
Medical Services The Laboratory was ISO 15189 Accredited on 11 July 2014 by South African National Accreditation System (SANAS) and Southern African Development Community Accreditation Service (SADCAS). The first Medical Laboratory to be accredited in Zimbabwe. This was achieved as a result of sheer dedication of employees and management towards continuous improvement and team culture. The quality accreditation has seen the Laboratory bench marking its quality service against international standards. The Laboratory expects to increase customer satisfaction and improve demand for pathology services. Revenue increased by 4% in the period under review. However Laboratory patient numbers are within 2013 levels. The growth in revenue was a result of the introduction of specialised tests and the referral Laboratory status. Direct costs increased by 9% as a result of higher reagent costs for specialised tests. The surplus decreased by 4% to $1.4 million (2013: $1.5 million). The Laboratory invested $119 000 in plant and equipment to improve operational efficiency. CIMAS Emergency Air Rescue Services (CEARS) was commissioned in February 2015 after obtaining all regulatory approvals. CEARS was established to airlift critically ill patients locally and regionally to appropriate medical facilities. The new product will close the gap created by the non-availability of a dedicated air ambulance service in the region outside of South Africa. CEARS will provide reliable services at competitive rates in line with the Society’s vision of being a champion in healthcare solutions. The minimal crew on board all evacuation missions is two pilots with considerable flying experience, a doctor and a nurse. The medical personnel have aviation medicine experience and are up to date in advanced cardiovascular life support and basic life support practices.
An additional Clinic was opened in December 2014 along Simon Muzenda Street (formerly Fourth Street) in Harare. This Clinic is unique in that it is open 24 hours a day has brought much relief to members. More clinics will be commissioned in Kwekwe and Highglen, Harare during the course of 2015, as we strive to make primary healthcare accessible and affordable. We are confident that this initiative will assist in reducing member shortfalls as well.
Mac T. Chaora Group Chief Executive Officer 20 May 2015
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CIMAS Medical Aid Society Annual Report 2014
FINANCIAL HIGHLIGHTS for the year ended 31 December 2014
Group financial highlights
Contribution income and fees
2014 2013 2012 2011 2010 US$ US$ US$ US$ US$ 117 100 365
110 365 324
98 012 787
84 213 015
67 416 667
Claims and direct costs 96 624 121
91 986 681
79 000 711
68 280 584
54 230 579
Investment income
2 220 730
2 565 200
2 022 724
511 150
198 444
Surplus
4 320 649
5 494 124
4 370 782
2 458 220
4 388 586
Reserve funds
31 511 030
27 229 384
20 852 148
16 580 156
13 374 342
Weeks reserve
8.7
8.1
5.6
5.0
4.0
31%
28%
25%
23%
23%
Statutory solvency ratio
CIMAS Medical Aid Society Annual Report 2014
FINANCIAL HIGHLIGHTS (continued) for the year ended 31 December 2014
Financial Highlights US$millions 10.0
140 Weeks Reserves 120
9.0 8.0
100 7.0 80
5.0
60
4.0
40
3.0 20 2.0 0
2009
2010
2011
2012
2013
(20)
Contribution Income and Fees Claims and Direct Costs Investment Income Surplus Reserve Funds
2014
1.0
Weeks
6.0
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20
CIMAS Medical Aid Society Annual Report 2014
FINANCIAL HIGHLIGHTS for the year ended 31 December 2014
CIMAS Medical Aid Society Annual Report 2014
Revenue increased by 4% in the period under review. However Laboratory patient numbers are within 2013 levels. The growth in revenue is a spin off effect from the introduction of specialised tests and the referral Laboratory status.
SURPLUS FOR THE YEAR
US$4.3million (2013 - US$5.5 million)
GROUP TURNOVER
US$117
million
~ 6% Medical Aid membership growth has been only 1% to 203,886 members compared to 202,830 members last year.
ACCUMULATED RESERVES
US$31.5million A solvency ratio of 31% (2013: US$27.2million being a solvency ratio of 28%
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CIMAS Medical Aid Society Annual Report 2014
CORPORATE GOVERNANCE STATEMENT
The Group is committed to the principles of openness, integrity and accountability. It complies with the tenets of the Medical Services Act (Chapter 15:13), the CIMAS Constitution, and other relevant legislation.
CIMAS Medical Aid Society Annual Report 2014
CORPORATE GOVERNANCE STATEMENT (continued)
1. Main Board The Board of CIMAS largely consists of non-executive members and meets at least quarterly. It is chaired by a nonexecutive member and administers the affairs of the Group at all times in a judicious manner and always acts in the best interests of the Group. The Board provides direction and leadership to the Group and is ultimately accountable for the overall governance, performance, strategy and affairs of the Group. Board members are appointed by the Board in a formal and transparent manner. Non-executive Board members are selected based on their skills, business experience and qualifications. Board members serve a four (4) year term of office and are thereafter eligible for re-election. However, Board members can only serve a maximum of twelve (12) years on the Board, i.e. three (3) terms of four (4) years each. Board members who are appointed are required to stand for election at the following AGM. Furthermore, once a Board member reaches the age of 70 years, they are no longer eligible for election or reelection (as the case may be). Additional special meetings may be convened to discuss specific issues which arise between scheduled board meetings. All board meetings are convened by formal notice. Supporting documentation in the form of comprehensive proposals and reports is distributed to Board members before board meetings to allow for adequate preparation, and to facilitate more relevant discussion at these meetings. Five (5) Board members constitute a quorum at Board meetings. Executive management consults regularly with Board members on relevant issues between Board meetings as may be required. Board members have access to all of the Group’s information. Board members are required to disclose their interests annually. Based on these declarations, no Board members have a material interest in any transaction with the Group during the financial period. Board fees of US$109 789 were paid to Board members in the year ended 31 December 2014 (2013: US$102 080). This expenditure requires approval of members at the Annual General Meeting.
2. Committees For the better exercise of its functions and responsibilities, the Board has the following committees; Finance, Audit, Human Resources, Health Education Fund and Risk & Compliance. The Board has adopted a process of reporting by Internal Audit, Risk Committee and external auditors to its Audit Committee in order to promote a coordinated approach to all assurance reporting on the risk areas of the business. The Group’s personnel are committed to the CIMAS Code of Ethics. This incorporates the Group’s ethical standards required of staff members in the interface with one another and with all stakeholders. The functions of the Committees are outlined below: 2.1. Finance Committee • Approving and adopting the annual budgets formulated for the Group; • Monitoring and evaluating the implementation of the budget formulated; • Reviewing the investment decisions made by the Group; • Checking on the utilisation of CIMAS resources; • Supervise and monitor the Group’s financial operations and affairs with a view to achieving co-ordination, efficiency and economy; and • Reviewing and approving the accuracy and integrity of the Group’s financial statements. Mr. E.N Mushayakarara (Chairman) (Passed on February 2015), Mr. L.E.M Ngwerume, Mr. M.M Valela, Mr. C.N Mhende (Retired March 2014), Mr. M.P Mahlangu, Mr. M.T Chaora (Group CEO) 2.2. Audit Committee The Audit Committee is responsible for assisting the Board fulfill its oversight responsibilities by: • monitoring the integrity of the Society’s financial statements, reviewing significant financial reporting judgments contained in them before their submission to the Board for approval; • monitoring compliance with laws and regulations and with CIMAS own code of business conduct; • keeping under review the consistency of the accounting policies applied by the Society; • reviewing the effectiveness of the accounting, internal control and business risk systems of the Society and its joint operations and subsidiaries;
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CIMAS Medical Aid Society Annual Report 2014
CORPORATE GOVERNANCE STATEMENT (continued)
