Master Production (Pty) Ltd Illustrative Financial Statements for the year ended 30 June 2020
GENERALLY ACCEPTED ACCOUNTING PRACTICE (GAAP) IN BOTSWANA FOR ENTITIES NOT REQUIRED TO COMPLY WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
Botswana Accountancy Oversight Authority Private Bag 0056 Gaborone, Botswana
2
GAAP in Botswana Model financial statements 2020
10th Floor | Varsha House, Gaborone Central Business District Telephone: (267) 3919735 Facsimile: (267) 3919737
Contents Introduction
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
This publication contains an illustrative set of financial statements for Master Production (Pty) Ltd that are prepared in accordance with GAAP in Botswana.
4
Balance Sheet
5
Income Statement
6
Significant Acccounting Policies
7 - 23
Notes To The Financial Statements
24 - 35
Master Production (Pty) Ltd Financial Statements for the year ended 30 June 2020
GAAP in Botswana Model financial statements 2020
3
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
This publication contains an illustrative set of financial statements for Master Production (Pty) Ltd that are prepared in accordance with GAAP in Botswana.
The Entity is fictitious, prepared solely for guidance for the users who prepare their financial statements in accordance with GAAP in Botswana. The illustrative financial statements are intended to reflect transactions, events and circumstances that we consider to be most common for a broad range of companies across a wide variety of industries in Botswana. Certain disclosures are included in these financial statements merely for illustrative purposes as they may not be applicable to the company. Notations shown in the righthand margin of each page are references to GAAP in Botswana paragraphs that describe the specific disclosure requirements.
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GAAP in Botswana Model financial statements 2020
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
BALANCE SHEET AS AT 30 JUNE 2020
Figures in pula
Notes
2019
Reference
2,790,658 3,011,859 31,274 4,526 300,000 300,000 35,000 71,000 76,000 3,227,932 3,392,385
GAAP 6.27 GAAP 6.27(c)
335,439 294,350 293,890 355,400 883,100 1,296,000 859,950 1,385,450 1,171,377 152,000 3,543,756 3,483,200 6,771,688 6,875,585
GAAP 6.167(a),(c) GAAP 6.232 GAAP 6.137 GAAP 6.137 GAAP 6.244
10 11 11
950,000 950,000 3,167,286 3,385,447 60,000 50,000
GAAP 6.255 GAAP 6.350 GAAP 6.352(b)
Total Equity
4,177,286 4,385,447
LIABILITIES Non-current liabilities Loans payable 12
1,013,222 1,146,992 1,013,222 1,146,992
GAAP 6.267
Current liabilities Trade and other payables 14 Loans payable 12 Provisions 15 Income tax payable 18 Deffered Government Grants 19 Total Liabilities TOTAL EQUITY AND LIABILITIES
1,197,480 1,051,300 133,700 125,374 49,000 55,500 11,000 10,972 190,000 100,000 1,581,180 1,343,146 2,594,402 2,490,138 6,771,688 6,875,585
GAAP 6.267 GAAP 6.267 GAAP 6.297 GAAP 6.326 GAAP 6.337
ASSETS Non-current assets Property,plant & equipment 3 Intangible assets 4 Investment in Subsidiary 5.1 Investments in Associates and Joint Venture 5.3 Other Investments 5.2 Current assets Inventory 6 Trade and other receivables 7 Livestock held for sale 9 Crops and feed 9 Cash and cash equivalents 8 TOTAL ASSETS EQUITY AND LIABILITIES EQUITY Stated Capital Retained earnings Other reserves
2020
GAAP 6.184
GAAP in Botswana Model financial statements 2020
5
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
INCOME STATEMENT For The Year Ended 30 June 2020
2020 Pula
2019 Pula
Reference
Revenue Government grant income 19 410,000 100,000 Revenue earned from services 21 4,800,000 4,650,000 Construction contracts 27 350,000 250,000 Sale of goods 21 4,020,500 2,583,500 Total revenue 9,580,500 7,583,500 Cost of sales (2,138,752) (1,987,560) Gross profit 7,441,748 5,595,940 Dividend income 60,000 Other income 23 69,000 20,200 Goodwill written off 27 - (25,000) Impairment loss (34,289) Operating expenses 25 (3,666,049) (3,110,475) Operating profit before interest and tax 3,870,410 2,480,665 Interest income 22 13,200 9,400 Finance costs 24 (79,012) (89,382) Profit before taxation 3,804,598 2,400,683 Taxation 18 (522,759) (376,236) Profit for the year 3,281,839 2,024,447 Prior period error
6
GAAP in Botswana Model financial statements 2020
30
108,000
-
GAAP 7.51(a) GAAP 7.33 GAAP 7.33
GAAP 6.96 GAAP 6.48 GAAP 6.49(a)
GAAP 7.52
GAAP 4.19(a)
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
1
Basis of preparation
Reference
GAAP in Botswana is applicable for entities incorporated under the Companies Act (the Act), the Standard shall apply to an “exempt private company” as defined in Section 2 (3) of the Act and the financial statements shall be prepared in terms of the provisions of Section 206 (3) of the Act. The Standard may be applied by an entity that is not required by any other law, regulation or requirement to apply IFRS, and which is not a public interest entity.
GAAP 1.03 GAAP 1.04
The financial statements have been prepared in accordance with GAAP in Botswana as issued by the Botswana Accountancy Oversight Authority (BAOA). The financial statements have been prepared on the historical cost basis and incorporate the principal accounting policies set out below. They are presented in Botswana Pula, the functional and reporting currency of the Entity.
GAAP 7.66 GAAP 7.67
1.1
Corporate Information
2
Significant Accounting Policies
2.1
Property, Plant and Equipment
The Entity is principally engaged in providing accounting consultancy services, farming of crops and animal husbandry, manufacturing of stationery and construction of buildings on a small scale.
Land and Buildings
Land and buildings are land along with anything permanently affixed to the land, such as buildings, specifically property that is stationary, or fixed in a location. This includes land and buildings used to produce goods and services, for administration purposes, held for capital appreciation or to earn rental income.
GAAP 6.51
Plant and Equipment
Plant and equipment comprises tangible items, other than land and buildings, which are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. Plant and equipment include tools, machinery, vehicles, office fittings and computer equipment used in the operation of the business.
GAAP 6.78
Recognition
Land, buildings, plant and equipment are recognised as a result of past events and from which future economic benefits are expected to flow to the company.
GAAP6.54 GAAP 6.81
Land and buildings that can be separated are accounted for separately, unless it is not possible to separate them.
GAAP 6.55
Measurement
Land, buildings, plant and equipment are initially measured at their cost. Cost is the amount of cash or cash equivalents paid or payable, or the consideration given, to acquire the land and buildings and plant and equipment at the time of their acquisition.
GAAP6.56 GAAP 6.82
GAAP in Botswana Model financial statements 2020
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Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
The cost of land and buildings acquired in a single transaction may be allocated between the land portion and the building portion of the purchase price. This could be achieved by determining the value of the land portion with a reference to the area size and the market related cost per area in the location, and the difference being accounted for as the building part of the property, or any other systematic and accepted basis.
GAAP 6.57
Subsequent to initial recognition, land and buildings, plant and equipment are measured at adjusted historical cost, which is their cost less accumulated depreciation (if applicable) and any impairment losses, at each reporting date.
GAAP 6.58 GAAP 6.82
If expenditure on land and buildings increases the value or output capacity of the property or item is replaced, and benefits are expected over more than one financial period, the expenditure are capitalised and depreciated consistently with the property’s remaining useful life.
GAAP 6.59 GAAP 6.83 GAAP 6.60 GAAP 6.85
The costs of the day-to-day servicing of the item (repairs and maintenance) are recognised in profit or loss as incurred.
