People’s National Party Financial Statements 30 June 2010
Draft date: 15 September 2010
People’s National Party Index 30 June 2010
Page Auditors’ Report to the Executive Committee Financial Statements Statement of financial position
1
Statement of comprehensive income
2
Statement of changes in equity
3
Statement of cash flows
4
Notes to the financial statements
5 – 21
Auditors’ Report to the Executive Committee Supplementary Information Operating and administrative expenses
22
15 September 2010 To the Executive Committee of the People’s National Party Kingston Auditors’ Report Report on the Financial Statements We have audited the accompanying financial statements of People’s National Party set out on pages 1 to 21, which comprise the statement of financial position as at June 30, 2010, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. 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, except as discussed in the following paragraph. 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 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. …/2
15 September 2010 To the Executive Committee of the People’s National Party Kingston Page 2 We did not obtain valuation report from independent valuator in respect of property which is included in the statement of financial position at $85,000,000. Management has not stated the property at original cost or fair value but has carried it at the value in the property tax assessment, which is based on unimproved value which constitutes a departure from International Financial Reporting Standards. Were have not been provided with any evidence of any audited financial statements in respect of the People’s National Party since its inception in September 1938; as a result, we are unable to determine the accuracy of the opening accumulated deficit of $1,914,756. This implies that there could be unrecorded assets and liabilities at the statement of financial position’s date. Owing to the nature of the organization’s records, we were unable to satisfy ourselves of whether or not there were any unrecorded assets and liabilities relating to that opening accumulated deficit of $1,914,756 by other audit procedures. Opinion In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to satisfy ourselves of the original cost or fair value of property and opening accumulated deficit, the financial statements give a true and fair view of the financial position of People’s National Party as of June 30, 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
Chartered Accountants Kingston, Jamaica
Page 1
People’s National Party Statement of Financial Position 30 June 2010 Note
2010 $
ASSETS Non-Current Asset Property, plant and equipment
3
85,079,223
Current Assets Receivables Cash in hand and at bank
4 5
2,286,439 4,002,265 6,288,704 91,367,927
EQUITY AND LIABILITIES Reserves Revaluation reserve Sunshine foundation fund Accumulated deficit
6 7
85,000,000 3,986,330 (1,837,821) 87,148,509
8 9
792,218 3,295,752 50,314 81,134 4,219,418
Current Liabilities Payables Dues collected in advance Taxation payable Bank overdraft
10
91,367,927 Approved for issue by the Executive Committee on 15 September 2010 and signed on its behalf by: __________________Chairman
__________________General Secretary
__________________Treasurer
Page 2
People’s National Party Statement of Comprehensive Income Year ended 30 June 2010
Note
2010 $
Income Members’ dues
11
8,723,381
Contributions
12
20,066,700
Other
1,192,840 29,982,921
Operating and administrative expenses (page 22)
(29,638,236)
Operating surplus
13
344,685
Finance cost
14
(217,436)
Net surplus before Taxation Taxation
127,249 15
(50,314)
Surplus for the year
76,935
Total comprehensive income
76,935
Page 3
People’s National Party Statement of Changes in Equity Year ended 30 June 2010
Sunshine foundation fund
Revaluation reserve $ Balance at 1 July 2009 Surplus arising on revaluation of property
Accumulated deficit $
85,000,000
-
Total $
(1,914,756)
(1,914,756)
-
85,000,000
Sunshine foundation fund
-
3,986,330
-
3,986,330
Total comprehensive income
-
-
76,935
76,935
85,000,000
3,986,330
Balance at 30 June 2010
(1,837,821)
87,148,509
Page 4
People’s National Party Statement of Cash Flows Year ended 30 June 2010 2010 $ CASH RESOURCES WERE PROVIDED BY: Operating Activities Surplus for the year
127,249
Adjustments for: Opening transactions, net Depreciation
(1,914,756) 4,135 (1,783,372)
Changes in operating assets and liabilities: Increase in receivables Increase in payables Increase in dues collected in advance Cash provided by operating activities
(2,286,439) 792,218 3,295,752 18,159
Investing Activity Purchase of property, plant and equipment Cash used in investing activity
(83,358) (83,358)
Financing Activity Sunshine foundation fund
3,986,330
Cash provided by financing activity
3,986,330
Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year
3,921,131 3,921,131
Represented by: Cash in hand and at bank Bank overdraft
4,002,265 (81,134) 3,921,131
Page 5
