Consolidated Financial Statements and Independent Auditor's Report
“Hayastan” All Armenian Fund
December 31, 2015
“Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
Contents
Page Independent auditor’s report 1 Consolidated statement of financial position 3 Consolidated statement of comprehensive income 4 Consolidated statement of changes in net assets 5 Consolidated statement of cash flows 6 Notes to the consolidated financial statements 7
“Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
“Hayastan” All Armenian Fund Members of the Board of Trustees as of December 31, 2015
1. Serzh Sargsyan RA President, President of the Board of Trustees 2. Robert Kocharyan RA Ex-president 3. Bako Sahakyan NKR President 4. Arkadi Ghukassyan NKR Ex-president, Vice President of the Board of Trustees 5. Gagik Harutiunyan Vice President of the Board of Trustees, Chairman of RA Constitutional Court 6. Galust Sahakyan Speaker of RA National Assembly 7. Hovik Abrahamyan RA Prime Minister 8. Eduard Nalbandyan RA Minister of Foreign Affairs 9. Arayik Harutyunyan NKR Prime Minister 10. Arthur Djavadyan Chairman of RA Central Bank 11. Gagik Khachatryan RA Minister of Finance 12. Hranush Hakobyan RA Minister of Diaspora 13. H.H. Garegin II Catholicos of All Armenians 14. H.H. Aram I Catholicos of the Great House of Cilicia 15. Nerses Petros XIX Tarmouni Catholicos Patriarch of the Armenian Catholic Church 16. Very Rev. Mkrtich Melkonian Representative of the Armenian Evangelical Church 17. Mike Kharapian Representative of the Armenian Ramgavar Azadagan Party 18. Vagharsh Ehramdjian Representative of the Armenian Revolutionary Federation 19. Aram Maleyan Representative of the S.D. Hunchakian Party 20. Hirair Hovnanian President of the Armenian Assembly of America 21. Berge Setrakian President of the Armenian General Benevolent Union 22. Viki Marashlyan Representative of the Armenian Relief Society 23. Arsen Ghazaryan President of the Union of Manufacturers and Businessmen (Employers) of Armenia 24. Jerry Manoukian President of Armenian Medical International Committee 25. Charles Aznavour France 26. Albert Boyajian United States of America 27. Vartan Gregorian United States of America 28. Eduardo Eurnekian Argentina 29. Bedros Terzian France 30. Dikran Izmirlian Switzerland 31. Samvel Karapetyan Russia 32. Mark Geragos United States of America 33. Kabriel Ghenberdji Syria 34. Vatche Manoukian Great Britain 35. Albert Boghossian Switzerland 36. Diruhi Burmayan Brazil 37. Eduardo Seferian Argentina
Control committee
38. Ara Aslan France 39. Gagik Khachatryan Minister of Finance of the Republic of Armenia
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To the Board of Trustees of “Hayastan” All Armenian Fund
We have audited the accompanying consolidated financial statements of “Hayastan” All Armenian Fund and its subsidiary, which comprise the consolidated statement of financial position as of December 31, 2015, and the consolidated statement of comprehensive income, consolidated statement of changes in net assets and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
²áõ¹Çï, гñÏ»ñ, ÊáñÑñ¹³ïíáõÃÛáõÝ Audit, Tax, Advisory ¶ñ³Ýà ÂáñÝÃáÝ ÆÝûñÝ»ßÝÉÇ ³Ý¹³Ù Member of Grant Thornton International Ltd
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of “Hayastan” All Armenian Fund and its subsidiaries as of December 31, 2015, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
May 5, 2016
Gagik Gyulbudaghyan Emil Vassilyan, FCCA
Managing Partner Engagement Partner
²áõ¹Çï, гñÏ»ñ, ÊáñÑñ¹³ïíáõÃÛáõÝ Audit, Tax, Advisory ¶ñ³Ýà ÂáñÝÃáÝ ÆÝûñÝ»ßÝÉÇ ³Ý¹³Ù Member of Grant Thornton International Ltd
“Hayastan” All Armenian Fund 3 Consolidated financial statements December 31, 2015
Consolidated statement of financial position
In thousand drams As of As of December 31, December 31, Note 2015 2014 (restated)
Assets
Non-current assets
Property and equipment 4 2,629,135 245,946
Intangible assets 375 679 Deferred income tax assets 10 - 5,166 Minimum profit tax prepayement 10,666 10,666
2,640,176 262,457 Current assets
Inventories 5 961,537 292,416
Accounts receivable and advances 6 1,808,603 554,890
Current income tax assets - 4,826
Term deposits 7 303,372 1,134,730
Cash and bank balances 8 758,504 758,287
3,832,016 2,745,149
Total assets 6,472,192 3,007,606
Liabilities and net assets
Non-current liabilities
Loans and borrowings 9 3,889 28,554
Deferred income tax liabilities 10 83,813 -
Grants related to assets 11 2,062,567 183,354
2,150,269 211,908
Current liabilities
Accounts payable 12 1,167,994 1,365,356
Loans and borrowings 9 7,230 15,107
Deferred income 13 3,839,624 2,269,284
5,014,848 3,649,747
Net assets (692,925) (854,049)
Total liabilities and net assets 6,472,192 3,007,606
The consolidated financial statements were approved on May 5, 2016 by:
Ara Vardanyan Kristine Mkrtchyan Executive Director Chief Accountant
The consolidated statement of financial position is to be read in conjunction with the notes to and forming part of the consolidated financial statements set out on pages 8 to 45.
“Hayastan” All Armenian Fund 4 Consolidated financial statements December 31, 2015
Consolidated statement of comprehensive income
In thousand drams Year ended Year ended December 31, December 31, Note 2015 2014 (restated)
Contribution income 14 8,572,595 7,808,471 Other income 70,305 93,789 Operating expenses 15 (8,567,685) (7,654,781) Administrative expenses 16 (400,759) (383,618) Other expenses (10,339) (151,561) Results from operating activities (335,883) (287,700)
Finance income 17 53,585 50,688 Finance expense 17 (1,640) (6,134) Other financial items 18 16,162 139,899 Result before taxes (267,776) (103,247)
Income tax expense/(recovery) 19 14,596 (11,433) Result for the year (253,180) (114,680)
Other comprehensive income Items that will not be reclassified subsequently to result Increase in revaluation reserve 517,879 - Income tax expense in other comprehensive income (103,575) 414,304 - Total comprehensive result for the year 161,124 (114,680)
The consolidated statement of comprehensive income is to be read in conjunction with the notes to and forming part of the consolidated financial statements set out on pages 8 to 45.
“Hayastan” All Armenian Fund 5 Consolidated financial statements December 31, 2015
Consolidated statement of changes in net assets
In thousand drams Revaluation Accumulated reserve loss Total as of January 1, 2014 - (739,369) (739,369)
Result for the year - (114,680) (114,680) Total comprehensive result for the year - (114,680) (114,680) as of December 31, 2014 (restated) - (854,049) (854,049)
Result for the year - (253,180) (253,180)
Other comprehensive result for the year 414,304 - 414,304 Total comprehensive result for the year 414,304 (253,180) 161,124 as of December 31, 2015 414,304 (1,107,229) (692,925)
The consolidated statement of changes in net assets is to be read in conjunction with the notes to and forming part of the consolidated financial statements set out on pages 8 to 45.
“Hayastan” All Armenian Fund 6 Consolidated financial statements December 31, 2015
Consolidated statement of cash flows
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 (restated) Cash flows from operating activities Result for the year (253,180) (114,680) Adjustments for: Depreciation and amortization 33,293 14,655 Loss on disposal of property and equipment 2,186 - Income from grants (8,561,800) (7,815,397) Income from grant related to assets (10,795) (4,269) Income tax expense/(recovery) (14,596) 11,433 Interest income (53,510) (50,688) Interest expense 1,640 6,134 Movement of the allowance for doubtful receivables (24,062) 2,954 Foreign exchange gain (16,162) (139,899) Operating result before working capital changes (8,896,986) (8,089,757)
Change in advances and receivables (526,223) 624,195 Change in inventories (395,990) 13,250 Change in accounts payable (191,404) 978,620 Cash used in operating activities (10,010,603) (6,473,692)
Donations received 9,324,359 7,875,989 Interest paid (2,136) (6,158) Income tax paid - (3,884) Net cash from/(used in) operating activities (688,380) 1,392,255
Cash flows from investing activities Acquisition of property and equipment and intangible assets (180,262) (36,953) Deposits collected/(Investment in deposits) 737,993 (565,181) Interest received 59,179 36,321 Net cash from/(used in) investing activities 616,910 (565,813)
Cash flows from financing activities Borrowings received/(provided), net (32,369) (29,100) Net cash used in financing activities (32,369) (29,100)
Net increase/(decrease) in cash and cash equivalents (103,839) 797,342 Foreign exchange effect on cash 16,360 31,277 Cash and cash equivalents at the beginning of the year (refer to note 25) 1,035,733 207,114 Cash and cash equivalents at the end of the year (refer to note 25) 948,254 1,035,733
The consolidated statement of cash flows is to be read in conjunction with the notes to and forming part of the consolidated financial statements set out on pages 8 to 45.
