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First Ghana Savings and Loans Limited

Financial Statements

31 December 2016


Financial statements

1

Contents Page

Corporate information

2

Directors’ report

3

Statement of directors’ responsibilities 4

Independent auditor’s report 5 - 7

Statement of profit or loss and other comprehensive income 8

Statement of financial position 9

Statement of changes in equity 10

Statement of cash flows 11

Notes to the financial statements

12 – 57


Corporate information

2

Directors: Mr. John Kweku Asamoah Chairman

Mr. Patrick Tei Kwapong Managing Director

Mr. Franklin Ashiadey Member

Mr. Steve Aggor Member

Mr. Divine Doku Member

Mr. Theophilus Dorgbetor Member

Dr. John Gartchie Gasti Member

Mrs. Hannah Quarcoopome Member

Secretary: Mr. Mohammed Ismaila

Registered Office: D. 563/4

Kojo Thompson Road

P.O. Box GP 2958

Accra

Auditors: Deloitte and Touche

Chartered Accountants

4 Liberation Road

P. O. Box GP 453

Accra

Branches: Accra- Adabraka

Accra - Osu

Kumasi - Amakom

Kumasi - Suame

Koforidua

Takoradi

Tamale

Tema

Sunyani

Hohoe

Bankers: National Investment Bank Limited

GCB Bank Limited

Barclays Bank (Ghana) Limited


Director’s report For the year ended 31 December 2016

3

The directors have the pleasure in submitting the audited financial statements of First Ghana

Savings and Loans Limited for the year ended 31 December 2016 and report thereon as

follows:-

1. Activities

The company carries on the business of savings and loans as defined by the Non-bank Financial

Institutions (Bank of Ghana) Act, 2008 (Act 774) and relevant sections of the Banking Act, 2004

(Act 673) as amended by the banking (Amendment) Act 2007, (Act 738).

2. Result for the year

The results of operations for the year ended 31 December 2016 are set out in the income

statement and balance sheet and the notes to the financial statement from pages 8 to 57.

2016 2015

GH¢ GH¢

The net (loss) / profit for the year ended 31 December

2016 transferred to the income surplus account

amounted to (294,815) 694,562

To which must be added the deficit brought forward at 1

January 2016 of

(8,320,995)

(9,036,231)

Giving a deficit of (8,615,810) (8,341,669)

Transfer to statutory reserve fund - (347,281)

Transfer to regulatory credit risk reserve (217,972) 367,955

Leaving a deficit on the income surplus account of (8,833,782) (8,320,995)

3. Dividend

The directors do not recommend the payment of dividend for the year under review (2015: nil).

4. Auditors

In accordance with Section 134(5) of the Companies Act, 1963, (Act 179) the auditors, Messrs.

Deloitte & Touche, will continue as auditors of the company.

On behalf of the board

_________________________________ ________________________________

Director Director

Date: Date:


Statement of directors’ responsibilities For the year ended 31 December 2016

4

The directors are responsible for preparing financial statements for each financial year which

give a true and fair view of the state of affairs of the company at the end of the financial year

and of the profit and loss of the company for that year. In preparing those financial statements

the directors are required to:

Select suitable accounting policies and apply then consistently;

Make judgments and estimates that are reasonable and prudent;

State whether applicable accounting standards have been

followed, subject to any material departures disclosed and

explained in the financial statements; and

Prepare the financial statements on the going concern basis unless

it is inappropriate to presume that the company will continue in

business

The directors are responsible for ensuring that the company keeps accounting records which

disclose with reasonable accuracy, at any time, the financial position of the company and which

enables them to ensure that the financial statements comply with the Companies Act, 1963

(Act 179) and the Non-bank Financial Institutions (Bank of Ghana) Act, 2008 (Act 774) and

relevant sections of the Banking Act, 2004 (Act 673) as amended by the banking (Amendment)

Act 2007, (Act 738). They are also responsible for taking such steps as are reasonably open to

them to safeguard the assets of the company and to prevent and detect fraud and other

irregularities.

The above statement which should be read in conjunction with the statement of the auditors’

responsibilities set out on page 6 is made with a view to distinguishing for shareholders the

respective responsibilities of the directors and the auditors, in relation to the financial

statements.

5

Independent auditor’s report To the Shareholders of First Ghana Savings and

Loans Limited Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of First Ghana Savings and Loans

Limited which comprise the statement of financial position as at 31 December 2016, the

statement of profit or loss and other comprehensive income, statement of changes in equity,

statement of cash flows for the year then ended, the notes to the financial statements including

a summary of significant accounting policies and other national disclosures.

In our opinion, the financial statements give a true and fair view of the financial position of

First Ghana Savings and Loans Limited as at 31 December 2016 and the financial performance

and cash flows for the year then ended in accordance with the International Financial Reporting

Standards, and in the manner required by the Companies Act, 1963 (Act 179), Non-bank

Financial Institutions (Bank of Ghana) Act, 2008 (Act 774) the relevant section of the Banking

Act, 2004 (Act 673), the Banking (Amendment) Act, 2007 (Act 738) and in the manner required

by the Companies Act, 1963 (Act 179)..

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our

responsibilities under those standards are further described in the Auditor’s Responsibilities for

the Audit of the Financial Statements section of our report. We are independent of the company

in accordance with the requirements of the International Federation of Accountants Code of

Ethics for Professional Accountants (IFAC Code) as adopted by the Institute of Chartered

Accountants Ghana (ICAG) and we have fulfilled our other ethical responsibilities in accordance

with IFAC Code. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

Other Information

The directors are responsible for the other information. The other information comprises the

Report of the Directors, which we obtained prior to the date of this auditor’s report. The other

information does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not

express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other

information and, in doing so, consider whether the other information is materially inconsistent

with the financial statements or our knowledge obtained in the audit, or otherwise appears to

be materially misstated.

Based on the work we have performed on the other information that we obtained prior to the

date of this auditor’s report, if we conclude that there is a material misstatement of this other

information, we are required to report that fact. We have nothing to report in this regard.

6

Independent auditor’s report To the Shareholders of First Ghana Savings and

Loans Limited Report on the Audit of the Financial Statements

Responsibilities of the Directors for the Financial Statements

The directors are responsible for the preparation of financial statements that give a true and

fair view in accordance with International Financial Reporting Standards Non-bank Financial

Institutions (Bank of Ghana) Act, 2008 (Act 774), the relevant sections of Banking Act, 2004

(Act 673), the Banking (Amendment) Act, 2007 (Act 738) and the requirements of the

Companies Act, 1963, (Act 179) and for such internal control as the directors determine is

necessary to enable the preparation of financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the

Company’s ability to continue as a going concern, disclosing, as applicable, matters related to

going concern and using the going concern basis of accounting unless the directors either

intend to liquidate the Company or to cease operations, or have no realistic alternative but to

do so.

Auditor’s Responsibilities for the Audit of Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as

a whole are free from material misstatement, whether due to fraud or error, and to issue an

auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,

but is not a guarantee that an audit conducted in accordance with ISAs will always detect a

material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to

influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain

professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those

risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for

our opinion. The risk of not detecting a material misstatement resulting from fraud is

higher than for one resulting from error, as fraud may involve collusion, forgery,

intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the directors.

We communicate with the audit committee and the directors regarding, among other matters,

the planned scope and timing of the audit and significant audit findings, including any

significant deficiencies in internal control that we identify during our audit.

7

Independent auditor’s report-continued To the Shareholders of First Ghana Savings and Loans Limited

Report on the Audit of the Financial Statements

Report on Other Legal and Regulatory Requirements

The Companies Act, 1963 (Act 179) requires that in carrying out our audit work we consider

and report on the following matters.

We confirm that:

i) We have obtained all the information and explanation which to the best of our

knowledge and belief were necessary for the purpose of our audit.

ii) The Company has kept proper books of account, so far as appears from our examination

of those books.

iii) The Company’s financial position and its statement of profit or loss and other

comprehensive income are in agreement with the books of account and returns.

The Non-Banking Financial Institutions Act, 2008 (Act 774) and relevant sections of the

Banking Act 2004(673) as amended by the Banking Amendment Act 2007 (Act 738) requires

that we state certain matters in our report.

We hereby state that:

I. the accounts give a true and fair view of the state of affairs of the Company and their

results for the year under review;

II. we were able to obtain all the information and explanations required for the efficient

performance of our duties as auditors;

III. the Company transactions were within its powers; and

IV. the Company has generally complied with the provisions in the relevant sections of

the Banking Act 2004 (Act 673) and the Banking (Amendment) Act 2007 (Act 738).

The engagement partner on the audit resulting in this independent auditor's report is Daniel

Kwadwo Owusu (ICAG/P/1327)

For and on behalf of Deloitte & Touche (ICAG/F/2017/129)

Chartered Accountants

4 Liberation Road

Accra Ghana

……………………….……………………….. 2017


Statement of profit or loss and other comprehensive income For the year ended 31 December 2016

8

The accompanying notes form an integral part of these financial statements

Note 2016 2015

GH¢ GH¢

Interest income 3 9,167,108 7,335,002

Interest expense 4 (2,870,185) (2,012,911)

Net interest income 6,296,923 5,322,091

Fee and commission income 5 646,463 558,656

Other operating income 6 51,769 206,842

Operating income 6,995,155 6,087,590

General and administrative expenses 7 (6,133,240) (4,511,628)

Impairment losses on loans and advances 9 (248,288) (244,826)

Operating profit 613,627 1,331,136

Finance cost 8 (629,260) (8,157)

Profit before tax (15,633) 1,322,979

Income tax expense 10 (279,182) (628,417)

(Loss)/profit for the year (294,815) 694,562

Other comprehensive income

Items that may be reclassified

subsequently to profit or loss

Fair value gain on available for sale financial

assets 625 (5,625)

Total comprehensive income (294,190) 688,937


Statement of financial position As at 31 December 2016

9

Note 2016 2015

Assets GH¢ GH¢

Cash and bank balances 11 4,483,755 2,054,852

Investment securities 12 23,232,529 15,497,826

Investments in equity 13 11,875 11,250

Loans and advances to

customers 14 7,934,223 7,308,887

Other assets 15 405,072 279,902

Property, plant and equipment 16 5,310,925 4,890,065

Total assets 41,378,379 30,042,782

Liabilities

Customer deposits 17 21,629,451 17,693,264

Other liabilities 18 1,618,217 724,938

Borrowings 19 6,629,260 -

Deferred income 20 66,525 70,573

Current income tax payable 10 86,027 190,100

Deferred tax liability 10 670,759 391,577

Total liabilities 30,700,239 19,070,453

Equity

Stated capital 21 18,029,137 18,029,137

Preference shares 22 187 187

Revaluation reserve 23 713,915 713,915

Available for sale reserve 24 10,800 10,175

Statutory reserve fund 25 469,172 469,172

Regulatory credit risk reserve 26 288,711 70,739

Income surplus (8,833,782) (8,320,995)

Total equity 10,678,140 10,972,330

Total equity and liabilities 41,378,379 30,042,782


_________________________________ ________________________________

Director Director

Date: Date:


Statement of changes in equity For the year ended 31 December 2016

10

Stated

capital

Preference

shares

Revaluation

reserve

Available

for sale

reserve

Statutory

reserve

fund

Regulatory

credit risk

reserve

Income

surplus Total

2016 GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Balance at 1 January 18,029,137 187 713,915 10,175 469,172 70,739 (8,320,995) 10,972,330

Transfer to regulatory

credit risk reserve -

-

-

- - 217,972 (217,972) -

Transfer to statutory

reserve -

-

-

- - - - -

Total comprehensive

income -

-

-

625 - - (294,815) (294,190)

Balance at 31 December 18,029,137 187 713,915 10,800 469,172 288,711 (8,833,782) 10,678,140

2015

Balance at 1 January 18,029,137 187 713,915 15,800 121,891 438,694 (9,036,231) 10,283,393

Transfer to regulatory

credit risk reserve -

-

-

- - (367,955) 367,955 -

Transfer to statutory

reserve -

-

-

- 347,281 - (347,281) -

Total comprehensive

income -

-

-

(5,625) - - 694,562 688,937

Balance at 31 December 18,029,137 187 713,915 10,175 469,172 70,739 (8,320,995) 10,972,330

The accompanying notes form an integral part of these financial statements.


