Umsobomvu Youth Fund Annual Report 2006 - Nyda

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notes to thefinancialstatementsfor the year ended31 March income 2006statementsfor the year ended31 March 20061 Accounting policies1.1 Basis of preparationThe financial statements are prepared in accordance withand comply with International Financial Reporting Standards(IFRS). IFRS 1, First-time Adoption of International FinancialReporting Standards, has been applied in preparing thesefinancial statements. These financial statements are the firstfinancial statements to be prepared in accordance with IFRS.The financial statements are prepared on the historical costbasis with the exception of certain financial instruments whichare measured at fair value.IFRS 1 grants certain exemptions from some requirements ofother IFRS’s in the transition period. The Fund elected exemptioncontained in paragraph 25A in IFRS 1 which permits an entity todesignate at fair value through profit or loss any financial assetor financial liability that qualifies for such designation at thestart of its first IFRS reporting period.The preparation of the financial statements in conformitywith IFRS requires the use of estimates and assumptions thataffect the reported amounts of assets and liabilities, as well asdisclosure of contingent assets and liabilities at balance sheetdate and reported amounts of revenues and expenses duringthe reporting period, based on Management’s best estimates ofcurrent events and transactions.Reconciliations and descriptions of the effect of the transitionfrom SA GAAP to IFRS on the Fund’s reserves and its surplusare provided in note 2.1.3 Adoption of IFRS’s during the yearThe Fund has adopted the following revised statements duringthe year and comparative information has been restated asrequired. The effect of IFRS adoption has been detailed innote 2.IAS 1 Presentation of Financial Statements;IAS 8 Accounting Policies, Changes in Accounting Estimates andErrors;IAS 10 Events after Balance Sheet Date;IAS 16 Property, Plant and Equipment;IAS 17 Leases;IAS 24 Related Party Disclosure;IAS 28 Investments in Associates;IAS 31 Interests in Joint Ventures;IAS 32 Financial Instruments: Presentation; andIAS 39 Financial Instruments: Recognition and Measurement.Early adoptionThe Fund has not early adopted any standard.IFRS’s and IFRIC interpretation and International AccountingStandards amendments not yet effectiveThe Fund has not applied the following IFRS’s and IFRICinterpretations that have been issued but are not yet effective:IFRS 7 – Financial Instruments: Disclosure – effective 1 January2007IFRIC 4 – Determining whether an Arrangement Contains a Lease– effective 1 January 2006IFRIC 9 – Reassessment of Embedded Derivatives – effective1 June 2006Umsobomvu Youth Fund 2006 Financial StatementsThe principal accounting policies adopted in the preparation ofthese financial statements are set out below and are consistentwith those of the previous year, except for changes made as aresult of the adoption of IFRS. The revised IFRS policies havebeen consistently applied to both years.1.2 Critical accounting estimates andjudgementsCritical accounting estimates are those that involve complexor subjective judgements or assessments. The areas of theFund’s business that typically require such estimates are thedetermination of fair value for financial assets and financialliabilities as well as impairment charges on the Fund’s assets.The fair values of the financial assets and liabilities areclassified and accounted for in accordance with the policiesset out below. Fair value is the amount for which an assetcould be exchanged between knowledgeable, willing partiesin an arm’s length transaction. The valuation methodologiesapplied in arriving at fair value are consistent with thosevaluation methodologies recommended by various internationalprivate equity organisations, and endorsed by the South AfricanVenture Capital Association (SAVCA).The fund has not yet applied the following amendments toIAS’s that are not yet effective:IAS 1 – Amendment – Capital Disclosures – effective 1 January2006IAS 19 – Amendment – Employee Benefits Actuarial Gains andLosses, Group Plans and Disclosure – effective 1 January 2006IAS 39 – Amendment – The Fair Value Option – effective1 January 2006IAS 39 – Amendment – Financial Guarantee Contracts – effective1 January 20061.4 Investments in associatesAn associate is an entity in which the Group has significantinfluence and which is neither a subsidiary nor a joint venture.The Fund has opted to elect the venture capital organisationexemption and account for investments in associates at fairvalue through profit and loss in terms of IAS 39. Fair valueadjustments are recognised in the income statement.1.5 Investments in jointly controlled assetsJointly controlled assets involve the joint control by theventurers of one or more assets contributed to, or acquired forthe purpose of the joint venture and dedicated to the purpose50