“Hayastan” All Armenian Fund 7 Consolidated financial statements December 31, 2015
Notes to the consolidated financial statements
1 Nature of operations and general information
“Hayastan” All Armenian Fund was founded on March 3, 1992, in accordance with the decree of the President of the Republic of Armenia.
“Hayastan” All Armenian Fund is humanitarian, non-political organization acting in accordance with the Constitution of the Republic of Armenia, its charter and decisions of the Board of Trustees.
The objectives of “Hayastan” All Armenian Fund are to:
• support to the social – economic development and reform processes in the Republic of Armenia;
• support to improvement and development of science, education, culture, social and healthcare sectors;
• support to the implementation of projects of high significance, etc.
The projects are implemented by the Executive Board. “Hayastan” All Armenian Fund has affiliate offices worldwide that work closely with the local Armenian communities. Each community contributes to realizing the “Hayastan” All Armenian Fund projects via their local affiliate offices.
Since 1996, each November “Hayastan” All Armenian Fund holds annual telethons in Los Angeles. Funds collected during the marathon are directed to the implementation of large scaled strategic projects defined in the annual meeting of the Executive Board. Along with telethons, the Fund organizes annual phoneathons that are held in European countries.
“Hayastan” All Armenian Fund implemented different projects such as the Earthquake Relief Initiative, Winter 92-94 Humanitarian Project, construction of Goris-Stepanakert and North-South highways as well as the revitalization of hundreds of schools, hospitals, massive water and gas supply networks and other key elements of infrastructure.
Today “Hayastan” All Armenian Fund focus is on the construction of the Vardenis-Martakert Highway. The third project of its kind to be carried out by “Hayastan” All Armenian Fund, the Vardenis-Martakert Highway (about 116 km) is expected to be a boom to the further socio- economic development of Artsakh and Armenia alike. The amounts raised will serve to construct single-family homes for families in Artsakh, who have five or more children and lack adequate housing, as well as to implement special projects in the Republic of Armenia and Artsakh adopted by the benefactors.
“Hayastan” All Armenian Fund 8 Consolidated financial statements December 31, 2015
The average number of employees of “Hayastan” All Armenian Fund during 2015 was 53 (2014: 57). The average number of employees of its subsidiary during 2015 was 43 (2014: 53).
“Hayastan” All Armenian Fund registered office is located at 3 Government House, Yerevan, Republic of Armenia. The subsidiary is located in Shirak marz, Mayisyan Industry Joint.
2 Basis of preparation
2.1 Statement of compliance The consolidated financial statements of “Hayastan” All Armenian Fund and its subsidiary (the Fund) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Currently, IFRS do not contain specific guidance for non-profit organizations and non- governmental organizations concerning the accounting treatment and presentation of financial statements. Where IFRS do not give guidance on how to treat transactions specific to not for profit sector, accounting policies have been based on the general principles of IFRS, as detailed in the International Accounting Standards Board (“IASB”) Framework for Preparation and Presentation Financial Statements.
The management of the Fund applied the “net assets” basis for presentation of the financial statements. The net asset is the difference between the Fund’s assets and liabilities and includes the accumulated profit or loss of the Fund and the revaluation reserve.
2.2 Basis of measurement The consolidated financial statements have been prepared on the historical cost basis with the exception of the Fund’s property and equipment, which are presented at revalued amount.
2.3 Functional and presentation currency The national currency of Armenia is the Armenian dram (“dram”), which is the Fund’s functional currency, since this currency best reflects the economic substance of the underlying events and transactions of the Fund.
These consolidated financial statements are presented in Armenian drams, since management believes that this currency is more useful for the users of these consolidated financial statements. All financial information presented in Armenian drams has been rounded to the nearest thousand.
2.4 Use of estimates and judgment The preparation of consolidated financial statements in conformity with IFRS requires management to make critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 20 to the consolidated financial statements.
“Hayastan” All Armenian Fund 9 Consolidated financial statements December 31, 2015
2.5 Adoption of new and revised standards In the current year the Fund has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the “IASB”) and International Financial Reporting Interpretations Committee (the “IFRIC”) of the IASB that are relevant to its operations and effective for annual reporting periods beginning on January 1, 2015.
New and revised standards and interpretations that are effective for annual periods beginning on or after January 1, 2015
Annual Improvements 2010-2012
The Annual Improvements 2010-2012 made several minor amendments to a number of IFRSs. The amendments relevant to the Fund are summarized below:
IFRS 3 Business Combinations
Accounting for contingent consideration in a business combination:
• clarifies that the classification of contingent consideration in a business combination as either a financial liability or an equity instrument is based solely on the requirements of IAS 32 Financial Instruments: Presentation;
• states that the subsequent measurement of contingent consideration in a business combination should be measured at fair value at each reporting date and changes in fair value should be recognized in profit or loss, regardless of whether it is a financial instrument or a non-financial instrument.
IFRS 13 Fair Value Measurement
Short-term receivables and payables:
• amends the Basis for Conclusions to clarify that an entity is not required to discount short-term receivables and payables without a stated interest rate below their invoice amount when the effect of discounting is immaterial.
IAS 16 Property, Plant and Equipment
Revaluation method-proportionate restatement of accumulated depreciation:
• addresses the diversity in practice in calculating the accumulated depreciation for an item of property, plant and equipment that is measured using the revaluation method;
• clarifies that the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount;
• clarifies that the accumulated depreciation is calculated as the difference between the gross carrying amount and the carrying amount after taking into account accumulated impairment losses.
“Hayastan” All Armenian Fund 10 Consolidated financial statements December 31, 2015
IAS 24 Related Party Disclosures
The suggested revisions in IAS 24:
• amend the definition of a “related party” in order to include “management entities” that provide key management personnel services to the reporting entity;
• require the disclosure of the amounts recognized by the reporting entity as a service fee to a separate management entity for the provision of the key management personnel services;
• provide a relief so that the reporting entity is not required to disclose components of the compensation to key management personnel where the compensation is paid via a management entity.
IAS 38 Intangible Assets
Revaluation method-proportionate restatement of accumulated amortization:
• makes equivalent changes to the accounting of intangible assets, as described above for IAS 16 Property, Plant and Equipment.
Annual Improvements 2011-2013
The Annual Improvements 2011-2013 made several minor amendments to a number of IFRSs. The amendments relevant to the Fund are summarized below:
IFRS 3 Business Combinations
Scope exceptions for joint ventures:
• amends IFRS 3 to exclude from its scope the accounting for the formation of all types of joint arrangements as defined in IFRS 11 Joint Arrangements;
• clarifies that the above mentioned scope exclusion only addresses the accounting in the financial statements of the joint arrangement itself, and not the accounting by the parties to the joint arrangement for their interests in the joint arrangement.
“Hayastan” All Armenian Fund 11 Consolidated financial statements December 31, 2015
Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Fund
At the date of authorization of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective, and have not been adopted early by the Fund.
Management anticipates that all of the relevant pronouncements will be adopted in the Fund’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Fund’s consolidated financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Fund’s financial statements.
Amendments to IAS 12 Income Taxes
The IASB has issued Recognition of Deferred Tax Assets for Unrealised Losses, which makes narrow-scope amendments to IAS 12 Income Taxes. The focus of these amendments is to clarify how to account for deferred tax assets related to debt instruments measured at fair value, particularly where changes in the market interest rate decrease the fair value of a debt instrument below cost.
These amendments clarify the following aspects:
• unrealized losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use;
• the carrying amount of an asset does not limit the estimation of probable future taxable profits;
• estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences;
• an entity should consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of the deductible temporary difference. If tax law imposes no such restrictions, an entity assesses a deductible temporary difference in combination with all of its other deductible temporary differences.
The Amendments are effective for annual periods beginning on or after January 1, 2017 and are required to be applied retrospectively. Management does not anticipate a material impact on the Fund’s consolidated financial statements from these Amendments.
