illustrative socpa financial statements template limited liability co english
Post on 08-May-2015
2.079 Views
Preview:
TRANSCRIPT
XYZ COMPANY(A Limited Liability Company)
ILLUSTRATIVE FINANCIAL STATEMENTS
December 31, 2008with
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT
To: The PartnersXYZ Company_____, Kingdom of Saudi Arabia
We have audited the accompanying financial statements of XYZ Company (“the Company”) which comprise the balance sheet as at ______________ and the related statements of income, cash flows and changes in partners’ equity for the year then ended and the attached notes (1) through (30) which form an integral part of the financial statements.
Management is responsible for the preparation and fair presentation of these financial statements in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia and in compliance with Article 175 of the Regulations for Companies and the Company’s Articles of Association. 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. Management has provided us with all the information and explanations that we require relating to our audit of these financial statements.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Saudi Arabia. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of 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 our 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, we consider 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 principles 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 opinion.
1
In our opinion, the financial statements taken as a whole:
1) present fairly, in all material respects, the financial position of the Company as at _____________, and of its results of operations and its cash flows for the year then ended in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia appropriate to the circumstances of the Company; and
2) comply with the requirements of the Regulations for Companies and the Company’s Articles of Association with respect to the preparation and presentation of the financial statements.
For KPMG Al Fozan & Al Sadhan
Signature:Name:License No.:
Date: Corresponding to:
2
XYZ COMPANY(A Limited Liability Company)
ILLUSTRATIVE BALANCE SHEETAs at December 31, 2008Expressed in thousands of Saudi Arabian Riyal
Note 2008 2007ASSETSCurrent assets: Cash and cash equivalents 4 Trade receivables 5 Inventories 6 Current investments 9 Prepayments and other current assets 7 Total current assets Non-current assets: Investments in equity accounted investees 8 Other investments 9 Deferred tax assets 26 Intangible assets 10 Leased assets 11 Property, plant and equipment 12 Total non-current assets Total assets
============= =============LIABILITIES AND PARTNERS’ EQUITYCurrent liabilities: Short-term bank debts 13 Current portion of finance lease obligation 11 Current portion of long-term bank debts 13 Current portion of SIDF loan 14 Trade payables 15 Accrued Zakat and income-tax 26
Provisions 16 Accrued expenses and other current liabilities 17 Total current liabilitiesNon-current liabilities: Deferred tax liabilities 26 Finance lease obligation 11 Long-term bank debts 13 SIDF loan 14 Employees’ end of service benefitsTotal non-current liabilities Total liabilities PARTNERS’ EQUITY Share capital 18 Statutory reserve 19 Other reserve (specify) 20 Unrealized gain (loss) on investments Retained earningsTotal partners’ equity
Total liabilities and partners’ equity============== ==============
The accompanying notes 1 through 30 form an integral part of these illustrative financial statements.
3
XYZ COMPANY(A Limited Liability Company)
ILLUSTRATIVE STATEMENT OF INCOMEFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal
Note 2008 2007Revenue / Sales Cost of sales Gross profit
Selling and marketing expenses 21 General and administrative expenses 22 Impairment loss 23 Realized gain (loss) on sale of investments – net Unrealized gain / loss from valuation of trade securities Income from held-to-maturity investments Share of profit of equity accounted investees Rental income – net 24 Other income 25
Operating incomeFinance incomeFinance expenses Net finance expenses
Income (loss) before Zakat Zakat (applicable for 100% Saudi owned company) 26
Net income (loss)============= =============
The accompanying notes 1 through 30 form an integral part of these illustrative financial statements.
