Consolidated Financial Statements and Independent Auditor's Report
“Hayastan” All Armenian Fund
December 31, 2012 "Hayastan" All Armenian Fund Consolidated financial statements December 31, 2012
Contents
Page Independent auditor’s report 1 Consolidated statement of financial position 3 Consolidated statement of comprehensive income 4 Consolidated statement of changes in equity 5 Consolidated statement of cash flows 6 Notes to the consolidated financial statements 8
"Hayastan" All Armenian Fund Consolidated financial statements December 31, 2012
“Hayastan” All Armenian Fund Members of the Board of Trustees as of December 31, 2012
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. Hovik Abrahamyan Speaker of RA National Assembly 7. Tigran Sargsyan 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. Vache Gabrielyan 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. Rene Levonian 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. Ara Boyajian 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. Hasmik Terterian 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. Vahe Jazmadarian France 39. Gagik Khachatryan Chairman of the State Revenues Committee under the RA Government
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To the Board of Trustees of "Haystan" All Armenian Fund
We have audited the accompanying consolidated financial statements of "Hayastan" All Armenian Fund (the “Fund”), which comprise the consolidated statement of financial position as of December 31, 2012, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the 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 as of December 31, 2012, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
April 22, 2013
Gagik Gyulbudaghyan Emil Vassilyan, FCCA
Managing Partner Engagement Partner
²áõ¹Çï, гñÏ»ñ, ÊáñÑñ¹³ïíáõÃÛáõÝ A udit, Tax, Advisory ¶ñ³Ýà ÂáñÝÃáÝ ÆÝûñÝ»ßÝÉÇ ³Ý¹³Ù Member of Grant Thornton International Ltd "Hayastan" All Armenian Fund 3 Consolidated financial statements December 31, 2012
Consolidated statement of financial position
In thousand drams As of As of December 31, December 31, Note 2012 2011
Assets
Non-current assets
Property and equipment 4 226,059 261,120
Intangible assets 163 538 Deferred income tax assets 5 3,967 2,348
230,189 264,006
Current assets
Inventories 6 335,719 341,519
Receivables and advances 7 531,922 752,392
Current income tax assets 23,458 -
Term deposits 8 427,847 595,304
Cash and bank balances 9 289,049 163,157
1,607,995 1,852,372
Total assets 1,838,184 2,116,378
Liabilities and net assets
Non-current liabilities
Grants related to assets 10 284 3,384
284 3,384
Current liabilities
Accounts payable 11 447,063 836,596
Current income tax liabilities - 56,604
Loans and borrowings 12 30,569 16,397
477,632 909,597
Net assets 1,360,268 1,203,397
Total liabilities and net assets 1,838,184 2,116,378
The consolidated financial statements were approved on April 4, 2013 by:
Ara Vardanyan Ruzanna Aghayan Executive Director Financial Manager
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 36.
"Hayastan" All Armenian Fund 4 Consolidated financial statements December 31, 2012
Consolidated statement of comprehensive income
In thousand drams Year ended Year ended December 31, December 31, Note 2012 2011
Income from operations 14 4,796,870 5,558,488 Other income 295,720 577,864 Operating expenses 15 (3,957,795) (6,098,677) Administrative expenses 16 (438,923) (416,234) Other expenses (170,816) (272,130) Profit/(loss) from operating activities 525,056 (650,689)
Finance income 17 46,392 23,243 Finance expense 17 (6,071) (2,487) Other financial items 18 26,172 33,309 Profit/(loss) before taxes 591,549 (596,624)
Income tax expense 19 (21,934) (80,453) Profit/(loss) for the year 569,615 (677,077)
Other comprehensive income Net decrease of operating financing (399,896) (358,275) Net decrease as a result of revaluation of property and equipment - (50,433) Income tax on other comprehensive income (12,848) - Total comprehensive profit/(loss) for the year 156,871 (1,085,785)
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 36.
"Hayastan" All Armenian Fund 5 Consolidated financial statements December 31, 2012
Consolidated statement of changes in equity
In thousand drams Financing for operations (refer Revaluation Accumulated to note 13) reserve loss Total as of January 1, 2011 2,918,430 114,675 (743,923) 2,289,182 Loss for the year - - (677,077) (677,077) Other comprehensive loss for the year (358,275) (50,433) - (408,708) Total comprehensive loss for the year (358,275) (50,433) (677,077) (1,085,785) as of December 31, 2011 2,560,155 64,242 (1,421,000) 1,203,397 Profit for the year - - 569,615 569,615 Other comprehensive loss for the year (399,896) (12,848) - (412,744) Total comprehensive profit for the year (399,896) (12,848) 569,615 156,871 as of December 31, 2012 2,160,259 51,394 (851,385) 1,360,268
The consolidated statement of changes in equity is to be read in conjunction with the notes to and forming part of the consolidated financial statements set out on pages 8 to 36.
