2012Illustratives FINAL

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IFRS Illustrative Consolidated Financial Statements

For the year ended 31 December 2012


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IFRS Illustrative Consolidated FinancialStatements

RSM International Limited has prepared a model set of consolidated financial statements for a fictitious company calledIFRS Statements Limited which, for the purpose of the exercise, is described as a company listed in Big City StockExchange and incorporated and domiciled in a fictitious country, Newland. No such company or jurisdiction exists and anypreparers of financial statements will need to ensure that their financial statements comply with local laws as well as allrelevant International Financial Reporting Standards (IFRS).

In addition, it should be noted that this company operates in a fictit ious environment which does not replicate the economicenvironment that characterised the year 2012, let alone the financial crises that have severely affected the global economyin the recent years. Hence, the preparation of IFRS consolidated financial statements in the 2011 and 2012 economic

environment might require specific considerations and disclosures that have not been contemplated while designing theseillustrative consolidated and comparative financial statements.

The consolidated financial statements assume that IFRS Statements Limited is an existing IFRS preparer and is tradinginternationally as well as in its own country of incorporation and actively expanding. Accordingly, it is not a first-time adopterof IFRS. First-time adopters should instead refer to IFRS1 First-time Adoption of International Financial ReportingStandards.

The model financial statements do not include separate financial statements for the parent, which may be required by locallaws or regulations, or may be prepared voluntarily. Where an entity presents separate financial statements that comply withIFRS, the requirements of IAS 27 Consolidated and Separate Financial Statementswill then apply to those separatefinancial statements.

The IFRS consolidated financial statements have been prepared according to all relevant Standards and Interpretations inforce as at 31 December 2012. Where applicable, we have illustrated the effects of adopting a number of amendments to

standards in 2012 (see Note 2 for details).

Suggested disclosures are cross-referenced to the underlying requirements in the texts of the relevant Standards andInterpretations. References are generally to the version of the relevant Standard or Interpretation mandatorily effective forthe 2012 financial statements (unless specified otherwise).

Whilst the model financial statements illustrate many presentation and disclosure requirements for the consolidated financialstatements of the fictitious group of companies that report under International Financial Reporting Standards, the financialstatements do not purport to be all inclusive. No single set of example financial statements can illustrate all possiblepresentations or required disclosures. Common additional and alternative disclosures are illustrated in the appendices. Inpractice, many entities will have followed special transitional rules that depended on when individual new standards wereadopted or IFRS were applied for the first time. The model financial statements represent one form of presentation.

Alternative presentations of IFRS may be appropriate and acceptable.

The preparation of financial statements complying with IFRS is the responsibility of the management of the relevant entity.Accordingly, the model financial statements provided cannot be taken as a definitive reference; they do not replace the needfor professional judgement having regard to relevant standards and other requirements and all the relevant circumstancesrelating to the issue under review. For the avoidance of doubt, the model financial statements are not based on any actuallegal framework in any one or more jurisdictions.

Although the model consolidated financial statements have been prepared by RSM International Limited, the viewsexpressed are the consolidated views of a group of professionals known as RSM IFRS Leadership Groupfor illustrativepurposes only and not those of any Member Firm of RSM International Limited itself.

The copyright in this published work belongs to and vests in RSM International Association and all rights are reserved. Nopart of this publication may be reproduced, stored in any system or transmitted in any form or by any means whetherelectronic, mechanical, photocopying, recording or otherwise without the prior permission in writing of RSM International

Association.


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CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS Page

Consolidated Income Statement 1

Consolidated Statement of Comprehensive Income 2

Consolidated Statement of Financial Position 3

Consolidated Statement of Changes in Equity 4

Consolidated Statement of Cash Flows 5

Notes 6

APPENDICESAPPENDIX 1 Consolidated Income Statement by nature of expense 63

APPENDIX 2 Consolidated Income Statement using a columnar approach to discontinued operations 65

APPENDIX 3 Consolidated Statement of Financial Position in order of liquidity 66

APPENDIX 4 Financial Instruments under IFRS 9 68

APPENDIX 5 Investment Properties 70

APPENDIX 6 Construction Contracts 72

KEY TO DISCLOSURE REFERENCES

IASXpY Paragraph Y of International Accounting Standard X

IFRSXpY Paragraph Y of International Financial Reporting Standard X

IFRICX International Financial Reporting Interpretations Committee number X

SIC-X Standing Interpretations Committee number X

These consolidated financial statements are presented in CU.

Unless otherwise stated, all amounts are expressed in thousands of CU.

Decimal symbol is dot (.) and digit-grouping symbol is comma (,)


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IAS1p51(a) IFRS STATEMENTS LIMITEDp49;51(b),(c) CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012

Page 1

ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

1p10(b);81(b) CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2012

This i l lustrates the presentat ion of com prehensive income in two statements, by funct ion of expense.

2012 2011

p113;51(d),(e) Notes CU'000 CU'000

CONTINUING OPERATIONS

IAS1p82(a) Revenue 3 22,803 15,160

IAS1p99;103 Cost of sales 4 (18,697) (11,720)

IAS1p85 GROSS PROFIT 4,106 3,440

IAS1p99;103 Distribution costs 4 (889) (747)

IAS1p99;103 Administrative expenses 4 (1,222) (1,015)

IAS1p99;103 Other operating expenses 4 (42) (130)

IAS1p82(b) Finance costs 5 (91) (95)

IAS1p82(c) Share of the profit (loss) of associates 13 140 300

IAS1p85 Gain (loss) on disposal of available-for-sale financial assets 6 63 18

IFRS3p42 Gain (loss) on revaluation of an associate becoming a subsidiary 17 490 -

IAS1p85 PROFIT BEFORE TAX 2,555 1,771

IAS1p82(d) Income tax expense 7 (682) (562)

IAS1p85 PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 1,873 1,209

DISCONTINUED OPERATIONS

IAS1p82(e) LOSS FOR THE YEAR FROM DISCONTINUED OPERATIONS 21 (110) (226)

IAS1p82(f) PROFIT FOR THE YEAR 1,763 983

PROFIT FOR THE YEAR ATTRIBUTABLE TO:

IAS1p83(a) Owners of the parent company 1,658 931

IAS1p83(a) Non-controlling interests 105 52

1,763 983

EARNINGS PER SHARE Cents Cents

BASIC 8

33p66;67;67A Continuing operations 4.34 3.53

AS33p68;68A Discontinued operations (0.27) (0.69)

33p66;67;67A Total basic earnings per share 4.07 2.84

DILUTED 833p66;67;67A Continuing operations 4.25 3.30

AS33p68;68A Discontinued operations (0.26) (0.65)

33p66;67;67A Total diluted earnings per share 3.99 2.65


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1p10(b);81(b) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2012

2012 2011

p113;51(d),(e) Notes CU'000 CU'000

PROFIT FOR THE YEAR

CONTINUING OPERATIONS 1,873 1,209

DISCONTINUED OPERATIONS (110) (226)

IAS1p81(b) PROFIT FOR THE YEAR 1,763 983

IAS1p81(b) OTHER COMPREHENSIVE INCOME

CONTINUING OPERATIONSIAS1p82(g) Exchange translation difference 32 65 50

IAS1p82(g) Gains on available-for-sale financial assets 6 10 12

IAS1p92 Reclassification adjustments on disposal of available-for-sale financial assets 6 (63) (18)

IAS1p82(g) Cash flow hedges 23 85 51

IAS1p82(g) Net investment hedge 23 87 61

IAS1p91(b)

Income tax relating to components of other comprehensive income from continuingoperations

1 (28) (17)

Other comprehensive income from continuing operations for the year 156 139

DISCONTINUED OPERATIONS

IAS1p82(g) Exchange translation difference 32 7 4

IAS1p91(b)

Income tax relating to components of other comprehensive income from discontinued

operations

1

- -Other comprehensive income from discontinued operations for the year 7 4

OTHER COMPREHENSIVE INCOME FOR THE YEAR 163 143

IAS1p82(i) TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,926 1,126

- FROM CONTINUING OPERATIONS 2,029 1,348

- FROM DISCONTINUED OPERATIONS (103) (222)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO:

IAS1p83(b) Owners of the parent company 1,826 1,082

IAS1p83(b) Non-controlling interests 100 44

1,926 1,126

IAS1p90 1Alternatively each component of other comprehensive income can be presented net of tax effect. When such option isselected, income tax relating to each component must be disclosed in the notes.


