Illustrative Integrated Annual Report IFRS Group 31 December 2014

Illustrative Integrated Annual Report IFRS Group 31 December 2014 IFRS Group Consolidated Financial Statements For the year ended 31 December 2014 ...
Author: Edward Harris
12 downloads 0 Views 3MB Size
Illustrative Integrated Annual Report IFRS Group 31 December 2014

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Introduction A cornerstone of accountability is fair and transparent reporting of transactions and events. Transparency cannot be measured in degrees, it is a yes/no test. Entities either are, or are not transparent. Increasingly regulation drives entities to provide more and more information. However providing more information does not of itself improve transparency. The IASB has undertaken a great deal of work on what Listed Entities should be reporting and in 2010 issued its Best Practice Statement ‘Management Commentary.’ That work has been developed by the International Integrated Reporting Committee and in 2013 it issued its Integrated Reporting Framework. We consider the work of both parties in this issue. The Abu Dhabi Accountability Authority (ADAA) does not suggest you make publically available information you do not need to, or is sensitive to you. However we do recommend that you consider the matters raised carefully and implement as much as you can, at least for internal stakeholder consumption. ADAA has for the last six years published its Accountability Report, in which we address many if not all of the matters raised. It can be found here www.adaa.abudhabi.ae. We include the requirements of the IASB’s Best Practice Statement on Management Commentary and IFRS 8 Segment Information and recommend Subject Entities include Commentary and Segment Reporting in their reporting as it gives management a good opportunity to communicate to stakeholders an insight of their stewardship of the Group of Subject Entities. ADAA also publishes a monthly IFRS Digest that addresses topical accounting issues. Publications are available on www.adaa.abudhabi.ae. This publication provides an illustrative set of consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) based on the requirements of IFRS for the financial year ended 31 December 2014. ADAA also publishes accounting briefing papers. Issues covered include; Leasing, Investment Entity Amendment, Depreciation, Government Related Party disclosures, Investment Entities, IFRS Disclosures, Investment Property, Fair Value measurement, Impairment and Transactions with Government. Papers are available on www.adaa.abudhabi.ae Audit firms BDO International, Deloitte, EY, KPMG and PWC provide free high quality comprehensive illustrative IFRS financial statements on their websites, some of which are tailored to specific industries. We suggest you make use of those financial statements too by following the links provided; PWC, KPMG, E&Y, Deloitte, BDO International. In addition the audit firms provide cross references to the requirements of the disclosure paragraph in the relevant accounting standard. Should you wish to discuss any of the items raised in this publication please contact the Accounting and Auditing Standards Desk, within the Financial Audit and Examination Group of ADAA. IFRS Group is an existing preparer of IFRS financial statements. The transitional provisions of IFRS 1 have not therefore been covered. In order to keep the financial statements to a manageable size, the notes to the financial statements have not always been provided in full, where this is the situation, it has been stated. 

The illustrative financial statements are written by the Accounting and Auditing Standards Desk (AASD) of the Financial Audit and Examination Group of the Abu Dhabi Accountability Authority (ADAA). All rights reserved.



The illustrative financial statements are intended as information for the reader only and none of the content is intended as accounting advice. Entities should refer to ADAA direct if advice is required for a particular issue.



Abu Dhabi Accountability Authority accepts no responsibility for loss or damage caused to any party who acts or refrains from acting in reliance on this publication, whether such loss is caused by negligence or otherwise.

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Contents

Integrated Reporting

Page Number

1

Management Commentary

10

Consolidated Income Statement

12

Consolidated Statement of Comprehensive Income

12

Consolidated Statement of Financial Position

13

Consolidated Statement of Changes in Equity

14

Consolidated Statement of Cash Flows

15

Notes to the Consolidated Financial Statements

16

Appendix I New standards and amendments

44

Appendix II Forthcoming requirements

47

*Prepared utilising PWC’s illustrative financial statements for 2014 year-ends accessible here.

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Integrated Reporting Introduction The International Integrated Reporting Committee (IIRC) is one organization at the forefront of the development of new ideas regarding integrated reporting. IIRC was formed in 2010 under the aegis of the Prince of Wales Accounting for Sustainability Project and the Global Reporting Initiative (GRI). In addition to business executives and investors, representatives from the major accounting bodies, standards setters and security regulators sit on this committee. Integrated reporting combines different strands of reporting; financial, management commentary, governance and remuneration, and sustainability reporting into a coherent whole that explains an organization’s ability to create and sustain value. The output of integrated reporting is an integrated report; a single report that the IIRC expects will become an organization’s primary report. An integrated report is not easy to prepare and because it is new there is not a huge number of examples to follow. The International Integrated Reporting Framework (the “ Framework”) issued in December 2013 by the IIRC provides guidance. Fundamentally the guidance enables an organisation to explain in understandable terms how it creates and sustains value in the short, medium and longer term. On the next few pages we set out the Framework guidance and provide some examples we have found.

Extracted from Integrated Reporting Framework Issued by IIRC

|1

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Value Creation Process: An Integrated Report explains how the Inputs and Business activities drive the Outputs and Outcomes for an organisation. The main elements of an Integrated Report are: Organizational overview and external environment Governance and remuneration Business Model Strategy and resource allocation Performance: Future outlook The following pages include a summarised description for each element and examples of reporting (where possible). Organizational overview and external environment The Integrated report answers the question: What does the organization do and what are the circumstances under which it operates? To achieve this; the organization explains its mission and vision, and provides context of how it goes about achieving them by identifying matters such as the organisation’s: Culture, ethics and values Ownership and operating structure Principal activities and markets Competitive landscape and market positioning considering factors such as o Threat of competition and o Substitute products or services, o Bargaining power of customers and suppliers, and o Intensity of competitive rivalry Position within the value chain Key quantitative data such as the number of employees and number of countries in which the organization operates and highlighting, in particular, significant changes from prior periods. Significant factors affecting the external environment and the organization’s response.

Governance & remunerations An integrated report answers the question: How does the organization’s governance structure support its ability to create value in the short, medium and long term?

|2

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Here an organisation sets out: Its leadership structure, the skills and diversity (range of backgrounds, gender, competence and experience) of those charged with governance and if regulatory requirements influence the design of its governance arrangements. The organization’s culture, ethics and values and how those are reflected in its use of and effects on its capitals (capitals being resources of cash, people, etc) and its relationships with key stakeholders. The specific processes used to make strategic decisions and to establish and monitor the culture of the organization, including its attitude to risk and mechanisms for addressing integrity and ethical issues. The responsibility those charged with governance take for promoting and enabling innovation. How remuneration and incentives are linked to value creation in the short, medium and long term, including how they are linked to the organization’s use of and effects on the capitals. Below is an example of how these matters might be described in an Integrated Report: The Board of Directors comprises xxx members, xxx of whom are independent. The independent members have no links to the signatories to the shareholders’ agreement, in compliance with prevailing legislation. An equal number of independent members compared to non independent members are required to constitute a formal Board meeting. Board meetings take place at least xxx times a year and all Board members should be present on all occasions, as well as all meetings of the committees on which they serve. List Members of the Board of Directors and related biographies. List Board Committees (e.g., Audit & Risk Committee, Finance Committee, Personnel & Remuneration Committee, Sustainability Committee….) the Committees responsibilities and members. Provide explanation of Board Remuneration policy. Provide information on Code of conduct and training for employees and Whistleblowing channels.

Business model An Integrated Report answers the question: What is the organization’s business model? An organization’s business model is its system of transforming inputs, through its business activities, into outputs and outcomes that aims to fulfil the organization’s strategic purposes and create value over the short, medium and long term. Inputs: An Integrated Report shows how key inputs relate to the capitals (resources) on which the organization depends, or that provide a source of differentiation for the organization, to the extent they are material to understanding the robustness and resilience of the business model.

|3

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Business activities: An Integrated Report describes the key business activities: This can include: How the organization differentiates itself in the market place e.g. through product differentiation, market segmentation, delivery channels and marketing. The extent to which the business model relies on revenue generation after the initial point of sale e.g. extended warranty arrangements or network usage charges. How the organization approaches the need to innovate. How the business model has been designed to adapt to change. Outputs: An Integrated Report identifies an organization’s key products and services. There may be other outputs, such as by-products and waste, including emissions that it is necessary to discuss within the business model disclosure, depending on materiality. Outcomes: An Integrated Report describes key outcomes, including: Internal outcomes e.g. employee morale, organizational reputation, revenue and cash flows, and External outcomes e.g. customer satisfaction, tax payments, brand loyalty, and social and environmental effects. Both positive outcomes i.e. those that result in a net increase in the capitals and thereby create value, and Negative outcomes i.e. those that result in a net decrease in the capitals and thereby diminish value.

The above diagram is extracted from business model background paper for Integrated report prepared by the Technical Collaboration Group (TCG) established by IIRC and can be found in the following link.

http://www.theiirc.org/wp-content/uploads/2013/03/Business_Model.pdf

|4

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

The following illustration is extracted from Transnet’s 2014 Integrated Report.