"Hayastan" All Armenian Fund 6 Consolidated financial statements December 31, 2012
Consolidated statement of cash flows
In thousand drams Year ended Year ended December 31, December 31, 2012 2011 Cash flows from operating activities Profit/(loss) for the year 569,615 (677,077) Adjustments for: Depreciation and amortization 37,480 33,737 Loss on disposal of property and equipment 27 124 Loss on donation of property and equipment - 6,357 Income from grants (4,796,870) (5,558,488) Income tax expense 21,934 80,453 Interest income (46,392) (23,243) Finance cost 6,071 2,487 Movement of the allowance for doubtful receivables 24,305 3,060 Foreign exchange gain (26,172) (33,309) Operating profit before working capital changes (4,210,002) (6,165,899)
Change in advances and receivables 379,038 239,416 Change in inventories 267,435 156,327 Change in payables (322,274) 388,094 Cash used in operating activities (3,885,803) (5,382,062)
Donations received 3,884,071 4,805,072 Interest paid (5,757) (2,332) Income tax paid (116,464) (12,002) Net cash used in operating activities (123,953) (591,324)
Cash flows from investing activities Acquisition of property and equipment and intangible assets (2,026) (15,204) Interest income received 19,389 23,004 Net cash from investing activities 17,363 7,800
"Hayastan" All Armenian Fund 7 Consolidated financial statements December 31, 2012
Consolidated statement of cash flows (continued)
In thousand drams Year ended Year ended December 31, December 31, 2012 2011 Cash flows from financing activities Borrowings received, net 11,560 14,415 Net cash from financing activities 11,560 14,415
Net decrease in cash and bank balances (95,030) (569,109) Foreign exchange effect on cash 26,423 33,874 Cash and bank balances at the beginning of the year 754,922 1,290,157 Cash and bank balances at the end of the year 686,315 754,922
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 36.
"Hayastan" All Armenian Fund 8 Consolidated financial statements December 31, 2012
Notes to the consolidated financial statements
1 Nature of operations and general information
“Hayastan” All Armenian Fund (the “Fund”) was founded on March 3, 1992, in accordance with the decree of the President of the Republic of Armenia.
The 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 the 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 Fund’s Executive Board. The Fund has affiliate offices worldwide that work closely with the local Armenian communities. Each community contributes to realizing the Fund’s projects via their local affiliate offices.
Since 1996, each November the 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.
The 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, the Fund’s focus is on breathing a new life into the rural areas of Armenia and Artsakh.
The average number of employees of the Fund during 2012 was 59 (2011: 61).
The Fund’s registered office is located at 3 Government House, Yerevan, Republic of Armenia.
"Hayastan" All Armenian Fund 9 Consolidated financial statements December 31, 2012
2 Basis of preparation
2.1 Statement of compliance The consolidated financial statements 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, the revaluation reserve as well as the unused balance of financing.
2.2 Basis of measurement The consolidated financial statements have been prepared on the historical cost basis with the exception of the Fund’s building, which is presented at fair value.
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. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates and the original estimates and assumptions will be modified as appropriate in the year in which circumstances change.
"Hayastan" All Armenian Fund 10 Consolidated financial statements December 31, 2012
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, 2012.
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.
IFRS 9 Financial Instruments
This Standard issued in November 2009 and amended in October 2010 introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. IFRS 9 requires all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortized cost or fair value. Specifically, debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt instruments and equity instruments are measured at their fair values at the end of subsequent accounting periods.
The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was recognized in profit or loss.
IFRS 9 is effective for annual periods beginning on or after January 1, 2015, with earlier application permitted. The management anticipate that IFRS 9 will be adopted in the Fund's consolidated financial statements for the annual period beginning January 1, 2015 and that the application of the
"Hayastan" All Armenian Fund 11 Consolidated financial statements December 31, 2012
new Standard will not have a significant impact on amounts reported in respect of the Fund’s financial assets and financial liabilities.
IFRS 13 Fair Value Measurement
IFRS 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. IFRS 13 is applicable for annual periods beginning on or after January 1, 2013. The Fund’s management has yet to assess the impact of this new standard.
Amendments to IAS 1 Presentation of Financial Statements
The Amendments to IAS 1 require an entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs:
(a) will not be reclassified subsequently to profit or loss and
(b) will be reclassified subsequently to profit or loss when specific conditions are met.
This amendment is applicable for annual periods beginning on or after July 1, 2012.
The Fund’s management expects this will change the current presentation of items in other comprehensive income; however, it will not affect the measurement or recognition of such items.
Amendments to IAS 32 Financial Instruments: Presentation: Offsetting Financial Assets and Financial Liabilities
The Amendments to IAS 32 add application guidance to address inconsistencies in applying IAS 32’s criteria for offsetting financial assets and financial liabilities in the following two areas:
• the meaning of “currently has a legally enforceable right of set-off”
• that some gross settlement systems may be considered equivalent to net settlement.
