PT CG Power Systems Indonesia - Crompton Greavescgglobal.com/pdfs/annual-report/ar14-15/28. PT CG...
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PT CG Power Systems Indonesia
Financial statements as of March 31, 2015 andfor the year then ended with independent auditors’ report
PT CG POWER SYSTEMS INDONESIAFINANCIAL STATEMENTS
AS OF MARCH 31, 2015AND FOR THE YEAR THEN ENDED
WITH INDEPENDENT AUDITORS’ REPORT
Table of Contents
Page
Statement of Directors
Independent Auditors’ Report
Statement of Financial Position..…………………………………………………………………………… 1 - 2
Statement of Comprehensive Income …..………………………………………………………………… 3
Statement of Changes in Equity .…………………………………………………………………………. 4
Statement of Cash Flows …………………………………………………………………………………. 5 - 6
Notes to the Financial Statements ………………………………………………………………………… 7 - 41
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The accompanying notes form an integral part of these financial statements.
1
PT CG POWER SYSTEMS INDONESIASTATEMENT OF FINANCIAL POSITION
As of March 31, 2015(Expressed in United States Dollars, unless otherwise stated)
Notes 2015 2014
ASSETS
CURRENT ASSETSCash and cash equivalents 4 1,383,888 4,020,890Accounts receivable, net 5 24,583,794 26,193,019Unbilled receivables 14,273,895 8,067,340Costs and estimated earnings in excess of billings, net 6 10,323,237 -Inventories, net 7 16,067,489 15,252,467Prepaid tax 9a 2,385,388 1,798,187Derivative assets 10 393,129 -Loans to related parties 25c 45,404,573 43,730,340Other current assets 8 1,752,408 1,908,713
TOTAL CURRENT ASSETS 116,567,801 100,970,956
NON-CURRENT ASSETEstimated claims of refundable taxes 9b 9,557,094 7,984,982Fixed assets, net 11 15,290,484 16,250,922Deposits 423,305 175,707Deferred tax assets, net 9f - 26,472
TOTAL NON-CURRENT ASSETS 25,270,883 24,438,083
TOTAL ASSETS 141,838,684 125,409,039
LIABILITIES AND EQUITY
LIABILITIES
CURRENT LIABILITIESAccounts payable 12 25,930,664 19,740,557Billings in excess of costs and estimated earnings, net 15 - 2,134,031Taxes payable 9c 125,890 1,011,150Derivative liabilities 10 98,904 524,516Advances from customers 13 7,108,326 11,687,784Advances a related party 25d 1,702,108 -Accruals and provisions 14 9,064,398 5,717,899Short term employee benefits 960,566 674,942Bank overdraft 16 3,782,088 -
TOTAL CURRENT LIABILITIES 48,772,944 41,490,879
NON-CURRENT LIABILITIESDeferred tax liability, net 9f 527,547 -Provision for employee benefits 17 579,227 1,586,292
TOTAL NON-CURRENT LIABILITIES 1,106,774 1,586,292
TOTAL LIABILITIES 49,879,718 43,077,171
The accompanying notes form an integral part of these financial statements.
2
PT CG POWER SYSTEMS INDONESIASTATEMENT OF FINANCIAL POSITION (continued)
As of March 31, 2015(Expressed in United States Dollars, unless otherwise stated)
Notes 2015 2014
EQUITYShare capital - authorised 20,000 shares (Series A 19,000, Series B 1,000); issued and fully paid 12,057 shares of Series A and 635 shares of Series B of USD1,000 or Rp1,853,000 per share 18 12,692,000 12,692,000Hedging reserve 10 (181,611) (599,623)Retained earnings: Appropriated 19 2,538,400 2,538,400 Unappropriated 76,910,177 67,701,091
TOTAL EQUITY 91,958,966 82,331,868
TOTAL LIABILITIES AND EQUITY 141,838,684 125,409,039
The accompanying notes form an integral part of these financial statements.
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PT CG POWER SYSTEMS INDONESIASTATEMENT OF COMPREHENSIVE INCOME
For the Year ended March 31, 2015 (Expressed in United States Dollars, unless otherwise stated)
Notes 2015 2014
NET REVENUE 20 128,613,594 122,786,058
COST OF REVENUE 21 (102,177,465) (98,971,506)
GROSS PROFIT 26,436,129 23,814,552
OPERATING EXPENSES:General and administration expenses 23 (7,225,426) (5,913,031)Selling and marketing expenses 22 (3,303,623) (2,752,070)Foreign exchange (loss)/gain, net (2,612,158) 206,822Other operating expenses, net 24 (732,393) (103,574)
Total operating expenses (13,873,600) (8,561,853)
OPERATING INCOME 12,562,529 15,252,699
OTHER INCOME:Interest expense (170,840) (251,479)Interest income 513,126 460,852
342,286 209,373
INCOME BEFORE CORPORATE INCOME TAX 12,904,815 15,462,072
CORPORATE INCOME TAX:Current tax expense (3,141,710) (4,726,778)Deferred tax expense (554,019) (48,347)
(3,695,729) (4,775,125)
INCOME FOR THE YEAR 9,209,086 10,686,947
OTHER COMPREHENSIVE INCOME:Cash flow hedges 10 418,012 (161,141)
TOTAL COMPREHENSIVE INCOME 9,627,098 10,525,806
The accompanying notes form an integral part of these financial statements.
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PT CG POWER SYSTEMS INDONESIASTATEMENT OF CHANGES IN EQUITY
Year ended March 31, 2015(Expressed in United States Dollars, unless otherwise stated)
Retained Earnings Share Hedging Total Capital Reserve Appropriated Un-appropriated Equity
Balance as of March 31, 2013 12,692,000 (438,482) 2,538,400 57,014,144 71,806,062
Total comprehensive income for the year - (161,141) - 10,686,947 10,525,806
Balance as of March 31, 2014 12,692,000 (599,623) 2,538,400 67,701,091 82,331,868
Total comprehensive income for the year - 418,012 - 9,209,086 9,627,098
Balance as of March 31, 2015 12,692,000 (181,611) 2,538,400 76,910,177 91,958,966
The accompanying notes form an integral part of these financial statements.
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PT CG POWER SYSTEMS INDONESIASTATEMENT OF CASH FLOWS
For the Year ended March 31, 2015 (Expressed in United States Dollars, unless otherwise stated)
Notes 2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES:Income before corporate income tax expense 12,904,815 15,462,072Adjustments to reconcile income before corporate income tax expense to net cash provided (used in)/by operating activities: Depreciation expense 11 1,667,263 1,524,298 Interest expense 170,840 251,479 Provision for employee benefits 17 919,637 1,037,171 Reversal allowance for impairment of trade receivables 5 - (314,000) Reversal for decline in value of inventory 7 (100,922) (138,831) Loss/(gain) on disposal of fixed assets 48,997 (6,099) Unrealized foreign exchange gain 1,272,032 (128,675) Interest income (513,126) (460,852)
16,369,536 17,226,563Changes in operating assets and liabilities: Accounts receivables 1,148,739 (4,425,308) Unbilled receivables (6,206,555) (5,139,391) Costs and estimated earnings in excess of billings (10,323,237) 8,805,221 Billings in excess of cost and estimated earnings (2,134,031) 2,134,031 Inventories (714,100) 3,030,723 Prepaid taxes (587,201) (745,249) Derivatives, net (400,729) (97,547) Other current assets 156,305 2,018,905 Estimated claim for refundable tax and tax assessments under appeal (318,717) 1,216,117 Deposits (247,598) (37,940) Accounts payable 5,170,674 (2,201,223) Taxes payable (92,452) 95,182 Advances from customers (4,579,458) 580,171 Advances from a related party 1,702,108 - Accruals and provisions 3,346,499 (1,882,881) Short term employee benefit 285,624 52,942
Cash generated from operations (13,794,129) 3,403,753
Corporate income tax paid (5,187,913) (5,743,688) Employee benefit paid 17 (249,888) (101,709) Contribution to plan assets (1,468,927) -
Net cash (used in)/provided by operating activities (4,331,321) 14,784,919
The accompanying notes form an integral part of these financial statements.
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PT CG POWER SYSTEMS INDONESIASTATEMENT OF CASH FLOWS (continued)
For the year ended March 31, 2015 (Expressed in United States Dollars, unless otherwise stated)
Notes 2015 2014
CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of fixed assets 11 82,546 7,633Acquisitions of fixed assets 11 (838,368) (3,161,658)Loans to related parties (1,208,849) (6,972,500)Interest received 47,742 13,771
Net cash used in investing activities (1,916,929) (10,112,754)
CASH FLOWS FROM FINANCING ACTIVITIES:Interest paid (170,840) (251,479)Increase/(decrease) in bank overdraft 3,782,088 (4,204,097)
Net cash provided/(used in) by financing activities 3,611,248 (4,455,576)
NET (DECREASE)/INCREASE IN CASH ANDCASH EQUIVALENTS (2,637,002) 216,589
CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 4,020,890 3,804,301
CASH AND CASH EQUIVALENTS AT ENDOF YEAR 4 1,383,888 4,020,890
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
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1. GENERAL
PT CG Power Systems Indonesia, (the “Company”), was established under the name of PT PauwelsTrafo Asia within the framework of the Foreign Investment Law No. 1 of 1967 as amended by lawNo. 11 of 1970 based on Notarial Deed No. 47 of Irawati Marzuki Arifin, S.H., dated November 20,1990. The Deed of Establishment was approved by the Minister of Justice of the Republic of Indonesiain Decision Letter No. C2-181O.HT.01.92 dated February 25, 1992.