Risks and opportunities An Integrated Report answers the question: What are the specific risks and opportunities that affect the organization’s ability to create value over the short, medium and long term and how is it dealing with them? This can include identifying: The external and internal sources of risks and opportunities. External sources derived from the environment the organisation operates in. Internal sources are those stemming from the organization’s business activities. The organization’s assessment of the likelihood that a risk or opportunity will arise and the impact if it does. Including consideration of the specific circumstances that would cause the risk or opportunity to arise. Such disclosure will invariably involve a degree of uncertainty.

|5

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

The specific steps being taken to mitigate or manage key risks or to create value from key opportunities, including the identification of the associated strategic objectives, strategies, policies, targets and KPIs. The following was extracted from Crown Estate annual report 2014

|6

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Strategy and resource allocation An integrated report answers the question: Where does the organization want to go and how does it intend to get there? An integrated report ordinarily identifies: The organization’s short, medium and long term strategic objectives. The strategies it has in place, or intends to implement, to achieve those strategic objectives. The resource allocation plans it has to implement its strategy. How it will measure achievements and target outcomes for the short, medium and long term. This can include describing: The linkage between the organization’s strategy and resource allocation plans, and the information covered by other content, including how its strategy and resource allocation plans: o Relate to the organization’s business model, and what changes to that business model might be necessary to implement chosen strategies, to provide an understanding of the organization’s ability to adapt to change, o Are influenced by/respond to the external environment and the identified risks and opportunities. The figure to the right side is extracted from ABSA Integrated annual report 2011. Extracted from ABSA integrated annual report 2011

Performance An Integrated Report answers the question: To what extent has the organization achieved its strategic objectives for the period and what are its outcomes in terms of effects on its capitals? An Integrated Report contains qualitative and quantitative information about performance, such as: Quantitative indicators with respect to targets and risks and opportunities, explaining their significance, their implications, and the methods and assumptions used in compiling them. The organization’s effects (both positive and negative) on the capitals, including material effects on capitals up and down the value chain.

|7

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

The state of key stakeholder relationships and how the organization has responded to key stakeholders’ legitimate needs and interests. The linkages between past and current performance, and between current performance and the organization’s outlook. The following illustration is from the Crown Estate Annual Report 2014

Future Outlook

|8

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

An Integrated Report answers the question: What challenges and uncertainties is the organization likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance? An integrated report highlights anticipated changes over time and provides information, built on sound and transparent analysis, about: 

The organization’s expectations about the external environment the organization is likely to face in the short, medium and long term.



How that environment will affect the organization.



How the organization is currently equipped to respond to the critical challenges and uncertainties that are likely to arise.

|9

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Management commentary guidance Introduction The IASB Practice Statement - Management Commentary provides guidance for the presentation of narrative reporting to accompany financial statements prepared in accordance with IFRSs. The objective of the practice statement is “to assist management in presenting useful management commentary that relates to financial statements prepared in accordance with IFRSs”. [PS (MC) para 1] The Practice Statement requires disclosure about the most important resources, risks and relationships that affect an entity’s value and how they are managed. It enables explanation of the main trends and factors that might affect future performance, and how an entity expects to grow or change in current and future periods. Hence, it combines information about the past, the present and the future. It is applicable prospectively from 8 December 2010. Because of the absence of numbers in this publication it is not possible for a proforma management commentary to be presented therefore we have provided guidance on the questions (by segment, where appropriate) that management in preparing a commentary should seek to address: What is the nature of the entity’s business? In which industries does the entity operate? PS MC 26 Depending on the nature of the business, include an integrated discussion of the following types of information: a) the industries in which the entity operates; b) the entity's major markets and competitive position within those markets; c) significant features of the legal, regulatory and macro-economic environments that influence the entity and the markets in which the entity operates; d) the entity’s main products and services, business processes and distribution methods; and e) the entity’s structure and how it creates value. What is the entity’s objective and its business model? What are the entity’s strategies for achieving its objectives? PS MC 27 Statements of objectives and strategies should provide the detail that enables investors to understand the priorities for action or the resources that must be managed to deliver results, as well as explaining how success will be measured and over what period of time. What are the entity’s resources? PS MC 30 Set out the critical financial and non-financial resources available to the entity and how those resources are used in meeting management’s stated objectives for the entity. Useful disclosures may include: a) Analysis of the adequacy of the entity’s capital structure. b) Financial arrangements (whether or not recognised in the statement of financial position). c) Liquidity and cash flows. d) Human and intellectual capital. e) Surplus resources and identified and expected inadequacies. What are the risks that will affect sustainability of the performance? What are the plans and strategies for bearing or mitigating risks? How effective were risk management policies? PS MC 31-32 Include a description of the entity’s principal risks and any changes thereto, together with a commentary on management’s plans and strategies for bearing or mitigating those risks and the effectiveness of risk management policies. It is important that entities distinguish their principal risks and uncertainties, rather than list all possible risks without highlighting which are the most important in assessing the potential success of the entity’s strategy. Entities should disclose the strategic, commercial, operational and financial risks where these may significantly affect the entity's strategies and progress of the entity's value. | 10

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

What are relationships with stakeholders? PS MC 33 Disclose significant relationships with stakeholders and how they are likely to influence the business performance and its value, and how the entity manages those relationships. The types of significant relationship that may be appropriate to disclose include: a) Shareholders – including controlling parties and parties with significant influence over the entity, their involvement in running the business. b) Customers – this may include management of customer services, details of customer losses and gains − in particular, those on which the entity has a degree of reliance − and new business development. c) Suppliers – ability to source appropriate suppliers, consideration of raw material availability and prices and vetting of supplier behaviour, etc. d) Employees – including satisfaction surveys, recruitment and retention, training and development, diversity, health and safety, employee communications, productivity, human rights and ethical trading. e) Societies and communities in which the entity operates– including environmental impact (for example, noise, pollution and waste), product safety, product responsibility, charitable donations’ and community projects. f) Lenders and creditors – including, negotiations of credit facilities and other arrangements with lenders and the impact of macro-economic factors on availability of credit. g) Regulators – including licenses to operate, pricing restrictions, tax negotiations and government discussions on legislation affecting the company. h) Strategic alliances – including joint ventures, business partnerships, sub-contractors and franchises. How does the entity measure the extent to which it has achieved its objectives? PS MC 37-40 The practice statement does not prescribe specific performance measures or indicators (KPIs) that entities should disclose however comparability will clearly be enhanced if the measures or indicators are accepted and widely used within an industry sector. Entities are encouraged to disclose the definition of each KPI and its calculation method and explain why the measures are relevant in the context of the chosen strategies and objectives. Where possible entities should also provide sufficient detail on measurement methods to allow users to make comparisons to other entities’ choice of KPI where they wish to do so. When multiple performance measures are disclosed, management should explain which are most important to managing the business. How has the entity performed in the current year compared with the objectives it set in previous periods? To what extent is the performance based on recurring transactions or ‘one-off’ events? PS MC 34 Management commentary should include explanations of the entity’s performance and progress during the period and its position at the end of that period. The analysis of results should be set in the context of the entity’s key performance measures and indicators. Management should provide discussion and analysis of significant changes in financial position, liquidity and performance compared with those of the previous period or periods. Unusual, non-recurring or exceptional items should be discussed and fully explained. Entities may express figures in terms of constant currency, so as to show the trends in performance, excluding the effect of exchange rates. The management commentary should include a discussion and analysis of significant changes in the entity's financial position and liquidity. What are the entity’s future prospects? What constraints exist that may hamper the entity’s plans? PS MC 36 Management should provide an analysis of the entity's prospects, which may include targets for financial and non-financial measures. When targets are quantified, management should explain the risks and assumptions necessary for users to assess the likelihood of achieving those targets.

| 11

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Consolidated Income Statement

Note CONTINUING OPERATIONS Revenue Cost of sales Gross profit Distribution costs Administrative expenses Government grant income Other income Other gains/(losses) – net Operating profit

24

21

Finance income Finance expense Finance costs – net Share of results of associates Profit for the year from continuing operations

26 26 26 10

Attributable to: Owners of the parent Non-controlling interests

Year ended 31 December 2014 2013 AED AED

X (X) X (X) (X) X X X X

X (X) X (X) (X) X X X X

X (X) X X X

X (X) X X X

X X X

X X X

IAS 1 does not prescribe the disclosure of operating profit on the face of the income statement. However, entities are not prohibited from disclosing this or a similar line item when it is necessary to explain the elements of financial performance (IAS 1.86). Government grant income may be presented as a deduction from the costs it is intended to compensate or presented separately in other income. It cannot be included as Revenue. Share of results of associates (and joint ventures) is typically presented after finance costs. In exceptional circumstances it may be disclosed within operating profit but only if the use of the associate or (joint venture) structure is the manner in which the Group normally organises its operations.