Statement of cash flows For the year ended 31 December 2016

11

2016

2015

GH¢ GH¢

Operating activities

Operating loss before taxation (15,633) 1,322,979

Adjustments for:

Depreciation 482,225 281,922

Profit on property & equipment disposal - (9,467)

Adjustment - (9,864)

Operating cash flow before movement in

working capital

466,592 1,585,570

Net change in loans and advances to customers (625,336) (4,394,880)

Net change in other assets (125,169) (112,330)

Net change in customer deposits 3,936,187 4,887,642

Net change in other liabilities 893,279 172,850

Net change in deferred income (4,048) 70,573

4,541,503 2,209,425

Tax paid (104,073) (80,056)

Net cash generated by operating activities 4,437,430 2,129,369

Investing activities

Purchase of property and equipment (903,084) (2,038,225)

Proceeds from sale of property and equipment - 20,000

Investments (7,734,703) 1,161,297

Net cash used in investing activities (8,637,787) (856,928)

Financing activities

Borrowings 6,629,260 (91,910)

Net cash generated from financing activities 6,629,260 (91,910)

Increase in cash and cash equivalents 2,428,903 1,180,531

Cash and cash equivalents at 1 January 2,054,852 874,321

Cash and cash equivalents at 31 December 4,483,755 2,054,852

Analysis of changes in cash and cash

equivalent

Cash in hand 81,594 88,589

Balances with banks 4,402,161 1,966,264

4,483,755 2,054,852



Notes to the financial statement For the year ended 31 December 2016

12

1. Corporate information

First Ghana Savings and Loans Limited is a public company incorporated and domiciled in

Ghana. The Company primarily is involved in savings and loans business. The address of the

Company’s registered office is: D563/4 Kojo Thompson Road, P.O. Box GP 2958, Accra.

2. Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these financial statements

are set out below. These policies have been consistently applied to all years presented,

unless otherwise stated.

2.1 Basis of preparation

The financial statements are prepared in compliance with International Financial Reporting

Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and in

the manner required by the Companies Act, 1963 (Act 179) and the Non-bank Financial

Institutions (Bank of Ghana) Act, 2008 (Act 774) and relevant sections of the Banking Act,

2004 (Act 673) as amended by the banking (Amendment) Act 2007, (Act 738).

The financial statements have been prepared on the historical cost basis. The financial

statements are presented in Ghana Cedi (GH¢).

2.1.1 Going concern

The Company’s management has made an assessment of its ability to continue as a going

concern and is satisfied that it has the resources to continue in business for the foreseeable

future. Furthermore, management is not aware of any material uncertainties that may cast

significant doubt upon the Company’s ability to continue as a going concern.

Therefore, the financial statements continue to be prepared on the going concern basis.

2.1.2 Accounting judgments, estimates and assumptions

Preparation of our financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that can affect

reported amounts of assets, liabilities, revenues and expenses. Accounting for these areas

is subject to estimates and assumptions. Management bases its estimates on historical

experience and on other assumptions we believe to be reasonable under the circumstances.

However, actual results may differ from our estimates. Key estimates used in the

preparation of the financial statements are disclosed below.

(a) Deferred tax assets and liabilities

Uncertainties exist with respect to the interpretation of complex tax regulations and the

amount and timing of future taxable income. Deferred tax assets are recognised to the

extent that it is probable that taxable profit will be available against which the losses can

be utilised. Significant management judgement is required to determine the amount of

deferred tax assets that can be recognised, based on the likely timing and the level of future

taxable profits together with future tax planning strategies.



13

(b) Useful lives of property, plant and equipment

The Company reviews the estimated useful lives of property, plant and equipment at the

end of each reporting period. During the current year, the directors determined that the

useful lives of the assets should remain the same.

(c) Held-to-maturity financial assets

The directors have reviewed the Company’s held-to-maturity financial assets in the light of

its capital maintenance and liquidity requirements and have confirmed the Company’s

positive intention and ability to hold those assets to maturity.

(d) Fair value measurement and valuation processes

In estimating the fair value of an asset or liability, the Company uses market-observable

data to the extent that it is available. Where Level 1 inputs are not available, the Company

engages third party qualified valuers to perform the valuation.

2.1.3 Application of new and revised standards, amendments and interpretations

At the date of authorisation of these financial statements the following new standards and

amendments to existing standards were in issue, but not yet effective:

IFRS 9 Financial Instruments

Classification and measurement of financial assets

On 24 July 2014, the IASB issued the final version of IFRS 9 Financial Instruments

incorporating a new expected loss impairment model and introducing limited

amendments to the classification and measurement requirements for financial assets.

This version supersedes all previous versions and is mandatorily effective for periods

beginning on or after 1 January 2018 with early adoption permitted (subject to local

endorsement requirements). For a limited period, previous versions of IFRS 9 may be

adopted early if not already done so provided the relevant date of initial application is

before 1 February 2015.

IFRS 9 uses a single approach to determine classification of financial assets (which will

then determine their measurement basis either at amortised cost or fair value,

replacing the many different rules in IAS 39). The approach is based on how an entity

manages its financial assets (“business model”) and the contractual cash flow

characteristics of such assets (“contractual cash flows”). The business model criterion

is met when an entity holds financial assets in order to collect the asset’s cash flows.

The contractual cash flows criterion is met when the contractual cash flows collected

from the financial asset represent solely interest and principal. When the two criteria

are met, the financial asset must be measured at amortised cost unless the fair value

designation is adopted. This assessment does not need to be performed on an asset by

asset business but rather on a portfolio basis. A new measurement category of fair

value through other comprehensive income will apply for debt instruments held within

a business model whose objective is achieved by collecting contractual cash flows and

selling financial assets.



14

Classification and measurement of financial liabilities

The classification criteria for financial liabilities contained in IAS 39 move to IFRS 9

unchanged and the IAS 39 classification categories of amortised cost and fair value through

profit or loss are retained. For a financial liability designated as at fair value through profit

or loss using the fair value option, the change in the liability’s fair value attributable to

changes in the liability’s credit risk is recognised directly in other comprehensive income,

unless it creates or increases an accounting mismatch. The amount that is recognised in

other comprehensive income is not recycled when the liability is settled or extinguished.

The meaning of credit risk is clarified to distinguish credit risk from asset-specific

performance risk. The cost exemption in IAS 39 for derivative liabilities is eliminated,

although the concept of bifurcating embedded derivatives from a financial liability host

contract remains unchanged from IAS 39.

Embedded derivatives

The embedded derivative concept that existed in IAS 39 has been included in IFRS 9 to

apply only to hosts that are not financial assets within the scope of the Standard.

Consequently, embedded derivatives that under IAS 39 would have been separately

accounted for at FVTPL because they were not closely related to the host financial asset will

no longer be separated. Instead, the contractual cash flows of the financial asset are

assessed in their entirety, and the asset as a whole is measured at FVTPL if the contractual

cash flow characteristics test is not passed

Derecognition

In October 2010 the requirements in IAS 39 relating to derecognition of financial assets

and financial liabilities were carried forward unchanged to IFRS 9.

Hedging

The hedge accounting requirements in IFRS 9 are optional. If certain eligibility and

qualification criteria are met, hedge accounting allows an entity to reflect risk management

activities in the financial statements by matching gains or losses on financial hedging

instruments with losses or gains on the risk exposures they hedge.

The three types of hedge accounting remain: cash flow hedges, fair value hedges and net

investment hedges. IFRS 9 allows combinations of derivatives and non-derivatives to be

designated as the hedging instrument. There has been a broadening of the types of risks

that may be hedged, especially for non-financial items. Risk components of non-financial

items may now be hedged under IFRS 9. Changes in the way forward contracts and

derivative options are accounted for when they are in a hedge accounting relationship will

reduce profit or loss volatility when compared with IAS 39. The effectiveness test has been

overhauled and replaced with the principle of an economic relationship. Retrospective

assessment of hedge effectiveness is no longer required. The new requirements do bring

with more extensive hedge documentation and disclosure for entities.

The hedge accounting model in IFRS 9 is not designed to accommodate hedging of open,

dynamic portfolios. As a result, for a fair value hedge of interest rate risk of a portfolio of



15

financial assets or liabilities an entity can apply the hedge accounting requirements in IAS

39 instead of those in IFRS 9. In addition when an entity first applies IFRS 9, it may choose

as its accounting policy choice to continue to apply the hedge accounting requirements of

IAS 39 instead of the requirements of Chapter 6 of IFRS 9.

Impairment

A new impairment model based on expected credit losses will apply to debt instruments

measured at amortised cost or at fair value through other comprehensive income, lease

receivables, contract assets and certain written loan commitments and financial guarantee

contracts. The loss allowance will be for either 12 month expected credit losses or lifetime

expected credit losses. The latter applies if credit risk has increased significantly since initial

recognition of the financial instrument. A different approach applies for purchased or

originated credit impaired financial assets.