The Company's Articles of Association have been amended several times, most recently by NotarialDeed No. 148 of Sutjipto, SH., M.Kn. dated August 25, 2011, to approve the appointment of theCompany’s Board of Commissioners and Directors for a period of five years. This change wasapproved by the Minister of Law and Human Rights of the Republic of Indonesia in Decision LetterNo. AHU-AH.01.10-31715 dated October 4, 2011.
The Company started commercial operations in March 1993. The Company engages in themanufacturing, marketing and maintenance of power transformers and sells its products to domesticand international markets, including Australia, New Zealand, Saudi Arabia, Africa, North America andSoutheast Asia. The Company also engages in the field of engineering, procurement and constructionservice in relation with the electricity transformers. The Company’s plant and head office are located inCileungsi, Bogor, West Java.
As at March 31, 2015, the Company has 453 permanent employees (2014: 447 permanentemployees) (unaudited).
The composition of the Board of Commissioners and Board of Directors as of March 31, 2015 and2014 are as follows:
2015 2014
President Commissioner Mr. Jean-Michel Aubertin Mr. Jayant Govindrao KulkarniCommissioners Mr. Trilochan Sar
Mr. Syahril Anwar Mr. Madhav Acharya
Mr. Syahril AnwarPresident Director Mr. Jan Prins Mr. Jan PrinsDirectors Mr. Abhaya Bhushan Chatterjee Mr. Abhaya Bhushan Chatterjee
Mr. Paolo Ruggero Damiani Mr. Trilochan Sar
The composition of the Company’s Board of Commissioners and Board of Directors as of March 31,2015 is based on Notarial Deed No. 64 of Aryanti Artisari, S.H., M. Kn., dated March 19, 2015, whichwas acknowledged by the Minister of Justice and Human Rights through his letter No. AHU-AH.01.03.0017704 dated March 19, 2015.
As March 18, 2015, Mr. Paolo Ruggero Damiani submitted resignation letter to the company. Up to thecompletion date of financial statement, the resignation of Mr. Paolo Ruggero Damiani has not beenlegalized through notarial deed.
The financial statements were completed and authorized for issuance by the Company’s managementon April 22, 2015.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Preparation of The Financial Statements
The financial statements have been prepared in accordance with Indonesian Financial AccountingStandards (“SAK”), which comprise of the Statements of Financial Accounting Standards (“PSAK”)and the Interpretations Financial Accounting Standards (“ISAK”) issued by the FinancialAccounting Standards Board of the Indonesian Institute of Accountants.
The financial statements have been prepared using the accrual basis, and the measurement basisused is historical cost, except for certain accounts which are measured on the basis as describedin the related accounting policies.
The statement of cash flow is prepared based on the indirect method by classifying cash flows onthe basis of operating, investing and financing activities using the indirect method.
The Company's financial statements are presented in US Dollars which is the functional currencyof the Company.
The financial reporting period of the Company is April 1 - March 31.
b. Foreign Currency Transactions and Balances
Transaction in foreign currencies are initially recorded by the Company at their respectivefunctional currency rate prevailing at the date of transaction. Monetary assets and liabiltiesdenominated in foreign currencies are translated into the functional currency at rates of exchangeat the reporting date.
The exchange rates used as of March 31, 2015 and 2014 are as follows (in full amount):
2015 2014
Rupiah/US Dollar 1 13,080 11,366 New Zealand Dollar/US Dollar 1 0.75 0.87 Euro/US Dollar 1 1.07 1.35 Singapore Dollar/US Dollar 1 0.73 0.79 Australian Dollar/US Dollar 1 0.76 0.93 Great Britain Poundsterling/US Dollar 1 1.48 1.66 Swedian Kroner/US Dollar 1 0.12 0.15 France Swiss/US Dollar 1 1.03 1.13
c. Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and in banks, short-term deposits with originalmaturities of three months or less, at the time of palecements and not restricted as to use.
d. Accounts Receivable
Accounts receivables are stated at original invoice amount less an allowance for impairment. Theaccounting policy for allowance for impairment as of March 31, 2015 and 2014 is described inNote 2e.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e. Financial Instruments
a. Financial Assets
Initial recognition and measurement
Financial assets within the scope of PSAK No. 55 (Revised 2011) are classified as financialassets at fair value through profit or loss, loans and receivables, held-to-maturity investments,or available-for-sale financial assets, as appropriate. The Company determine theclassification of its financial assets after initial recognition and, where allowed and appropriate,re-evaluate this designation at each financial year-end.
When financial assets are initially recognized, they are measured at fair value, plus, in thecase of financial assets not at fair value through statement of income, directly attributabletransaction costs.
The Company’s financial assets include cash and cash equivalents, trade receivable, unbilledreceivable, other receivables and loans to related parties which fall under the loans andreceivables category.
The Company’s financial assets also consist of derivative assets which are classified underfinancial assets at fair value through profit or loss.
Subsequent measurement
Loans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market. Such financial assets are carried at amortized costusing the effective interest method. Gains and losses are recognized in the statement ofcomprehensive income when the loans and receivables are derecognized or impaired, as wellas through the amortization process.
Derivative assets are subsequently measured at fair value (Note 2f).
Derecognition
A financial asset (or where applicable, a part of a financial asset or part of a group of similarfinancial assets) is derecognized when: (1) the rights to receive cash flows from the assethave expired; or (2) the Company has transferred its rights to receive cash flows from theasset or has assumed an obligation to pay the received cash flows in full without materialdelay to a third party under a “pass-through” arrangement; and either (a) the Company hastransferred substantially all the risks and rewards of the asset, or (b) the Company has neithertransferred nor retained substantially all the risks and rewards of the asset, but has transferredcontrol of the asset.
Impairment of Financial Assets
The Company assesses at each balance sheet date whether there is any objective evidencethat a financial asset or a group of financial assets is impaired. A financial asset or a group offinancial assets is deemed to be impaired if, and only if, there is objective evidence ofimpairment as a result of one or more events that has occurred after the initial recognition ofthe asset (an incurred ‘loss event’) and that loss event has an impact on the estimated futurecash flows of the financial asset or the group of financial assets that can be reliably estimated.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
10
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e. Financial Instruments (continued)
a. Financial Assets (continued)
Assets carried at amortized cost
The Company first assesses individually whether objective evidence of impairment existsindividually for financial assets that are individually significant, or collectively for financialassets that are not individually significant. If the Company determines that no objectiveevidence of impairment exists for an individually assessed financial asset, whether significantor not, it includes the asset in financial assets with similar credit risk characteristics andcollectively assesses them for impairment. Assets that are individually assessed forimpairment and for which an impairment loss is, or continues to be, recognized are notincluded in a collective assessment of impairment.
The Company assesses whether objective evidence of impairment exists collectively. If thereis objective evidence that an impairment loss on financial assets carried at amortized cost hasbeen incurred, the amount of the loss is measured as the difference between the asset'scarrying amount and the present value of estimated future cash flows discounted at thefinancial asset's original effective interest rate. The carrying amount of the asset is reducedthrough the use of an allowance account. The impairment loss is recognized in the statementof comprehensive income.
When the asset becomes uncollectible, the carrying amount of impaired financial assets isreduced directly or if an amount has been charged to the allowance account, the amountscharged are written off against the carrying value of the financial asset.
To determine whether there is objective evidence that an impairment loss on financial assetshas been incurred, the Company considers factors such as the probability of insolvency orsignificant financial difficulties of the debtor and default or significant delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the decrease canbe related objectively to an event occurring after the impairment was recognized, thepreviously recognized impairment loss is reversed to the extent that the carrying amount ofthe asset does not exceed its amortized cost at the reversal date. The amount of reversal isrecognized in the statement of comprehensive income.
b. Financial Liabilities
Initial recognition and measurement
Financial liabilities within the scope of PSAK No. 55 (Revised 2011) are classified as financialliabilities at fair value through profit and loss, financial liabilities measured at amortized cost, oras derivatives designated as hedging instruments in an effective hedge, as appropriate. TheCompany determine the classification of its financial liabilities at initial recognition.
Financial liabilities are recognized initially at fair value, plus, in the case of financial liabilitiesother than derivatives, directly attributable transaction costs.
The Company’s financial liabilities include accounts payable, accruals and short-term loanswhich are classified under financial liabilities measured at amortized cost.
Derivative liabilities is classified under financial liabilities at fair value through profit and loss.Derivative liabilities is subsequently measured at fair value (Note 2f).