The Amendments are effective for annual periods beginning on or after January 1, 2014 and are required to be applied retrospectively. Management does not anticipate a material impact on the Fund’s consolidated financial statements from these Amendments.
Amendments to IFRS 7 Financial Instruments: Disclosures: Offsetting Financial Assets and Financial Liabilities
Qualitative and quantitative disclosures have been added to IFRS 7 relating to gross and net amounts of recognized financial instruments that are (a) set off in the statement of financial position and (b) subject to enforceable master netting arrangements and similar agreements, even if not set off in the statement of financial position. The Amendments are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. The required disclosures should be provided 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, 2012
Consolidation standards
A package of new consolidation standards is effective for annual periods beginning or after January 1, 2013. Information on these new standards is presented below. Management has not yet completed its assessment of the impact of these new and revised standards on the Fund’s consolidated financial statements.
IFRS 10 Consolidated Financial Statements
IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation - Special Purpose Entities. IFRS 10 revises the definition of control and provides extensive new guidance on its application. These new requirements have the potential to affect which of the Fund’s investees are considered to be subsidiaries and therefore change the scope of consolidation. However, the requirements on consolidation procedures, accounting for changes in non-controlling interests and accounting for loss of control of a subsidiary remain the same. Management’s provisional analysis is that IFRS 10 will not change the classification (as subsidiaries or otherwise) of any of the Fund’s existing investees at December 31, 2012.
IFRS 11 Joint Arrangements
IFRS 11 supersedes IAS 31 Interests in Joint Ventures. It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. In addition, IAS 31’s option of using proportionate consolidation for joint ventures has been eliminated. IFRS 11 now requires the use of the equity accounting method, which is currently used for investments in associates.
Management does not anticipate a material impact on the Fund’s net assets or profits.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 integrates and makes consistent the disclosure requirements for various types of investments, including unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.
Transition guidance for IFRS 10, IFRS 11, IFRS 12
Subsequent to issuing the new standards the IASB made some changes to the transitional provisions in IFRS 10, IFRS 11 and IFRS 12. The guidance confirms that the entity is not required to apply IFRS 10 retrospectively in certain circumstances and clarifies the requirements to present adjusted comparatives. The guidance also makes changes to IFRS 11 and IFRS 12 which provide similar relief from the presentation or adjustment of comparative information for periods prior to the immediately preceding period. Further, it provides additional relief by removing the requirement to present comparatives for the disclosures relating to unconsolidated structured entities for any period before the first annual period for which IFRS 12 is applied.
The new guidance is also effective for annual periods beginning on or after January 1, 2013.
"Hayastan" All Armenian Fund 13 Consolidated financial statements December 31, 2012
Consequential amendments to IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures
IAS 27 now only addresses separate financial statements. IAS 28 brings investments in joint ventures into its scope. However, IAS 28’s equity accounting methodology remains unchanged.
Annual Improvements 2009-2011
The Annual Improvements 2009-2011 (the “Annual Improvements”) made several minor amendments to a number of IFRSs. The amendments relevant to the Fund are summarized below:
Clarification of the requirements for opening statement of financial position: • clarifies that the appropriate date for the opening statement of financial position is the beginning of the preceding period (related notes are no longer required to be presented) • addresses comparative requirements for the opening statement of financial position when an entity changes accounting policies or makes retrospective restatements or reclassifications, in accordance with IAS 8.
Clarification of the requirements for comparative information provided beyond minimum requirements: • clarifies that additional financial statement information need not be presented in the form of a complete set of financial statements for periods beyond the minimum requirements • requires that any additional information presented should be presented in accordance with IFRS and the entity should present comparative information in the related notes for that additional information.
The Annual Improvements noted above are effective for annual periods beginning on or after January 1, 2013. 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 subsidiaries:
December 31, 2012 Ownership Date of Date of Subsidiary % Country incorporation Industry acquisition
“HATM” LLC 100% Republic of May 14, 1999 Production 1999 Armenia and sale of furniture and woodworks and other
"Hayastan" All Armenian Fund 14 Consolidated financial statements December 31, 2012
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
Foreign currency transactions
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 403.58 drams for 1 US dollar as of December 31, 2012 (December 31, 2011: 385.77 drams for 1 US dollar).
Exchange differences arising on the settlement and retranslation of monetary items, are included in profit or loss for the period.
3.3 Property and equipment
One of the buildings owned by the Fund, which was provided as a grant, is 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.
Any revaluation increase arising on the revaluation of such property and equipment is recognized in other comprehensive income (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
"Hayastan" All Armenian Fund 15 Consolidated financial statements December 31, 2012
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.
Other property and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost comprises purchase price including import duties and non-refundable purchase taxes and other directly attributable costs. When an item of property and equipment comprises major components having different useful lives, they are accounted for as separate items of property and equipment.
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 10-20 years Computers and accessories 1-5 years Vehicles 5 -10 years Other property and equipment 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, 2012
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 invites 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 expensed in the consolidated statement of comprehensive income.