Depreciation
8
Freehold Land that is separately identifiable is not depreciated. Buildings and plant and equipment are depreciated over their estimated useful lives, which is equivalent to the period prescribed by BURS for the computation of capital allowances. Land and buildings obtained in one transaction, but not separately recognised as a land portion and a buildings portion, are not depreciated if the major part of the value of the land and buildings relates to the land portion.
GAAP 6.63 GAAP 6.65
Land that has been acquired separately through a leasehold arrangement is amortised over the shorter of its useful life or remaining lease period.
GAAP 6.64 GAAP 6.90
Depreciation of an item of plant and equipment begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of being operated in the manner intended by management. Depreciation of an item of plant and equipment ceases when it is derecognised. However, depreciation does not cease when the item of plant and equipment becomes idle or is retired from active use unless it is fully depreciated.
GAAP 6.72
The depreciation charge for each period is recognised in profit or loss, unless it is included in the carrying amount of another asset. The depreciable amount of a building, plant and equipment or depreciable land is allocated on the straight line basis over its useful life as prescribed by BURS in the Income Tax Act 52.01 Third Schedule.
GAAP 6.67 GAAP 6.88 GAAP 6.89 GAAP 6.68 GAAP6.27(a)
Buildings Motor vehicle Computer equipment Office Equipment Furniture and equipment
GAAP6.27(b)
GAAP in Botswana Model financial statements 2020
25 Years (4%) 4 years (25%) 10 Years (10%) 10 Years (10%) 10 Years (10%)
GAAP 6.66 GAAP 6.87
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
The useful life of a building or depreciable land is assessed at the time of acquisition and is reviewed when clear indicators arise which may significantly affect the current estimated useful life of the building or depreciable land. Clear indications of a change may include, for example, a change in how a building or depreciable land is used, significant unexpected wear and tear, technological advancement and changes in market prices. Any changes to the initially estimated useful life of a building or depreciable land is accounted for as a change in accounting estimate.
GAAP 6.69 GAAP 6.70 GAAP 6.71
Impairment
At the end of each reporting date, an assessment is made on whether there is any indication that the buildings, plant and equipment may be impaired. Such indicators include building’s market value has declined significantly, changes in the asset’s technological, market, evidence of obsolescence or physical damage, asset becoming idle and evidence that the economic performance of the asset is, or will be, worse than expected. If such evidence exists, the recoverable amount, of the building is determined. The recoverable amount is the estimated selling price of the asset in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. If the recoverable amount is less than the carrying amount of an investment, an impairment loss, equal to the difference, is recognised as an expense in the Income Statement immediately. Any individually material assets are assessed for impairment separately. Other assets may be aggregated, based on their nature or risk characteristics, and assessed for impairment collectively.
GAAP 6.35 GAAP 6.38 GAAP 6.73 GAAP 6.33 GAAP 6.92 GAAP 6.49(d)
An impairment loss is recognised as an expense in the Income Statement immediately if it is known. After the recognition of an impairment loss, the depreciation charge for the asset is adjusted to accommodate the new carrying value over its remaining useful life.
GAAP 6.42 GAAP 6.43
Impairment loss may be reversed if the indicator(s) of impairment no longer exist(s). The new carrying amount of the asset is measured at its revised net realisable value. The carrying amount of an asset for which a previously recognised impairment loss is reversed may not exceed the amount it would have been measured at had the adjusted historical cost been applied without any impairment. Therefore, an asset is never measured at an amount exceeding its cost. Reversals of previously recognised impairment losses are included as income in the Income Statement in the reporting period in which the reversal occurs.
GAAP 6.44 GAAP 6.47 GAAP 6.93
Compensation from third parties for land and buildings that were impaired, lost or given up is included in profit or loss when the compensation becomes receivable.
De-recognition
The carrying amount of land and buildings, plant and equipment is derecognised and expensed on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from derecognising land and buildings are included in profit or loss when the item is derecognised. Gains are not classified as revenue.
GAAP 6.76 GAAP 6.94
The gain or loss arising from de-recognition of land and buildings are determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item(s).
GAAP in Botswana Model financial statements 2020
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Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
2.2
Intangible Assets
An Intangible asset is an identifiable non-monetary asset without physical substance. The Entity has Intangible assets that comprise of computer software.
Measurement
Intangible assets are initially measured at its cost; costs directly attributable include costs of developing an intangible asset, except for amounts paid to a service provider. Subsequent to initial recognition, intangible asset are measured at cost less accumulated amortisation and any impairment losses, at each reporting date.
GAAP 6.16
Amortisation of computer software is allocated on a straight-line basis over its useful life as follows:
GAAP 6.18 (a)
Computer Software
2 years (50%)
Impairment
At the end of each reporting date, computer software is assessed whether there is any indication that it may be impaired. If any such evidence exists, the recoverable amount is immediately determined. An impairment loss shall be recognised as an expense in the income statement immediately it is known.
De-recognition
The carrying amount of intangible asset is derecognised and expensed on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from derecognising a computer software is included in profit or loss when the item is derecognised. Gains are not classified as revenue. The gain or loss arising from derecognition of intangible asset are determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item(s).
2.3
GAAP 6.24
Livestock and growing crops - Biological assets excluding bearer plants An Entity recognises livestock, growing crops and agricultural produce when, and only when: (a) (b) (c)
GAAP 6.127
the Entity controls the assets as a result of past events; it is probable that future economic benefits associated with the assets will flow to the Entity; and the cost of the assets can be measured reliably.
Measurement
Livestock and growing crops are initially measured at their cost. Livestock consist of cattle which are bought, bred and sold in Botswana when they reach the maturity stage at around 18 months. When they reach the maturity stage the Entity classifies the cattle as held for sale. The vineyards are used in the production of grapes .
10
GAAP 6.30 GAAP 6.42
GAAP in Botswana Model financial statements 2020
GAAP 6.128
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
GAAP 6.129
The cost of livestock and growing crops comprises: (a) (b) (c) (d) (e)
the purchase price of the asset, including import duties and non refundable purchase taxes; after deducting trade discounts and rebates, but excluding settlement discounts; costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of being operated in the manner intended by the Entity; and costs related to the biological transformation of livestock and growing crops until the asset reaches full production, but not costs to maintain mature livestock or growing crops. Or tax values as prescribed by BURS.
Examples of items that comprise cost, or not, of livestock and growing crops comprise: The cost of livestock and growing crops include purchase of livestock, transport of livestock to farm, feeding of livestock, as well as the cost of fertilization and watering of the soil of crops or plantations. (i)
Costs that are not costs of livestock and growing crops are administration and other general overhead costs. Costs an Entity incurs to maintain livestock and growing crops that produce regenerative agricultural produce, such as fruit, wool and milk, are not capitalized.
Subsequent to initial recognition, livestock and growing crops are measured at adjusted historical cost, which is the cost of the livestock or growing crop less any accumulated impairment losses, at each reporting date. Assessment for impairment of livestock and growing crops is done on an annual basis at each reporting date.
Derecognition
The carrying amount of an item of livestock and/or growing crops are derecognised and expensed: (a) (b) (c)
GAAP 6.131
GAAP 6.133
when it is transferred to inventory; when it is sold; or when no further economic benefits are expected from its disposal.
The gain or loss arising from derecognising livestock and growing crops is included in profit or loss when the item is derecognised. The gain or loss arising from de-recognition of livestock and growing crops is determined as the difference between the net disposal proceeds, and the carrying amount of the item.
GAAP 6.134
The carrying amount of the livestock and growing crops derecognised is based on an accepted basis based on quantifiable measures, e.g. the relative cost or weight of the class of livestock and growing crops sold to the total of that class.