“Hayastan” All Armenian Fund 12 Consolidated financial statements December 31, 2015
IFRS 9 Financial Instruments (2014)
The IASB released IFRS 9 Financial Instruments (2014), representing the completion of its project to replace IAS 39 Financial Instruments: Recognition and Measurement. The new standard introduces extensive changes to IAS 39’s guidance on the classification and measurement of financial assets and introduces a new “expected credit loss” model for the impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting.
The Fund’s management have yet to assess the impact of this new standard on the Fund’s consolidated financial statements. The new standard is required to be applied for annual reporting periods beginning on or after January 1, 2018.
Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortization
The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets.
The amendments are effective prospectively for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments are not expected to have any impact to the Fund given that the Fund has not used a revenue-based method to depreciate its non-current assets.
Amendments to IAS 27 Separate Financial Statements: Equity Method in Separate Financial Statements
The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. For first-time adopters of IFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to IFRS.
The amendments are effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments will not have any impact on the Group’s consolidated financial statements.
“Hayastan” All Armenian Fund 13 Consolidated financial statements December 31, 2015
Annual Improvements 2012-2014
The Annual Improvements 2012-2014 made several minor amendments to a number of IFRSs. The amendments relevant to the Fund are summarized below:
IFRS 7 Financial Instruments: Disclosures
The amendments provide additional guidance to help entities identify the circumstances under which a servicing contract is considered to be “continuing involvement” for the purposes of applying the disclosure requirements in paragraphs 42E-42H of IFRS 7. Such circumstances commonly arise when, for example, the servicing fee is dependent on the amount or timing of the cash flows collected from the transferred financial asset or when a fixed fee is not paid in full due to non-performance of that asset.
The Annual Improvements 2012-2014 noted above are effective for annual periods beginning on or after January 1, 2016. Management does not anticipate a material impact on the Fund’s consolidated financial statements from these Amendments.
2.6 Subsidiaries The consolidated financial statements include the following subsidiary:
December 31, 2015 and December 31, 2014 Ownership Date of Date of Subsidiary % Country incorporation Industry acquisition
“HATM” Limited 100% Republic of May 14, 1999 Production 1999 Liability Armenia and sale of Company furniture and woodworks and other
2.7 Restatement of financial statements The financial statements including the comparative information for prior periods are presented as if the correction had been made in the period in which such a necessity arose. Therefore, the amount of the correction that relates to each period presented is included in the financial statements of that period. The amount of the correction in the comparative financial statements of prior periods is made in the earliest period presented. However, the correction did not have any impact on the financial results of the prior periods (refer to note 27).
“Hayastan” All Armenian Fund 14 Consolidated financial statements December 31, 2015
3 Significant accounting policies
3.1 Basis of consolidation
Subsidiaries
Subsidiaries are those enterprises, which are controlled by the Fund. Control exists, when the Fund has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in the consolidated financial statements from the date when control effectively commences until the date that control effectively ceases.
The financial statements of “HATM” LLC are included in the consolidated financial statements of the Fund. The Fund is 100% owner of “HATM” LLC.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized gains arising from intra-group transactions, are eliminated in presenting the consolidated financial statements. Unrealized gains arising from transactions with associates are eliminated against the investment in the associate.
3.2 Foreign currencies
In preparing the consolidated financial statements, transactions in currencies other than the functional currency are recorded at the rates of exchange defined by the Central Bank of Armenia prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates defined by the Central Bank of Armenia prevailing on the reporting date, which is 483.75 drams for 1 US dollar and 528.69 drams for 1 euro as of December 31, 2015 (December 31, 2014: 474.97 drams for 1 US dollar, 577.47 drams for 1 euro). Non-monetary items are not retranslated and are measured at historic cost (translated using the exchange rates at the transaction date), except for non-monetary items carried at fair value that are denominated in foreign currencies which are retranslated at the rates prevailing on the date when the fair value was determined.
Exchange differences arising on the settlement and retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period, except for differences arising on the translation of non-monetary items in respect of which gains and losses are recognized directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognized directly in equity.
3.3 Property and equipment Property and equipment of the Fund, are stated in the statement of financial position at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the reporting date.
“Hayastan” All Armenian Fund 15 Consolidated financial statements December 31, 2015
Any revaluation increase arising on the revaluation of such property and equipment is recognized in other comprehensive income and presented in net assets (except to the extent that it reverses a revaluation decrease for the same asset previously recognized in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged) and shows as revaluation reserve in shareholder’s equity. A decrease in the carrying amount arising on the revaluation of such property and equipment is charged to profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.
The revaluation surplus is transferred to the accumulated profit as the asset is used by the Fund. The amount of the surplus transferred is the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to accumulated profit.
The gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Expenditure to replace a component of an item of property and equipment that is accounted for separately is capitalized with the carrying amount of the component being written off. Other subsequent expenditure is capitalized if future economic benefits will arise from the expenditure. All other expenditure, including repair and maintenance, is recognized in the consolidated statement of comprehensive income as incurred.
Depreciation is charged to the consolidated statement of comprehensive income on a straight line basis over the estimated useful lives of the individual assets. Depreciation commences when assets are available for use. The estimated useful lives are as follows:
Buildings and constructions - 10-20 years Vehicles - 1-5 years Fittings - 5-10 years Other - 5-10 years.
3.4 Intangible assets Intangible assets, which are acquired by the Fund and which have finite useful lives, are stated at cost less accumulated amortization and impairment losses.
Amortization is charged to the consolidated statement of comprehensive income on a straight line basis over the estimated useful lives of the intangible assets, which is estimated at 5-10 years.
“Hayastan” All Armenian Fund 16 Consolidated financial statements December 31, 2015
3.5 Inventories Inventories include valuable items and other material values to be donated by the Fund or maintained for other purposes, construction materials and finished goods of the subsidiary, as well as other items to be distributed through various projects.
Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.
At each reporting date the Fund assesses the net realizable value of available inventories. The Fund management uses judgment to determine their net realizable value derived from the characteristics of those inventories. In valuating certain items the Fund uses external valuators.
If, as a result of valuation, it becomes evident that the net realizable value is lower than the cost of inventories, this difference is recognized in the consolidated statement of comprehensive income.
3.6 Financial instruments Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognized when the Fund becomes a part to the contractual provisions of the financial instrument.
Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred.
Financial liabilities are derecognized when they are extinguished, discharged, cancelled or expire.
Financial assets and financial liabilities are measured initially at fair value plus transaction costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement financial assets other than hedging instruments are divided into the following categories upon initial recognition:
• loans and receivables • financial assets at fair value through profit or loss • available-for-sale financial assets • held-to-maturity investments.
Financial assets are assigned to different categories on initial recognition, depending on the characteristics of the instrument and its purpose. A financial instrument's category is relevant for the way it is measured and whether any resulting income and expenses are recognized in profit or loss or in other comprehensive income. Refer to note 21.2 for a summary of the Fund's financial assets by category.
“Hayastan” All Armenian Fund 17 Consolidated financial statements December 31, 2015
Generally, the Fund recognizes all financial assets using settlement date accounting. An assessment of whether a financial asset is impaired is made at least at each reporting date. All income and expenses relating to financial assets that are recognized in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. i. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and include trade and other receivables as well as cash and bank balances.
Accounts receivable
Current accounts receivable are initially recognized at fair value. Subsequently they are measured at amortized cost less provision for impairment. A provision for impairment of accounts receivable is established when there is objective evidence that the Fund will not be able to collect all amounts due according to the original terms of the receivables.
Receivables from expected donations and grants (contributions receivable) are not recognized as of the reporting date until there is a reasonable assurance that the donations will be received.
Significant financial difficulties of the debtor and default and delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate.
The balance of the allowance is adjusted by recording a charge or income to the result of the reporting period. Any amount written-off with respect to customer account balances is charged against the existing allowance for doubtful accounts. All accounts receivable for which collection is not considered probable are written-off. i Cash and bank balances
The Fund’s cash and bank balances comprise cash in hand, bank accounts and cash in transit ii. Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity and include deposits at commercial banks. Investments are classified as held-to-maturity if it is the intention of the Fund's management to hold them until maturity.
Deposits are subsequently measured at amortized cost using the effective interest method. In addition, if there is objective evidence that the deposit has been impaired, the financial asset is measured at the present value of estimated cash flows. Any changes to the carrying amount of the deposit are recognized in the result.