3.6 Financial instruments 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.
Financial assets and financial liabilities are measured subsequently as described below.
Financial assets
Financial assets other than hedging instruments are divided into the following categories:
· 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 directly in other comprehensive income. Refer to 20.2 for a summary of the Fund's financial assets by category.
"Hayastan" All Armenian Fund 17 Consolidated financial statements December 31, 2012
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 expense relating to financial assets are recognized in the consolidated statement of comprehensive income line item "finance costs" or "finance income", respectively.
i. 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 investment has been impaired, the financial asset is measured at the present value of estimated cash flows. Any changes to the carrying amount of the investment are recognized in the consolidated statement of comprehensive income.
ii. Borrowings 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.
Trade and other receivables
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 trade receivables 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. 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 statement of comprehensive income 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.
Receivables for projects implementation relate to the receipt of the amounts for the expenses incurred in the framework of the Fund’s operations that the Fund management expects to be recovered. In determining this amount management of the Fund estimates the recoverability of the amounts expensed. Management considers historical experience, presence of the specific donator’s promise, capability to complete the project and other circumstances while making such estimates.
Cash and bank balances
The Fund’s cash and bank balances comprise cash in hand, bank accounts and cash in transit.
"Hayastan" All Armenian Fund 18 Consolidated financial statements December 31, 2012
Financial liabilities
The Fund's financial liabilities include borrowings and trade and other payables (including finance lease liabilities). A summary of Fund's financial liabilities by category is given in note 20.2.
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 consolidated statement of comprehensive income 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 Payables
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, 2012
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 profit or loss 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.
In respect of available-for-sale equity securities, any increase in fair value subsequent to an impairment loss is recognized directly in equity.
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 whose primary condition is that the Fund should purchase, construct or otherwise acquire non-current assets are recognized as deferred income 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 Provisions A provision is recognized in the statement of financial position when the Fund has a legal or constructive obligation as a result of past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
"Hayastan" All Armenian Fund 20 Consolidated financial statements December 31, 2012
3.10 Financing for operations Donations received within the framework of the Fund’s activities as well as financing received for the projects implemented through different funds are recognized in the consolidated statement of changes in the net assets.
Donations received from Telethon and other sources Donations received from 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 changes in net assets.
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 disclosure of these amounts.
Executive Committee funds Amounts for this fund are received from “Financing for operations” and are used to cover administrative expenses.
Special funds Consolidated statement of changes in net assets 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.
3.11 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.
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.
"Hayastan" All Armenian Fund 21 Consolidated financial statements December 31, 2012
3.12 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.
Income from donation
This income is recognized when there is a reasonable assurance that the donation will be received or when the donation is factually received. This income is included in “Income from operations” 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 received the service. This income is included in “Other income” caption.
Income from operations of subsidiary
This income includes sale of goods and recognized when the goods have been actually transferred to the buyer, which is the point when the risks related to the damage of these goods, are transferred to the buyer. This income is included in “Other income” caption.
Income from investment
This income includes deposited funds and is recognized using settlement date accounting. This income is included in “Finance income” caption.
"Hayastan" All Armenian Fund 22 Consolidated financial statements December 31, 2012
4 Property and equipment
Land, Computers buildings and and Granted constructions Vehicles accessories assets Total Cost or valuation As of January 1, 2011 29,620 263,685 139,653 - 432,958 Additions - 1,786 12,896 - 14,682 Disposal - (969) (16,279) - (17,248) Reclassified from non-current assets held-for-sale - - - 207,160 207,160 as of December 31, 2011 29,620 264,502 136,270 207,160 637,552 Additions 532 292 780 - 1,604 Disposal - - (916) - (916) as of December 31, 2012 30,152 264,794 136,134 207,160 638,240
Accumulated depreciation as of January 1, 2011 13,306 226,873 120,406 - 360,585 Charge for the year 612 14,126 13,277 4,956 32,971 Eliminated on disposal - (969) (16,155.0) - (17,124) as of December 31, 2011 13,918 240,030 117,528 4,956 376,432 Charge for the year 1,855 11,936 12,489 10,358 36,638 Eliminated on disposal - - (889) - (889) as of December 31, 2012 15,773 251,966 129,128 15,314 412,181
Carrying amount as of December 31, 2011 15,702 24,472 18,742 202,204 261,120 as of December 31, 2012 14,379 12,828 7,006 191,846 226,059
As of December 31, 2012, the Fund’s subsidiary “HATM” LLC pledged property and equipment with the cost of drams 123,884 thousand (December 31, 2011: drams 123,884 thousand) as a security for credit line (refer to note 12).
As of December 31, 2012 the cost of the assets with a carrying amount of nil is drams 184,001 thousand (December 31, 2011: drams 162,822 thousand).