Consolidated Statement of Comprehensive Income

Note Profit for the year Other comprehensive income: Gains on property revaluation Currency translation differences Change in value of available-for-sale financial assets Change in value of effective hedge instruments Other comprehensive income for the year Total comprehensive income for the year Attributable to: Owners of the parent Non-controlling interests

9 13

Year ended 31 December 2014 2013 AED AED X X X X X

X X X

X

X

X

X

X X X

X X X

The notes on pages XX to XX are an integral part of these consolidated financial statements.

| 12

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Consolidated Statement of Financial Position Note

As at 31 December 2014 2013 AED AED

Non-current assets Intangible assets Investment property Property, plant and equipment Investment in associates Trade and other receivables

7 8 9 10 11

X X X X X X

X X X X X X

Current assets Trade and other receivables Inventories Available-for-sale financial assets Cash and cash equivalents

11 12 13 14

X X X X X X

X X X X X X

Current liabilities Borrowings Finance leases Deferred government grants Trade and other payables Provisions

19 20 21 23 32

X X X X X X

X X X X X X

Non-current liabilities Borrowings Finance leases Deferred government grants Employees end of service benefits Provisions

19 20 21 22 32

X X X X X X X X

X X X X X X X X

16 18 15 17

X X X X X X X

X X X X X X X

Total assets

Total liabilities Net assets Equity Share capital Retained earnings Revaluation reserve Other reserves Equity attributable to owners of the parent Non-controlling interests Total equity

31

The notes on pages XX to XX are an integral part of these consolidated financial statements The consolidated financial statements on pages XX to XX were authorised for issue by board of directors on (date) and were signed on its behalf by:

Print name Chief Executive

Print name Finance Director

Print name Chairman

Signature

Signature

Signature

| 13

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Consolidated Statement of changes in equity

Note Balance at 1 January 2013 Profit or loss Other comprehensive income Total comprehensive income Transactions with owners Issue of share capital Dividends Balance at 1 January 2014 Profit or loss Other comprehensive income Total comprehensive income Transactions with owners Issue of share capital Dividends Balance at 31 December 2014

Share capital AED X

X

Total AED X

Noncontrolling interest AED X

Total equity AED X

X X X

X X X

X X X

X X X

X

(X) X

X (X) X

X (X) X

X (X) X

X X

X X X

X X X

X X X

X X X

X

(X) X

X (X) X

X (X) X

X (X) X

Share premium AED X

Other reserves AED X

Retained earnings AED X

X

X X

X

X

X X

X

X X

X

The notes on pages XX to XX are an integral part of these consolidated financial statements

| 14

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Consolidated Statement of cash flows 2014 AED

2013 AED

Net profit/(loss) from continuing operations

X

X

Non-cash Movements Depreciation Amortisation Movement in provision for doubtful debts Movement in provisions Gains/losses on sale of property, plant and equipment Movement in Government grant

X X X X X X

X X X X X X

Working capital adjustments Change in receivables Change in payables Change in inventory Net cash generated from operating activities

X X X X

X X X X

X X X X X X

X X X X X X

Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Proceeds from issue of shares Dividends paid Net cash used in financing activities

X X X X X

X X X X X

Net increase/(decrease) in cash and cash equivalents Cash, cash equivalents and bank overdrafts at beginning of year Cash, cash equivalents and bank overdrafts at end of year

X X X

X X X

Note Cash flows from operating activities

Cash flows from investing activities Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Purchases / Proceeds from sale of intangible assets Purchases of available-for-sale financial assets Interest received Net cash used in investing activities

9 9 7 13

14

The notes on pages XX to XX are an integral part of these consolidated financial statements

| 15

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Notes to the consolidated financial statements 1

GENERAL Disclose:    

2

Name of the reporting entity. Description of the nature of IFRS group's operations and its principal activities. Name of the parent of the reporting entity and the ultimate parent (if any). Place of incorporation and domicile, its legal form, country of incorporation, address of registered office and information regarding the length of its life if it is limited life.

BASIS OF PREPARATION The consolidated financial statements of IFRS Group have been prepared on the going concern basis in accordance with International Financial Reporting Standards and IFRIC interpretations issued by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings and available-for-sale financial assets. The consolidated financial statements are presented in United Arab Emirates Dirham (AED), which is the functional currency of IFRS Group. The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying IFRS Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3 below.

3

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

3.1 Critical accounting estimates and assumptions IFRS Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. (a) Inventory provision (b) Trade receivables provision 3.2 Critical judgements in applying the Group’s accounting policies (a) Investment property (b) Available for-sale financial assets (c) The useful lives of intangible assets and property, plant and equipment Give sufficient details of each estimate/judgement to comply with IAS 1.129 a) b) c) d).

| 16

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

4

SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

4.1 Changes in accounting policy and disclosures (a) New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2014:1 The following standards have been adopted by the group for the first time for the financial year beginning on or after 1 January 2014 and have a material impact on the group: Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the group financial statements. Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. Amendment to IAS 39, ‘Financial instruments: Recognition and measurement’ on the novation of derivatives and the continuation of hedge accounting. This amendment considers legislative changes to ‘over-the-counter’ derivatives and the establishment of central counterparties. Under IAS 39 novation of derivatives to central counterparties would result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument meets specified criteria. The group has applied the amendment and there has been no significant impact on the group financial statements as a result. IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37 ‘Provisions’. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should be recognised. The Group is not currently subjected to significant levies so the impact on the Group is not material. Annual Improvements 2010-2012 Cycle In the 2010-2012 annual improvements cycle, the IASB issued seven amendments to six standards, which included an amendment to IFRS 13 Fair Value Measurement. The amendment to IFRS 13 is effective immediately and, thus, for periods beginning at 1 January 2014, and it clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. This amendment to IFRS 13 has no impact on the Group. Annual Improvements 2011-2013 Cycle In the 2011-2013 annual improvements cycle, the IASB issued four amendments to four standards, which included an amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendment to IFRS 1 is effective immediately and, thus, for periods beginning at 1 January 2014, and clarifies in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided either standard is applied consistently throughout the periods presented in the entity’s first IFRS financial statements. This amendment to IFRS 1 has no impact on the Group, since the Group is an existing IFRS preparer. 1

2

A detailed list of IFRSs and IFRIC interpretations effective on or after 1 January 2012 is included as appendix I

A detailed list of forthcoming requirements is included as appendix II

| 17

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

(b) New standards, amendments and interpretations not yet adopted (2) A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these consolidated financial statement. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below: 

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset.



Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The adoption of IFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but no impact on the classification and measurement of the Group’s financial liabilities.



IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted. The adoption of IFRS 15 will have no impact on the measurement of the Group’s revenue. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

4.2 Consolidation Controlled entities Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. ____________ 2

A detailed list of forthcoming requirements is included as appendix II

| 18

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any noncontrolling interest in the acquire on an acquisition-by-acquisition basis, either at fair value or at the noncontrolling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss. Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity. The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, noncontrolling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies. Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. Disposal of subsidiaries When the group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Joint arrangements The group applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor. IFRS Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. | 19

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the group’s net investment in the joint ventures), the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures. Unrealised gains on transactions between the group and its joint ventures are eliminated to the extent of the group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the group. 4.3 Intangible assets (a) Contractual customer relationships Contractual customer relationships acquired from third parties are recognised at cost at the acquisition date. The contractual customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship. (b) Trademarks and licenses Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of 15 to 20 years. (c) Computer software Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by IFRS Group are recognised as intangible assets when the following criteria are met:  It is technically feasible to complete the software product so that it will be available for use;  Management intends to complete the software product and use or sell it; and there is an ability to use or sell the software product;  It can be demonstrated how the software product will generate probable future economic benefits;  Adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and  The expenditure attributable to the software product during its development can be reliably measured. Directly attributable costs that are capitalised within software product costs include employee costs and an appropriate portion of relevant overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Computer software development costs recognised as assets are amortised over their estimated useful lives, which does not exceed three years. (e) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net identifiable assets of the acquired entity at the date of acquisition. Goodwill on acquisitions of entities is included in ‘intangible assets.’ If goodwill is negative, which very occasionally happens in a distressed purchase situation then a credit is taken to the Income Statement. | 20

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to the operating segment. Any impairment is recognised immediately as an expense and is not subsequently reversed 4.4 Impairment of non-financial assets Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date. 4.5 Investment property Investment property is property held to earn rental income and/or for capital appreciation rather than for the purpose of operating activities. Investment property assets are carried at cost less accumulated depreciation and any recognised impairment in value. The depreciation policies for investment property are consistent with those for buildings within the category of Property, Plant and Equipment. For disclosure purposes fair values are evaluated annually by an accredited external, independent valuer, applying a valuation model recommended by the International Valuation Standards Committee. Disposals are recognised on completion: profits and losses arising are recognised through the income statement, the profit on disposal is determined as the difference between the sales proceeds and the carrying amount of the asset. 4.6 Property, plant and equipment After initial recognition land and buildings are carried at fair value, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses with sufficient regularity to ensure that its carrying amount is not materially different from its fair value at the end of the reporting period. Fair value is usually determined from market based evidence by appraisal that is normally undertaken by professionally qualified valuers. All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows: Asset class

