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Illustrative Financial Statements
February 2004February 2004
Illustrative Financial Statements
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Preface
These Illustrative Financial Statements were developed by KPMG Romania toprovide a guide for those preparing or reading Romanian Financial Statements
in accordance with Ministry of Public Finance Order no. 94/2001. They pro-
vide accessible and concise guidance on the format of a complete set of finan-
cial statements in accordance with MOPF 94/2001 as at 31 December 2003.
We would be pleased to assist you further with the analysis and interpretation
of the financial statements.
Contact:
KPMG RomaniaCalea Serban Voda 133,Sector 4, BucharestRomaniaTel: +40 (21) 336 22 66Fax: +40 (21) 336 11 77E-mail: kpmgro@kpmg.roWeb site: www.kpmg.ro
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Prepared in accordance with OMFP no. 94/2001
(Free translation from Romanian)
February 2004
Illustrative Financial StatementsS.C. Alfa S.R.L
as at 31 December 2003
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2004 KPMG Audit SRL. All rights reserved. Printed in RomaniaPublication "Illustrative Financial Statements as at 31 December 2003 prepared inaccordance with OMFP 94/2001" gives one possible example of preparation of FinancialStatements as at 31 December 2003 in accordance with Romanian statutory requirements.This publication is for illustrative purposes only and it is not a comprehensive study of theapplication and interpretation of Romanian legislative requirements relevant to preparationof Financial Statements. Whilst care has been taken in its preparat ion, reference to the legalenactments relevant to preparation of Financial Statements should be made, and specificadvice sought, for a complete understanding. No responsibility for loss to any person acting
or refraining from action as a result of any material in this publication is accepted by KPMG.
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PL EFinancial Statements
A complete set of annual financial statements includes
the following components:
Balance Sheet
Statement of Income
Statement of Changes in Shareholders' Equity
Statement of Cash Flows and
Notes to the Financial Statements.
S.C. Alfa S.R.L. ("The Company") must also present
with the annual financial statements two supplementary
forms (Additional Data - Code 30, Fixed Assets - Code
40), these are not part of the financial statements and
are not audited.
Any item to be presented in an entity's financialstatements may be shown in more detail than required by
the format adopted if this greater detail will help to
present the information in a more relevant way for the
users.
KPMG Audit S.R.L. has prepared these Illustrative Financial Statements in
accordance with Ministry of Public Finance Order no. 94/2001 for approval ofthe accounting regulations harmonised with the lV Directive of the European
Economic Communities and International Accounting Standards.* ("OMFP
94/2001"), with all the subsequesnt amendments, effective starting with the
financial statements for the year ended 31 December 2000.
3 I l l u s t r a t i v e F i n a n c i a l S t a t e m e n t s
Balance Sheet and Income Statement
The Balance Sheet and Income Statement must show at
least the items listed in the form of the balance sheet andincome statement provided by OMFP 94/2001.
For the purpose of this illustrative model of financial
statements, the lines from the Balance Sheet and
Statement of Income with zero amounts are not
presented.
Statement of Cash Flows
The Statement of Cash Flows must present the items
described by one of the cash flow methodologies from
IAS 7 "Cash flow statements": direct method or indirect
method. S.C. Alfa S.R.L. has chosen to present the
Statement of Cash Flows using the indirect method.
*The International Accounting Standards have been renamed the International Financial Reporting Standards by theInternational Accounting Standards Board.
1) The International Financial Reporting Standards (IFRS) include:a) The International Financial Reporting Standards;b) The International Accounting Standards; andc) The interpretations issued by the International Financial Reporting Interpretations Committee or by the former
Standing Interpretations Committee and adopted by IASB.2) IFRS, the English abreviation for the International Financial Reporting Standards.
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The Statement of Changes inShareholders' Equity
The statement of changes in shareholders' equity will
disclose the information required by OMFP 94/2001.
Notes to the financial statements
In accordance with OMFP 94/2001, ten compulsory
notes should be presented.
The entity will show separately in the explanatory notes,
the appropriation of net profit as follows:
a) the amount of any dividends proposed to be paid out
of the net profit for the year. According to IAS 10
"Events after the balance sheet date", if these
dividends are proposed or declared after the balance
sheet date, the entity should not recognize them as
liability at the balance sheet date;b) any amount transferred to reserves;
c) the amount allocated to cover the accounting loss for
the preceding year;
d) other distributions.
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Contents
Balance Sheet 7
Statement of Income 10
Statement of Changes
in Shareholders' Equity 12
Statement of Cash Flows 13
Notes to Financial Statements 15-38
Additional data 39-43
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at 31 December 2003
(Free translation from Romanian)
COD 10
Thousand ROL Row no. 2002 2003
A. NON-CURRENT ASSETS
I. INTANGIBLE ASSETS
Set-up costs (acc. 203-2803-2903) 02 12,626 2,773
Concessions, patents, licenses, trademarks and similar rights
and assets (acc. 2051+2052+208-2805-2808-2905-2908) 03 756,329 275,366
TOTAL: (rows 01 to 05) 06 768,955 278,139II. TANGIBLE ASSETS
Land and buildings (acc. 211+212-2811-2812-2911-2912) 07 474,242,340 491,717,741
Plant and machinery and motor vehicles (acc. 213-2813-2913) 08 25,735,565 29,770,478
Fixtures and fittings (acc. 214-2814-2914) 09 216,200 355,026
Fixed assets in progress and advance payments for fixed
assets in progress (acc. 231+232-2931) 10 415,493 2,407,315
TOTAL: (rows 07 to 10) 11 500,609,598 524,250,560
III. FINANCIAL ASSETS
Investment in Group Companies 12 1,000,000 1,000,000Other financial assets (acc. 2673+2674+2678+2679-2966-2969) 17 151,056 25,854
TOTAL FINANCIAL ASSETS: (rows 12 to 18) 19 1,151,056 1,025,854
TOTAL NON-CURRENT ASSETS 20 502,529,609 525,554,553
B. CURRENT ASSETS
I. INVENTORIES
Raw materials and consumables
(acc. 301+3021+3022+3023+3024+3025+3026+3028+303+/-
308+351+358+381+/-388-391-3921-3922-3951-3958-398) 21 18,723,491 32,125,911
Work in progress (acc. 331+332+341+/-3481+3541-393-3941-3952) 22 127,277,161 123,955,388
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County: Dolj
Legal entity: S.C. Alfa S.R.L. Type of property: Private 35
Address: Florilor Street, no. 25, Oras Main activity (CAEN group name):
Phone: 0235 123 456; Fax: 0235 123 457 Construction of industrial equipment
