Certified Practising Accountants

Papua New Guinea

2014

Annual Report

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Contents

President’s Perspective 2

Executive Director’s Review 4

Governance and Council Responsibilities 5

Membership and Promoting CPA 6

Educating and Training Future CPAs 9

Accounting Standards Board 13

Staffing 13

Financial Statement 14

Council Declaration 16

Independent Auditors’ Report 17

Statement of Comprehensive Income and Profit and Loss

18

Statement of Changes in Equity 19

Statement of Financial Position 20

Statement of Cash Flows 21

Notes to Financial Statements 22

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I am happy to report to the 2014 Annual General Meeting (AGM) as President of the Certified Practising Accountants Papua New Guinea (CPA PNG) having served for five years. It’s an absolute privilege to be President of CPA PNG, an organisation that consistently lives its values. Whether I am talking to members, employers, or other professional bodies, everyone has something good to tell me about CPA PNG. This is testament of the trust and confidence we have cultivated over the years. It is important that we continue to maintain our reputation as individuals and corporately as a professional accounting body. Our mission is to “serve the public interest as we continue to be trusted and recognised for providing professionals to meet the needs of the business community and the government”. The initiatives undertaken by the Council is to build the foundations for future success and growth of CPA PNG in order to reflect its mission across PNG and the Pacific.

Over the course of the year we achieved a great deal for our members, the broader community and the organisation by continuing to invest in our people, technology, and the value of our CPA PNG designation. Working on behalf of our members and the profession to influence changes in regulatory environment in PNG. I am very proud that Council has taken bold and brave decisions this year to enable us to face the future with confidence. We have opened new Branch in Kokopo to strengthen membership services in the NGI region. Invested in ICT infrastructure to improve membership services.Approved a permanent public relations officer to improve membership services.Council has sourced external consultant to complete a comprehensive 5 year strategic plan which will give focus and direction.I am very satisfied with the initiatives that the Council has undertaken thus far. In this endeavor, I wish to take this opportunity to thank members of the Council, past and present, senior members of the profession, the management of CPA PNG and all members for giving me the opportunity to provide leadership at the strategic level. We have commenced working with relevant government agencies and legal firms on the amendments to our enabling legislation, the Accountants’ Act 1996. It is now in its advanced stage, expected to be completed during the next term of Council. Our efforts to secure full membership with International Federation of Accountants (IFAC) has been steady. Our compliance efforts with satisfying membership obligations required by IFAC has been published on the IFAC website. The compliance and reporting efforts are ongoing. This cannot be achieved in isolation but through the collaborative process of getting all stakeholders involved

President’s Perspective

Dr. Ken Ngangan President

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particularly the government institutions. With the progress so far we expect to achieve full membership by end of 2015. CPA PNG designation is highly recognizable. We have experienced growth in membership over the years as a result of the success in our branding of CPA qualification. On the international level CPA PNG enjoys support from CPA Australia and other regional professional bodies. We have secured exemption for the fundamental subjects under ACCA qualification of England and Wales. This has been a significant achievement. An MOU would be signed to allow Qualified CPAs to undertake examination to achieve ACCA qualification. CPA PNG recognizes the importance of supporting local communities and would like to work with community based organizations (CBOs) through voluntary work. Volunteering allows members to gain knowledge and skills and expand their professional network. The things you have learned in one area can often be applied in a variety of situations to suit other needs. With the combined efforts of accountants and business leaders we can meet the demands of the competitive and challenging economy we live. As outgoing president, I would like to thank my fellow Council members, the Secretariat staff and all members involved in our branch network and Committees for all that you do to enhance the growth and development of CPA PNG’s reputation.

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Our primary objective is to best serve our members. As a leading Accounting Professional Body, CPA PNG is focused on delivering services that our members value and to assist them to add value to the organisations and communities they work. Engaging with our members is the most valuable activity our staff performs. Our resolve to better serve members involves fostering strong and engaging relationship with members. Making the best efforts to provide high quality advice and information in a timely manner.

The core areas of our performance in 2014 in relation to membership services include responding to members’ range of enquiries and requests. Making outbound calls to assist members in providing specific course advice related to CPA, CAT programs. We have increased our level of course offering in relation to our continuing professional development obligations. The training rooms have been upgraded to cater for the increasing needs for bigger review class size in Port Moresby. Facilitators of the review class are senior level academics, industry practioneers and highly qualified staff who ensure that the discussions and coaching sessions conducted are of the highest standard.