of the joint venture. These joint ventures do not involve theestablishment of a corporation, partnership or other entityor a financial structure that is separate from the venturersthemselves. Each venturer has control over its share of futureeconomic benefit through its share of the jointly controlledasset.The Fund recognises in its financial statements:• Its share of the jointly controlled assets and liabilities, classifiedaccording to the nature of the assets and liabilities;• Any income from the sale or use of its share of the output ofthe jointly controlled asset; and• Its share of any expenses incurred by the joint venture andany expense that it has incurred in respect of its interest inthe jointly controlled assets.1.6 Investments in jointly controlled entitiesA jointly controlled entity is a joint venture that involves theestablishment of an entity in which each venturer has aninterest. The entity operates in the same way as other entities,except that a contractual arrangement between the venturersestablishes joint control over the economic activity of the entity.The interest in such an entity is accounted for by the equitymethod of accounting.The ranges of rates used are as follows:Computer hardware 20% – 33% per annumComputer software 20% – 33% per annumOffice equipment 20% – 33% per annumFurniture17% – 25% per annumMotor vehicles17% – 20% per annumLeasehold improvements Over the remaining term of the lease1.9 Intangible assetsIntangible assets acquired separately are measured on initialrecognition at cost. Following initial recognition, intangibleassets are carried at cost less any accumulated amortisation andany accumulated impairment losses. The internally generatedand externally acquired intangible assets are capitalised andhave finite useful lives. The useful life and the amortisationmethod for an intangible asset are reviewed at least at eachfinancial year-end.Internally developed intangible assets are capitalised only whenit is technically feasible to complete the intangible asset so thatit will be available for use, and the intention to complete andability to use can be demonstrated taking into account how theasset will generate future economic benefits, the availabilityof resources to complete, and the ability to reliably measureexpenditure during development.balancesheetsat 31 March 20061.7 Group accountsThe consolidated financial statements comprise the financialstatements of Umsobomvu Youth Fund, its subsidiaries andjoint ventures. Subsidiary companies are those in which theFund, directly or indirectly, has an interest of more than half ofthe voting rights or otherwise has power to exercise control overthe operations. Subsidiary companies are consolidated from thedate on which effective control is transferred to the Group andcease to be consolidated when the investment is disposed ofor the Fund no longer has control as described above. All intercompanytransactions, balances and unrealised surpluses anddeficits on transactions between Group companies have beeneliminated. The investment in subsidiary is measured at cost.1.8 Property, plant and equipmentProperty, plant and equipment are stated at cost, excludingthe cost of day-to-day servicing, less accumulated depreciationand accumulated impairment in value. Property, plant andequipment are depreciated over their expected useful lives on astraight line basis at rates estimated to write each asset downto estimated residual value over the term of its useful life.An item of property, plant and equipment is derecognised upondisposal or when no future economic benefits are expected fromits use or disposal. Any gain or loss arising on derecognitionof the asset is included in the income statement in the yearthe asset is derecognised. The asset’s residual values, usefullives and depreciation methods are reviewed, and adjusted ifappropriate, at each financial year-end.The Fund amortises its intangible assets at a rate of between20% – 33% per annum. Software under development isamortised when the software becomes available for use.1.10 Impairment of assetsThe Fund regularly reviews its assets for indications ofimpairment, and accounts for impairment or reversals ofprior impairment in accordance with the provisions of IAS 36:Impairment of Assets. Where the carrying amount is greaterthan its recoverable amount it is written down immediately toits recoverable amount. The recoverable amount is the higherof an asset’s net selling price and its value in use. In assessingvalue in use, the estimated future cash flow is discounted to itspresent value using a discount rate that reflects current marketassessments of the time value of money and the risk specificto the asset.1.11 Government grantsOn initial recognition, Government grants are presentedas deferred income in line with the requirements of IAS 20:Accounting for Government Grants and Disclosure of GovernmentAssistance. Subsequent to initial recognition, Governmentgrants are recognised as income on a systematic and rationalbasis over the periods necessary to match them with the relatedcosts, being the project disbursement costs.Government grants not yet disbursed are allocated betweencommitted and uncommitted, restricted and unrestricted funds.Committed funds represent the portion of the deferred grantincome that has been contractually committed to projects,but not yet drawn or disbursed as at balance sheet date.Uncommitted and restricted funds are reserves that cannot beUmsobomvu Youth Fund 2006 Financial Statements51
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Page 8 and 9: performancefor yearunder reviewSkil
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Page 18 and 19: chiefexecutive’sreport• Youth E
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Page 32 and 33: statement ofcorporategovernanceYout
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Page 54 and 55: notes to thefinancialstatementsfor
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Umsobomvu Youth Fund Annual Report 2006 - Nyda

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