GAAP 6.136
GAAP in Botswana Model financial statements 2020
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Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
2.4
Agriculture produce The Entity recognizes agricultural produce when, and only when, the Entity controls the assets as a result of past events, it is probable that future economic benefits associated with such assets will flow to the Entity and the fair value or cost of the assets can be measured reliably.
GAAP 6.132
Agricultural produce generated by an entity’s livestock and growing crops are measured at its cost at the point of harvest. Such measurement is the cost at that date when applying inventories.
2.5
Investments Measurement Equity instrument
The equity instrument is initially measured at cost. Subsequent to initial recognition, an equity instrument is measured at adjusted historical cost less accumulated impairment losses, at each reporting date.
Debentures
Investments in debentures are initially measured at cost. Subsequent to initial recognition, they are measured at cost less accumulated impairment losses, at each reporting date.
Investments in Associates and Joint ventures
GAAP 6.178 GAAP 6.173
Investments in Associates and Joint Ventures are initially measured at cost. Subsequent to initial recognition, they are measured at cost less accumulated impairment losses, at each reporting date.
GAAP 6.173 GAAP 6.216
Transaction costs that are directly attributable to the acquisition of the investment are included in the initial measurement of cost. Examples of transaction costs of investments include the consideration paid, stamp duties and other non- refundable taxes.
GAAP 6.174
Derecognition
12
GAAP6.173
An Entity derecognises an investment with control, joint control or significant influence and debentures when, and only when:
GAAP6.179
(a) (b)
the contractual rights to the cash flows from the investment expire; or it transfers the investment if, and only if, it either:
GAAP 6.216
(i) (ii)
transfers the contractual rights to receive the cash flows of the investment;or retains the contractual rights to receive the cash flows of the investment, but assumes a contractual obligation to pay the cash flows to one or more recipients.
The gain or loss arising from de-recognition of an investment is included in profit or loss when the item is derecognised. A material gain or loss is presented separately on the face of the Income Statement. Gains are classified as revenue.
GAAP 6.181
The gain or loss arising from de-recognition of an investment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the investment.
GAAP 6.182
GAAP in Botswana Model financial statements 2020
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
ii)
Investments in Subsidiaries Master Production (Pty) Ltd has a 51% voting rights in Berca (Pty) Ltd, therefore, it has control over the subsidiary. Control is achieved when: a) b) c)
The Entity has power to govern the financial and operating policies of the Entity; it obtains benefits from its involvement with Entity; The Entity has more than 50% of the voting rights of another Entity.
Master Production (Pty) Ltd does not consolidate its subsidiary and therefore the financial statements do not reflect all asset and liabilities under control of Master Production (Pty) Ltd.
ii)
GAAP6.217 (b)
Investments with control, joint control or significant influence Master Production (Pty) Ltd is in a joint venture with Water drops Botswana, they jointly own 50% of Original Coolers (Pty) Ltd. The Entity entered into the Joint venture on the 25th November 2019.
iii)
GAAP 6.207
GAAP 6.216
Loans receivable and interest-bearing financial instruments Measurement
GAAP 6.197
The recoverable amount of an interest bearing financial instrument is the present value of estimated future cash flows discounted at the interest-bearing financial instrument’s original effective interest rate (i.e. the effective interest rate computed at initial recognition).
Impairment of investments
An Entity assesses at each reporting date whether there is any objective evidence that any investment is impaired. If any such evidence exists, the Entity immediately determines the recoverable amount of the related investment. Management made an assessment of the investment in listed shares and it was determined that the recoverable amount of the investment is less than its carrying amount, and therefore the investment was impaired. An impairment loss was recognised in the statement of comprehensive income for the investments in shares.
Recognition
If the recoverable amount is less than the carrying amount of an investment, an impairment loss, equal to the difference, is recognised as an expense in the Income Statement immediately.
Assessment
Any individually material investment are assessed for impairment separately. Equity investments, regardless of materiality, are assessed for impairment individually.
GAAP 6.191 GAAP 6.216
GAAP 6.193
GAAP 6.194 GAAP 6.195
GAAP in Botswana Model financial statements 2020
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Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
2.6
Inventory The Entity keeps raw materials used in the manufacturing of stationery and finished goods. The Entity also engages in the rearing of livestock and growing crops, as such it has livestock and grapes as inventory.
Measurement
Raw materials and finished goods are initially measured at cost, consisting of costs of purchase, costs of conversion and other costs incurred in bringing the inventory to its present location and condition. Subsequent to initial recognition they are measured at the lower of cost and its fair value less cost to complete and sell (also known as net realisable value (NRV)), at each reporting date. A trade discount, rebate or a similar item received from a supplier of inventories, which is shown on the original invoice, is recognised as a reduction of such inventories acquired. The Entity receives a discount of 5% of the original invoice from the supplier for the purchase of raw materials.
GAAP 6.160 GAAP 6.147 GAAP 6.167 (a)
Livestock and growing plants Cost of inventories
The cost of inventory comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to its present location and condition .The costs of purchase of inventory comprise the purchase price, import duties and non- refundable other taxes, transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Costs of conversion comprise costs directly related to the units of production, such as direct labour , together with a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods.
GAAP 6.147 GAAP 6.148
Fair value less cost to complete and sell
14
The cost of inventories may not be recoverable if those inventories are damaged, if they have become wholly or partially obsolete, or if their selling prices have declined. The cost of inventories may also not be recoverable if the estimated costs of completion or the estimated costs to be incurred to make the sale have increased . The practice of writing inventory down below cost to fair value less cost to complete and sell is consistent with the view that assets should not be carried in excess of amounts expected to be realised from their sale or use.
GAAP 6.152
Estimates of fair value less cost to complete and sell are based on the most reliable evidence available at the time the estimates are made. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the reporting date to the extent that such events confirm conditions existing at the reporting date. An assessment is made of fair value less cost to complete and sell inventory when there are indications that an item of inventory’s fair value less cost to complete and sell is lower than its carrying amount. Such indicators may include physical damage, natural decay, obsolescence, unsaleability or declining selling prices.
GAAP 6.153
When the circumstances that previously caused inventories to be written down below cost no longer exist, or when there is clear evidence of an increase in fair value less cost to complete and sell because of changed economic circumstances, the amount of the writedown is reversed (i.e. the reversal is limited to the amount of the original write down) so that the new carrying amount is the lower of the cost and the revised fair value less cost to complete and sell. This occurs, for example, when an item of inventory that is carried at fair value less cost to complete and sell, because its selling price has declined, is still on hand in a subsequent period and its selling price has increased.
GAAP 6.156
GAAP in Botswana Model financial statements 2020
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
The carrying amount of an inventory item for which a previously recognised write down to fair value less cost to complete and sell is reversed may not exceed its original cost. The amount of any reversal of any write down of inventories, arising from an increase in fair value less cost to complete and sell is recognised as an adjustment to the cost of the related inventories and recognised in profit or loss in the reporting period in which the reversal occurs.
GAAP 6.157
When inventories are sold the carrying amount of those inventories are recognised as an expense in the reporting period in which the related revenue is recognised. The amount of any write down of inventories to fair value less cost to complete and sell and all losses of inventories are recognised as an expense in the reporting period in which the writedown or loss occurs.
GAAP 6.159
Cost formulas
The Entity uses the first in first out (FIFO) method for its finished goods, which includes stationery, livestock . However for the raw materials that the entity uses in the production of its stationery the entity uses the weighted average cost formula method.
2.7
Cash and Cash Equivalents Cash and cash equivalents comprise, cash on hand, demand deposits and other balances with banks, including short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to a risk of changes in value that is not material.