We are mindful of the long term impact of our actions. Supporting Accounting Education by building long term relationships with academics, institutions, colleges and schools are critical to the future growth of CPA PNG. We recognise that high quality Accounting Education can lead to successful businesses and broader community development. In 2014 we have successfully convened three conferences with combined attendance of well over 1,500 participants. A total of 21 continued professional developments were undertaken with a total attendance of 375 participants. In the years ahead we will continue to provide the needed training to our members and broaden the audience to educate the wider community on what Accountants and CPAs do and the value they bring with them. To strengthen our resolve to increase publicity and influence public opinion, we have conducted visits and delivered Accounting modules and IFRS to a few institutions and schools to encourage and promote CPA PNG designation and the exciting career prospects of the profession.

The nuclear age we live in has brought about rapid technological changes that are impacting many facets of the way business are done. Our members increasingly wish to interact with us through many different technological interfaces. Our response to meeting the current and future members has been to invest in infrastructure and technology. In early 2015 we would have a completely new and redesigned database system which will modernise the record keeping functions related to membership services. We understand the limitations faced by the institution, in delivering its promise to serve its members with the highest quality. The value and significance of our service to our existing and prospective members are underpinned by the resources we control and our capability to deploy the talents and skills we have. The resources needed to serve our members as well as meeting clients’ expectations at large have been critical to achieving our goals and to exist as a leading Accounting Professional body in PNG. Council has been decisive in making some decisions that allowed for the strengthening and expansion of CPA PNG’s branch activities. With Kokopo being the second branch, a fulltime employee would serve the NGI Region. These efforts are to build the foundations to advance the growth and development of CPA PNG for the years ahead.

Executive Director’s Perspective

Yuwak Tau

Executive Director

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Governance and Council Responsibilities CPA PNG is governed by 12 elected councilors comprising a President, a Vice President, a Treasurer, and nine Councilors. Councilors retire each year and may offer themselves for re-election. The Council has a number of committees that address issues affecting the profession which falls under their respective mandates as follows:

Executive/Finance Committee

Education/Examination Committee (in accordance with the Accountants Act 1996)

Membership, Ethics and Disciplinary Committee

Accounting Standards Committee

Continuing Professional Education / Conference / Branch Committee

Public Sector Committee

Public Relations Committee

Constitution & Legislation Committee

Disciplinary matters are referred to the Accountants Statutory Committee established under the Accountants Act 1996.

The council members for the 2013/2014 year were:

Name Meetings Comments

Eligible to

attend

Attended

1 Dr. Ken Ngangan (President) 6 4 2 apologies

2 Daniel Biti (V/President) 6 6 -

3 John Wau (Treasurer) 6 1 5 apologies

4 Kirsty Laird 6 1 Resigned (12/08/14)

5 James Gore 6 6 -

6 Rachael Kichawen 6 6 -

7 Richard Kuna 6 4 2 apologies

8 Veronica Thomas 6 5 1 apology

9 Nelson Luru 6 2 Resigned (19/03/14)

10 Rajadurai Jeyankanthan 6 5 1 apology

11 Manny Masangkay 6 2 4 apologies

12 Stephen Beach 6 5 1 apology

13 Lemeki Ila – Co-opted Auditor Gen 6 3 3 apologies

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Membership and Promoting CPA Your Council aims to continue to make CPA PNG the premier accounting professional body in Papua New Guinea and bring services to its members using cost effective means without passing on the associated costs to the members and their employers.

Section 67 of the Accountants Act stipulates that:

(1) A person who –

(a) possesses qualifications of diploma, degree or professional level in commerce, economics, business or related disciplines; and

(b) is employed by the State or by a statutory body or by a private organisation to perform duties connected with –

(i) the recording, classifying and analysing of financial transactions; or (ii) the preparing of financial information; or (iii) the making of financial or business decisions; or (iv) auditing and/or investigation transactions of an accounting nature; or (v) book-keeping and accounting generally, shall be registered as an Accountant in Employment.

(2) The prospective employer of a person to whom Subsection (1) applies shall apply for the registration of that person prior to that person commencing employment.

The degree and diploma qualifications from the following local universities and institutions are prerequisite qualifications to becoming a member under Registered Accounting Graduate and Registered Accounting Technician categories.

University of Papua New Guinea

Papua New Guinea University of Technology

Pacific Adventist University (including Sonoma Adventist College)

Divine Word University

University of Goroka

National Polytechnic Institute of PNG (Lae Technical College)

Port Moresby Business College

Goroka Business College

Kokopo Business College

Institute of Business Studies

International Training Institute

IEA College of TAFE

Overseas Tertiary Institutions which conduct Diploma and Degree courses at least at the same level as the above Institutions.

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Expatriates who are qualified members of a recognized overseas accounting professional body may be admitted to membership at CPA level only. Fellow membership is awarded not by application but in recognition of significant contributions made to CPA PNG administered under the existing policies and guidelines. LNG Accountants The Council has considered the situation whereby expatriate accountants who will be directly employed with the major contractors of the PNG LNG Project but may not meet the requirement of being a member of a recognized overseas accounting professional body. Such applicants will be considered on a case by case basis under the Special Admission rule and will be designated as “LNG Accountant” under the CAT category. Their membership will only be for a specified period.