IFRS 14 Regulatory Deferral Accounts

IFRS 14 Regulatory Deferral Accounts permits an entity which is a first-time adopter of

International Financial Reporting Standards to continue to account, with some limited

changes, for 'regulatory deferral account balances' in accordance with its previous GAAP,

both on initial adoption of IFRS and in subsequent financial statements. Regulatory deferral

account balances, and movements in them, are presented separately in the statement of

financial position and statement of profit or loss and other comprehensive income, and

specific disclosures are required.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 specifies how and when an IFRS reporter will recognise revenue as well as requiring

such entities to provide users of financial statements with more informative, relevant

disclosures. The standard provides a single, principles based five-step model to be applied

to all contracts with customers. The core principle of IFRS 15 is that an entity will recognise

revenue to depict the transfer of promised goods or services to customers in an amount

that reflects the consideration to which the entity expects to be entitled in exchange for

those goods or services. This core principle is delivered in a five-step model framework:

Identify the contract(s) with a customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognise revenue when (or as) the entity satisfies a performance obligation.

Application of this guidance will depend on the facts and circumstances present in a contract

with a customer and will require the exercise of judgment.



16

IFRS 16 Leases

IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose

leases. The standard provides a single lessee accounting model, requiring lessees to

recognise assets and liabilities for all leases unless the lease term is 12 months or less or

the underlying asset has a low value. Lessors continue to classify leases as operating or

finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its

predecessor, IAS 17.

IFRIC 22 Foreign Currency Transactions and Advance Consideration

IFRIC 22 clarifies the accounting for transactions that include the receipt or payment of

advance consideration in a foreign currency.

The Interpretation covers foreign currency transactions when an entity recognises a non-

monetary asset or non-monetary liability arising from the payment or receipt of advance

consideration before the entity recognises the related asset, expense or income. It does

not apply when an entity measures the related asset, expense or income on initial

recognition at fair value or at the fair value of the consideration received or payed at a date

other than the date of initial recognition of the non-monetary asset or non-monetary

liability. Also, the Interpretation need not be applied to income taxes, insurance contracts

or reinsurance contracts.

Consensus

The date of the transaction, for the purpose of determining the exchange rate, is the

date of initial recognition of the non-monetary prepayment asset or deferred income

liability.

If there are multiple payments or receipts in advance, a date of transaction is

established for each payment or receipt.

Amendments to Standards and interpretations

IFRS 2 Share- Based Payments

The IASB finalised three separate amendments to IFRS 2:

Effects of vesting conditions on the measurement of a cash-settled share-based payment

Until now, IFRS 2 contained no guidance on how vesting conditions affect the fair value of

liabilities for cash-settled share-based payments. IASB has now added guidance that

introduces accounting requirements for cash-settled share-based payments that follows the

same approach as used for equity-settled share-based payments.

Accounting for a modification to the terms and conditions of a share-based payment that

changes the classification of the transaction from cash-settled to equity-settled

http://www.ifrs.org/Current-Projects/IASB-Projects/IFRS-2-share-based-payment-transactions-that-include-performance-condition/Pages/Home.aspx

http://www.ifrs.org/Current-Projects/IASB-Projects/IFRS-2-Modification-from-cash-settled-to-equity-settled/Pages/IFRS-2-Modification-from-cash-settled-to-equity-settled.aspx

http://www.ifrs.org/Current-Projects/IASB-Projects/IFRS-2-Modification-from-cash-settled-to-equity-settled/Pages/IFRS-2-Modification-from-cash-settled-to-equity-settled.aspx



17

Until now, IFRS 2 did not specifically address situations where a cash-settled share-based

payment changes to an equity-settled share-based payment because of modifications of

the terms and conditions. The IASB has introduced the following clarifications:

On such modifications, the original liability recognised in respect of the cash-settled

share-based payment is derecognised and the equity-settled share-based payment

is recognised at the modification date fair value to the extent services have been

rendered up to the modification date.

Any difference between the carrying amount of the liability as at the modification

date and the amount recognised in equity at the same date would be recognised in

profit and loss immediately.

Classification of share-based payment transactions with net settlement features

IASB has introduced an exception into IFRS 2 so that a share-based payment where the

entity settles the share-based payment arrangement net is classified as equity-settled in

its entirety provided the share-based payment would have been classified as equity-settled

had it not included the net settlement feature.

IFRS 4 Insurance Contracts

The IASB issued amendments to IFRS 4 providing two options for entities that issue

insurance contracts within the scope of IFRS 4:

an option that permits entities to reclassify, from profit or loss to other comprehensive

income, some of the income or expenses arising from designated financial assets; this

is the so-called overlay approach;

an optional temporary exemption from applying IFRS 9 for entities whose predominant

activity is issuing contracts within the scope of IFRS 4; this is the so-called deferral

approach.

An entity choosing to apply the overlay approach retrospectively to qualifying financial

assets does so when it first applies IFRS 9. An entity choosing to apply the deferral

approach does so for annual periods beginning on or after 1 January 2018. The application

of both approaches is optional and an entity is permitted to stop applying them before the

new insurance contracts standard is applied.

http://www.ifrs.org/Current-Projects/IASB-Projects/IFRS-2-tax-withholdings/Pages/IFRS-2-tax-withholdings.aspx



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IFRS 7 Financial Instrument: Disclosures

Disclosures about the initial application of IFRS 9

The following disclosures are required in the reporting period when IFRS 9 is first applied:

changes in the classifications of financial assets and financial liabilities; and

details of financial assets and financial liabilities which have been reclassified so that

they are measured at amortised cost, including the fair value of the financial asset or

liability at the end of the reporting period and the fair value gain or loss that would have

been recognised in profit or loss during the reporting period if the financial asset had

not been reclassified.

IFRS 10 Consolidated Financial Statements

Investment Entities Exemption

Amends IFRS 10, IFRS 12 and IAS 27 to provide investment entities an exemption from

the consolidation of particular subsidiaries and instead require that an investment entity

measure the investment in each eligible subsidiary at fair value through profit or loss in

accordance with IFRS 9 or IAS 39.

Sale or Contribution of Assets between an Investor and its Associate or Joint

Venture

The objective of the project is to address an acknowledged inconsistency between the

requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution

of assets between an investor and its associate or joint venture.

The main consequence of the amendments is that a full gain or loss is recognised when a

transaction involves a business (whether it is housed in a subsidiary or not). A partial gain

or loss is recognised when a transaction involves assets that do not constitute a business,

even if these assets are housed in a subsidiary.

IFRS 11 Joint Arrangements

Accounting for Acquisitions of Interests in Joint Operations

The amendment addresses how a joint operator should account for the acquisition of an

interest in a joint operation in which the activity of the joint operation constitutes a

business. IFRS 11 now requires that such transactions shall be accounted for using the

principles in IFRS 3 Business Combinations and other standards. The most significant

impacts will be the recognition of goodwill and the recognition of deferred tax assets and

liabilities. The amendments not apply to acquisitions of interests in joint operations but

also when a business is contributed to a joint operation on its formation.

http://www.iasplus.com/en/standards/ifrs10


http://www.iasplus.com/en/standards/ias27-2011


http://www.iasplus.com/en/standards/ias39



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IFRS 12 Disclosure of Interests in Other Interests

Investment Entities

This amendment clarifies which subsidiaries of an investment entity should be consolidated

instead of being measured at fair value. The impact on whether the entities may be

consolidated will result in changes in the disclosure requirements of IFRS 12 for

subsidiaries.

IFRS 15 Revenue from Contracts with Customers

To keep the IASB and FASB informed on interpretive issues occurring during

implementation of the converged revenue recognition standard and to assist in determining

what action may be needed to resolve diversity in practice, the Boards created the Joint

Transition Resource Group for Revenue Recognition (TRG).

The discussions of the TRG highlighted potential diversity in stakeholders' understanding

of some topics in IFRS 15. In response to this, the IASB made amendments to the following

areas clarify IFRS 15:

Distinct goods or services

Principal versus agent

Licensing

Determining the nature of the entities promise

Sales-based usage- based royalties

IAS 1 Presentation of Financial Statements

The narrow-focus amendments to IAS 1 clarify, rather than significantly change, existing

IAS 1 requirements. In most cases the proposed amendments respond to overly

prescriptive interpretations of the wording in IAS 1. The amendments relate to the

following:

materiality;

order of the notes;

subtotals;

accounting policies; and

disaggregation



20

IAS 7 Statement of Cash Flows

The amendments come with the objective that entities shall provide disclosures that enable

users of financial statements to evaluate changes in liabilities arising from financing

activities.

To achieve this objective, the IASB requires that the following changes in liabilities arising

from financing activities are disclosed (to the extent necessary): (i) changes from financing

cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other

businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values;

and (v) other changes.

The IASB defines liabilities arising from financing activities as liabilities "for which cash

flows were, or future cash flows will be, classified in the statement of cash flows as cash

flows from financing activities". It also stresses that the new disclosure requirements also

relate to changes in financial assets if they meet the same definition.

The amendments state that one way to fulfil the new disclosure requirement is to provide

a reconciliation between the opening and closing balances in the statement of financial

position for liabilities arising from financing activities. This is a departure from the

December 2014 exposure draft that had proposed that such a reconciliation should be

required.

Finally, the amendments state that changes in liabilities arising from financing activities

must be disclosed separately from changes in other assets and liabilities

IAS 12 Income Taxes

The amendments in Recognition of Deferred Tax Assets for Unrealised Losses clarify the

following aspects:

Unrealised losses on debt instruments measured at fair value and measured at cost

for tax purposes give rise to a deductible temporary difference regardless of whether

the debt instrument's holder expects to recover the carrying amount of the debt

instrument by sale or by use.

The carrying amount of an asset does not limit the estimation of probable future

taxable profits.

Estimates for future taxable profits exclude tax deductions resulting from the

reversal of deductible temporary differences.

An entity assesses a deferred tax asset in combination with other deferred tax

assets. Where tax law restricts the utilisation of tax losses, an entity would assess

a deferred tax asset in combination with other deferred tax assets of the same type



21

IAS 16 Property, plant and equipment

Clarification of Acceptable Methods of Depreciation and Amortisation

The amended IAS 16 introduces a rebuttable presumption that revenue is not an

appropriate basis for amortisation of property, plant and equipment. This presumption can

only be rebutted in two limited circumstances:

1. Property plant and equipment is expressed as a measure of revenue; or

2. Revenue and consumption of the item of property, plant and equipment are highly

correlated.

Guidance is introduced to explain that expected future reductions in selling prices could be

indicative of a reduction of the future economic benefits embodied in an asset.

Agriculture: Bearer Plants

The amendments require biological assets that meet the definition of a bearer plant to be

accounted for as property, plant and equipment in accordance with IAS 16. Bearer plants

are defined as living plants that are used in the production or supply of agricultural produce

and for which there is only a remote likelihood that the plant will also be sold as agricultural

produce (other than as incidental scrap sales at the end of the plant’s productive life). For

cost benefit reasons, the amendments permit fair value as deemed cost for bearer plants

on transition.