Measurement
Cash and cash equivalents are measured at cost. Subsequent to initial recognition, an item of cash and cash equivalents are measured at adjusted historical cost, which is its cost plus any accrued interest, where applicable, at each reporting date.
2.8
GAAP 6.167(a)
GAAP 6.2.40
GAAP6.2.42 GAAP 6.2.43
Accounts Receivable Measurement
Accounts receivable are initially measured at cost, which is the documented amount agreed between the parties, usually the invoiced amount. Any directly related costs relating to the obtaining of the receivable is recognised in profit or loss in the reporting period in which the costs are paid or payable. Subsequent to initial recognition, accounts receivable are measured at adjusted historical cost, which is the amount outstanding at the reporting date.
GAAP 6.221
If an amount receivable is issued at a premium or discount, the premium or discount shall be recognised in the Income Statement spread over the period of the instrument, using the effective interest rate method. Pre-payments shall be measured at cost, adjusted for the proportionate delivery of the goods or services, and recognised in profit or loss. The Entity’s accounts receivable include amounts owing from the sale of livestock, agricultural produce and stationery. The Entity’s average credit terms is 30 days for all its accounts receivables.
Derecognition
An Entity derecognises an accounts receivable when, and only when:
GAAP 6.231
GAAP 6.228
GAAP in Botswana Model financial statements 2020
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Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
(a) (b)
the contractual rights to receive the cash flows from the asset has expired; or it transfers the contractual rights to receive the cashflow from the asset or retains the contractual rights to receive the cash flows of the asset, but assumes a contractual obligation to pay the cash flows to one or more recipients, i.e a third party.
GAAP 6.229 GAAP 6.230
The gain or loss arising from de-recognition of the accounts receivable is included in profit or loss when the item is derecognised. The gain or loss arising from derecognition of amounts receivable is difference between the consideration received for the part derecognised, if any, and the allocated carrying amount of the item.
2.9
Provisions, contingent liabilities, commitments under derivative contracts and contingent assets Provision A provision is recognised when: the Entity has a present obligation (legal or constructive) as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.
GAAP 6.275
For a liability to qualify for recognition there shall not only be a present obligation but also the probability of an outflow of resources embodying economic benefits to settle that obligation. An outflow of resources or other event is regarded as probable if the event is more likely than not to occur, i.e. the probability that the event will occur is greater than the probability that it will not. Where it is not probable that a present obligation exists and where the possibility of an outflow of resources embodying economic benefits is remote, an Entity does not recognise but must disclose a contingent liability.
GAAP 6.277
(a) (b) (c)
Measurement
A provision is initially, and at each reporting date, be measured at the best estimate of the expenditure required to settle the present obligation. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the carrying amount of the provision is derecognised and included in profit or loss when the item is derecognised.
Contingent Liabilities
16
GAAP 6.285 GAAP 6.293
Where it is not probable that a present obligation exists and where the possibility of an outflow of resources embodying economic benefits is remote, the Entity does not recognise but discloses a contingent liability. The amount disclosed as a contingent liability is management’s best estimate of the possible undiscounted cash outflows.
GAAP 6.28
A contingent liability is initially, and at each reporting date, should be measured and disclosed, but not recognised as a liability, at the best estimate of the possible undiscounted cash outflows.
GAAP 6.286
GAAP in Botswana Model financial statements 2020
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
Contingent Assets
2.10
A contingent asset is not recognised in the financial statements, since this may result in the recognition of income that may never be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
GAAP 6.282
The amount disclosed as a contingent asset is management’s best estimate of the possible undiscounted cash inflows.
GAAP 6.284
A contingent asset is initially, and at each reporting date, measured and disclosed, but not recognised as an asset, at the best estimate of the possible undiscounted cash inflows.
GAAP 6.287
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when the reimbursement is received. In the Income Statement, the income recognised for a reimbursement may be set-off against the expense relating to a provision, and the net amount presented or disclosed.
GAAP 6.289 GAAP 6.260
Accounts Payables The Entity’s accounts payables consist of employee costs accruals (severence and leave),trade payables of supplier of stationary and amounts due to suppliers of cattle and grape fruit trees and other payables. Amounts payable are only recognised when there is a legal enforceable right to claim the amount by the suppliers.
Measurement
An amount payable is initially measured at its cost, which is the documented amount agreed between the parties, usually the invoiced amount. Subsequent to initial recognition, an amount payable is measured at adjusted historical cost, which is the amount outstanding at each reporting date; including accrued interest calculated using the contractual interest rate agreed, at each
Derecognition
The Entity derecognises part of the carrying amount of amount payable particularly trade payables when the obligation specified in the contract is discharged, cancelled or expires. The gain or loss arising from derecognising an amount payable is included in profit or loss when the item is derecognised. The gain or loss arising from derecognition of amounts payable is determined as the difference between the consideration received for the part derecognised, if any, and the allocated carrying amount of the item.
2.11
GAAP 6.26
GAAP 6.261 GAAP 6.262 GAAP 6.263
GAAP6.264 GAAP6.265 GAAP 6.266
Loans Payable Recognition
Loans payable are recognised when there is a legal enforceable right to claim the amount.
Measurement
GAAP6.259 GAAP6.260 GAAP 6.264
Loans payable are initially recognised at cost, being the fair value of consideration received and acquisition charges associated with the loan. After initial recognition loans payable are subsequently measured at adjusted historical cost, which is the amount outstanding at the reporting date including accrued interest, if any, calculated using the contractual interest rate agreed, at each reporting date.
GAAP in Botswana Model financial statements 2020
17
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
Derecognition
The Entity derecognises the carrying amount of the loan payable when the obligation specified in the contract is discharged, cancelled or expires. The gain or loss arising from the derecognition of the loan payable is included in profit or loss when the item is derecognised.
2.12
Taxation Income Tax
Tax is the amount of income taxes payable(receivable) in respect of the taxable profit(tax loss )for a period based on the applicable income tax rate prescribed by BURS ,enacted as of the end of the reporting period.Tax expense or income comprises current tax expense(income) .Income tax expense (income) is recognised as an expense or income in the Income Statement.
GAAP6.317 GAAP6.315 GAAP 6.320
The Entity pays income taxes on its company profits, i.e corporate taxes, withholding taxes on dividends received from its subsidiary, and withholding taxes on livestock.
GAAP 6.314
Recognition
Current income tax payable for the current and any prior period will, to the extent unpaid, be recognised as a current liability. If the amount already paid in respect of the current and any prior period exceeds the amount due for those periods, the excess shall be recognised as a current asset. Any over- or under-provision for current income taxes is accounted for as a change in estimate and is adjusted for when the taxation authorities have made an assessment of the amount of income tax payable or as soon as the Entity becomes aware of the change in estimate.
Measurement
Current income tax liabilities (assets) for the current and any prior periods are initially, and at each subsequent reporting date, measured at the amount expected to be paid to (recovered from) BURS, using the tax rates (and tax laws) enacted (or substantively enacted) at the reporting date, applicable to the profits of the Entity. An Entity shall accrue tax liabilities for penalties and interest, if applicable.
Presentation
An Entity shall offset current tax assets and current tax liabilities if, and only if, the Entity has a legally enforceable right to set off current tax assets against current tax liabilities.
Deffered tax
The Entity does not account for deffered tax.
2.13
GAAP 6.318
GAAP 6.322
GAAP 6.323
GAAP 6.321
Stated Capital Ordinary shares are classified as equity and stated at the fair value of the consideration received. Equity is subsequently measured at cost.
18
GAAP6.261 GAAP 6.263
GAAP in Botswana Model financial statements 2020
GAAP6.254 GAAP 6.256
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
2.14
Retained earnings and Reserves Recognition
The Entity recognises retained earnings in the period in which amounts are generated. The Entity transfers certain amounts for a specific future purposes as other reserves. Other reserves include statutory capital reserve. Statutory capital reserve includes amounts of money set aside by the Entity, in order to meet unmatured obligations.