Life

Buildings Machinery Vehicles Furniture, fittings and equipment

25-40 years 10-15 years 3-5 years 3-8 years | 21

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other gains/ (losses) – net’ in the income statement. The frequency of revaluations depends upon the changes in fair values of the items of property, plant and equipment being revalued. When the fair value of a revalued asset differs materially from its carrying amount, a further revaluation is required. 4.7 Investments in associates Associates are entities over which IFRS Group has significant influence but not control. Generally this is indicated by the holding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method, the investment is recognised on acquisition at cost and IFRS Group’s share of the financial result in post-acquisition periods added, if a profit (or, deducted if a loss) to the carrying amount of net assets. The group’s investment in associates includes goodwill identified on acquisition. IFRS Group’s share of post-acquisition profits (and losses) is disclosed in the Income Statement and IFRS Group’s share of changes in an associate Other Comprehensive Income are disclosed in the Other Comprehensive Income Statement. Should IFRS Group’s share of losses of an associate equal or exceed its carrying amount then IFRS Group does not recognise any further losses unless it is contractually required to pay for them. At each reporting date investments in associates are assessed for impairment and if impaired a charge is reported in the Income statement. There was no impairment in the current year. Profits and losses arising on transactions with associates are eliminated on consolidation to the extent of IFRS Group’s share. Dilution gains and losses are recognised in the Income Statement. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group. 4.8 Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. If collection of the trade receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are classified as non-current assets. 4.9 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises design costs, raw

| 22

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. 4.10 Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Regular purchases and sales of financial assets are recognised on the trade-date the date on which IFRS Group commits to purchase or sell the asset. Investments are initially (and subsequently) recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and IFRS Group has transferred substantially all risks and rewards of ownership. Gains or losses arising from changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income in the period in which they arise. Dividend income from financial assets is recognised as part of other income when IFRS Group’s right to receive payments is established. On sale accumulated gains and losses on available for sale financial assets recognised in other comprehensive income are included in the Income Statement within “Other gains/ (losses) – net.” IFRS Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For equity investments classified as available-forsale, a significant or prolonged decline in the fair value of the security below its cost is evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative lossmeasured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss is recognised in the income statement. Impairment testing of trade receivables is described in note 11. 4.11 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty. 4.12 Cash and cash equivalents In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the statement of financial position, bank overdrafts are shown within borrowings in current liabilities. 4.13 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, from the proceeds.

| 23

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

4.14 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. 4.15 Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. 4.16 Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. In determining whether a lease is a finance lease or an operating lease careful consideration is given to: a) The period of the lease term, whether are any options to extend and the likelihood of the IFRS Group opting to extend. b) Payments described as contingent payments or contingent rent. If the nature of the contingent amount is such that it is more likely than not to become payable under IFRS Group’s normal (or expected) business operations, then these payments are not contingent and are deemed part of the normal lease payments. IFRS Group leases certain property, plant and equipment. Leases of property, plant and equipment where IFRS Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in current or non-current liabilities. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under a finance lease are depreciated over the shorter of the useful life of the asset and the lease term. 4.17 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of IFRS Group’s activities. Revenue is shown net of returns, rebates and discounts. Revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the | 24

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Group’s activities as described below. IFRS Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Sales of goods – wholesale IFRS Group manufactures and sells a range of products in the wholesale market. Sales of goods are recognised when IFRS Group has delivered products to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler’s acceptance of the products. Delivery does not occur until the products have been shipped to the specified location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed or IFRS Group has objective evidence that all criteria for acceptance have been satisfied. The products are often sold with volume discounts; customers have a right to return faulty products in the wholesale market. Sales are recorded based on the price specified in the sales contracts, net of the estimated volume discounts and returns at the time of sale. Accumulated experience is used to estimate and provide for the discounts and returns. The volume discounts are assessed based on anticipated annual purchases. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with the market practice. Sales of goods – retail IFRS Group operates a chain of retail outlets. Sales of goods are recognised when IFRS Group sells a product to the customer. Retail sales are usually in cash or by credit card. It is IFRS Group’s policy to sell its products to the retail customer with a right to return within 28 days. Accumulated experience is used to estimate and provide for such returns at the time of sale. IFRS Group does not operate any loyalty programmes. Sales of services IFRS Group sells design services and transportation services to other manufacturers. These services are provided on a time and material basis or as a fixed-price contract, with contract terms generally ranging from less than one year to three years. Revenue from time and material contracts, typically from delivering design services, is recognised under the percentage-of-completion method. Revenue is generally recognised at the contractual rates. For time contracts, the stage of completion is measured on the basis of labour hours delivered as a percentage of total hours to be delivered. For material contracts, the stage of completion is measured on the basis of direct expenses incurred as a percentage of the total expenses to be incurred. Revenue from fixed-price contracts for delivering design services is also recognised under the percentage-of-completion method. Revenue is generally recognised based on the services performed to date as a percentage of the total services to be performed. Revenue from fixed-price contracts for delivering transportation services is generally recognised in the period the services are provided, using a straight-line basis over the term of the contract. If circumstances arise that may change the original estimates of revenues, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in income in the period in which the circumstances that give rise to the revision become known by management.

| 25

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Rental income from investment property Rental income is recognised on an accruals basis. 4.18 Employee benefits (a) IFRS Group makes pension contributions on behalf of UAE in accordance with Law no. 2 of 2000. The contributions are treated as payments to a defined contribution pension plan. A defined contribution plan is a pension plan under which fixed contributions are paid into a separate pension fund. IFRS Group has no legal or constructive obligations to pay further contributions if the pension fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (b) IFRS Group provides end of services benefits for its expatriate employees. The entitlement to these benefits is based upon the employees’ length of service and completion of a minimum service period. The expected costs of these benefits are based on an actuarial assessment of the liabilities using the projected unit credit method and are accrued over the period of employment. 4.19 Dividends Dividends to IFRS Group’s shareholders are recognised as a liability in the consolidated financial statements in the period in which the dividends are approved by IFRS Group’s shareholders. 4.20 Government grants The Government of Abu Dhabi owns more than 50% of the equity of IFRS Group. Accordingly transactions with the Government must be assessed to determine if the transactions is a transaction with a shareholder in their capacity as a shareholder and therefore transacted in equity or a government grant and therefore dealt with in income or deferred income. Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and IFRS Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the income statement on a straight-line basis over the expected lives of the related assets. 4.21

Foreign currency translation

4.21.1 Functional and presentation currency The consolidated financial statements are presented in United Arab Emirates Dirham (AED), which is the presentation currency of IFRS Group. Items included in the financial statements of the group’s entities are measured using the currency of the primary economic environment in which the entities operate, this is their functional currency. 4.21.2 Transactions and balances Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from settlement, or translation of year end monetary balances denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses relating to borrowings, cash and cash equivalents are include | 26

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

within finance income or costs in the income statement. All other exchange gains and losses are presented with “other gains/ (losses) – net.” IFRS group’s available for sale securities are only denominated in AED. 4.21.3 Foreign operations For IFRS group entities that have functional currencies that are not AED their assets and liabilities are translated at closing rate and their results for the year at average rate. The exchange difference that results is included in other comprehensive income. 4.22 Segment Information The IFRS Group Board of Directors and Senior Management Executive Committee (SMEC) are considered to be the Chief Operating Decision-Maker as defined by IFRS 8. Management has determined the operating segments based on the information reviewed by the Board and SMEC for the purposes of allocating resources and assessing performance. The Board and SMEC consider the business from both a geographic and product perspective. Geographically management considers the performance in the Americas, Europe, MENA and Asia. From a product perspective, management considers the wholesale, retail, services and rental activities in these geographies. Although the US segment does not meet the quantitative thresholds required by IFRS 8 for reportable segments, management has concluded that this segment should be reported, as it is closely monitored by the SMEC as a potential growth region and is expected to materially contribute to IFRS Group’s revenue in the future. The Board assesses the performance of the operating segments based on a measure of adjusted EBITDA. This measurement basis excludes discontinued operations and the effects of non-recurring expenditure from the operating segments such as restructuring costs, legal expenses and goodwill impairments when the impairment is the result of an isolated, non-recurring event. The measure also excludes the effects of equity-settled share-based payments and unrealised gains/losses on financial instruments. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of IFRS Group.