Company register no.: J16/3456/1991 CAEN Group Code: 3456
Country: Romania Fiscal Code: R 1 2 3 4 5 6 7
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Finished products and goods for resale (acc. 345+346+/-3485+/-3486+3545
+3546+356+357+361+/-368+371+/-378-3945-3946-3953-3954-3956-3957
-396-397-4428) 23 177,882 170,464
Advance payments for the purchase of inventories (acc. 4091) 24 18,249,574 9,212
TOTAL INVENTORIES: (rows 21 to 24) 25 164,428,108 156,260,975
II. RECEIVABLES
Trade receivables (acc. 4092+4111+4118+413+418-491) 26 18,630,724 185,895,768
Other receivables (acc. 425+4282+431+437+4382+441+4424+4428+444
+445+446+447+4482+ 4582+ 461+473-496+5187) 29 8,081,269 29,665,072
TOTAL: (rows 26 to 30) 31 26,711,993 215,560,840
III. SHORT TERM FINANCIAL INVESTMENTS
IV. CASH AND BANK ACCOUNTS (acc. 5112+5121+5124+5125+5311+5314+5321+5322+5323+5328+5411+5412+542) 36 14,984,273 147,059,606
TOTAL CURRENT ASSETS (rows 25+31+35+36) 37 206,124,374 518,881,421
C. ACCRUED EXPENSES (acc. 471) 38 382,078 147,872
D. CURRENT LIABILITIES
Liabilities to credit institutions (acc. 1621+1622+1624+1625+1627+1682
+5191+5192+5198) 40 21,382,999 30,118,957
Advances from clients (acc 419) 41 157,638,838 93,334,151
Trade payables (acc. 401+404+408) 42 73,806,714 114,779,774
Other liabilities, including fiscal and social security liabilities
(acc.1623+1626+167+1687+2698+421+423+424+426+427+4281+431
+437+4381+441+4423+4428+444+446+447+4481+4551+4558+456
+457+4581+462+473+509+5186+5193+5194+5195+5196+5197) 46 394,493,682 740,325,877
TOTAL: (rows 39 to 46) 47 647,322,233 978,558,759
E. CURRENT ASSETS, NET CURRENT LIABILITIES (rows 37+38-47-64) 48 (441,012,753) (459,529,466)
F. TOTAL ASSETS LESS CURRENT LIABILITIES (rows 20+48 - 63) 49 61,516,856 66,025,087
G. DEBTS THAT HAVE TO BE PAID IN MORE THAN A YEAR
Other liabilities, including tax liabilities and other social charges
(acc.1623+1626+167+1687+2698+421+423+424+426+427+4281+431
+437+4381+441+4423+4428+444+446+447+4481+4551+4558+456
+457+4581+462+473+509+5186+5193+5194+5195+5196+5197) 57 96,791,621 -
TOTAL: (rows 50 to 57) 58 96,791,621 -
H. PROVISIONS FOR RISKS AND CHARGES 59
Other provisions (acc. 151) 60 7,706,196 13,092,017
TOTAL PROVISIONS: (rows 59 + 60) 61 7,706,196 13,092,017
I. DEFFERED REVENUE (rows 63+64) 62 196,972 -
Deffered revenue (acc. 472) 64 196,972 -
J. CAPITAL AND RESERVES
I. CAPITAL (rows 66 to 68), out of which: 65 296,892,431 296,892,431- subscribed and paid-in capital (acc. 1012) 67 296,892,431 296,892,431
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III. REVALUATION RESERVES (acc. 105)
- Credit balance 70 95,957,454 122,794,493
- Debit balance 71
IV. RESERVES (acc. 106) (rows 73 to 76) 72 6,020,724 6,020,724
Legal reserves (acc. 1061) 73 2,572,838 2,572,838
Other reserves (acc. 1068+/-107) 76 3,447,886 3,447,886
V. RETAINED EARNINGS (acc. 117)
- Credit balance 77
- Debit balance 78 232,720,476 441,851,570
VI. PROFIT/LOSS OF THE PERIOD (acc. 121)
- Credit balance 79 69,076,992
- Debit balance 80 209,131,094TOTAL EQUITY (rows 65+69+70-71+72+77-78+79-80-81) 82 (42,980,961) 52,933,070
TOTAL EQUITY AND RESERVES (rows 82+83) 84 (42,980,961) 52,933,070
ADMINISTRATOR, PREPARED BY,
Full name Full name
Signature Signature
Companys stamp
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County: Dolj
Legal entity: S.C. Alfa S.R.L. Type of ownership: Private 35
Address: Florilor Street, no. 25, Oras Main activity (CAEN group name):
Phone: 0235 123 456; Fax: 0235 123 457 Construction of industrial equipment
Company register no.: J16/3456/1991 CAEN Group Code: 3456
Country: Romania Fiscal Code: R 1 2 3 4 5 6 7
STATEMENT OF INCOME
for the year ended 31 December 2003
Free translation from Romanian
COD 20
Thousand ROL Row no. 2002 2003
1. Net turnover (rows 02 to 04) 01 279,533,981 690,107,045
Turnover (acc. 701+702+703+704+705+706+708) 02 272,257,918 683,094,699
Revenues from goods for resale (acc. 707) 03 7,276,063 7,012,346
2. Variation in inventories (acc. 711) 05 68,469,361 (11,279,558)
3. Own work capitalized (acc. 721+722) 07 5,179,271 1,846,853
4. Other operating income (acc. 758+7417) 08 77,702 2,734,789
TOTAL OPERATING INCOME (rows 01+05-06+07+08) 09 353,260,315 683,409,129
5.a) Raw materials and consumables (acc. 601+602-7412) 10 105,212,628 108,037,585
Other expenses related to inventories (acc. 603+604+606+608) 11 4,154,704 6,095,688
b) Electricity, heating and water expenses (acc. 605-7413) 12 20,921,374 25,343,678
Goods for resale (acc. 607) 13 6,020,074 5,806,849
6. Personnel expenses (rows 15+16) 14 201,348,482 239,664,624
a) Salaries (acc. 641-7414) 15 140,971,225 171,736,969
b) Social security contributions (acc. 645-7415) 16 60,377,257 67,927,655
7.a) Adjustments on the value of tangible and intangible assets (rows 18-19) 17 11,698,027 13,338,440
a.1) Expenses (acc. 6811+6813) 18 11,698,027 13,338,440
7.b) Adjustments on the value of current assets (rows 21-22) 20 (7,993,253) (6,765,554)
b.1) Expenses (acc. 654+6814) 21 35,587,854 29,642,406
b.2) Revenues (acc. 754+7814) 22 43,581,107 36,407,960
8. Other operating expenses (rows 24 to 26) 23 145,160,633 163,604,524
8.1. Third party services (acc. 611+612+613+614+621+622+623+624
+625+626+627+628-7416) 24 71,755,891 93,438,285
8.2. Other taxes, duties and similar expenses (acc. 635) 25 12,573,320 10,050,146
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8.3. Compensations, donations and net value of assets disposed (acc. 658) 26 60,831,422 60,116,093
8.4. Adjustments regarding the provisions for risks and charges (rows 28-29) 27 3,258,540 5,385,821
Expenses (acc. 6812) 28 5,032,980 9,741,582
Revenues (acc. 7812) 29 1,774,440 4,355,761
TOTAL OPERATING EXPENSES (rows 10 to 14+17+20+23+27) 30 489,781,209 560,511,655
PROFIT/LOSS FROM OPERATIONS:
- Profit (row 09-30) 31 122,897,474
- Loss (row 30-09) 32 136,520,894
11. Interest income (acc. 766) 37 987,072 440,750
- Out of which, related to group companies 38 987,072 440,750
Other financial revenues (acc. 7617+762+763+764+765+767+768+788) 39 5,595,704 7,397,320
TOTAL FINANCIAL REVENUES (rows 33+35+37+39) 40 6,582,776 7,838,070
13. Interest expense (acc. 666-7418) 44 4,467,901 1,786,195
Other financial expenses (acc. 663+664+665+667+668+688) 46 74,713,960 59,872,357
TOTAL FINANCIAL EXPENSES (rows 41+44+46) 47 79,181,861 61,658,552
FINANCIAL RESULT
- Loss (row 47-40) 49 72,599,085 53,820,482
14. CURRENT RESULT:
- Profit (rows 31+48) 50 69,076,992
- Loss (rows 32+49) 51 209,119,979
TOTAL REVENUES (rows 09+40+52) 56 359,843,091 691,247,199
TOTAL EXPENSES (rows 30+47+53) 57 568,963,070 622,170,207
GROSS RESULT
Profit (row 56-57) 58 69,076,992
Loss (rows 57-56) 59 209,119,979
18. INCOME TAX (acc. 691-791) 60 11,115 -
Current tax on profit expenses (acc. 6911) 61
20. NET RESULT OF THE PERIOD (rows 58-60)
- Profit 65 69,076,992
- Loss 66 209,131,094
21. Earnings per share (ROL)
- basic 67 (17,600) 5,820
- diluted 68 (17,600) 5,820
ADMINISTRATOR, PREPARED BY,
Full name Full name
Signature Signature
Companys stamp
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County: Dolj
Legal entity: S.C. Alfa S.R.L. Type of ownership: Private 35
Address: Florilor Street, no. 25, Oras Main activity (CAEN group name):