4
XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE STATEMENT OF CASH FLOWSFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal
Note 2008 2007Cash flows from operating activities:
Net income (loss) for the yearAdjustments to reconcile net income to net cash
provided by operating activities:Depreciation Amortization of intangible assets Impairment loss Loss/gain on sale of property, plant and equipment
Impairment lossRealized gain (loss) on sale of investments – net Unrealized gain / loss from valuation of trade securitiesIncome from held-to-maturity investmentsShare of profit of equity accounted investeesZakat charge for the yearFinance expenses for the year
Changes in operating assets and liabilities:Decrease (increase) in trade receivablesDecrease (increase) in inventories
(Increase) decrease in prepayments and other current assets
Increase (decrease) in trade payablesIncrease (decrease) in accrued expenses and other liabilitiesNet increase (decrease) in employees’ end of service benefits
Finance expenses paidZakat paid Total adjustments Net cash provided by (used in) operating activities Cash flows from investing activities:
Additions to intangible assets Additions to property, plant and equipment Proceeds from sale of property, plant and equipmentPurchase of investmentsInvestment income receivedProceeds from sale of investments
Net cash provided by (used in) investing activities Cash flows from financing activities:
Dividend paid*Zakat and income tax paid on behalf of the partners*Zakat and income tax reimbursed by the partnersNet movement in short-term bank debtsNet movement in long term bank debts Net movement in finance lease obligation Net movement in SIDF loan
Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year
================ ================Non-cash items (described if applicable)*Applicable to mixed company
The accompanying notes 1 through 30 form an integral part of these illustrative financial statements.
5
XYZ COMPANY(A Limited Liability Company)
ILLUSTRATIVE STATEMENT OF CHANGES IN PARTNERS’ EQUITYFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal
Unrealized Share Statutory Other reserve gain/(loss) on Retained Capital reserve (specify) investments earnings Total
Balance at December 31, 2006Net income (loss) for the year 2007Transfer to statutory reserveZakat and income tax (applicable to a mixed company): Charge for the year Reimbursed/reimbursable by the partnersNet effect of adjustments in unrealized gain/(loss) on investmentsOther movement (specify)Dividend paid Balance at December 31, 2007
Net income for the year 2008Transfer to statutory reserveZakat and income tax (applicable to a mixed company): Charge for the year Reimbursed/reimbursable by the partnersDividend paidOther movement (specify)Net effect of adjustments in unrealized gain (loss) on investments
Balance at December 31, 2008========== ========== ========== ========== ========== ==========
The accompanying notes 1 through 30 forman integral part of these financial statements.
6
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
XYZ Company (the Company) is a limited liability company formed under the Regulation for
Companies in the Kingdom under Commercial Registration No. ____________ dated
____________, corresponding to ____________.
[Describe activities such as]
The principal activities of the Company are to manufacture and sell ____________in the local,
Middle East and other export markets.
The Company’s registered office is located at the following address:
_________________
_________________
_________________
_________________
2. BASIS OF PREPARATION
(a) Statement of compliance
The accompanying financial statements have been prepared in accordance with the
generally accepted accounting standards in Saudi Arabia issued by the Saudi Organization
for Certified Public Accountants (SOCPA).
The financial statements were authorized for issue by the Board of Directors / management
(specify) on (date)
(b) Basis of measurement
The financial statements have been prepared on historical cost basis (except for available-
for-sale investments which are stated at their fair values), using the accrual basis of
accounting and the going concern concept.
7
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
2. BASIS OF PRESENTATION (continued)
(c) Functional and presentation currency
These financial statements are presented in Saudi Arabian Riyals (SR) which is the
functional currency. All financial information presented in SR has been rounded to the
nearest thousand.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgment, estimates
and assumptions that affect the application of policies and reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimates are revised and in
future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in
applying accounting policies that have the most significant effect on the amounts
recognized in the financial statements is included in the following notes:
[Specify note with reference of balance sheet item, if applicable.]
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in
the financial statements. Certain comparative amounts have been reclassified to conform with
the current year’s presentation (give reference of note where reclassification was done).
(a) Trade receivables
Trade receivables are stated at original invoice amount less provisions made for amounts
which in the opinion of the management may not be received. Bad debts are written off
when identified.
8
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of
inventories is principally based on the weighted average principle, and includes
expenditure incurred in acquiring the inventories, production or conversion costs and other
costs incurred in bringing them to their existing location and condition. In the case of
manufactured inventories and work in progress, cost includes an appropriate share of
production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and selling expenses.
(c) Investments
(i) Investment in trade securities
Investment in trade securities which are purchased for trading purposes are initially
recorded at cost and then re-measured and stated in the balance sheet at market value
and included under current assets. Realized gain or loss on sale of trade securities and
changes in market value at balance sheet date are credited or charged to income
statement.
(ii) Held to maturity investments
Investment in securities held to maturity is measured at annualized cost using the
effective interest method, less any impairment loss.