Revenue Year ended 31 December 2014

US wholesale US retail Europe wholesale Europe retail MENA Asia Total

Year ended 31 December 2013

Total segment revenue

Intersegment revenue

Revenue from external customers

Total segment revenue

Intersegment revenue

Revenue from external customers

X X X X X X X

X X X X X X X

X X X X X X X

X X X X X X X

X X X X X X X

X X X X X X X

Sales between segments are carried out at arm’s length. The revenue from external parties reported to the strategic steering committee is measured in a manner consistent with that in the Consolidated Income Statement.

| 27

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

EBITDA Year ended

Year ended

31 December 2014

31 December 2013

Adjusted

Adjusted

EBITDA

EBITDA

X X X X X X X X X X X X X X X X X

X X X X X X X X X X X X X X X X X

US wholesale US Retail Europe wholesale Europe retail MENA Asia Total Depreciation Amortization Restructuring costs Legal expenses Goodwill impairment Unrealized financial instrument gains Share options granted to directors and employees Finance costs – net Other Profit before tax and discontinued operations

Due to the MENA operations utilizing excess capacity in certain Asia assets that are geographically close to the MENA region, a portion of the depreciation charge of AED XX (2013: nil) relating to the MENA assets has been allocated to the Asia segment to take account of this. Assets Year ended 31 December 2014

US wholesale US retail Europe wholesale Europe retail MENA ASIA Total Unallocated Deferred tax Available-for-sale financial assets Financial assets at fair value through the profit and loss Derivative financial instruments Assets of disposal group classified as held for sale Total assets per the balance sheet

Year ended 31 December 2013

Total assets

Investments in associates

Additions to non-current assets2

Total assets

Investments in associates

Additions to non-current assets1

X X X X X X X X X X

X X X X X X X X X X

X X X X X X X X X X

X X X X X X X X X X

X X X X X X X X X X

X X X X X X X X X X

X X X X

X X X X

X X X X

X X X X

X X X X

X X X X

The amounts provided to the Board and SMEC with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Investment in shares (classified as available-for-sale financial assets at fair value through profit or loss) held by IFRS Group are not considered to be segment assets but rather are managed by the treasury function. IFRS Group’s interest-bearing liabilities are not considered to be segment liabilities but rather are managed by the treasury function. ______________ 1 Additions to non-current assets exclude other than financial instruments and deferred tax assets.

| 28

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Entity-wide information Breakdown of the revenue from all services is as follows: Analysis of revenue by category: - Sales of goods - Revenue from services Total

2014

2013

X X X

X X X

IFRS Group is domiciled in the UAE. The result of its revenue from external customers in the UAE is AED X (2013: AED Y), and the total of revenue from external customers from other countries is AED X (2013 Y). The breakdown of the major component of the total of revenue from external customers from other countries is disclosed above. 5

FINANCIAL RISK MANAGEMENT IFRS Group entities transact wherever possible in the functional currency of the entity. This limits the Group’s economic exposure to currency risk unless repatriation of funds is required. IFRS Group assets, liabilities and results are however susceptible to foreign exchange risk. IFRS Group is exposed to fair value interest rate risk, cash flow interest rate risk and price risk. IFRS Group is also exposed to credit risk and liquidity risk. Risk management is carried out by the Board of Directors and a financial risk report is submitted periodically to the Board. The financial risk report evaluates financial risk. Market risk (i)

Foreign exchange risk

IFRS Group historically has not hedged its foreign exchange risks. The primary reason for this is because IFRS Group’s subsidiary entities are mainly based in America and the AED is pegged to the US Dollar. IFRS Group is considering significant acquisitions in other territories which if they occur will cause IFRS Group’s attitude toward foreign exchange hedging policy to change. (ii)

Price risk

IFRS Group is exposed to equity securities price risk because of investments held and classified on its statement of financial position as available-for-sale. IFRS Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, IFRS Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Board of Directors. IFRS Group’s equity investments in other entities are publicly traded on Abu Dhabi equity indexes. The table below summarises the impact of increases/decreases of the Abu Dhabi stock exchange on the profit for the year and on equity. The analysis is based on the assumption that the equity indexes had increase/decreased by 5% with all other variables held constant and all the equity instruments moved according to the historical correlation with the index: Impact on profit 2014 2013 Increase Decrease

(iii)

X X

X X

Impact on equity 2014 2013 X X

X X

Cash flow and fair value interest rate risk

IFRS Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose IFRS Group to cash flow interest rate risk which is partially offset by cash held at variable rates. Borrowing issued at fixed rates exposes IFRS Group to fair value interest rate risk. | 29

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Credit risk Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposure to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘AAA’ are accepted. If wholesale customers are independently rated, these ratings are used. If there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors, individual risk limits are set based on internal or external rating in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards. Liquidity risk The Board of Directors monitors rolling forecasts of IFRS Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (note 19) at all times so that IFRS Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration IFRS Group’s debt financing plans, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable external regulatory or legal requirement, for example, currency restrictions. Surplus cash held over and above the balance required for working capital management is invested in interest bearing current accounts, time deposits, money market deposits and marketable securities. Choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts. At the reporting date, IFRS Group held money market funds of AED X (2013: AED Y) and other liquid assets of AED X (2013: AED Y) that are expected to readily generate cash inflows for managing liquidity risk. The table below analyses IFRS Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Comparative information has been restated as permitted by the amendments to IFRS 7 for the liquidity risk disclosures. At 31 December 2014 Borrowings (Ex finance lease liabilities) Finance lease liabilities Trade and other payables

Less than 1 year

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

X X X

X X X

X X X

X X X

X X X

X X X

X X X

X X X

At 31 December 2013 Borrowings (Ex finance lease liabilities) Finance lease liabilities Trade and other payables

Capital risk management IFRS Group’s objectives when managing capital are to safeguard IFRS Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, IFRS Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, IFRS Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowing (including and non-current borrowings’ as shown in the consolidated statement of financial position) less cash and | 30

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt. 6

SUBSIDIARIES Details of the principal subsidiaries are shown below: Ownership interest Name of entity

Country of incorporation

2014 %

Principal activities

2013 %

Subsidiary 1 Subsidiary 2 Subsidiary 3 Subsidiary 4

7

INTANGIBLE ASSETS

Year ended 31 December 2013 Opening net book amount Additions Amortisation Impairment Closing net book amount Analysed as: Cost Accumulated amortisation and impairment Net book amount Year ended 31 December 2014 Opening net book amount Additions Amortisation Impairment Closing net book amount Analysed as: Cost Accumulated amortisation and impairment Net book amount

Acquired trademarks and licenses AED

Acquired contractual customer Relationships AED

Internally generated software development costs AED

Goodwill AED

Total AED

X X X X X

X X X X X

X X X X X

X X X X X

X X X X X

X X X

X X X

X X X

X X X

X X X

X X X X X

X X X X X

X X X X X

X X X X X

X X X X X

X X X

X X X

X X X

X X X

X X X

Amortisation of AED X (2013: AED Y) is included in cost of sales in the income statement, AED X (2013: AED Y) in distribution costs and AED X (2013: AED Y) in administrative expenses. Additions of internally generated software development cost includes AED X (2013: AED Y) of interest capitalised at an average borrowing rate of Z%. Impairment requires consideration of IAS 36 disclosure requirements.

| 31

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Impairment tests for goodwill Management reviews the business performance based on geography and type of business. It has identified US, Europe, MENA and Asia as the main geographies. There are both retail and wholesale segments in the US and the Europe. In all other geographies, the group has only wholesale business. Goodwill is monitored by management for each group of CGUS at the operating segment level. The following is a summary of goodwill allocation for each operating segment: Goodwill allocation in 2014

US wholesale US retail Europe wholesale Europe retail MENA wholesale Asia wholesale Total

Opening X X X X X X X

Addition X X X X X X X

Disposal X X X X X X X

Impairment X X X X X X X

Other adjustments X X X X X X X

Opening X X X X X X X

Addition X X X X X X X

Disposal X X X X X X X

Impairment X X X X X X X

Other adjustments X X X X X X X

Closing X X X X X X X

Closing X X X X X X X

Goodwill allocation in 2013 US wholesale US retail Europe wholesale Europe retail MENA wholesale Asia wholesale Total

The balance of the goodwill on consolidation of AED X (2013: AED Y) is related to the European Segment. The recoverable amount of CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the country in which the CGUs operates. The key assumptions used for value-in-use calculations in 2014 are as follows:

Gross margin Growth rate Discount rate

US wholesale

US retail

Europewholesale

Europe retail

MENA wholesale

Asia retail

All other segments

X X X

X X X

X X X

X X X

X X X

X X X

X X X

| 32

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014 The key assumptions used for value-in-use calculations in 2013 are as follows: UK wholesale

US wholesale

Europewholesale

Europe wholesale

MENA wholesale

Asia retail

All other segments

X X X

X X X

X X X

X X X

X X X

X X X

X X X

Gross margin Growth rate Discount rate

These assumptions have been used for the analysis of each CGU within the operating segment. Management determined budgeted gross margin and results based on past performance and expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rate used is pre-tax and reflect specific risks relating to the relevant operating segments. The impairment charge arose in a wholesale CGU (included in the Asian operating segment) due to the deterioration of the financial performance of the CGU in the segment. 8

INVESTMENT PROPERTY Investment AED

Development AED

Total AED

Year ended 31 December 2013 Opening net book amount Additions Disposals Impairment Depreciation

X X X X X

X X X X X

X X X X X

Closing net book amount

X

X

X

Analysed as: Cost Accumulated depreciation Net book amount

X X X

X X X

X X X

Year ended 31 December 2014 Opening net book amount Additions Disposals Depreciation