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IAS1p10(a) CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2012

2012 2011

p113;51(d),(e) Notes CU'000 CU'000

ASSETS

IAS1p60 NON-CURRENT ASSETS

IAS1p54(a) Property, plant and equipment 10 5,800 5,520

IAS1p55 Goodwill 11 1,329 605

IAS1p54(c) Other intangible assets 12 2,414 803

IAS1p54(e) Investments in associates 13 281 249

IAS1p54(d) Available-for-sale financial assets 15 274 269

AS1p54(o);56 Deferred tax assets 28 243 140

Total non-current assets 10,341 7,586

IAS1p60 CURRENT ASSETS

IAS1p54(g) Inventories 18 2,623 1,995IAS1p54(h) Trade and other receivables 19 2,586 1,517

IAS1p54(i) Cash and cash equivalents 20 622 360

5,831 3,872

IAS1p54(j) Non-current assets classified as held for sale 21 1,016 -

Total current assets 6,847 3,872

TOTAL ASSETS 17,188 11,458

EQUITY AND LIABILITIES

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY

IAS1p54(r) Capital 31 2,596 1,870

IAS1p54(r) Reserves 32 1,035 295

IAS1p54(r) Retained earnings 6,309 5,1519,940 7,316

IAS1p54(q) NON-CONTROLLING INTERESTS 306 35

TOTAL EQUITY 10,246 7,351

IAS1p60 NON-CURRENT LIABILITIES

IAS1p55 Long-term borrowings 22 2,182 823

IAS1p54(m) Derivative financial instruments 23 17 10

IAS1p54(k) Trade and other payables 24 195 161

IAS1p55 Long-term retirement benefit obligations 26 466 250

AS1p54(o);56 Deferred tax liabilities 28 780 297

IAS1p54(l) Long-term provisions 29 92 38

IAS1p55 Other non-current liabilities 30 60 156

Total non-current liabilities 3,792 1,735

IAS1p60 CURRENT LIABILITIES

IAS1p55 Short-term borrowings 22 964 748

IAS1p54(m) Derivative financial instruments 23 186 103

IAS1p54(k) Trade and other payables 24 1,017 1,045

IAS1p55 Short-term retirement benefit obligations 26 9 42

IAS1p54(n) Current tax payable 7 523 415

IAS1p54(l) Short-term provisions 29 151 19

2,850 2,372

IAS1p54(p) Liabilities directly associated with non-current assets classified as held for sale 21 300 -

Total current liabilities 3,150 2,372

TOTAL LIABILITIES 6,942 4,107

TOTAL EQUITY AND LIABILITIES 17,188 11,458


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S1p10(c);106

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2012

Capital ReservesRetainedEarnings

Attributableto Owners

of theParent

Non-controllingInterests

TOTALEQUITY

p113;51(d),(e) Notes CU000 CU000 CU000 CU000 CU000 CU000

At 1 January 2011 1,810 64 4,690 6,564 41 6,605

Profit for the year - - 931 931 52 983

Other comprehensive income for the year - 231 (80) 151 (8) 143

Total comprehensive income for the year 32 - 231 851 1,082 44 1,126

Share options 31 60 - 80 140 - 140

Equity dividends paid 9 - - (470) (470) (50) (520)

At 31 December 2011 1,870 295 5,151 7,316 35 7,351

Profit for the year - - 1,658 1,658 105 1,763

Other comprehensive income for the year - 192 (24) 168 (5) 163

Total comprehensive income for the year - 192 1,634 1,826 100 1,926

Ordinary shares issued on acquisition of

subsidiary 31 774 - - 774 - 774Share options 31 62 - 24 86 - 86

Issue of convertible bonds 32 - 548 - 548 - 548

Equity dividends paid 9 - - (500) (500) (389) (889)

Purchase of treasury shares 31 (110) - - (110) - (110)

Non-controlling interest adjustment due toan associate becoming a subsidiary 17 - - - - 560 560

At 31 December 2012 2,596 1,035 6,309 9,940 306 10,246


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IAS1p10(d) CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2012

This i l lustrates the direct method of report ing cash f lows from operat ing act iv i t ies.

2012 2011

p113;51(d),(e) Notes CU'000 CU'000

IAS7p10 CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 22,563 15,300

Payments to suppliers and employees (20,164) (12,857)

Net cash flow generated from operations 2,399 2,443

IAS7p31 Interest paid (115) (108)

IAS7p35 Income taxes paid (447) (250)

Net cash generated by operating activities 37 1,837 2,085IAS7p10 CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of subsidiary (net of cash acquired) 17 (303) -

Delayed payment for earlier acquisition 30 (100) -

Disposal of subsidiary (net of cash disposed of) 21 306 -

Proceeds from sale of property, plant and equipment 10 76 273

Proceeds from sale of intangible assets 12 167 25

Purchase of property, plant and equipment 10 (1,841) (902)

Purchase of intangible assets 12 (1,713) (307)

Available-for-sale investments: 15

- bought (75) -

- sold 80 -IAS7p31 Interest received 5 7 5

IAS7p31 Dividends received 5 12 11

Net cash used in investing activities (3,384) (895)

IAS7p10 CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares 31 62 60

Proceeds from issue of convertible bonds 22 1,572 -

Purchase of treasury shares 31 (110) -

Proceeds of new bank loans and derivatives 22 648 -

Net fresh factor borrowings 22 123 92

Repayment of bank loans 22 - (599)

Finance lease repayments 22 (51) (44)

IAS7p31 Dividends paid to owners of the parent company 9 (500) (470)

Net cash generated by (used in) financing activities 1,744 (961)

CASH AND CASH EQUIVALENTS 20

At 1 January 223 (4)

Net increase in the year 197 229

IAS7p28 Effect of exchange rate changes on cash and cash equivalents held - (2)

At 31 December 420 223

COMPRISING

Cash in hand and at bank 334 285

Short-term investments 288 75CASH AND CASH EQUIVALENTS PER THE STATEMENT OF FINANCIAL

POSITION 622 360Less bank overdrafts (202) (137)CASH AND CASH EQUIVALENTS FOR THE STATEMENT OF CASH FLOWSPURPOSES 420 223


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Page 6


NOTES

Page

1 General information 7

2 Summary of significant accounting policies 7

3 Segment information 21

4 Analysis of expenses by nature 25

5 Finance income and costs 26

6 Gain / loss on available-for-sale financial assets 26

7 Income tax expense 27

8 Earnings per share 28

9 Dividends on equity shares 28

10 Property, plant and equipment 29

11 Goodwill 30

12 Other intangible assets 32

13 Investments in associates 33

14 Joint ventures 34

15 Available-for-sale financial assets 34

16 Subsidiaries 34

17 Business combinations 35

18 Inventories 36

19 Trade and other receivables 36

20 Cash and cash equivalents 37

21 Non-current assets classified as held-for-sale and discontinued operations 38

22 Borrowings 39

23 Derivative financial instruments and hedge accounting 41

24 Trade and other payables 42

25 Information on financial risks 42

26 Retirement benefit obligations 47

27 Share-based payments 50

28 Deferred tax 51

29 Provisions 52

30 Other non-current liabilities 53

31 Equity capital 54

32 Other reserves 55

33 Related party transactions 5634 Key management compensation 57

35 Commitments 57

36 Contingent liabilities 57

37 Reconciliation of profit to net cash flow generated from operations 58

38 Events after the reporting period 58

39 Significant judgements and key sources of estimation uncertainty 59


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IAS1p10(e) NOTESFOR THE YEAR ENDED 31 DECEMBER 2012

Page 7


1 GENERAL INFORMATION

IFRS Statements Limited is a corporation domiciled in, and registered under the laws of, the Republic of Newland, where thehead office is located. IFRS Statements Limited together with its subsidiaries (the Group) is organised into three business segments: mechanical, electronic and chemicals.