Phone: 0235 123 456; Fax: 0235 123 457 Construction of industrial equipment
Company register no.: J16/3456/1991 CAEN Group Code: 3456Country: Romania Fiscal Code: R 1 2 3 4 5 6 7
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYfor the year ended 31 December 2003
(Free translation from Romanian)
Balance Additions Disposals Balance at
at 1 January 31 December
Thousand ROL Total, out Transfers Total, out Transfers
of which: of which:
Share capital 296,892,431 - - - - 296,892,431
Revaluation reserve 95,957,454 35,983,409 - 9,146,370 - 122,794,493
Legal reserve 2,572,838 3,453,850 - - - 6,026,688
Other reserves 3,447,886 - - - 3,447,886
Retained earnings (78,542,202) (209,131,094) (209,131,094) - - (287,673,296)
Retained earnings from
first applications of
IAS less IAS 29 (154,178,274) - - - - (154,178,274)
Profit/ (Loss) for the
year (209,131,094) 69,076,992 - (205,677,244) (205,677,244) 65,623,142
Total shareholders'equity (42,980,961) (100,616,843) (209,131,094) (196,530,874) (205,677,244) 52,933,070
ADMINISTRATOR, PREPARED BY,
Full name Full name
Signature Signature
Companys stamp
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County: Dolj
Legal entity: S.C. Alfa S.R.L. Type of ownership: Private 35
Address: Florilor Street, no. 25, Oras Main activity (CAEN group name):
Phone: 0235 123 456; Fax: 0235 123 457 Construction of industrial equipment
Company register no.: J16/3456/1991 CAEN Group Code: 3456
Country: Romania Fiscal Code: R 1 2 3 4 5 6 7
STATEMENT OF CASH FLOWSfor the year ended 31 December 2003
Free translation from Romanian
Thousand ROL 2002 2003
OPERATING ACTIVITIES
Net profit (loss) before taxation
and extraordinary items (209,131,094) 69,076,992
Adjustments for:
Increase of provisions for risks and charges - 5,385,821
Depreciation and amortization 11,698,027 13,338,440
Net value of disposals of fixed assets (77,702) (2,734,789)
Revenue from interest (987,072) (440,750)
Interest expense 4,467,901 1,786,195
Operating profit before working capital changes (194,029,940) 86,411,909
Increase in short term payables 356,537,003 193,668,888
Increase in trade and other receivables (7,742,449) (252,919,328)
(Increase)/ Decrease in inventories (83,549,067) 8,167,133
Cash generated from operations 71,215,547 35,328,602
Interest paid (4,582,013) (1,786,195)
Income tax received 669,749 -
CASH GENERATED BY OPERATING ACTIVITIES 67,303,283 33,542,407
INVESTING ACTIVITIES
Purchase of property, plant and equipment (7,315,923) (22,508,454)
Proceeds from sale of property,
plant and equipment 2,896,949 15,716,898
Interest received 987,072 440,750
CASH FLOW FROM INVESTING ACTIVITIES (3,431,902) (6,350,806)
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FINANCING ACTIVITIES
Proceeds from issuance of share capital - 96,698,880
Payment of finance lease liabilities - (551,106)
Repayment of borrowings (62,080,976) (21,382,999)
Proceeds from long-term borrowings 88,783 30,118,957
NET CASH FROM FINANCING ACTIVITIES (61,992,193) 104,883,732
Net increase in cash and cash equivalents 1,879,188 132,075,333
Cash and cash equivalents at 1 January 13,105,085 14,984,273
Cash and cash equivalents at 31 December 14,984,273 147,059,606
ADMINISTRATOR, PREPARED BY,
Full name Full nameSignature Signature
Companys stamp
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PL ENote 1. Non-current assets
Movements in the gross book value, depreciation
and net book value during financial year ended 31
1.1 Intangible assets
Cost
Thousand ROL 31 December 2002 Additions Disposals 31 December 2003
Set up and development costs 21,472 - 10,379 11,093
Other intangibles (licenses) 1,708,174 - 1,150,592 557,582
Total 1,729,646 - 1,160,971 568,675
Accumulated amortization
Thousand ROL 31 December Amortization Accumulated 31 December2002 charge for the amortization of 2003
year disposals
Set up and development costs 8,846 9,853 10,379 8,320
Other intangibles (licenses) 951,845 480,963 1,150,592 282,216
Total 960,691 490,816 1,160,971 290,536
Net book value 768,955 278,139
December 2003 for each group of intangible assets
is detailed below:
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1.2 Tangible assets
Cost or valuation
Thousand ROL 31 December 2002 Acquisitions Disposals 31 December 2003
Freehold land 172,059,013 - 200 172,058,813
Buildings 394,009,392 254,994,827 2,208,723 646,795,496
Plant, machinery and motor
vehicles 53,164,643 9,749,793 2,922,541 59,991,895
Fixtures and fittings 387,989 212,360 81,420 518,929
Fixed assets in progress 353,169 11,488,717 9,795,669 2,046,217
Advances to fixed assets suppliers 62,324 2,027,421 1,728,647 361,098
Total 620,036,530 278,473,118 16,737,200 881,772,448
Accumulated depreciation
Thousand ROL 31 December Depreciation Accumulated 31 December
2002 charge for the depreciation of 2003
year* disposals
Buildings 91,826,065 236,677,223 1,366,720 327,136,568
Plant and machinery and motor
vehicles 21,732,866 4,065,269 2,004,422 23,793,713
Impairment provision 5,696,212 1,044,621 313,129 6,427,704
Fixtures and fittings 171,789 62,934 70,820 163,903
Total 119,426,932 241,850,047 3,755,091 357,521,888
Net book value 500,609,598 524,250,560
* Depreciation charge for the year includes the differences from revaluation.
S.C. Alfa S.R.L. concluded a lease agreement (contract
no. 4002/03/01/2003) with SC Leasing Romania S.R.L.
for the acquisition of equipment necessary to the
acetylene supply with a total value of ROL 1,798,200
thousand.
The land owned by the Company is located in Oras
having a surface of 733,121 square meters.
The buildings are stated at their revalued amounts less
subsequent accumulated depreciation, as allowed by the
alternative treatment as per OMFP 94/2001. At 10 May
2003, the buildings have been revalued in accordance
with HG 403/2000, by an independent valuer S.C.
Evaluarea S.A, a certified ANEVAR member. For the
computation of the revalued amounts the valuer used the
Consumer Price Index (CPI) published by the National
Statistics Office of Romania. The gross revalued amounts
were subsequently adjusted to the market
value/replacement cost appraised by the independent
valuer.
The Company recorded as at 31 December 2003
differences from the revaluation of the building
amounting to ROL 255,994,679 thousands related to the
gross book value and ROL 227,957,640 thousand
related to accumulated depreciation. These differences
are presented in the table of movements above, as
additions and depreciation charge related to year ended
31 December 2003.
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1.3 Financia l assets
Thousand ROL 31 December 2002 31 December 2003
Investment in subsidiary 1,000,000 1,000,000
Other investments 151,056 25,854
Total 1,151,056 1,025,854
Thousand ROL 31 December Movements 31 December
2002 2003
Increase Decrease
Provision for litigation and claims - 1,440,964 - 1,440,964
Provision for warranties granted
to customers 7,706,196 8,300,618 4,355,761 11,651,053
Total 7,706,196 9,741,582 4,355,761 13,092,017
Note 2. Provision for risks and charges
The investment in subsidiary represents the investment in
S.C. ABC SRL, a company with headquarters in
Bucharest. S.C. Alfa S.R.L owns 100% of this company.