IAS 27 Separate Financial Statements

Equity Method in Separate Financial Statements

The objective of this narrow-scope project is to restore the option to use the equity method

of accounting in separate financial statements. IAS 27 Separate Financial Statements

allows an entity to account for investments in subsidiaries, joint ventures and associates

either at cost or in accordance with IFRS 9 Financial Instruments in the entity’s separate

financial statements.

IAS 28 Investments in Associates and Joint Ventures


Venture



of assets between an investor and its associate or joint venture. The main consequence of

the amendments is that a full gain or loss is recognised when a transaction involves a

business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised

when a transaction involves assets that do not constitute a business, even if these assets

are housed in a subsidiary.



22


Venture



of assets between an investor and its associate or joint venture.

The main consequence of the amendments is that a full gain or loss is recognised when a

transaction involves a business (whether it is housed in a subsidiary or not). A partial gain

or loss is recognised when a transaction involves assets that do not constitute a business,

even if these assets are housed in a subsidiary.

IAS 38 Intangible assets

Clarification of Acceptable Methods of Depreciation and Amortisation

The amended IAS 38 introduces a rebuttable presumption that revenue is not an

appropriate basis for amortisation of an intangible asset. This presumption can only be

rebutted in two limited circumstances:

1. The intangible asset is expressed as a measure of revenue; or

2. Revenue and consumption of the intangible asset are highly correlated.

Guidance is introduced to explain that expected future reductions in selling prices could be

indicative of a reduction of the future economic benefits embodied in an asset.

IAS 40 Investment Property

The amendment provides guidance on transfers to, or from, investment properties. More

specifically, the question was whether a property under construction or development that

was previously classified as inventory could be transferred to investment property when

there was an evident change in use. The IASB amended the paragraph to reinforce the

principle for transfers into, or out of, investment property in IAS 40 to specify that such a

transfer should only be made when there has been a change in use of the property.

IAS 41 Agriculture

Bearer Plants

The amendments require biological assets that meet the definition of a bearer plant to be

accounted for as property, plant and equipment in accordance with IAS 16. Bearer plants

are defined as living plants that are used in the production or supply of agricultural produce

and for which there is only a remote likelihood that the plant will also be sold as agricultural

produce (other than as incidental scrap sales at the end of the plant’s productive life). For

cost benefit reasons, the amendments permit fair value as deemed cost for bearer plants

on transition.



23

Improvements to IFRS

IFRS 1 First-time Adoption of International Financial Reporting Standards

The amendment deleted the short-term exemptions in paragraphs E3–E7 of IFRS 1,

because they have now served their intended purpose.

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Change in methods of disposal

The amendments introduce specific guidance in IFRS 5 for when an entity reclassifies an

asset (or disposal group) from held for sale to held for distribution to owners (or vice versa),

or when held-for-distribution accounting is discontinued. The amendments state that:

Such reclassifications should not be considered changes to a plan of sale or a plan of

distribution to owners and that the classification, presentation and measurement

requirements applicable to the new method of disposal should be applied; and

Assets that no longer meet the criteria for held for distribution to owners (and do not

meet the criteria for held for sale) should be treated in the same way as assets that

cease to be classified as held for sale.

IFRS 7 Financial Instruments: Disclosure

Servicing contracts

The amendments provide additional guidance to clarify whether a servicing contract is

continuing involvement in a transferred asset for the purpose of disclosures required in

relation to transferred assets. Paragraph 42C(c) of IFRS 7 states that a pass through

arrangement under a servicing contract does not, in itself, constitute a continuing

involvement for the purposes of the transfer disclosure requirements. However, in practice,

most service contracts have additional features that lead to a continuing involvement in

the asset, for example, when the amount and/or timing of the service fee depends on the

amount and/or timing of the cash flows collected.

Applicability of the amendments to IFRS 7 on offsetting disclosure to condensed

interim financial statements

Amendments to IFRS 7were made to remove uncertainty as to whether the disclosure

requirements on offsetting financial assets and financial liabilities (introduced in December

2011) and effective for periods beginning on or after 1 January 2013) should be included

in condensed interim financial statements, and if so, whether in all condensed interim

financial statements after 1 January 2013 or only in the first year. The amendments clarify

that the offsetting disclosures are not explicitly required for all interim periods. However,

the disclosures may need to be included in condensed interim financial statements to

comply with IAS 34 Interim Financial Reporting


Notes to the financial statements For the year ended 31 December 2016

24

IFRS 12 Disclosure of Interests in Other Interests

Scope

Clarified the scope of the standard by specifying that the disclosure requirements in the

standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in

paragraph 5 that are classified as held for sale, as held for distribution or as discontinued

operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued

Operations.

Investment Entities

Clarifies that an investment entity measuring all of its subsidiaries at fair value provides

the disclosures relating to investment entities required by IFRS 12.

IAS 19 Employee Benefits

The amendments to IAS 19 clarify that the high quality corporate bonds to estimate the

discount rate for post-employment benefits should be issued in the same currency as the

benefits to be paid. These amendments would result in the depth of the market for high

quality corporate bonds being assessed at currency level.

IAS 28 Consolidated Financial Statements

Investment Entities Exemption

Clarified that the election to measure at fair value through profit or loss an investment in

an associate or a joint venture that is held by an entity that is a venture capital

organisation, or other qualifying entity, is available for each investment in an associate or

joint venture on an investment-by-investment basis, upon initial recognition

IAS 34 Interim Financial Reporting

The amendments clarify the requirements relating to information required by IAS 34 that

is presented elsewhere within the interim financial report but outside the interim financial

statements. The amendments require that such information be incorporated by way of

cross-reference from the interim financial statements to the other part of the interim

financial report that is available to users on the same terms and at the same time as the

interim financial statements.

The Entity has elected not to adopt these new standards and amendments to existing

standards in advance of their effective date. The Entity anticipates that the adoption of

these standards and amendments to existing standards will have no material impact on

the financial statements of the Entity in the period of initial application.



25

2.2 Interest income and expense

Interest income and expense for all interest-bearing financial instruments are recognised

within “Interest income” and “Interest expense” in the income statement using the effective

interest method.

The effective interest method is a method of calculating the amortised cost of a financial

asset or liability (or group of assets and liabilities) and of allocating the interest income or

interest expense over the relevant period. The effective interest rate is the rate that exactly

discounts the expected future cash payments or receipts through the expected life of the

financial instrument, or when appropriate, a shorter period, to the net carrying amount of

the instrument.

The application of the method has the effect of recognising income (and expense)

receivable (or payable) on the instrument evenly in proportion to the amount outstanding

over the period to maturity or repayment. In calculating the effective interest rate, the

Company estimates cash flows (using projections based on its experience of customers’

behaviour) considering all contractual terms of the financial instrument but excluding future

credit losses. Fees, including those for early redemption are included in the calculation to

the extent that they can be wholly measured and are considered to be an integral part of

the effective interest rate. Cash flows arising from the direct and incremental costs of

issuing financial instruments are also taken into account in the calculation. Where it is not

possible to otherwise estimate reliably the cash flows or the expected life of a financial

instrument, effective interest is calculated by reference to the payments or receipts

specified in the contract, and the full contractual term.

Once a financial asset or a group of similar finances assets has been written down as a

result of an impairment loss, interest income is thereafter recognised using the rate of

interest used to discount the future cash flows for the purpose of measuring the impairment

loss.

2.3 Fees and commissions

Unless included in the effective interest calculation, fees and commissions are recognised

on an accruals basis when the service has been provided. Fees and commissions not

integral to the effective interest arising from negotiating, or participating in the negotiation

of a transaction from a third party, such as the acquisition of loans, shares or other

securities or the purchase or sale of businesses, are recognised on completion of the

underlying transaction. Portfolio and other management advisory and service fees are

recognised based on the applicable service contracts.

Commitment fees, together with related direct costs, for loan facilities where draw down is

probable are deferred and recognised as an adjustment to the effective interest on the loan

once drawn. Other commitment fees are recognised over the term of the facilities.



26

2.4 Financial assets

Initial recognition

Financial assets within the scope of IAS 39 are classified as financial assets at fair value

through profit or loss, loans and receivables, held-to-maturity investments, available-for-

sale financial assets, or as derivatives designated as hedging instruments in an effective

hedge, as appropriate. The company determines the classification of its financial assets at

initial recognition.

Financial assets are recognized initially at fair value plus, in the case of investments not at

fair value through profit or loss, directly attributable transaction costs.

Purchases or sales of financial assets that require delivery of assets within the time frame

established by regulation or convention in the marketplace (regular way purchases) are

recognized on the trade date, i.e., the date that the company commits to purchase or sale

of the asset.

Fair value through profit and loss (FVTPL)

Financial assets are classified as at FVTPL when the financial asset is either held for trading

or it is designated as at FVTPL or it is designated as at FVTPL.

A financial asset is classified as held for trading if:

(a) it has been acquired principally for the purpose of selling it in the near term; or (b) on

initial recognition it is part of a portfolio of identified financial instruments that the Company

manages together and has a recent actual pattern of short term profit taking; or (c) it is a

derivative that is not designated an defective as a hedging instrument.

A financial asset may be designated at FVTPL upon initial recognition if:

(a) such designation eliminates or significantly reduces a measurement or recognition

inconsistency that would otherwise arise or (b) the financial assets forms part of a group of

financial assets and liabilities or both, which is managed and its performance is evaluated

on a fair value basis

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on

remeasurement recognized in profit or loss.

Loans, advances and other receivables

Loans, advances and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market, other than: (a) those classified as held for

trading and those that the Company on initial recognition designates as at fair value through

profit and loss; (b) those that the Company upon initial recognition designates as available-

for-sale; or (c) those for which the holder may not recover substantially all of its initial

investment, other than because of credit deterioration.

Loans, advances and receivables and held-to-maturity financial assets are carried at

amortised cost using the effective interest method. Available-for-sale financial assets are



27

carried at fair value. Gains and losses arising from changes in the fair value of available-

for-sale financial assets are recognised directly in equity until the financial asset is

derecognised or impaired, at which time the cumulative gain or loss previously recognised

in equity is recognised in the profit or loss account. However, interest calculated using the

effective interest method is recognised in the profit and loss account. Dividend on available-

for-sale equity instruments are recognised in the profit and loss account when the

Company’s right to receive payment is established.

Held-to maturity

Held-to-maturity assets are non-derivative financial assets with fixed or determinable

payments and fixed maturities that management has the positive intention and ability to

hold to maturity. Were the Company to sell more than an insignificant amount of held-to-

maturity assets, the entire category would have to be reclassified as available for sale.