Depreciation expense calculated during the reporting period amounted to drams 36,638 thousand (2011: drams 32,971 thousand). Drams 29,295 thousand (2011: drams 25,716 thousand) from the specified amount were charged to the administrative expenses and drams 7,343 thousand (2011: drams 7,255 thousand) to other expenses, respectively.
During 2011 the Fund’s land and building located at 28 Arshakunyats avenue, Yerevan were reclassified to the class of “Lands, buildings and construction”, since management changed its intention to classify those assets as “non-current assets held-for-sale”.
In accordance with the contract signed on September 19, 2011, the Fund has granted its building located at 28 Arshakunyats avenue to the Ministry of Culture of the Republic of Armenia for the establishment of a museum named after Komitas.
"Hayastan" All Armenian Fund 23 Consolidated financial statements December 31, 2012
5 Deferred income taxes The movement of deferred income taxes is disclosed below:
In thousand drams 2012 2011 Balance at the beginning of year 2,348 7,812 Recognised in equity (12,848) - Credited /(charged) to consolidated statement of comprehensive income (refer to note 19) 14,467 (5,464) Balance at the end of year 3,967 2,348
Deferred income taxes for the year ended December 31, 2012 can be summarized as follows:
In thousand drams Recognized in Recognized statement of January directly in comprehensive December 1, 2012 equity income 31, 2012 Deferred income tax assets Accumulated tax losses brought forward - - 14,082 14,082 Accounts payable 1,186 - 340 1,526 Accounts receivable 357 - 45 402 Inventories 189 - - 189 Property and equipment 616 - - 616 2,348 - 14,467 16,815 Deferred income tax liabilities Property and equipment - 12,848 - 12,848 - 12,848 - 12,848 Net position – deferred income tax assets 2,348 (12,848) 14,467 3,967
Deferred income taxes for the year ended December 31, 2011 can be summarized as follows:
In thousand drams Recognized in statement of January 1, comprehensive December 31, 2011 income 2011 Deferred income tax assets Accumulated tax losses brought forward 5,660 (5,660) - Accounts payable 990 196 1,186 Accounts receivable 357 - 357 Inventories 189 - 189 Property and equipment 616 - 616 Net position – deferred income tax assets 7,812 (5,464) 2,348
Analyzed as: 2012 2011 To be recovered/redeemed after more than 12 months 2,117 - To be recovered/redeemed within 12 months 1,850 2,348
"Hayastan" All Armenian Fund 24 Consolidated financial statements December 31, 2012
6 Inventories
In thousand drams As of As of December 31, December 31, 2012 2011 Jewelry and other items 246,631 247,602 Construction materials 12,281 20,631 Finished goods for sale 33,311 58,868 Other 43,496 14,418 335,719 341,519
Construction materials and finished goods for sale relate to the operation of the 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 260,266 thousand (2011: drams 377,791 thousand).
Jewelry and other items are presented at net realizable value as follows:
In thousand drams As of As of December 31, December 31, 2012 2011 Cost 340,304 341,275 Impairment (93,673) (93,673) Net realizable value 246,631 247,602
Impairment of inventories
At each reporting date the Fund estimates the recoverability of the carrying values of inventories by calculating for them the net realizable value. The Fund’s management makes judgment to determine the net realizable value for those inventories based on their characteristics. As of December 31, 2012 the impairment loss of inventories amounts to drams 93,673 thousand (2011: drams 93,673 thousand).
7 Receivables and advances
In thousand drams As of As of December 31, December 31, 2012 2011 Advances for construction works 175,175 243,406 Advances for goods and services 32,160 11,880 Accounts receivable for projects implementation 357,878 435,155 Other 46,333 117,270 611,546 807,711
Allowances for doubtful receivables (79,624) (55,319)
Net receivables and advances 531,922 752,392
"Hayastan" All Armenian Fund 25 Consolidated financial statements December 31, 2012
Advances for construction works have been paid to the following entities:
In thousand drams As of As of December 31, December 31, 2012 2011 “Pareks-Gaz” LLC - 24,080 “Sigma Group Service ”LLC 78,915 - “Karalans” LLC 47,307 78,861 “Khachen CJSC - 25,342 “Pargev” LLC 28,021 - “Never” LLC 550 74,294 Other 20,382 40,829 175,175 243,406
Accounts receivable for projects implementation are presented below:
In thousand drams As of As of December 31, December 31, 2012 2011 “Karmir Shuka village drinking water supply system construction project” 88,182 82,273 “Secondary school project in Oshakan village, Aragatsotn Region” 45,231 5,055 “Project for the furnishing of Tchaikovsky music school/Australia” 28,716 - “Renovation of Gyumri Children's Home Orphanage” 77,467 2,814 Shengavit district boarding kindergarten renovation proejct 17,065 83,600 Project for the construction of Ghuze Tchartan kindergarden 34,137 78,671 Reconsruction of water supply system in Nrnadzor village, Syunik region 23,393 23,393 Construction of a new hospital in Martuni Town - 77,480 Noragyugh village, drinking water supply internal system project, Askeran Region - 25,108 Other projects 43,687 56,761 357,878 435,155
Movement of the allowance for doubtful receivables is presented below:
In thousand drams 2012 2011 Balance at the beginning of year 55,319 52,258 Increase in the allowance during the year (included in other expenses) 24,305 3,061 Balance at the end of year 79,624 55,319
During the year the increase in provision made up drams 23,392 thousand, which was intended for the water supply reconstruction project in Nrnadzor village. This is conditioned by the fact that the debt was not approved by the donator.