The main object of activity of the company is design of
industrial equipment. The investment in S.C. ABC SRL is
stated at cost. The company has not consolidated the
financial statements of S.C. ABC S.R.L, as OMFP
94/2001. The presentation of unconsolidated financial
statements is in accordance with the provisions of the
Ministry of Public Finance Order no. 1827/2003 (OMFP
1.827/2003)
The Company is in litigation with S.C. Activitatea S.A.
for the service performed by S.C. Alfa S.R.L.
S.C. Activitatea S.A. claims penalties for non-compliance
with their deadline in the amount of 1,440,964 thousand
ROL.
The warranty provision represents the best estimate of
the Company's liability under the 12 months warranty
granted, based on prior experience.
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Note 3. Profit appropriation
For the year ended 31 December 2003 the Company has
recorded a net profit of ROL 69,076,992 thousands,
distributed as follows:
E
X A
M
PL E
Thousand ROL 2003
Legal reserves 3,453,850
Reserves related to fiscal incentives 13,815,398
Partial recovery of loss recorded in previous years 47,663,124
Profit carried forward 4,144,620
Total 69,076,992
The undistributed profit carried forward consists of
dividends approved after the year ended 31 December
2003 amounting to 4,144,620 thousand ROL, dividends
that will be distributed to shareholders in 2004.
The Company approved the distribution of profit
according to the legislation in force as follows:
3,453,850 thousand ROL: 5% from the gross profit
of the year has been transferred to the legal reserve.
The Company will stop this transfer when the legal
reserve equals 20% of the social capital.
13,815,398 thousand ROL: the Company received a
fiscal credit (50% reduction in income tax) for the
investments made from reinvested profit, having the
obligation to transfer to its development funds both
the fiscal credit and the reinvested profit.
47,663,124 thousand ROL: partial recovery of the
loss recorded in previous years.
The legal reserves and the reserves related to fiscal
incentives cannot be distributed.
Note 4. Analysis of operating result
Thousand ROL 2002 2003
1. Net turnover 279,533,981 690,107,045
2. Cost of sales (3+4+5) 230,013,027 412,437,379
3. Operating expenses 132,182,745 297,342,931
4. Auxiliary expenses 18,386,805 21,631,534
5. Indirect expenses 79,443,477 93,462,914
6. Gross profit (1-2) 49,520,954 277,669,666
7. Distribution expenses - -
8. Administrative expenses 189,936,244 159,353,834
9. Other operating revenues 3,894,396 4,581,642
10. Operating result (6-7-8+9) (136,520,894) 122,897,474
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The Company includes in production cost both direct and
indirect production costs. Administrative expenses are
not included.
To obtain the cost of sales, production cost was adjusted
with the change in the stocks (balance of account 711 in
the income statement).
Operational result presented above includes also the net
loss from the disposal of fixed assets amounting to ROL
536,000 thousands for 2003.
For information regarding rent and operational leasing
contracts, see Note 10.5.
Note 5. Trade receivables and payables
5.1 Trade receivables
Thousand ROL 31 December 31 December Due term
2002 2003 less than one more than one
year year
Trade receivables 27,588,059 194,502,919 194,502,919 -
Allowance for trade receivables (8,957,335) (8,911,928) (8,911,928)
Other receivables 8,081,269 29,969,849 29,969,849 -
Total 26,711,993 215,560,840 215,560,840 -
5.2 Trade payables
Thousand ROL 31 December 31 December Due term
2002 2003 less than one more than one
year year
Liabilities to credit institutions 21,382,999 30,118,957 30,118,957 -
Advance payments from clients 157,638,838 93,334,151 93,334,151 -
Trade payables 73,806,714 114,779,774 114,779,774 -
Other payables 394,493,682 740,325,877 740,325,877 -
Total 647,322,233 978,558,759 978,558,759 -
As at 31 December 2003, the Company included in the
short term receivable the following receivables:
- ROL 31,825 million S.C. Epsilon S.R.L.,
- ROL 50,250 million Alfa Standard Corporation and
- ROL 45,225 million S.C. Gamma S.R.L., representing
the value of services provided by the Company in favour
of customers, and which are currently under
dispute. Management estimates that the value of these
services will be recovered.
As at 31 December 2003 the Company recorded in the
financial statements an allowance for doubtful debts
amounting to ROL 8,911,928 thousand, collection
considered by the management of the company as
uncertain.
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The item "Other liabilities" comprise the following
elements:
E
X A
M
PL E
The contribution to the share capital represents the
amount paid by S.C. Beta S.A. in order to increase the
share capital (refer to Note 18).
Thousand ROL 31 December 31 December Due term
2002 2003 less than one more than oneyear year
Personnel related payables 4,638,785 6,383,495 6,383,495 -
Amounts payable to state budget 183,476,314 295,488,104 295,488,104 -
Dividends payable from 2002 3,716,233 3,520,717 3,520,717 -
Sundry creditors 3,338,588 5,004,171 5,004,171 -
Other liabilities 199,323,762 331,983,416 331,983,416 -
Contribution to share capital - 96,698,880 96,698,880 -
Payables leasing - 1,247,094 1,247,094
Total 394,493,682 740,325,877 740,325,877 -
On 6 December 2003 the Company concluded an
overdraft facility contract with Delta Bank S.A. for a
maximum amount of USD 1,200,000. As at 31
December 2003 the overdraft balance was USD
899,000. According to the conditions in the contract, the
overdraft should be reimbursed by 30 June 2004. The
interest applicable to this overdraft is the bank's interest
base rate plus a margin of 1.5% computed on an annual
basis (360 days).
The guarantees set up by the Company in relation to this
overdraft facility are:
First rank pledge over the Company's cash in bank, in
accordance with the pledge contract;
First rank pledge for an amount of USD 1,266,111
over the Company's receivables, in accordance with
the pledge contract.
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A. Accounting principles
The financial statements for the year ended 31 December2003 have been prepared in accordance with the follow-
ing accounting principles:
Going concern principle - it is assumed that the Compa-
ny normally continues its operation in the foreseeable
future without entering into liquidation or significantly
reducing its activity.
Consistency principle - leads to the continuity in the
application of the rules and regulations regarding the
assessment, accounting and presentation of the owner-
ship elements and of the results, thus ensuring the time
comparability of the accounting information.
Prudence principle - adjustments have been proposed for
depreciation in an asset's value as well as for probable
liabilities and potential losses that come from the current
financial year or from a prior financial year.
Matching principle - all income and charges relating to
the financial year have been considered, no matter of the
date of receipt or payment.
Valuation of Asset and Liability items - in determining the
aggregate amount of any item in the balance sheet, the
amount of each individual asset or liability has been
determined separately.
Opening balance - The opening balance sheet of a finan-
cial year must correspond to the closing balance sheet of
the previous financial year, except for certain reclassifi-
cations of accounts necessary to ensure comparability
with the financial statements for the year ended 31
December 2003.
Offsetting- Items representing assets or income may not
be net off against items representing liabilities or expen-
diture, except for the netting off between assets and lia-
bilities approved by OMFP 94/2001.
Substance over form - The information presented in the
financial statements should reflect the economic sub-
stance of events and transactions and not only their legal
form.
Materiality - Each significant item should be presentedseparately in the financial statements.
B. Significant accounting policies
(a) Basis of preparation
The financial statements have been prepared in ROL and
are presented in thousand ROL.
(b) Statement of compliance
Second year of applying OMFP 94/2001
The financial statements were prepared in accordance
with the OMFP no. 94/2001 - "for the approval of the
accounting regulations harmonized with Economic Euro-
pean Committee Fourth Directive and with the Interna-
tional Financial Reporting Standards".