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e. Financial Instruments (continued)
b. Financial Liabilities (continued)
Subsequent measurement
Subsequent to initial recognition, all financial liabilities are measured at amortized cost usingthe effective interest method, except for derivatives, which are measured at fair value, unlessthe effect of discounting would be immaterial, in which case they are stated at cost.
For financial liabilities other than derivatives, gains and losses are recognized in the statementof comprehensive income when the liabilities are derecognized and through the amortizationprocess. Any gains or losses arising from changes in fair value of derivatives are recognized inthe statement of comprehensive income. Net gains or losses on derivatives include exchangedifferences
Derecognition
A financial liability is derecognized when the obligation specified in the contract is dischargedor cancelled or expired. When an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability aresubstantially modified, such an exchange or modification is treated as a derecognition of theoriginal liability and the recognition of a new liability, and the difference in the respectivecarrying amounts is recognized in the statement of comprehensive income.
c. Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the net amount are reported in thestatement of financial position if, and only if, there is a currently enforceable legal right to offsetthe recognized amounts and there is an intention to settle on a net basis, or to realize theassets and settle the liabilities simultaneously.
d. Fair Value of Financial Instruments
The fair value of financial instruments that are actively traded in organized financial markets isdetermined by reference to quoted market bid prices at the close of business at the end of thereporting period. For financial instruments where there is no active market, fair value isdetermined using valuation techniques permitted by PSAK No. 55 (Revised 2011), suchtechniques may include using recent arm’s length market transactions; reference to thecurrent fair value of another instrument that is substantially the same; discounted cash flowanalysis; or other valuation models.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
12
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f. Derivative Financial Instruments and Hedge Accounting
Derivatives are initially recognized at fair value on the date the derivative contract is entered intoand are subsequently re-measured at their fair value. The method of recognizing the resulting gainor loss depends on whether the derivative is designated as a hedging instrument, and if so, thenature of the item being hedged The Company designates derivatives as hedges of a particularrisk associated with a recognized asset of liability or a highly probable forecast transaction (cashflow hedge).
The Company documents at the inception of the transaction the relationship between hedginginstruments and hedged items, as well as its risk management objective and strategy forundertaking various hedge transactions. The Company also documents its assessment, both athedge inception and on an ongoing basis, of whether the derivatives that are used in hedgingtransactions are highly effective in offsetting changes in cash flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify ascash flow hedges is recognized in equity. The gain or loss relating to the ineffective portion isrecognized immediately in the profit or loss within foreign exchange gain/(loss) - net.
Amounts accumulated in equity are recycled in the profit or loss in the periods when the hedgeditem affects profit or loss (for example, when the forecast sale that is hedged takes place).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria forhedge accounting, any cumulative gain or loss existing in equity at that time remains in equity andis recognized when the forecast transaction is ultimately recognized in the profit or loss. When aforecast transaction is no longer expected to occur, the cumulative gain or loss that was reportedin equity is immediately transferred to the profit or loss within foreign exchange gain/(loss) - net.
Changes in the fair value of derivative instruments that do not qualify for hedge accounting arerecognized immediately in the profit or loss.
g. Related Parties Transactions
The Company conducts transactions with related parties. The definition of related party is inaccordance with “PSAK” No. 7 (Revised 2010), “Related Party Disclosures”.
All material transactions with related parties are disclosed in the notes to the Company’s financialstatements.
The nature and extent of transactions with related parties are described in Note 25.
h. Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined based on themoving average method and includes an appropriate proportion of directly attributable fixed andvariable overheads. Net realisable value is the estimate of the selling price in the ordinary courseof business, less the costs of completion and selling expenses.
Allowance for decline in value of inventory is determined on the basis of estimated future usage orsale of individual inventory items.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
13
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i. Fixed Assets
Fiixed assets are stated at cost less accumulated depreciation and impairment losses. Such costincludes the cost of replacing part of the fixed assets when that cost is incurred, if the recognitioncriteria are met. Likewise, when a major inspection is performed, its cost is recognized in thecarrying amount of the fixed assets as a replacement if the recognition criteria are satisfied. Allother repairs and maintenance costs that do not meet the recognition criteria are recognized in thestatement of comprehensive income as incurred.
Depreciation is computed using the straight-line or double-declining balance methods based on theestimated useful lives or depreciation rates of the assets as follows:
Years Straight-line: Buildings 25 Machinery and equipment 10 - 20
Rates Double declining-balance: Transportation equipment 50% Office furniture, fixtures and equipment 25%
Land is stated at cost and is not depreciated.
An item of fixed assets is derecognized upon disposal or when no future economic benefits areexpected from its use or disposal. Any gain or loss arising on derecognition of the asset(calculated as the difference between the net disposal proceeds and the carrying amount of theasset) is included in the statement of comprehensive income in the period the asset isderecognized.
The residual values, useful lives and methods of depreciation of fixed assets are reviewed, andadjusted prospectively if appropriate, at each financial year end.
Construction in progress represents the accumulated costs of materials and other relevant costsup to the date when the asset is complete and ready for use. These costs are reclassified to therespective fixed asset accounts when the asset has been made ready for use.
When the carrying amount of an asset exceeds its estimated recoverable amount, the asset iswritten down to its estimated recoverable amount, which is determined as the higher of the netselling price or value in use.
j. Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance ofthe arrangement at the inception date and whether the fulfillment of the arrangement is dependenton the use of a specific asset and the arrangement conveys a right to use the asset. Leases thattransfer to the lessee substantially all of the risks and rewards incidental to ownership of theleased item are classified as finance leases. Leases which do not transfer substantially all of therisks and rewards incidental to ownership of the leased item are classified as operating leases.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
14
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j. Leases (continued)
The Company as a lessee
i) Under a finance lease, the Company is required to recognize assets and liabilities in itsstatement of financial position at amounts equal to the fair value of the leased property or, iflower, the present value of the minimum lease payments, each determined at the inception ofthe lease. Minimum lease payments are required to be apportioned between finance chargesand the reduction of the outstanding liability. The finance charges are required to be allocatedto each period during the lease term so as to produce a constant periodic rate of interest onthe remaining balance of the liability. Contingent rents are required to be charged asexpenses in the periods in which they are incurred. Finance charges are reflected in thefinancial statement of comprehensive income. Capitalized leased assets (presented are partof fixed assets) are depreciated over the shorter of the estimated useful life of the asset andthe lease term, if there is no reasonable certainty that the Company will obtain ownership ofthe asset by the end of the lease term.
ii) Under an operating lease, the related lease payments are recognized in statement ofcomprehensive income on a straight-line basis over the lease term.
k. Impairment of Non-Financial Assets
The Company assess at each annual reporting period whether there is an indication that an assetmay be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e.an intangible asset with an indefinite useful life, or goodwill acquired in a business combination) isrequired, the Company makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or Cash Generating Unit (CGU)’s fairvalue less costs to sell and its value in use, and is determined for an individual asset, unless theasset does not generate cash inflows that are largely independent of those from other assets orgroups of assets. Where the carrying amount of an asset exceeds its recoverable amount, theasset is considered impaired and is written down to its recoverable amount. Impairment losses ofcontinuing operations are recognized in statement of comprehensive income as “impairmentlosses”. In assessing the value in use, the estimated net future cash flows are discounted to theirpresent value using a pretax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. In determining fair value less costs to sell,recent market transactions are taken into account, if available. If no such transactions can beidentified, an appropriate valuation model is used to determine the fair value of the assets. Thesecalculations are corroborated by valuation multiples or other available fair value indicators.
Impairment losses of continuing operations, if any, are recognized as profit or loss under expensecategories that are consistent with the functions of the impaired assets.
l. Trade and Other Payables
Trade and other payables are obligation to pay for goods or services that have been acquired inthe ordinary course of business from suppliers. The accounting policy for trade and other payablesas of March 31, 2015 and 2014 is described in Note 2e.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
15
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
m. Provision
Provisions are recognized when the Company has a present obligation (legal or constructive)where, as a result of a past event, it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation and a reliable estimate can be made of the amountof the obligation.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimates. Ifit is no longer probable that an outflow of resources embodying economic benefits will be requiredto settle the obligation, the provision is reversed.
n. Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of newshares (if any) are shown in equity as a deduction, net of tax, from the proceeds.
o. Project work in progress, Revenue and Expense Recognition
Revenue from the sale of products is recognised when all significant risks and rewards ofownership have been transferred to the customers, net of returns, discounts, sales incentives andvalue added tax.
Revenue from construction contract is accounted for using the percentage of completion basis,after management’s assessment of each individual contract. Stage of completion is measured byreference to costs incurred to date as a percentage of total contract cost. All foreseeable lossesare recognised as soon as they are apparent. Project work in progress is valued with reference tocost plus profit recognised to date.
Expenses are recognised when they are incurred (accrual basis).
Contract cost includes direct labour and overheads that relate to specific contracts, and theappropriate portion of those costs which can be attributed to contract activity in general and whichcan be allocated on a reasonable basis. Amounts provided for losses on contracts and progressbillings, are deducted from the amount of the project cost at valuation.