2. Committees (continued) 2.2. Audit Committee (continued) • reviewing and, as appropriate, making recommendations to the Board on business risks, internal controls and compliance; • monitoring and reviewing the effectiveness of the Society’s internal audit function; and • monitoring and reviewing the performance of the Society’s external auditors, keeping under review their independence and objectivity, making recommendations as to their reappointment (or, where appropriate, making recommendations for change), and approving their terms of engagement and the level of audit fees payable to them. Mr. M. M. Valela (Chairman), Mrs. E. Fundira, Mr. M. T. Chaora 2.3. Human Resources Committee • Approving and adopting the annual staff budgets formulated for the Group; • Monitoring and evaluating the implementation of the Human Resources policies;
• Reviewing the Human Resources decisions made by the Group; • Supervise and monitor the Group’s Human Resources operations and affairs with a view to achieving co-ordination, efficiency and economy; • Ensuring transparency and consistency in the application of Human Resources policies; and • Ensuring that CIMAS conditions of service remain internally consistent and externally competitive. Mr. M. P. Mahlangu (Chairman), Mr. T. M Johnson, Mr. S. P. Kuipa, Mr. L. E. M. Ngwerume, Mr. M. T. Chaora 2.4. Health Education Fund Committee • Aimed at assisting Zimbabwe attain its human resource development goals and needs; • Assists students pursue academic and professional courses in health care services and related sectors identified by the Group; and • Assists in the education and training of competent healthcare services professionals who will make a positive contribution to Zimbabwe. Mr. J. Manyakara (Chairman), Mr. B. Mswaka, Mr. T. M. Johnson, Mr. M. T. Chaora
3. Board and Committees Attendance 2014 Main Board
Total Meetings
Total Present
Total Absent
Mr. M. P. Mahlangu
8
8
—
Mr. E. M. Makonese (Retired June 2014)
4
3
1
Mrs. E. Fundira
8
8
—
Mr. T. M. Jonhson
8
6
2
Mr. S. P. Kuipa
8
8
—
Mr. C. N. Mhende (Retired March 2014)
2
2
—
Mr. J. Manyakara
8
8
—
Mr. B. Mswaka
8
8
—
Mr. S. Ndlovu
8
7
1
Mr. M. M. Valela
8
5
3
Mr. E. N. Mushayakarara (Passed on February 2015)
8
7
1
Mr. L. E. M. Ngwerume
8
5
3
Mr. M. T. Chaora
8
7
1
CIMAS Medical Aid Society Annual Report 2014
CORPORATE GOVERNANCE STATEMENT (continued)
3. Board and Committees Attendance 2014 (continued) Finance Committee
Total Meetings
Total Present
Total Absent
Mr. L. E. M. Ngwerume
6
2
4
Mr. M. M. Valela
6
3
3
Mr. M. P. Mahlangu
6
5
1
Mr. M. T. Chaora
6
5
1
Mr. V. L. Ndlovu
6
6
—
Mr. E. N. Mushayakarara (Passed on February 2015)
6
5
1
Mr. C. N. Mhende (Retired March 2014)
2
0
2
Total Meetings
Total Present
Total Absent
Mr. J. Manyakara
3
3
—
Mr. B. Mswaka
3
2
1
Health Education Committee
Mr. M. P. Mahlangu
3
—
3
Mr. M. T. Chaora
3
3
—
Mr. V. L. Ndlovu
2
2
0
Dr. D. Gwatidzo
3
3
—
Mr. P. Ngondo
3
3
—
Audit Committee
Total Meetings
Total Present
Total Absent
Mr. T. M. Johnson
1
1
—
Mr. L. E. M. Ngwerume
3
—
3
Mrs. E. Fundira
3
2
1
Mr. M. M. Valela
3
2
1
Mr. M. T. Chaora
3
2
1
Total Meetings
Total Present
Total Absent
Medical Aid Society Mr. T. M. Jonhson
2
2
0
Mr. M. P. Mahlangu
5
4
1
Mr. D. MacDonald
5
2
3
Mrs. P. P. Mutembwa
5
2
3
Mr. S. P. Kuipa
5
3
2
Mr. M. T. Chaora
5
5
—
Mr. V. L. Ndlovu
5
5
—
Mr. R. Takawira
5
4
1
Mrs. E. Fundira
3
2
1
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CIMAS Medical Aid Society Annual Report 2014
CORPORATE GOVERNANCE STATEMENT (continued)
3. Board and Committees Attendance 2014 (continued) MEDCO
Total Meetings
Total Present
Total Absent
Mr. S. P. Kuipa
4
3
1
Mr. M. P. Mahlangu
4
3
1
Mrs. E. Fundira
2
2
0
Mr. M. T. Chaora
4
4
—
Mr. V. L. Ndlovu
4
4
—
Mr. R. Takawira
4
3
1
Mr B. Mswaka
2
2
0
Total Meetings
Total Present
Total Absent
Mr. C. N. Mhende (Retired March 2014)
2
2
—
Dr. R. Mabeza-Chimedza
6
5
1
Mr. B. Mswaka
6
6
—
Mr. M. P. Mahlangu
6
1
5
Dr. A. M. Nyakabau
6
6
—
Mr. M. T. Chaora
6
6
—
Mr. V. L. Ndlovu
6
6
—
Mr. M. Nyamwanza
6
6
—
Mrs. T. Moyo
1
1
0
Total Meetings
Total Present
Total Absent
Mr. J. Manyakara
5
5
—
Mr. E. M. Makonese (Retired June 2014)
2
2
0
Mrs. M. R. N. Chidzonga
5
5
—
Dr. J. Kanyekanye
5
3
2
Mr. M. P. Mahlangu
5
0
5
Mr. M. T. Chaora
5
5
—
Mrs. Z. R. Mutambirwa
5
5
—
Mr. V. L. Ndlovu
5
5
—
Total Meetings
Total Present
Total Absent
Mr. M. P. Mahlangu
2
0
2
Mr. T. M. Johnson
2
2
—
Mr. E. N. Mushayakarara (Passed on February 2015)
2
1
1
Mr. M. T. Chaora
2
2
—
Mr. V. L. Ndlovu
2
2
—
Medical Services
Healthcare Services
Healthguard International
CIMAS Medical Aid Society Annual Report 2014
CORPORATE GOVERNANCE STATEMENT (continued)
4 Audit and Accountability At the end of each financial year, the Group’s financial statements and affairs are audited by its external auditors, Deloitte & Touche. Such financial statements and affairs present a true and fair view of the state of affairs of the Group at the end of the financial year and of the operations and cash flows for the period. In preparing the said financial statements, generally accepted accounting practices have been followed, suitable accounting policies have been used, and applied consistently, and reasonable and prudent judgments and estimates have been made. The Group endeavours to maintain the solvency and liquid ratios stipulated in the Medical Services Act (Chapter 15:13). In addition, reports on the Group’s financial statements are submitted to the Secretary of the Ministry of Health and Child Care every quarter. The Board recognises and acknowledges its responsibility for the system of internal financial control. The Group’s policy on business conduct, which covers ethical behaviour, compliance with legislation and sound accounting practice, underpins the internal financial control process. The control system includes written accounting and control policies and procedures, clearly defined lines of accountability and delegation of authority, and comprehensive financial reporting and analysis against approved budgets. The responsibility for operating the system is delegated to Executive Management who confirm that they have reviewed its effectiveness. They consider that it is appropriately designed to provide reasonable, but not absolute, assurance that assets are safeguarded against material loss or unauthorised use and transactions are properly authorised and recorded. The effectiveness of the internal financial control system is monitored through Management reviews, and a comprehensive program of internal audits. In addition, the Group’s external auditors review and test appropriate aspects of the internal financial control systems during the course of their annual examinations of the Group.
5 Corporate Governance The Group continues to practice high corporate governance standards which contribute to its ongoing sustainability. The Board is ultimately responsible for ensuring that the Group adheres to sound corporate governance principles. The aim is to achieve a balance between the governance expectations of the regulatory authority, members and other stakeholders, and the need to ensure the sustainability of the Group. However, governance in the Group extends beyond compliance with codes, legislation, and regulations. Management strives to create and maintain a culture of good governance across the business, linked to the Group’s business philosophy, which incorporates its purpose, vision and values. The Group’s values are core to its business philosophy and guide the way the Group conducts its business and interacts with all stakeholders. The business philosophy and values were developed and are modified as circumstances and the environment change. Management strives to embed the values and Code of Ethics in the culture of the Group. The induction programme educates new employees on the values and the business philosophy. The Group maintains a register of gifts received by employees. The Group promotes a culture of openness and transparency throughout the organisation, in accordance with the Group’s values. Extensive use of internal communication mechanisms and external facilities such as Deloitte’s Tip-Offs Anonymous are encouraged.
27
28
CIMAS Medical Aid Society Annual Report 2014
CONSOLIDATED FINANCIAL STATEMENTS
CIMAS Medical Aid Society Annual Report 2014
CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2014
Report of the Independent Auditors
28
Statements of Financial Position
29
Statements of Profit or Loss and Other Comprehensive Income
30
Statements of Changes in Equity
31
Statements of Cash Flows
33
Notes to the Consolidated Financial Statements
34
29
30
CIMAS Medical Aid Society Annual Report 2014
REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBERS OF CIMAS MEDICAL AID SOCIETY We have audited the accompanying consolidated financial statements of CIMAS Medical Aid Society and its subsidiaries (the “Group”), which comprise the consolidated and Society statements of financial position as at 31 December 2014 and the consolidated and Society statements of profit or loss and other comprehensive income, the consolidated and Society statements of changes in equity and the consolidated and Society statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information as set out on pages 29 to 73. Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are 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 these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group and the Society as at 31 December 2014 and of the Group and Society’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.