The year 2003 represents the second year of effective
application of the accounting regulations harmonized
with Economic European Committee and with the Inter-
national Financial Reporting Standards.
The annual financial statements comprise of:
Balance Sheet
Statement of Income
Statement of Changes in Stockholders' Equity Statement of Cash Flows
Notes to the Financial Statements.
First year of applying OMFP 94/2001 [if the case]
The first financial year in which the Company issued its
financial statements in accordance with the provisions of
the Ministry of Finance Order 94/2001 is the year ended
31 December 2003. The financial statements for the pre-
vious years were prepared and issued in accordance with
the Romanian accounting rules provided in Law 82/1991.
The Company did not show comparative financial state-
ments for year 2002 and, also, it did not show the cash
flow statement and the statement of changes in equity
for the financial year ended 31 December 2003, as stat-
ed in OMFP 94/2001.
Also, the effect of the adjustments of adopting for the
first time the OMFP 94/2001 are shown in the retained
earnings, the profit and loss account for the year not
being affected.
These statements include:
Balance Sheet Statement of Income
Notes to the Financial Statements.
Note 6. Significant accounting principlesand policies
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[Note: The Illustrative financial statements prepared in
accordance with OMFP 94/2001, in the first year of
applying OMFP 94/2001, do not include the Statement of
Changes in Equity and the Statement of Cash Flows].
(c) Standards applicable in hyperinflationary economies
and foreign currency translations
Measurement currency
The Company operates in a highly inflationary economy.
The Company's management considers that the meas-
urement currency, as defined by SIC 19 "Reporting Cur-
rency-Measurement and Presentation of Financial State-
ments Under IAS 21 and IAS 29" is the USD/EUR, due to
the following reasons:
selling prices for the main products and services are
linked to the USD/EUR;
imports are made mainly in USD/EUR; the Company is to a large extent financed in
USD/EUR;
management uses USD/EUR-based reports to monitor
the Company's financial performance;
other reasons.
In accordance with SIC 19, since the measurement cur-
rency of the Company is USD/EUR, the financial state-
ments should be prepared in USD/EUR and transactions
in foreign currencies (all currencies other than USD/EUR)
should be recorded at the exchange rate from the date ofthe transaction, according to International Accounting
Standard "The Effects of Changes in Foreign Exchange
Rates" (IAS 21).
The Company's management decided to prepare the
financial statements based on historical cost. Therefore,
the Company chose the alternative accounting treatment
stipulated by OMFP 94/2001 and did not adjust the
financial statements in accordance with IAS 21 "The
effects of changes in foreign exchange rates".
(d) Foreign currency transactions
Foreign currency transactions are presented at the for-
eign exchange rate ruling at the date of the transaction.
At year end, monetary assets and liabilities denominated
in foreign currencies are translated to ROL at the foreign
exchange rate ruling at the balance sheet date, and the
foreign exchange rate differences arising on translation
are recognized in the income statement.
(e) Property, plant and equipment
i) Own assets
Land and buildings are stated in the balance sheet at their
revalued amount less accumulated depreciation and
impairment losses (refer to accounting policy (k)). The
cost of self-constructed assets includes the cost of mate-
rials, direct labor and an appropriate proportion of pro-
duction overheads. The historic cost has been revalued in
accordance with Government decisions: 945/1990,
26/1992, 500/1994, 983/1998 and 403/2000 using
indexes established by the respective normative acts.
ii) Leased Assets
Leases in terms of which the Company assumes sub-
stantially all the risks and rewards of ownership are clas-
sified as finance leases. Plant and equipment acquired by
way of finance leasing are stated at an amount equal to
the lower of their fair value and the present value of the
minimum lease payments at inception of the lease, less
accumulated depreciation and impairment losses. Lease
payments are accounted for as described in accounting
policy at paragraph (p) below.
Capitalised leased assets are depreciated over the short-
er of the estimated useful life of the asset or the lease
term.
iii) Subsequent repair and maintenance expenditure
Repair and maintainance expenditure made in order to
restore or maintain the value of the fixed assets is includ-
ed in the profit and loss account when incurred. Expens-
es perfomed towards improvement of technical perform-
ance are capitalised and depreciated over the remainingperiod of depreciation of the specific fixed asset.
iv) Depreciation
Depreciation is provided to write off the cost (or valuation)
less the estimated residual value by using the straight line
method of depreciation over the estimated useful lives of
items of property, plant and equipment, and major com-
ponents that are accounted for separately.
Estimated useful lives are as follows:
Buildings 40 years
Plant and equipment 5-12 years
Vehicles 5 years
Fixtures and fittings 5-10 years
Land and fixed assets under construction are not depre-
ciated.
(f) Intangible assets
i) Intangible assets that are acquired by the Company arestated at cost less accumulated amortization (see below)
and impairment losses (refer accounting policy (k) below).
ii) Amortization is charged to the income statement on a
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straight-line basis over the estimated useful lives of intan-
gible assets.
The most significant part of the intangible assets record-
ed by the Company comprise software. Software is
depreciated using the straight-line method over the esti-
mated useful life, which does not exceed 5 years.
(g) Investments
Investments held to maturity by the Company are stated
at amortized cost less impairment losses (refer to
accounting policy (k)).
(h) Inventories
Inventories are stated at the lower of cost and net realis-
able value. Net realisable value is the estimated selling
price in the ordinary course of business, less the esti-
mated costs of completion and selling expenses.
The cost of inventory is based on the First In First Out
principle (or Weighted Average principle) and includes
expenditure incurred in acquiring the inventories and
bringing them to their existing condition and location. In
the case of manufactured inventories and work in
progress, cost includes an appropriate share of overheads
based on normal operating capacity.
(i) Trade and other receivables
Trade and other receivables are stated at their cost less
impairment losses.
(j) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
call deposits.
(k) Impairment
The carrying amounts of the Company's assets other
than inventories and deferred tax assets, are reviewed at
each balance sheet date to determine whether there is
any indication of impairment.
If any such indication exists, the asset's recoverable
amount is estimated. An impairment loss is recognized
whenever the carrying amount of an asset or its cash-
generating unit exceeds its recoverable amount. Impair-
ment losses are recognized in the income statement or in
equity [if the case].
i) Calculation of recoverable amount
The recoverable amount of the Company's investments in
held-to-maturity securities and receivables is calculated
as the present value of expected future cash flows, dis-
counted at the original effective interest rate correspon-
ding to these assets. Receivables with a short duration
are not discounted.
ii) Reversals of impairment
An impairment loss in respect of a held-to-maturity
receivable is reversed if the subsequent increase in recov-
erable amount can be related objectively to an event
occurring after the impairment loss was recognized.
In respect of other assets, an impairment loss is reversed
if there has been a change in the estimates used to deter-
mine the recoverable amount.
An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying
amount that would have been determined, net of depre-
ciation or amortization, if no impairment loss had been
recognized.
(l) Issued capital
Dividends
Dividends are recognized as a liability in the period in
which their distribution is approved.
(m) Interest-bearing borrowings
Interest-bearing borrowings are recognized initially at
cost, less attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated
at amortized cost with any difference between cost and
redemption value being recognized in the income state-
ment over the period of the borrowings on an effective
interest basis.
(n) Trade and other payables
Trade and other payables are stated at their cost, which
is the fair value of the consideration to be paid in the
future for goods and services received.
(o) Lease obligation
Leases are classified as finance leases whenever the
terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are
classified as operating leases.
The corresponding liability to the lessor is included in the
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balance sheet as a finance lease obligation. Finance costs
are charged to the statement of income over the term of
the relevant lease so as to produce a constant periodic
rate of interest on the remaining balance of the obliga-
tions for each accounting period.