Treasury bills with an original maturity of more than 182 days, treasury notes and other

government bonds are classified as held-to-maturity.

Regular way purchases and sales of financial assets held-to-maturity are recognised on

trade-date – the date on which the Company commits to purchase or sell the asset.

Available-for-sale

Available-for-sale assets are those intended to be held for an indefinite period of time, which

may be sold in response to needs for liquidity or changes in interest rates, exchange rates,

or equity prices. Investment securities and treasury bills are classified as available for sale.

AFS financial assets are measured at fair value with fair value gains or losses recognised in

other comprehensive income.

Impairment of financial assets

The company assesses at each reporting date whether there is any objective evidence that

a financial asset or a group of financial assets is impaired. A financial asset or group of

financial assets is deemed to be impaired if, and only if, there is objective evidence of

impairment as a result of one or more events that has occurred after the initial recognition

of the asset (an incurred “loss event”) and that loss event has an impact on the estimated

future cash flows of the financial asset or the group of financial assets that can be reliably

estimated. Evidence of impairment may include indications that the debtors or a group of

debtors is experiencing significant financial difficulty, default or delinquency in interest or

principal payments, the probability that they will enter bankruptcy or other financial

reorganization and where observable data indicate that there is a measurable decrease in

the estimated future cash flows, such as change in arrears or economic conditions that

correlate with defaults.



28

Derecognition of financial assets

A financial asset (or where applicable a part of a financial asset or part of a group of similar

financial assets) is derecognized when:

the rights to receive cash flows from the asset have expired; or

the company has transferred its rights to receive cash flows from the asset or has

assumed an obligation to pay the received cash flows in full without material delay to a

third party under a “pass-through” arrangement; and either (a) the company has

transferred substantially all risks and rewards of the asset, or (b) the company has

neither transferred nor retained substantially all the risks and rewards of the asset but

has transferred control of the asset.

When the company has transferred its rights to receive cash flows from an asset or has

assumed an obligation to pay the received cash flows in full without material delay to a

third party under the “pass-through” arrangement, and has neither transferred nor retained

substantially all the risks and rewards of the asset nor transferred control of the asset, a

new asset is recognized to the extent of the company’s continuing involvement in the asset.

Continuing involvement that takes the form of a guarantee over the transferred asset is

measured at the lower of the original carrying amount of the asset and the maximum

amount of consideration that the company could be required to repay.

2.5 Financial liabilities

Initial recognition

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair

value through profit and loss, loans and borrowings, or as derivatives designated as

hedging instruments in an effective hedge, as appropriate. The company determines the

classification of its financial liabilities at initial recognition.

Financial liabilities are recognised initially at fair value and in the case of loans and

borrowings, directly attributable to transaction costs.

The company’s financial liabilities include trade and other payables, bank overdraft and

loans and borrowings.

Subsequent measurement

The measurement of financial liabilities depends on their classifications as follows:

Financial liabilities at fair value through profit and loss

Financial liabilities at fair value through profit and loss includes financial liabilities held for

trading and financial liabilities designated upon initial recognition as at fair value through

profit and loss.



29

Financial liabilities are classified as held for trading if they are acquired for the purposes of

selling in the near term.

Gains and losses on liabilities held for trading are recognized in the income statement.

The company has not designated any financial liabilities as at fair value through profit or

loss.

Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured

at amortised cost using the effective interest rate method.

Gains and losses are recognized in the income statement when the liabilities are

derecognized as well as through the amortisation process.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or

cancelled or expires.

When an existing financial liability is replaced by another from the same lender on

substantially different terms, or the terms of an existing liability are substantially modified,

such an exchange or modification is treated as a derecognition of the original liability and

the recognition of a new liability, and the difference in the respective carrying amounts is

recognized in the income statement

2.6 Property, plant and equipment

The company recognises an item of property, plant and equipment as an asset when it is

probable that future economic benefits will flow to it and the cost can be reliable measured

by the company.

Property, plant and equipment are stated at cost less accumulated depreciation and any

impairment in value. Depreciation is provided on the depreciable amount of each asset on a

straight-line basis over the anticipated useful life of the asset. The depreciable amount

related to each asset is determined as the difference between the cost and the residual value

of the asset. The residual value is the estimated amount, net of disposal costs that the

company would currently obtain from the disposal of an asset in similar age and condition as

expected at the end of the useful life of the asset.

When significant parts of property, plant and equipment are required to be replaced in

intervals, the company recognises such parts as individual assets with specific useful lives

and depreciation respectively. The present value of the expected cost for the

decommissioning of the asset after its use is included in the cost of the respective asset if

the recognition criteria for a provision are met.



30

The current annual depreciation rates for each class of property, plant and equipment are as

follows:

Freehold land and buildings 2%

Motor vehicles 20%

Furniture, fixtures &

equipment 15%

Data processing equipment 20%

Costs associated with day-to-day servicing and maintenance of assets is expensed as

incurred. Subsequent expenditure is capitalized if it is probable that future economic benefits

associated with the item will flow to the company.

An item of property, plant and equipment is derecognized upon disposal or when no future

economic benefits are expected to arise from the continued use of the asset. Any gain or loss

arising on derecognition of the asset (calculated as the difference between the net disposal

proceeds and the carrying amount of the item) is included in the statement of comprehensive

income in the year the item is derecognized.

Residual values, useful lives and methods of depreciation for property and equipment are

reviewed, and adjusted if appropriate, at each financial year end.

Impairment of non-financial assets

The carrying values of property, plant and equipment are reviewed for indications of

impairment annually, or when events or changes in circumstances indicate the carrying value

may not be recoverable. If any such indication exists and where the carrying values exceed

the estimated recoverable amount, the assets or cash-generating units to which the asset

belongs are written down to their recoverable amount. The recoverable amount of property,

plant and equipment is the greater of net selling price and value in use. In assessing value

in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the

risks specific to the asset.

For assets, excluding goodwill, an assessment is made at each reporting date as to whether

there is any indication that previously recognised impairment losses may no longer exist or

may have decreased. A previously recognised impairment loss is reversed only if there has

been a change in the assumptions used to determine the assets recoverable amount since

the last impairment loss was recognised. The reversal is limited so that the carrying amount

of the asset does not exceed its recoverable amount, nor exceed the carrying amount that

would have been determined, net of depreciation, had no impairment loss been recognised

for the asset in prior years. Such reversal is recognised in the income statement unless the

asset is carried at revalue amount, in which case the reversal is treated as a revaluation

increase.



31

2.7 Intangible assets

Acquired computer software licences are capitalised on the basis of the costs incurred to

acquire and bring to use the specific software. These costs are amortised over their

estimated useful lives.

Costs associated with developing or maintaining computer software programmes are

recognised as an expense as incurred. Costs that are directly associated with the production

of identifiable and unique software products controlled by the Company, and that will

probably generate economic benefits exceeding costs beyond one year, are recognised as

intangible assets. Direct costs include the software development employee costs and an

appropriate portion of relevant overheads.

Computer software development costs recognised as assets are amortised over their

estimated useful lives.

2.8 Provision

General Provisions are recognised when the company has a present obligation (legal or

constructive) as a result of a past event, and 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. Where the company expects some

or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset,

but only when the reimbursement is virtually certain. The expense relating to any provision

is presented in the income statement net of any reimbursement. If the effect of the time

value of money is material, provisions are discounted using a current pre-tax rate that

reflects, where appropriate, the risks specific to the liability. Where discounting is used,

the increase in the provision due to the passage of time is recognised as a finance cost.

2.9 Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise cash at

banks and in hand, short-term fixed deposits with an original maturity of three months or

less, bank overdrafts which are repayable on demand. All of the component of the cash

and cash equivalent form an integral part of the company's cash management. Cash and

cash equivalents are measured subsequently at amortised cost.

2.10 Employee benefits

The Company contributes to the defined contribution scheme (the Social Security Fund) on

behalf of employees.

Social security contributions

This is a national pension scheme under which the company pays 13.5% of qualifying

employees’ basic monthly salaries to a state managed Social Security Fund for the benefit of

the employees. All employer contributions are charged to the statement of profit or loss and

other comprehensive income as incurred and included under staff costs.



32

Provident fund (PF)

Employees contribute 10% of their basic salary in to provident fund. This is a defined

contribution scheme.

2.11 Taxation

Income tax

Income tax is recognized in the statement of profit or loss except to the extent that it

relates to items recognized directly in shareholders’ equity or other comprehensive income,

in which case it is recognized in shareholders’ equity or other comprehensive income.

Current tax assets and liabilities for the current and prior periods are measured at the

amount expected to be recovered from or paid to the taxation authorities. The tax rates

and tax laws used to compute the amount are those that are enacted or substantively

enacted by the reporting date. Current tax assets and liabilities are offset when the

Company intends to settle on net basis and the legal right to set-off exists.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the

reporting date between the tax bases of assets and liabilities and their carrying amounts

for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

when the deferred income tax liability arises from initial recognition of goodwill or of an

asset or liability in a transaction that is not a business combination and, at the time of

the transaction, affects neither the accounting profit nor taxable profit or loss, and

in respect of taxable temporary differences associated with investments in subsidiaries,

associates and interests in joint ventures, when the timing of the reversal of the

temporary differences can be controlled and it is probable that the temporary

differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carry

forward of unused tax credits and unused tax losses, to the extent that it is probable that

taxable profit will be available against which the deductible temporary differences, and the

carry forward of unused tax credits and unused tax losses can be utilized except:

when the deferred income tax assets relating to the deductible temporary differences

arises from the initial recognition of an asset or liability in a transaction that is not a

business combination and, at the time of the transaction, affects neither the accounting

profit nor taxable profit or loss, and

in respect of deductible temporary differences associated with investments in

subsidiaries, associates and interests in joint ventures, deferred income tax assets are

recognized only to the extent that is probable that the temporary differences will



33

reverse in the foreseeable future and taxable profit will be available against which the

temporary differences can be utilized.

The carrying amount of deferred income 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 to allow all or part of the deferred income tax assets to be utilized.

Unrecognised deferred income tax assets are reassessed at each reporting date and

are recognized to the extent that it has become probable that future taxable profit will

allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply

to the year when the asset is realized or the liability is settled, based on tax rates (and tax

laws) that have been enacted or substantively enacted at the reporting date.

Deferred income tax relating to items recognized directly in equity is recognized in equity

and not in the statement of profit or loss and other comprehensive income.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally

enforceable right exists to set off current tax assets against current income tax liabilities

and the deferred income taxes relate to the same taxable entity and the same taxation

authority.