Deloitte & Touche Chartered Accountants (Zimbabwe) Harare 20 May 2015
CIMAS Medical Aid Society Annual Report 2014
STATEMENTS OF FINANCIAL POSITION as at 31 December 2014
CONSOLIDATED SOCIETY
2014 2013 2014 2013 Note US$ US$ US$ US$ ASSETS Non-current assets Property and equipment Investment property Intangible assets Deferred tax assets
5 7 8 9.1
7 296 604 5 570 000 1 999 956 179 615
7 207 378 4 420 000 1 585 583 9 401
7 028 891 5 570 000 — —
6 805 542 4 420 000 — —
Total non-current assets
15 046 175
13 222 362
12 598 891
11 225 542
Current assets Inventories Trade and other receivables Financial assets at fair value through profit or loss Cash and bank balances
11 12 13 14
1 847 868 10 004 756 1 109 613 21 911 095
1 569 191 4 884 921 628 774 20 094 384
1 722 035 9 719 404 1 109 613 20 755 321
1 451 711 4 664 009 628 774 19 190 699
Total current assets
34 873 332
27 177 270
33 306 373
25 935 193
Total assets
49 919 507
40 399 632
45 905 264
37 160 735
Revaluation reserve Foreign currency translation reserve 10 Retained earnings
1 997 384 (167 366 ) 29 681 012
1 997 384 (128 363 ) 25 360 363
1 932 684 — 28 100 228
1 932 684 — 23 242 812
Total reserves
31 511 030
27 229 384
30 032 912
25 175 496
9.1
—
2 468
—
—
Current liabilities Current tax liability Provisions for claims outstanding 15 Trade and other payables 16
5 502 8 430 008 9 972 967
158 359 7 730 707 5 278 714
— 8 375 898 7 496 454
— 7 670 953 4 314 286
Total current liabilities
18 408 477
13 167 780
15 872 352
11 985 239
Total liabilities
18 408 477
13 170 248
15 872 352
11 985 239
Total reserves and liabilities
49 919 507
40 399 632
45 905 264
37 160 735
RESERVES AND LIABILITIES
Non-current liabilities Deferred tax liabilities
M.P. MAHLANGU CHAIRMAN 20 May 2015
M.T. CHAORA GROUP CHIEF EXECUTIVE OFFICER
M. E. CHITAKUNYE SECRETARY
31
32
CIMAS Medical Aid Society Annual Report 2014
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 31 December 2014
CONSOLIDATED SOCIETY
2014 2013 2014 2013 Note US$ US$ US$ US$
Contribution income and fees Claims and direct costs
17 18
117 100 365 110 365 324 116 614 519 110 140 639 (96 624 121 ) (91 986 681 ) (96 271 699 ) (91 785 999 )
Operating surplus Administration costs 19 Net gain from fair value adjustment on investment property 7 Sundry income Foreign exchange (loss)/gain
20 476 244 18 378 643 20 342 820 18 354 640 (19 769 615 ) (15 527 874 ) (19 271 883 ) (16 578 167 ) 1 007 940 265 415 (1 435 )
120 000 381 900 2 019
1 007 940 210 352 —
120 000 179 512 22 036
Surplus before investment income Investment income 20
1 978 549 2 220 730
3 354 688 2 565 200
2 289 229 2 568 186
2 098 021 2 893 869
Surplus before income tax Income tax credit/ (expense) 9.2
4 199 279 121 370
5 919 888 (425 764 )
4 857 415 —
4 991 890 (17 136 )
Surplus for the year
4 320 649
5 494 124
4 857 415
4 974 754
Other comprehensive (loss) / income Items that will not be reclassified subsequently to profit or loss: Gains on revaluation of property and equipment Items that may be reclassified subsequently to profit or loss: Foreign currency translation loss 10
—
897 635
—
897 635
(39 003 )
(14 523 )
—
—
Other comprehensive (loss) / income for the year, net of tax
(39 003 )
883 112
—
897 635
Total comprehensive income for the year
4 281 646
6 377 236
4 857 415
5 872 389
CIMAS Medical Aid Society Annual Report 2014
STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2014
CONSOLIDATED
Revaluation Foreign currency Retained reserve translation reserve earnings Total US$ US$ US$ US$
Year ended 31 December 2013 Balance at 1 January 2013 Surplus for the year
1 082 881 —
(113 840 ) —
Other comprehensive income Revaluation increase 897 635 — Transfer to retained earnings 16 868 — Foreign currency translation loss — (14 523 ) Total comprehensive income
19 883 107 20 852 148 5 494 124 5 494 124
— (16 868 ) —
914 503
(14 523 )
1 997 384
(128 363 )
25 360 363 27 229 384
1 997 384 —
(128 363 ) —
25 360 363 27 229 384 4 320 649 4 320 649
Other comprehensive income Foreign currency translation loss
—
(39 003 )
—
Total comprehensive income
—
(39 003 )
4 320 649
1 997 384
(167 366 )
Balance at 31 December 2013
5 477 256
897 635 — (14 523 ) 6 377 236
Year ended 31 December 2014 Balance at 1 January 2014 Surplus for the year
Balance at 31 December 2014
(39 003 ) 4 281 647
29 681 012 31 511 031
33
34
CIMAS Medical Aid Society Annual Report 2014
STATEMENTS OF CHANGES IN EQUITY (continued) for the year ended 31 December 2014
SOCIETY
Revaluation Foreign currency Retained reserve translation reserve earnings Total US$ US$ US$ US$
Year ended 31 December 2013 Balance at 1 January 2013 Surplus for the year
1 018 181 —
— —
Other comprehensive income Revaluation increase 897 635 — Transfer to retained earnings 16 868 — Total comprehensive income Balance at 31 December 2013
18 284 926 19 303 107 4 974 754 4 974 754
— (16 868 )
897 635 —
4 957 886
5 872 389
914 503
—
1 932 684
—
23 242 812 25 175 496
1 932 684 —
— —
23 242 812 25 175 496 4 857 415 4 857 415
—
—
1 932 684
—
Year ended 31 December 2014 Balance at 1 January 2014 Surplus for the year Total comprehensive income Balance at 31 December 2014
4 857 415
4 857 415
28 100 227 30 032 911
CIMAS Medical Aid Society Annual Report 2014
STATEMENTS OF CASH FLOWS for the year ended 31 December 2014
CONSOLIDATED SOCIETY
2014 2013 2014 2013 Note US$ US$ US$ US$
Cash flow from operating activities Surplus before income tax Adjustments for: Depreciation and amortization 5; 8 Impairment recognised in profit or loss 5.2 Net gain from fair value adjustment on investment property 7 Net fair value loss/(gain) on financial assets at fair FVTPL 13 Foreign currency translation loss 10 Interest and dividend received 20 (Profit)/loss on disposal of property and equipment 21
4 199 279
5 919 888
4 857 415
4 991 890
782 927 5 910
710 078 49 138
686 157 5 910
530 880 9 581
(1 007 940 )
(120 000 )
(1 007 940 )
(120 000 )
118 420 (39 003 ) (1 947 278 ) (1 941 )
(167 145 ) (14 523 ) (2 083 656 ) 3 482
118 420 — (2 006 780 ) (1 090 )
(167 145 ) — (2 124 372 ) 3 482
Cash generated before working capital changes Increase in trade and other receivables Increase in inventories Increase in claims outstanding Increase in trade and other payables
2 110 374 (5 119 835 ) (278 677 ) 699 301 4 694 253
4 297 262 (951 641 ) (348 642 ) 1 687 857 790 124
2 652 092 (5 055 395 ) (270 324 ) 704 945 3 182 168
3 124 316 (1 557 400 ) (370 064 ) 1 628 103 1 838 290
Cash generated from operating activities Tax paid for the year
2 105 416 (204 169 )
5 474 960 (483 621 )
1 213 486 —
4 663 245 (17 637 )
Net cash generated from operating activities
1 901 248
4 991 339
1 213 486
4 645 608
Cash flows from investing activities Purchase of property and equipment 5; 7 (1 148 161 ) (840 629 ) Proceeds from disposal of property and equipment 21 131 612 35 625 New software development 8 (416 006 ) (1 351 425 ) (Purchase of)/proceeds from disposal of financial assets at FVTPL 13 (599 259 ) 23 165 Interest and dividend received 1 947 278 2 083 657
(1 111 295 ) 54 909 —
(601 835 ) 35 170 —
(599 259 ) 2 006 780
23 165 2 124 372
351 136
1 580 872
Net cash (used in)/ generated from investing activities
(84 536 )
(49 607 )
Net increase in cash and bank balances Cash and bank balances at beginning of the year
1 816 711 20 094 384
4 941 732 15 152 652
1 564 622 6 226 480 19 190 699 12 964 219
Cash and bank balances at end of the year
21 911 095
20 094 384
20 755 321 19 190 699
14
35
36
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2014
1 GENERAL INFORMATION CIMAS Medical Aid Society is a Society registered in terms of the Zimbabwe Medical Services Act (Chapter 15:13) 2000. The main business of the Society and its subsidiaries (together “the Group”) is the provision of value added healthcare solutions to members, employees and other stakeholders.
2 APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS’s) 2.1 New and amended standards adopted by the Group The following new standards, amendments and interpretations are effective for accounting periods beginning on or after 1 January 2014 and are relevant to the Group: Standard/Interpretation Content
Applicable for financial years beginning on/after
IAS 32 (amendment)
Financial instruments: presentation
1 January 2014
IAS 36 (amendments)
Impairment of assets
1 January 2014
IAS 39 (amendment)
Financial instruments: recognition
1 January 2014
and measurement
Amendments to IFRS 10,
Consolidated financial statements,
IFRS 12 and IAS 27
Disclosure of interests in other entities
and Separate financial statements respectively.
IFRIC 21 (new)
Levies
1 January 2014
1 January 2014
IAS 32 (amendment) ‘Financial instruments: presentation’. This amendment clarifies some requirements for offsetting financial assets and financial liabilities on the balance sheet. IAS 36 (amendments) ‘Impairment of assets’. The amendments reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where the recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. IAS 39 (amendment) ‘Financial instruments: recognition and measurement’. The amendment makes it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met. IFRS 10, IFRS 12 and IAS 27 (amendments) regarding the preparation of consolidated financial statements. The amendments provide ‘investment entities’ (as defined) an exemption from the consolidation of particular subsidiaries and instead require that an investment entity measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS 9 Financial Instruments or IAS 39 Financial Instruments: Recognition and Measurement IFRIC 21 (new) ‘Levies’. This interpretation provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, contingent liabilities and contingent assets and those where the timing and amount of the levy is certain. The Group complies with these standards and the nature of the amendments is such that there is no significant impact on the results.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
2.2 New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2014 and not early adopted The following new standards, amendments and interpretations have been issued but are not yet effective and are relevant to the Group’s operations: Standard/Interpretation Content
Applicable for financial years beginning on/after
IFRS 9 (amendments)
Financial instruments
1 January 2018
IFRS 15 (new)
Revenue from contracts with customers
1 January 2017
IAS 19 (amendments)
Employee benefits
1 July 2014
IFRS 3 (annual improvement)
Business combinations
1 July 2014
IFRS 8 (annual improvement)
Operating segments
1 July 2014
IFRS 13 (annual improvement)
Fair value measurement
1 July 2014
IAS 16 and IAS 38
Property, plant and equipment
(annual improvement)
and Intangible assets
1 July 2014
IAS 24 (annual improvement)
Related party disclosures
1 July 2014
IFRS 9 (amendments) ‘Financial instruments’. A finalised version of IFRS 9 which contains accounting requirements for financial instruments, replacing IAS 39 Financial Instruments: Recognition and Measurement. The standard contains requirements that provide guidance on classification and measurement, impairment, hedge accounting and dereognition. IFRS 15 (new) ‘Revenue from Contracts with Customers”. Provides a single, principles based five-step model to be applied to all contracts with customers. The five steps in the model are as follows identification of the contract with the customer and the performance obligations in the contract, determination of the transaction price allocation of the transaction price to the performance obligations in the contracts and recognition of revenue when (or as) the entity satisfies a performance obligation. IAS 19 (amendments) ‘Employee benefits’. Amends IAS 19 Employee Benefits to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions, can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service is rendered. IFRS 3 (annual improvement) ‘Business combinations’. Requires the contingent consideration that is classified as an asset or a liability to be measured at fair value at each reporting date IFRS 8 (annual improvement) ‘Operating segments’. Requires disclosure of the judgements made by management in applying the aggregation criteria to operating segments, clarify reconciliations of segment assets only required if segment assets are reported regularly IFRS 13 (annual improvement) ‘Fair value measurements’ Clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and payables on an undiscounted basis.