Operating lease rentals are charged to the profit and
loss account on a straight-line basis over the period ofthe lease. Lease rentals discounts granted are recog-
nised in the profit and loss account as a reduction of
expense.
(p) Provisions
A provision is recognized in the balance sheet when the
Company has a legal or constructive obligation as a result
of a past event, and it is probable that an outflow of eco-
nomic benefits will be required to settle the obligation.
The provisions are revised at the end of each period and
adjusted in order to reflect the most accurate estimate.
Warranties
A provision for warranties is recognized when the under-
lying products or services are sold. The provision is based
on historical warranty data and a weighting of all possi-
ble outcomes against their associated probabilities.
(q) Revenue
Goods sold
Revenue from the sale of goods is recognized in the
income statement when the significant risks and rewards
of ownership over the goods have been transferred to the
buyer.
(r) Financial result
This includes interest payable on borrowings, interest
receivable on funds invested, interest payable on finance
leases and foreign exchange gains and losses. The prin-
cipal of separate financial statements is followed in order
to recognise these elements.
The interest expense component of finance lease pay-
ments is recognized in the income statement using the
effective interest rate method.
(s) Income tax
Tax on the profit or loss for the year comprises current
and deferred tax.
Current tax is the expected tax payable calculated on the
taxable income for the year, using tax rates enacted or
substantially enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxationpurposes. The amount of deferred tax provided is based
on the expected manner of realization or settlement of
the carrying amount of assets and liabilities, using tax
rates enacted or substantially enacted at the balance
sheet date.
A deferred tax asset is recognized only to the extent that
it is probable that future taxable profits will be available
against which the asset can be utilized. Deferred tax
assets are reduced to the extent that it is no longer prob-
able that the related tax benefit will be realized.
The effect on deferred tax of any changes in tax rates is
charged to the income statement, except to the extent
that it relates to items previously charged or credited
directly to equity.
(t) Related parties
Parties are considered related when one party, either
through ownership, contractual rights, family relationship
or otherwise, has the ability to directly control or signifi-
cantly influence the other party.
(u) Estimates
In preparing the financial statements, management is
required to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the
date of the balance sheet and revenue and expenses for
the year. Actual results could differ from those estimates.
Estimates are used when accounting for items and mat-
ters such as allowance for un-collectable accounts
receivable, discounted non-current receivables, inventory
obsolescence, amortization/depreciation and taxes.
The effect of changes in accounting estimates is com-
puted prospectively and is included in the determination
of net profit or loss in:
the period of the change, if the change affects the
period only; or
the period of the change and future periods, if the
change affects both.
(v) Comparative information [if applicable]
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Certain items from the 2002 financial statements have
been reclassified to conform to the 2003 financial state-
ments presentation.
(w) Pensions and other post retirement benefits
During its normal activity, the Company pays to the statetaxes due for its employees. All Company's employees
are members of the Romanian Pensions Fund.
The Company's policy does not include any other pen-
sions scheme or any plan of supplementary benefits after
retiring, consequently, it has no other obligations regard-
ing the pensions system.
In addition, the Company has no obligation in granting
any other benefits to its employees at the retirement
date.
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Note 7. Share capital
During 2003, the average number of employees was
2,659 (in 2002: 2,751). The functional structure of
of Directors' members were:
E
X A
M
PL E
At 31 December 2003, the authorized share capital is
ROL 296,892,431 thousand comprised of 11,875,697
ordinary shares, having a par value of ROL 25,000. All
issued shares are fully paid. The shareholder's structure
as at 31 December 2003 is as follows:
Thousand ROL % No of shares Share capital
Beta S.A. 82.93 9,847,250 246,181,256
Company M 6.62 786,541 19,663,515
Company T 2.38 282,963 7,074,075
Other shareholders 8.07 958,943 23,973,585
Total 100 11,875,697 296,892,431
The revaluation reserve relating to property, plant and
equipment, amounting to ROL 102,565,653 thousand
(increase in the fair value of the property at the date of
revaluation), is included in the Company's share capital in
accordance with GD 945/1990, GD 26/1992 and GD
500/1994.
As mentioned in Note 18, on 30 March 2004 the
Company's share capital increased as a result of issuing
3,862,771 shares in accordance with the General
Shareholder's Meeting held on 9 January 2004 with the
ROL equivalent of USD 2,880,000.
Note 8. Information regardingemployees, administrators and directorspersonnel is as follows:
Category Number
Managers 9
Workers 2,089
Production Technicians 479
Administration 68
IT 14
Total 2,659
The Company is managed by the Board of Directors,
which has 3 members. At 31 December 2003, the Board
Name Position
Florian Popescu General manager
Gheorghe Mincu Member
Nicoleta Vornicu Member
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The current Board of Directors has been appointed by the
General Shareholders Meeting held on 30 August 2003.
The Company's Directors have been appointed by the
Decisions of the Board of Directors from 5 September
2003 and 22 September 2003.
As at 31 December 2003, the Company's Management
has the following structure:
E
X A
M
PL E
The management's wages represent 4% from the total
salary expenses in 2003.
Name Position
Eng. Florian Popescu General Director
Eng. Claudiu Postelnicu Technical Director
Eng. Adrian Popovici Production Director
Eng. Vlad Solomon Marketing Director
Eng. Marius Grigore Quality Director
Eng. Alina Oprea Logistics Director
Ec. Mariana Calin Finance Director
Eng. Elena Ionescu Human Resources Director
Law. Cristian Tudor Legal Director
The Company's payroll expenses in 2003 were:
Thousand ROL 2003
Employees - salaries payable 171,736,969
Company's contribution to social security 43,824,046
Company's contribution to unemployment fund 8,597,562
Company's contribution to health fund 12,090,280
Company's contribution to support fund for disabled persons 3,415,767
Total 239,664,624
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28 I l l u s t r a t i v e F i n a n c i a l S t a t e m e n t s
Note 9. Performance measurement
Thousand ROL
2002 2003
I. Liquidity ratios
Current ratio
Current assets (A) 206,124,374 518,881,421
Current liabilities (B) 647,322,233 978,558,759
A/B - number of times 0.32 0.53
Quick ratio (acid test)
Current assets (A) 206,124,374 518,881,421
Inventories (B) 164,428,108 156,260,975
Current liabilities (C) 647,322,233 978,558,759
(A-B)/C - number of times 0.06 0.37
II. Risk ratios
Degree of indebtness ratio
Borrowed capital (A) 96,791,621 -
Equity (B) (42,980,961) 52,933,070
A/B (if negative, N/A) N/A -
Interest cover ratio
Profit before interest and tax (A) (204,652,078) 70,863,187
Interest expense (B) 4,467,901 1,786,195
A/B - number of times (if negative, N/A) N/A 39.67
III. Efficiency ratios
Inventory turnover
Inventory (A) 164,428,108 156,260,975
Cost of sales (B) 115,387,406 119,940,122
(A/B)*365 - number of days 520 476
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Thousand ROL
2002 2003
Accounts receivable turnover
Trade receivables (A) 18,630,724 185,895,768
Net turnover (B) 279,533,981 690,107,045
(A/B)*365 - number of days 24 98
Accounts payable turnover
Trade payables (A) 73,806,714 114,779,774
Net turnover (B) 279,533,981 690,107,045
(A/B)*365 - number of days 96 61
Non-current assets turnover
Net turnover (A) 279,533,981 690,107,045
Non-current assets (B) 502,529,609 525,554,553
(A/B) - number of times 0.56 1.31
Asset turnover
Net turnover (A) 279,533,981 690,107,045
Total assets (B) 709,036,061 1,044,583,846
(A/B) - number of times 0.39 0.66
IV. Profitability ratios
Gearing ratio
Profit before interest and tax (A) (204,652,078) 70,863,187
Total assets less current liabilities (B) 61,516,856 66,025,087
(A/B) (if negative, N/A) - 1.07
Gross profit margin
Gross profit from sales (A) 49,520,954 277,669,666
Net turnover (B) 279,533,981 690,107,045
(A/B) 18% 40%
V. Earning per share ratios
Earning per share
Net result atributable to ordinary shareholders (A) (209,131,094) 69,076,992
Number of outstanding ordinary shares (B) 11,875,697 11,875,697
(A/B) - Thousand ROL (17.6) 5.82
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Note 10. Other Information10.1 The Company
S.C. Alfa S.R.L. was set up in 1991 in accordance with
Law no.15/1990, Law no. 31/1990 and Law
no.1224/1990, under the registration no.