Management believes that there is no further credit provision required in excess of the allowance for doubtful debts.
Refer to note 21.1 for the currencies in which the trade and other receivables are denominated.
"Hayastan" All Armenian Fund 26 Consolidated financial statements December 31, 2012
8 Term deposits
In thousand drams As of As of December 31, December 31, Currency 2012 2011 Euro 21,930 489,161 US dollar 36,147 34,557 Armenian dram 369,770 71,586 427,847 595,304
Term deposits were invested with different maturity periods, from 31 to 454 days and with the following rates: · Armenian dram 5.8-12%, average effective interest rate – 9.61% · US dollar 7%, average effective interest rate – 7% · Euro 2.5-5.5 %, average effective interest rate – 2.71 %.
9 Cash and bank balances
In thousand drams As of As of December 31, December 31, 2012 2011 Cash in hand 1,125 1,487 Bank accounts 287,924 161,670 289,049 163,157
10 Grants related to assets
In thousand drams
2012 2011 Balance at beginning of year 3,384 6,012 Additions - 449 Realized to income (included in income from operations) (3,100) (3,077) Balance at end of year 284 3,384
"Hayastan" All Armenian Fund 27 Consolidated financial statements December 31, 2012
11 Accounts payable
In thousand drams As of As of December 31, December 31, 2012 2011 Payables to contractors 334,246 740,613 Trade payables 9,392 2,046 Advances received 6,275 674 Employee benefits payable 47,100 43,922 Other 50,050 49,341 447,063 836,596
Payables to contractors are presented below:
In thousand drams As of As of December 31, December 31, 2012 2011 “Karalans” LLC 33,650 33,990 “Qaravan” LLC 100,434 259,661 “Sigma Group Service” LLC 27,418 - “HOV-GRIG-SHIN” LLC 7,321 27,995 “Techno Fit” LLC 34,007 50,750 “Never” LLC 8,291 22,742 “Tiv 1 Shinvarchutyun” OJSC 6,671 21,496 “Nairishin” OJSC 4,312 42,056 “Viraj AK” - 74,074 “Khachen” CJSC - 45,314 “Dorojnik” LLC 13,782 30,040 “Pareks-Gaz” LLC 25,182 11,315 Ministry of Urban Development of the Republic of Nagorno-Karabakh 26,405 10,055 Other 46,773 111,125 334,246 740,613
12 Loans and borrowings
In thousand drams Current As of As of December 31, December 31, 2012 2011 Secured bank borrowings 30,569 16,197 Unsecured borrowings from related parties - 200 30,569 16,397
Secured bank loans refer to credit line of US dollars 110,000 and of US dollars 10,000 from “Inecobank” CJSC by the Fund’s subsidiary “HATM” LLC. The credit line of US dollars 110,000 has an annual interest rate of 13% and the maturity period is defined as January 9, 2014, and the credit line of US dollars 10,000 has an annual interest rate of 18% and the maturity period is defined
"Hayastan" All Armenian Fund 28 Consolidated financial statements December 31, 2012
as February 28, 2017. As of December 31, 2012 the used balance of the provided credit line amounted to drams 30,146 thousand (2011: 15,646) and the accrued expenses amounted to drams 423 thousand (2011: drams 109 thousand). The annual financial expenses amounted to drams 6,071 thousand (2011: drams 2,487 thousand).
Loans are secured by the Fund’s subsidiary “HATM” LLC property and equipment with the cost of drams 123,884 thousand (December 31, 2011: drams 123,884 thousand) as a security for credit line (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 21.1 for the currencies in which the loans and borrowings are denominated.
13 Financing for operations and other items of net assets As of the reporting date the balance of financing for operations includes the unused portion of donations received from annual telethons and other sources, as well as special and executive committee fund balances.
Movement of this financing is presented below:
In thousand drams 2012 2011 Balance at beginning of year 2,560,155 2,918,430 Funds received 4,394,038 5,225,067 Funds used (4,793,770) (5,555,411) Other movements (164) (27,931) Balance at end of year 2,160,259 2,560,155
Funds are received from telethons, special funds and other sources.
Donations received from Telethons and other sources Donations received in the annual telethon in November 2012 made up US dollar 21,422,477 (2011: US dollar 12,286,478), which includes actually received and promised donations.