37
38
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
2 APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS’s) (continued) 2.2 New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2014 and not early adopted (continued) IAS 16 and IAS 38 (annual improvement) ‘Property, plant and equipment and Intangible assets’. Clarify that the gross amount of property, plant and equipment is adjusted in a manner consistent with a revaluation of the carrying amount. IAS 24 (annual improvement) ‘Related party disclosures’. Clarifies how payments to entities providing management services are to be disclosed The Group is considering the implications of these new standards, amendments and interpretations, and the impact on the Group and timing of their adoption.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 3.1 Basis of preparation and presentation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, (“IFRS”) and IFRIC interpretations. The consolidated financial statements are based on statutory records that are maintained under the historical cost convention and as modified by the revaluation of property and equipment, investment property and financial assets at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions change. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4 to the financial statements. 3.2 Going concern The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current financing. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements. 3.3 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Society and subsidiaries controlled by the Group. Control is achieved when the Group: • has power over the investee • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
2 APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS’s) (continued) 3.3 Basis of consolidation (continued) The Group reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power, including: • • • •
the size of the Group’s holding or voting rights relative to the size and dispersion of holdings of the other voters; potential voting rights held by the Group, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous annual general meetings.
a) Strategic business units Strategic business units are all entities over which the Group has the power to govern the financial and operating policies. Strategic business units are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date when that control ceases. Inter group transactions, balances and unrealised gains on transactions between strategic business units are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the strategic business units have been changed where necessary to ensure consistency with the policies adopted by the Group. b) 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. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. c) Business combinations The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are generally recognised in profit or loss as incurred. The Group recognises any non-controlling interest in the acquiree on an acquisition- by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
39
40
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.3 Basis of consolidation (continued) c) Business combinations (continued) Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at the acquisition date through profit or loss. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 (Financial Instruments: Recognition and Measurement) either in profit or loss or as a charge to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of noncontrolling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. d) Interest in joint operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. When the Group undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation: • • • • •
its assets, including its share of any assets held jointly. Its liabilities, including its share of any liabilities incurred jointly. Its revenue from the sale of its share of the output arising from the joint operation. Its share of the revenue from the sale of the output by the joint operation. Its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses. When the Group transacts with a joint operation in which the Group is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent of other parties’ interests in the joint operation. When a group entity transacts with a joint operation in which the Group entity is a joint operator (such as a purchase of assets), the Group does not recognize its share of the gains and losses until it resells those assets to a third party. Inter-group transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-group transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.4 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decisionmaker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group executive committee that makes strategic decisions. 3.5 Foreign currency translation In preparing the financial statements of each individual group entity, transactions in currencies other that the Group’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. a) Functional and presentation currency Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group operates (“the functional currency”). The financial statements are presented in the United States of America dollar (“US$”), which is the Group’s functional and presentation currency. b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of profit or loss. c) Group companies The results and financial position of all CIMAS entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at rates at the date of the transactions); and • all resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of the net investment in foreign entities are recognised in the foreign currency translation reserve in the statement of comprehensive income. When a foreign operation is partially disposed of or sold, such exchange differences are reclassified to profit or loss as part of the gain or loss on sale.
41
42
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.6 Property and equipment Land and buildings held for use in the production or supply of goods or services, or for administrative purposes are stated in the consolidated statement of financial position at their revalued amounts being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period. Increases in the carrying amount arising on revaluation of land and buildings are credited to revaluation reserve in the statement of changes in equity. Decreases that offset previous increases of the same asset are charged against revaluation reserve directly in equity; all other decreases are charged to the statement of profit or loss and other comprehensive income. Depreciation on revalued buildings is recognised in profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Freehold land is not depreciated. Motor vehicles, furniture and equipment are stated at cost less accumulated depreciation and accumulated impairment. Depreciation is calculated using the straight line method to allocate their costs or revalued amounts to their residual values over their estimated useful life as follows: Buildings and leasehold properties
40 years
Furniture and equipment
4 years
Computers
4 years
Motor vehicles
4 years
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting date. An 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. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset recognised in profit or loss. 3.7 Investment property Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value. Gains and losses arising from changes in the fair value of investment properties are included in profit or loss in the period in which they arise. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.8 Intangible assets Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. 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 costs, employee costs and an appropriate portion of other 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 four years. Amortisation begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. 3. 9 Impairment of non-financial assets At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment (if any). Assets that have an indefinite useful life, for example land, 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 is recognised for the amount by which the asset’s carrying amount 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 levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
43
44
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.10 Financial assets 3.10.1 Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. a) Financial assets at fair value through profit or loss Financial assets at fair value through profit and loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the reporting date. These are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables” and cash and cash equivalents in the statement of financial position. 3.10.2 Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group commits to purchase or sell the asset. Financial instruments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest rate method. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss ‘category are presented in the statement of comprehensive income in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of investment income when the Group’s right to receive payments is established. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income. 3.10.3 Derecognition A financial asset is derecognised when the Group loses control over the contractual rights that comprise the asset. A financial liability is derecognised when it is paid or securitised. 3.11 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.12 Impairment of financial assets (a) Assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or category of financial assets is impaired. A financial asset or a category of financial assets is impaired and impairment is incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or category of financial assets that can be reliably estimated. For loans and receivables category, the amount of the loss is measured as the difference between the assets carrying amounts and the present values of the estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of comprehensive income. If a loan or held to maturity investment has a variable interest rate, the discount rate for measuring any impairment is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instruments future value using an observable market price. The criteria that the Group uses to determine that there is objective evidence of impairment include: • significant financial difficulty of the issuer or obligor; • a breach of contract, such as a default or delinquency in interest or principal payments; • the Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; • It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; • The disappearance of an active market for that financial asset because of financial difficulties; or • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: (i) Adverse changes in the payment status of borrowers in the portfolio; and (ii) National or local economic conditions that correlate with defaults on the assets in the portfolio. The Group first assesses whether objective evidence of impairment exists. If, in a subsequent period, the amount of the impairment decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment is recognised in the statement of comprehensive income. 3.13 Inventories Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-out (FIFO) basis. The cost of inventories excludes borrowing costs. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
45
46
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.14 Trade receivables Trade receivables are amounts due from customers for contributions yet to be received or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. 3.15 Cash and bank balances In the consolidated statement of cash flows, cash and cash equivalents comprise: • cash in hand; • cash at bank • other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Cash and bank balances only include items held for the purpose of meeting short-term cash commitments rather than for investing or other purposes. Cash and bank balances have a maturity of less than three months. Cash and bank balances are carried at cost which due to their short term nature approximates fair value. 3.16 Provision for claims outstanding Provisions for claims outstanding is the provision made for the established cost of claims notified but not yet settled at yearend, using the best information available at that time. Provision is also made for the cost of claims incurred but not reported (IBNR) until after the reporting date. The provision for claims outstanding is shown within current liabilities on the statement of financial position and are carried at cost, which is the fair value of the consideration to be paid in the future for claims made and services rendered. 3.17 Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 3.18 Provisions Provisions 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. 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.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.18 Provisions (continued) 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. 3.19 Taxation The Society is domiciled in Zimbabwe. Under the current laws of Zimbabwe, there is no income, estate, corporation, capital gains, or other taxes payable by the Society. This is with the exception of Value Added Tax (VAT) which is due and payable where applicable. An exception to this is in regards to Healthguard International (Pty) Limited, which is registered and domiciled in the Republic of South Africa and hence is under the jurisdiction of South Africa Revenue Services (SARS), and CIMAS Administrators t/a MEDCO, a company registered in Zimbabwe. The income tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to the items recognised directly in equity. In this case the tax is also recognised in equity respectively. 3.19.1 Current Tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 3.19.2 Deferred Tax Deferred income tax is recognised, using the statement of financial position method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is also not recognised if the temporary difference arises from goodwill or is related to investments in subsidiaries. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority or either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
47
48
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.20 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for the sale of services or goods supplied, stated net of discounts, returns and value added taxes and after eliminated sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity, and when specific criteria have been met for each of the Group’s activities as described below. Revenue is recognised as follows: a) Contribution income Contribution income is recognised in the accounting period in which contributions are received and membership is granted. b) Fees Fees are recognised as revenue in the accounting period in which the services were rendered, by reference to the completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.
Finance income Interest income Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Dividend income Dividend income is recognised when the right to receive payment is established.