J16/3456/1991.
[The following comments are to be tailored by the Com-
pany to reflect its specific situation.]
I. Liquidity ratios
Current ratio, respectively quick ratio (acid test), shows
how many times the current liabilities are covered by thecurrent assets, respectively by current assets less inven-
tory. The ratios obtained are low in comparison with the
recommended figure (around 2), illustrating a reduced
capacity of current assets (mainly trade receivables and
cash and cash equivalents) to cover the amount of cur-
rent liabilities.
II. Risk ratios
The degree of indebtness ratio shows how many times
the borrowed capital (long term debts) can be covered by
own capital and reflects the financing structure of the
Company at the end of the financial year. As the ratio has
a negative value at 31 December 2002 and a nil value at
31 December 2003, it is not relevant to compute it.
Interest cover ratio shows how many times interest
expense is covered by profit before interest and tax. The
lower the ratio, the more risky the position of the com-
pany is considered to be. For 2002, the analysis of the
indicator is not relevant, as the indicator has a negative
value.
III. Efficiency ratios
Inventory turnover indicates the number of days goods
are held by the company.
Accounts receivable turnover indicates the number of
days until the debtors pay their debt to the company,
showing the effectiveness of the company in collecting
its receivables. The increase in the number of days in
2003 may indicate problems connected to the control of
credit given to clients.
Accounts payable turnoverindicates the number of cred-it days the company obtains from its suppliers.
Non-current assets turnover evaluates the efficiency in
managing the non-current assets by examining the value
of the turnover generated by operating these.
Assets turnoverevaluates the efficiency in managing the
total assets by examining the value of the turnover gen-
erated by the companys assets.
IV. Profitability ratios
Gearing ratio represents the profit the company obtains
from one unit of resource, invested in the business. The
company recorded a loss in 2002 and a profit in 2003.
Gross profit margin has a high level in 2003.
V. Earnings per share ratios
Earnings per share ratio was ROL 5,820 per share in2003, and in 2002 the company recorded losses of ROL
17,610 per share.
The Company's headquarters is located in Oras, Florilor
Street no. 25.
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10.2 Related Parties
The Company carried on commercial transactions in
2002 and 2003 with the following related parties:
The Company owns 100% shares of S.C. ABC S.R.L.,
E
X A
M
PL E
The most important foreign clients are the German
company Foreign Business AG and the Swedish Business
Company from Sweden.
10.3 Income Tax
At 31 December 2003, the deferred tax - asset has been
computed based on Company's accumulated fiscal
losses, which can be carried forward, and based on the
temporary differences between the accounting and the
fiscal base for the items detailed in note 15.
As the realisation of this asset is not probable, the
deferred tax computed as mentioned above has not been
recorded in the financial statements.
Total net fiscal losses amount to ROL 185,719,892
thousand as follows:
- Year 2001 ROL 12,215,922 thousand - Loss
- Year 2002 ROL 173,503,970 thousand - Loss
The accumulated fiscal losses can be carried forward
over maximum five years.
In the financial year ended 31 December 2003, the
Company recorded an accounting profit of ROL
69,076,992 thousand in the financial statements in
nominal terms and a fiscal profit of ROL 75,076,992
thousand.
The reconciliation between the fiscal result and the
accounting result is presented below:
Company Country of origin Address
S.C. Eficienta S.R.L. Romania Oras, Ardeziei Street, no. 137
S.C. Contractul S.R.L. Romania Oras, Victoriei Street, no. 20
1. accounting profit for the year ROL 69,076,992 thousand
2. non taxable revenues ROL 61,077,251 thousand
3. total non deductible expenses ROL 67,077,251 thousand
4. fiscal profit (row1-row2+row3) ROL 75,076,992 thousand
5. recoverable fiscal loss from previous years ROL (260,796,884) thousand
6. accumulated fiscal loss (row4+row5) ROL (185,719,892) thousand
7. tax on profit 25 % ROL 0 thousand
10.4 Details on turnover
The turnover for 2003 is ROL 690,107,045 thousand out
of which 95.8% relates to exports and 4.2% relates to
domestic market.
based in Romania, Str. Nova, nr 3, Bucharest.
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32 I l l u s t r a t i v e F i n a n c i a l S t a t e m e n t s
and is stated in the service contract signed by the
company and by Audit S.R.L.
E
X A
M
PL E
10.5 The amount of future payments for rent and operating
lease contracts.
Rent
Thousand ROL Instalments to be paid at Instalments to be paid at
31 December 2002 31 December 2003
Less than 1 year 3,325,623 3,831,413
Between 1 and 5 years 6,964,497 8,275,837
More than 5 year - -
Total 10,290,120 12,107,250
Operating leasing
Thousand ROL Instalments to be paid at Instalments to be paid at
31 December 2002 31 December 2003
Less than 1 year 1,421,450 1,421,450
Between 1 and 5 years 1,097,965 1,729,850
More than 5 year - -
Total 2,519,415 3,151,300
10.6 Auditors
The Company's auditor is Audit S.R.L. The audit fees are
based on the existing agreement between the two parties
10.7 Security granted
a) Letters of guarantee (collateral cash)
Contract no. Beneficiary EUR544 Foreign Business AG 69,025
545 Foreign Business AG 69,025
553 Foreign Business AG 30,677
555 Foreign Business AG 107,371
Total 276,098
Contract no. Beneficiary EUR
566 Swedish Business 60,000
Total 60,000
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Note 11. Inventory
b) Letters of guarantee in the favor of Customs Security
Bureau Constanta (collateral cash)
booked a provision for work in progress amounting to
ROL 26,895,398 thousand.
10.8 Pledges received
There were no letters of guarantee issued in the
Company's favor.
E
X A
M
PL E
Thousand ROL 31 December 2002 31 December 2003
Raw materials 12,516,187 25,253,066
Provisions for raw materials (172,565) (1,115,892)
Consumables 4,466,108 7,535,193
Provisions for consumables (311,922) (784,817)
Small inventory 250,941 1,074,262
Work in progress 162,308,928 150,850,786
Provisions for work in progress (35,031,767) (26,895,398)
Semi-finished goods, finished
goods, residual products 193 12
Inventory held by third parties 1,974,742 164,099
Goods for resale and packaging
materials 177,689 170,452Advances for inventory purchase 18,249,574 9,212
Total 164,428,108 156,260,975
The recoverability of the debt related to Utility
International litigation was evaluated by the management
of the Company as doubtful and the Company has
Beneficiary Value ROL
Duane 600,000,000
Duane 600,000,000
Total 1,200,000,000
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34 I l l u s t r a t i v e F i n a n c i a l S t a t e m e n t s
Note 12. Cash and cash equivalents
Note 13. Lease obligation
Financial leases as at 31 December 2003 are as
follows:
related parties are as follows:
E
X A
M
PL E
Thousand ROL 31 December 2002 31 December 2003
Cash at bank 14,899,201 146,978,987
Petty cash 5,434 6,320
Other cash and cash equivalents 79,638 74,299
Total 14,984,273 147,059,606
Thousand ROL 31 December 31 December 31 December 31 December
2002 2003 2003 2003
Period Payments Interest Principal
Less than one year - 1,371,803 124,709 1,247,094
Between one year and five years - - - -More than five years - - - -
Total - 1,371,803 124,709 1,247,094
supply with a total value of 64,283 EURO; at 31
December 2003 eight installments had been paid and the
remaining ten installments amount to 35,714 EURO.