“Hayastan” All Armenian Fund 18 Consolidated financial statements December 31, 2015
Classification and subsequent measurement of financial liabilities
The Fund's financial liabilities include loans and borrowings and trade and other payables. A summary of the Fund's financial liabilities by category is given in note 21.2. i. Loans and borrowings
Loans and borrowings are recognized initially at fair value, net of issuance costs associated with the borrowing. Subsequent to initial recognition, loans and borrowings are stated at amortized cost with any difference between cost and redemption value recognized in the result of the year over the period of the borrowings on an effective interest basis. Interest and other costs incurred in connection with borrowings are expensed as incurred as part of finance expenses, except for the borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, which are capitalized as part of that asset. ii. Trade and other payables
Trade and other payables are stated at fair value and subsequently stated at amortized cost.
3.7 Impairment
Impairment of property and equipment and intangible assets
Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of net selling price and value in use. 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 or cash-generating unit is reduced to its recoverable amount. Impairment losses are recognized as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash- generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount, in which case any reversal of impairment loss is treated as a revaluation increase.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
“Hayastan” All Armenian Fund 19 Consolidated financial statements December 31, 2015
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account.
With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the result, to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
3.8 Grants Grants are not recognized until there is reasonable assurance that the Fund will comply with the conditions attaching to them and the grants will be received.
Grants with a primary condition to purchase, construct or otherwise acquire non-current assets are recognized as grants related to assets in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Other grants are recognized as income over the periods necessary to match them with the cost for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Fund with no future related costs are recognized in profit or loss in the period in which they become receivable.
3.9 Donations Donations received in the framework of the Fund’s activities, as well as the financing received for purposes of different projects, are recognized in the consolidated statement of financial position as “Deferred income”, when there is reasonable assurance that the donation will be received. Deferred income, in parallel with the intended use of the contribution, is transferred to the consolidated statement of comprehensive income.
Donations received from Telethon and other sources Donations received from the annual telethon and other sources (including paid donations and the part of promised donations, on which some expenses have already been incurred at the reporting year) are recognized in the consolidated statement of financial position as “Deferred income”.
Donations, which have been received for the projects that are not directly implemented by the Fund, are not included in these consolidated financial statements.
Projects co-financed by the Fund are reflected in these financial statements only at the amount of co-financing, since the remaining amounts are not controlled by the Fund. Refer to note 13 for the disclosure of these amounts.
Executive Committee funds Amounts for this fund are received from “Financing for operations” and are used to cover the administrative expenses.
“Hayastan” All Armenian Fund 20 Consolidated financial statements December 31, 2015
Special funds The consolidated statement of financial position includes the amounts for the special funds, which are deposited in commercial banks and interests earned on these funds are used to deliver pensions to the children of died soldiers, and students.
3.10 Income tax Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Fund expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Fund intends to settle its current tax assets and liabilities on a net basis.
“Hayastan” All Armenian Fund 21 Consolidated financial statements December 31, 2015
Material changes were made to tax accounting principles of property and equipment and intangible assets as a result of amendments in tax legislation of the Republic of Armenia. The annual amount of depreciation and amortization of property and equipment and intangible assets acquired after January 1, 2014 is calculated according to groups of non current assets as the product of annual amortization interest rate, defined for the group, and the carrying (residual) amount at the end of the last day of the reporting period.
The calculation of amortization and depreciation of intangible assets and property and equipment acquired till January 1, 2014 is performed on a straight line basis.
3.11 Income recognition The income of the Fund arises from the use of donations received, business operations of the Fund, operations of the subsidiary, investments of free funds, etc.
Contribution income
This income is recognized, when there is a reasonable assurance that the donation will be received or when the donation is factually received, and the relevant expenses have already been incurred for the donation received. This income is included in “Contribution income” caption.
Income from business operation
This income includes rendering of services and sale of goods and is recognized, when the service has been delivered, and goods are actually transferred, which is evidenced by the documents signed by the parties receiving the service and/or goods. This income is included in “Other income” caption.
Income from operations of subsidiary
This income includes sale of goods and is recognized, when goods have been actually transferred to the buyer, which is the point, when the significant risks and rewards related to the ownership of these goods are transferred to the buyer. This income is included in “Other income” caption.
Income from investment
This income includes invested bank deposits and is recognized using the settlement date accounting. This income is included in “Finance income” caption.
“Hayastan” All Armenian Fund 22 Consolidated financial statements December 31, 2015
4 Property and equipment
In thousand drams Land, Computers buildings and and constructions Fittings Vehicles accessories Total
Revalued amount
As of January 1, 2014 329,270 191,244 86,916 136,636 744,066
Additions - 1,557 32,140 3,104 36,801
Disposal - (133) (19,881) (765) (20,779) as of December 31, 2014 329,270 192,668 99,175 138,975 760,088
Additions 1,889,919 3,126 - 7,440 1,900,485
Disposal - (2,773) (1,986) (11,021) (15,780)
Revaluation surplus 455,993 53,960 5,404 2,522 517,879 as of December 31, 2015 2,675,182 246,981 102,593 137,916 3,162,672
Accumulated depreciation and impairment as of January 1, 2014 123,172 188,219 76,083 132,832 520,306
Charge for the year 1,331 982 8,699 3,603 14,615
Eliminated on disposal - (133) (19,881) (765) (20,779) as of December 31, 2014 124,503 189,068 64,901 135,670 514,142
Charge for the year 11,307 7,580 9,597 4,505 32,989
Eliminated on disposal - (1,706) (867) (11,021) (13,594) as of December 31, 2015 135,810 194,942 73,631 129,154 533,537
Carrying amount as of December 31, 2014 204,767 3,600 34,274 3,305 245,946 as of December 31, 2015 2,539,372 52,039 28,962 8,762 2,629,135
As of December 31, 2015 the Fund’s subsidiary “HATM” LLC pledged property and equipment with the cost of drams 123,884 thousand (December 31, 2014: drams 123,884 thousand) as a security for the credit line (refer to note 9).
The Fund’s property and equipment were last revalued in 2015 by an independent valuer. Valuations were made on the basis of recent market transactions.
If the property and equipment were stated at historical cost, their carrying amounts as of the reporting dates would be drams 175,680 thousand (as of December 31, 2014: drams 144,831 thousand), respectively.
“Hayastan” All Armenian Fund 23 Consolidated financial statements December 31, 2015
Additions of the class of "Land, buildings and constructions" include:
− Apartments at the amount of drams 169,696, which were bought by the Fund in Shirak marz, and were transferred to free-of-charge use to beneficiaries for 5 years (refer to note 11).
− The land and the building located at 28 Arshakunyats avenue, Yerevan, which, in accordance with the free-of-charge use contract dated September 19, 2012, were granted to the Ministry of Culture of the Republic of Armenia by the Fund for the establishment of a museum named after Komitas. The capital expenditures of the building and the land at the amount of drams 1,720,223 thousand were implemented by "Pyunik" Human Resources Development Foundation and "Luys" Foundation. The fair value of this building, as presented in the independent valuer's report, is in compliance with its carrying amount (refer to note 11).
Depreciation expense has been charged as follows.
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Administrative expenses 17,667 12,066 Other expenses 15,322 2,549 32,989 14,615
5 Inventories
In thousand drams As of As of December 31, December 31, 2015 2014 Jewellery and other items 244,823 244,852 Construction materials 14,563 9,372 Finished goods for sale 42,945 16,926 Other 659,206 21,266 961,537 292,416
Construction materials and finished goods for sale relate to the operation of "Hayastan" All Armenian Fund’s subsidiary.
Other inventories include goods that are to be donated to different projects, but are not yet distributed and are transferred under the custody.
The cost of inventories recognized as an expense during the year is drams 671,957 thousand (2014: drams 425,506 thousand).
“Hayastan” All Armenian Fund 24 Consolidated financial statements December 31, 2015
Jewellery and other items are presented at net realizable value as follows:
In thousand drams As of As of December 31, December 31, 2015 2014 Cost 338,496 338,525 Impairment (93,673) (93,673) Net realizable value 244,823 244,852 Impairment of inventories
At each reporting date the Fund estimates the recoverability of the carrying amounts of inventories by calculating their net realizable value. The Fund’s management makes judgment to determine the net realizable value for those inventories based on their characteristics.