2.12 Foreign currency translation

The company’s financial statements are presented in Ghana cedis (GHS) which is also the

company’s functional currency. Items included in the financial statements of the company

are measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rate

prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the

functional currency rate of exchange ruling at the reporting date. All differences are taken

to the income statement

Non-monetary items that are measured in terms of historical cost in a foreign currency are

translated using the exchange rate as at the date of the initial transaction and are not

subsequently restated. Non-monetary items measured at fair value in a foreign currency

are translated using the exchange rates at the date when the fair value was determined.



34

3 Interest income

2016 2015

GH¢ GH¢

Loans and advances to customers (note 3.1) 3,543,441 2,722,412

Investment securities 5,623,667 4,612,590

9,167,108 7,335,002

3.1 Interest income on loans and advances

2016 2015

GH¢ GH¢

On personal finance loans 3,518,114 2,714,130

On staff loans 25,327 8,282

3,543,441 2,722,412

4 Interest expense

2016 2015

GH¢ GH¢

On deposits 2,757,429 1,936,469

On current accounts - 9,643

On savings accounts 112,756 66,800

2,870,185 2,012,911

5 Fees and commission income

2016 2015

GH¢ GH¢

Commission on cheques & passbooks 6,439 3,588

Commission on salaries and cheques 372,103 331,010

Commission - closed accounts 661 183

Commission - insurance 52,127 96,977

Loan processing fees 154,960 36,599

Transfer charges 79 142

Account maintenance fees 11,323 8,322

Service fees 23,823 76,340

Commission on western union transfers 11,577 5,495

Commission on mobile money 13,371 -

646,463 558,656



35

6 Other Operating Income

2016 2015

GH¢ GH¢

Sundries 7,721 36,002

Exchange gain 2,086 13,494

Dividend received - 690

Profit on disposal of fixed assets 3,674 9,467

Provision no longer required 38,288 147,189

51,769 206,842

7 Operating and other expenses

2016 2015

GH¢ GH¢

Personnel expenses (note 7.1) 3,549,591 2,687,173

Printing, postage & stationery 76,965 56,619

Business license 44,258 25,692

Entertainment & protocol 48,563 58,695

Legal 581,682 88,206

Travelling 187,056 186,393

Bank charges 47,029 50,014

Subscription & dues 11,603 19,555

Telephone 19,502 22,811

Motor vehicle running 78,808 40,719

Audit fees 51,565 47,000

Computer consumables 33,784 18,227

Marketing - 13,060

Cleaning 12,591 10,427

Sundry office & others 33,003 47,114

Security 158,393 115,532

Agents commission 6,085 15,530

Board and annual general meeting expenses 23,535 29,062

Valuation expenses 9,476 2,850

Insurance 40,397 17,415

Depreciation and amortisation 482,225 281,922

Utility 258,068 125,201

Repairs & maintenance 36,161 49,656

Rent, light, water & insurance 80,087 47,344

Generator running 35,779 73,519

Debt write off 227,034 381,890

6,133,240 4,511,628



36

7.1 Personnel expenses

2016 2015

GH¢ GH¢

Salaries 2,940,362 2,234,463

Annual bonus 105,512 95,864

Staff training 23,452 9,390

Medicals 121,988 78,010

Social Security Fund 162,335 119,502

Provident fund 62,723 48,877

Directors remuneration 82,188 61,641

Other staff cost 51,031 39,426

3,549,591 2,687,173

The average number of persons employed by the company during the year was 109

(2015: 95)

8 Finance cost

2016 2015

GH¢ GH¢

Interest on borrowings secured 629,260 8,157

9 Impairment losses on loans and advances

GH¢ GH¢

Balance at 1 Jan 7,034,977 6,790,151

Impairment charge 248,288 244,826

Balance at 31 Dec 7,283,265 7,034,977

2016 2015

GH¢ GH¢

Individually assessed 7,272,243 7,001,116

Collectively assessed 11,022 33,861

Balance at 31 Dec 7,283,265 7,034,977



37

10 Taxation

a. Income tax expense

2016 2015

GH¢ GH¢

Current Income Tax - 239,785

Deferred Tax 279,182 388,632

279,182 628,417

b. Deferred Tax

Deferred tax is calculated, in full, on all temporary differences under the liability

method using a principal tax rate of 25% (2015: 25%). The movement on the deferred

income tax account is as follows:

2016 2015

GH¢ GH¢

At start of year 391,577 2,945

Income statement (credit)/charge 279,182 388,632

At end of year 670,759 391,577

c. Corporate tax

Balance at

1 January

Charge for

the year Payments

Balance at

31 December

Corporate tax GH¢ GH¢ GH¢ GH¢

2012 30,371 - - 30,371

2013 - - - -

2014 - - - -

2015 159,729 - - 159,729

2016 - - (104,073) (104,073)

190,100 - (104,073) 86,027

d. Reconciliation of effective tax

2016 2015

GH¢ GH¢

Profit before tax (15,633) 1,322,979

Tax computed at applicable tax rate of 25% (3,908) 330,745

Tax effect of non-deductible expense 283,090 297,672

Total tax expense 279,182 628,417

Effective Tax rate Nil 48%



38

11 Cash and bank balances

For the purposes of the cash flow statement, cash and cash equivalents comprise of

cash on hand and balances with banks. Cash and cash equivalents exclude the

mandatory reserve requirement held with Bank of Ghana.

2016 2015

GH¢ GH¢

Cash on hand 81,594 88,588

Balances with banks 4,402,161 1,966,264

4,483,755 2,054,852

12 Investments securities

2016 2015

GH¢ GH¢

Treasury bills 16,941 16,941

Fixed deposits (note 13a) 23,215,588 15,480,885

23,232,529 15,497,826

12a. Fixed deposits

Gold Coast Securities Ltd 4,635,701 3,974,838

FirstBanC Financial Services Ltd. 6,667,397 -

Unisecurities Ghana Limited 11,912,490 10,951,436

Beige Capital Savings Loans - 554,611

23,215,588 15,480,885

Movement in fixed deposits

Balance as at 1 January 15,480,885 16,642,182

Additions 6,029,740 550,000

Disinvestments (658,376) (3,196,055)

Accrued interest 2,363,339 1,484,758

Balance as at 31 December 23,215,588 15,480,885

13 Investments in equity

2016 2015

GH¢ GH¢

Balance at 1 January 11,250 16,875

Changes in fair value 625 (5,625)

Balance at 31 December 11,875 11,250



39

14 Loans and advances to customers

2016 2015

GH¢ GH¢

Gross loans and advances 17,836,395 16,545,183

Less:

Deferred interest (2,657,195) (2,423,725)

Allowances for impairment (7,283,265) (7,034,977)

Reversal off impairment allowance 38,288 222,406

8,015,520 7,308,887

Analysis by type of facility

Mortgage loan 6,217,865 7,124,508

Personal Loans 11,145,302 3,949,650

Staff loans 473,229 122,205


Analysis by business segments

Construction 7,081,210 6,478,559

Commerce and finance 2,167,643 833,701

Services 3,260,061 3,002,543

Miscellaneous 5,327,482 881,560


Analysis by type of customer

Individuals 14,604,940 9,130,981

Private enterprise 2,758,226 1,916,606

Staff 473,229 148,776


Analysis of maturity

Due within 1 month 560,342 402,445

Due after 1 month but within 3 months 671,795 445,959

Due after 3 months but within 12 months 3,702,289 1,268,151

Due after 12 months but within 5 years 3,786,325 7,707,357

Overdue 9,115,643 1,372,451




40

2016 2015

Loan loss provision

Gross non-performing loans ratio 46% 43%

50 largest exposures to total exposures 2,769,785 2,634,744

15 Other assets

2016 2015

GH¢ GH¢

Sundry receivables 79,897 5,607

Inventory 130,551 42,870

Prepayments 194,623 231,425

405,071 279,902



41

16 Property, Plant and Equipment

Land and

buildings

Motor

vehicles

Furniture,

fixtures &

equipment

Computer

equipment

Constructi

on in

progress

Leasehold

improvem

ent

Western

union

project

Total

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Cost

Balance at 1 Jan 2016 2,208,306 874,900 797,113 641,087 1,170,295 22,526 118,347 5,832,574

Additions in the year - 3,260 122,429 117,682 339,787 319,926 - 903,084

Transfer - - - - - - - -

2,208,306 878,160 919,542 758,769 1,510,082 342,452 118,347 6,735,658

Accumulated

depreciation

Balance at 1 Jan 2016 147,708 136,945 308,371 268,592 - 3,312 77,580 942,508

Charge for the year 42,052 162,721 99,510 103,694 - 58,905 15,343 482,225

189,760 299,666 407,881 372,287 - 62,217 92,923 1,424,733

Net book value at

Dec 2016 2,018,546 578,494 511,661 386,483 1,510,082 280,235 25,424 5,310,925



42

Land and

buildings

Motor

vehicles

Furniture,

fixtures &

equipment

Computer

equipment

Construc

tion in

progress

Leasehold

improveme

nt

Western

union

project

Total

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Cost

Balance at 1 Jan 2015 2,367,961 166,334 719,754 456,789 28,158 - 118,347 3,857,343

Additions in the year 24,345 771,559 77,359 184,299 958,137 22,526 - 2,038,225

Disposals during the

year - (62,993) - - - - -

(62,993)

Transfer (184,000) - - - 184,000 - - -

2,208,306 874,900 797,113 641,088 1,170,295 22,526 118,347 5,832,575

Accumulated

depreciation

Balance at 1 Jan 2015 115,577 120,227 230,299 189,421 - - 67,388 722,912

Charge for the year 41,996 69,178 78,073 79,171 - 3,312 10192 281,922

Disposals during the

year - (52,460) - - - - - (52,460)

Adjustment (9,864) - - - - - - (9,864)

147,709 136,945 308,372 268,592 - 3,312 77,580 942,510

Net book value at

Dec 2015 2,060,597 737,955 488,741 372,496 1,170,295 19,214 40,767 4,890,065



43

17 Customer deposits

Analysis by type of deposits

2016 2015

GH¢ GH¢

Current accounts 7,668,096 7,011,595

Savings account 701,026 398,515

Special fixed deposits 12,496,969 9,650,572

Daakye mpontuo fund 416,901 329,862

Savings plus 14,019 10,215

Other fixed deposits 332,440 292,505

21,629,451 17,693,264

Analysis by type of customer

2016 2015

GH¢ GH¢

Individuals and other private enterprise 21,629,451 17,693,264

20 largest depositors to total deposit ratio 39% 37%

18 Other liabilities

2016 2015

GH¢ GH¢

Sundry payables 1,048,638 724,938

Accruals 569,579 -

1,618,217 724,938

19 Borrowings

2016 2015

GH¢ GH¢

Term loan 6,629,260 -

6,629,260 -

Movement in borrowings

Balance at 1 January - 91,910

Additions 6,000,000 -

Interest expense 629,260 -

Repayments - (91,910)

Balance at 31 December 6,629,260 -

Terms and conditions of borrowing

The borrowing represents placements by National Investment Bank Limited at an interest rate of 33% for a six months period. It expires on 28 February 2017.