Measurement
The Entity initially measures retained earnings at its cost, which is the amounts generated in profit or loss. Other reserves are initially measured at its cost, which is the carrying amount of the retained earning transferred to the reserve. Subsequent to initial recognition, retained earnings and reserves shall be measured at adjusted historical cost, which is initial cost less amounts distributed to owners or applied for a specific purpose, at each reporting date.
2.15
GAAP 6.352(a) GAAP 6.346 GAAP 6.347
GAAP 6.348 GAAP 6.349
Leases Entity as a lessee
Lease payments shall be recognised in the Income Statement as an expense as and when they are paid or payable. Any expense included in the lease instalments shall be recognised separately in the Income Statement. Any initial direct costs of a lease shall be recognised in profit or loss in the reporting period in which they are incurred, i.e. when they are paid or payable. Lease payments shall be recognised in the Income Statement as an expense as and when they are paid or payable. Any finance expense included in the lease instalments shall be recognised separately in the Income Statement. Contingent rentals shall be recognised as an expense when they are incurred, i.e. when they are paid or payable.
Entity as a lessor
Lease receipts are recognised in income when received or receivable.Any initial direct costs of a lease shall be recognised in profit or loss in the reporting period in which they are incurred, i.e. when they are paid or payable. Lease receipts are recognised in income when received or receivable. Any finance income included in the lease instalments shall be recognised separately in the Income Statement.
GAAP 6.106 GAAP 6.107 GAAP 6.108
GAAP 6.111 GAAP 6.112 GAAP 6.113 GAAP 6.114
A lessor shall recognise a leased asset in its Balance sheet according to the nature of the asset and as per the appropriate section of this standard. Contingent rental received shall be recognised in income when it is earned i.e. received or receivable.
2.16
Revenue Recognition
Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the Entity. However, when an uncertainty arises about the collectability of an amount already included in revenue, the uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is recognised as an expense, rather than as an adjustment of the amount of revenue originally recognised.
GAAP 7.10
GAAP in Botswana Model financial statements 2020
19
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
Sale of goods
The Entity recognises revenue from the sale of livestock, agriculture produce and stationary only when all the following conditions are also satisfied: (a) (b)
GAAP 7.12
The Entity has transferred to the buyer the significant risks and rewards of ownership of the goods; and The Entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.
The amount of revenue arising on a transaction is usually determined by agreement between the Entity and the customer or client. It is measured at the invoiced value, net of Value Added Tax (VAT).
Services
The Entity renders accounting services such as preparation of tax returns, preparation of financial statements to the Government, companies and individuals. Revenue earned from such services is measured at the value of the transaction price. The Entity recognises revenue when all the risks and rewards have been passed to the customer. For services that are completed overtime, the Entity measures the stage of completion for the service rendered using an estimate determined as a percentage of the complete service, and then allocates revenue according to the percentage of completion.
GAAP7.13 GAAP 7.33(a)
Interest, Royalties, Dividends
Revenue arising from the use by others of Entity assets yielding interest, royalties, and dividends is recognised on the following basis:
(a) (b) (c)
Interest is recognised using the effective interest rate method; Royalties is recognised on an accrual basis in accordance with the substance of the relevant agreement; and Dividends are recognised when rights are established (usually the date on which the dividends are authorised).
Discounts
A trade discount, rebate or other similar item granted relating to a sale of goods or rendering of services shown on the original invoice is recognised as a reduction in the measurement of the related revenue. Discounts granted related to a sale of goods or rendering of services, extended subsequent to the recognition of the related revenue, i.e. therefore not shown on the original invoice, is recognised as a reduction of revenue in the period the discount is utilised by the customer.
Exchange of goods
When goods are sold or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue. The revenue in an exchange transaction is measured at the net realisable value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. When the net realisable value of the goods or services received cannot be measured reliably, the revenue is measured at the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents transferred.
20
GAAP in Botswana Model financial statements 2020
GAAP 7.15
GAAP 7.25
GAAP 7.26
GAAP 7.29
GAAP 7.30
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
2.17
Government grants and designated funds i) Government grant income and designated fund income Recognition and measurement
Government grant income and designated fund income are recognised in the Income Statement when an increase in future economic benefit related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably. This means, in effect, that recognition of income occurs simultaneously with the recognition of increases in assets or decreases in liabilities. Government grants are recognised when there is reasonable assurance that the grant will be received, and all attached conditions will be compiled with. When the grant relates to an expense item it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Government grants receivable as compensation for expenses or losses already incurred or for the purpose of giving the Entity immediate financial support with no further related costs are recognised as income in the period in which they become receivable.
GAAP 7.47
GAAP 7.49
The Entity received government grants related to the purchase of farming equipment and also for the compensation for farming expenses already incurred by the Entity.
ii)
Government Grant related to Assets / Designated Funds Recognition and measurement
Grant obligations and designated fund liabilities are recognised in the Balance Sheet when it is probable that an outflow of resources embodying economic benefit will result from the settlement of a present obligation and the amount at which the settlement will take place can be measured reliably.
2.18
GAAP 6.335
Grant obligations and designated fund liabilities are not recognised as equity, unless it is equity.
GAAP 6.336
Grant obligations and designated fund liabilities are recognised in the Balance Sheet to the extent that the specific purpose has not yet been completed or to the extent that the Entity is yet to comply with the specified future performance conditions.
GAAP 6.337
A grant obligation and designated fund liability are measured at cost, which is the amount received or receivable.
GAAP 6.339
Subsequent to initial recognition, a grant obligation and a designated fund liability are measured at adjusted historical cost, which is cost less the extent to which the specific purpose (for designated fund liability) has been completed or the Entity has complied with the specified future performance conditions for grants.
GAAP 6.340
Construction Contracts Recognition
Construction contract revenue is recognised in the Income Statement when an increase in future economic benefit related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably. This means, in effect, that recognition of income occurs simultaneously with the recognition of increases in assets or decreases in liabilities.
GAAP 7.37 GAAP 3.25
GAAP in Botswana Model financial statements 2020
21
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
Measurement
The Entity recognises revenue from construction contracts based on an objective measurement of work completed, using the accumulated value of work certified during the reporting period. Revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable. Contract costs are recognised as expenses in the period in which they are incurred.
GAAP 7.38
Contracts costs shall comprise: (a) (b) (c)
costs that relate directly to the specific contract; costs that are attributable to contract activity in general and can be allocated to the contract; and such other costs as are specifically chargeable to the customer under the terms of the contract and shall be accounted for on the accrual basis.
Retentions are amounts of progress billings that are not paid until the satisfaction of conditions specified in the contract for the payment of such amounts or until defects have been rectified. Progress billings are amounts billed for work performed on a contract whether or not they have been paid by the customer. Advances are amounts received by the contractor before the related work is performed.
2.19
Cost of Sales Cost of sales includes the cost of inventories recognised as expenses. When inventories are sold, the carrying amount of those inventories must be recognised as an expense in the period in which the related revenue is recognised.
2.20
22
GAAP 7.01
Interest Expense Interest expense is recorded as it accrues using the effective interest rate. Borrowing costs are recognised as an expense in the period which they are incurred except those that are directly attributable to the construction or development of an asset.
2.21
GAAP 7.40
GAAP 7.52
Employee Benefits Employee benefits are all forms of consideration given by an Entity in exchange for services rendered by employees such as salaries, wages, performance bonus, medical aid as well as termination costs.
GAAP 7.54
Employee benefits are recognised as an expenses for the period they were incurred.