9
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(iii) Investments in associates and jointly controlled entities (equity accounted investees)
Associates are those entities in which the Company has significant influence, but not
control, over the financial and operating policies. Significant influence is presumed
to exist when the Company holds between 20 and 50 percent of the voting power of
another entity. Jointly controlled entities are those entities over whose activities the
Company has joint control, established by contractual agreement and requiring
unanimous consent for strategic financial and operating decision. Associates and
jointly controlled entities are accounted for using the equity method (equity
accounted investee) and are initially recognized at cost. The Company’s investment
includes goodwill identified on acquisition, net of any accumulated impairment
losses. The financial statements include the Company’s share of income and
expenses and equity movement of the equity accounted investees from the date that
significant influence commences until the date that significant influence ceases.
When the Company’s share of losses exceeds its interest in an associate, the
Company’s carrying amount is reduced to nil and recognition of further losses is
discontinued except to the extent that the Company has incurred legal or constructive
obligations or made payments on behalf of an associate. The Company's share of
profits or losses of the investee companies is credited or charged to the income
currently.
(iv) Available-for-sale investments
The Company has less than 20% equity investments in locally listed companies and
various companies which are not for trading purposes and where the Company does
not have any significant influence or control and, accordingly, these are classified as
investments available for sale and subsequent to initial recognition, they are measured
at fair value and changes therein other than impairment losses (see Note __) are
recognized in equity. Fair value is determined by reference to the market value in the
open market if exists. In the absence of an open market, the cost is considered to be
the fair value for these investments.
10
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Permanent diminution in value of the above mentioned investments, if any, is charged to
the statement of income.
(d) Intangible assets
i) Pre-operating costs
Pre-operating costs includes all costs and expenses incurred during the pre-operating
stage and have the future economic benefits. Such costs are amortized using the
straight-line method over the related economic benefit periods not exceeding _______
years.
ii) Research and development costs
Expenditure on research activities, undertaken with the prospect of gaining new
scientific or technical knowledge and understanding, is recognized in profit or loss
when incurred.
Development activities involve a plan or design for the production of new or
substantially improved products, services and processes. Development expenditure is
capitalized only if development costs can be measured reliably, the product, service or
process is technically and commercially feasible, future economic benefits are
probable, and the Company intends to and has sufficient resources to complete
development and to use or sell the asset. The expenditure capitalized includes the
cost of materials, direct labour and overhead costs that are directly attributable to
preparing the asset for its intended use. Borrowing costs related to the development
of qualifying assets are recognized in profit or loss as incurred. Other development
expenditure is recognized in profit or loss as incurred.
Capitalized development expenditure is measured at cost less accumulated
amortization and accumulated impairment losses. Capitalized development cost is
amortized using the straight-line method over the related benefit periods not
exceeding __ years.
11
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
iii) Other intangible assets
(Specify nature and amortization policy)
(e) Leased assets
The Company accounts for tangible assets obtained under finance lease by recording the
asset and the related liability. The amounts are determined on the basis of lower of fair
value of assets and discounted value of minimum lease payments. Finance charges are
allocated to accounting period in a manner so as to provide a constant periodic rate of
charge on the outstanding liability. Leased assets are depreciated over the shorter of the
lease term and their useful lives unless it is reasonably certain that the Company will
obtain ownership by the end of the lease term. Land is not depreciated. Depreciation is
charged applying the straight-line method using the following annual depreciation rates:
Assets category Year
-- --
-- --
-- --
(f) Property, plant and equipment
Property, plant and equipment are measured at cost, less accumulated depreciation and
accumulated impairment loss. Cost includes expenditure that is directly attributable to the
acquisition of the asset. Finance costs on borrowings to finance the construction of the
assets are capitalized during the period of time that is required to complete and prepare the
asset for its intended use.
Subsequent expenditure is capitalized only when it increases the future economic benefits
embodied in the item of property, plant and equipment. All other expenditure is
recognized in the income statement when incurred.
12
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciation is charged to the income statement on a straight-line basis over the estimated
useful lives of individual item of property, plant and equipment.