The Group operates in 40 countries worldwide, essentially in Europe, America and Asia. It includes 21 commercial subsidiariesacross those three continents and 5 manufacturing plants in Europe and Asia. Markets where the Group is not present v ia asubsidiary and that are considered significant are served using local distributors.

IFRS Statements Limited is listed on the Big City stock exchange in the Republic of Newland.

The Group is controlled by Newmagic Corporation domiciled in Newland, which holds 51% of the ordinary shares of the Group.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF PREPARATION

1p116;117(a)IAS1p16

These consolidated financial statements have been prepared on a going concern basis and in accordance with InternationalFinancial Reporting Standards (IFRS), being Standards and Interpretations issued by the International Accounting StandardsBoard (IASB), in force at 31 December 2012. The consolidated financial statements have been prepared under the historicalcost convention, unless mentioned otherwise in the accounting policies below (eg certain financial instruments that aremeasured at fair value). Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The consolidated financial statements comprise an income statement, a statement of comprehensive income, a statement offinancial position, a statement of changes in equity, a statement of cash flows, and notes. Income and expenses, excluding thecomponents of other comprehensive income, are recognised in the income statement. Other comprehensive income isrecognised in the statement of comprehensive income and comprises items of income and expense (including reclassificationadjustments) that are not recognised in the income statement, as required or permitted by IFRS. Reclassification adjustmentsare amounts reclassified to profit or loss in the income statement in the current period that were recognised in othercomprehensive income in the current or previous periods. Transactions with the owners of the Group in their capacity as ownersare recognised in the statement of changes in equity.

The Group presents the income statement using the classification by function of expenses, known also as the Cost of Salesapproach. The Group believes this method provides more useful information to the readers of the financial statements as itbetter reflects the way operations are run from a business point of view. The statement of financial position format is based on acurrent/non-current distinction.

IAS8p28 For the preparation of these consolidated financial statements, the following amended pronouncements are mandatory for thefirst time for the financial year beginning 1 January 2012 (the list does not include information about new pronouncements thataffect first-time adopters of IFRS or not-for-profit and public sector entities since they are not relevant to IFRS Statements

Limited).1

Amendments to IAS 12 titled Deferred Tax: Recovery of Underlying Assets(issued in December 2010) - The amendmentsintroduce a presumption (that may be rebutted under certain conditions) that the carrying amount of an asset measuredusing the fair value model in IAS 40 Investment Propertywill be recovered through sale. The amendments also incorporateinto IAS 12 the guidance in respect of revalued non-depreciable property, plant and equipment, previously contained in SIC-21 which is accordingly withdrawn. The amendments are applicable, retrospectively, to annual periods beginning on or after1 January 2012.

Amendments to IFRS 7 titled Disclosures Transfers of Financial Assets(issued in October 2010) - The amendmentsimprove the disclosure requirements in relation to transferred financial assets, whether they are derecognised in theirentirety or not. The amendments are applicable to annual periods beginning on or after 1 July 2011, but not to comparatives.

1Although none of the amended pronouncements affected significantly IFRS Statements Limited, they are given for illustration

purposes.Only those changes that have an effect on the current period or any prior period, would have such an effect except that it isimpracticable to determine the amount of the adjustment, or might have an effect on future periods, are required to be disclosed.


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IAS1p10(e) NOTES (CONTINUED)FOR THE YEAR ENDED 31 DECEMBER 2012

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IAS8p30 The following new standards, amendments and interpretations have been issued by the IASB but are not yet effective for thefinancial year beginning 1 January 2012 and have not been early adopted by IFRS Statements Limited (the list does not includeinformation about new pronouncements that affect interim financial reporting or first-time adopters of IFRS since they are notrelevant to IFRS Statements Limited).The Directors anticipate that the new standards, amendments and interpretations will be adopted in the Group's consolidatedfinancial statements when they become effective. The Group has assessed, where practicable, the potential impact of all thesenew standards, amendments and interpretations that will be effective in future periods.

1

Amendments to IAS 1 titled Presentation of Items of Other Comprehensive Income (issued in June 2011) - Theseamendments improve the presentation of the components of other comprehensive income, mainly the Group will be requiredto group items presented in OCI based on whether or not they will be reclassified to profit or loss subsequently. They areeffective for annual periods beginning on or after 1 July 2012.

Amendment to IAS 1 Presentation of Financial Statements(Annual Improvements to IFRSs 20092011 Cycle, issued in May2012) - The amendment clarifies that additional comparative information is not necessary for periods beyond the minimumrequired by IAS 1, however if voluntarily presented, it should be in accordance with IFRS, without triggering a requirement toprovide a complete set of financial statements. It also clarifies that, in the case of changes in accounting policiesretrospectively or a retrospective restatement or reclassification which has a material effect on the information in thestatement of financial position at the beginning of the preceding period, the Group should present the statement of financialposition at the end of the current period and the beginning and end of the preceding period. However, other than disclosureof certain specified information, related notes will not be required to accompany the opening statement of financial positionas at the beginning of the preceding period. The amendment is effective for annual periods beginning on or after 1 January2013.

Amendment to IAS 16Property, Plant and Equipment (Annual Improvements to IFRSs 20092011 Cycle, issued in May2012) - The amendment clarifies that items such as spare parts, stand-by equipment and servicing equipment should berecognised as PPE when they meet the definition in IAS 16 and as inventory otherwise. It is effective for annual periodsbeginning on or after 1 January 2013.

Revised IAS 19 Employee Benefits(issued in June 2011) - The key amendments include elimination of the corridorapproach, modification of accounting for termination benefits and improvement of the recognition and disclosurerequirements for defined benefit plans. The amendments are effective for annual periods beginning on or after 1 January2013. The Group will not be able to continue using the corridor approach for recognising actuarial gains and losses. Theeffect of this is yet to be quantified.

Revised IAS 27 Separate Financial Statements (issued in May 2011)The revised and re-titled Standard now only dealswith the requirements for separate financial statements, which have been carried over largely unchanged from IAS 27Consolidated and Separate Financial Statements. The Standard mainly requires that when an entity prepares separatefinancial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either at cost,or in accordance with IFRS 9 Financial Instruments / IAS 39 Financial Instruments: Recognition and Measurement. It alsodeals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements. It is

effective for annual periods beginning on or after 1 January 2013.

Revised IAS 28 Investments in Associates and Joint Ventures (issued in May 2011)The revised and re-titled Standardprescribes the accounting for investments in associates and sets out the requirements for the application of the equitymethod when accounting for investments in associates and joint ventures. It defines'significant influence', provides guidanceon how the equity method of accounting is to be applied (including exemptions from applying the equity method in somecases) and prescribes how investments in associates and joint ventures should be tested for impairment. It is effective forannual periods beginning on or after 1 January 2013.