Revenue in excess of the amount billed is recorded as an asset, in project work in progress.Progress billing in excess of revenue is recorded as a liability, in advance from customers.
p. Corporate Income Tax
Current tax expense is determined based on the estimated taxable income for the year computedusing prevailing tax rates.
The Company presented adjustments of income tax from previous years, if any, as part of “CurrentTax (Expense)/Benefit” in the statement of comprehensive income.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
16
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
p. Corporate Income Tax (continued)
Deferred tax assets and liabilities are recognized for the future tax consequences attributable todifferences between the financial statements carrying amounts of existing assets and liabilities andtheir respective tax bases. Deferred tax liabilities are recognized for all taxable temporarydifferences and deferred tax assets are recognized for deductible temporary differences and carryforward tax benefit of unused fiscal losses to the extent that it is probable that taxable income willbe available in future periods against which the deductible temporary differences and carry forwardtax benefit of unused fiscal losses can be utilized.
Deferred tax is calculated at the tax rates that have been enacted or substantially enacted at thereporting date. Deferred tax is charged or credited in the statement of comprehensive income,except when it relates to items charged or credited directly to equity, in which case the deferred taxis also charged or credited directly to equity.
Deferred tax assets and liabilities are offset in the statement of financial position, except if theseare for different legal entities, in the same manner the current tax assets and liabilities arepresented.
Amendments to taxation obligation are recorded when an assessment is received or, if appeal isapplied, when the results of the appeal are received. The additional taxes and penalty imposedthrough Tax Assessment Letter (“SKP”) are recognized as income or expense in the current periodprofit or loss, unless objection/appeal action is taken. The additional taxes and penalty imposedthrough SKP are deferred as long as they meet the asset recognition criteria.
q. Provision for Employee Benefits
Short-term employee benefits
Short-term employee benefits are recognised when they accrue to the employees.
Pension benefits and other post-employment benefits
The cost of providing employee benefits under the Law is determined using the “Projected UnitCredit” actuarial valuation method. Actuarial gains and losses are recognized as income orexpense when the net cumulative unrecognized actuarial gains and losses for each individual planat the end of the previous reporting year exceeded 10% of the defined benefit obligation at thatdate. These gains or losses are recognized on a straight-line basis over the remaining workinglives of each employee.
The Company also provides other post-employment termination, which is separation pay. Theseparation pay benefit is paid to employees in the case of voluntary resignation, subject to aminimum number of years of service. This benefit has been accounted for using the samemethodology as for the defined benefit pension plan.
Other long-term benefits
The Company also provides other long-term employee benefits as per collective labor agreementsuch as long service leave and jubilee awards. Entitlement to these benefits is usually based onthe employee remaining in service up to retirement age and the completion of a minimum serviceperiod. The expected costs of these benefits are accrued over the period of employment, using anaccounting methodology similar to that for defined benefit pension plans, but in a simplified form.These obligations are valued annually by independent qualified actuary.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
17
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
r. Segment Information
A segment is a distinguishable component of the Company that is engaged either in providingcertain products (business segment), or in providing products within a particular economicenvironment (geographical segment), which is subject to risks and rewards that are different fromthose in other segments.
Segment revenue, expenses, results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis to that segment. They aredetermined before intra-group balances and intra-group transactions are eliminated.
s. New and Revised Accounting Standards that have been Published but not yet Effective
The following are several published accounting standards by the Indonesian Financial AccountingStandards Board (“DSAK”) that are considered relevant to the financial reporting of the Companybut not yet effective for 2014 financial statements are as follows:
i) PSAK 1 (2013): Presentation of Financial Statements, adopted from IAS 1, effectiveJanuary 1, 2015
ii) PSAK 24 (2013): Employee Benefits, adopted from IAS 19, effective January 1, 2015iii) PSAK 46 (2014): Income Taxes, adopted from IAS 12, effective January 1, 2015 PSAK 50
(2014): Financial Instruments: Presentation, adopted from IAS 32, effective January 1, 2015iv) PSAK 48 (2014): Impairment of Assets, adopted from IAS 36, effective January 1, 2015v) PSAK 50 (2014): Financial Instruments: Presentation, adopted from IAS 32, effective
January 1, 2015vi) PSAK 55 (2014): Financial Instruments: Recognition and Measurement, adopted from IAS
39, effective January 1, 2015vii) PSAK 60 (2014): Financial Instruments: Disclosures, adopted from IFRS 7, effective January
1, 2015viii) PSAK 68: Fair Value Measurement, adopted from IFRS 13, effective January 1, 2015ix) ISAK 26 (2014): Reassessment of Embedded Derivatives, adopted from IFRIC 9, effectively
January 1, 2015
The Company is presently evaluating and has not determined the effects of the revised and newPSAK on the financial statements.
3. SOURCE OF ESTIMATION UNCERTAINTY
The preparation of the Company’s financial statements requires management to make judgments,estimates and assumptions that affect the reported amounts of revenues, expenses, assets andliabilities, and the disclosure of contingent liabilities, at the end of the reporting period. Uncertaintyabout these assumptions and estimates could result in outcomes that require a material adjustment tothe carrying amount of the asset and liability affected in future periods.
Judgments
The following judgments are made by management in the process of applying the Company’saccounting policies that have the most significant effects on the amounts recognized in the financialstatements:
Classification of Financial Assets and Financial Liabilities
The Company determined the classifications of certain assets and liabilities as financial assets andfinancial liabilities by judging if they meet the definition set forth in PSAK No. 55 (Revised 2011).Accordingly, the financial assets and financial liabilities are accounted for in accordance with theCompany and accounting policies disclosed in Note 2e.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
18
3. SOURCE OF ESTIMATION UNCERTAINTY (continued)
Judgments (continued)
Determination of Functional Currency
Functional currency of the Company is the currency of the primary economic environment in which theCompany operates. The functional currency is a currency that affects the revenues and expenses ofthe services rendered. The Company determined that its functional currency is US Dollar.
Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year/period are disclosed below. The Company based itsassumptions and estimates on parameters available when the financial statements were prepared.Existing circumstances and assumptions about future developments may change due to marketchanges or circumstances arising beyond the control of the Company. Such changes are reflected inthe assumptions when they occur.
Employee Benefits
The present value of the pension obligations depends on a number of factors that are determined onan actuarial basis using a number of assumptions. The assumptions used in determining the netcost/(income) for pensions include the discount rate. Any changes in these assumptions will impact thecarrying amount of pension obligations.
The Company determines the appropriate discount rate at the end of each reporting period. This is theinterest rate that should be used to determine the present value of estimated future cash outflowsexpected to be required to settle the pension obligations. In determining the appropriate discount rate,the Company considers the interest rates of government bonds that are denominated in the currencyin which the benefits will be paid and that have terms to maturity approximating the terms of the relatedpension obligation.
Other key assumptions for pension obligations are based in part on current market conditions.Additional information is disclosed in Note 17.
Revenue Recognition
The Company uses the percentage of completion method in accounting for its fixed price contracts todeliver construction services. The use of percentage of completion method requires the Company toestimate the services performed to date as a proportion of the total services to be performed.
Warranty
The Company provide guarantee that their product is reliable and free from known defects and that theCompany will, without charge, repair or replace defective parts within 24 months and under certainconditions. Based on past experience, the Company believes that the actual warranty will not exceed0.5% of the actual sales for the last 24 months. The Company has, therefore, recognized provision forwarranty and recorded as a cost of sales.
Penalty on Late Delivery
Based on the sales agreement with the customer, the Company provide guarantee that they arereliable to provide and install the goods in their customer’s premises in the date stipulated in thecontracts. Failure to provide on the agreed date will resulted on penalty as per mentioned in thecontract. The Company has, therefore, recognized provision for penalty on late delivery based onfurther review over the actual recognized delivery date and the date in contract.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
19
3. SOURCE OF ESTIMATION UNCERTAINTY (continued)
Estimates and Assumptions (continued)
Depreciation of Fixed Assets
Management determines the estimated useful lives and related depreciation charges for the fixedassets. Management will revise the depreciation charge where useful lives are different to thosepreviously estimated, or it will write off or write down technically obsolete assets or non-strategicassets that have been abandoned or sold. Further details are disclosed in Note 11.
Income Tax
Significant judgment is involved in determining the provision for corporate income tax. There arecertain transactions and computation for which the ultimate tax determination is uncertain during theordinary course of business. The Company recognized liabilities for corporate income tax issues basedon estimates of whether additional corporate income tax will be due.
Uncertain Tax Exposure
In certain circumstances, the Company may not be able to determine the exact amount of its current orfuture tax liabilities due to ongoing investigations by the taxation authority. Uncertainties exist withrespect to the interpretation of complex tax regulations and the amount and timing of future taxableincome.
In determining the amount to be recognized in respect of an uncertain tax liability, the Companyapplies similar considerations as it would use in determining the amount of a provision to berecognized in accordance with PSAK No. 57, “Provisions, Contingent Liabilities and ContingentAssets”. The Company makes an analysis of all tax positions related to income taxes to determinewhether a tax liability on unrecognized tax benefit should be recognized.