Categories of CPA PNG Membership The two distinct categories of membership are; Certified Practising Accountants (CPA) and Certified Accounting Technician (CAT). These two categories have gained prominence and the tiers are consistent with similar arrangements around the globe. The premier CPA membership category is restricted to degree qualified accountants (those with accounting major qualifications), while the CAT membership category is open to members with diplomas in accounting, or degree qualifications in disciplines other than a major in accounting from affiliated institutions. The Council realised the importance of the role played by the lower tier accounting staff in organisations and have since adopted high profile papers for its examinations to enhance and further develop candidates with the subject knowledge through the issue of high quality study materials that may be used well after the examinations.

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Membership Statistic The following graph shows the total membership trend since 2002. The non-financial members are for the last 3 years.

CPAPNG is continuing to develop competent accountants in both the private and public sectors. The graph below provides an analysis of the financial members in the private and public sectors as at year-end.

0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600

200020012002200320042005200620072008200920102011201220132014

Total Membership Trend (2000 - 2014)

Non-Citizen (Financial) Citizen (Financial) Non-Financial (All)

-

200

400

600

800

1,000

1,200

1,400

Fellow CPA CAT AccountingTechnician

RG/RAG RAT

- 90

- 247

256

106 24

1,352

11

561

643

387

Total Members (30 September 2014)

Public Private

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Educating and Training Future CPAs Interest in the examination programme continues to increase as Registered Graduate and Accounting Technician members realise the importance of completing professional programmes. The Institute’s branding efforts has greatly added value as indicated by the increase in enrollment for examination. The Council envisages members’ advancement through to CPA status.

The courses in the old structure will be available only in 2014. By 2015 only one examination structure will be available. This effectively means that the modules under the old CPA programmes will be phased out by the end of 2014. Candidates with outstanding modules in the old CPA program will have their passed modules assessed and will be asked to make up with equivalent units in the new CPA program to complete their professional program. Courses currently run under the two tiers are noted below.

Certified Practising Accountant (CPA) Certified Accounting Technician (CAT)

1. Foundations of Accounting (FoA) 1. Foundations of Accounting (FoA)

2. PNG Business Law 2. Financial Accounting & Reporting

3. PNG Taxation Law & Practice 3. Management Accounting

4. Financial Reporting (CPA A) 4. Intro to Business Law

5. Strategic Management Accounting (CPA A) 5. Intro to Taxation

6. Advanced Audit & Assurance (CPA A) 6. Accounting Concepts & Principles or Business Finance

7. Financial Risk Management (CPA A)

Mentoring Program The current three years’ work experience requirement before Accounting Technicians and Certified Practising Accountants are issued their respective certificates will continue to be maintained for the benefit of the members. For the good of the profession, fully qualified CPA members may be asked to volunteer to supervise upcoming members under the mentoring program.

Congratulations to Prize winners in the two examinations that were concluded during the semesters are noted below. These are listed below:-

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Prize winners in the two examination sittings during the year were as follows: October 2013

Name Employer Subject Awards Sponsors

Suzie Oken PwC FoA – CAT Category Gore Accountants & Business Advisors

Mosley Elly IPBC FoA – CAT Category CPA PNG

Joe Alo Kiningi Oceanic Communications Ltd FoA – CAT Category CPA PNG

Sheila Lokolo Gore Accountants & Business Advisors

FoA – CAT Category CPA PNG

Nelis David Tuma’e

PwC FOA – CPA Star Business Consultants

Harriet Anderson PwC FOA – CPA Star Business Consultants

Olivia Kilanda PwC FOA – CPA Star Business Consultants

Alfred Y Pini SP Brewery Ltd FOA – CPA Wau Accountants & Business Consultants

Gennie James Gore Accountants & Business Advisors

FOA – CPA CPA PNG

Amanda Tau Ernst & Young FOA – CPA CPA PNG

Ben Simon Anitua Ltd Business Law Deloitte Touche Tohmatsu

Kila Benny NCS Hidden Valley Business Law Deloitte Touche Tohmatsu

Alwyn Maniura Telikom PNG Ltd Financial Accounting 2 PwC

Walter Sapur Auditor General’s Office Professionalism & Prof. Ethics

CPA Aust. PNG Branch.

Golden Gantau East West Transport. Knowledge Mgmt CPA Aust. PNG Branch.