X X X X

X X X X

X X X X

Closing net book amount

X

X

X

Analysed as: Cost Accumulated depreciation Net book amount

X X X

X X X

X X X

The fair value of investment properties is AED X as of 31 December 2014 (2013: AED X), impairment charges on investment properties were determined following a fair value assessment performed by independent qualified professionals using internationally accepted valuation methods such as taking comparable properties as a guide to current market prices or by applying the discounted cash flow method. Adjustments were then made to arrive at valuations of the properties on the fair value less cost to sell basis. Impairment charges are mainly related to decline in properties value within the GCC countries. | 33

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Impairment requires consideration of IAS 36 disclosure requirements Rental income from investment properties in the year to 31 December 2014 totalled AED X (2013: AED X). Investment properties to the value of AED X are subject to restrictions in the form of real estate loans. Depreciation expense of AED X (2013: AED Y) has been charged in cost of goods sold AED X (2013: AED Y) in selling and marketing costs and AED X (2013: AED Y) in administrative expenses. Direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period was AED X (2013: AED Y). Direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income during the period was AED X (2013: AED Y). There were no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements in either year. 9

PROPERTY, PLANT AND EQUIPMENT

Year ended 31 December 2013 Opening net book amount Revaluation surplus Additions Disposals Depreciation Impairment Closing net book amount Analysed as: Cost or valuation Accumulated depreciation Net book amount Year ended 31 December 2014 Opening net book amount Revaluation surplus Additions Disposals Depreciation Impairment Closing net book amount Analysed as: Cost or valuation Accumulated depreciation Net book amount

Machinery AED

Furniture, fittings and equipment AED

Total AED

X X X X X X X

X X X X X X X

X X X X X X X

X X X X X X X

X X X

X X X

X X X

X X X

X X X

X X X X X X X

X X X X X X X

X X X X X X X

X X X X X X X

X X X X X X X

X X X

X X X

X X X

X X X

X X X

Land and buildings AED

Vehicles AED

X X X X X X X

IFRS Group’s land and buildings were last revalued on 1 January 2014 by independent valuers. Valuations were made on the basis of recent market transactions on arm’s length terms. Management considers that the fair value of land and buildings at 31 December 2014 is not materially different from that at 1 January 2014. Bank borrowings are secured on land and buildings for the value of AED X (2013: AED Y) (note 19). Depreciation expense of AED X (2013: AED Y) has been charged in cost of goods sold AED X (2013: AED Y) in selling and marketing costs and AED X (2013: AED Y) in administrative expenses. | 34

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

If land and buildings were stated on the historical cost basis, the amount would be as follows:

2014 AED

2013 AED

X X X

X X X

2014 AED

2013 AED

X X X

X X X

Cost Accumulated depreciation Net book amount

Vehicles and machinery includes the following amounts where IFRS Group is a lessee under a finance lease: Cost - capitalised finance leases Accumulated depreciation Net book amount

IFRS Group leases various vehicles and machinery under non-cancellable finance lease agreements. The lease terms are between three and 15 years and the majority of the risks and rewards of ownership of the assets lie with IFRS Group. 10

INVESTMENT IN ASSOCIATES The investments in associates are as follows:

Name of entity

Principal activity

Country of incorporation

Associate 1 Associate 2 Associate 3

Ownership interest 2014 2013 % % X X X X X X

Published fair value 2014 2013 AED AED X X X X X X X X 2014 AED

2013 AED

Share of the associates’ statement of financial position: Current assets Non-current assets Current liabilities Non-current liabilities Equity Carrying amount

X X X X X X

X X X X X X

Share of the associates’ revenue and profit: Revenue Profit

X X

X X

| 35

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

11

TRADE AND OTHER RECEIVABLES

Trade receivables Less: provision for impairment Trade receivables – net Prepayments Receivables from related parties (note 30) Loans to related parties (note 30) Less non-current portion: loans to related parties Current portion

The fair values of trade and other receivables are as follows: Trade receivables Receivables from related parties Loans to related parties

2014 AED

2013 AED

X X X X X X X X X

X X X X X X X X X

2014 AED X X X X

2013 AED X X X X

The fair values of loans to related parties are based on cash flows discounted using a rate based on the borrowings rate of X% (2013: Y%). The discount rate equals to EIBOR plus appropriate credit rating. The effective interest rates on non-current receivables were as follows: Loans to related parties (note 30)

2014 AED X%

2013 AED Y%

As of 31 December 2014, trade receivables of AED X (2013: AED Y) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: 1 to 3 months overdue 3 to 6 months overdue

Movements on IFRS Group’s provision for impairment of trade receivables are as follows: At 1 January Impairment during the year Written off during the year as uncollectable Unused amounts reversed At 31 December

2014 AED X X X

2013 AED X X X

2014 AED

2013 AED

X X X X X

X X X X X

The creation and release of provision for impaired receivables have been included in ‘administrative expenses’ in the income statement. Unwind of discount is included in ‘finance costs’ in the income statement. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets.

| 36

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

12

INVENTORIES Raw materials Work in progress Finished goods

2014 AED X X X X

2013 AED X X X X

The cost of inventories recognised as an expense in ‘cost of sales’ amounted to AED X (2013: AED Y). IFRS Group reversed AED X of a previous inventory write-down in July 2014. IFRS Group has sold all the goods that were written down to an independent retailer in Oman at original cost. The amount reversed is included in ‘cost of sales’ in the income statement. 13

AVAILABLE FOR SALE FINANCIAL ASSETS

At 1 January Exchange differences Acquisition of subsidiary (note xx) Additions Disposals Transfer on account of acquisition of control Net gains/(losses) transfer from equity (note xx) Reclassification of previously held interest in ABC Group (note xx) Net gains/(losses) transfer to equity (note xx) At 31 December Less non-current portion Current portion

2014 AED X X X X X X X X X X X X

2013 AED X X X X X X X X X X X X

The group removed profits of xx (2013: xx) and losses xx (2013: xx) from equity into the income statement. Losses in the amount of xx (2013: xx) were due to impairments. Available-for-sale financial assets include the following:

Listed securities: Equity securities – UK Equity securities – Europe Equity securities – US Debentures with fixed interest of 6.5% and maturity date of 27 August 2016 Non-cumulative 9% non-redeemable preference shares Unlisted securities: Debt securities with fixed interest ranging from 6.3% to 6.5% and maturity dates between July 2015 and May 2017 Total

2014 AED X X X X X X X X

2013 AED X X X X X X X X

X

X

2014 AED X X X X X

2013 AED X X X X X

Available-for-sale financial assets are denominated in the following currencies:

UK pound Euro US dollar Other currencies Total

| 37

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

The fair values of unlisted securities are based on cash flows discounted using a rate based on the market interest rate and the risk premium specific to the unlisted securities (2014: 6%; 2013: 5.8%). The fair values are within level 2 of the fair value hierarchy (see note 3.3). The maximum exposure to credit risk at the reporting date is the carrying value of the debt securities classified as available for sale. None of these financial assets is either past due or impaired. 14

CASH AND CASH EQUIVALENTS Cash at bank and on hand Short-term bank deposits Cash and cash equivalents (excluding bank overdrafts)

2014 AED X X X

2013 AED X X X

Cash and cash equivalents include the following for the purposes of the statement of cash flows:

2014 AED

2013 AED

X X X

X X X

Vehicles Machinery Total

2014 AED X X X

2013 AED X X X

The future aggregate minimum lease payments under non-cancellable finance leases are as follows:

2014 AED

2013 AED

X X X X (X) X

X X X X (X) X

2014 AED X X X X

2013 AED X X X X

Cash and cash equivalents Bank overdrafts (note 19) Cash and cash equivalents (including bank overdrafts)

15

REVALUATION RESERVE (note not provided)

16

SHARE CAPITAL (note not provided)

17

OTHER RESERVES (note not provided)

18

RETAINED EARNINGS (note not provided)

19

BORROWINGS (note not provided)

20

FINANCE LEASES The carrying amount of the finance leases are as follows:

No later than 1 year Later than 1 year and no later than 5 years Later than 5 years Amounts payable under finance leases Less: future finance charges Present value of lease obligations

21

DEFERRED GOVERNMENT GRANTS At January Received during the year Released to the income statement At December

| 38

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Current Non-current

2014 AED X X X

2013 AED X X X

Government grants have been received for the purchase of certain items of property, plant and equipment. 22

EMPLOYEE END OF SERVICE BENEFITS (note not provided. The disclosure requirements are complex.)