The estimated useful lives of assets for current and comparative periods are as follow:
Years
Buildings
Leasehold improvements
Plant and equipment
Furniture and office equipment
Motor vehicles
(g) Impairment of assets
Financial assets, property, plant and equipment and other non-current assets are reviewed
for impairment losses whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss, if any, is recognized for the
amount by which the carrying amount of the asset exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows.
(h) Provisions (Applicable to the warranties, restructuring, onerous contracts, etc. and not
for accrual)
A provision is recognized if, as a result of past events, the Company has a present legal or
constructive obligation that can be estimated reliably, and it is probably that an outflow of
economic benefit, will be required to settle the obligation.
13
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
i) Warranties
A provision for warranties is required when the underlying products and services
are sold. The provision is based on historical working data and a weighing of all
possible outcomes against their associated probabilities.
ii) Other (specify)
(i) Employees’ end of service benefits
Employees’ end of service benefits, calculated in accordance with Saudi Arabian labour
regulations, are accrued and charged to statement of income. The liability is calculated at
the current value of the vested benefits to which the employee is entitled, should his
services are terminated at the balance sheet date.
(j) Revenue recognition
Revenue from sales is recognized upon delivery or shipment of products to customers, and
is recorded net of returns, trade discounts and volume rebates.
Revenue from services is recognized when services are performed.
Rental income is recognized in the statement of income on a straight-line basis over the
term of the lease.
(k) Operating leases
Payments under operating leases are recognized in the statement of income on a straight-
line basis over the term of the term of the lease. Lease incentives received are recognized
as an integral part of the total lease expense over the term of the lease.
14
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Expenses
Selling and marketing expenses are those arising from the Company’s efforts underlying
the marketing, selling and distribution functions. All other expenses, excluding direct
costs and financial charges, are classified as general and administrative expenses.
Allocations of common expenses between cost of sales and selling, marketing, general and
administrative expenses, when required, are made on a consistent basis.
(m) Zakat and income-tax
[For 100% Saudi owned companies]
Zakat, computed in accordance with Saudi Arabia Tax and Zakat regulations, is accrued
and charged to statement of income currently.
[For mixed companies]
Zakat and income tax, computed in accordance with the Saudi Arabian fiscal regulations,
are accrued and charged to retained earnings. Since the partners have agreed to reimburse
Zakat and income tax from the proceeds of the future dividend, such amount receivable
from the partners are credited to retained earnings; [OR if applicable]
Zakat and income tax, computed in accordance with Saudi Arabian fiscal regulations, are
accrued and charged to retained earnings. Zakat and income tax, when reimbursed by the
partners, are credited to retained earnings.
Deferred tax liabilities and assets are recognized for all temporary differences at current
rates of taxation. The carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that sufficient taxable
profit will be available in the near future to allow all or part of the deferred tax asset to be
utilized.
15
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) Foreign currency translation
Transactions denominated in foreign currencies are translated to the functional currency of
the Company at the exchange rates ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currency at the balance sheet date are translated to
the functional currency of the Company at the foreign exchange rate ruling at that date.
Exchange differences arising on translation are recognized in the statement of income
currently.
(o) Dividends
Interim dividends are recorded as liability in the period in which they are approved by the
Board of Directors. Final dividends are recorded in the period in which they are approved
by the shareholders.
(p) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash with banks and other short-term
highly liquid investments, if any, with original maturities of three months or less, which
are available to the Company without any restrictions.
4. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at December 31 comprise the following:
2008 2007
Cash in hand
Cash at bank on current accounts
Short term bank depositsOther (specify)
============ ============
16
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
5. TRADE RECEIVABLES
Trade receivables at December 31 comprise the following:
2008 2007
Related parties
Other customers
Total
Provision for doubtful accounts
============ ============
6. INVENTORIES
Inventories at December 31 comprise the following:
2008 2007
Raw and packing materials
Work-in-process
Finished goods
Spare parts and consumables
In-transit inventories
Total
Provision for slow moving items
============ ============
17
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
6. INVENTORIES (inventories)
1. Disclose inventory included in the financial statements that is pledged as security for
liabilities of the Company.
2. Disclose the difference between the value of cost of goods sold and similarly for ending
inventory computed according to the method applied by the Company and the weighted
average methods in case the Company used LIFO or FIFO.