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May 2014

Name Employer Subject Awards

Charlie Pitt PwC FoA – CAT Category Gore Accountants & Business Advisors

Robin Nikints Deloitte FoA – CAT Category CPA PNG

Natasha Vaina BPNG FoA – CAT Category CPA PNG

Margaret Aitsi Unknown FoA – CAT Category CPA PNG

Israel Mudima PNG Microfinance FoA – CAT Category CPA PNG

Joseph Tirang Institute of Business Studies

FoA – CAT Category CPA PNG

Catherine Vaitak

PwC FoA – CPA Category Star Business Consultants

Ruth Norum Deloitte FoA – CPA Category Wau Accountants & Business Consultants

Patrick Nambore

Telikom PNG Ltd Business Law Deloitte

Yoba Nimeh Unknown Business Law Deloitte

Pius Peter Nakatt

PwC Business Law Deloitte

Amanda Tau Ernst & Young Business Law Deloitte

Sunnie Jean Ilaru

Deloitte Taxation Deloitte

John Polup Deloitte Taxation Deloitte

Molna Andrew Auditor General Office Auditing Institute Of Business Studies

Sini Temara Pacific Adventist University

Professionalism & Prof. Ethics CPA Aust. PNG Branch

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Continuing Professional Education / Conferences CPA PNG will continue to deliver quality, practical Continuing Professional Education Programmes (CPEs) to its members. Due to staffing constraints during the year, there were fewer activities in respect to CPEs. The fees charged for our ongoing CPEs for both members and non-members are competitive compared to other similar sessions conducted by training providers and consultants. This will remain unchanged for some time, until a cost structure review is undertaken.

CPE Hours As per CPA PNG Rule 10.1: Fellow, CPA and Accounting Technician members are required to undertake a minimum of 40 hours (20 structured and 20 unstructured) of continuing professional education in each year. 10 of the 20 hours of structured CPE must be obtained from CPE organised by CPA PNG.

The requirement to complete CPE hours is a necessary requirement to renewing membership. A member can make up for the CPEs within the 12 months if CPEs were not undertaken for the previous year.

Conferences held during the year: Participation in our two annual conferences continues to increase each year. The Lae and Madang Branch conferences have been successfully convened. The Madang branch conference is a rotating one that other active branches around the country may opt to host in their branches.

CPAPNG / CPA Australia Annual Conference – held at Gateway Hotel, Port Moresby in November 2013. The theme was “Restructuring, Reforming and Positioning Organisations – Continually Changing Field”. We had a good attendance of 1,100 participants (2012 - 964).

Lae Annual Conference – held at Melanesian Hotel, Lae in August 2013. The theme was “Business Management and Financial Control in Challenging Times” We had outstanding presentations and also had a record attendance of 344 participants (2013 - 302). Kokopo Conference – held at Kokopo Village Resort, in June 2013. The theme was “Growing the Local economy, what is the Accountant’s Role”. We had 112 participants.

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Accounting Standards Board (ASB) The Accounting Standards Board that comes under the Investment Promotion Authority has not met for the last three years to deliberate on outstanding issues falling within their jurisdiction. One of the notable outstanding agenda items awaiting ASB attention is the International Financial Reporting Standards for Small to Medium-sized Entities (IFRSs for SMEs). If adopted, this will mean that those entities who meet the SME/SMP criteria may prepare accounts using these standards which are a simpler version of the current IFRSs. It has been a practice that we only adopt the globally applicable standards as we do not have the capacity to develop and apply our own standards.

Staffing There has not been any staff turnover or recruitment during the financial year. We do acknowledge and pay tribute to the passing away of late Karlus Kepakan. The CPA PNG staff is a strong and committed team striving to continue to serve the members.

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Certified Practising Accountants Papua New Guinea

Financial Statements For the year ended 30 September 2014 Financial Statements For the financial year ended 30 September 2014

Table of contents

Page

Report of the Council members 1 - 2

Independent auditor’s report 3

Statement of profit or loss and other comprehensive income 4

Statement of changes in equity 5

Statement of financial position 6

Statement of cash flows 7

Notes to the financial statements 8 - 19

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REPORT OF THE COUNCIL MEMBERS The Council members are pleased to present their report on the financial statements of Certified Practising Accountants Papua New Guinea (CPA PNG) for the financial year ended 30 September 2014.

Nature of entity and activities The Certified Practising Accountants Papua New Guinea (formerly Papua New Guinea Institute of Accountants) was established under the Accountants Act 1996. The Institute is governed by an elected Council and is not subject to the control or direction of any person other than as provided by the Accountants Act 1996. The primary purpose of CPA PNG is to promote the interests of the accountancy profession and its members in Papua New Guinea. Its functions include the determination of the qualifications acceptable for membership, the administration of membership, examinations, the provision of continuing professional education, developing and formulating rules of ethical and professional conduct applicable to members, the promotion of accounting, auditing and other professional standards and the provision of services to members.

Results The results for the financial year ended 30 September 2014 show a net surplus of K141,687 (2013: surplus of K85,081). Members funds as at 30 September 2014 is K10,137,424 (2013: K9,995,737).