Deferred Tax Assets
Deferred tax assets are recognized for all deductible temporary differences, to the extent that it isprobable that taxable profit will be available against which the deductible temporary differences.Significant management estimates are required to determine the amount of deferred tax assets thatcan be recognized, based upon the likely timing and the level of the future taxable profits together withfuture tax planning strategies.
Allowance for Decline in Value of Inventories
Allowance for declining value of inventories is estimated based on the best available facts andcircumstances, including but not limited to, the inventories’ own physical conditions, their marketselling prices, estimated costs of completion and estimated costs to sell. The allowance are re-evaluated and adjusted as additional information received affects the amount estimated. The carryingamounts of the Company’s inventories before allowance for declining value of inventories aredisclosed in Note 7.
Fair Value of Financial Instruments
Where the fair value of financial assets and financial liabilities recorded in the statement of financialposition cannot be derived from active markets, their fair value is determined using valuationtechniques including the discounted cash flow model. The inputs to these models are taken fromobservable markets where possible, but where this is not feasible, a degree of judgment is required inestablishing fair values. The judgments include considerations of inputs such as liquidity risk, creditrisk and volatility. Changes in assumptions about these factors could affect the reported fair value offinancial instruments.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
20
4. CASH AND CASH EQUIVALENTS
2015 2014
Cash on hand 11,298 14,222 Cash in banks: U.S. Dollar accounts 625,154 1,692,163 New Zealand Dollar accounts 620,760 689,218 Australian Dollar accounts 74,380 969,199 Indonesian Rupiah accounts 46,561 410,119 European Euro accounts 5,735 245,969
1,383,888 4,020,890
5. ACCOUNTS RECEIVABLES, NET
2015 2014
Third parties 24,533,610 26,113,259 Related party (Note 25a) 50,184 79,760
Total 24,583,794 26,193,019 Less: Allowance for impairment - -
Total 24,583,794 26,193,019
Changes in the allowance for impairment are as follows:
2015 2014
Beginning balance - (314,000) Reversal allowance for impairment - 314,000
Ending balance - -
As of March 31, 2015, management believes that all receivable are collectible and a provision forimpairment is not considered necessary. As of March 31, 2014, management believes that theallowance for impairment is adequate to cover possible losses on uncollectible accounts. Managementalso believes that there are no significant concentrations of credit risk in trade receivables.
6. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS
2015 2014
Contract costs incurred 54,064,765 - Estimated earnings 9,026,922 -
63,091,687 -Less: progress billings (52,768,450) -
10,323,237 -
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
21
7. INVENTORIES, NET
2015 2014
Project work in process 10,720,238 11,602,616 Raw materials 5,278,156 3,194,951 Materials in transit 275,768 762,495
16,274,162 15,560,062Allowance for decline in value of inventory (206,673) (307,595)
Total Inventories 16,067,489 15,252,467
Changes in the allowance for decline in value of inventory are as follows:
2015 2014
Beginning balance (307,595) (446,426) Reversal allowance for decline in value of inventory 100,922 138,831
Ending balance (206,673) (307,595)
At year end management believes that the provision for decline in value of inventories is adequate tocover possible losses due to the slow moving inventories.
8. OTHER CURRENT ASSETS
2015 2014
Advances for purchase of raw materials 1,323,083 1,378,312 Prepayments: Prepaid rentals 194,164 277,509 Prepaid insurance 107,794 211,710 Others 127,009 27,903
1,752,050 1,895,434 Other receivables 358 13,279
1,752,408 1,908,713
9. TAXATION
a. Prepaid taxes
2015 2014
Value added tax 2,385,388 1,798,187
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
22
9. TAXATION (continued).
b. Estimated claims of refundable taxes2015 2014
Refundable corporate income tax 2015 1,387,867 - Refundable corporate income tax 2014 - 160,828 Refundable corporate income tax 2011 440,009 440,009 Value added tax - fiscal year:
- 2015 912,356 -- 2014 5,791,926 1,745,143- 2013 593,860 5,542,217- 2012 431,076 96,785
9,557,094 7,984,982
Corporate Income Tax
Year Date of taxassessments
Totalunderpayments/(overpayment)
paidStatus as of March 31, 2015
2015 - US$1,387,867 Waiting for tax examination process
2014 - - Submitted a revised 2014 fiscal year corporateincome tax return which reported tax payableof US$67,072 while the Company reportedrefundable tax amounted to US$160,828. TheCompany charged the differences to currentyear statement of comprehensive income.
2011 April 25, 2013 US$440,009 Tax appeal process. Up to the completion dateof financial statements, the Tax Court has notyet issued any decision on such appeal letters.
Value Added Tax (VAT)
Tax periodDate of tax
assessmentsTotal
underpayments/(overpayment)
paid
Status as of March 31, 2015
January -February
2015
- US$912,356 Waiting for tax examination process
February -December
2014
February 5, 2015 US$5,776,905 The Company received the refund for VATperiod February 2014 amounted toUS$944,424 on April 10, 2015. For VATperiod March - December 2014, theCompany is being audited by theDirectorate General of Taxation (“DGT”).
January2014
January 19, 2015 US$15,021 The Company is requesting cancellation orreduction of the Tax Collection Letter to theDGT. Up to the completion date of financialstatements, the DGT has not yet issued itsdecision.
Total 2014 US$5,791,926
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
23
9. TAXATION (continued).
b. Estimated claims of refundable taxes (continued)
Value Added Tax (VAT) (continued)
Tax periodDate of tax
assessmentsTotal
underpayments/(overpayment)
paid
Status as of March 31, 2015
October2013
December 15,2014
US$28,477 The Company partially received the refundon January 8, 2015 amounted toUS$382,907 against US$411,384. OnMarch 3, 2015, the Company submittedobjection letter to the DGT on the un-refunded amount. Up to the completiondate of financial statements, the DGT hasnot yet issued its decision.
January -July andOctober -December
2013
March 10,September 26and November
10 2014
US$565,383 The Company is requesting cancellation orreduction of Tax Collection Letter periodJanuary - July and December 2013 to theDGT. The Company has filed a lawsuitagainst the decision of the DGT to the TaxCourt for the Tax Collection Letter periodOctober and November 2013 on January13, 2015. Up to the completion date offinancial statements, the DGT and the TaxCourt have not yet issued its decision.
Total 2013 US$593,860
July -December
2012
January 20 andDecember 16,
2014
US$61,226 Tax objection process for VAT period July -December 2012. Up to the completion dateof financial statements, the DGT has notyet issued its decision on its objection.
July-December
2012
January 14, 2015 US$369,850 The Company is requesting cancellation orreduction of Tax Collection Letter periodDecember 2012 to the DGT. The Companyhas filed a lawsuit against the decision ofthe DGT to the Tax Court for the TaxCollection Letter period July - November2012 on February 10, 2015. Up to thecompletion date of financial statements, theDGT and the Tax Court have not yet issuedits decision.
Total 2012 US$431,076
c. Taxes payable2015 2014
Final tax 83,845 809,581 Withholding income tax Articles 23 and 26 41,517 98,110 Employee income tax Article 21 528 103,459
125,890 1,011,150
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
24
9. TAXATION (continued).
d. Reconciliation of corporate income tax
The reconciliation between income before corporate income tax expense multiplied by the tax rateof 25% and income tax expense are presented below:
2015 2014
Income before corporate income tax expense 12,904,815 15,462,072
Tax on income at the statutory rate of 25% 3,226,204 3,865,518 Net permanent difference 315,448 330,916 Income subject to final tax 19,605 (75,435) Under provision of corporate income tax 134,472 641,980 Adjustment on beginning balance of deferred tax - 12,146
Corporate income tax expense 3,695,729 4,775,125
e. Components of corporate income tax expense
2015 2014
Current tax expense 2,923,393 3,473,751 Under provision of 2014 corporate income tax 227,900 - Over provision of 2012 corporate income tax (93,428) - Under provision of 2011 corporate income tax - 641,980 Final tax on construction contracts 83,845 611,047 Deferred tax expense relating to the origination and reversal of temporary differences 554,019 48,347
Total corporate income tax expense 3,695,729 4,775,125
f. Deferred tax assets and liabilities
2015 2014
Deferred tax assets: Provision for warranty 328,154 302,102 Provision for late delivery 252,612 413,524 Provision for commission 245,556 185,561 Provision for bonus 240,142 168,735 Provision for employee benefits 144,807 396,573 Allowance for decline in value of inventory 51,668 76,899
1,262,939 1,543,394 Deferred tax liability: Fixed assets (1,790,486) (1,516,922)
Deferred tax (liabilities)/assets, net (527,547) 26,472
The utilization of deferred tax assets recognized by the Company is dependent upon future taxableincome in excess of income arising from the reversal of existing taxable temporary differences.The Company’s management believes that the deferred tax assets can be utilized in the future.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
25
9. TAXATION (continued).
g. Analysis of changes in deferred tax assets and liability
2015 2014
Deferred tax asset - beginning balance 26,472 74,819 Deferred tax expense for the year (554,019) (48,347)
Deferred tax (liabilities)/assets - ending balance (527,547) 26,472
h. Administration
Under the taxation laws of Indonesia, the Company submits tax returns on the basis of selfassessment. The DGT may assess or amend taxes for years prior to 2009 within ten years fromthe date the tax became due, or until the end of year 2014, whichever is earlier. Based on taxationlaws which are applicable starting in year 2009, the DGT may assess or amend taxes within fiveyears from the date the tax becomes due.