Amendments to IAS 32 titled Offsetting Financial Assets and Financial Liabilities(issued in December 2011)Theamendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32, mainly by clarifyingthe meaning of currently has a legally enforceable right of set-off and that some gross settlement systems may beconsidered equivalent to net settlement. They are effective for annual periods beginning on or after 1 January 2014.

1 Since this list of new/revised/amended standards and interpretations was drafted in September 2012, it should be extended to include

all such changes up to the date of authorisation for issue of the 2012 financial statements.


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Amendment to IAS 32Financial instruments: Presentation (Annual Improvements to IFRSs 20092011 Cycle issued in May2012) - The amendment clarifies that income tax relating to distributions to holders of an equity instrument and to transactioncosts of an equity transaction should be accounted for in accordance with IAS 12. It is effective for annual periods beginningon or after 1 January 2013.

Amendments to IFRS 7 titled Disclosures - Offsetting Financial Assets and Financial Liabilities(issued in December 2011) -The amendments allow investors to bridge differences in the offsetting reporting requirements of IFRS and US GAAP andintroduce new disclosures that provide better information on how companies mitigate credit risk, including on relatedcollateral pledged or received. They are effective for annual periods beginning on or after 1 January 2013.

IFRS 9 Financial Instruments(issued in November 2009 and amended in October 2010) - This standard introduces newrequirements for the classification and measurement of financial assets and financial liabilities and for derecognition.

o IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments:

Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debtinvestments that are held within a business model whose objective is to collect the contractual cash flows, and thathave contractual cash flows that are solely payments of principal and interest on the principal outstanding aregenerally measured at amortised cost at the end of subsequent accounting periods. All other debt investments andequity investments are measured at their fair value at the end of subsequent accounting periods.

o The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates tothe accounting for changes in fair value of a financial liability (designated as at fair value through profit or loss)attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that aredesignated as at fair value through profit or loss, the amount of change in the fair value of the financial liability thatis attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless therecognition of the effects of changes in the liability's credit risk in other comprehensive income would create orenlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit riskare not subsequently reclassified to profit or loss. Currently, under IAS 39, the entire amount of the change in thefair value of the financial liability designated as at fair value through profit or loss is recognised in profit or loss.

o The derecognition provisions are carried over almost unchanged from IAS 39.

IFRS 9 is effective for annual periods beginning on or after 1 January 2015. The Directors anticipate that IFRS 9 will beadopted in the Group's consolidated financial statements when it becomes mandatory and that the application of the newStandard might have a significant impact on amounts reported in respect of the Groups financial assets and financialliabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has beencompleted.

IFRS 10 Consolidated Financial Statements(issued in May 2011)The new Standard replaces all of the guidance oncontrol and consolidation in IAS 27 Consolidated and Separate Financial Statementsand SIC-12 ConsolidationSpecialPurpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a singleeconomic entity remains unchanged, as do the mechanics of consolidation. IFRS 10 introduces a single consolidation modelthat identifies control as the basis for consolidation for all types of entities, where control is based on whether an investor

haspower over the investee,exposure/rights to variable returns from its involvement with the investee andthe ability to useits power over the investee to affect the amount of the returns. The new standard also includes guidance on participatingand protective rights and on agent/principal relationships. It is effective for annual periods beginning on or after 1 January2013.

IFRS 11 Joint Arrangements(issued in May 2011)The new Standard (that replaces IAS 31 Interests in Joint Ventures)requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing itsrights and obligations, and then account for those rights and obligations in accordance with that type of joint arrangement.Joint arrangements are either joint operations or joint ventures:

o In a joint operation, parties have rights to the assets and obligations for the liabilities relating to the arrangement.Joint operators recognise their assets, liabilities, revenue and expenses in relation to their interest in the jointoperation.

o In a joint venture, parties have rights to the net assets of the arrangement. A joint venturer applies the equitymethod of accounting for its investment in a joint venture in accordance with IAS 28 Investments in Associates and

Joint Ventures(2011). Unlike IAS 31, the use of 'proportionate consolidation' is not permitted.

IFRS 11 is effective for annual periods beginning on or after 1 January 2013. When applied, IFRS 11 is expected to havesignificant impact on the Groups consolidated financial statements as the proportionate consolidation method (currentlyapplied by IFRS Statements Limited) will be eliminated. The effect of this change is yet to be quantified.


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IFRS 12 Disclosure of Interests in Other Entities (issued in May 2011)The new Standard combines, enhances andreplaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities.It requires extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risksassociated with, interests in other entities and the effects of those interests on the Groups financial position, financialperformance and cash flows. IFRS 12 is effective for annual periods beginning on or after 1 January 2013.

IFRS 13 Fair Value Measurement(issued in May 2011)The new Standard defines fair value, sets out a single frameworkfor measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when other IFRSs requireor permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fairvalue, change what is measured at fair value in IFRS or address how to present changes in fair value. The newrequirements are effective for annual periods beginning on or after 1 January 2013.

IFRIC 20Stripping Costs in the Production Phase of a Surface Mine (issued in October 2011) -The interpretation provides

guidance on the accounting for waste removal (stripping) costs in the production phase of a mine. Such stripping costsshould be recognised as an asset if they generate a benefit of improved access to an identifiable component of the ore body,it is probable that the benefits will flow to the entity and the costs can be measured reliably. Capitalised stripping costs areamortised over the useful life of the identified component. On transition, existing production stripping costs must be writtenoff to retained earnings, unless they can be attributed to an identifiable component of an ore body. IFRIC 20 is effective forannual periods beginning on or after 1 January 2013.

IAS18p35(a) (B) REVENUE RECOGNITION

IAS18p14 Revenue from the sale of goods

Revenue from the sale of goods is recognised in the consolidated statement of comprehensive income on the date that goodsare delivered to the customer and legal title has passed. Revenue is the fair value of the consideration received or receivable forgoods and is net of estimated returns, trade discounts and sales-based taxes (eg value added tax).

IAS18IE10 Installation fees

Installation fees are recognised by reference to the stage of completion of the installation activity at the reporting date, unlessthey are incidental to the sale of a product, in which case they are recognised when the goods are sold. In general, the stage ofcompletion is based on man-hours or cost incurred, the appropriate method depending on the type of contract.

IAS18IE11 Servicing fees

Servicing fees are recognised over the term of the servicing contract.

S18p13;IE11 Multiple element arrangements

In certain circumstances, the products are sold together with other additional items (package). Thepackage might include oneor more of the following items: servicing, installation, future technical upgrades or other case-by-case items. In such cases, therecognition criteria specified above are applied to the separately identifiable components of the package in order to reflect thesubstance of the transaction.

IAS18p30(a) Interest income

Interest income is recognised on a time-proportion basis using the effective interest method.

IAS18p30(b) Royalty income

Fixed fee royalty income is recognised, in accordance with the substance of the agreement, on a straight-line basis over theperiod of the sub-licences and sales-linked royalty income is recognised in profit or loss when the products are sold by thelicensee.

IAS18p30(c) Dividend income

Dividend income is recognised when the right to receive the dividend is established.

(C) BASIS OF CONSOLIDATION

IAS27p12 Subsidiaries

IAS27p14

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and

operating policies generally accompanying a shareholding of more than one half of the voting rights.The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessingwhether the Group controls another entity.


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The Groups financial statements incorporate the results, cash flows, assets and liabilities of IFRS Statements Limited and all ofits directly and indirectly controlled subsidiaries. Subsidiaries are consolidated from the effective date of acquisition, which is thedate on which the Group effectively obtains control of the acquired business, until that control ceases. Control exists when theGroup has the power to govern the financial and operating policies so as to gain benefits from its activities.