23

TRADE AND OTHER PAYABLES Trade payables Amounts due to related parties (note 30) Government of Abu Dhabi account (note 27) Amounts owed to associates Accruals and deferred income

2014 AED X X X X X X

2013 AED X X X X X X

The directors consider that the carrying amount of trade payables approximates to their fair value. 24

REVENUE Rental income Sales of goods – wholesale Sales of goods – retail Sales from services Total Revenue

25

2014 AED X X X X X

2013 AED X X X X X

2014 AED X X X X X X X X X

2013 AED X X X X X X X X X

EXPENSES BY NATURE Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefit expense (note 22) Depreciation, amortisation and impairment charges (notes 7, 8 and 9) Transportation expenses Advertising costs Operating lease payments (note 29) Other expenses Total cost of sales, distribution costs and administrative expenses

| 39

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

26

FINANCE INCOME AND EXPENSES Finance expense: Interest on bank borrowings Interest on finance lease liabilities Fair value adjustment of bank borrowings attributable to interest rate risk

2014 AED

2013 AED

X X X

X X X

X

X

(X) X

(X) X

Finance income: – Interest income on short-term bank deposits – Interest income on available-for-sale financial assets – Interest income on loans to related parties (note 30) Total finance income

X X X X

X X X X

Net finance costs

X

X

Less: amounts capitalised on qualifying assets Total finance expense

27

GOVERNMENT OF ABU DHABI ACCOUNT (note not provided)

28

CONTINGENT LIABILITIES The estimated total of IFRS Group’s contingent liabilities at 31 December 2014 was AED X (2013: AED Y). The principal components of the contingent liabilities relate to legal proceedings, obligations arising under environmental legislation. Guarantees issued by group companies at 31 December 2014 amounted to AED X (2013: AED Y), Included in this are discounted trade bills with value of AED X (2013: AED Y). No individual contingent liability is significant. The fair value of guarantees is not material in either 2014 or 2013. IFRS Group is not involved in any legal or arbitration proceedings which might lead to material loss or expenditure in the context of the Group results. Similarly we do not have any material obligations under environmental legislation. None of our Directors are involved in any legal proceedings.

29

COMMITMENTS (a) Capital commitments Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:

Property, plant and equipment Intangible assets Total

(b)

2014 AED X X X

2013 AED X X X

Operating lease commitments

IFRS Group leases various retail outlets, offices and warehouses under non-cancellable operating lease agreements. The lease terms are between five and 10 years, and the majority of lease agreements are renewable at the end of the lease period at market rate. IFRS Group also leases various plant and machinery under cancellable operating lease agreements. IFRS Group is required to give a six-month notice for the termination of these agreements. The lease expenditure charged to the income statement during the year is disclosed in note 25.

| 40

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

No later than 1 year Later than 1 year and no later than 5 years Later than 5 years Total

30

2014 AED X X X X

2013 AED X X X X

RELATED PARTY TRANSACTIONS IFRS Group is controlled by Related Party Entity, which owns X% of IFRS Group’s shares. The remaining Y% of the shares is widely held. IFRS Group’s ultimate parent and controlling party is UAE Government Related Party Entity. The following transactions were carried out with related parties: (a)

Sales of goods and services

Sales of goods: Associates Sales of services: Ultimate parent (legal and administration services) Close family members of the ultimate controlling party (design services) Total

2014 AED

2013 AED

X

X

X X X

X X X

Goods are sold based on the price lists in force and terms that would be available to third parties 1. Sales of services are negotiated with related parties on a cost-plus basis, allowing a margin ranging from X% to Y% (2013: X% to Y %). (b)

Purchases of goods and services 2014 AED

2013 AED

Purchases of goods: Associates X X Purchases of services: Entity controlled by key management personnel X X Immediate parent (management services) X X Total X X 1 Management should disclose that related-party transactions were made on an arm’s length basis only when such terms can be substantiated (IAS24p21).

Goods and services are bought from associates and an entity controlled by key management personnel on normal commercial terms and conditions. The entity controlled by key management personnel is a firm belonging to [NAME], a non-executive director of the company. Management services are both from the immediate parent on a cost-plus basis, allowing a margin ranging from X% to Y% (2013: X% to Y %). (c) Key management compensation Key management includes directors (executive and non-executive), members of the Executive Committee and the Head of Internal Audit. The compensation paid to key management for employee services is shown below: Salaries and other short-term employee benefits Termination benefits Post-employment benefits Other long-term benefits Total

2014 AED X X X X X

2013 AED X X X X X

| 41

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

(d)

Year-end balances arising from sales/purchases of goods/services 2014 AED

2013 AED

X X

X X

X X X

X X X

Receivables from related parties (note 11): Ultimate parent Close family members of key management personnel Payables to related parties (note 23): Immediate parent Associates Entity controlled by key management personnel

The receivables from related parties arise mainly from sale transactions and are due two months after the date sales. The receivables are unsecured in nature and bear no interest. No provisions are held against receivables from related parties (2013: nil). The payables to related parties arise mainly from purchase transactions and are due two months after the date of purchase. The payables bear no interest.

(e)

Loans to related parties 2014 AED

2013 AED

X X X X X X

X X X X X X

Loans to key management of IFRS Group (and their families): At 1 January Loans advanced during year Loan repayments received Interest charged Interest received At 31 December

(f)

Loans advanced to key management Amount of loan (AED)

Term

Interest rate

2014 Name Name

X X

Repayable monthly over 2 years Repayable monthly over 2 years

X% X%

2013 Name Name

X X

Repayable monthly over 2 years Repayable monthly over 1 year

X% X%

Name of key management

No provision was required in 2014 (2013: nil) for the loans made to key management personnel. 31

NON CONTROLLING INTERESTS – (note not provided)

| 42

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

32

PROVISIONS 2014 AED

2013 AED

X X X

X X X

X X X

X X X

Warranty and technology provision AED X X (X) X

Other AED X X (X) X

Total AED X X (X) X

X

X

X

Warranty provision Other Analysed as: Current Non-current

Balance at 1 January 2013 Additional provision Utilisation of provision Unwinding of discount Balance at 31 December 2013

The warranty and technology provisions represent management’s best estimate of the group’s liability under warranties granted and remedial work required under technology licenses, based on past experience in Environmental Technologies Division. Warranties generally cover a period up to three years. The other provisions include environmental, onerous leases and legal provisions. Amounts provided reflect management’s best estimate of the expenditure required to settle the obligations at the balance sheet date. It is possible that these and further contingent environmental and legal liabilities may give rise to expenditure above that provided. Further details of environmental and legal provisions and contingent liabilities are not provided to avoid the potential of seriously prejudicing the group’s stance in law. 33

IFRS 7 DISCLOSURES FOR FINANCIAL ASSETS/LIABILITIES – (note not provided)

34

EVENTS AFTER THE REPORTING PERIOD – (note not provided)

| 43

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Appendix I: New standards and amendments Below is a list of standards/interpretations that have been issued and are effective for periods beginning on or after 1 January 2014. Topic

Key requirements

Effective date

Amendment to IAS 1, ‘Financial statement presentation’, regarding other comprehensive income

The main change resulting from these amendments is a

1 July 2012

Amendment to IAS 19, ‘Employee benefits’

These amendments eliminate the corridor approach and

Amendment to IFRS 1, ‘First time adoption’, on government loans

This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008.

1 January 2013

Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset

This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial

1 January 2013

and liability offsetting

statements in accordance with US GAAP.

Amendment to IFRSs 10, 11 and 12 on transition guidance

These amendments provide additional transition relief to IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will

requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially re-classifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. 1 January 2013

calculate finance costs on a net funding basis.

1 January 2013

remove the requirement to present comparative information for periods before IFRS 12 is first applied. Annual improvements 2011

These annual improvements, address six issues in the 20092011 reporting cycle. It includes changes to: . IFRS 1, ‘First time adoption’ . IAS 1, ‘Financial statement presentation’ . IAS 16, ‘Property plant and equipment’ . IAS 32, ‘Financial instruments; Presentation’

1 January 2013

. IAS 34, ‘Interim financial reporting’ IFRS 10, ‘Consolidated financial statements’

The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entity (an entity that controls one or more other entities) to present consolidated financial statements. It defines the principle of control, and establishes controls as the basis for consolidation. It sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. It also sets out the accounting requirements for the preparation of consolidated financial statements.

1 January 2013

| 44

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014 IFRS 11, ‘Joint arrangements’

IFRS 11 is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its share of assets, liabilities, revenue and expenses. Joint ventures arise where the joint venture has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.

1 January 2013

IFRS 12, ‘Disclosures of interests in other entities’

IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

1 January 2013

IFRS 13, ‘Fair value

IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP.

1 January 2013

IAS 27 (revised ), ‘Separate financial statements’

IAS 27 (revised 2011) includes the provisions on separate

1 January 2013

IAS 28 (revised 2012), ‘Associates and joint ventures’

IAS 28 (revised 2011) includes the requirements for joint ventures, as well as associates, to be equity accounted

IFRIC 20, ‘Stripping costs in the production phase of a surface mine’

This interpretation sets out the accounting for overburden waste removal (stripping) costs in the production phase of a surface mine. The interpretation may require mining entities reporting under IFRS to write off existing stripping assets to opening retained earnings if the assets cannot be attributed to an identifiable component of an ore body.

1 January 2013

Amendment to IAS 32, ‘Financial instruments: Presentation’, on asset and liability offsetting

These amendments are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

1 January 2014

Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities

These amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead, they will measure them at fair value

1 January 2014

measurement’

financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10. 1 January 2013

following the issue of IFRS 11.

through profit or loss. The amendments give an exception to entities that meet an ‘investment entity’ definition and which display particular characteristics. Changes have also been made IFRS 12 to introduce disclosures that an investment entity needs to make. Amendment to IAS 36,

This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that

1 January 2014

| 45

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014 ‘Impairment of assets’ on recoverable amount disclosures

amount is based on fair value less costs of disposal.