GAAP 7.56
Termination benefits are recognised as a liability and an expense only when the Entity is demonstrably committed either: to terminate the employment of an employee or group of employees before the normal retirement date; or to provide termination benefits as a result of an offer made in order to encourage voluntary redundancy.
GAAP 7.58
Employee benefits, including termination benefits, are measured at the amounts paid or payable.
GAAP 7.60
GAAP in Botswana Model financial statements 2020
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
2.22
Goodwill All goodwill (positive or negative) is written off to the income statement immediately upon recognition.
2.23
Accounting Policies, Errors and Changes in Accounting Estimates
i)
Changes in Accounting Policies
ii)
iii)
The Entity changes its accounting policies if it is required by GAAP and if the amendments thereto results in the financial statements providing reliable and more relevant information about the effects of transactions, events or conditions on the entity’s financial position or financial performance. There were no new standards issued.
GAAP 6.96
GAAP 4.13
Changes in Accounting Estimates
The effect of changes in an accounting estimate is included in the determination of profit or loss in the current period, i.e. prospective application. Adjustment to comparative amounts is not permitted.
GAAP 4.23
Prior Period Errors
A prior period error is an omission from, or misstatement in, the Entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information. The effect of the correction of a material prior period error is included in the financial statements in the current period, i.e., prospective application.
GAAP 4.17
GAAP in Botswana Model financial statements 2020
23
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
3. PROPERTY,PLANT & EQUIPMENT Land Buildings Motor Vehicles
Computer Equipment
Plant and Furniture & Machinery Fittings
Total
Figures in pula 2020 Cost At 1 July 2019 Additions Disposals
560,389 (123,980)
1,562,730 15,300 -
339,200 (28,000)
50,800 8,800 (14,000)
730,490 11,000 (8,600)
At 30 June 2020
436,409
1,578,030
311,200
45,600
732,890
36,600 14,100 (19,870)
3,280,209 49,200 (194,450)
GAAP6.27 (d)i GAAP6.27 (d)ii
30,830 3,134,959
Accumulated Depreciation At 1 July 2019 56,730 37,900 24,220 125,600 23,900 268,350 GAAP6.27(c) 6.27(d)iii Charge for the year 38,900 24,040 5,200 73,200 5,600 146,940 GAAP6.27(a) Disposal (30,800) (2,300) (8,600) (41,700) Impairment loss* (32,085) (3,000) (35,085) GAAP6.27(d)iv GAAP6.49(a) Reversal of prior year impairment 3,258 2,538 5,796 GAAP6.27(d)v GAAP6.49(b) GAAP6.47 At 30 June 2020 66,803 33,678 24,120 190,200 29,500 344,301 Carrying value At 30 June2020
436,409
1,511,227
277,522
21,480
542,690
1,330 2,790,658
At 30 June 2019
560,389
1,506,000
301,300
26,580
604,890
12,700 3,011,859
Note The above include the Land and building with the following characteristics Land and Buildings that have restrictions on its title; Encumbrances on buildings
83,000
GAAP6.28(a)i
Land and building pledged as security for liabilities;
98,000
GAAP 6.28(a)ii
Amount of contractual commitment on acquisition of land and buildings
208,702
GAAP 6.28(a)iii
* The impairment loss was due to the evidence of cracks noted in one of the buildings 35,085
GAAP 6.28(b) GAAP 6.49( c)
Proceeds received from sale of property ,plant and equipment
24
GAAP in Botswana Model financial statements 2020
57,000
GAAP 6.28c
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
4. INTANGIBLE ASSETS 2020 P
Cost Opening Balance Additions Disposals Closing Balance
2019 P
27,526 36,498 (10,000) 54,024
12,526 20,000 (5,000) 27,526
Opening Balance Charge for the year Disposal
23,000 5,750 (6000)
21,000 4,000 (2,000)
Closing Balance
22,750
Opening Net Book Value
4,526
Closing Net Book Value
31,274
4,526
5. INVESTMENTS 2020
2019
GAAP 6.27 (d)i GAAP 6.27 (d)ii
Amortisation GAAP 6.27 (d)iii GAAP 6.27(a)
23,000 8,474
GAAP 6.27(c)
5.1 Investment in Subsidiary 300,000 300,000 GAAP 6.183(b)(i) GAAP 6.207
Master Production (Pty) Ltd bought 30,000 shares at P10 each in Berca (Pty) Ltd, an unlisted technology company. An assessment of the equity investments of the Entity indicated that there was no impairment required. 5.2 Investment in Equity and Debentures Debentures 51,000 Listed equity investments 20,000 71,000
GAAP 6.184
51,000 25,000 GAAP 6.183(b)(i) 76,000
The Entity had issued debentures to Infra (Pty) Ltd, a maintenance company towards the improvement of the local recreational park and carries interest at 5% , the debenture has a maturity date of 3 years and is redeemable in 2021.
GAAP 6.184
Profit in disposal of investments-unlisted equity instruments
GAAP 6.187
-
4,500
GAAP in Botswana Model financial statements 2020
25
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
5.3 Investments in Associates and Joint Ventures 2020 P Investment in Water Drops Botswana (Pty) Ltd
-
GAAP 6.217
The Entity entered in to a Joint Venture in November 2019 at a cost of P35,000,where it has equal voting rights and joint control.
GAAP 6.217
Impairment of investments Listed shares at cost (25000 shares) less impairment of the investment Fair value of shares
35,000
2019 P
25,000 (5,000) 20,000
25,000 - 25,000
GAAP 6.203 GAAP 6.188
Master Production (Pty) Ltd bought 25,000 shares at cost, Cosmo Limited is a listed Entity . The fair values of the shares at the end of the reporting period are as follows: P20,000 in 2020 and P25,000 in 2019.The investments in shares of the Entity was impaired as it was making losses . As at 30 June 2020 the share price was P0.80.
GAAP 6.204(c) GAAP 6.184
Berca (Pty) Ltd, is a material subsidiary of Master Production (Pty) Ltd as it has a 51% voting rights in Berca (Pty) Ltd .The following are the summarised financial results of the Entity :
GAAP 6.217(c)
Net assets Net liabilities Net profit/(loss) Amounts owing from the parent-(Master Production(Pty) Ltd. Dividends paid to subsidiary Equity
652,000 152,000 85,000 25,000 60,000 500,000
658,000 158,000 500 25,000 500,000
2020 P
2019 P
6.INVENTORY
Raw materials
55,900
Finished goods: Stationery Manufactured 50,534 Farming inventory Livestock 170,000 Plant produce 95,500 265,500 less: inventory written down (36,495) Total inventories 335,439
26
GAAP in Botswana Model financial statements 2020
37,750
GAAP 6.167(b)
45,600 165,500 45,500 211,000 294,350 GAAP 6.167(a),(c)
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
The cost of inventory recognised as an expense during the year was P55,199,(2020) and 43,123(2019).
GAAP 6.167(d)
The Entity secured a short term loan from the bank and Inventories with a carrying amount of 50,000(2020) and 50,000 (2019) were pledged as security for the loan.
GAAP 6.167(f)
During the year ended 30 June 2020, the inventory write down related entirely to the books in stock, as they were damaged due to water spillage, their value was written down by P36,495 in 2020.