44

20 Deferred income

2016 2015

GH¢ GH¢

Balance at 1 Jan 70,573 -

Movement (4,048) 70,573

Balance at 31 Dec 66,525 70,573

21 Stated capital

a. The number of authorised shares is 10,000,000,000 shares of no par value.

b. Sated capital is as follows:

No. of

shares

2016

GH¢

No. of

shares

2015

GH¢

Consideration other than cash 30,147,555 3,014,569 30,147,555 3,014,569

Issue for cash 60,058,272 15,014,568 60,058,272 15,014,568

90,205,827 18,029,137 90,205,827 18,029,137

There is no unpaid liability on any share and there are no calls or instalments unpaid.

22 Preference shares

The number of authorised shares is 187 shares of no par value

No. of

shares

Amount

2016

No. of

shares

Amount

2015

GH¢ GH¢

Issue for cash 187 187 187 187 The preference shares are non-cumulative shares issued at an interest rate of 3%.

23 Revaluation reserve

2016 2015

GH¢ GH¢

Balance as at 1 January 713,915 713,915

Revaluation gain - -

Balance as at 31 December 713,915 713,915

The revaluation surplus is as a result of valuing the company’s landed properties above its current carrying amount by an independent valuer.



45

24 Available for sale reserve

2016 2015

GH¢ GH¢


Fair value movement 625 (5,625)


25 Statutory reserve

2016 2015

GH¢ GH¢


Transfer from income surplus account - 347,281


Statutory reserve fund represents the cumulative amount set aside from annual net

profit after tax as required by Section 29 of the Banking Act, 2004 (Act 673). The

proportion of net profits transferred to this reserve ranges from 12.5% to 50% of

net profit after tax, depending on the ratio of existing statutory reserve fund to paid-

up capital. There was no movement in the current year as a result of the current

year loss.

26 Regulatory credit risk reserve

2016 2015

GH¢ GH¢

At 1 January 70,739 438,694

Transfer from income surplus account 217,972 (367,955)

At 31 December 288,711 70,739

Regulatory credit risk reserve represents the excess of loan impairment provision

determined under the Bank of Ghana guidelines over the provisions for loan impairment

per IFRS.

27 Income surplus

The income surplus balance represents the amount available for dividend distribution

to the members of the Company. Movements in the income surplus account are shown

in the statement of changes in equity on page 10.



46

28 Profit for the year

The profit for the year has been arrived at after deducting:

29 Financial instruments

a. Financial Assets

b. Held-to-maturity

2015 2015

GH¢ GH¢

Fixed deposits 23,215,588 15,480,885

c. Available for sale

2016 2015

GH¢ GH¢

Investments in equity 11,875 11,250

d. Loans and receivables

2016 2015

GH¢ GH¢

Loans and advance to customers 17,836,395 16,545,184

Sundry receivables 79,897 5,607

17,916,292 16,550,791

2016 2015

GH¢ GH¢

Directors’ emoluments 82,188 61,641

Audit fees 51,565 47,000

Depreciation 482,224 281,922

Interest on borrowings 629,260 8,157

2016 2015

GH¢ GH¢

Held-to-maturity (HTM) 23,215,588 15,480,885

Available for sale 11,875 11,250

Loans and receivables 17,836,395 16,550,791

41,063,858 32,042,926



47

29 Financial instruments - continued

e. Fair value of financial assets not carried at fair value

The following describes the methodologies and assumptions used to determine fair

values for those financial instruments which are not already recorded at fair value in

the financial statements (i.e. held to maturity and loans and receivables).

Assets for which fair value approximates carrying values

For financial assets that have a short-term maturity (less than three months), demand

deposits and savings accounts without a specific maturity, the carrying amounts

approximate to their fair value.

The fair values of fixed rate financial assets carried at amortised cost approximate to

their fair value.

30 Management of financial risk

The Company’s activities expose it to a variety of financial risks and those activities

involve the analysis, evaluation, acceptance and management of some degree of risk

or combination of risks. Taking risk is core to the Company’s business, and the

operational risks are an inevitable consequence of being in business. The Company’s

aim is therefore to achieve an appropriate balance between risk and return and

minimise potential adverse effects on its financial performance.

Risk management is carried out by the Board sub-committee, Risk Committee of the

Board, Asset and Liability Committee (ALCO) under policies approved by the Board of

Directors. Risk management department identifies, evaluates and hedges financial

risks in close cooperation with the operating units. The Board provides written

principles for overall risk management, as well as written policies covering specific

areas such as interest rate risk, credit risk and use of non-derivative financial

instruments. The most important types of risk are credit risk, liquidity risk, market

risk and other operational risk. Market risk includes currency risk, interest rate and

other price risk.

Credit risk

The Company takes on exposure to credit risk, which is the risk that a counterparty

will cause a financial loss to the Company by failing to pay amounts in full when due.

Credit risk is one of the most important risks for the Company’s business, management

therefore carefully manages the exposure to credit risk. Credit exposures arise

principally in lending and investment activities. Credit risk management and control is

centralised in the credit committee, whose membership comprises executive

management, which reports regularly to the Board of Directors.

The Company structures the levels of credit risk it undertakes by placing limits on the

amount of risk accepted in relation to one borrower, or groups of borrowers, and to

industry segments. Such risks are monitored on a revolving basis and subject to annual



48

or more frequent review. Limits on the level of credit risk by product and industry

sector are approved quarterly by the Board of Directors.

Exposure to credit risk is managed through regular analysis of the ability of borrowers

and potential borrowers to meet interest and capital repayment obligations and by

changing lending limits where appropriate. Exposure to credit risk is also managed in

part by obtaining collateral, corporate and personal guarantees.

Credit risk monitoring and control

Credit risk exposures of the Company are monitored closely. The Credit Committee

ensures regularity of credit approvals and line utilizations authorizes disbursements of

credit facilities when approval conditions are met, and perform periodical reviews of

collaterals at the Company. The Credit Committee is also responsible for the

preparation of internal risk management reports for consideration of the Board of

Directors. The Recoveries Department monitors past due exposures with a view to

maximizing loan recoveries.

2016 2015

Mortgage

loans

Business

and

personal

loans

Mortgage

loans

Business and

personal

loans

GH¢ GH¢ GH¢ GH¢

Neither past due nor

impaired - 9,137,035 - 9,369,627

Past due but not impaired - 708,290 - 128,659

Impaired 6,217,865 949,440 6,256,153 790,745

Gross loans and advances 6,217,865 11,138,052 6,256,153 10,289,031

Loans and advances neither past due nor impaired

The credit quality of the portfolio of loans and advances that were neither past due nor

impaired can be assessed by reference to the internal rating system adopted by the

Company. These loans are all classified as current.

Loans and advances past due but not impaired

Loans and advances less than 90 days past due are not considered impaired, unless

other information is available to indicate the contrary. Gross amount of loans and

advances by class to customers that were past due but not impaired were as follows:

2016 2015

GH¢ GH¢

Past due up to 30 days 236,097 41,702

Past due 30-60 days 362,042 63,159

Past due 60-90 days 110,151 23,798



49

Loans and advances individually impaired

The breakdown of the gross amount of individually impaired loans and advances by

class, along with the fair value of related collateral held by the Company as security,

are as follows:

2016 2015

GH¢ GH¢

Individually assessed impaired loans and advances 7,283,265 7,046,898

Fair value of collateral 7,006,663 6,327,598

Repossessed collateral

There were no repossessed assets as at 31 December 2016.

Maximum exposure to credit risk before collateral held

The Company's maximum exposure to credit risk at 31 December 2016 and 2015 is

the same as the balances of the various financial assets in the statement of financial

position listed below.

2016 2015

GH¢ GH¢

Financial investments 23,232,529 15,497,826

Loans and Advances to customers 7,934,223 7,308,887

Cash and bank balances 4,483,755 2,054,852

35,650,507 24,861,565

The above table represents a worst case scenario of credit risk exposure to the

Company at 31 December 2016 and 31 December 2015, without taking account of any

collateral held or other credit enhancements attached. For assets reported in the

statement of financial position, the exposures set out above are based on carrying

amounts.

Loans and advances to customers are secured by collateral in the form of charges over

land and buildings and/or plant and machinery, corporate and personal guarantees or

cash.

Liquidity risk

Liquidity risk is the risk that the Company is unable to meet its payment obligations

associated with its financial liabilities as they fall due and to replace funds when they

are withdrawn. The consequence may be the failure to meet obligations to repay

customers and fulfill commitments to lend.



50

The Company is exposed to daily calls on its available cash resources from maturing

deposits and current accounts. The Company does not maintain cash resources to meet

all of these needs as experience shows that a minimum level of reinvestment of

maturing funds can be predicted with a high level of certainty. The Bank of Ghana

requires that the Company maintain a cash mandatory reserve ratio. In addition, the

Board sets limits on the minimum proportion of maturing funds available to meet such

calls and on the minimum level of other borrowing facilities that should be in place to

cover withdrawals at unexpected levels of demand. The Treasury Department monitors

liquidity ratios on a daily basis.

Liquidity management within the Company has several strands. The first is day-to-day

funding, managed by monitoring future cash flows to ensure that requirements can be

met. This includes replenishment of funds as they mature or as they are borrowed by

customers. The company maintains a portfolio of highly marketable assets that can

easily be liquidated as protection against any unforeseen interruption to cash flow.

Finally, the ability to monitor, manage and control intra-day liquidity in real time is

recognised by the Company as a mission critical process, any failure to meet specific

intra-day commitments may have an immediate impact on the Company’s reputation.

Monitoring and reporting take the form of cash flow measurement and projections for

the next day, week and month as these are key periods for liquidity management. In

addition to cash flow management, Treasury also monitors unmatched medium-term

assets and the level and type of undrawn lending commitments and the usage of

overdraft facilities.

Sources of liquidity are regularly reviewed to maintain a wide diversification by

provider, product and term.

An important source of structural liquidity is provided by our core private deposits.

Although deposits are repayable on demand, the company’s broad base of customers

– numerically and by depositor type – helps to protect against unexpected fluctuations.

Such accounts form a stable funding base for the company’s operations and liquidity

needs.

To avoid reliance on a particular group of customers or market sectors, the distribution

of sources and the maturity profile of deposits are also carefully managed. Important

factors in assuring liquidity are competitive rates and the maintenance of depositors’

confidence. Such confidence is based on a number of factors including the company’s

reputation, the strength of earnings and the company’s financial position.

The table below presents the cash flows payable by the Company under financial

liabilities by remaining contractual maturities at the balance sheet date.