3.21 Leases 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 the statement of comprehensive income on a straight line basis over the period of the lease. The group leases out investment properties on a short term leases renewable annually. Income from these operating leases is recognised as investment income in the statement of comprehensive income net of service costs payable to the property managers.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.22 Employee benefits a) Pension obligations Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has a defined contribution fund. A defined contribution fund is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. For the defined contributions plans, the Group pays contributions to a privately administered pension insurance plan on a contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefits expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. b) Termination benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the reporting date are discounted to present value. c) Bonus plans The Group recognises a liability and an expense for bonuses. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. 3.23 Contingencies and commitments The Group discloses a contingent liability when: • it has a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or • it has a present obligation that arises from past events but not recognised because – it is not probable that an outflow of resources will be required to settle an obligation; or – the amount of the obligation cannot be measured with sufficient reliability. Items are classified as commitments where the Group commits itself to future transactions with external parties.
4
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in note 3, the Board members of the Group are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates The 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 if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
49
50
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) 4.1 Key sources of estimation uncertainty The following are key sources of estimation uncertainty, apart from those involving critical judgments (see note 4.2 below), that the Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements (a) Useful lives of property and equipment The Group’s management determines the estimated useful lives and related depreciation charges for its property and equipment. This estimate is based on projected life cycles for these assets. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write off or write down technically obsolete or non-strategic assets that have been abandoned or sold. (b) Incurred but not reported claims provision The Group’s estimates for reported and unreported claims and resulting provisions are continually reviewed and updated, and adjustments resulting from this review are recognised in the statement of comprehensive income. The process relies upon the basic assumption that past experience, adjusted for the effect of current developments and likely trends, is an appropriate basis for predicting future events. (c) Income taxes The Group is subject to income taxes under the jurisdiction of South Africa Revenue Service with regards to Healthguard International (Pty) Limited which is registered and domiciled in the Republic of South Africa and CIMAS Administrators t/a MEDCO, a company registered in Zimbabwe. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. (d) Provision for doubtful receivables The Group provides for impairment of those receivables that are 90 days and over. The provision for bad debts is arrived at on a case by case basis for those accounts in arrears for periods of 90 days or more and assesses the probability of those amounts being recoverable by engaging the debtors. (e) Fair value measurements and valuation processes Some of the Group’s assets are measured at fair value for financial reporting purposes. In estimating the fair value of an asset, the Group uses market-observeable data to the extent it is available. Where Level 1 inputs are not available, the Group engages third party qualified valuers to perform the valuation. Information about the valuation techniques and inputs used in determining the fair value of assets are disclosed in notes 5,7 and 22.4 4.2 Critical judgments in applying accounting policies The Group has not made any significant judgments during the year.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
5 PROPERTY AND EQUIPMENT-CONSOLIDATED
Freehold Buildings Leasehold Furniture & Computer land Property Equipment Equipment US$ US$ US$ US$ US$
Motor Vehicles US$
Total US$
Year ended 31 December 2013 Opening net book amount Additions Disposals Revaluation increase Impairment recognised in profit or loss Depreciation
1 588 500 3 133 041 — 11 204 — — 376 220 521 415
— 137 090 — —
829 402 473 268 (21 067 ) —
400 546 105 128 (6 163 ) —
315 948 6 267 437 113 939 840 629 (11 877 ) (39 107 ) — 897 635
— (80 380 )
— (804 )
(9 581 ) (317 669 )
(39 557 ) (166 899 )
— (49 138 ) (144 326 ) (710 078 )
Closing net book amount
1 964 720 3 585 280
136 286
954 353
293 055
273 684 7 207 378
At 31 December 2013 Cost or valuation 1 964 720 3 585 280 137 090 1 606 649 Accumulated depreciation — — (804 ) (652 296 )
760 856 (467 801 )
674 420 8 729 015 (400 736 ) (1 521 637 )
Carrying amount
954 353
293 055
273 684 7 207 378
136 286 101 160 —
954 353 438 431 (9 264 )
293 055 279 171 (3 468 )
273 684 7 207 378 170 856 1 006 101 (116 939 ) (129 671 )
— (3 293 )
(5 910 ) (375 200 )
— (168 592 )
— (5 910 ) (144 390 ) (781 294 )
234 153 1 002 410
400 166
183 212 7 296 604
— —
1 964 720 3 585 280
136 286
Year ended 31 December 2014 Opening net book amount Additions Disposals Impairment recognised in profit or loss Depreciation
1 964 720 3 585 280 — 16 483 — —
Closing net book amount
1 964 720 3 511 944
— —
— (89 819 )
Year ended 31 December 2014 At 31 December 2014 Cost or valuation 1 964 720 3 601 763 238 250 2 035 816 1 036 559 Accumulated depreciation — (89 819 ) (4 097 ) (1 033 406 ) (636 393 )
728 338 9 605 446 (545 126 ) (2 308 842 )
Carrying amount
183 212 7 296 604
1 964 720 3 511 944
234 153 1 002 410
400 166
51
52
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
5 PROPERTY AND EQUIPMENT-SOCIETY
Freehold Buildings Leasehold Furniture & Computer land Property Equipment Equipment US$ US$ US$ US$ US$
Motor Vehicles US$
Total US$
Year ended 31 December 2013 Opening net book amount Additions Disposals Revaluation increase Impairment recognised in profit or loss Depreciation
1 588 500 3 133 041 — 11 204 — — 376 220 521 415
— 137 090 — —
782 628 276 493 (20 640 ) —
227 872 63 109 (6 135 ) —
153 144 5 885 185 113 939 601 835 (11 877 ) (38 652 ) — 897 635
— (80 380 )
— (804 )
(9 581 ) (293 858 )
— (83 719 )
— (9 581 ) (72 119 ) (530 880 )
Closing net book amount
1 964 720 3 585 280
136 286
735 042
201 127
183 087 6 805 542
At 31 December 2013 Cost or valuation 1 964 720 3 585 280 137 090 1 344 992 Accumulated depreciation — — (804 ) (609 950 )
568 734 (367 607 )
385 592 7 986 408 (202 505 ) (1 180 866 )
Carrying amount
— —
1 964 720 3 585 280
136 286
735 042
201 127
183 087 6 805 542
Opening net book amount Additions Disposals Impairment recognised in profit or loss Depreciation
1 964 720 3 585 280 — 16 483 — —
136 286 101 160 —
735 042 431 850 (9 264 )
201 127 248 885 (2 775 )
183 087 6 805 542 170 856 969 234 (41 780 ) (53 819 )
— (89 819 )
— (3 295 )
(5 910 ) (346 648 )
— (117 444 )
— (5 910 ) (128 952 ) (686 157 )
Closing net book amount
1 964 720 3 511 944
234 151
805 070
329 793
183 212 7 028 891
At 31 December 2014 Cost or valuation 1 964 720 3 601 763 238 250 1 767 578 Accumulated depreciation — (89 819 ) (4 099 ) (962 508 )
814 844 (485 051 )
514 669 8 901 824 (331 457 ) (1 872 933 )
Carrying amount
329 793
183 212 7 028 891
Year ended 31 December 2014
— —
1 964 720 3 511 944
234 151
805 070
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
5 PROPERTY AND EQUIPMENT-SOCIETY (continued) 5.1 Fair value measurement of the Group’s freehold land and buildings The revaluations were based on independent valuation by an external independent third party (Bard Real Estate). The valuations were based on information relating to comparable market transactions, rentals, property sales and leases in the period the valuation was undertaken. The valuers also analysed the capitalisation rates being used in the market and used the investment method of valuation which assumes that a potential investor will purchase the building in order to derive a return through rental income. Land and buildings are shown at fair value based on this valuation. The fair value was taken to be the open market value of the land and buildings. The open market value is defined as “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.” The basis of value was subject to the assumption that the property has a multipurpose use and shall be sold in the open market. Because of the short nature of leases in Zimbabwe, freehold properties were valued as if vacant and available to let. The last valuation was done at 31 December 2013. Details of the Group’s freehold land and buildings and information about the fair value hierarchy are as follows:
Level 1 Level 2 Level 3 Fair value as at 31/12/14 US$ US$ US$ US$ Land and buildings Freehold land Buildings
— —
1 964 720 3 511 944
— —
1 964 720 3 511 944
—
5 476 664
—
5 476 664
There were no transfers between level one and level two during the year. 5.2 Impairment recognised in the year The Group recognised impairment costs in respect of Healthcare Services Division’s furniture and equipment following greater than anticipated wear and tear. The total impairment value of US$5 910 (2013: US$49 138) has been included in profit or loss in the administration costs line item.