Council members The Council members for the 2013/2014 year were:

Name Designation

1 Dr. Ken Ngangan President

2 Daniel Yamunge Biti Vice President

3 John Wau Treasurer

4 Kirsty Laird Councillor (resigned on 12/08/14)

5 Manny Masangkay Councillor

6 Rajadurai Jeyakanthan Councillor

7 James P. Gore Councillor

8 Richard Kuna Councillor

9 Veronica Thomas Councillor

10 Steven Beach Councillor

11 Rachel Kichawen Councillor

12 Lemeki Ila Co-opted

13 Nelson Luru Councillor (resigned on 19/03/14)

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Report of the Council Members continued

Auditors DFK Mayberry Chartered Accountants retire as auditors and, being eligible, offer themselves for re-election. Audit fees are disclosed in note 3.

Council declaration statement The Council states that in its opinion: (a) there are reasonable grounds to believe that CPA PNG will be able to pay its debts as and

when they become due and payable;

(b) the attached financial statements and notes hereto are prepared in accordance with, including compliance with generally accepted accounting practice and giving a true and fair view of the financial position and performance of CPA PNG.

Signed in accordance with a resolution of the Council. Dated at Port Moresby this __________ day of __________________ 2014.

roddie

Text Box

17page

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Statement of profit or loss and other comprehensive income For the financial year ended 30 September 2014

2014 2013

Notes K K

Revenue

Operating revenue 2 (a) 3,353,168 2,851,237

Investment income 2 (b) 148,311 470,253

Other income 2 (c) 48,800 6,163

Total revenue

3,550,278 3,327,653

Expenses

Membership services costs 3 (a) (1,734,428) (1,520,992)

Administration costs 3 (b) (1,349,809) (1,409,074)

Building expenses 3 (c) (324,354) (312,506)

Total expenses

(3,408,592) (3,242,572)

Net profit/(loss) for the year

141,687 85,081

Other comprehensive income

- -

Total comprehensive income/(loss) for the year

141,687 85,081

The above statement is to be read in conjunction with the notes to the financial statemen

Certified Practising Accountants Papua New Guinea

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Statement of Changes in Equity

For the Financial Year ended 30 September 2014

Asset revaluation reserve

Retained earning

Total

K K K

Balance at 1 October 2012 5,824,897 4,085,759 9,910,656

Net profit for the year - 85,081 85,081

Balance at 30 September 2013 5,824,897 4,170,840 9,995,737

Net profit for the year - 141,687 141,687

Balance at 30 September 2014 5,824,897 4,312,527 10,137,424

The above statement is to be read in conjunction with the notes to the financial statements.

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Statement of Financial Position As at 30 September 2014

2014 2013

Notes K K

Current assets

Cash and cash equivalents 4, 16 2,395,091 2,580,689

Financial assets 8 1,317,148 1,445,467

Other debtors and prepayments 5 383,495 140,195

Inventory – educational materials

402,133 351,420

Total current assets

4,497,867 4,517,771

Non-current assets

Property, plant and equipment 7 6,022,931 6,160,699

Total assets

10,520,798 10,678,470

Liabilities

Creditors and accruals 6 94,816 204,773

Employee provisions 14 70,648 66,199

Income received in advance

217,910 411,760

Total liabilities

383,374 682,732

Net assets

10,137,424 9,995,737

Members equity

Retained earnings

4,312,527 4,170,840

Reserve

5,824,897 5,824,897

Total members equity

10,137,424 9,995,737

The above statement is to be read in conjunction with the notes to the financial statements.

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Statement of Cash Flows

For the Financial Year ended 30 September 2014

2014 2013

Note

K K

Cash follows from operating activities

Cash received from membership fees and members activities during the financial year

3,132,813 3,203,123

Cash paid for operating expenses

(3,372,004) (2,500,942)

Net operating cash inflow/(outflow)

(239,191) 702,181

Cash flows from investing activities

Purchase of property, plant and equipment

(210,611) (83,253)

Movement in financial assets

128,319 (156,343)

Dividends received

66,041 61,533

Interest received

69,845 62,998

Net investing cash inflow/(outflow)

53,594 (115,065)

Net increase/(decrease) in cash and cash equivalents

(185,597) 587,116

Cash and cash equivalents at the beginning of the financial year

2,580,689 1,993,573

Cash and cash equivalents at the end of the financial year

4

2,395,091 2,580,689

The above statement is to be read in conjunction with the notes to the financial statements.