10. DERIVATIVE ASSETS AND LIABILITIES
2015 2014
Derivative Derivative Derivative Derivative assets liabilities assets Liabilities
Designated as cash flow hedges 393,129 (607,083) - (491,528) Not qualifying as hedges - 508,179 - (32,988)
393,129 (98,904) - (524,516)
The fair value of derivative liabilities have been determined using rates quoted by the Company’sbankers at the reporting date which are calculated by reference to the market interest rates and foreignexchange rates.
The Company entered into forward exchange and commodity contracts to manage its exposure to thevariability of cash flows, primarily related to future sales and purchases of inventories denominated inforeign currencies over the next 12 months. As of March 31, 2015, the Company had an outstandingforward foreign exchange contracts with a notional amount of MYR29,138,296, US$6,718,782,AUD2,421,355, and NZD1,899,702, EUR112,000. (2014: MYR25,412,994, US$6,020,326,AUD2,421,355, and NZD1,899,702).
As of March 31, 2015, the balance of deferred net loss on derivatives of US$181,611 (2014: net loss ofUS$599,623) incurred from changes in the fair value of forward foreign exchange and commoditycontracts that are highly effective, has been recognized in hedging reserve. The Company expects thatsubstantially all of this amount will be credited into the profit or loss within 12 months from the reportingdate.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
26
11. FIXED ASSETS
Movements in 2015Balance Transfers/ Balance
March 31, 2014 Additions Deductions Reclassification March 31, 2015
Cost:
Land 925,812 - - - 925,812Buildings 8,804,234 39,443 - 146,048 8,989,725Machinery and equipment 24,196,753 594,238 (1,112,563) 64,220 23,742,648Transportation equipment 55,063 - - 55,063Office furniture, fixtures
and equipment 2,154,293 83,506 (133,507) 36,950 2,141,242Assets under construction 126,037 121,181 (247,218) -
36,262,192 838,368 (1,246,070) - 35,854,490
Accumulated depreciation:
Buildings 4,986,176 390,462 - - 5,376,638Machinery and equipment 13,378,209 1,115,663 (1,012,434) - 13,481,438Transportation equipment 52,520 1,271 - - 53,791Office furniture, fixtures
and equipment 1,594,365 159,867 (102,093) - 1,652,139
20,011,270 1,667,263 (1,114,527) - 20,564,006
Net book value 16,250,922 15,290,484
Movements in 2014Balance Transfers/ Balance
March 31, 2013 Additions Deductions Reclassification March 31, 2014
Cost:
Land 925,812 - - - 925,812Buildings 7,870,629 - - 933,605 8,804,234Machinery and equipment 21,639,809 1,984,198 - 572,746 24,196,753Transportation equipment 72,678 - (17,615 ) - 55,063Office furniture, fixtures
and equipment 1,986,025 165,806 (9,876 ) 12,338 2,154,293Assets under construction 633,072 1,011,654 - (1,518,689) 126,037
33,128,025 3,161,658 (27,491 ) - 36,262,192
Accumulated depreciation:
Buildings 4,662,143 324,033 - - 4,986,176Machinery and equipment 12,318,710 1,059,499 - - 13,378,209Transportation equipment 67,236 2,706 (17,422 ) - 52,520Office furniture, fixtures
and equipment 1,464,840 138,060 (8,535 ) - 1,594,365
18,512,929 1,524,298 (25,957 ) - 20,011,270
Net book value 14,615,096 16,250,922
As of March 31, 2014, assets under construction mainly represent construction of building for windingshop and installation of hydraulic cylinder for pressing and lifting accessories.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
27
11. FIXED ASSETS (continued)
Depreciation in 2015 and 2014 were charged to the following accounts:
2015 2014
Cost of revenue (Note 21) 1,527,910 1,394,565 General and administrative expenses (Note 23) 123,532 125,997 Selling expenses (Note 22) 15,821 3,736
1,667,263 1,524,298
12. ACCOUNTS PAYABLE
2015 2014
Trade payables: Third parties 24,059,610 19,472,852 Related parties (Note 25b) 1,871,054 267,705
25,930,664 19,740,557
Trade payables and other payables are non-interest bearing and are normally settled on terms rangedbetween 30 to 90 days.
For explanations on the Company’s liquidity risk management processes, refer to Note 26.
13. ADVANCES FROM CUSTOMERS
2015 2014
Advance from customers 7,108,326 11,687,784
This account represents advances from customers in relation to the sales of power transformer units.
14. ACCRUALS AND PROVISIONS
2015 2014
Accrued material cost 4,646,651 917,568 Provision warranty 1,312,616 1,208,410 Provision late delivery charges 1,010,446 1,654,097 Provision commission 982,223 742,240 Accrued freight charges 486,203 122,542 Others 626,259 1,073,042
9,064,398 5,717,899
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
28
15. BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS, NET
2015 2014
Contract costs incurred - 28,317,148 Estimated earnings - 5,344,882
- 33,662,030Less: progress billings - (35,796,061)
- (2,134,031)
16. BANK OVERDRAFT
2015 2014
ANZ Bank Indonesia (“ANZ”) 1,681,282 - Standard Chartered Bank (“SCB”) 1,469,004 - Hongkong and Shanghai Banking Corporation (“HSBC”) 631,802 -
3,782,088 -
The Company obtained banking facilities from SCB based on banking facilities agreement dated May16, 2005, with combine limit of US$6,500,000. The agreement has been amended several times, thelatest was on July 3, 2014 to increase limit facility up to US$10,000,000 and extend the loan facilityuntil further amandment. This banking facilities include short term loan facility, bank overdraft facility,import Letter of Credit facilities, shipping guarantee facility, import invoice financing facility, exportinvoice financing facility and credit bill negotiated discrepant facility.
On April 20, 2012, the Company obtained banking facilities from HSBC with combined limit facilities ofUS$8,000,000. The agreement has been amended on April 23, 2013 to extend the loan facility untilMarch 31, 2015. This banking facilities includes bank overdraft, revolving loan, import facility, domesticreceivable financing and bank guarantee facility.
The Company obtained banking facilities from ANZ based on banking facilities agreement datedOctober 9, 2007, with combine limit of US$6,500,000. The agreement has been amended severaltimes, the latest on June 4, 2014 to extend the loan facility until May 31, 2015. This banking facilitiesinclude bank overdraft facility, import Letter of Credit facilities. Shipping guarantee facility, importinvoice financing facility, export invoice financing facility and credit bill negotiated discrepant facility.
Summary of Banking Facilities:
Standard Chartered Bank
2015 2014
Total Credit Facilities 10,000,000 6,500,000 Utilization: Bank Guarantee (5,936,108) (3,751,297) Letter of Credit (807,828) - Bank Overdraft (1,469,004) -
1,787,060 2,748,703
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
29
16. BANK OVERDRAFT (continued)
Summary of Banking Facilities: (continued)
ANZ Bank Indonesia
2015 2014
Total Credit Facilities 15,000,000 15,000,000 Utilization: Bank Guarantee (6,574,875) (2,669,476) Letter of Credit (5,956,386) (10,792,963) Bank Overdraft (1,681,282) -
787,457 1,537,561
The Hongkong and Shanghai Banking Corporation (HSBC)
2015 2014
Total Credit Facilities 8,000,000 8,000,000 Utilization: Bank Guarantee (4,650,660) (4,831,514) Letter of Credit (1,704,526) (1,235,975) Bank Overdraft (631,802) -
1,013,012 1,932,511
17. PROVISION FOR EMPLOYEE BENEFITS
As of March 31, 2015 and 2014, the Company provided provision for employee benefit based on thereport of independent actuaries, PT Padma Radya Aktuaria, as per its report dated April 1, 2015 andApril 1, 2014, respectively.