People’s National Party Notes to the Financial Statements 30 June 2010 1. Identification and Principal Activities The People’s National Party is an unincorporated association established in Jamaica on September 18, 1938, and is governed by a written constitution. The principal objectives of the People’s National Party are the upliftment and development of Jamaica and its people, which it pursues by engaging in the activities of a political party. The Party’s operations are administered by its Secretariat, and its real property is held on its behalf by trustees, and these financial statements cover those operations and such property. The principal office of the People’s National Party is located at 89 Old Hope Road, Kingston 6. These financial statements are presented in Jamaican dollars. 2. Statement of compliance, basis of preparation and significant accounting policies (a) Statement of compliance: The financial statements are prepared in accordance with International Financial Reporting Standard (IFRS) and their interpretations issued by the International Accounting Standards Board (IASB). During the year certain new standards, interpretations and amendments to the existing standards became effective. Management has assessed that IFRS 7 Financial Instruments: Disclosures and the amendments to IAS 1 Presentation of Financial Statements were the only relevant pronouncements, and appropriate additional disclosures, together with comparatives, are incorporated in these financial statements. At the date of authorization of the financial statements the following relevant new standards, amendment to standards and interpretation, which were in issue, are not yet effective. Those standards and interpretations are effective for the accounting periods beginning on, or after the indicated dates:
Page 6
People’s National Party Notes to the Financial Statements 30 June 2010 2.
Statement of compliance, basis of preparation and significant accounting policies (continued) (a) Statement of compliance (continued): •
IAS Revised 1- Presentation of Financial Statements (effective January 1, 2010) requires presentation of all non-owner changes in equity, either in a single statement of comprehensive income, or in an income statement plus a statement of comprehensive income. Revised IAS 1 also requires that a statement of financial position be presented at the beginning of the comparative period when the entity restates the comparatives, a disclosure for reclassification adjustments and disclosure of dividends and related per share amounts be disclosed on the face of the statement of changes in equity or in the notes.
•
IAS 23, Revised – Borrowings Costs (effective January 1, 2010) removes the option of immediately recognizing all borrowing costs as an expense. The standard requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of the asset.
•
Amendments to IAS 32 Financial instruments: Presentation (effective January 1, 2010. The amendments allow certain instruments that would normally be classified as liabilities to be classified as equity if certain conditions are met. Where such instruments are reclassified, the entity is required to disclose the amount, the timing and the reason for the reclassification. The adoption of IAS 1 revised and IAS 23 revised and amendment to IAS 32 are expected to result in adjustments and additional disclosures to the financial statements. Management has not completed its evaluation of the impact of adopting these standards on the financial statements.
(b) Basis of preparation: The financial statements are presented in Jamaican dollars ($), which is the functional currency of the fund. The financial statements are prepared under the historical cost basis. The accounting policies have been applied consistently by the organization.
Page 7
People’s National Party Notes to the Financial Statements 30 June 2010 2.
Statement of compliance, basis of preparation and significant accounting policies (continued) (c) Use of estimates and judgement: The preparation of the financial statement to conform to IFRS requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and contingent liabilities at the statement of financial position date, and the income and expense for the year then ended. Actual amounts could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision only that period, or in the period of the revision and future periods is the revision affects both current and future periods. Judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next financial year are discussed below: (i) Allowance for impairment losses on receivables: In determining amounts recorded for impairment losses on receivables in the financial statements, management makes judgements regarding indicators of impairment, that is, whether there are indicators that suggest there may be a measurable decrease in the estimated cash flows from receivables, for example, through default and adverse economic conditions. Management also makes estimates of the likely estimated future cash flows form impaired receivables as well as the timing of such cash flows. Historical loss experience is applied where the indicators of impairment are not observable on individually significant receivables with similar characteristics, such as credit risks. (d) Cash and cash equivalents: Cash and cash equivalent comprise cash, bank balances and short-term deposits maturing within three months or less from the date of deposit or acquisition that are readily convertible into known amounts of cash and which are not subject to significant risk of change in value. Bank overdrafts, repayable on demand and forming an integral part of the group’s cash management activities, are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Page 8
People’s National Party Notes to the Financial Statements 30 June 2010 2.