7. PREPAYMENTS AND OTHER CURRENT ASSETS
Prepayments and other current assets at December 31 comprise the following:
2008 2007
Prepayments
Margin deposits with banks
Supplier advances
Employee housing and other advances
Zakat and income tax reimbursable by the partners
Other
============ ============
18
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
8. INVESTMENTS IN EQUITY ACCOUNTED INVESTEES
Investments in associates and jointly controlled entities described as equity accounted investees
at December 31 comprise the following:
Name
Effective ownership
interest (%) 2008 2008
---------------------- Total
Less: Impairment loss
(Disclose reason for not using equity method on investments (with name) where investment is 20
– 50% of interest.)
19
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
9. OTHER INVESTMENTS
a) Other investments at December 31 comprise of the following:
2008 2007
Investments in trade securities
Held-to-maturity investments
Available for sale (AFS) investments
Miscellaneous (specify)
Total
Less: Investments classified under current assets:
Investments in trade securities
Current portion of held-to-maturity investments
Current investments
Non-current investments============ ============
b) Investments in trade securities at December 31, comprise the following:
2008 2007
Cost
Unrealized gain (loss)
Fair value============ ============
c) Held-to-maturity at December 31, comprise the following:
2008 2007
Cost
Impairment loss
Revised cost
Amortization or premium / discount
Fair value============ ============
20
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
9. OTHER INVESTMENTS (continued)
d) Investments available for sale at December 31, comprise the following:
2008 2007
Cost
Impairment loss
Revised cost
Unrealized gain (loss)
Fair value============ ============
e) Miscellaneous
[Specify and give details.]
10. INTANGIBLE ASSETS
a) Intangible assets at December 31 comprise the following:
2008 2007
Pre-operating expenses
Product development or other
intangible assets (specify)
============ ============
b) Pre-operating expenses
The movement in pre-operating expenses for the year ended December 31 is as follows:
2008 2007Total Total
Cost
Balance at beginning of the year
Additions during the year
Cost fully amortized
Balance at end of the year
21
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
10. INTANGIBLE ASSETS (continued)
Accumulated amortization and impairment
Balance at beginning of the year
Amortization charge for the year
Cost fully amortized
Impairment loss adjustments
Balance at end of the year
Net balance at December 31============ ============
[Disclose any significant movement during the year.]
c) Product development or Other intangible assets (specify)
The movement in other intangible assets (specify) for the year ended December 31 is as
follows:2008 2007Total Total
Cost
Balance at beginning of the year
Additions during the year
Cost fully amortized during the year
Balance at end of the year
Accumulated amortization and impairment
Balance at beginning of the year
Amortization charge for the year
Cost fully amortized during the year
Impairment loss adjustments
Balance at end of the year
Net balance at December 31============ ============
[Disclose any significant movement during the year.]
22
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
11. LEASED ASSETS
a) Leased assets at December 31 acquired under finance lease terms and detailed as under:
2008 2007CostBalance at beginning of the yearAddition during the yearDisposal during the year
Balance at end of the year
Accumulated depreciation:
Balance at beginning of the year
Charge for the year
Relating to disposal
Balance at end of the year
Net leased assets============ ============
b) The lease assets have been acquired under a finance lease agreement for a total lease value
of SR __________ payable SR __________in advance and balance SR
__________payable in __ equal monthly instalments effective [date]. The aggregate
fair value of the leased assets was estimated to be SR __________which has been
capitalized as part of leased assets cost.
23
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
11. LEASED ASSETS (continued)
At December 31 the net present value of the finance lease obligation is presented in the
financial statements as follows:
2008 2007
Current portion shown under current liabilities
Non-current portion shown under non-current liabilities
============ ============
The future minimum lease payments as of December 31, for the future years are analyzed
as follows:
2008 2008
Year
2009201020112012 2013 and thereafter
24
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
12. PROPERTY, PLANT AND EQUIPMENT
The movement in property, plant and equipment during the year ended December 31, 2008 is analyzed as under: [ modify the class of assets as
appropriate] Furniture
Plant and and office Motor Capital work Land Buildings equipment equipment vehicles in progress Total
Cost:Balance at January 1, 2008AdditionsTransfers from capital work in progressReclassification Disposals Balance at December 31, 2008
Accumulated depreciation and impairment:Balance at January 1, 2008Depreciation charge for the yearImpairment loss adjustmentsReclassification Disposals Balance at December 31, 2008
Net book value:At December 31, 2008
========== ========== ========== ========== ========== ========== ==========At December 31, 2008
========== ========== ========== ========== ========== ========== ==========
25
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
12. PROPERTY, PLANT AND EQUIPMENT (continued)
a) Additions include SR ___________ in respect of interests capitalized during 2008 (2008:
SR _____________). The rate used to determine the amount of finance costs capitalized
during 2008 was ___% (2008: ___%).