The estimated liabilities for employee service entitlements based on the actuary reports have beendetermined using the following assumptions:
2015 2014
Discount rate 7.50% per annum 8.60% per annumWages and salary increase 7.50% per annum 7.50% per annum
Retirement age 55 year of age 55 year of age Mortality rate TMI 3 - 2011 TMI 3 - 2011 Withdrawal rate 3.5% p.a at age 25 3.5% p.a at age 25
and reducing linearly and reducing linearly to 0% p.a at age 55 to 0% p.a at age 55
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
30
17. PROVISION FOR EMPLOYEE BENEFITS (continued)
The details of the provision for employee service entitlements as of March 31, 2015 and 2014 are asfollows:
2015 2014
Present value of benefit obligation 5,799,052 5,407,479 Fair value of plan assets (3,661,258) (2,444,290)
2,137,794 2,963,189
Unrecognized past service cost - non-vested (1,543,684) (1,357,549)Unrecognized actuarial loss (14,883) (19,348)
Provision for employee service entitlements 579,227 1,586,292
The changes in the provision for employee service entitlements for the years ended March 31, 2015and 2014 are as follows:
2015 2014
Beginning balance 1,586,292 710,162 Expenses charged to the profit and loss account 919,637 1,037,171
Payments during the year (249,888) (101,709) Effect of changes in foreign exchange rate (207,887) (59,332) Contribution paid to plan assets (1,468,927) -
Ending balance 579,227 1,586,292
A one percentage point change in the assumed discount rate would have the following effects:
Increase Decrease
Present value of define benefit obligation (503,977) 674,866
The movement of present value of obligation is as follows:
2015 2014
At beginning of year 5,407,479 6,537,274 Current service cost 666,281 774,851 Past service cost - 106,485 Interest cost 389,161 331,348 Curtailments and settlements - (96,692) Expected benefit payment (404,448) (181,385) Actuarial gains/(losses) 449,240 (1,051,812) Effect of changes in foreign exchange rate (708,661) (1,012,590)
At end of year 5,799,052 5,407,479
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
31
17. PROVISION FOR EMPLOYEE BENEFITS (continued)
Comparison of present value of obligation:
Present value of obligation
March 31, 2015 5,799,052March 31, 2014 5,407,479March 31, 2013 6,537,274March 31, 2012 4,830,490March 31, 2011 2,753,980March 31, 2010 1,986,745
The details of the employee service entitlements expense recognized in the 2015 and 2014 statementof comprehensive income is as follows:
2015 2014
Current service cost 666,281 774,851 Interest cost 389,161 331,348 Amortization of past service cost - non-vested 2,704 2,975 Amortization actuarial loss 39,484 88,523 Expected return of plan assets (177,993) (108,369) Past service cost (vested) - 106,485 Effect of settlement - (96,692) Effect of changes in foreign exchange rate - (61,950)
919,637 1,037,171
As of March 31, 2015, the company has funded the total amount of post-employment benefit ofRp47,890,862,006 or equivalent to US$3,661,258 (2014: Rp27,316,987,550 or equivalent toUS$2,444,290) to Manulife Insurance.
18. SHARE CAPITAL
In accordance with Notarial Deed No. 11 (Indonesian version) and No. 12 (English version) of AryantiArtisari, S.H., M. Kn., dated September 4, 2013, 635 of the Company’s shares owned by PT MahesaEngineers and Constructor were sold to PT Meta Fokus Sarana Ananda. This deed has beenapproved by the Minister of Justice and Human Rights of the Republic Indonesia through his letterNo. AHU-101.AH.02.02 dated November 8, 2013.
Ownership of the Company’s share capital as of March 31, 2015 and 2014 were as follows:
Number of Percentage of Authorized, issued Shareholders shares ownership and paid in capital
CG Power Systems Belgium N.V. 12,057 95% 12,057,000 PT Meta Fokus Sarana Ananda 635 5% 635,000
12,692 100% 12,692,000
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
32
19. APPROPRIATION FOR STATUTORY RESERVE
The Company established a statutory reserve amounting to USD 2,538,400. It is in accordance withLaw No. 40 Year 2007 on a Limited Liability Company, which requires companies to set up a reservereaching to a minimum 20% of the Company’s issued and fully paid share capital.
20. NET REVENUE2015 2014
Sales of products: Export 38,699,182 53,353,535 Domestic 60,484,763 49,064,264
Total sales of product 99,183,945 102,417,799
Revenue from construction contracts: Domestic 11,043,761 20,238,366 Export 18,385,888 129,893
Total revenue from construction contracts 29,429,649 20,368,259
128,613,594 122,786,058
Sales commissions of US$561,126 (2014: US$650,653) were recorded as part of net revenueattributable to sales of products.
21. COST OF REVENUE
2015 2014
Cost of goods sold: Material costs 62,007,029 67,311,699 Direct labor 780,746 884,761 Provision for employee benefits 490,111 582,663 Manufacturing expenses: Freight on sales 5,723,495 5,296,859 Indirect labor 3,248,792 2,845,883 Utilities 1,985,305 1,475,923 Depreciation of fixed assets (Note 11) 1,527,910 1,394,565 Others 666,469 2,581,811
76,429,857 82,374,164
Construction contract costs: Material costs 24,920,255 15,958,480 Direct labor 420,652 331,244 Overhead expenses 406,701 307,618
25,747,608 16,597,342
102,177,465 98,971,506
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
33
22. SELLING AND MARKETING EXPENSES
2015 2014
Salaries and wages 2,167,713 1,437,172 Travelling 251,231 474,242 Provision for employee benefits 215,774 185,757 Marketing 136,569 234,880 Depreciation of fixed assets (Note 11) 15,821 3,736 Others 516,515 416,283
3,303,623 2,752,070
23. GENERAL AND ADMINISTRATIVE EXPENSES
2015 2014
Salaries and wages 3,533,312 2,872,878 Corporate fees 838,002 534,132 Utilities 573,425 464,990 License fees 453,051 499,975 Professional fees 436,042 468,890 Provision for employee benefits 213,752 268,751 Depreciation of fixed assets (Note 11) 123,532 125,997 Insurance 76,314 61,491 Others 977,996 615,927
7,225,426 5,913,031
24. OTHER OPERATING INCOME/(EXPENSES), NET
2015 2014
Sales of scrap 354,245 646,340 Bank charges (1,105,000) (761,092) Gain on disposal of fixed assets (48,997) 6,099 Others, net 67,359 5,079
(732,393) (103,574)
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
34
25. RELATED PARTY BALANCES AND TRANSACTIONS
In the normal course of business, the Company engages in transactions with related parties which areconducted on term and conditions agreed between parties.
The nature of transactions and relationships with related parties, are as follows:
Nature of related parties Related parties Transactions
Ultimate Shareholder Crompton Greaves Ltd. Sales of transformers,reimbursement of expensesand purchase of rawmaterials
Ultimate Holding Company CG International B.V. Interest income
Shareholder CG Power Systems BelgiumN.V.
Reimbursement of expenses,management fee andpurchase of raw materials
Other related parties CG Power Systems Brazil Sales of transformers
Crompton Greaves Ltd.Mumbai
Reimbursement of expensesand purchase of rawmaterials
Crompton Greaves Ltd.Nashik
Purchase of raw materials
CG Holdings Belgium N.V. Interest income, purchase ofraw materials, managementfee and reimbursement ofexpenses
CG Sales Networks AmericasInc.
Reimbursement of expenses
CG Sales Networks Ireland Reimbursement of expenses
Crompton Greaves Ltd.Mandideep
Purchase of fixed assets
CG Electric Systems HungaryZrt
Purchase of raw materialsand reimbursement ofexpenses
Crompton Greaves SalesNetwork Malaysia
Sales of transformers,reimbursement of expenses
ZIV Aplicaciones YTechnologia S.L.
Reimbursement of expenses
CG Power America Purchase of raw materialsand reimbursement ofexpenses
ZIV Grid Automations S.L Purchase of raw materialsand reimbursement ofexpenses
Crompton Graves MotorAhmednagar
Purchase of raw materials,reimbursement of expenses
CG International HoldingSingapore
Reimbursement of expenses
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
35
25. RELATED PARTY BALANCES AND TRANSACTIONS (continued)
The nature of transactions and relationships with related parties, are as follows (continued):
Nature of related parties Related parties TransactionsOther related parties Crompton Greaves Ltd.
Kanjur Marg EaPurchase of raw materials
CG Power Systems IrelandLtd
Reimbursement of expenses
a) Due from related parties - accounts receivables (Note 5):
2015 2014
Crompton Greaves Sales Network Malaysia 40,192 23,570 ZIV Aplicaciones Y Technologia S.L. 9,992 - Crompton Greaves Ltd. Mumbai - 34,391 CG Holdings Belgium NV - 14,555 Crompton Greaves Ltd. - 4,134 CG Power Systems Belgium NV - 3,110
50,184 79,760
Outstanding balances of due from related parties at the year-end are unsecured and interest free.There have been no guarantees received for any amount due from related parties. For the yearended March 31, 2014 ad 2013, the Company did not record any impairment of due from relatedparties due to all due from related parties are collectible. This assessment is undertaken eachfinancial year through examining the financial position of the related party and the market in whichthe related party operates.
b) Due to related parties - accounts payable (Note 12):
2015 2014
Crompton Greaves Ltd. 851,096 5,000 CG Power Systems Belgium N.V. 812,852 48,544 CG Holdings Belgium NV 128,040 145,552 ZIV Grid Automations S.L 64,660 - Crompton Graves Motor Ahmednagar 7,250 - CG International Holding Singapore 7,156 - CG Power Systems Ireland Ltd - 34,001 Crompton Greaves Ltd. Kanjur Marg Ea - 21,508 Crompton Greaves Sales Network Malaysia - 13,100
1,871,054 267,705
Outstanding balances of due to related parties at the year-end are unsecured and interest free.There have been no guarantees provided for any amount due to related parties.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
36
25. RELATED PARTY BALANCES AND TRANSACTIONS (continued)
c) Loans to related parties:
2015 2014
CG International B.V. 45,404,573 39,328,496CG Holdings Belgium N.V. - 4,401,844
45,404,573 43,730,340
The Company provided loans denominated in US Dollar currency to related parties. During theyear, the loans are charged with interest at the rates ranging from 1.15% to 1.17% per annum(2014: 1.15% to 1.25% per annum). The loans are covered by agreement, unsecured and have nofixed repayment schedules.