53
54
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
6 SEGMENT INFORMATION The Group’s executive committee is the Group’s chief operating decision maker. Group management has determined the operating segments based on the reports reviewed by the Group executive committee that are used to make strategic decisions. At 31 December 2014, the Group was organised into five main business segments: 1) Medical Aid (CIMAS Fund and Healthguard International (Pty) Ltd aggregated) 2) CIMAS Administrators (Pvt) Ltd t/a MEDCO 3) Medical Services Division 4) Healthcare Services Division 5) Shared Services Division The following individual operating segments have been aggregated in arriving at reportable segments of the Group: a) CIMAS Fund b) Healthguard International (Pty) Ltd These have been aggregated on the basis of: i) Nature of revenues from major products and services for the divisions are similar ii) Major customers for the division and the subsidiary reside in the same geographical area (Zimbabwe). Medical aid contributions are primarily from external members who are domiciled in Zimbabwe. There is no contribution income from a transaction with a single external member that amounted to 10% or more of the Group’s total contributions.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
6 SEGMENT INFORMATION (continued) The segment results are as follows:
Medical Aid US$
MEDCO US$
Medical Healthcare Services Services US$ US$
Shared Consolidation Services elimination US$ US$
Contribution income Fees Intersegment revenue
100 724 237 692 760 —
— — 5 030 091
— 7 524 317 —
— — 8 159 051 — — 4 220 024
— 100 724 237 — 16 376 128 (9 250 115 ) —
Contribution income and fees Claims and direct costs
101 416 997 (88 757 005 )
5 030 091 7 524 317 — (3 964 575 )
8 159 051 4 220 024 (3 902 542 ) —
(9 250 115 ) 117 100 365 — (96 624 122 )
5 030 091
Total US$
Year ended 31 December 2014
Operating surplus
12 659 992
3 559 742
4 256 509 4 220 024
(9 250 115 )
Administration costs Depreciation
(12 923 528 ) (5 609 603 ) (2 463 505 ) (148 857 ) (95 138 ) (284 283 )
(3 182 960 ) (4 582 835 ) (113 888 ) (133 616 )
9 768 598 (18 993 833 ) — (775 782 )
Total administration costs Exchange loss Other income
(13 072 385 ) (5 704 741 ) (2 747 788 ) (1 435 ) — — 315 941 55 062 4 832
(3 296 848 ) (4 716 451 ) — — 3 266 1 798 749
9 768 598 (19 769 615 ) — (1 435 ) (1 912 434 ) 265 416
(Deficit)/Surplus before investment income
(1 393 951 )
20 476 243
(97 887 )
(619 588 )
816 786
962 927 1 302 322
970 609
Investment income Net gain from fair value adjustment on investment property Income tax (expense)/credit
2 774 579
43 437
158 621
101 043
61 533
(918 483 )
2 220 730
1 007 940 (9 978 )
— 131 348
— —
— —
— —
— —
1 007 940 121 370
Surplus/(deficit) for the year
3 674 654
(444 803 )
975 407
1 063 970 1 363 855
(2 312 434 )
4 320 649
55
56
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
6 SEGMENT INFORMATION (continued)
Medical Aid US$
MEDCO US$
Medical Healthcare Services Services US$ US$
Shared Consolidation Services elimination Total US$ US$ US$
Contribution income Fees Intersegment revenue
95 670 972 685 994 —
— — 6 094 503
— 7 266 586 —
— — 6 741 772 — — 4 284 613
— — (10 379 116 )
Contribution income and fees Claims and direct costs
96 356 966 (85 690 677 )
6 094 503 7 266 586 — (3 297 906 )
6 741 772 4 284 613 (2 998 098 ) —
(10 379 116 ) 110 365 324 — (91 986 681 )
Operating surplus
10 666 289
6 094 503
3 968 680
3 743 674 4 284 613
(10 379 116 )
Administration costs Depreciation
(11 341 944 ) (5 456 621 ) (2 402 461 ) (136 002 ) (179 198 ) (225 206 )
(2 892 410 ) (3 626 163 ) (83 927 ) (85 745 )
10 901 802 (14 817 796 ) — (710 078 )
Total administration costs Exchange (loss)/gain Other income
(11 477 946 ) (5 635 819 ) (2 627 667 ) (20 017 ) — — 147 125 202 387 14 737
(2 976 337 ) (3 711 908 ) — 22 036 15 699 1 952
10 901 802 (15 527 874 ) — 2 019 — 381 900
Year ended 31 December 2013
Surplus before investment income
95 670 972 14 694 352 —
18 378 643
(684 549 )
661 071
1 355 750
783 036
596 693
522 687
3 234 688
Investment income Net gain from fair value adjustment on investment property Income tax expense
2 769 431
74 939
145 260
58 442
39 815
(522 687 )
2 565 200
120 000 (110 042 )
— (315 722 )
— —
— —
— —
— —
Surplus for the year
2 094 840
420 288
1 501 010
841 478
636 508
—
120 000 (425 764 ) 5 494 124
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
6 SEGMENT INFORMATION (continued) Segmental assets and liabilities
The segment assets and liabilities and capital expenditure are as follows:
Medical Aid MEDCO US$ US$
Medical Healthcare Services Services US$ US$
Shared Services Total US$ US$
Year ended 31 December 2014 Assets
37 916 545
3 447 413
4 122 778
Liabilities
16 841 752
342 218
422 667
762 880
153 560
18 408 477
306 012
452 874
223 520
370 550
211 213
1 564 169
Assets
29 722 554
2 717 450
4 445 353
2 220 188 1 294 087
40 399 632
Liabilities
11 868 309
257 639
407 122
422 694
214 484
13 170 248
35 337
1 590 219
374 512
122 721
69 265
2 192 054
Capital expenditure
3 115 922 1 316 849
49 919 507
Year ended 31 December 2013
Capital expenditure
57
58
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
7 INVESTMENT PROPERTY
Land Buildings Total US$ US$ US$
Fair value Year ended 31 December 2013 Balance as at 1 January 2013 436 840 3 863 160 Change in fair value 14 870 105 130
4 300 000 120 000
Balance as at 31 December 2013
3 968 290
4 420 000
Year ended 31 December 2014 Balance as at 1 January 2014 451 710 3 968 290 Additions — 142 060 Change in fair value 50 590 957 350
4 420 000 142 060 1 007 940
451 710
Balance as at 31 December 2014
502 300
5 067 700
5 570 000
7.1 Fair value measurement of the Group’s investment properties Investment properties are valued annually at fair value comprising open market value by a professionally qualified valuer who holds a recognised relevant professional qualification and has recent experience in the locations and categories of the investment properties valued. The valuations were based on information relating to comparable market transactions and rentals which took place in the current year and the current properties on sale and leased properties. The valuers also analysed the capitalisaton rates being used in the market and used the investment method of valuation which assumes that a potential investor will purchase the building in order to derive a return through rental income The last valuation was done at 31 December 2014 and the next one will be at 31 December 2015. There were no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or disposals. There has been no change in valuation technique during the year. Details of the Group’s investment property and information about the fair value hierarchy are as follows: Fair value as Level 1 Level 2 Level 3 at 31/12/14 US$ US$ US$ US$
Investment properties in Zimbabwe
There were no transfers between level one and level two during the year.
—
5 570 000
—
5 570 000
CONSOLIDATED
2014 US$
2013 US$
The following amounts have been recognised in the consolidated statement of comprehensive income:
Rental income Direct operating expenses arising from investment properties that generate rental income
391 872
314 744
(31 996 )
(45 918 )
Net rental income
359 876
268 826
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
8 INTANGIBLE ASSETS
At beginning of the year Additions Amortisation
At end of the year
CONSOLIDATED 2014 US$
2013 US$
1 585 583 416 006 (1 633 )
234 158 1 351 425 —
1 999 956
1 585 583
The carrying amount of the intangible assets relates to Costs incurred on externally generated software development costs for the new medical aid administration system. Amortisation relating to a significant portion of the balance is yet to commence as the software development is still work in progress.
9 TAXATION 9.1 DEFERRED TAX
The analysis of deferred income tax assets and deferred income tax liabilities
Deferred tax assets: Deferred tax assets to be recovered after more than 12 months
179 615
9 401
Deferred tax liabilities: Deferred tax liabilities to be settled after more than 12 months
—
2 468
179 615
6 933
Net deferred income tax assets
The gross movement on the deferred income tax account is as follows: As at 1 January 6 933 (45 762 ) Effect of foreign currency translation (3 848 ) (2 010 ) Credit to profit or loss and other comprehensive income 176 530 54 705
As at 31 December
179 615
6 933
59
60
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
9 TAXATION (continued) 9.2 INCOME TAX (CREDIT)/EXPENSE
Amounts recognised in profit or loss and other comprehensive income Current income tax Effect of foreign currency translation Deferred tax credit
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
51 312 3 848 (176 530 )
478 459 2 010 (54 705 )
— — —
17 136 — —
(121 370 )
425 764
—
17 136
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the basic tax rate as follows: CONSOLIDATED 2014 2013 US$ US$
Income tax reconciliation
Surplus before taxation
4 199 279
5 919 888
Tax at 25.75% Effect of income that is exempt from taxation Effect of different tax rates for Healthguard International (Pty) Ltd Non - deductible expenses for tax purposes Other - dividend withholding tax
1 081 315 (1 221 833 ) 4 123 15 025 —
1 524 371 (1 249 754 ) 7 436 126 575 17 136
(121 370 )
425 764
(3)% 25.75% 28.00%
7.70% 25.75% 28.00%
Effective tax rate Statutory tax (Zimbabwe) Statutory tax (RSA)
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
10 FOREIGN CURRENCY TRANSLATION RESERVE CONSOLIDATED 2014 2013 US$ US$
Balance at beginning of year
(128 363 )
(113 840 )
Exchange differences arising on translating the foreign operations Exchange differences arising from dividends Prior period FCTR Adjustment
(8 637 ) (30 366 ) —
(4 001 ) (23 175 ) 12 653
Foreign currency translation loss for the year
(39 003 )
(14 523 )
Balance at end of year
(167 366 )
(128 363 )
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional currencies to the Group’s presentation currency (i.e. United States Dollars) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve.