As presented in the 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 2012, for the implementation of the Fund’s projects drams 429,941 thousand of co-financing was used by the Government of the Nagorno- Karabakh Republic (2011: drams 315,672 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 within the framework of “HimnaTavush” Development Foundation. These expenses were made and controlled by the Fund and during the year ended December 31, 2012 amounted to drams 472,269 thousand (2011: drams 116,413 thousand).
"Hayastan" All Armenian Fund 29 Consolidated financial statements December 31, 2012
The movement of the donations from telethon and other sources is presented below:
In thousand drams
2012 2011 Balance at beginning of year 2,476,636 2,652,556 Funds received 4,392,797 5,200,099 Funds used (recognized in “Income from operations”) (4,456,422) (5,209,452) Amount returned (164) - Inflows from special funds - 89,426 Outflows to Executive Committee fund (328,502) (255,993) Balance at end of year 2,084,345 2,476,636
Special fund Movement of the special funds is presented below:
In thousand drams
2012 2011 Balance at beginning of year 83,519 187,334 Funds received 1,241 24,968 Outflows to donations received from telethon and other sources - (89,426) Revaluation - (27,931) Funds used (recognized in “Income from operations”) (8,846) (11,426) Balance at end of year 75,914 83,519
Executive Committee fund Movement of the special funds is presented below:
In thousand drams
2012 2011 Balance at beginning of year - 78,540 Inflows from telethon donations and other sources 328,502 255,993 Funds used (recognized in “Income from operations”) (328,502) (334,533) Balance at end of year - -
13.1 Revaluation reserve The revaluation reserve includes the difference between the amount paid for the acquisition and revalued amount of land and building located at 28 Arshakunyats avenue. As a result of another revaluation of land and building performed by an independent valuation expert the cost of land and building was decreased by drams 47,575 thousand. During 2011 part of land and building was disposed at the amount of drams 2,858 thousand.
"Hayastan" All Armenian Fund 30 Consolidated financial statements December 31, 2012
14 Income from operations
In thousand drams Year ended Year ended December 31, December 31, 2012 2011 Income from projects 4,793,770 5,555,411 Income from grants related to assets 3,100 3,077 4,796,870 5,558,488
15 Operating expenses
In thousand drams Year ended Year ended December 31, December 31, 2012 2011 Construction works 2,198,362 4,568,412 Presidential prizes 54,983 54,157 Donation of equipment 736,148 838,672 Annual expenses of the Board of Trustees 36,423 43,063 Telethon organization expenses 144,826 300,273 Republic of Nagorno- Karabakh airport expenses 491,371 - Other projects 295,682 294,100 3,957,795 6,098,677
Republic of Nagorno-Karabakh airport expenses
“Fruitfull Armenia Fund” decided to sponsor the procurement of the airplane for the government of the Republic of Nagorno-Karabakh and to finance the training program orgnized for the pilots and the technical staff of the airport. The appropriate agreement at the amount of 1,200,000 was signed to implement the mentioned program. The project was inplemented through the Fund.
The construction works for 2012 and 2011 performed in Armenia and Nagorno-Karabakh include the following: - water pipelines renovation, - gas utility works, - construction and renovation of medical institutions, - roads construction, - school construction and other.
16 Administrative expenses
In thousand drams Year ended Year ended December 31, December 31, 2012 2011 Employee benefits 286,992 275,871 Communication expenses 12,432 13,204 Trip expenses 34,757 21,853 Promotion expenses 16,808 16,401 Office expenses 25,286 27,295 Depreciation and amortization expenses 29,547 26,003 Other 33,101 35,607 438,923 416,234
"Hayastan" All Armenian Fund 31 Consolidated financial statements December 31, 2012
17 Finance income and costs
In thousand drams Year ended Year ended December 31, December 31, 2012 2011 Interest expenses on bank borrowings (6,071) (2,487) Total finance costs (6,071) (2,487)
Interest income on short-term bank deposits 46,392 23,243 Total finance income 46,392 23,243
Net finance income 40,321 20,756
18 Other financial items
In thousand drams Year ended Year ended December 31, December 31, 2012 2011
Gain/(loss) from exchange differences on:
Financial liabilities measured at amortized costs 27,788 (1,202) Loans and receivables (1,616) 34,511 26,172 33,309
19 Income tax expense
In thousand drams Year ended Year ended December 31, December 31, 2012 2011 Current tax 36,401 74,989 Deferred tax (refer to note 5) (14,467) 5,464 21,934 80,453
Reconciliation of effective tax rate is as follows:
In thousand drams Year ended Year ended December Effective tax December 31, Effective tax 31, 2012 rate (%) 2011 rate (%) Profit /(loss) before taxation (under IFRS) 591,549 (596,624) Tax calculated at a tax rate of 20% (2011: 20%) 118,310 20.0 (119,325) 20.0 Income tax losses 14,082 2.4 (5,660) 0.9 Non-taxable)/non-deductible items, net (110,458) (18.7) 205,438 (34.4) Income tax expense/(recovery) 21,934 3.7 80,453 (13.5)
"Hayastan" All Armenian Fund 32 Consolidated financial statements December 31, 2012
20 Financial instruments
20.1 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.