Statement of compliance, basis of preparation and significant accounting policies (continued) (e) Membership dues and other receivables: Membership dues and other receivables are carried at the original invoice amount less provision made for impairment of these receivables. A provision for impairment of receivables is established when there is objective evidence that the organization will not be able to collect all the amounts due according to the original terms of the receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowings. Bad debts are written off during the year in which they are identified. (f) Accounts payable: Trade and other payables, are stated at amortised cost. (g) Provisions: A provision is recognized in the statement of financial position when the fund has a legal and constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the obligation. (h) Taxation: Taxation on the profit or loss for the year comprises current and deferred tax. Taxation is recognized in the statement of comprehensive income, except to the extent that it relates to items recognized directly to equity, in which case it is recognized in equity. Current tax is the expected tax payable on the income for the year, using tax rates enacted at the statement of financial position.
Page 9
People’s National Party Notes to the Financial Statements 30 June 2010 2. Statement of compliance, basis of preparation and significant accounting policies (continued) (i) Property, plant and equipment: (i) Owned assets: Items of plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and related costs to put the asset into service. The cost of replacing part of an item of plant and equipment is recognized in the carrying amount of an item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. The costs of day-to-day servicing of plant and equipment are recognized in profit or loss as incurred. (ii) Depreciation: Depreciation is computed on the straight-line basis at annual rates estimated to write off the plant and equipment over their expected useful lives. Furniture and equipment Office equipment
10% 10%
Land is not depreciated Depreciation methods, useful lives and residual values are reassessed annually. When the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in operating surplus. Repairs and maintenance expenses are charged to the income and expenditure account during the period in which they are incurred.
Page 10
People’s National Party Notes to the Financial Statements 30 June 2010 3. Statement of compliance, basis of preparation and significant accounting policies (continued) (j) Revenue recognition: Revenue comprises the fair value of the consideration received or receivable for the sale of goods or services in the ordinary course of the company’s activities. Revenue is recognized as follows:Members’ dues and services Members’ dues and services are recognized in the accounting period for which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. (k) Expenses: Net finance cost: Net finance costs comprise interest payable borrowings calculated using the effective interest rate method, interest income on funds invested during the course of routine treasury transactions, material bank charges and foreign exchange gains and losses recognized in the statement of comprehensive income.
Page 11
People’s National Party Notes to the Financial Statements 30 June 2010 2. Statement of compliance, basis of preparation and significant accounting policies (continued) (l) Impairment: Objective evidence that financial assets are impaired can include default or delinquency by a customer, indications that a customer will enter bankruptcy and changes in the payment status of customers. The carrying amounts of the assets, other than deferred tax assets are reviewed at each statement of financial position date to determine whether there is any indication of impairment. Intangible assets are assessed regardless of indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated at each statement of financial position date. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of comprehensive income. Impairment losses in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of other assets in the unit on a pro rata basis. Impairment losses are recognized in the statement of comprehensive income. When a decline in the fair value of an available-for-sale financial asset has been recognized directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized directly in equity is recognized in the statement of comprehensive income even though the financial asset has not been derecognized. The amount of the cumulative loss that is recognized in the statement of comprehensive income is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in the statement of comprehensive income. (i) Calculation of recoverable amount: The recoverable amount of the receivables carried at amortised cost is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short duration are not discounted. An impairment loss in respect of an available-for-sale investment is calculated by reference to its current fair value.
Page 12
People’s National Party Notes to the Financial Statements 30 June 2010 2.