6 Accounts receivable and advances
In thousand drams As of As of December 31, December 31, 2015 2014 Advances for construction works 900,555 98,562 Advances for acquisition of goods and services 121,092 153,436 Contributions receivable 766,383 307,218 Other 79,109 78,272 1,867,139 637,488
Allowances for doubtful receivables (58,536) (82,598)
Net accounts receivable and advances 1,808,603 554,890
Advances for construction works have been paid to the following entities:
In thousand drams As of December As of December 31, 2015 31, 2014
“Qaravan” LLC 263,542 -
“Dorojnik” LLC 171,626 -
“Khachen” CJCS 91,144 -
“Virazh” PC 79,913 -
“Pant” LLC 72,827 -
“Chanshin” CJSC 95,520 -
“Kapavor” Co. Ltd 8,668 67,107
“Four Architects” LLC - 4,396
“Artsakhchan institute” CJSC 2,773 2,773
Other 114,542 24,286
900,555 98,562
“Hayastan” All Armenian Fund 25 Consolidated financial statements December 31, 2015
Contributions receivable are presented below:
In thousand drams As of December As of December 31, 2015 31, 2014
Renovation of the school named after Tchaykovskiy 382,239 -
Renovation of the school in Meliq village 51,674 6,339
Water supply of Khachardzan community 48,536 -
Construction of Khandzq village community center 46,480 82,280
Kirants irrigation project 45,480 36,608
President's award starting from 2013 38,241 12,553
Qarin Tak community centre 52,442 25,580
Tavush marz, greenhouses in villages/Argentina 26,161 -
RA Aragatsotn marz Oshakan village secondary school 25,785 -
Roof of Norq infectious clinic 1st block 13,262 -
Ashotsq village new secondary school 9,976 -
President's youth award starting from 2013 9,695 7,210
Syuniq marz Nrnadzor village water supply project - 23,393
School No. 78, Yerevan - 8,712
Tavush marz Khachardzanmedical point 7,500 -
Reconstruction of Yerevan No. 103 kindergarten 7,269 -
Tchaikovsky musical school furnishing project - 8,126
Gyumri Children's Home Orphanage project - 22,665
Khachardzan village school reconstruction and furnishing project - 12,278
Chartar mini football field - 6,279
Construction of Drakhtik village kindergarten 172 13,450
Ghuze Chartan kindergarten construction project - 34,137
Other 1,471 7,608
766,383 307,218
The policy for recognition or derecognition of these receivables is presented in note 3.6.
The movement of the allowance for doubtful receivables is presented below:
In thousand drams 2015 2014 Balance at the beginning of year 82,598 79,644 Increase in the allowance during the year (included in other expenses) - 3,107 Decrease in the allowance during the year (included in other income) (24,062) (153) Balance at the end of year 58,536 82,598
Management believes that there is no further credit allowance required in excess of the allowance for doubtful debts.
Refer to note 22 for the currencies, in which the accounts receivable are denominated.
“Hayastan” All Armenian Fund 26 Consolidated financial statements December 31, 2015
7 Term deposits
In thousand drams As of As of December 31, December 31, Currency 2015 2014 Euro 5,592 6,037 US dollar 196,705 794,253 Armenian dram 101,075 334,440 303,372 1,134,730
Term deposits are disclosed below:
27 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015 Balance of term deposit as of Interest income December 31, 2015 (in thousand (in thousand drams) drams) Principal Commence- Interest rate Name amount Currency ment date Maturity date (%) Principal Interest 2015 ConverseBank CJSC KAMD 68,000 11/19/2014 2/19/2015 8.00% - - 730 ConverseBank CJSC KAMD 61,180 12/9/2014 3/9/2015 8.00% - - 898 ConverseBank CJSC KAMD 135,050 5/16/2014 1/15/2019 13.25% - - 173 ConverseBank CJSC KAMD 26,861 5/16/2014 1/16/2017 12.75% 26,861 5,574 3,425 ConverseBank CJSC KAMD 26,861 5/16/2014 1/15/2018 13.00% 26,861 5,683 3,492 ConverseBank CJSC KAMD 119,000 2/11/2015 3/11/2015 14.00% - - 1,232 ConverseBank CJSC KAMD 40,000 3/10/2015 4/10/2015 14.00% - - 460 ConverseBank CJSC KAMD 42,000 3/10/2015 5/11/2015 14.00% - - 983 ConverseBank CJSC KAMD 30,000 4/13/2015 7/13/2015 12.00% - - 898 ConverseBank CJSC KAMD 16,000 7/15/2015 10/15/2015 8.50% - - 339 ConverseBank CJSC KAMD 35,000 8/26/2015 2/26/2016 9.00% 35,000 1,096 1,096 ConverseBank CJSC USD 77,700 5/16/2014 5/15/2015 6.75% - - 923 ConverseBank CJSC USD 150,000 5/16/2014 1/15/2016 7.25% 72,563 8,524 5,224 ConverseBank CJSC USD 72,300 12/17/2014 6/17/2015 4.75% - - 743 ConverseBank CJSC USD 200,000 8/26/2014 2/26/2015 4.75% - - 795 ConverseBank CJSC USD 100,000 8/26/2014 3/26/2015 5.08% - - 546 ConverseBank CJSC USD 38,000 11/26/2014 5/26/2015 3.75% - - 425 ConverseBank CJSC USD 400,000 12/26/2014 6/26/2015 4.75% - - 4,314 ConverseBank CJSC USD 200,000 2/26/2014 8/26/2015 4.75% - - 2,275 ConverseBank CJSC USD 73,816 8/26/2014 4/27/2015 5.42% - - 597 ConverseBank CJSC USD 77,700 5/15/2015 11/16/2015 5.00% - - 940 ConverseBank CJSC USD 72,300 6/23/2015 12/23/2015 5.00% - - 862 ConverseBank CJSC USD 77,700 11/17/2015 12/17/2015 1.75% - - 52 ConverseBank CJSC USD 72,300 12/24/2015 3/24/2016 5.00% 34,976 25 25 ConverseBank CJSC USD 77,700 12/28/2015 3/28/2016 3.75% 37,554 12 12 ConverseBank CJSC USD 100,000 3/26/2015 10/26/2015 5.08% - - 1,393 ConverseBank CJSC USD 73,816 4/28/2015 10/28/2015 5.25% - - 910 ConverseBank CJSC USD 250,000 7/27/2015 12/28/2015 4.45% - - 5,682 ConverseBank CJSC USD 200,000 8/26/2015 12/28/2015 4.13% - - 1,333 ConverseBank CJSC USD 100,000 10/26/2015 12/28/2015 2.78% - - 227 ConverseBank CJSC USD 73,816 10/28/2015 12/28/2015 5.25% - - 79 AraratBank CJSC USD 250,000 9/9/2014 9/9/2015 6.75% - - 5,554 AraratBank CJSC KAMD 80,000 5/29/2015 11/26/2015 12.50% - - 1 AraratBank CJSC KAMD 63,000 5/29/2015 11/26/2015 12.50% - - 3,884 AmeriaBank CJSC USD 85,640 5/16/2014 5/18/2015 6.50% - - 1,009 AmeriaBank CJSC USD 85,640 5/18/2015 5/18/2016 6.30% 41,428 1,623 1,623 UniBank CJSC Euro 10,000 3/6/2014 3/6/2015 5.50% - - 51 UniBank CJSC Euro 10,000 3/6/2015 3/4/2016 7.00% 5,287 305 305
Total 280,530 22,842 53,510
28 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015 Balance of term deposit as of Interest income December 31, 2014 (in thousand (in thousand drams) drams) Principal Commence- Interest rate Name amount Currency ment date Maturity date (%) Principal Interest 2014