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Notes to the Financial Statements For the Financial Year ended 30 September 2014

1. Summary of accounting policies

Statement of compliance The financial statements of Certified Practising Accountants Papua New Guinea (“CPA PNG”) have been prepared in accordance with International Financial Reporting Standards as adopted by the Accounting Standards Board of Papua New Guinea (ASB). Basis of preparation The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The following significant accounting policies have been adopted in the preparation and presentation of the financial report. a) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash in banks and investments in money

market instruments, net of outstanding bank overdrafts. b) Comparative amounts

Where applicable comparative amounts have been reclassified to be consistent with current year classifications. This has not resulted in any adjustments to opening retained earnings.

c) Employee benefits Provision is made for benefits accruing to employees in respect of annual leave and long service

leave when it is probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of employee benefits expected to be settled within 12 months, are

measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Defined contribution plans Contributions to defined contribution superannuation plans are expensed when incurred. d) Provisions Provisions are recognized when the CPA PNG has a present obligation, the future sacrifice of

economic benefits is probable, and the amount of the provision can be measured reliably.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

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Summary of accounting policies continued When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

e) Taxation

The net income of CPA PNG is exempted from income tax under Section 27 of the Papua New Guinea Income Tax Act 1959 as amended.

f) Impairment of assets

At each reporting date, CPA PNG reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, CPA PNG estimated the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized in profit or loss immediately, unless the relevant asset is carried at fair value, in which cash the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognized in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

g) Financial instruments

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Investments are valued as at 30 September 2014 as follows: i. Listed shares are valued at 30 September 2014 at last sale price on that date. ii. The net movement on revaluation is reflected in the statement of comprehensive income.

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Summary of accounting policies continued

Financial assets at FVTPL are subsequently re-measured at fair value based on quoted bid prices. Gains or losses arising from changes in the fair value of securities classified as FVTPL are recognized in the statement of comprehensive income in the period in which they arise. AFS financial assets are recognized at fair value based on an independent valuation. Gains or losses arising from the change in the fair value are recognized in the investment revaluation reserve. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the CPA PNG’s has the positive intention and ability to hold-to-maturity. Where there is intention to sell other than insignificant amount to held-to-maturity assets, the entire category would be tainted and reclassified as available-for-sale. Held-to-maturity investments are carried at amortised cost using effective interest rate method. Trade receivables, loans and other receivables are recorded at amortised cost less impairment.

h) Property, plant and equipment

Land and buildings are measured at fair value. Fair value is determined on the basis of independent valuation prepared by external valuation experts, based on discounted cash flows or capitalization of net income (as appropriate). The fair values are recognized in the financial statements of the CPA PNG, and are reviewed at the end of each reporting period to ensure that the carrying value of land and buildings is not materially different from their fair values. Any revaluation increase arising on the revaluation of land and buildings is credited to the asset revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognized as an expense in profit or loss, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of land and buildings is charged as an expense in profit or loss to the extent that it exceeds the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the asset revaluation reserve, net of any related deferred taxes, is transferred directly to retained earnings. Plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis so as to write-off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives and depreciation method is reviewed at the end of each annual reporting period.

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Summary of accounting policies continued The following estimated useful lives are used in the calculation of depreciation:

Buildings 20 years Office equipment 4 years Computers and printers and furniture 5 years Motor vehicle 5 years

i) Revenue recognition

Revenue is accounted for on the accrual basis of accounting, except for membership fees which are brought to account when received. Interest revenue Interest income is recognized when it is probable that the economic benefits will flow to the CPA PNG and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition. Dividend revenue Dividend revenue from investments is recognized when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the CPA PNG and the amount of income can be measured reliably). Property rental income Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct cost incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term. Movement in fair market value of investments Changes in fair market value of investments are recognized as income and are determined between the difference between the fair market value at year end or consideration received (if sold during the year) and the fair market value as at the prior year end or cost (if the investment was acquired during the period).

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Notes to the Financial Statements For the Financial Year ended 30 September 2014

` 2014 2013

K K

2. Revenue

(a) Operating revenue

Membership fees 1,154,148 948,372

Exam fees and modules

1,094,956 925,659

Conference – National 719,650 617,426

Conference – Lae Branch 177,900 167,750

Conference – Others 51,800 29,600

Continuing Professional Education 146,714 154,430

CPAA (PNG Branch) Fee 8,000 8,000

Total 3,353,168 2,851,237

(b) Investment income

Interest income 69,845 62,998

Rent received 140,743 189,380

Dividends received 66,041 61,532

Fair vale Gain on financial assets (128,319) 156,343

Total 148,310 470,253

(c ) Other income

Merchandising income - 60

Training room hire 820 2,838

Sundry income 47,980 3,265

Total 48,800 6,103

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Notes to the Financial Statements