b) Capital work in progress - [Disclose nature of major work]
c) The building is situated on plot of land leased from the Industrial Estate Administration,
[city] for ____ years commencing from _______________ for nominal annual rental. The
lease is renewable for a similar period on the same conditions and such other conditions as
agreed by the parties concerned.
d) See Note 13 with respect to the pledge of certain fixed assets of the Company as collateral
to Saudi Industrial Development Fund.
e) Buildings at December 31, 2008 include properties having cost SR ______________ and
book value SR ______________ leased to third parties under operating lease
arrangements.
f) Depreciation charge for the year ended December 31, has been allocated as follows:
2008 2007
Cost of sales
Selling and marketing expenses
General and administrative expenses
============ ============
26
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
13. BANK DEBTS
a) Short-term bank debts
Short-term bank debts represent amounts outstanding under bank overdraft and short-term
loan facilities with certain commercial banks to finance the working capital requirement of
the Company.
[Describe security and covenants, etc. for the facilities, if these are specific to short-term
bank debts only]
b) Long-term bank loans
Long-term bank loans at December 31 comprise of the following:
2008 2008
[Name of banks]
__
__
============ ============
Presented in the balance sheet as follows:
Current portion shown under current liabilities
Non-current portion shown under non-current liabilities
============ ============
[Disclosure (modify as necessary)]
27
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
13. BANK DEBTS (continued)
Short and long-term bank loans, overdrafts, guarantees and other facilities from the banks
are secured by _____________________________________. All bank borrowings bear
commission at agreed commercial rates. The facility agreements with the banks contains
covenants which, among other things, limits distribution of dividends in order to maintain
a minimum net worth and require that certain financial ratios be maintained.
[Describe guarantees, if applicable.]
14. SIDF LOAN
The loan from Saudi Industrial Development Fund (SIDF) was obtained to finance the
acquisition / expansion of the manufacturing facilities. Against the total approved loan facility
of SR __________ at December 31, 2008, a sum of SR __________ was received and the
balance unavailed facility amounted to SR __________. The loan is secured by a mortgage on
the Company’s fixed assets and the personal and corporate (if applicable) guarantees of the
partners in the proportion to their ownership interest in the Company. The loan agreement
contains covenants which, among other things, limits future capital expenditure and requires
certain financial ratios to be maintained.
[Describe any non-compliance of loan covenants and its impact.]
Based on the repayment schedule, the outstanding SIDF loan balance at December 31 is
calculated in the balance sheet as follows:
2008 2007
Current portion shown under current liabilities
Non-current portion shown under non-current liabilities
Total============ ============
28
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
15. TRADE PAYABLES
Trade payables at December 31 comprise of the following:
2008 2007
Related parties
Other parties
============ ============
16. PROVISIONS
(Provide details of provisions)
17. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at December 31 comprise of the following:
2008 2007
Accrued expenses
Customers’ advances
Unearned rental income
Other [specify]
============ ============
29
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
18. SHARE CAPITAL
At December 31, 2008, the share capital of the Company was SR ________ (2007: SR
________) divided into ____ shares (2007: ________ shares) of SR ___ each, which are fully
paid and owned as follows:
No. of shares % Amount
Name of significant partners------
Total ========== ========== ==========
[Describe any change in share capital during the year]
19. STATUTORY RESERVE
In accordance with Company’s Articles of Association and the Regulations for Companies in the
Kingdom of Saudi Arabia, the Company is required to transfer 10% of its net income each year
to a statutory reserve until such reserve equals 50% of its share capital. This reserve is not
available for distributions to the shareholders. [Add the following sentence if statutory reserve
reached to 50% of the capital and no more allocation:]
The statutory reserve requirement has been fulfilled and, accordingly, the Company is not
required to transfer any additional amount towards this reserve.