S.C. Alfa S.R.L. concluded a lease agreement (contract
no. 4002/03/01/2003) with SC Leasing Romania for the
acquisition of equipment necessary in the acetylene
Note 14. Related parties14.1 Balances as at 31 December 2003
Thousand ROL 31 December 2002 31 December 2003
Receivables from related parties
S.C. Eficienta S.R.L. 2,790,676 3,637,973
S.C. Contractul S.R.L. 1,741,780 1,771,443
Total 4,532,456 5,409,416
As at 31 December 2003, the amounts receivable from
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X A
M
PL E
Thousand ROL 31 December 2002 31 December 2003
Payables to related partiesTrade Suppliers (related parties)
S.C. Eficienta S.R.L. 20,137,624 35,476,432
S.C. Contractul S.R.L. 20,893,299 14,993,841
Suppliers of fixed assets (related parties)
S.C. Contractul S.R.L. - 10,250,670
Total 41,030,923 60,720,943
14.2 Transactions with related parties
14.2.1 Purchases
Thousand ROL 2002 2003
Fixed assets purchases
S.C. Contractul S.R.L. 10,191,496 10,250,670
Total 10,191,496 10,250,670
Thousand ROL 2002 2003
Raw material purchases
S.C. Eficienta S.R.L. 32,135,754 45,908,220
S.C. Contractul S.R.L. 31,410,773 44,535,236
Total 63,546,527 90,443,456
Thousand ROL 2002 2003
Purchases of consumables
S.C. Eficienta S.R.L. 559,301 654,003
Total 559,301 654,003
As at 31 December 2003, the balances payable to
related parties are as follows:
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At 31 December 2003, the deferred tax asset was not
recorded in the financial statements as its realisation
was not considered probable. The deferred tax asset is
generated by the items presented in the following table,
E
X A
M
PL E
14.2.2 Sales
Thousand ROL 2002 2003
Sales of merchandise
S.C. Eficienta S.R.L. 2,060,952 2,265,374
Total 2,060,952 2,265,374
Note 15. Deferred tax
Thousand ROL 31 December 2003
Property, plant and equipment 1,013,129
Intangible assets 506,565
Investment property -
Other investments 593,948
Inventories 848,497
Interest-bearing loans and borrowings -
Employee benefits 254,549
Deferred government grants 151,964
Provisions -
Other items 1,696,994
Tax value of loss carried forward -
Total 5,065,646
Alfa S.A. is involved in the following litigations:
Litigation with Alfa Standard Corporation for the
recovery of the amount of USD 325,000 relating to
services rendered. As the debt under litigation is covered
by a letter of guarantee issued by Corporation Bank in
favour of Alfa S.A., the Company did not provide for this
amount. Alfa Standard Corporation required additionalpenalties amounting to USD 162,000 for not meeting the
deadline of the repayments, but lawyers estimate the
probability of loosing the law suit as being low.
Litigation with S.C. Popescu S.A. for the recovery of
penalties computed in relation with delivered equipment.
According to the Company's lawyers, the probability that
the Company will lose the litigation and incur losses is
remote. Therefore, no provision was recorded in the
financial statements.
Note 16. Contingent liabilities
representing temporary differences between their fiscal
base and their accounting base, and by the fiscal loss
brought forward (refer to note 10.3).
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X A
M
PL E
Shareholder % Number of shares Value of capital
(thousand ROL)
Beta S.A. 87.11 13,710,021 342,750,525
Company M 5.00 786,541 19,663,515
Company T. 1.80 282,963 7,074,075
Other shareholders 6.09 958,943 23,973,585
Total 100 15,738,468 393,461,700
Note 17. Environment
Romania is currently undergoing a process of accelerated
harmonization of the environmental regulations with the
European Union legislation in force. As of 31 December
2003, the Company does not consider the costs related
to environment issues to be significant, consequently it
did not record any liability relating to anticipated costs,
including legal and consultancy fees, research,
development and implementation of projects concerning
the protection of the environment.
Note 18. Subsequent events
The General Shareholders Meeting has decided on 9
January 2004 the increase of the share capital by cash
subscription - the ROL equivalent of USD 2,880,000,
representing 3,862,771 shares with a nominal value ofROL 25,000. As the other shareholders did not take their
preemptive right, the amount was subscribed and paid in
entirely by Beta S.A.
The share capital increase was recorded at the Trade
Register on 30 March 2004. The structure of theshareholders of the Company after the share capital
increase is as follows:
Note 19. Risk Management
The main risks that the Company may face and the
measures applicable are detailed below.
(i) Foreign currency risk and inflation
The Company carries on its activity in Romania, in a
hyperinflation environment. As a result there is a risk of
net monetary assets (denominated in ROL) devaluation.
At present, there are no markets outside Romania for
ROL conversion in other currencies.
The inflation rate decreased constantly from 54.8% in
1999 to 17.8% in 2002 (2000:40.7%, 2001: 34.5%).
The local currency has suffered a steady devaluation
compared to EURO (the ROL-EURO exchange rate was
41,113 at 31 December 2003 compared to 34,919 at 31
December 2002).
(ii) Market risk
The Romanian Economy is in transition, and there exists
uncertainty regarding the future evolution of the political
and economic development. The management cannot
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38 I l l u s t r a t i v e F i n a n c i a l S t a t e m e n t sE
X A
M
PL E
foresee the changes that may occur in Romania and the
effects that these changes may have onto the financial
status, operating results and Company's cash flows.
(iii) Interest rate risk
The Company has concluded a short-term loan with Delta
Bank S.A. The interest rate is variable, being the bank
base rate plus a 1.5% margin.
(iv) Credit risk
In the normal course of its business, the Company is
subject to credit risk principally from trade debtors.
Management closely monitors its exposure to credit risk
on a regular basis. Credit risk with respect to trade
receivables is limited due to a large number of customers
comprising the Company's customer base. Accordingly,
management believes there are no significant
concentrations of credit risk.
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X A
M
PL EADDITIONAL DATA (not part of the financial statements)
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X A
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PL E
ADMINISTRATOR,
Name and surname ______________________
Signature _______________________________
Companys stamp
PREPARED BY,
Name and surname ______________________
Signature _______________________________
Companys stamp
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X A
M
PL E
PREPARED
BY
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Namean
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Signature
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Company
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ADMINISTRATOR
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Namean
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Company
sstamp
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42 I l l u s t r a t i v e F i n a n c i a l S t a t e m e n t sE
X A
M
PL E
A
DMINISTRATOR
,
Namean
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______________________
Signature
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Company
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43 I l l u s t r a t i v e F i n a n c i a l S t a t e m e n t sE
X A
M
PL E
A
DMINISTRATOR
,
Namean
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44 I l l u s t r a t i v e F i n a n c i a l S t a t e m e n t s
For further information, please contact:
KPMG Romania
BucharestCalea Serban Voda, 133Sector 4Tel: +40 (21) 336 22 66
Fax: +40 (21) 336 11 77
TimisoaraStr. Victor Babes nr. 17Timisoara, cod 300 595Tel: 0256 499 055 Fax: 0256 499 361
E-mail: kpmgro@kpmg.roWeb site: www.kpmg.ro
Contacts
Victor Kevehazi, Senior Partnervkevehazi@kpmg.ro
Bill Bowman, Partnerbbowman@kpmg.ro
John Lane, Partnerjohnlane@kpmg.ro
Serban Toader, PartnerStoader@kpmg.ro
Aura Giurcaneanu, Senior Manageragiurcaneanu@kpmg.ro
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