For the Financial Year ended 30 September 2014

2014 2013

K K

3. Operating expenses

(a) Member services costs

Education / Examinations 704,387 524,845

Continuing Professional Education 103,839 124,762

Journals and Membership Recognition - 3,776

National Conference Costs 583,432 504,423

Lae Conference Costs 175,904 171,329

Conference costs – Others 49,112 44,927

Branch Expenses 67,336 60,553

Overseas Conference Expenses 45,651 75,787

Awards and Donations 4,500 10,590

Total 1,734,428 1,520,992

(b) Administration costs

Advertising and Promotions 75,260 150,639

Affiliations 23,641 19,705

Communication Expenses 67,382 52,855

Postages 13,970 22,389

Printing and Stationery 26,494 17,816

Motor Vehicle Expenses 35,762 50,589

Electricity 32,308 29,718

Audit fees 3,000 3,100

Insurance 16,864 26,100

Bank Charges 14,178 14,248

Bad Debts 14,940 -

Computer/Copier Supplies 18,460 42,911

Repairs and Maintenance – Others 18,091 16,542

Council Expenses 72,736 22,945

President’s Expenses 7,800 7,800

Training Room Hire Costs 586 91

Accountants Act Review 72,736 -

Recruitment and Repatriation 41,034 -

Salary and Wages 364,627 430,742

Staff Accommodation 178,464 215,991

Staff Packaged Utilities 5,000 25,100

Long Service Leave 7,460 32,524

Leave Fares 21,176 16,278

Annual Leave 20,460 -

Superannuation 33,584 32,669

School Fees 68,716 39,705

Staff Costs/Uniforms/Subscriptions 30,906 28,122

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Notes to the Financial Statements For the Financial Year ended 30 September 2014

2014 2013

K K

Staff Medical Insurance 10,920 10,920

Consumables and Sundry Expenses 8,703 7,494

Depreciation 104,480 82,295

Loss/(Gain) on Disposal (2,534) 9,786

Total 1,349,809 1,409,074

(c ) Building Costs

Repairs and Maintenance – Air Conditioner 16,354 16,882

Repairs and maintenance – Generator 6,413 3,802

Repairs and Maintenance – Others 19,506 6,497

Rates and Other Taxes 8,421 10,154

Land Rent 24,745 25,000

Insurance 3,004 6,632

Depreciation 245,911 243,539

Total 324,354 312,506

4. Cash and Cash Equivalents

Cash on Hand 1,500 1,500

Cash at Bank 439,281 559,688

Total Cash on Hand 440,781 561,188

Short Term Deposits 1,954,311 2,020,001

Total 2,395,091 2,581,189

The above short term deposits are held with Bank South Pacific Limited for a period of 12 months and 182 days respectively. The Treasury Bills are held with Bank of PNG for 365 days. These will mature in August 2015. A Visa card security deposit of K20,000 is held with ANZ Bank Limited.

5. Other Debtors and Prepayments

Conference / CPE Expenses prepaid 159,055 34,165

Prepayments 31,649 13,730

Sundry Debtors 80,546 30,520

GST Recoverable 12,610

Accrued Income 27,199 34,404

Rent Bonds 9,051 9,051

Housing Advance 63,384 18,324

Total 383,495 140,194

6. Creditors and Accruals

Bond Fees Refundable 10,920 15,821

Sundry Creditors and Accruals 83,897 188,952

Total 94,817 204,773

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Notes to the Financial Statements

For the Financial Year ended 30 September 2014

7. Property, Plant and Equipment

`Land & Building at Fair Value

K

Motor Vehicle at Cost

K

Office Equipment

at Cost K

Furniture & Fittings

at Cost K

Computers & Printers

at Cost K

Total

K

Gross Carrying Amount Balance at 1 October 2012

6,384,000

167,354

153,975

62,958

294,417

7,062,704

Additions 19,309 84,390 16,273 - 2,181 122,153

Disposals / Transfers - (83,718) - - - (83,718)

Balance at 1 October 2013 6,403,309 168,026 170,248 62,958 296,598 7,101,140

Additions 32,879 90,900 34,330 11,696 43,896 213,701

Disposals / Transfers - - - - (3,090) (3,090)

Balance at 30 September 2014

6,436,188 258,926 204,579 74,654 337,404 7,311,751

Accumulated Depreciation

Balance at 1 October 2012 243,300 42,742 83,601 43,750 239,144 652,537

Depreciation Expense 243,539 31,055 26,316 3,180 21,745 325,835

Disposals / Transfers - (37,932) - - (37,932)

Balance at 1 October 2013 486,839 35,865 109,917 46,930 260,889 940,440

Depreciation Expense 245,911 36,202 26,316 3,180 21,745 350,390

Disposals / Transfers - - - - (2,011) (2,011)

Balance at 30 September 2014

732,750 72,067 141,940 53,043 289,019 1,288,820

Net Book Value – 30/09/14 5,703,438 186,859 62,638 21,611 48,385 6,022,931

Net Book Value – 30/09/13 5,916,470 132,161 60,331 16,028 35,709 6,160,699

Independent valuations of CPA PNG’s land and buildings are usually performed every two years by reputable valuers to determine the fair value of land and building the valuation, which conforms to International Valuation Standards, determined by reference to market values. No independent valuation was performed during the year.