IAS27p27 The non-controlling interests in the net assets and net results of consolidated subsidiaries are shown separately in theconsolidated statement of financial position and consolidated statement of comprehensive income.

IAS27p28 Total comprehensive income (ie profit or loss and each component of other comprehensive income) is attributed to the ownersof the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

IAS27p20 All intragroup transactions, balances, income and expenses are eliminated in full on consolidation.

IAS27p30;31

Changes in the Group's ownership interest in a subsidiary that do not result in the Group losing control are accounted for astransactions with owners in their capacity as owners (ie equity transactions). The carrying amounts of the Group's and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between theamount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recogniseddirectly in equity and attributed to the owners of the parent.

IAS27p34 Upon loss of control of a subsidiary, the Groups profit or loss is calculated as the difference between (i) the fair value of theconsideration received and of any investment retained in the former subsidiary and (ii) the previous carrying amount of theassets (including any goodwill) and liabilities of the subsidiary and any non-controlling interests.

IAS31p3 Joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity for which thestrategic financial and operating decisions require the unanimous consent of the parties sharing control (ie existence of jointcontrol).

IAS31p57;34

IAS28p2

Interests in joint venture entities are recognised using the proportionate consolidation method of accounting whereby theGroups share of each of the assets, liabilities, income and expenses of a jointly controlled entity is combined line by line withsimilar items in the Groups financial statements.

Profits on Group transactions with joint ventures are eliminated on consolidation to the extent of the Groups interest in therelevant joint venture.

Associates

Associates are entities over which the Group is in a position to exercise significant influence on the financial and operatingpolicy decisions but not control or joint control.

IAS28p11 Associates are accounted for using the equity method of accounting. Under the equity method, the investment is initiallyrecognised at cost and adjusted thereafter for the post-acquisition change in the investors share of comprehensive income ofthe associate. On acquisition of the investment, any difference between the cost of the investment and the investors share of

the net fair value of the associates identifiable assets, liabilities and contingent liabil ities is accounted forin accordance withIFRS 3 Business Combinations. The goodwill (net of any accumulated impairment loss) relating to an investment in an associateis included within the carrying amount of that investment.

The Groups share of its associates post-acquisition profits or losses is recognised in the income statement, and its share ofpost-acquisition movements in other comprehensive income is recognised in other comprehensive income. The cumulativepost-acquisition movements are adjusted against the carrying amount of the investment.

Distributions received from an investee reduce the carrying amount of the investment.

IAS28p29;30 If the Groups share of losses of an associate equals or exceeds its interest in the associate, the Group does not provide foradditional losses, unless it has incurred obligations or made payments on behalf of the associate.

IAS28p22 Profits on Group transactions with associates are eliminated to the extent of the Groups interest in the relevant associate.

Translation of financial statements of foreign entitiesIAS21p39;40 The assets and liabilities of foreign operations are translated into CU using exchange rates at the reporting date. The

components of shareholders equity are stated at historical value.


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Average exchange rates for the period are used to translate income and expense items of foreign operations. However, ifexchange rates fluctuate significantly, the exchange rates at the dates of the transactions are used.

All resulting exchange differences are recognised in other comprehensive income and accumulated in a separate component ofequity.

IAS21p47 Any goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities ofthat foreign operation and, as such, translated at the closing rate.

1p48;48A;48B On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect of that operationattributable to the owners of the parent company are reclassified to profit or loss. The cumulative amount of the exchangedifferences relating to that foreign operation that had been attributed to the non-controlling interests are derecognised, butwithout reclassification to profit or loss. The same applies in case of loss of control, joint control or significant influence.

IAS21p48C On the partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share ofexchange differences accumulated in the separate component of equity are re-attributed to non-controlling interests (they arenot recognised in profit or loss). For any other partial disposal of foreign entity (ie associates or jointly controlled entities withoutloss of significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified toprofit or loss.

Business CombinationsRS3p4;18;21 The Group applies the acquisition method to account for all acquired businesses, whereby the identifiable assets acquired and

the liabilities assumed are measured at their acquisition-date fair values (with few exceptions as required by IFRS 3 BusinessCombinations).

IFRS3p37 The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of theacquisition-date fair values of the assets transferred by the Group, the liabilities incurred by the Group to the former owners ofthe acquiree and the equity interests issued by the Group.

IFRS3p53 Acquisition-related costs (eg finders fees, consulting fees, administrative costs, etc.) are recognised as expenses in the periodsin which the costs are incurred and the services are received.

IFRS3p32 On acquisition date, goodwill is measured as the excess of the aggregate of consideration transferred, any non-controllinginterests in the acquiree, and acquisition-date fair value of the Group's previously held equity interest in the acquiree (if businesscombination achieved in stages) over the net of the acquisition-date amounts of the identifiable assets acquired and theliabilities assumed.

IFRS3p34;36 If, after appropriate reassessment, the amount as calculated above is negative, it is recognised immediately in profit or loss as abargain purchase gain.

IFRS3p19 At acquisition date, non-controlling interests in the acquiree that are present ownership interests and entitle their holders to aproportionate share of the entity's net assets in the event of liquidation are measured at either fair value or the present

ownership instruments proportionate share in the recognised amounts of the acquiree's identifiable net assets. This choice ofmeasurement is made separately for each business combination. Other components of non-controlling interests are measuredat their acquisition-date fair values, unless otherwise required by IFRS.

RS3p39;45;58 The acquisition-date fair value of any contingent consideration is recognised as part of the consideration transferred by theGroup in exchange for the acquiree. Changes in the fair value of contingent consideration that result from additional informationobtained during the measurement period (maximum one year from the acquisition date) about facts and circumstances thatexisted at the acquisition date are adjusted retrospectively against goodwill.

IFRS3p42 In a business combination achieved in stages, the Group remeasures its previously held equity interest in the acquiree at itsacquisition-date fair value and any resulting gain or loss is recognised in profit or loss. If any, changes in the value of theGroups equity interest in the acquiree that have been previously recognised in other comprehensive income are reclassified toprofit or loss, if appropriate had that interest been disposed of directly.

(D) PROPERTY, PLANT AND EQUIPMENT6p15;16;73(a) On initial recognition, items of property, plant and equipment are recognised at cost, which includes the purchase price as well

as any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating inthe manner intended by management.


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After initial recognition, items of property, plant and equipment are carried at cost less any accumulated depreciation andimpairment losses.

IAS16p50;51S16p73(b),(c)

Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over its useful economic lifeas follows:Buildings 2% straight linePlant and equipment 10-33% straight lineComputer equipment 25% straight lineMotor vehicles 25% straight lineLand is not depreciated

Useful lives, residual values and depreciation methods are reviewed, and adjusted if appropriate, at the end of each reportingperiod.

IAS16p67;68

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected toarise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant andequipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognisedin profit or loss.

Leased assetsIAS17p8 Leases are classified as finance leases if substantially all the risks and rewards of ownership are transferred to the lessee. All

other leases are classified as operating leases.

IAS17p20 Assets and liabilities arising from finance lease contracts are initially recognised in the consolidated statement of financialposition at their fair value at the inception of the lease or, if lower, at the present value of the minimum future lease rentals.

IAS17p27 After initial recognition, the depreciation policy applied is consistent with that for depreciable assets that are owned. As a result,the depreciation recognised is calculated in accordance with the useful life stated for property, plant and equipment (the Groupdoes not hold leased intangible assets). In cases where there is no reasonable certainty that the lessee will obtain ownership bythe end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.