Statement of compliance, basis of preparation and significant accounting policies (continued) (l) Impairment (continued): (i)
Calculation of recoverable amount (continued): The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
(ii) Reversals of impairment: An impairment loss in respect of receivables carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. An impairment loss in respect of goodwill is not reversed. For all other assets, an impairment loss is reversed if there is an indicator that the impairment loss no longer exists and there has been a change in the estimate used to determine the recoverable amount. All impairment losses are recognized in the statement of comprehensive income. Any cumulative loss in respect of an available-for-sale in investment recognized previously in equity is transferred to the statement of comprehensive income. For available-for-sale equity securities, the reversal is recognized directly in equity. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Page 13
People’s National Party Notes to the Financial Statements 30 June 2010 2.
Statement of compliance, basis of preparation and significant accounting policies (continued) (m) Determination of profit and loss: Profit is determined as the difference between the revenues from services rendered and the costs and other charges incurred during the year. Profits on transactions are taken in the year in which they are realized. A transaction is realized at the moment of delivery of goods and services. Losses are taken in the year in which they are realized or determinable. (n) Financial instruments: A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. For the purpose of these financial statements, financial assets have been determined to include cash and cash equivalents, accounts receivable, loan and other receivables, related party receivables and investments. Similarly, financial liabilities include accounts payable, short and long-term borrowings and related party payables. (o) Determination of fair value: Fair value amounts represent estimates of the arm’s length consideration that would be currently agreed between knowledgeable, willing parties who are under no compulsion to act and is best evidenced by a quoted market price, if one exists. Some financial instruments lack an available trading market. These instruments have been valued using present value or other generally accepted valuation techniques and the fair value shown may not necessarily be indicative of the amounts realizable in an immediate settlement of the instruments.
Page 14
People’s National Party Notes to the Financial Statements 30 June 2010 3. Property, Plant and Equipment Office Equipment $
Land $
Furniture & Equipment $
Total $
Cost 1 July 2009
-
-
-
-
Revaluation
85,000,000
-
-
85,000,000
-
63,358
20,000
83,358
85,000,000
63,358
20,000
85,083,358
1 July 2009
-
-
-
-
Charge for year
-
2,135
2,000
4,135
30 June 2010
-
2,135
2,000
4,135
85,000,000
61,223
18,000
85,079,223
Additions 30 June 2010 Depreciation -
Net book value 30 June 2010
Page 15
People’s National Party Notes to the Financial Statements 30 June 2010 4. Receivables 2010 $ Dues receivable Staff loan
2,275,439 11,000 2,286,439
5. Cash in hand and at bank 2010 $ Bank of Nova Scotia Jamaica Limited National Commercial Bank Jamaica Limited
4,001,159 1,106 4,002,265
Cash at bank substantially comprise savings and operating accounts at licensed commercial banks in Jamaica.
6. Revaluation reserve 2010 $ Balance at beginning of year
-
Transfer to revaluation reserve (Note 3)
85,000,000
Balance at end of year
85,000,000
Page 16
People’s National Party Notes to the Financial Statements 30 June 2010 7. Sunshine foundation fund Sunshine foundation fund is represented by a saving account held at Bank of Nova Scotia Jamaica Limited (See Note 5). This fund is reserved for special projects.
8.
Payables 2010 $ Trade payables Accrued charges
202,311 195,000
Other payables
394,907 792,218
9. Dues collected in advance This represents membership dues collected within the current year, but attributable to subsequent years.