Financial Instruments: Recognition and Measurement Amendment to IAS 39 ‘Novation of derivatives’

This amendment provides relief from discontinuing hedge accounting when novation ot a hedging instrument to a central counter party meets specified criteria.

1 January 2014

IFRIC 21, ‘Levies’

This is an interpretation of IAS 37, ‘Provisions, contingent

1 January 2014

liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

| 46

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

Appendix II: Forthcoming requirements Below is a list of standards/interpretations that have been issued and are not effective for periods starting on 1 January 2014, but will be effective for later periods. Topic

Key requirements

Effective date

Annual improvements 2012

These annual improvements amend standards from the 2010 – 2012 reporting cycle. It includes changes to:

1 July 2014.

■ IFRS 2, ‘Share based payments’, and clarifies the definition of a ‘vesting condition’ and separately defines ‘performance condition’ and ‘service condition’. ■ IFRS 3, ‘Business combinations’, and clarifies that an obligation to pay contingent consideration which meets the definition of a financial instrument is classified as a financial liability or equity, on the basis of the definitions in IAS 32, ‘Financial instruments: Presentation’. It also clarifies that all non-equity contingent consideration is measured at fair value at each reporting date, with changes in value recognised in profit and loss. ■ IFRS 8, ‘Operating segments’ which is amended to require disclosure of the judgements made by management in aggregating operating segments. It is also amended to require a reconciliation of segment assets to the entity’s assets when segment assets are reported. ■ IFRS 13, ‘Fair value’ which amended the basis of conclusions to clarify that it did not intend to remove the ability to measure short term receivables and payables at invoice amounts where the effect of discounting is immaterial. ■ IAS 16,’Property, plant and equipment’ and IAS 38,’Intangible assets’ are amended to clarify how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model. ■ IAS 24,’Related party disclosures’ is amended to include, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity (the ‘management entity’). Disclosure of the amounts charged to the reporting entity is required. Annual improvements 2013

These annual improvements amend standards from the 2011 – 2013 reporting cycle. It includes changes to:

1 July 2014.

■ IFRS 1,’First time adoptions of IFRSs’, basis of conclusions is amended to clarify that where a new standard is not mandatory but is available for early adoption a first-time adopter can use either the old or the new version, provided the same standard is applied in all periods presented. ■ IFRS 3,’Business combinations’ is amended to clarify that IFRS 3 does not apply to the accounting for the formation of any joint venture under IFRS 11.

| 47

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014 ■ IFRS 13,’Fair value measurement’ is amended to clarify that the portfolio exception in IFRS 13 applies to all contracts (including nonfinancial contracts) within the scope of IAS 39 or IFRS 9. ■ IAS 40,’Investment property’ is amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive. IAS 40 assists users to distinguish between investment property and owner-occupied property. Preparers also need to consider the guidance in IFRS 3 to determine whether the acquisition of an investment property is a business combination. Amendment to IAS 19, ‘Employee benefits’ regarding employee or third party contributions to defined benefit plans.

The amendment applies to contributions from employees or third parties to defined benefit plans and clarifies the treatment of such contributions. The amendment distinguishes between contributions that are linked to service only in the period in which they arise and those linked to service in more than one period.

1 July 2014.

The objective of the amendment is to simplify the accounting for contributions that are independent of the number of years of employee service, for example employee contributions that are calculated according to a fixed percentage of salary. Entities with plans that require contributions that vary with service will be required to recognise the benefit of those contributions over employee’s working lives.

Amendment to IFRS 11, ‘Joint arrangements’ regarding acquisition of an interest in a joint operation.

This amendment provides new guidance on how to account for the acquisition of an interest in a joint venture operation that constitutes a business. The amendments require an investor to apply the principles of business combination accounting when it acquires an interest in a joint operation that constitutes a ‘business’. The amendments are applicable to both the acquisition of the initial interest in a joint operation and the acquisition of additional interest in the same joint operation. However, a previously held interest is not re-measured when the acquisition of an additional interest in the same joint operation results in retaining joint control.

1 January 2016.

Amendment to IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’ regarding depreciation and amortisation.

This amendment clarifies that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset.

1 January 2016

This has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. The presumption may only be rebutted in certain limited circumstances. These are where the intangible asset is expressed as a measure of revenue; or where it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated.

| 48

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014 Amendments to IAS 16, ‘Property, plant and equipment’ and IAS 41, ‘Agriculture’ regarding bearer plants Amendments to IFRS 10 and IAS 28 regarding the sale or contribution of assets between an investor and its associate or joint venture

These amendments change the reporting for bearer plants, such as grape vines, rubber trees and oil palms. Bearer plants should be accounted for in the same way as property, plant and equipment because their operation is similar to that of manufacturing. The amendments include them in the scope of IAS 16 rather than IAS 41. The produce on bearer plants will remain in the scope of IAS 41. These amendments address an inconsistency between IFRS 10 and IAS 28 in the sale or contribution of assets between an investor and its associate or joint venture.

1 January 2016.

Amendment to IAS 27, ‘Separate financial statements’ regarding the equity method IFRS 14, ‘Regulatory deferral accounts’.

The amendment allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.

1 January 2016

This standard permits first-time adopters of IFRS to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognise such amounts, the standard requires that the effect of rate regulation must be presented separately from other items.

1 January 2016

Annual improvements 2014

These annual improvements amend standards from the 2012 – 2014 reporting cycle. It includes changes to:

1 July 2016

1 January 2016

A full gain or loss is recognised when a transaction involves a business. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if those assets are in a subsidiary.

■ IFRS 5,’Non-current assets held for sale and discontinued operations’ – The amendment clarifies that, when an asset (or disposal group) is reclassified from ‘held for sale’ to ‘held for distribution’, or vice versa, this does not constitute a change to a plan of sale or distribution, and does not have to be accounted for as such. This means that the asset (or disposal group) does not need to be reinstated in the financial statements as if it had never been classified as ‘held for sale’ or ‘held for distribution’ simply because the manner of disposal has changed. The amendment also explains that the guidance on changes in a plan of sale should be applied to an asset (or disposal group) which ceases to be held for distribution but is not reclassified as ‘held for sale’. ■ IFRS 7,’Financial instruments: Disclosures’ – There are two amendments: – Servicing contracts – If an entity transfers a financial asset to a third party under conditions which allow the transferor to derecognise the asset, IFRS 7 requires disclosure of all types of continuing involvement that the entity might still have in the transferred assets. The standard provides guidance about what is meant by continuing involvement. The amendment is prospective with an option to apply retrospectively. There is a consequential amendment to IFRS 1 to give the same relief to first time adopters.

| 49

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014

– Interim financial statements – the amendment clarifies that the additional disclosure required by the amendments to IFRS 7, ‘Disclosure – Offsetting financial assets and financial liabilities’ is not specifically required for all interim periods unless required by IAS 34. This amendment is retrospective. ■ IAS 19,’Emplyee benefits’ – The amendment clarifies that, when determining the discount rate for post-employment benefit obligations, it is the currency that the liabilities are denominated in that is important, not the country where they arise. The assessment of whether there is a deep market in high-quality corporate bonds is based on corporate bonds in that currency, not corporate bonds in a particular country. Similarly, where there is no deep market in high-quality corporate bonds in that currency, government bonds in the relevant currency should be used. The amendment is retrospective but limited to the beginning of the earliest period presented. ■ IAS 34,’Interim financial reporting’ – the amendment clarifies what is meant by the reference in the standard to ‘information disclosed elsewhere in the interim financial report’. The amendment also amends IAS 34 to require a cross-reference from the interim financial statements to the location of that information. The amendment is retrospective. IFRS 15, ‘Revenue from contracts with customers’

This is the converged standard on revenue recognition. It replaces IAS 11, ‘Construction contracts’, IAS 18,’Revenue’ and related interpretations.

1 January 2017.

Revenue is recognised when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the good or service. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: ■ Step 1: Identify the contract(s) with a customer ■ Step 2: Identify the performance obligations in the contract ■ Step 3: Determine the transaction price ■ Step 4: Allocate the transaction price to the performance obligations in the contract ■ Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation IFRS 15 also includes a cohesive set of disclosure requirements that will result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

| 50

IFRS Group Consolidated Financial Statements For the year ended 31 December 2014 IFRS 9, ‘Financial instruments’

The complete version of IFRS 9 replaces most of the guidance in IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value, through profit or loss.

1 January 2018. Earlier application is permitted. If an entity elects to early apply it must apply all of the requirements at the same time with the following exception: Entities with a date of initial application before 1 February 2015 continue to have the option to apply the standard in phases.

IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. Extracted from PwC – Illustrative IFRS corporate consolidated financial statements for 2013 year ends.

| 51