20.2 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 As of As of December 31, December 31, 2012 2011 Held-to-maturity investments: Term deposits 427,847 595,304 Loans and receivables: Accounts receivable 404,211 455,137 Cash and bank balances 289,049 163,157 1,121,107 1,213,598
Financial liabilities
In thousand drams As of As of December 31, December 31, 2012 2011 Financial liabilities measured at amortized costs: Loans and borrowings 30,569 16,397 Accounts payable 388,787 787,002 419,356 803,399
21 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.
21.1 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
Most of the Fund’s transactions are carried out in Armenian drams. 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.
"Hayastan" All Armenian Fund 33 Consolidated financial statements December 31, 2012
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:
Item
As of December 31, 2012 US dollar Euro Other Financial assets Term deposits 36,147 21,930 - Receivables 356,907 - - Cash and bank balances 157,019 69,372 10,166 550,073 91,302 10,166 Financial liabilities Loans 30,569 - - 30,569 - - Net position 519,504 91,302 10,166
Item
As of December 31, 2011 US dollar Euro Other Financial assets Term deposits 33,037 488,728 - Receivables 435,155 - - Cash and bank balances 47,256 25,844 22,685 515,448 514,572 22,685
Financial liabilities Loans 15,755 - - 15,755 - - Net position 499,693 514,572 22,685
The following table details the Fund’s sensitivity to a 10% (2011: 10%) increase and decrease in dram against US dollar. 10% (2011: 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% (2011: 10%) change in foreign currency rates.
If Armenian dram had strengthened against US dollar and Euro by 10% (2011: 10%) then this would have had the following impact:
In thousand drams US dollar impact Euro impact 2012 2011 2012 2011 Consolidated statement of comprehensive income 51,950 49,969 9,130 51,457
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.
"Hayastan" All Armenian Fund 34 Consolidated financial statements December 31, 2012
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 As of As of December 31, December 31, 2012 2011 Financial assets at carrying amounts Term deposits 427,847 595,304 Accounts receivable 404,211 488,161 Cash and bank balances 289,049 163,157 693,260 651,318
At the reporting date there was no significant concentration of credit risk in respect of trade and other receivables. The Fund has made provisions of drams 79,624 thousand as of December 31, 2012 (December 31, 2011: drams 55,319 thousand) for overdue receivables.
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.
2012 Non-interest Fixed interest rate bearing instruments Total Weighted average effective interest rate (%) 16% Less than 6 months 388,787 - 388,787 6 months to 1 year - 30,569 30,569 388,787 30,569 419,356
2011 Non-interest Fixed interest rate bearing instruments Total Weighted average effective interest rate (%) 16% Less than 6 months 787,002 - 787,002 6 months to 1 year 200 16,197 16,397 787,202 16,197 803,399
"Hayastan" All Armenian Fund 35 Consolidated financial statements December 31, 2012
The Fund considers expected cash flows from financial assets in assessing and managing liquidity risk, particularly its cash resources and trade receivables. The Fund’s cash resources and trade receivables do not exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within one year.
21.2 Fair values The fair value has been determined either by reference to the market value at the reporting date or by discounting the relevant cash flows using market interest rates for similar instruments. As a result of this exercise, management believes that the fair value of its financial assets and liabilities approximates their carrying amounts.
22 Contingencies
22.1 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.
The possible effects of these factors on the Fund may include the inability to pay creditors when they become due, impaired reputation, difficulties in selling the goods and services, difficulties in obtaining funds, etc. All these problems may lead to the lessened liquidity of the Fund and, accordingly, to going concern problems. Also, there are still uncertainties about the economic situation of countries, collaborating with Armenia, due to the forecasted slowdown in the world economy, which may lead to the shortage of money transfers from abroad, as well as to the decline in the prices of mining products, upon which the economy of Armenia is significantly dependant. In times of more severe market stress the situation of Armenian economy and of the Fund may be exposed to deterioration. 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.
The financial statements of the Fund do not include the effects of adjustments, if any, which might have been considered necessary, had the effects of the factors described above become observable and reliably measurable in Armenia.
22.2 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.
"Hayastan" All Armenian Fund 36 Consolidated financial statements December 31, 2012
22.3 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.
23 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:
In thousand drams As of As of December 31, December 31, 2012 2011 Cash and bank balances 289,049 163,157 Short-term investments 427,847 595,304 716,896 758,461
24 Related party transactions The Fund's related parties includes subsidiary for separate financial statements and key management and others as described below.
24.1 Transactions with management and close family members Management of the Fund and their close family members as of December 31, 2012 and December 31, 2011 had no significant shares in the charter capital.
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, 2012 2011 Salaries and bonuses 16,406 15,283
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