IAS17p25 The interest element of rental obligations is charged to profit or loss over the period of the lease at a constant rate on thebalance of finance lease obligations outstanding.

IAS17p33 Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the lease term.

SIC-15 Incentives to take out operating leases are credited to the consolidated statement of comprehensive income on a straight-linebasis over the lease term.

Provision is made in the consolidated statement of financial position for the present value of the onerous element of operatingleases. This typically arises when the Group ceases to use premises and they are left vacant to the end of the lease or are sub-let at rentals, which fall short of the amount payable by the Group under the lease.

(E) INTANGIBLE ASSETS

GoodwillIFRS3p32

IAS36p10(b)

Goodwill arising in a business combination is initially measured at its cost, being the excess of the sum of the considerationtransferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equityinterest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilitiesassumed.

After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairmentlosses. Goodwill is not amortised.

Separately acquired intangible assetsIAS38p24;27

AS38p74;104

On initial recognition, intangible assets acquired separately are measured at cost. The cost of a separately acquired intangibleasset comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts

and rebates and any directly attributable cost of preparing the asset for its intended use.

After initial recognition, intangible assets are carried at cost less any accumulated amortisation and impairment losses. Theestimated useful life and amortisation method are revised at the end of each reporting period with the effect of any changes inestimate being accounted for on a prospective basis.


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S38p112;113 An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gainsor losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds andthe carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

Internally generated intangible assetsIAS38p57

IAS38p71

Development costs represent typical internally generated intangible assets of relevance for the Group. Costs incurred in relationto individual projects are capitalised only when the future economic benefit of the project is probable and the following mainconditions are met: (i) the development costs can be measured reliably, (ii) the technical feasibility of the product has beenascertained and (iii) management has the intention and ability to complete the intangible asset and use or sell it.

Given the type of businesses managed by the Group and the cumulative experience gained by the Group, usually the fact thatthe intangible asset will generate probable future economic benefits is reasonably certain only shortly before a product islaunched into the market. Costs incurred before that point in time are not reinstated.

Internally generated intangible assets primarily relate to internally developed software and internally developed patentedtechnology as well as processes or recipes.

IAS38p54 Research costs are expensed as incurred.

After initial recognition, internally generated intangible assets follow the accounting policies of separately acquired intangibleassets as stated above.

Intangible assets acquired in a business combinationIAS38p34 Identifiable intangible assets acquired as part of a business combination are initially recognised separately from goodwill i f the

assets fair value can be measured reliably, irrespective of whether the asset had been recognised by the acquiree before thebusiness combination. An intangible asset is considered identifiable only if it is separable or if it arises from contractual or otherlegal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

After initial recognition, intangible assets acquired as part of a business combination follow the accounting policies of separatelyacquired intangible assets as stated above.

38p118(a),(b) Amortisation

For intangible assets with finite useful lives, amortisation is calculated so as to write off the cost of the asset, less its estimatedresidual value, over its useful economic life as follows:Licences 5% straight lineCustomer lists 1533% straight lineBrands (except Brand Supervalve) 5% straight lineDevelopment costs 20% straight line

Intangible assets with an indefinite useful life are not amortised, but subject to review for impairment as described below. BrandSupervalve was acquired as part of a business combination and its useful life was determined to be indefinite.

(F) IMPAIRMENT OF NON-FINANCIAL ASSETS

Impairment of Property, plant and equipment and Intangible assetsAS36p9;18;22

IAS36p30;55

S36p104;119

The carrying amounts of such assets are reviewed at each reporting date for indications of impairment and where an asset isimpaired, it is written down as an expense through the consolidated statement of comprehensive income to its estimatedrecoverable amount. Recoverable amount is the higher of value in use and the fair value less costs to sell of the individual assetor the cash-generating unit. The recoverable amount is determined for an individual asset, unless the asset does not generatecash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amountis determined for the cash-generating unit to which the asset belongs.

Value in use is the present value of the estimated future cash flows of that unit. Present values are computed using pre-taxdiscount rates that reflect the time value of money and the risks specific to the unit whose impairment is being measured.

Impairment losses for cash-generating units are allocated first against the goodwill of the unit and then pro rata amongst theother assets of the unit. Subsequent increases in the recoverable amount caused by changes in estimates are credited to the

consolidated statement of comprehensive income to the extent that they reverse the impairment.

Impairment of GoodwillIAS36p10 Irrespective of whether there is any indication of impairment, goodwill is tested for impairment annually, or more frequently if

events or changes in circumstances indicate that it might be impaired.


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IAS36p80 For the purpose of impairment testing, goodwill is allocated to each cash-generating unit, or groups of cash-generating units thatare expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquireewere assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated represent thelowest level within the entity at which the goodwill is monitored for internal management purposes and is not larger than anoperating segment.

IAS36p124 Goodwill impairment is not reversed in any circumstances.

IAS2p36(a) (G) INVENTORIES

Inventories are carried in the consolidated statement of financial position at the lower of cost and net realisable value. Cost isdetermined on a first-in first-out (FIFO) basis. The cost of work in progress and finished goods comprises materials, direct labourand attributable production overheads based on normal levels of activity.

Write-down is made for obsolete and slow-moving items based on their expected future use and net realisable value.

Net realisable value is the estimated sales price in the ordinary course of business after allowing for all further costs ofcompletion and disposal.

IFRS7p21 (H) FINANCIAL INSTRUMENTS

IAS39p14;43

IFRS7pB5(c)

Initial recognition and measurement

The Group recognises a financial asset or a financial liability in the consolidated statement of financial position when, and onlywhen, it becomes a party to the contractual provisions of the instrument. On initial recognition, the Group recognises all financialassets and financial liabilities at fair value. The fair value of a financial asset / liability on initial recognition is normallyrepresented by the transaction price. The transaction price for financial assets / liabilities other than those classified at fair valuethrough profit or loss includes the transaction costs that are directly attributable to the acquisition / issue of the financialinstrument. Transaction costs incurred on acquisition of a financial asset and issue of a financial liability classified at fair value

through profit or loss are expensed immediately.

The Group recognises financial assets using settlement date accounting, thus an asset is recognised on the day it is received bythe Group and derecognised on the day that it is delivered by the Group.

Subsequent measurement of financial assets

Subsequent measurement of financial assets depends on their classification on initial recognition. The Group classifies financialassets in one of the following four categories:

IAS39p9 Financial assets at fair value through profit or loss (FVTPL) Assetsare classified in this category when they are held principallyfor the purpose of selling or repurchasing in the near term (trading assets) or are derivatives (except for a derivative that is adesignated and effective hedging instrument) or meet the conditions for designation in this category at initial recognition.

IAS39p55(a)IFRS7pB5(e)

Gains or losses arising on remeasurement of financial assets at FVTPL incorporate any dividend or interest earned and arerecognised in profit or loss.

For the years ended on 31 December 2012 and 2011, the Group did not classify any financial assets as held for trading ordesignated as at fair value through profit or loss.

AS39p9;46(a) Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market. Assets that the Group intends to sell immediately or in the near term cannot be classified in thiscategory. These assets are carried at amortised cost using the effective interest method (except for short-term receivableswhere interest is immaterial) minus any reduction for impairment or uncollectibility.

Typically trade and other receivables, bank balances and cash are classified in this category.

AS39p9;46(b) Held-to-maturity financial assets These are non-derivative financial assets with fixed or determinable payments and fixedmaturity that an entity has the positive intention and ability to hold to maturity. Financial assets that upon initial recognition theGroup designates as at fair value through profit or loss or available-for-sale and those that meet the definition of loans and

receivables cannot be classified in this category. Similar to Loans and Receivables, these assets are carried at amortised costusing the effective interest method minus any reduction for impairment or uncollectibility.