ConverseBank CJSC 15,000 AMD 01.10.2012 25.11.2014 11.50% 1,461 - - ConverseBank CJSC 48,500 AMD 19.02.2014 19.05.2014 8.50% 994 - - ConverseBank CJSC 26,861 AMD 16.05.2014 16.01.2017 12.75% 2,149 26,861 2,149 ConverseBank CJSC 26,861 AMD 16.05.2014 15.01.2018 13.00% 2,191 26,861 2,191 ConverseBank CJSC 135,050 AMD 16.05.2014 15.01.2019 13.25% 11,227 135,050 11,227 ConverseBank CJSC 49,400 AMD 19.05.2014 19.11.2014 9.00% 2,229 - - ConverseBank CJSC 60,000 AMD 09.09.2014 09.12.2014 8.00% 1,183 - - ConverseBank CJSC 68,000 AMD 19.11.2014 19.02.2015 8.00% 626 68,000 626 ConverseBank CJSC 61,180 AMD 09.12.2014 09.03.2015 8.00% 295 61,180 295 ConverseBank CJSC 100,000 USD 28.02.2014 28.03.2014 2.25% 68 - - ConverseBank CJSC 200,000 USD 28.02.2014 29.04.2014 2.25% 300 - - ConverseBank CJSC 200,000 USD 28.02.2014 05.05.2014 2.25% 330 - - ConverseBank CJSC 100,000 USD 28.02.2014 09.06.2014 3.25% 366 - - ConverseBank CJSC 400,000 USD 30.04.2014 27.05.2014 3.75% 12 - - ConverseBank CJSC 77,700 USD 16.05.2014 15.05.2015 6.75% 1,563 36,905 1,563 ConverseBank CJSC 150,000 USD 16.05.2014 15.01.2016 7.25% 3,241 71,246 3,241 ConverseBank CJSC 38,000 USD 26.08.2014 26.11.2014 3.75% 153 - - ConverseBank CJSC 200,000 USD 26.08.2014 26.02.2015 4.75% 1,570 94,994 1,570 ConverseBank CJSC 100,000 USD 26.08.2014 26.03.2015 5.08% 840 47,497 840 ConverseBank CJSC 73,816 USD 26.08.2014 27.04.2015 5.42% 661 35,061 661 ConverseBank CJSC 400,000 USD 26.08.2014 26.06.2015 4.75% 2,620 189,988 148 ConverseBank CJSC 200,000 USD 26.08.2014 27.07.2015 4.75% 1,461 94,994 1,461 ConverseBank CJSC 38,000 USD 26.11.2014 26.05.2015 4.75% 82 18,049 82 ConverseBank CJSC 72,300 USD 17.12.2014 17.06.2015 4.75% 62 34,340 62 AmeriaBank CJSC 33,000 AMD 15.03.2013 17.02.2014 11.50% 489 - - AmeriaBank CJSC 33,000 AMD 15.03.2013 17.03.2014 11.75% 797 - - AmeriaBank CJSC 33,000 AMD 15.03.2013 15.04.2014 12.00% 1,128 - - AmeriaBank CJSC 78,900 AMD 15.03.2013 15.05.2014 12.00% 3,476 - - AmeriaBank CJSC 60,000 AMD 15.05.2014 19.08.2014 8.00% 1,249 - - AmeriaBank CJSC 25,000 AMD 15.05.2014 16.06.2014 5.80% 123 - - AmeriaBank CJSC 72,300 USD 20.03.2014 16.12.2014 5.00% 1,262 - - AmeriaBank CJSC 85,640 USD 15.05.2013 16.05.2014 7.00% 919 - - AmeriaBank CJSC 85,640 USD 16.05.2014 18.05.2015 6.50% 1,660 40,676 1,628 AraratBank CJSC 200,000 USD 28.03.2014 27.06.2014 4.00% 812 - - AraratBank CJSC 250,000 USD 09.09.2014 09.09.2015 6.75% 2,281 118,742 505 UniBank CJSC 10,000 Euro 06.03.2014 06.03.2015 5.50% 317 5,775 262
Total 1,106,219 28,511 50,197
29 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
8 Cash and bank balances
In thousand drams As of As of December 31, December 31, 2015 2014 (restated) Cash in hand 9,606 2,332 Bank accounts 748,898 755,955 758,504 758,287
9 Loans and borrowings
In thousand drams Current Non-current As of As of As of As of December 31, December 31, December 31, December 31, 2015 2014 2015 2014 Secured bank loans 7,230 15,107 3,889 28,554 7,230 15,107 3,889 28,554
As of December 31, 2015 the outstanding balance of loans amounted to drams 11,119 thousand (2014: drams 43,661 thousand) and the accrued interests amounted to nil (2014: drams 496 thousand). During the reporting period the interest expense amounted to drams 1,640 thousand (2014: drams 6,134 thousand).
Loans are secured by the Fund’s subsidiary “HATM” LLC property and equipment at the cost of drams 123,884 thousand (refer to note 4).
The fair values of current loans and borrowings equal their carrying amount, as the impact of discounting is not significant.
Refer to note 22 for the currencies, in which the loans and borrowings are denominated.
10 Deferred taxes The movement of deferred taxes is disclosed below:
In thousand drams 2015 2014 Balance at the beginning of the year 5,166 15,964 (Charged)/credited in other comprehensive income (103,575) - (Expense)/recovery charged during the year (refer to note 19) 14,596 (10,798) Balance at the end of the year (83,813) 5,166
30 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
Deferred taxes for the year ended December 31, 2015 can be summarized as follows:
In thousand drams Recognized in other January 1, comprehensive Recognized December 31, 2015 income in profit or loss 2015 Deferred tax assets Accumulated tax loss 15,318 - (1,846) 13,472 Accounts receivable 1,597 - (200) 1,397 Accounts payable 981 - (87) 894 Inventories 189 - - 189 18,085 - (2,133) 15,952 Deferred tax liabilities Property and equipment - 103,575 (3,810) 99,765 - 103,575 (3,810) 99,765
Deferred tax assets estimation (12,919) - 12,919 -
Net position – deferred income tax assets/(liabilities) 5,166 (103,575) 14,596 (83,813)
Deferred income taxes for the year ended December 31, 2014 can be summarized as follows:
In thousand drams Recognized in other January 1, comprehensive Recognized December 31, 2014 income in profit or loss 2014 Deferred tax assets Accumulated tax loss 12,919 - 2,399 15,318 Accounts receivable 1,850 - (253) 1,597 Accounts payable 390 - 591 981 Inventories 189 - - 189 Property and equipment 616 - (616) - 15,964 - 2,121 18,085
Deferred tax assets estimation - - (12,919) (12,919)
Net position – deferred income tax assets 15,964 - (10,798) 5,166
Analyzed as: 2015 2014 To be recovered/redeemed after more than 12 months (98,368) - To be recovered/redeemed within 12 months 14,555 5,166
31 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
11 Grants related to assets
In thousand drams 2015 2014 (restated) Balance at the beginning of year 183,354 156,202 Additions 1,890,008 32,141 Realized to income (included in income from donations) (10,795) (4,989) Balance at the end of year 2,062,567 183,354
Additions include:
− Apartments at the amount of drams 169,696, which were bought by the Fund in Shirak marz, and were transferred to free-of-charge use to beneficiaries for 5 years.
− The cost of the building has significantly increased in the result of expenditures incurred by "Pyunik" Human Resources Development Foundation and "Luys" Foundation at the amount of drams 1,720,223 thousand and capitalized to the cost of the building, which is in compliance with the estimations done by an independent valuer.
12 Accounts payable
In thousand drams As of As of December 31, December 31, 2015 2014 Payables to contractors 1,050,416 1,232,101 Trade payables 5,536 22,061 Advances received 3,477 13,416 Employee benefits payable 54,609 46,729 Other 53,956 51,049 1,167,994 1,365,356
32 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
The payables to contractors are presented below:
In thousand drams As of As of December 31, December 31, 2015 2014
“Qaravan” LLC 270,667 530,808
“Akhuryan Coopshin” Co. Ltd 138,346 -
“Virazh” PC 83,092 153,495
“Chanshin” CJSC 148,035 129,161
“Dorojnik” LLC 33,023 123,642
“Vrej”CJSC 17,816 59,894
“Kapavor”LLC 127,959 37,180
“Pareqs-Gaz” LLC 21,813 27,895
“Sigma Group Service” LLC 25,600 25,600
“Shahbilding” LLC 1,538 22,921
“Milaqs group” CJSC - 17,286
“Karalans” LLC 13,862 13,862
“Artsakhjan intitute” CJSC - 11,909
“Start plus” LLC 10,132 9,450
“Hov-Grig-Shin” LLC - 9,041
“Khachen” CJSC 7,010 8,617
“Tiv 1 Shinvarchutyun” OJSC 22,769 7,345
“Shinkarkas” LLC 1,143 6,801
“Jannakhagits institute” LLC 7,992 5,546
“Vahag Shin” LLC 14,984 -
Other 104,635 31,648
1,050,416 1,232,101
13 Deferred income As of the reporting date the balance of deferred income includes the unused portion of donations received from annual telethons and other sources, as well as special and executive committee fund balances.
Movement of the deferred income is presented below
In thousand drams 2015 2014 (restated) Balance at the beginning of year 2,269,284 2,089,513 Funds received 10,301,836 7,983,253 Realized to income (refer to note 14) (8,561,800) (7,803,482) Translation to grants related to assets (169,696) - Balance at the end of year 3,839,624 2,269,284
Funds are received from telethons, special funds and other sources.