20. OTHER RESERVE (specify)
[Disclose details of the reserve. How it is created and will be utilized.]
30
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
21. SELLING AND MARKETING EXPENSES
Selling and marketing expenses for the year ended December 31 comprise the following:
2008 2007
[Disclose major item of expenses such as any amount which is 5-10% of the total expenses.](Modify expense headings as appropriate to the company)
Employee costs
Advertising and sales promotion
Rent
Depreciation
Bad and doubtful debts
Repairs, maintenance and consumables
Other
============ ============
31
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
22. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the year ended December 31 comprise the following:
2008 2007
[Disclose material expenses such as any amount which is 5-10% of the total expenses.](Modify expense headings as appropriate to the company)
Employee costs
Amortization of intangible assets
Travel
Depreciation
Training
Utilities, telephone and communication
Insurance
Computer-related
Rent
Repairs and maintenance
Other
============ ============
23. IMPAIRMENT LOSS
(Provide detailed note in that respect)
32
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
24. RENTAL INCOME – NET
Rental income for the year ended December 31 comprises the following:
2008 2008Total rental income
Costs and expenses: Operating costs Depreciation
Total costs and expenses
Rental income, net============ ============
25. OTHER INCOME (EXPENSE) – NET
Other income (expense) – net for the year ended December 31 comprises the following:
[Disclose material amount.]
2008 2007
Profit (loss) on disposal of property, plant and equipment
Scrap sales
Miscellaneous
============ ============
33
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
26. ZAKAT AND INCOME-TAX
a) Charge for the year
i) Zakat and income-tax charge for the year ended December 31 comprises the
following:
2008 . 2007 .
Zakat Income-tax Total ZakatIncome-
tax Total
For current year
For previous year _________ _________ _________ _________ _________ ________
======== ========
========
========
========
========
ii) The significant components of Zakat base for the current year ended December 31,
2008 are as follow:
[Summarize information from Zakat calculation sheet such as:]
2008 2007
Capital
Adjusted net income
Adjusted equity and provision at beginning of year
Deduction for property, plant and equipment
Deduction for investment
Deduction for intangible assets
Deduction from dividend paid
iii) Income-tax charge for the current year is based on the adjusted taxable income
calculated on the portion of equity owned by the foreign partner.
34
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
26. ZAKAT AND INCOME-TAX (continued)
iv) Zakat and income-tax for previous years relates to certain amounts disallowed at
the time of final assessment by the Department of Zakat and Income Tax. [Explain
based on information in assessment order.]
b) Accrued Zakat and income tax
The movement in accrued zakat and income-tax during the year ended December 31 is as
follows:
2008 . 2007 .
Zakat Income-tax Total ZakatIncome-
tax Total
Balance at beginning of the year
Add: Charge for the year
Less: Payments during the year _________ _________ _________ _________ _________ ________
Balance at end of the year
======== ========
========
========
========
========
c) Status of assessments
Zakat assessments have been finalized with the Department of Zakat and Income Tax
(DZIT) and final zakat certificates obtained for the years up to ___.
[Disclose assessment under appeal, etc. and any contingent liability in that respect]
35
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
26. ZAKAT AND INCOME-TAX (continued)
d) Deferred tax assets and liabilities
(i) Recognized deferred tax
Recognized deferred tax assets and liabilities at December 31 are attributable to the
following:
2008 2007
Property, plant and equipment
Intangible assets
Investments
Employee termination benefits
Provisions
Other [specify]
Net deferred tax assets (liabilities)============ ============
The movement in recognized deferred tax assets (liabilities) during the year ended
December 31, 2008 is summarized as under:
2008 2007
Balance at beginning of the year
Provided during the year
Released during the year
Balance at end of the year============ ============
36
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
26. ZAKAT AND INCOME-TAX (continued)
(ii) Unrecognized deferred tax
Unrecognized deferred tax liability
Disclose any unrecognized deferred tax liability with reason for non-accrual.
Unrecognized deferred tax assets
Disclose nature, amount and reason for non-accrual OR
No deferred tax asset has been recognized as it is not possible to determine when such
timing difference will reverse.