11 INVENTORIES
Reagents and Lab consumables Drugs and clinical consumables Stationery Fuel
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
799 720 906 176 130 962 11 010
752 947 626 810 133 366 56 068
799 720 906 176 5 129 11 010
752 947 626 810 15 886 56 068
1 847 868
1 569 191
1 722 035
1 451 711
13 699 617 151 767
12 TRADE AND OTHER RECEIVABLES
Trade receivables (excluding loans) Loans to key management (note 27b)
5 783 349 262 105
12 097 428 151 767
5 632 034 262 105
Trade receivables 13 851 384 6 045 454 Less: provision for impairment of trade receivables (note 12.2) (4 178 477 ) (1 508 040 )
12 249 195
5 894 139
(2 798 230 )
(1 508 040 )
Trade receivables - net (note 12.1) Prepayments
9 672 907 331 849
4 537 414 347 507
9 450 965 268 439
4 386 099 277 910
10 004 756
4 884 921
9 719 404
4 664 009
61
62
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
12 TRADE AND OTHER RECEIVABLES (continued) 12.1 At 31 December 2014, the ageing analysis of these trade receivables is as follows:
0 - 30 days 30 - 120 days Over 120 days
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
5 482 570 2 998 334 1 192 003
2 908 247 1 367 062 262 105
5 482 570 2 776 392 1 192 003
2 756 932 1 367 062 262 105
9 672 907
4 537 414
9 450 965
4 386 099
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The fair value of trade and other receivable approximate the carrying values because of their short tenure. 12.2 Movements in the accumulated impairment on trade receivables were as follows:
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$ 1 001 371
At 1 January Increase/(decrease) in provision for impairment Unused amounts reversed
1 508 040
1 001 371
1 508 040
2 734 342 (63 905 )
568 079 (61 410 )
2 734 342 (63 905 )
As at 31 December
4 178 477
1 508 040
4 178 477
1 508 040
568 079 (61 410 )
12.3 Trade receivables past due but not impaired
-Receivables from large companies -Receivables from individuals, small and medium sized companies
2 570 873
899 353
2 570 873
899 353
1 040 327
147 866
1 040 327
147 866
Total past due but not impaired
3 611 200
1 047 219
3 611 200
1 047 219
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
13
FINANCIAL ASSETS
13a) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
CONSOLIDATED SOCIETY
2014 2013 US$ US$ Financial assets at fair value through profit or loss includes the following: Listed equity investments 1 109 613 628 774
2014 US$
2013 US$
1 109 613
628 774
The movement in financial assets may be classified as follows: At beginning of the year 628 774 484 794 Additions (disposals) 599 259 (23 165 ) Net fair value (loss)/ gain (118 420 ) 167 145
628 774 599 259 (118 420 )
484 794 (23 165 ) 167 145
1 109 613
628 774
1 109 613
628 774
The fair value is the closing price for the counters at the Zimbabwe Stock Exchange as at 31 December.
14
CASH AND BANK BALANCES
Cash and bank balances Short-term bank deposits
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
4 361 504 17 549 591
4 137 897 15 956 487
3 893 926 3 789 184 16 861 395 15 401 515
21 911 095
20 094 384
20 755 321 19 190 699
15
PROVISION FOR CLAIMS OUTSTANDING
At beginning of the year Change in provision for claims
7 730 707 699 301
6 042 850 1 687 857
7 670 953 704 945
6 042 850 1 628 103
At end of the year
8 430 008
7 730 707
8 375 898
7 670 953
63
64
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
16
TRADE AND OTHER PAYABLES
Trade payables Accrued expenses Provisions for other liabilities and charges (note 16.1)
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
7 252 343 382 164 2 338 460
3 697 569 252 896 1 328 249
5 114 554 198 293 2 183 607
3 149 932 240 605 923 749
9 972 967
5 278 714
7 496 454
4 314 286
All trade and other payables are due within twelve months of the date of the statement of financial position.
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
1 328 249 1 010 211
1 585 673 (257 424 )
923 749 1 259 858
1 360 855 (437 106 )
2 338 460
1 328 249
2 183 607
923 749
16.1 Provisions for other liabilities and charges
At beginning of the year Movement in current year
17
CONTRIBUTION INCOME AND FEES
Contribution income Fees
18
CLAIMS AND DIRECT COSTS
Claims Other costs
100 724 237 16 376 128
95 670 972 100 188 089 94 947 451 14 694 352 16 426 430 15 193 188
117 100 365 110 365 324 116 614 519 110 140 639
(88 757 005 ) (85 690 677 ) (88 073 522 ) (85 172 451 ) (7 867 116 ) (6 296 004 ) (8 198 177 ) (6 613 548 ) (96 624 121 ) (91 986 681 ) (96 271 699 ) (91 785 999 )
In the current year fees relating to services rendered by consultant medical professionals has been reclassified to direct costs. In prior year such costs were included in operating expenses. The impact is an increase in claims and direct costs for the comparative period by US$1 072 010 and a reduction in administration costs by the same amount.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
19
ADMINISTRATION COSTS
Employee benefit expenses Marketing and public relations Audit fees Consultancy fees Depreciation and impairment charges Directors fees Motor vehicle expenses Staff training Telephone and internet Software licences Provision for impairment of trade receivables (note 12.2) Operating lease instalments Fund administration fees Other expenses (i)
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
10 218 645 734 795 110 990 173 248 788 838 109 789 195 934 100 549 393 671 1 820 202 2 734 342 189 000 — 2 199 612
9 677 638 704 702 165 381 197 997 759 216 102 080 105 369 80 241 297 274 62 524 568 079 — — 2 807 373
7 611 054 734 392 100 000 161 542 692 067 109 789 195 934 91 838 237 545 47 361 2 734 342 189 000 5 030 091 1 336 928
6 932 042 404 494 165 381 151 588 540 461 102 080 105 369 48 427 141 149 62 524 568 079 — 6 094 503 1 262 070
19 769 615
15 527 874
19 271 883 16 578 167
(i) Included in other expenses are numerous operating costs incurred in the day to day running of the business.
20
INVESTMENT INCOME
Interest income Rental income Dividend income Net fair value (loss)/gain on financial assets at FVTPL Brokerage fees on disposal of financial assets at FVTPL
21
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
1 907 216 391 872 40 062 (118 420 ) —
2 074 988 314 745 8 668 167 145 (346 )
1 854 284 679 826 152 496 (118 420 ) —
1 997 243 602 698 127 129 167 145 (346 )
2 220 730
2 565 200
2 568 186
2 893 869
PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
Net book value of disposed assets Profit/ (loss) on sale of property and equipment
129 671 1 941
39 107 (3 482 )
53 819 1 090
38 652 (3 482 )
Proceeds from sale of property and equipment
131 612
35 625
54 909
35 170
65
66
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
22 FINANCIAL RISK MANAGEMENT 22.1 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 and price risk), credit risk, liquidity risk, foreign exchange risk and cash flow interest rate 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 under policies approved by the board of directors. The Board provides written principles for overall management as well as written policies covering specific areas, such as, foreign exchange risk, interest rate risk, credit risk and the investment of excess liquidity. a) Market risk The Group takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate, currency and equity securities, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. Market risk can be described as the risk of change in fair value of a financial instrument brought about by changes in interest rates and equity prices. b) Foreign exchange risk Foreign exchange risk is the risk arising from fluctuations in foreign exchange rates and their effect on future commercial transactions or recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The Group is exposed to foreign exchange risk arising from various current exposures on purchases that are denominated in currency other than the US$, primarily with respect to the South African Rand. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities. Management has set up a policy requiring the Group to manage its foreign exchange risk against their functional currency. Management monitors exposures to foreign exchange risk on an ongoing basis, and tries to match foreign currency inflows and outflows. The Group has certain investments in foreign operations, whose net assets are exposed to minimum foreign currency translation risk as the subsidiary trades in its home currency to reduce such exposure. The exchange rates applied in the current financial year were as tabulated:
2014
2013
Average (R/$) Closing Spot (R/$)
10.840 11.600
9.6191 10.5042
At 31 December 2014, if the US dollar had strengthened by 10% against the South African Rand with all other variables held constant, the effect on equity would have been US$11 736 (2013: US$21 754) higher/lower, mainly as a result of foreign exchange gains/losses on translation of the Rand denominated foreign subsidiary operations of Healthguard International (Pty) Limited.
CIMAS Medical Aid Society Annual Report 2014
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
22 FINANCIAL RISK MANAGEMENT (continued) 22.1 Financial risk factors (continued) c) Price risk Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Group is exposed to equity securities price risk because of investments held by the Group and classified in the consolidated statement of financial position as financial assets at fair value through profit and loss. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group. Surplus for the year would increase/decrease as a result of gains/losses on equity securities classified as at fair value through profit or loss. At 31 December 2014, if share prices increased/decreased by 10%, other variables held constant, the effect on equity would have been +/-US$110 961 (2013: +/-US$62 877) higher/lower. d) Cash flow and fair value interest rate risk The Group Executive Committee consisting of senior executives of the Group, meets on a regular basis to analyse, amongst other matters, interest rate exposures and re-evaluate treasury management strategies against revised economic forecasts. Compliance with Group policies and exposure limits is reviewed at quarterly board meetings. e) Credit risk Credit risk is the risk that one party to the financial instrument will cause a financial loss to the other party by failing to discharge a contract. The Group has no significant concentrations of credit risk. Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, including outstanding trade receivables. Only approved financial institutions with sound capital bases are utilised to invest surplus funds. For customers, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.
The Group’s maximum exposure to credit risk by class of financial asset is as follows:
CONSOLIDATED 2014 2013 US$ US$ Trade receivables, net of provision for impairment (note 12) 9 672 907 4 537 414 Cash and cash equivalents 21 911 095 20 755 321
31 584 002 25 292 735
The fair value of cash and cash and equivalents and trade other receivables as at 31 December approximates the carrying amount.