Funds received include drams 273,131 thousand (2014: drams 113,143 thousand) in the form of donated goods and drams 697,975 thousand (2014: drams 146,818 thousand), which were accrued (promised) but not actually received by the Fund.
33 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
Donations received from Telethons and other sources Donations received in the annual telethon in November, 2015 made up US dollar 10,378,465 (2014: US dollar 12,399,550), which includes actually received and promised donations.
As presented in note 3.10, the Fund’s consolidated financial statements include only those projects, which were financed or co-financed by the Fund. In case of co-financing, the part of projects, which are not controlled by the Fund, are not included in these consolidated financial statements. During 2015, for the implementation of the Fund’s projects drams 891,505 thousand of co-financing was used by the Government of the Nagorno-Karabakh Republic (2014: drams 1,332,675 thousand), which were not included in the consolidated financial statements of the Fund due to the above- mentioned reason. In addition, the consolidated financial statements of the Fund do not include expenses incurred in the framework of “HimnaTavush” Development Foundation, which were made and controlled by “HimnaTavush” Development Foundation.
The movement of the donations from telethon and other sources is presented below:
In thousand drams
2015 2014 (restated)
Balance at the beginning of year 2,205,671 2,025,308
Funds received 10,301,836 7,975,357
Recognized to contribution income (refer to note 14) (8,382,509) (7,701,886)
Grants related to assets (169,696) -
Outflows to Executive Committee fund (171,109) (93,108)
Balance at the end of year 3,784,193 2,205,671
Special fund
Movement of the special funds is presented below:
In thousand drams
2015 2014
Balance at the beginning of year 63,613 64,205
Funds received 15 7,896
Realized to income (refer to note 14) (8,182) (8,488)
Balance at the end of year 55,446 63,613
Executive Committee fund
Movement of the special funds is presented below:
In thousand drams
2015 2014
Balance at the beginning of year - -
Inflows from donations received from telethon and other sources 171,109 93,108
Income from fund use (refer to note 14) (171,109) (93,108)
Balance at the end of year - -
34 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
14 Contribution income
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 (restated) Income from financing of projects (refer to note 13) 8,561,800 7,803,482 Income from grants related to assets (refer to note 11) 10,795 4,989 8,572,595 7,808,471
Income from financing of projects is disclosed below:
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Income received from Telethon's donations and other sources (refer to note 13) 8,382,509 7,701,886 Income from special funds (refer to note 13) 8,182 8,488 Income from Executive Committee fund (refer to note 13) 171,109 93,108 8,561,800 7,803,482
15 Operating expenses
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Construction works 7,305,138 6,863,577 President's awards 72,651 51,248 Donation of equipment and other property 617,634 326,679 Telethon organization expenses 150,706 134,321 Financial aid to Syrian Armenians - 78,559 Other projects 421,556 200,397 8,567,685 7,654,781
The construction works for 2015 and 2014 performed in Armenia and Nagorno-Karabakh include:
− reconstruction and renovation of water pipelines, − construction of buildings of public importance, − construction and renovation of medical institutions, − construction of roads, − construction of schools, etc.
35 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
16 Administrative expenses
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Employee benefits 265,623 241,606 Trip expenses 18,954 15,898 Promotion expenses 14,411 11,009 Office expenses 37,936 39,772 Depreciation and amortization expenses 18,288 13,101 Other 45,547 62,232 400,759 383,618
17 Finance income and expense
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Interest expenses on bank borrowings (1,640) (6,134) Total finance costs (1,640) (6,134)
Interest income on bank deposits 53,510 50,197 Interest income on bank accounts 75 491 Total finance income 53,585 50,688
Net finance income 51,945 44,554
18 Other financial items
In thousand drams Year ended Year ended December 31, December 31, 2015 2014
Gain/(loss) from exchange differences on:
Loans and accounts receivable 16,987 160,878
Financial liabilities measured at amortized costs (825) (20,979)
16,162 139,899
19 Income tax expense/(recovery)
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Current tax - 635 Deferred tax (refer to note 10) (14,596) 10,798 (14,596) 11,433
36 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
Reconciliation of effective tax rate is as follows:
In thousand drams Year ended Year ended December 31, Effective tax December 31, Effective tax rate 2015 rate (%) 2014 (%) Result before taxation (under IFRS) (267,776) (103,247) Tax calculated at a tax rate of 20% (2014: 20%) (53,555) 20.0 (20,649) 20.0 Income tax losses/(use) (1,846) 0.7 2,399 (2.3) Reversal of tax loss recognized (12,919) 4.8 12,919 (12.5) (Non-taxable)/non-deductible items, net 53,724 (20.1) 16,764 (16.2) Income tax expense/(recovery) (14,596) 5.4 11,433 (11.1)
20 Critical accounting estimates and judgments Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
20.1 Critical accounting estimates The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Useful lives of property and equipment
Management has estimated useful lives of the property and equipment. Management believes that estimated useful lives of the property and equipment are not materially different from economical lives of those assets. If actual useful lives of property and equipment are different from estimations, financial statements may be materially different.
Contributions receivables
Amounts that are expected to be received for the expenses incurred within the scope of the Fund’s operations are recognized in the caption of “Contributions receivable”. The Fund’ management estimates the recoverability of the spent amounts. The estimates are made based on the historical experience, the donor’s commitment, probability of project implementation, etc. If the recovered amounts differ from the estimated amounts then the financial statements may be materially different.
37 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
21 Financial instruments
21.1 Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition 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 3.6.
21.2 Categories of financial instruments The carrying amounts presented in the consolidated statement of financial position relate to the following categories of assets and liabilities:
Financial assets
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Held-to-maturity investments: Term deposits 303,372 1,134,730 Loans and receivables: Accounts receivable 845,492 385,490 Cash and bank balances 758,504 758,287 1,907,368 2,278,507 Financial liabilities
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Financial liabilities measured at amortized costs: Loans and borrowings 11,119 43,661 Accounts payable 1,150,999 1,347,071 1,162,118 1,390,732
38 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
22 Financial risk management The Fund is exposed to various risks in relation to financial instruments. The main types of risks are market risk, credit risk and liquidity risk.
Financial risk factors a) Market risk The Fund is exposed to market risk through its use of financial instruments and specifically to currency risk.
Foreign currency risk
The Fund undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise.
Most of the Fund’s donations are received in Armenian drams, US dollars and Euro. Exposures to currency exchange rates arise from the Fund’s term deposits, receivables, cash and loans, which are primarily denominated in US dollars and Euro. The Fund also has a US dollar loan, which has been used to fund the purchase. Besides the subsidiary of “Hayastan” All Armenian Fund has a credit, which was used for the procurement.
Foreign currency denominated financial assets and liabilities which expose the Fund to currency risk are disclosed below. The amounts shown are those reported to key management translated into Armenian drams at the closing rate:
In thousand drams
Item
As of December 31, 2015 US dollar Euro Other Financial assets Term deposits 196,705 5,592 - Cash and bank balances 570,361 111,743 1,268 767,066 117,335 1,268 Financial liabilities Loans 3,889 - - Accounts payable - 12 - 3,889 12 - Net position 763,177 117,323 1,268
39 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
In thousand drams
Item
As of December 31, 2014 US dollar Euro Other Financial assets Term deposits 794,253 6,037 - Accounts receivable 28,950 262 Cash and bank balances 279,344 978 48,161 1,102,547 7,277 48,161 Financial liabilities Loans 43,661 - - 43,661 - - Net position 1,058,886 7,277 48,161
The following table details the Fund’s sensitivity to a 10% (2014: 10%) increase and decrease in dram against US dollar. 10% (2014: 10%) represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% (2014: 10%) change in foreign currency rates.
If Armenian dram had strengthened against US dollar and Euro by 10% (2014: 10%) then this would have had the following impact:
In thousand drams US dollar impact Euro impact 2015 2014 2015 2014 Consolidated statement of comprehensive income 76,318 105,889 11,732 728
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Fund’s exposure to currency risk. b) Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Fund. The effect of this risk for the Fund arises from different financial instruments, such as accounts receivable, term deposits, etc. The maximum exposure to credit risk is represented by the carrying amounts of the following financial instruments:
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Financial assets at carrying amounts Term deposits 303,372 1,134,730 Accounts receivable 845,492 385,490 Bank balances 748,898 755,955 1,897,762 2,276,175
At the reporting date there was no significant concentration of credit risk in respect of receivables. The Fund has made provisions of drams 58,536 thousand as of December 31, 2015 (December 31, 2014: drams 82,598 thousand) for overdue receivables.