The loan to CG Holdings Belgium N.V. was settled on September 15, 2014
d) Advance from a related party:
2015 2014
CG Sales Network America Inc 1,702,108 -
1,702,108 -
e) Details of transactions with related parties:
2015 2014
Sales and other income
Interest income: CG International B.V. 441,127 404,909 CG Holdings Belgium N.V. 22,803 50,765
463,930 455,674
As a percentage of total interest income 96% 99%
Sales of transformers and services:
CG Power Systems Brazil 569,500 - CG Sales Network Malaysia 40,192 - Crompton Greaves Ltd. 6,825 -
616,517 -
As a percentage of total sales 0.5% -
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
37
25. RELATED PARTY BALANCES AND TRANSACTIONS (continued)
Purchases and other expenses
Purchase of raw material: Crompton Greaves Ltd. Mumbai 1,051,856 - CG Holdings Belgium N.V. 192,216 844,237 Ziv Grid Automation S.L. 64,660 - Crompton Greaves Ltd. Kanjur Marg Ea 18,000 - Cromptom Greaves Motors Ahmednagar 7,250 - CG Power Systems Belgium N.V. 3,186 738,469 Crompton Greaves Ltd. Nashik - 326,830 CG Electric Systems Hungary Zrt - 247,295
1,337,168 2,156,831
As a percentage of total purchase 2% 4%
e) Details of transactions with related parties (continued):
Reimbursement of expenses/(income): CG Holdings Belgium N.V. 1,262,733 941,427 CG Power Systems Belgium N.V. 488,363 559,311 Crompton Greaves Ltd. (67,001) - Ziv Aplicaciones Y Technologia S.L. (34,916) - CG Sales Network Malaysia 24,346 - Ziv Grid Automation S.L. (15,495) -
CG Electric Systems Hungary (14,309) - Crompton Greaves Ltd Mumbai (3,569) - CG Power Systems Ireland Ltd (2,623) - Crompton Greaves Ltd. Kanjur Marg Ea 57 - Crompton Greaves Ltd T-1 Kanjur Mumbai - 22,376 CG Power Systems USA Inc. - 13,950 CG Electric Systems Hungary Zrt - 938
1,637,586 1,538,002
As a percentage of total operating expenses 12% 18%
The Company is being charged with allocated charges over centralized department function thathas been performed by CG Power Systems Belgium N.V. and CG Holding Belgium N.V..
The Company has an agreement with CG Power Systems Belgium N.V. wherein the Companyagreed to have the right to reproduce, use and sell the products in ASEAN, Australia, NewZealand, and Japanese contractor business (irrespective of final destination and any countrywhere the order is transferred to the Company from a Group Company (“CG”)), in accordance withthe quality standards, norms and specifications instructed or approved and to use CG's technicalknow-how in the manufacture of the products. As compensation, the Company pays a license feeof design engineering fee to CG Power Systems Belgium N.V..
In 2009, the Company entered into an agreement with CG Holdings Belgium N.V. wherein theCompany agreed to use CG’s Trademark in the manufacture of the products. As compensation,the Company pays a branding fee to CG Holdings Belgium N.V..
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
38
25. RELATED PARTY BALANCES AND TRANSACTIONS (continued)
f) Key management compensation:
The key management personal employee benefit as at March 31, 2015 and 2014 are as follow:
2015 2014
Salaries and other short-term employee benefit 306,990 336,873 Post-employment benefit 23,613 20,911
330,603 357,784
26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
a. Financial Risk Factors
The Company’s activities expose it to a variety of financial risks: foreign exchange risk, credit risk,and liquidity risk. The Company’s overall risk management program focuses on the unpredictabilityof financial markets and seeks to minimize potential adverse effects on the Company’s financialperformance. The Company uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by the Controlling Shareholder Group Treasury under policiesapproved by the Head Office. The Group Treasury identifies, evaluates and hedges financial risksin close co-operation with the Company’s operating units. The Head Office provides writtenprinciples for overall risk management, as well as written policies covering specific areas, such asforeign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Foreign exchange risk
The Company operates internationally and is exposed to foreign exchange risk arising from variouscurrency exposures, primarily with respect to the European Euro, Australian Dollar and NewZealand Dollar. Foreign exchange risk arises from future commercial transactions and recognisedassets and liabilities.
The Company is required to hedge its foreign exchange risk exposure with the Group Treasury. Tomanage its foreign exchange risk arising from future commercial transactions and recognisedassets and liabilities, the Company uses forward contracts, transacted with the Group Treasury.
The Group Treasury’s risk management policy is to hedge between 80% and 100% of anticipatedcash flows (mainly export sales and purchase of raw materials) in each major foreign currency forthe subsequent 12 months.
Credit risk
The Company has no significant concentrations of credit risk. It has policies in place to ensure thatsales of products are only made to customers with an appropriate credit history. Derivativecounterparties and cash transactions are limited to high-credit-quality financial institutions. TheCompany has policies that limit the amount of credit exposure to any financial institution.
Credit risk is managed on a Group basis. Credit risk arises from short-term bank deposits,derivative financial instruments and deposits with banks and financial institutions, as well as creditexposures to customers, including outstanding receivables and committed transactions. TheCompany trades only with recognized and creditworthy third parties. In addition, receivablebalances are monitored on an ongoing basis with the result that the Company’s exposure to baddebts is not significant.
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
39
26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
a. Financial Risk Factors (continued)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities,the availability of funding through an adequate amount of committed credit facilities and the abilityto close out market positions. The Company seeks to manage its liquid funds through cashplanning. The Company uses historical figures and experiences and forecasts from its collectionsand disbursements. Also, the Company only places funds that exceeded its requirements in themoney market. Placements made are strictly based on cash planning assumptions and covers onlya short period of time.
b. Fair Value Estimation
Fair value is the amount for which an asset could be exchanged, or a liability settled, in an arm’slength transaction basis.
The fair value of forward foreign exchange contracts is determined using quoted forward exchangerates at the reporting date.
The gross carrying amount for financial assets with maturity of less than one year, including cashand bank, accounts receivable, loan to related parties are assumed to approximate their fair valuesdue to their short-term maturity.
The carrying values of financial liabilities with maturity of less than one year, including accountspayable, are assumed to approximate their fair values as the impact of discounting is notconsidered significant.
27. COMMITMENTS
The Company has capital expenditure commitment on building, machinery and equipment forimproving testing unit facilities. As March 31, 2014, the outstanding commitment amounted toUS$617,894 (2013: US$488,919).
28. SEGMENT INFORMATION
The Company is presently engaged in the following business activities:a. Power divisionb. System division
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
40
28. SEGMENT INFORMATION (continued)
Segment information based on business segments is presented below:
2015
Power Transformer System
Division Division Elimination Total
Revenue 107,929,457 29,429,648 (8,745,511 ) 128,613,594 Cost of revenue (85,175,368) (25,747,608) 8,745,511 (102,177,465)
Gross income 22,754,089 3,682,040 - 26,436,129 Operating expenses (11,900,038) (1,631,276) - (13,531,314)
Income before corporate income tax expense 10,854,051 2,050,764 - 12,904,815
2014
Power Transformer System
Division Division Elimination Total
Revenue 107,400,370 20,368,259 (4,982,571 ) 122,786,058 Cost of revenue (87,356,735) (16,597,342) 4,982,571 (98,971,506)
Gross income 20,043,635 3,770,917 - 23,814,552 Operating expenses (7,147,275) (1,205,205) - (8,352,480)
Income before corporate income tax expense 12,896,360 2,565,712 - 15,462,072
The following table shows the distribution of the Company’s information by geographical segment:
2015
Indonesia Australia New Zealand Total
Revenue 105,670,189 1,358,073 21,585,332 128,613,594 Cost of revenue (84,046,830) (989,952) (17,140,683 ) (102,177,465)
Gross income 21,623,359 368,121 4,444,649 26,436,129 Operating expenses (11,213,927) (745,633) (1,571,754 ) (13,531,314)
Income/(loss) before corporate income tax expense 10,409,432 (377,512) 2,872,895 12,904,815
2014
Indonesia Australia New Zealand Total
Revenue 93,501,181 6,311,654 22,973,223 122,786,058 Cost of revenue (77,627,728) (5,373,554) (15,970,224 ) (98,971,506)
Gross income 15,873,453 938,100 7,002,999 23,814,552 Operating expenses (4,242,818) (1,418,593) (2,691,069 ) (8,352,480)
Income/(loss) before corporate income tax expense 11,630,635 (480,493) 4,311,930 15,462,072
PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS
As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)
41
29. NON-CASH TRANSACTIONS
Non-cash transactions of the Company as follow:
2015 2014
Reclassification of assets under construction to fixed assets (Note 11) 165,009 1,518,689
165,009 1,518,689