68
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
22 FINANCIAL RISK MANAGEMENT (continued) 22.1 Financial risk factors (continued)
e) Credit risk (continued) The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit rating (if available) or to historical information about counterparty default rates:
Trade receivables Counterparties without external credit rating
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
9 672 907
4 601 302
9 450 965
4 449 987
The Group held cash and cash equivalents of US$21 911 094 at 31 December 2014 (US$20 094 384: 2013). The cash and cash equivalents are held with banks and financial institution counterparties with Global Credit Rating Company ratings indicated below:
AA (ZA) AA-(ZW) A+ (ZW) A-(ZW) A (ZW) BBB (ZW) BBB+ (ZW) BB+ (ZW) BB-(ZW) Cash on hand
CONSOLIDATED SOCIETY 2014 US$
2013 US$
2014 US$
2013 US$
503 744 2 171 294 3 990 795 6 971 209 927 819 6 668 696 619 605 — — 57 933
511 983 1 864 327 3 054 491 3 546 612 80 977 5 247 036 5 679 122 — 77 686 32 150
— 2 171 294 3 990 795 6 971 209 284 789 6 668 696 619 605 — — 48 933
— 1 864 327 3 054 491 3 546 612 — 4 945 311 5 679 122 — 77 686 23 150
21 911 095
20 094 384
20 755 321 19 190 699
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
22 FINANCIAL RISK MANAGEMENT (continued) 22.1 Financial risk factors (continued) e) Credit risk (continued) CONSOLIDATED 2014 2013 US$ US$ Analysis by credit quality of financial assets is as follows: Neither past due nor impaired -Trade receivables -Cash and cash equivalents (excl. cash on hand)
5 482 570 3 155 207 21 853 162 20 062 234
Total neither past due nor impaired
27 335 732 23 217 441
Trade receivables neither past due nor impaired -Receivables from large companies -Receivables from individuals, small and medium sized companies
4 221 579
2 697 852
1 260 991
792 343
Total neither past due nor impaired
5 482 570
3 490 195
Trade receivable past due but not impaired -Receivables from large companies 2 570 873 -Receivables from individuals, small and medium sized companies 1 619 464
899 353 147 866
Total past due but not impaired
4 190 337
1 047 219
Total trade receivables, net of provision for impairment
9 672 907
4 537 414
There is no significant concentration of credit risk with respect to cash and cash equivalents as the Group holds cash accounts with large financial institutions with sound financial and capital cover.   f) Liquidity risk Liquidity risk is the risk that the Group may fail to meet its payment obligations when they fall due, the consequences of which may be the failure to meet the obligations to creditors. The Group identifies this risk through periodic liquidity gap analysis and the maturity profile of assets and liabilities. Where major gaps appear, action is taken in advance to close or minimise the gaps. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available. Management monitors rolling forecasts of the Group’s liquidity on a frequent basis.
69
70
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
22 FINANCIAL RISK MANAGEMENT (continued) 22.1 Financial risk factors (continued) f) Liquidity risk (continued) The table below analyses the Group’s financial instruments into the relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:
Less than Between three 3 months months and one year Total US$ US$ US$
At 31 December 2014 Assets Trade and other receivables (excluding prepayments) 9 672 908 — 9 672 908 Financial assets at fair value through profit or loss 1 109 613 — 1 109 613 Cash and cash equivalents 21 911 095 — 21 911 095 Total assets
32 693 616
—
32 693 616
Liabilities Provision for claims outstanding 8 430 008 — 8 430 008 Trade and other payables (excluding statutory liabilities) 9 972 967 — 9 972 967 Total liabilities
18 402 975
—
18 402 975
Liquidity gap
14 290 641
—
14 290 641
Less than Between three 3 months months and one year Total US$ US$ US$
At 31 December 2014 Assets Trade and other receivables (excluding prepayments) 4 537 414 — 4 537 414 Financial assets at fair value through profit or loss 628 774 — 628 774 Cash and cash equivalents 20 094 384 — 20 094 384 Total assets
25 260 572
—
25 260 572
Liabilities Provision for claims outstanding 7 730 707 — Trade and other payables (excluding statutory liabilities) 5 278 714 —
7 730 707 5 278 714
Total liabilities
13 009 421
—
13 009 421
Liquidity gap
12 251 151
—
12 251 151
The Group determines ideal weights for maturity time buckets, which are used to benchmark the actual maturity profile. Maturity mismatches across the time buckets are managed through conversion of financial assets at fair value through profit or loss into cash and cash equivalents. The above amounts disclosed in the table are contractual undiscounted cash flows.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
22 FINANCIAL RISK MANAGEMENT (continued) 22.2 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 benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the statement of financial position plus net debt. The Group had no borrowings as at 31 December 2014 (2013: no borrowings). 22.3 Fair value estimation The fair value of financial instruments traded on the Zimbabwe Stock Exchange is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current bid price. The nominal value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The carrying value of all financial instruments carried at any other amount other than fair value approximates their fair value due to their short term tenure. The fair value of financial liabilities for disclosure purposes is estimated by contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
22.4 Fair value hierarchy
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources: unobservable inputs reflect the Group’s market assumptions. These two types of inputs have created the following fair value hierarchy; Level 1 - Quoted prices (unadjusted) in active market for identical assets or liabilities. This level includes listed equity securities traded on the Zimbabwe Stock Exchange. Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This level includes non listed equity investments. The following table presents the Group’s assets that are measured at fair value (excluding investment property disclosed in note 7)
Level 2 Level 1 Total US$ US$ US$
Year ended 31 December 2014 Assets Financial assets at fair value through profit or loss -Trading securities
—
1 109 613
1 109 613
—
628 774
628 774
Year ended 31 December 2013 Assets Financial assets at fair value through profit or loss -Trading securities
71
72
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
22 FINANCIAL RISK MANAGEMENT (continued) 22.5 Categories of financial instruments
CONSOLIDATED SOCIETY
2014 US$
2013 US$
2014 US$
2013 US$
Financial assets Trade and other receivables excluding pre-payments Cash and bank balances
9 787 563 21 911 095
4 537 414 20 094 384
9 577 919 4 386 099 20 755 321 19 190 699
Total
31 698 658
24 631 798
30 333 240 23 576 798
1 109 613
628 774
1 109 613
628 774
9 972 967 8 430 008
5 278 714 7 730 707
7 496 454 8 375 898
4 314 286 7 670 953
18 402 975
13 009 421
Assets at fair value through profit or loss Assets as per statement of financial position: Financials assets at fair value through profit or loss Financial liabilities Liabilities as per statement of financial position: Trade and other payables excluding statutory liabilities Provision for claims outstanding Total
15 872 352 11 985 239
23 INTEREST IN JOINT OPERATIONS The Group has the following Joint Operations: Harare Haemodialysis Centre The Group has 51% interest in Harare Haemodialysis Centre, a private clinic providing renal services. St Clements Chemotherapy Clinic The Group also has a 50% interest in Medical Investment – St Clements Chemotherapy Clinic, which is a clinic providing chemotherapy services.
24 SUBSIDIARIES
Details of the Group’s subsidiaries at the end of the reporting period are as follows: Place of Proportion of ownership Name of Subsidiary Principal activity incorporation held by the Group 31/12/14 31/12/13 Healthguard International (Pty) Ltd CIMAS Administrators (Pvt) Ltd t/a Medco
Medical insurance Medical Administration
RSA ZW
100% 100%
100% 100%
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
25 CAPITAL COMMITMENTS CONSOLIDATED 2014 2013 US$ US$
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
Capital expenditure authorised and contracted for Capital expenditure authorised but not contracted for
1 006 101 2 352 296
825 566 3 328 355
3 358 397
4 153 921
26 RETIREMENT BENEFIT OBLIGATIONS All eligible employees are members of the following independently administered pension funds: CIMAS - Defined Contribution Fund The defined contribution fund is a separately funded plan for all eligible employees who were employed after 1 January 1999 and those employees who transferred from the defined benefit fund. The plan is funded by agreed fixed rates of contribution of 14.9% by the Group and 6% by the employee. Contributions are charged to the statement of comprehensive income in the year to which they relate. National Social Security Authority The Group and its employees contribute to the National Social Security Authority Scheme. This is a social security scheme which was promulgated under the National Social Security Authority Act. The Group obligations under the scheme are limited to specific contributions legislated from time to time. These are presently 3.5% of pensionable emoluments limited to US$700 per month per employee. The Group’s contributions to both funds were:
2014 US$
2013 US$
CIMAS defined contribution fund 719 900 659 173 National Social Security Authority 75 399 56 883 795 299 716 056
73
74
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
27 RELATED PARTY TRANSACTIONS
Balances and transactions between the Group’s divisions and subsidiaries, which are related parties of the Group, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. a) Key management compensation Key management includes directors (executive and non-executive) and members of the management operational team. The compensation paid and payable to key management for employee service is as shown below:
2014 US$
2013 US$
Remuneration to key management: Salaries and other short term benefits Post employment benefits
1 448 031 97 094
1 086 952 89 028
1 545 125
1 175 980
2014 US$
2013 US$
At 1 January Loans advanced during the year Loan repayments during the year Ex- management reclassified to other debtors Interest charged Interest received
262 105 156 240 (110 475 ) (156 103 ) 9 158 (9 158 )
310 248 73 275 (121 418 ) — 15 992 (15 992 )
As at 31 December
151 767
262 105
b) Loans to related parties Loans to key management of the company
The loans advanced to key management have an interest rate of 6% (2013: 6%) and are repayable over periods ranging between 3 months to 3 years depending on the nature of the loan. No allowance for impairment was required in 2014 (2013: nil) for the loans made to key management personnel.
CIMAS Medical Aid Society Annual Report 2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2014
28 NON CANCELLEABLE OPERATING LEASE COMMITMENTS During the course of the year, the Group entered into a 12 month lease for an aircraft used by the CIMAS Emergency Air Rescue Service. The commitments are as follows: Not later than one year Later than one year and not longer than 5 years Later than 5 years
29 EVENTS AFTER REPORTING PERIOD
There were no material subsequent events that would have any effect on these financial statements.
2014 US$
2013 US$
315 000 — —
— — —
315 000
—
75
76
CIMAS Medical Aid Society Annual Report 2014
NOTES
Head Office Cnr Jason Moyo Ave / Harare St, P O Box 143, Harare Tel: +263 4 777300-15, Fax: +263 4 753567 email: marketing@cimas.co.zw, www.cimas.co.zw
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