40 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
The credit risk for cash and cash equivalents is small, since the counterparties are reputable banks. c) Liquidity risk Liquidity risk is the risk that the Fund will be unable to meet its obligations.
The Fund’s policy is to run a prudent liquidity management policy by means of holding sufficient cash and bank balances, as well as highly liquid assets for making all operational and debt service related payments when those become due.
The following table details the Fund’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Fund can be required to pay.
The table includes both interest and principal cash flows.
2015 Non-interest Fixed interest rate bearing instruments Total Weighted average effective interest rate (%) 15% Less than 6 months 1,154,888 - 1,154,888 6 months to 1 year - 7,230 7,230 1-5 years - 3,889 1,154,888 11,119 1,162,118
2014 Non-interest Fixed interest rate bearing instruments Total Weighted average effective interest rate (%) 14.5% Less than 6 months 1,347,071 - 1,347,071 6 months to 1 year - 15,107 15,107 1-5 years 28,554 28,554 1,347,071 43,661 1,390,732
The Fund considers expected cash flows from financial assets in assessing and managing liquidity risk, particularly its cash resources and receivables. The Fund’s cash resources and receivables do not exceed the current cash outflow requirements. Cash flows from receivables are all contractually due within one year.
41 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
23 Fair value measurement
23.1 Fair value measurement of non-financial assets The land and buildings of the Fund are stated at revalued amount. The estimated fair values of the land and buildings are categorized within Level 2 of the fair value hierarchy. The fair values of those assets are estimated based on appraisals performed by independent, professionally-qualified property valuers who hold necessary licenses. The significant inputs and assumptions are developed in close consultation with management. Further information is set out below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (ie an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. Valuation inputs, used for fair value measurement of financial instruments after initial recofnition, are classified in accordance to three levels:
• level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities, that the entity can access at the measurement date, • level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: a) quoted prices for similar assets or liabilities in active markets b) quoted prices for identical or similar assets or liabilities in markets that are not active c) inputs other than quoted prices that are observable for the asset or liability d) inputs that are derived principally from or corroborated by observable market data by correlation or other means ('market-corroborated inputs').
• level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs shall reflect the assumptions that market participants would use when pricing the asset or liability, including assumptions about the risk .
Property and equipment (Level 2)
The fair values of these assets are assessed on the basis of independent, professionally qualified valuers, which have the necessary licenses. The Fund’s property and equipment were revalued by an independent valuer as of November 18, 2015, and the subsidiary's property and equipment were revalued as of June 30, 2015, respectively. The significant variables and assumptions were developed in close cooperation with the management.
The appraisal of lands was carried out using a comparable sales method.The essence of this method is that lands sold or to be sold are reviewd and compaired with the estimated land, thus appropriate corrections are made between the estimated and comparable objects.
The appraisal of buildings was carried out using a cost method. The essence of this method is that at the appraisal date the total of expenses, necessary for creating real estate having similar useful lives and importance or the exact copy of the real estate estimated, is determined by calculated market prices.
42 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
24 Contingencies
24.1 Business environment Armenia continues to undergo political and economic changes. As an emerging market, Armenia does not possess a developed business and regulatory infrastructure that generally exists in a more mature free market economy. In addition, economic conditions continue to limit the volume of activity in the financial markets, which may not be reflective of the values for financial instruments. The main obstacle to further economic development is a low level of economic and institutional development, along with a centralized economic base, regional instability and international economic crisis.
Deterioration of economic situation of countries collaborating with the Republic of Armenia led to the shortage of money transfers from abroad, upon which the economy of Armenia is significantly dependant. Further decline in international prices of mining products, uncertainties due to possibilities of attraction of direct capital investments, inflation, may lead to deterioration of the situation of Armenian economy and of the Fund. However, as the number of variables and assumptions involved in these uncertainties is big, management cannot make a reliable estimate of the amounts by which the carrying amounts of assets and liabilities of the Fund may be affected.
Management of the Fund believes that in the current conditions appropriate measures are implemented in order to ensure economic stability of the Fund.
24.2 Insurance The Armenian insurance industry is in its development stage and many forms of insurance protection common in other parts of the world are not yet generally available in Armenia. The Fund does not have full coverage for its plant facilities, business interruption, or third party liability in respect of property or environmental damage arising from accidents on the Fund property or relating to the Fund operations. Until the Fund obtains adequate insurance coverage, there is a risk that the loss or destruction of certain assets or environmental damage could have a materially adverse affect on the Fund’s operations and financial position.
24.3 Taxes The taxation system in Armenia is relatively new and is characterized by frequently changing legislation, which is often subject to interpretation. Often differing interpretations exist among various taxation authorities and jurisdictions. Taxes are subject to review and investigations by tax authorities, which are enabled by law to impose severe fines and penalties.
These facts may create tax risks in Armenia substantially more than in other developed countries. Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation. However, the relevant authorities may have differing interpretations and the effects could be significant.
25 Cash and cash equivalents For the purpose of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks and short-term investments with a maturity period of less than 3 months, net of outstanding bank overdrafts. Cash and bank balances at the end of the financial year as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position, as follows:
43 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
In thousand drams As of December As of December 31, 2015 31, 2014 Cash and bank balances 758,504 758,287 Short-term bank deposits 189,750 277,446 948,254 1,035,733
26 Related party transactions The Fund's related parties includes subsidiary for separate financial statements, key management and others as described below.
26.1 Transactions with management and close family members Key management received the following remuneration during the year, which is included in payroll and employee benefits.
In thousand drams Year ended Year ended December 31, December 31, 2015 2014 Salaries and bonuses 21,507 15,254
27 Restatement of comparative financial statements As disclosed in note 2.7, the policy of the Fund is the retrospective adjustment of mistakes disclosed in the current year.
During 2015 management of the Fund has decided that some items of the statement of financial position as of December 31, 2014 and some items of the statement of comprehensive income for the year ended December 31, 2014 are not stated properly related to the project expenses of the 100th anniversary of the Genocide.
As described in note 3.9, the financial statements of the Fund include only the projects financed or co-financed by resources controlled by the Fund. According to decree No. 70 dated November 17, 2014, which was declared during the Board meeting of the Fund, the projects devoted to the 100th anniversary of the Genocide were not implemented by the Fund. Therefore, the consolidated financial statements of the Fund do not include the expenses implemented within these projects. As a result, those changes have been adjusted in the reporting period, as follows:
44 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
In the consolidatedstatement of financial position as of December 31, 2014:
In thousand drams As of December 31, As of December 2014 31, (before 2014 restatement) Restatement (restated)
Assets
Non-current assets
Property and equipment 243,201 2,745 245,946
Intangible assets 679 - 679
Deferred income tax assets 5,166 - 5,166
Minimum profit tax prepayment 10,666 - 10,666
259,712 2,745 262,457
Current assets
Inventories 292,416 - 292,416
Accounts receivable and advances 719,524 (164,634) 554,890
Current income tax assets 4,826 - 4,826
Term deposits 1,134,730 - 1,134,730 Cash and bank balances 1,442,297 (684,010) 758,287
3,593,793 (848,644) 2,745,149
Total assets 3,853,505 (845,899) 3,007,606
Liabilities and net assets
Non-current liabilities
Loans and borrowings 28,554 - 28,554
Grants related to assets 185,191 (1,837) 183,354
213,745 (1,837) 211,908
Current liabilities
Accounts payable 1,365,106 250 1,365,356
Loans and borrowings 15,107 - 15,107
Deferred income 3,164,841 (895,557) 2,269,284
4,545,054 (895,307) 3,649,747
Net assets (905,294) 51,245 (854,049)
Total liabilities and net assets 3,853,505 (845,899) 3,007,606
45 “Hayastan” All Armenian Fund Consolidated financial statements December 31, 2015
In the consolidated statement of comprehensive income as of December 31, 2014:
In thousand drams As of December 31, As of 2014 December 31, (before 2014 restatement) Restatement (restated)
Contribution income 7,821,503 (13,032) 7,808,471 Other income 93,789 93,789 Operating expenses (7,666,446) 11,665 (7,654,781) Administrative expenses (386,363) 2,745 (383,618) Other expenses (151,561) (151,561) Results from operating activities (289,078) 1,378 (287,700)
Finance income 50,688 - 50,688 Finance expense (6,134) - (6,134) Other financial items 90,032 49,867 139,899 Result before taxes (154,492) 51,245 (103,247)
Income tax expense/(recovery) (11,433) - (11,433) Result for the year (165,925) 51,245 (114,680)
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