GAAP 6.167(c)
The amount of contractual committments for acquistion of inventory was P45,000 and Nil(2019)
GAAP 6.167(g)
Inventory of P5,000 that was written down was reversed in the current year as the animals that were ailing had since recovered
GAAP 6.167(h)
7. TRADE AND OTHER RECEIVABLES 2020 P Amounts receivable Trade receivables 210,980 Amounts uncollectable/doubtful (95,500) Net trade receivables 115,480 Livestock and growing plants receivables 155,000 Prepayments 9,110 Staff loans 14,300
328,300 (91,000) 237,300 96,000 9,400 12,700
Total amounts receivable
355,400
Allowance account
293,890
2019 P GAAP 6.232 GAAP 6.233 GAAP 6.232 GAAP 6.232 GAAP 6.232
GAAP 6.233
Balance at the beginning of the year impairment of accounts receivables Balance at the end of the year
91,000 4,500 95,500
91,000 91,000
Trade receivables of P100,000 have been encumbered as security for the overdraft facility of P100,000.
GAAP 6.234
8. CASH AND CASH EQUIVALENTS 2020 Petty cash 1,900 Call and current accounts 1,169,477 1,171,377
2019 4,000 148,000 152,000
Included in this balance is P23 000 (2019:18 000) that is not available for use by the Entity. Included in this balance is cash of ZAR28,398
GAAP 6.244 GAAP 6.245
GAAP in Botswana Model financial statements 2020
27
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
9. LIVESTOCK AND GROWING CROPS Livestock Vineyard Total GAAP 6.129, GAAP 6.137 Cost At 1 July 2018 991,000 850,950 1,841,950 Additions 955,000 885,000 1,840,000 Trade discounts & rebates (5,500) (5,500) Transfer to inventory (650,000) (345,000) (995,000) At 30 June 2019 Additions Trade discounts & rebates Transfer to inventory
1,296,000 287,100 (700,000)
At 30 June 2020
883,100
Net book value At 30 June 2020 At 30 June 2019
883,100 1,296,000
1,385,450 2,681,450 205,000 492,100 (5,000) (5,000) (725,500) (1,425,500)
GAAP 6.133
859,950 1,743,050
859,950 1,385,450
1,743,050 2,681,450
The Entity has pledged part of its livestock in order to fulfil the collateral requirements for its loan with the bank. At 30 June 2020 and 2019, Livestock of P35,550 and P25,000 was pledged as security.
GAAP 6.138
10. EQUITY 2020 P Stated Capital at no par value
950,000
2019 P 950,000
GAAP 6.255
950000 shares issued at P1 each all fully paid 11. RESERVES Retained earnings Balance at the beginning 3,385,447 Profit for the year 3,281,839 Dividends paid (3,500,000)
1,361,000 2,024,447 -
Balance at the end
3,385,447
3,167,286
GAAP 6.351
Statutory Capital Reserve Balance at the beginning Transfer from Retained Earnings
50,000 10,000
50,000
Balance at the end
60,000
50,000
GAAP 6.352(b)
The Statutory Capital Reserve represents 10% annual transfer from retained earnings for use in future expansion of the Entity.
28
GAAP in Botswana Model financial statements 2020
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
12. LOANS PAYABLE 2020 P
2019 P
Non current Absa Bank of Botswana Limited loan
1,013,222
1,146,992
GAAP 6.267
Current Absa Bank of Botswana Limited loan
133,700
125,374
GAAP 6.267
Facility : The outstanding loan relates to a financing facility obtained in 2017 from Absa Bank GAAP 6.268( a, c & d) of Botswana Limited of P1.5million to procure machinery. The loan is for 10 years,repayble in monthly instalments at a variable interest rate of prime plus 2%. Buildings are pledged as security to the value of machinery acquired. 13. LEASES Lessee Non-cancellable operating lease rentals payable as follows: Less than one year Between one and five years Total actual future cash flows payable
35,783 126,400 162,183
32,475 162,183 194,658
GAAP 6.110(a & b)
Lease payments recognised during the year
32,475
25,468
GAAP 6.110(c)
Operating lease payments represent rentals payable by Master Production (Pty) Ltd for certain buildings it rents for use as offices. Leases are negotiated for an average term of five (5) years. Lease payments are increased every year to reflect market rentals. No contingent rent is payable.
GAAP 6.110(d & e)
The operating lease in place can be terminated after the first three (3) years having lapsed by giving three (3) calendar months written notice of the intention to terminate without penalty. The Entity has no intention to exercise this option. The Entity received sub-leasing rentals of P13 000. Lessor Non-cancellable operating lease rentals receivable as follows: Less than one year Between one and five years
12,000 26,000 38,000
10,000 40,000 50,000
Total lease income during the year
12,000
10,000
GAAP 6.118 (a)
GAAP in Botswana Model financial statements 2020
29
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
The Entity leases out properties. The leases typically run for a period of four (4) years at 10% annual escalation rate with an option to renew at the end of the lease term. The Entity is not allowed to sub-lease the property in the first six months of occupying the property.
GAAP 6.118(c)
The Entity made sub-lease payments during the year of P64,000
GAAP 6.118(b)
14. ACCOUNTS PAYABLES 2020 P Employees costs accruals (severance and Leave) Trade payables Write off Other payables Interest payable
289,200 759,100 (15,820) 153,000 12,000 1,197,480
2019 P 215,300 682,000 146,000 8,000 1,051,300
Part cancellation of a liability Writeoff represents the reduction of trade payables through negotitating with the supplier for a 20% discount on the outstanding balance due to cashflow problems.The part cancellation of liability results in savings to the Entity and is therefore recognized as other income since the saving of cash outflows are not attained through the ordinary course of business operations. The average credit period on purchases of livestock and growing crops from suppliers is 6 months. No interest is charged on the payables for the first 30 days from the date of the invoice. Thereafter, interest is charged at 2% per annum on the outstanding balance. The Entity has internal management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
GAAP 6.267
GAAP 6.266
GAAP 6.268
Trade payables are non-interest bearing and are normally settled on 30 day terms. 15. PROVISIONS Employee claims (i)
Warranties (ii)
Balance at the beginning of the year Additional Provision in the year Utilisation of Provision Amounts reversed during the year
40,000 -
15,500 3,000 (5,500) (4,000)
55,500 3,000 (5,500) (4,000)
Balance at the end of the year
40,000
9,000
49,000
Current Non Current Total Provision
40,000 40,000
9,000 9,000
30
GAAP in Botswana Model financial statements 2020
Total
GAAP 6.297
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
(i)
In 2018, the Entity received a claim from a former employee for alleged unfair dismissal and unlawful failure to renew the contract. The Entity’s Legal Advisors are of the opinion that the prospects of the claim succeeding are likely and they estimated that the maximum probable loss would be P80,000. An amount of P40,000 was paid in 2019 and a provision of P40,000 was recognised. The matter is before the courts and the Entity was informed that the matter is likely to be concluded during the 2021 financial year.
(ii)
The provision for warranty claims represents the present value of the directors’ best estimate of the future outflow of economic benefits that will be required under the Entity’s obligations for warranties of goods bought. The estimate has been made on the basis of historical warranty trends and may vary as a result of new materials, altered manufacturing processes or other events affecting product quality.
16. CONTINGENT LIABLITIES Master Production (Pty) Ltd is in dispute with its supplier for an alleged breach of contract. The Entity’s lawyers have advised that the maximum probable charge is estimated at P25,000. However, the outcome of the lawsuit is currently unknown.
GAAP 6.300
17. CONTINGENT ASSETS The Entity has a claim outstanding against a supplier for the supply of faulty products. Based on negotiations to date, the directors believe that it is probable that their claim will be successful and that compensation of P15,000 will be recovered.