For the years that ended on 31 December 2012 and 2011, the Group did not carry any financial asset classified in this category.


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IAS39p9;46

S39p55(b);67

Available-for-sale (AFS) financial assets These are non-derivative financial assets that are designated as available for sale oninitial recognition or are not classified in one of the previous categories. They are carried at their fair value.

Except for foreign exchange gains and losses,interest income and dividends that are recognised in profit or loss, changes in thecarrying amount of AFS financial assets are recognised in other comprehensive income and accumulated in revaluation reserve,until the investment is disposed of or is determined to be impaired. At that time, the cumulative gain or loss previouslyaccumulated in the revaluation reserve is reclassified to profit or loss.

7pB5(f);37(b) Impairment of financial assets

IAS39p58;59 At the end of each reporting period, the Group assesses whether its financial assets (other than those at FVTPL) are impaired,based on objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimatedfuture cash flows of the (group of) financial asset(s) have been affected. Objective evidence of impairment could includesignificant financial difficulty of the counterparty, breach of contract, probability that the borrower will enter bankruptcy,

disappearance of an active market for that financial asset because of financial difficulties, etc.

IAS39p61 For AFS equity instruments, a significant or prolonged decline in the fair value of the investment below its cost is consideredalso to be objective evidence of impairment.

IAS39p64

IFRS7pB5(d)

In addition, for trade receivables that are assessed not to be impaired individually, the Group assesses them collectively forimpairment, based on the Group's past experience of collecting payments, an increase in the delayed payments in the portfolio,observable changes in economic conditions that correlate with default on receivables, etc.

Only for trade receivables, the carrying amount is reduced through the use of an allowance account and subsequent recoveriesof amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowanceaccount are recognised in profit or loss.

For all other f inancial assets, the carrying amount is directly reduced by the impairment loss.

IAS39p65 For financial assets measured at amortised cost, if the amount of the impairment loss decreases in a subsequent period and thedecrease can be related objectively to an event occurring after the impairment was recognised, the previously recognisedimpairment loss is reversed (either directly or by adjusting the allowance account for trade receivables) through profit or loss.However, the reversal must not result in a carrying amount that exceeds what the amortised cost of the financial asset wouldhave been had the impairment not been recognised at the date the impairment is reversed.

IAS39p69;70 For AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of theinvestment can be objectively related to an event occurring after the recognition of the impairment loss. In respect of AFS equitysecurities, an increase in fair value subsequent to an impairment loss is recognised in other comprehensive income andaccumulated in revaluation reserve; impairment losses are not reversed through profit or loss.

IAS39p17 Derecognition of financial assets

Irrespective of the legal form of the transactions, financial assets are derecognised when they pass the substance over formbased derecognition test prescribed by IAS 39. That test comprises two different types of evaluations which are applied strictlyin sequence:

Evaluation of the transfer of risks and rewards of ownership

Evaluation of the transfer of control

Whether the assets are recognised / derecognised in full or recognised to the extent of Groups continuing involvement dependson accurate analysis which is performed on a specific transaction basis.

Subsequent measurement of financial liabilitiesSubsequent measurement of financial liabilities depends on how they have been categorised on initial recognition. The Groupclassifies financial liabilities in one of the following two categories:

AS39p9;47(a) Liabilities at fair value through profit or loss (FVTPL) Liabilities are classified in this category when they are held principally forthe purpose of selling or repurchasing in the near term (trading liabilities) or are derivatives (except for a derivative that is adesignated and effective hedging instrument) or meet the conditions for designation in this category. All changes in fair value

relating to liabilities at fair value through profit or loss are charged to the income statement as they arise.

For the years that ended on 31 December 2012 and 2011, the Group did not classify any financial liabilities held for trading ordesignated as at fair value through profit or loss.


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IAS39p9;47 Other financial liabilitiesAll liabilities which have not been classified in the previous category fall into this residual category.These liabilities are carried at amortised cost using the effective interest method.Typically, trade and other payables and borrowings are classified in this category. Items classified within trade and otherpayables are not usually remeasured, as the obligation is known with a high degree of certainty and settlement is short-term.

IAS32p18(a) Preference shares

These are classified as liabilities in accordance with their substance rather than their legal form. Preference shares representfinancial liabilities classified in the other liabilities category and are therefore carried at amortised cost. Dividends onpreference shares are classified as an interest expense.

IAS39p39;41 Derecognition of financial liabilities

A financial liability is removed from the Groups statement offinancial positiononly when the liability is discharged, cancelled orexpired (i.e. extinguished). The difference between the carrying amount of the financial liability derecognised and the

consideration paid is recognised in profit or loss.IAS39p88 Hedging

The normal course of the Groups business exposes it to currency and interest rate risks. In order to hedge these risks inaccordance with the Boards written treasury policies, the Group uses derivatives and other hedging instruments. IAS 39 allows3 types of hedging relationships:

Fair value hedge

Cash flow hedge

Hedge of a net investment in a foreign operation

The Group uses hedge accounting only when the following conditions at the inception of the hedge are satisfied:

The hedging instrument and the hedged item are clearly identified

Formal designation and documentation of the hedging relationship is in place. Such hedge documentation includes thehedge strategy and the method used to assess the hedges effectiveness; and

The hedge relationship is expected to be highly effective throughout the life of the hedge

The above documentation is subsequently updated at each reporting date in order to assess whether the hedge is still expectedto be highly effective over the remaining life of the hedge.

IAS39p89;92 Fair value hedge The gain or loss from remeasuring the hedging instrument at fair value (for a derivative hedging instrument) orthe foreign currency component of its carrying amount (for a non-derivative hedging instrument) is recognised in theconsolidated income statement. The gain or loss on the hedged item attributable to the hedged risk is also recognised in theconsolidated income statement. If the hedge is terminated, no longer meets the criteria for hedge accounting or is revoked, theadjusted carrying amount of a hedged financial instrument for which the effective interest method is used is amortised to theconsolidated income statement.

IAS39p95 Cash flow hedge The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge isrecognised (net of tax) in other comprehensive income

and accumulated under hedging reserve, and the ineffective portion ofthe gain or loss on the hedging instrument is recognised in profit or loss.

No adjustment is made to the hedged item.

IAS39p97 If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, theassociated gains or losses that were recognised in equity are reclassified to profit or loss in the same period or periods duringwhich the asset acquired or liability assumed affects the consolidated profit or loss.

S39p98(b);99 If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, ora forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedgeaccounting is applied, then the Group removes the associated gains and losses that were accumulated in equity and includesthem in the initial cost or other carrying amount of the asset or liability (basis adjustment).

IAS39p102 Hedge of a net investment in a foreign operation Hedges of a net investment in a foreign operation are accounted for similarly tocash flow hedges. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive

income and accumulated under the foreign currency translation reserve, whilst the ineffective portion is recognised immediatelyin the consolidated income statement.

The gain or loss on the hedging instrument that has been accumulated in equity is reclassified to profit or loss on disposal of theforeign operation.


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Derivatives

All derivatives are initially recognised and subsequently carried at fair value. The Group policy is to use derivatives only forhedging purposes. Accounting for derivatives engaged in hedging relationships is described in the above section.

Sometimes, the Group enters into certain derivatives in order to hedge some transactions and all the strict hedging criteriaprescribed by IAS 39 are not met. In those cases, even though the transaction has its economic and business rationale, hedgeaccounting cannot be applied. As a result, changes in the fair value of those derivatives are recognised in the consolidatedincome statement and the hedged item follows normal accounting policies.

IAS39p11 Embedded derivatives

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristicsare not closely related to those of the host contracts and the host contracts are not measured at FVTPL.