10. Bank overdraft 2010 $ National Commercial Bank Jamaica Limited Bank overdraft represents a book balance.
81,134
Page 17
People’s National Party Notes to the Financial Statements 30 June 2010 11. Members’ dues This represents annual deduction collected from individual or group members. 12. Contributions 2010 $ Constituency obligation fee Contributions Councillors income Parliamentarian income
744,000 6,194,997 4,008,202 9,119,501 20,066,700
13. Operating surplus In arriving at the operating surplus, the following have been charged: 2010 $ Auditors’ remuneration
195,000
Depreciation Directors’ emoluments-
4,135
Fee Executive remuneration
1,883,431
14. Finance cost
Bank charges
2010 $ 217,436
Page 18
People’s National Party Notes to the Financial Statements 30 June 2010 15. Taxation Taxation is based on the operating profit for the year adjusted for taxation purposes and comprises income tax at 33⅓%:
Income tax at 33 1/3%
2010 $ 50,314
The taxation charge in the statement of comprehensive income differs from the theoretical amount that would arise using the income tax rate of 33⅓%, as follows:
Surplus before Taxation Tax calculated at a tax rate of 33⅓% Adjusted for the effects of: Reversible timing differences attributable to: Accelerated capital allowances Other charges and allowances
2010 $ 127,249 42,416
6,136 1,762 50,314
Page 19
People’s National Party Notes to the Financial Statements 30 June 2010 16. Financial instruments
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. Financial instruments carried on the statement of financial position include cash and cash equivalents, receivables and payables. a) Fair value Fair value is the amounts for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction, who are under no compulsion to act and is best evidenced by a quoted market price. If no quoted market price exists, the fair value is determined using other appropriate valuation methodologies. Fair values shown may not necessarily be indicative of the amounts realizable in an immediate settlement of the instrument. The amounts included in the financial statements for cash and cash equivalents, receivables, and payables reflect their approximate fair values because of the short-term nature of these instruments. b) Financial instrument risks Exposure to credit, interest rate, foreign currency, market, liquidity and cash flow risks arises in the ordinary course of business. No derivative financial instruments are presently used to manage, mitigate or eliminate exposure to financial instrument risks. (i)
Credit risk: Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The organization manages this risk by maintaining cash resources with reputable financial institutions and assessing the credit worthiness of customers. Cash and cash equivalents have a significant concentration in licensed financial institutions that the committee of management consider reputable. The maximum exposure to credit risk is represented by the carrying amount of each financial asset.
Page 20
People’s National Party Notes to the Financial Statements 30 June 2010 16. Financial instruments (continued)
b) Financial instrument risks (continued) (ii)
Interest rate risk: Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The organization’s operating cash flows are substantially independent of changes in market interest rates.
(iii) Foreign currency risk: Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. At the statement of financial position date, the party had no exposure to foreign currency. (iv) Market risk: Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices whether those changes are caused by factors specific to the individual security, its issuer or factors affecting all securities traded in the market. At the statement of financial position date, the organization had no exposure to market risk. (v)
Liquidity risk: Liquidity risk, also referred to as funding risk, is the risk that the business will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at, or close to, its fair value. Prudent liquidity risk management implies maintaining sufficient cash resources and short-term deposit, and the availability of funding through an adequate amount of committed facilities. The party aims at maintaining flexibility in funding by ensuring that sufficient cash resources are held and that external financial support is in place to meet financial commitments.
Page 21
People’s National Party Notes to the Financial Statements 30 June 2010 16. Financial instruments (continued)
b) Financial instrument risks (continued) (vi) Cash flow risk: Cash flow risk is the risk that future cash flows associated with a monetary financial instrument will fluctuate in amount. The organization manages this risk through budgetary measures ensuring, as far as possible, that cash flows from financial assets and liabilities are matched to mitigate any significant adverse cash flows.
15 September 2010 To the Committee of Management People’s National Party Kingston Auditors’ Report The supplementary information presented on page 22 taken from the accounting records of the organization, has been subjected to the tests and other auditing procedures applied in our examination of the organization’s financial statements for the year ended 30 June 2010.
In our opinion, this information although not necessary for a fair presentation of the organization’s state of affairs and results of operations is fairly presented in all material respects in relation to the financial statements taken as a whole.
Chartered Accountants Kingston, Jamaica
Page 22
People’s National Party Operating and Administrative Expenses Year ended 30 June 2010
2010 $ Accounting fee
639,443
Advertisement
242,995
Audit fee
195,000
Depreciation
4,135
Donations
42,100
Due and subscription
33,207
Professional fees
317,234
Meeting and conference
6,199,529
Motor vehicle expense
1,088,249
Office supplies
522,081
Printing and stationery
102,754
Property taxes
704,808
Repairs and maintenance
777,537
Security
100,850
Staff cost Transportation Utilities Website development
15,538,505 40,700 2,815,754 273,355 29,638,236