27. COMMITMENTS AND CONTINGENCIES
a) At December 31, the Company has the following commitments:
2008 2007
For capital expenditures
For Investments
Other (specify)
b) At December 31, 2008, the Company has a contingent liability of SR __________ (2007:
SR _________) in respect of bank guarantees issued by the Company’s bank in respect of
bid bonds, contracts advance payments and performance bonds.
[Disclose other contingent liabilities.]
37
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
28. RELATED PARTY TRANSACTIONS AND BALANCES
[Follow guidance of related party definition from SOCPA standards for identification of related
party]
a) Related party transactions mainly represent purchases and sales of goods and services which
are undertaken at mutually agreed terms and approved by management from the following
entities:
Name of entity Relationship
b) Disclose material transactions with individual related party other than purchase and sales if
it is necessary to understand the effort of the related party transaction on the enterprises
financial statements.
Related party transactions for the year ended December 31 and balances arising-there from
are described as under:
Nature of Amount of transaction Closing balanceTransactions with transaction during the year Receivable/(Payable)
2008 2007 2008 2007
[Specify affiliate, Sale of products
partner, other Purchase of goods
related party]
Management fees
Others (specify)
38
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
29. OPERATING LEASES
[Disclosure as lessee - modify as appropriate]
a) The Company has various operating leases for office space, warehouse, retail outlets,
employees' accommodations [Disclose as appropriate]. The leases are for initial period for
one year to _____ years with options to renew the leases after lease periods. Lease
payments are either fixed or increase annually to reflect market rentals. Rental expenses for
the year ended December 31, 2008 amounted to SR ___ (2008: SR ___).
b) At December 31, the Company’s obligations under non-cancellable operating leases are
payable as follow:2008 2007
Within one year
Between two and five years
More than five years
Total============ ============
[Disclosure as lessor (modify as appropriate)]
a) The Company has rented certain properties to third parties under operating lease
arrangement. [Disclose as appropriate]. The leases are for initial period for one year to
_____ years with options to renew the leases after lease periods. Lease payments are either
fixed or increase annually to reflect market rentals. The cost and book value of the leased
assets at December 31, 2008 amounted to SR __________ (2008: SR ______) and SR
_______ (2008: SR ____________) respectively.
39
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
29. OPERATING LEASES (continued)
b) At December 31, the minimum lease payments for non-cancellable leases are as follow:
2008 2007
2009
2010
2011
2012
2013 and thereafter
Total============ ============
30. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Financial instruments carried on the balance sheet include cash and cash equivalents, trade and
other accounts receivable, investments, short-term borrowings, accounts payable, other
liabilities, and long-term debt.
Credit risk is the risk that one party will fail to discharge an obligation and will cause the other
party to incur a financial loss. The Company has no significant concentration of credit risks.
Cash and cash equivalents are placed with national and international banks with sound credit
ratings. Trade and other accounts receivable are mainly due from local customers and related
parties and are stated at their estimated realizable values.
Fair value and cash flow interest rate risks are the exposures to various risks associated with
the effect of fluctuations in the prevailing interest rates on the Company's financial position and
cash flows. The Company’s interest rate risk arise mainly from short term bank deposits and
bank debts and long term debts, which are at floating rates of interest. All deposits and debts are
subject to re-pricing on a regular basis. Management monitors the changes in interest rates and
believes that the fair value and cash flow interest rate risks to the Company are not significant.
40
XYZ COMPANY(A Limited Liability Company)
NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal
30. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet
commitments associated with financial instruments. Liquidity risk may result from the inability
to sell a financial asset quickly at an amount close to its fair value.
Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to
meet the Company's future commitments.
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in
foreign exchange rates. The Company's transactions are principally in Saudi riyal and United
States dollar. Other transactions in foreign currencies are not material. Currency risk is managed
on regular basis.
Fair value is the amount for which an asset could be exchanged, or a liability settled between
knowledgeable willing parties in an arm's length transaction. As the accompanying financial
statements are prepared under the historical cost method, except for the revaluation of the
available-for-sale and trade securities at fair value through equity, differences may arise between
the book values and the fair value estimates. Management believes that the fair values of the
Company's financial assets and liabilities are not materially different from their carrying values.
41
top related