GAAP 6.301
18. TAXATION 2020 P
2019 P
The major components of tax expense are as follows: Current income tax expense under provision for prior year income taxes Capital gains tax Withholding tax on dividends Income tax expense
511,501 6,758 4,500 522,759
375,708 528 376,236
GAAP 6.325
15,000 522,759 (526,759) 11,000
24,000 376,236 (389,264) 10,972
GAAP 6.326
Reconciliation of income tax payable Balance at the beginning of the period Income tax expense- charge for the year Tax paid Balance payable at the end of the period Tax and accounting profit reconciliation Accounting profit 3,804,598 Tax calculated at current tax rate : 22%
837,012
2,400,683 528,150
GAAP in Botswana Model financial statements 2020
31
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
Tax effect of adjustments on taxable income Income not subjected to tax (518,947) Final tax on dividend income 4,500 Expenses not deductible for tax purposes 173,200 Effect of differential tax rates 26,995 522,759
(328,544) 165,860 10,770 376,236
GAAP 6.329
The Entity received dividends from its Subsidiary, Berca Pty (Ltd) . Dividends received from subsidiriary less withholding taxes at 7.5% Net dividends received
60,000 (4,500) 55,500
0 0 0
GAAP 6.328
withholding taxes on livestock (4%)
91,420
46,600
GAAP 6.327
Master Production (Pty) Ltd makes agriculture produce i.e vineyard from 60 hectares therefore exempt for tax purposes. The Entity paid withholding taxes on the sale of its livestock to the government of Botswana. The assessed tax losses available to be offset against future taxable profits for the year ended 30 June 2020 as below: Opening balance Tax losses for the year Closing balance
55,000 55,000
GAAP 6.327
55,000 55,000
19. DEFFERED GOVERNMENT GRANT Balance at the beginning of the period Grant received during the year Grant recognised in profit or loss / utilised Grant unutilised
100,000 500,000 (410,000) 190,000
GAAP 6.341
The grant was received from government for assisting in the acquisition of farm implements and farming working capital for use for a period of two years. The Grant cannot be used for any other purpose other than that of acquisition of farm implements.
GAAP 6.342
20. RELATED PARTIES Youth Development Fund
500,000
500,000
GAAP 7.51(a)
The Entity received a government grant of P500,000 for the purchase of equipment and there are no unfulfilled conditions attaching to the grant. There were no restrictions imposed by the arrangement.
GAAP 7.51(b),(c)
All related party transactions are entered into at arm’s length in the ordinary course of business. Dividend received from Berca (Pty) Ltd
32
GAAP in Botswana Model financial statements 2020
60,000
-
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
21. REVENUE 2020 P Revenue earned from services
2019 P
4,800,000
4,650,000
GAAP 7.33
Sale of goods Livestock 2,285,500 Agriculture produce 1,160,000 Stationary 575,000 4,020,500
1,165,000 995,500 423,000 2,583,500
GAAP 7.33
Consultancy for accounting
Construction contract revenue
350,000
250,000
GAAP 7.39(a)
5,700 2,500 600 1,400 10,000 20,200
GAAP 6.289
There were no exchange of goods done or discounts offered to customers during the year. 22. FINANCE INCOME Bank 8,900 Staff loans 4,300 13,200
6,700 2,700 9,400
23. OTHER INCOME Insurance claim Trailer Hire Recoveries Profit on sale of property, plant and equipment 45,000 Royalties 12,000 Rental income 12,000 69,000 24. FINANCE COSTS Interest on overdraft Interest on loans/borrowings 25. OPERATING EXPENSES
79,012 79,012
Salaries 1,455,000 Wages 75,300 Performance Bonus 442,655 Termination benefits 59,600 Medical aid contributions; and 47,500 Retirement plan contributions. 172,000 Amortisation and depreciation 77,500 Rental charges 35,783 Other expenses 1,300,711 3,666,049
2,500 86,882 89,382
GAAP 7.52
1,405,000 63,400 152,000 63,500 45,500 169,000 74,600 32,475 1,105,000 3,110,475
GAAP in Botswana Model financial statements 2020
33
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
26.CONSTRUCTION CONTRACTS The Entity entered into a three year fixed price contract commencing on 01 July 2019 for the construction of an office building for a client. Contract Progress at the end of the year - 30 June 2020 Construction costs incurred to date 250,000 Recognised profits less recognised losses 50,000 300,000 Amount of advances received (progress billings) retention amount
-
GAAP 7.40(a)
350,000 - 50,000
GAAP 7.40(b) GAAP 7.40(c)
27. GOODWILL
2019 P
Total identifiable net assets at fair value 300,000 Cash consideration 325,000 Goodwill 25,000 Goodwill written off (25,000) Master Production (Pty) Ltd acquired 51% of Berca (Pty) Ltd at a consideration of P325,000, the net asset value of the acquisition was P300,000. Goodwill of P25,000 resulting from the acquisition has been written off. 28. EVENTS AFTER THE REPORTING DATE On the 11 March 2020 the World Health Organisation declared the Coronavirus COVID 19 outbreak to GAAP 8.12 & 8.13 be a pandemic due to its rapid spread across the globe. The Botswana Government has taken stringent measures ahead of any confirmed cases to help contain the virus such as controlling entrants into the country at the borders, implementing social distancing measures and requiring self isolation quarantine by those potentially affected. These measures are similar, though at early stage, to those adopted by other countries which has led to weaker economic outlook globally. As a result, Master Production (Pty) Ltd will likely experience a decrease in profitability especially by the third quarter of the year due to decline in revenue, possible increase in cost of funding or increased impairments as customers and businesses potentially become affected by the pandemic. The Entity expects to continue as a going concern as farming was classified as an essential service during the lock down and the Entity was able to continue its operations and sustain itself. We also assessed the significant judgements and estimates used by the Entity to determine the amounts recognised in the financial statements at year end and concluded that there were no significant changes to the amounts recognised. On the 31st July 2020,Matser Production (Pty) Ltd declared a dividend of P2,500 000. GAAP 8.10 & 8.11
34
GAAP in Botswana Model financial statements 2020
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
29.CHANGE IN ACCOUNTING ESTIMATES During the year the Entity changed the amortisation period of computer software from two years to four years. The change was a result of reviewing the useful lives of intangible assets. The accounting estimate was revised prospectively as follows. P Opening cost of intangible 23,000 Amortisation at old rate(50%) 11,500 Carrying Value 11,500 Opening cost of intangible 23,000 Amortisation at new rate(25%) 5,750 Carrying Value 17,250 Change in accounting estimate 5,750
GAAP 4.24
30.PRIOR PERIOD ERRORS The Entity erroneously recorded an accrual for cleaning expenses at P120,000 instead of the correct value of P12,000. This resulted in expenses being overstated by P108,000 and accruals overstated by P108,000. The error is corrected in the current year.
GAAP 4.19(b)
2020 2019 P P Income Statement extract GAAP 4.20 Other expenses Profit after tax
1,300,711 3,281,839
997,000 2,048,207
note 25
153,000
38,000
note 14
Balance Sheet Extract Other payables
* The information disclosed in prior year if for information purposes 31. DEEMED VALUES The deemed value stated below is only for information.
GAAP 8.26
The Entity carries its leasehold improvements at cost less accumulated depreciation, however during the current year the board made a request to management to perform a fair value analysis on its leasehold improvements to assess the cost-benefit for evaluation purposes. The Entity engaged an independent valuation specialist, Chartered Surveyors & Co to assess the fair value as at 30 June 2020. The valuation is based on proprietary databases of prices of transactions for leasehold improvements of similar nature, location and condition. Leasehold improvements were valued at P 2,184,691. The disclosed deemed value disclosed above does not form an integral part of the financial statements.
GAAP in Botswana Model financial statements 2020
35
Master Production (Pty) Ltd Financial Statements NOTES TO THE FINANCIAL STATEMENTS
GENERALLY ACCEPTED ACCOUNTING PRACTICE (GAAP) IN BOTSWANA FOR ENTITIES NOT REQUIRED TO COMPLY WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
36
GAAP in Botswana Model financial statements 2020