The carrying amount of land and building had they been recognized under the cost model are as follows:

2014 2013

K K

Land 405,000 405,000

Building 879,426 879,426

Total 1,284,426 1,284,426

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Notes to the Financial Statements

For the Financial Year ended 30 September 2014

2014 2013

` K K

8. Financial Assets

Investment in Shares 1,317,148 1,445,467

1,317,148 1,445,467

Balance as at 1 October 2013 1,445,467 1,289,124

Purchase of Shares during the Year - -

Disposal of Shares during Year - -

Fair value Loss/Gain (128,319) 156,343

Balance as at 30 September 2014 1,317,148 1,445,467

Total Investment in Shares 1,317,148 1,445,467

CPA PNG hold shares in the companies (Oil Search Limited, New Britain Palm Oil Limited, Bank South Pacific Limited, Credit Corporation Ltd and City Pharmacy Ltd) listed in the Port Moresby Stock Exchange. These companies are involved in exploring and extraction of oil and gas, planting, manufacture and production of sugar and oil palm, banking and financial intermediaries, property investments and pharmaceutical.

9. Government Grants The Annual Government Grant (NEC Decision No. 207/2003) of K500,000 for the nine years starting 2005 to 2013 totaling K4.5 million has not been received. These amounts have not been brought into the account.

10. Related Party Transactions During the year, CPA PNG entered into transactions with accounting firms by whom certain Council members are employed. All transactions were conducted on terms either favorable to CPA PNG or on an arm’s length commercial basis.

Key management personnel remuneration in aggregate in the year 2014:

Salary 364,627 387,411

Non-monetary 34,226 32,257

Superannuation:

- Employee 10,858 10,339

- Employer 33,584 32,669

Total 443,296 462,676

Non-monetary benefits relates to value of assessable benefits charged for salary tax purposes on housing and motor vehicles provided to key management.

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Notes to the Financial Statements

For the Financial Year ended 30 September 2014

11. Contingent Liabilities

There were no contingent liabilities at balance date and none have arisen since balance date. (2013: Knil).

12. Capital Commitments

There are no capital commitments at balance date (2013: Knil).

13. Revaluation Reserve

2014 2013

K K

Balance at 1 October 2013 5,824,897 5,824,897

Movement during the Year - -

Balance at 30 September 2014 5,824,897 5,824,897

CPA Haus was last revalued to K6.384 million in 2011. The property is revalued after every three to five years and therefore was not revalued this year.

14. Employee Provisions

Long Service Annual Packaged Total

K K K K

Balance at 1 October 2013 41,465 18,722 6,012 66,199

Adjustment - - (500) (500)

Additional Provisions Recognized 8,965 22,638 5,000 36,603

Reductions Arising from Payments (1,505) (19,637) (5,000) (26,142)

Balance at 30 September 2014 48,925 21,723 5,512 76,160

Current - 21,723 5,512 27,235

Non-Current 48,925 - - 48,925

Total 48,925 21,723 5,512 76,160

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Notes to the Financial Statements For the Financial Year ended 30 September 2014 15. Financial Instruments

(a) Financial Risk Management Objectives

CPA PNG’s Council provides services to the institute, co-ordinates access to domestic financial markets, and manages the financial risks relating to the operations of the CPA PNG. CPA PNG does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The use of financial derivatives is governed by the CPA PNG’s policies approved by the Council, which provide written principles on the use of financial derivatives. Compliance with policies and exposure limits is reviewed by the Council on a continuous basis.

(b) Significant Accounting Policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognized, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statement.

(c) Interest Rate Risk Management

CPA PNG is not exposed to interest rate risk as it does not have any borrowing with any financial institutions at year end.

(d) Credit Risk Management

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the CPA PNG. CPA PNG recognized membership fees only when received and is brought to account. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the CPA PNG’s maximum exposure to credit risk.

(e) Liquidity Risk Management

CPA PNG manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

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`16. Fair values

Fair value estimation The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)

Inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)

Inputs for asset or liability that are not based on observable market data (unobservable inputs)

(Level 3)

The following table presents assets and liabilities that are measured at fair value at 30 September 2014:

Level 1 K

Level 2 K

Level 3 K

Total K

Assets

Investments – Listed securities 1,317,148 - - 1,317,148

Total 1,317,148 - - 1,317,148

Liabilities - - - -

Sensitivity analysis If the share prices moves up or down by 10% the investment portfolio will increase or decrease by K131,415.

17. Subsequent Events There has not been any matter or circumstance, other than that referred to in the financial statements or notes thereto, that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the CPA PNG, the results of those operations, or the state of affairs of the CPA PNG in future financial years.