39p48A;46(c);

9pAG72;AG81Fair value determinationWhenever available, the fair value of a financial instrument is derived from an active market. The appropriate quoted marketprice for an asset held or liability to be issued is usually the current bid price and, for an asset to be acquired or liability held, theasking price. If there is no market, or the markets available are not active, the Group establishes fair value by using a valuationtechnique. Valuation techniques include using recent arms length market transactions between knowledgeable, willing parties, ifavailable, reference to the current fair value of similar instruments, incorporate all factors that market participants would considerin setting a price and are consistent with accepted economic methodologies for pricing financial instruments. As far as unquotedequity instruments are concerned, in cases where it is not possible to reliably measure the fair value, such instruments arecarried at cost.

IAS7p6

IAS7p8

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, on demand deposits and other short-term highly liquid investments that arereadily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

For the purpose of the statement of cash flows only, cash and cash equivalents include bank overdrafts repayable on demand.

Since the characteristics of such banking arrangements is that the bank balance often fluctuates from being positive tooverdrawn, they are considered an integral part of the Groups cash management.

(I) DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

FRS5p31- 34 Discontinued operations

These are either separate major lines of business or geographical operations that have been sold or classified as held for sale.When held for use, discontinued operations were a cash-generating unit or a group of cash-generating units. They compriseoperations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest ofthe entity. Their results are shown separately in the consolidated statement of comprehensive income and comparative figuresare restated to reclassify them from continuing to discontinued operations.

S5p68;15;25 Non-current assets (or disposal groups) held for sale

A non-current asset (or disposal group) held for sale represents an asset whose carrying amount will be recovered principally

through a sale transaction rather than through continuing use. For this to be the case, the sale must be highly probable and thenon-current asset (or disposal group) must be available for immediate sale in its present condition. The appropriate level ofmanagement must be committed to the sale which should be expected to qualify for recognition as a completed sale within oneyear from its classification. Disposal groups and non-current assets held for sale are included in the consolidated statement offinancial position at fair value less costs to sell, if this is lower than the previous carrying amount. Once an asset is classified asheld for sale or included in a group of assets held for sale, no further depreciation or amortisation is recorded.

IAS20p39(a) (J) GOVERNMENT GRANTS

Government grants are recognised when the conditions for receipt are met and there is reasonable assurance that the grant wil lbe received. Grants related to assets are initial ly taken to deferred income and then released to profit or loss on a systematicand rational basis over the useful lives of the related assets. The majority of grants are to assist with the purchase of plant andmachinery. Grants related to income are deducted in reporting the related expense.Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving

immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which theybecome receivable.


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IAS23p8 (K) BORROWING COSTS

Interest on borrowings to finance the purchase and development of a self-constructed qualifying asset (ie an asset thatnecessarily takes a substantial period of time to get ready for its intended use or sale) is included in the cost of the asset untilsuch time as the asset is substantially ready for use or sale. Such borrowing costs are capitalised net of any investment incomeearned on the temporary investment of funds that are surplus pending such expenditure.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

IAS21p23;28 (L) FOREIGN CURRENCY TRANSACTIONS

Foreign currency monetary assets and liabilities are translated into the functional currency of the concerned entity of the Groupusing the exchange rates at the reporting date. Gains and losses arising from changes in exchange rates after the date of the

transaction are recognised in profit or loss (except when deferred in other comprehensive income as qualifying cash flowhedges).Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at theexchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency (egavailable-for-sale equity instruments) are translated using the exchange rates at the date when the fair value is determined.

(M) RETIREMENT BENEFITS

The Group operates a defined benefit obligation scheme for many employees and various defined contribution schemes coverother employees.

IAS19p44 Defined contribution schemes

The annual contributions payable in respect of defined contribution schemes are charged to profit or loss in the period to whichthey relate. Any cumulative difference between amounts payable and amounts paid are shown in the statement of financialposition as receivables or payables, but otherwise the assets and liabilities of those schemes are not included in the financialstatements as the employer is not exposed to their risks and rewards, which instead lie with the members of those schemes.

9p120;120A(a) Defined benefit schemes

The defined benefit scheme offers retirement benefits that are linked to the service, age and remuneration of employees. Theassets of the scheme are held in trust funds separately from those of the Group.

Operating expenses in the consolidated income statement include:

The current service cost of the defined benefit plan

The annual amortisation, over the expected average remaining service lives of relevant employees, of actuarial gains orlosses which exceed 10% of the greater of (i) the present value of the plan assets and (ii) the present value of the definedbenefit obligation (the corridor approach)

The years unwinding discount on scheme liabilities, net of the expected return for the year on scheme assets.

Enhancements to scheme benefits are expensed to the extent they have already vested, or where they have not vested they are

spread on a straight-line basis over the average period to vesting.

The Group consolidated statement of financial position includes the excess of the present value of the defined benefitobligations in respect of service up to the reporting date, over the fair value of the scheme assets plus any unrecognisedactuarial gains (or less any unrecognised actuarial losses) less any unrecognised past service costs. An independent qualifiedactuary annually advises the Group of the defined benefit obligation using the Projected Unit Credit Method. The present valueof the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturityapproximating the terms of the related pension liability. In countries where there is no deep market in such bonds, the marketrates on government bonds are used.

(N) SHARE-BASED PAYMENTS

IFRS2p15 Share-based payments of the Group are equity-settled share options granted to employees, for which an option pricing model is

used to estimate the fair value at grant date. That fair value is charged on a straight-line basis as an expense in the consolidatedincome statement over the period that the employee becomes unconditionally entitled to the options (vesting period), with acorresponding increase in equity.


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IFRS2p19;20 The number of such options is adjusted annually to reflect best estimates of those expected to vest (ignoring purely market-based conditions) with consequent changes to the expense. Equity is also increased by the proceeds receivable, as and whenemployees choose to exercise their options.

IFRS2p27 If the Group modifies the terms and conditions on which the equity instruments were granted, as a minimum, the servicesreceived measured at the grant date fair value of the equity instruments granted (unless those equity instruments do not vestbecause of failure to satisfy a vesting condition other than a market condition) are charged to the consolidated incomestatement.

IFRS2p28 Cancellations of grants of equity instruments during the vesting period (other than a grant cancelled by forfeiture when thevesting conditions are not satisfied) are accounted for as an acceleration of vesting, therefore the unrecognised remainingamount is recognised immediately in the consolidated income statement.

(O) INCOME TAXESIAS12p46 Tax currently payable is calculated using the tax rates in force or substantively enacted at the reporting date. Taxable profit

differs from accounting profit either because some income and expenses are never taxable or deductible, or because the timepattern that they are taxable or deductible differs between tax law and their accounting treatment.

IAS12p15 Using the statement of financial position liability method, deferred tax is recognised in respect of all temporary differencesbetween the carrying value of assets and liabilities in the consolidated statement of financial position and the corresponding taxbase, with the exception of goodwill not deductible for tax purposes and temporary differences arising on initial recognition ofassets and liabilities that do not affect taxable or accounting profit.

IAS12p47 Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability issettled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date.

IAS12p24;34 Deferred tax assets are recognised only to the extent that the Group considers that it is probable (ie more likely than not) that

there will be sufficient taxable profits available for the asset to be utilised within the same tax jurisdiction.

IAS12p74 Deferred tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets againstcurrent tax liabilities, they relate to the same tax authority and the Groups intention is to settle the amounts on a net basis.

AS12p58;61A

IAS12p39

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except if it arisesfrom transactions or events that are recognised in other comprehensive income or directly in equity. In this case, the tax isrecognised in other comprehensive income or directly in equity, respectively.

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