51

As at 31 December 2016

Up to one

months

Over one

month but

not more

than three

month

Over three

months but

not more

than one

year

Over one

year but not

more than

five years Total

GH¢ GH¢ GH¢ GH¢ GH¢

Liabilities

Customer deposits 3,947,295 2,296,966 15,053,641 597,099 21,895,000

Borrowings - 6,629,260 6,629,260

Other liabilities 37,223 55,632 141,300

249,539 483,694

Total liabilities 3,984,518 8,981,858 15,194,941 846,638 29,007,955

Assets

Cash and bank

balance

4,556,865 - - - 4,556,865

Financial

Investments 4,004,578 - 16,864,612 - 20,869,190

Loans and advances

to customers 1,735,538 3,470,442 2,355,674 10,274,741 17,836,395

Others assets

(excluding

prepayment) - 210,448 - - 210,448

Total assets 10,296,981 3,875,395 19,220,286 10,274,741 43,667,403

Cumulative

liquidity gap 6,312,463 (5,300,968) 4,025,345 9,428,103 14,658,141

As at 31 December

2015

Total liabilities 3,227,541 3,564,132 3,952,929 7,630,644 18,375,246

Total assets 6,814,901 926,674 14,522,840 5,857,196 28,121,611

Cumulative

liquidity gap 3,587,360 (2,637,458) 10,569,911 (1,773,448) 9,746,365

The balances in the above table will not agree directly to the balances in the statement

of financial position as the table incorporates all cash flows (principal and interest), on

an undiscounted basis.



52

Market risk

Market risk is the risk that changes in market prices, which include currency exchange

rates, interest rates and equity prices, will affect the fair value or future cash flows of

a financial instrument. Market risk arises from open positions in interest rates and

foreign currencies, both of which are exposed to general and specific market

movements and changes in the level of volatility. The objective of market risk

management is to manage and control market risk exposures within acceptable limits,

while optimising the return on risk. Overall responsibility for managing market risk

rests with the Assets and Liabilities Committee (ALCO). The Risk Management

Department is responsible for the development of detailed risk management policies

(subject to review and approval by ALCO) and for the day to day implementation of

those policies.

Interest rate risk

The Company takes on exposure to the effects of fluctuations in the prevailing levels

of market interest rates on both its fair value and cash flow risks. Interest margins

may increase as a result of such changes but may reduce or create losses in the event

that unexpected movements arise. Interest rate risk is managed principally through

monitoring interest rate gaps and by having pre-approved limits for repricing bands.

ALCO is the monitoring body for compliance with these limits and is assisted by the

Risk Department in its day-to-day monitoring activities.

Interest rate sensitivity analysis

The sensitivity of the income statement is the effect of assumed changes in interest

rates on the net income for one year, based on the financial assets and liabilities held

at 31 December 2016 and 2015.

Impact on net interest income

The effect on interest of a 250 basis points change would be as follows:

+250 basis

points 2016

-250 basis

points 2016

+250 basis

points 2015

-250 basis

points 2015

GH¢ GH¢ GH¢ GH¢

Effect on net interest

income 157,423 (157,423) 133,052 (133,052)



53

Fair values of financial assets and liabilities

(i) Financial instruments not measured at fair value

The table below summaries the carrying amounts and fair values of those financial assets

and liabilities not presented on the statement of financial position at their fair values:

Carrying

amount

Carrying

amount

Fair value Fair value

2016 2015 2016 2015

GH¢ GH¢ GH¢ GH¢

Financial assets

Cash and bank balance 4,483,755 2,054,852 4,483,755 2,054,852

Investments securities (classified as

held to maturity) 23,232,529 15,497,826 23,232,529 15,497,826

Loans and advances to customers 7,934,223 7,308,887 8,015,520 7,308,887

Other assets (excluding

prepayments)

210,448 48,477 8,681 48,477

35,860,955 24,910,042 33,030,908 24,910,042

GH¢ GH¢ GH¢ GH¢

Financial liabilities

Customer deposits 21,629,451 17,693,264 21,629,451 17,693,264

Other liabilities 1,618,217 681,982 1,618,217 681,982

Borrowings

6,629,260 -

6,629,260 -

29,876,928 18,418,202 29,876,928 18,375,246

(ii) Loans and advances to other financial institutions

Loans and advances to other financial institutions include inter-bank placements and

items in the course of collection. The carrying amount of floating rate placements and

overnight deposits is a reasonable approximation of fair value.

The estimated fair value of fixed interest bearing deposits is based on discounted cash

flows using prevailing money-market interest rates for debts with similar credit risk and

remaining maturity.

(iii) Loans and advances to customers

Loans and advances are net of charges for impairment. The estimated fair value of loans

and advances represents the discounted amount of estimated future cash flows expected

to be received. Expected cash flows are discounted at current market rates to determine

fair value. The carrying amount approximates their fair value.



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(iv) Deposits from banks and due to customers

The estimated fair value of deposits with no stated maturity, which includes non-interest

bearing deposits, is the amount repayable on demand. The estimated fair value of fixed

interest-bearing deposits not quoted in an active market is based on discounted cash

flows using interest rates for new debts with similar remaining maturity. The carrying

amount of approximates their fair value.

(v) Managed funds and other borrowed funds

The aggregate fair values are calculated based on a discounted cash flow model is used

based on a current yield curve appropriate for the remaining term to maturity.

(vi) Off-balance sheet financial instruments

The estimated fair values of the off-balance sheet financial instruments are based on

markets prices for similar facilities. When this information is not available, fair value is

estimated using discounted cash flow analysis.

Fair value hierarchy

IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those

valuation techniques are observable or unobservable. Observable inputs reflect market

data obtained from independent sources; unobservable inputs reflect the Company’s

market assumptions. These two types of inputs have created the following fair value

hierarchy:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

This level includes listed equity securities and debt instruments on exchanges (for

example, The Ghana Stock Exchange).

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from

prices). This level includes the majority of Bank of Ghana’s securities and other derivative

contracts.

• Level 3 – inputs for the asset or liability that are not based on observable market data

(unobservable inputs). This level includes equity investments and debt instruments with

significant unobservable components. As at 31 December 2016, the Company did not hold

any level 3 financial assets and/or liabilities.

This hierarchy requires the use of observable market data when available. The Company

considers relevant observable market prices in its valuation where possible. Financial

instruments measured at fair value at 31 December 2016 were classified as follows:



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31 Related party transactions

This relates to intercompany dealings and transactions with key management

personnel.

In the normal course of business, investment accounts were operated and other

transactions carried out with related parties. The balances outstanding as at year-

end were as follows:

2016 2015

GH¢ GH¢

Amounts due to related party 6,629,260 -

Amount due from related party - -

a. Transactions with related parties

2016

GH¢

2015

GH¢

National Investment Bank Limited Repayment of loan - 91,910

National Investment Bank Limited Borrowings 6,626,260 -

b. Compensation of key management personnel

Most of the key management personnel of the company are paid from the parent

company- National Investment Bank.

c. Directors’ remuneration

The director’s remuneration for the year including directors’ fees and other

remuneration amounted to GH¢ 82,188 (2015: GH¢ 61,641)

Terms and conditions of related party transactions

The transactions with related parties are made on terms equivalent to those that

prevail in arm’s length transactions. Outstanding balances at the year-end are

unsecured and settlement occurs in cash. There have been no guarantees provided or

received for any related party receivables or payables. For the year ended 31

December 2016, the company has not recorded any impairment of receivables relating

to amounts owed by related parties.



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32 Contingencies and commitments

Legal proceedings and regulations

The Company may be party to certain legal proceedings arising in the ordinary course

of business. In the opinion of management, there are no current legal proceedings or

other claims outstanding which could have a material adverse effect on the results of

operations or financial position of the Company

Contingent liabilities

There were no contingent liabilities as at reporting date.

Commitments

There were no capital commitments as at reporting date.

33 Capital management

The company’s total regulatory capital is divided into two tiers:

Tier 1 capital (core capital): stated capital, share premium, income surplus, statutory

reserve and minority interests after deductions for goodwill and intangible assets, and

other regulatory adjustments relating to items that are included in equity but are

treated differently for capital adequacy purposes.

Tier 2 capital (supplementary capital): 25% (subject to prior approval) of revaluation

reserves and other reserves, subordinated debt not exceeding 50% of Tier 1 capital

and hybrid capital instruments. Qualifying Tier 2 capital is limited to 100% of Tier 1

capital.

There have been no material changes in the company’s management of capital during

the period.

The Company’s objectives when managing capital, which is a broader concept than

the ‘equity’ on the balance sheets, are:

to comply with the capital requirements set by Bank of Ghana;

to safeguard the Company’s ability to continue as a going concern, so that it can

continue to provide returns for shareholders and benefits for other stakeholders;

to maintain a strong capital base to support the development of its business.

Capital adequacy and use of regulatory capital are monitored regularly by

management, employing techniques based on the guidelines developed by the Basel

Committee, as implemented by the Bank of Ghana for supervisory purposes. The

required information is filed with Bank of Ghana on a monthly basis.

Bank of Ghana requires each non-bank financial institution to: (a) hold the minimum

level of regulatory capital of GH¢7 million; (b) maintain a ratio of total regulatory

capital to the risk-weighted assets plus risk-weighted off-balance sheet assets (the

‘Basel ratio’) at or above the required minimum of 10%.



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The table below summarises the composition of regulatory capital and the ratios at 31

December:

Tier 1 Capital

2016 2015

GH¢ GH¢

Share capital 18,029,323 18,029,323

Disclosed reserve (7,398,566) (6,330,707)

Tier 1 Capital 10,630,758 11,698,616

Less:

Intangibles 11,875 11,250

Net Tier 1 Capital 10,618,883 11,687,366

Total assets (less Contra items)

Less:

Cash on hand 81,594 30,592,392

Claims on Bank of Ghana (Bills and bonds) 755,741 88,588

Invests in the capital of other banks and

financial institutions

11,875 150,885

80% of claims on discount houses 16,695,352 11,210,454

80% of claims on other banks (cedis/forex) 2,917,136 1,447,401

50% of residential mortgages loans 3,108,932 3,128,076

Adjusted total assets 17,559,140

Add:

100% of 3 years average annual gross income 7,219,249 5,119,033

Adjusted Asset Base

Adjusted capital base as percentage of adjusted

asset base

45.74% 59.40%

Capital Surplus/ Deficit 8,854,958 9,719,889

34 Event after the reporting period

No significant event occurred after the end of the reporting date which is likely to

affect these financial statements.

Documents

First Ghana Savings and Loans Limited Financial Statements ...first-ghana.com/.../plugins/mesh/documents/FGSL_Final_Accounts_2… · First Ghana Savings and Loans Limited as at 31