INTEAN POALROATH RONGROEURNG LTD
Financial Statements
for the year ended 31 December 2010
and
Report of the Independent Auditors
Corporate Information
Company
Intean Poalroath Rongroeurng Ltd
Registration No
Co. 7896/05 P
Registered office
No. 54, Russian Confederation Boulevard
Sangkat Phsa Depot 3, Toul Kork, Phnom Penh
Kingdom of Cambodia
Shareholders
Oknha Phou Puy
IPR (HK) Limited
Board of Directors
Oknha Phou Puy
Mr. Scott Alexander Lewis
Mrs. Hao Simorn
Mr. Hort Bunsong
Mr. Sim Huy Chhong
Mr. Chan Sophal
Mr. Mao Savin
Mr. Narath Veasna
Management team
Mr. Hort Bunsong
Mr. Ouk Chansophea
Mr. Hay Kimkhorn
Auditor
KPMG Cambodia Ltd
Principal banker
Acleda Bank Plc.
Chairman
Member (appointed on
30 December 2010)
Member (resigned on 15
July 2010)
Member
Member
Member
Member
Member
General Manager
Operation Manager
(appointed on
15 February 2011)
Finance Manager
and Acting Human
Resource Manager
Intean Poalroath Rongroeurng Ltd
Contents
Page
1.
Report of the Board of Directors
1
2.
Report of the independent auditors
6
3.
Balance sheet
8
4.
Income statement
9
5.
Statement of changes in equity
10
6.
Statement of cash flows
11
7.
Notes to the financial statements
12
Report of the Board of Directors
The Board of Directors presents its report together with the audited financial statements of Intean
Poalroath Rongroeurng Ltd (“the Company”) for the year ended 31 December 2010.
Principal activities
The Company is principally engaged in the provisions of micro-finance services to the rural
population of Cambodia. Those services comprise granting credit for poor and low-income
households and small enterprises operating in the Kingdom of Cambodia.
Financial results
The financial results of the Company for the year ended 31 December 2010 were as follows:
US$
Profit before income tax
Income tax expense
Net profit for the year
26,659
(12,269)
14,390
Dividends
No dividend was declared or paid and the Directors do not recommend any dividend to be paid
for the year under review.
Share capital
During the year the Company increased its registered and paid up share capital from
US$1,722,000 to US$3,088,645. The Company has completed the process of amending its
Memorandum and Articles of Association with the Ministry of Commerce. However, it is still
pending approval from the National Bank of Cambodia.
Reserves and provisions
There were no material movements to or from reserves and provisions during the financial year
other than as disclosed in the financial statements.
1
Intean Poalroath Rongroeurng Ltd
Report of the Board of Directors (continued)
Bad and doubtful loans
Before the financial statements of the Company were prepared, the Board of Directors took
reasonable steps to ascertain that action had been taken in relation to the writing off of bad loans
and the making of provision for doubtful loans, and satisfied themselves that all known bad loans
had been written off and adequate provision had been made for bad and doubtful loans.
At the date of this report, the Board of Directors is not aware of any circumstances which would
render the amount written off for bad loans or the amount of allowance for doubtful loans in the
financial statements of the Company inadequate to any substantial extent.
Current assets
Before the financial statements of the Company were prepared, the Board of Directors took
reasonable steps to ensure that any current assets, other than loans, which were unlikely to be
realised in the ordinary course of business at their values as shown in the accounting records of
the Company had been written down to amounts which they might be expected to realise.
At the date of this report, the Board of Directors is not aware of any circumstances which would
render the values attributed to the current assets in the financial statements of the Company
misleading.
Valuation methods
At the date of this report, the Board of Directors is not aware of any circumstances that have
arisen which render adherence to the existing method of valuation of assets and liabilities in the
financial statements of the Company misleading or inappropriate.
Contingent and other liabilities
At the date of this report, there does not exist:
(a) any charge on the assets of the Company which has arisen since the end of the financial year
which secures the liabilities of any other person; and
(b) any contingent liability in respect of the Company that has arisen since the end of the
financial year other than in the ordinary course of its business operations.
2
Intean Poalroath Rongroeurng Ltd
Report of the Board of Directors (continued)
Contingent and other liabilities (continued)
No contingent or other liability of the Company has become enforceable, or is likely to become
enforceable within the period of twelve months after the end of the financial year which, in the
opinion of the Board of Directors, will or may have a material effect on the ability of the
Company to meet its obligations as and when they fall due.
Change of circumstances
At the date of this report, the Board of Directors is not aware of any circumstances, not otherwise
dealt with in this report or the financial statements of the Company, which would render any
amount stated in the financial statements misleading.
Items of an unusual nature
The results of the operations of the Company for the year ended 31 December 2010 were not, in
the opinion of the Board of Directors, substantially affected by any item, transaction or event of a
material and unusual nature.
There has not arisen in the interval between the end of the financial year and the date of this
report any item, transaction or event of a material and unusual nature likely, in the opinion of the
Board of Directors, which affect substantially the results of the operations of the Company for the
current financial year in which this report is made.
The Board of Directors
The members of the Board of Directors during the period and at the date of this report are:







Oknha Phou Puy, Chairman
Mr. Scott Alexander Lewis, Member (appointed on 30 December 2010)
Mrs. Hao Simorn, Member (resigned on 15 July 2010)
Mr. Hort Bunsong, Member
Mr. Sim Huy Chhong, Member
Mr. Chan Sophal, Member
Mr. Mao Savin, Member

Mr. Narath Veasna, Member
All members are non-executive board members, except Mr. Hort Bunsong, who holds the
position of the General Manager.
3
Intean Poalroath Rongroeurng Ltd
Report of the Board of Directors (continued)
Directors’ interests
The Directors who held office at the end of the financial year and their interests in the shares of
the Company are as follows:
Holding
%
Okhna Phou Puy
IPR (HK) Limited
Number of
shares
US$ 119 each
66.35%
33.65%
17,220
8,735
100.00%
25,955
Directors’ benefits
During and at the end of the financial year, no arrangements existed to which the Company is a
party with the object of enabling Directors of the Company to acquire benefits by means of the
acquisition of shares in or debentures of the Company or any other body corporate.
Since the end of the previous financial year, no Director of the Company has received or become
entitled to receive any benefit (other than a benefit included in the aggregate amount of
emoluments received or due and receivable by the Directors as disclosed in the financial
statements) by reason of a contract made by the Company or a related corporation with a firm of
which the Director is a member, or with a company in which the Director has a substantial
financial interest other than as disclosed in the financial statements.
Events since the balance sheet date
At the date of this report, there have been no significant events occurring after the balance sheet
date which would require adjustments or disclosures to be made in the financial statements.
Responsibilities of the Board of Directors in respect of the financial
statements
The Board of Directors is responsible for ascertaining that the financial statements present fairly,
in all material respects, the financial position of the Company as at 31 December 2010, and its
financial performance and its cash flows for the year then ended. In preparing these financial
statements, the Board of Directors is required to:

adopt appropriate accounting policies which are supported by reasonable and prudent
judgments and estimates and then apply them consistently;
4
Intean Poalroath Rongroeurng Ltd
Report of the Board of Directors (continued)
Responsibilities of the Board of Directors in respect of the financial
statements (continued)

comply with Cambodian Accounting Standards and the guidelines of the National Bank of
Cambodia relating to the preparation and presentation of the financial statements or, if there
have been any departures in the interest of true and fair presentation, ensure that these have
been appropriately disclosed, explained and quantified in the financial statements;

maintain adequate accounting records and an effective system of internal controls;

prepare the financial statements on a going concern basis unless it is inappropriate to assume
that the Company will continue operations in the foreseeable future; and

control and direct the Company effectively in all material decisions affecting the operations
and performance and ascertain that such have been properly reflected in the financial
statements.
The Board of Directors confirms that they have complied with the above requirements in
preparing the financial statements.
On behalf of the Board of Directors
Oknha Phou Puy
Chairman
Mr. Hort Bunsong
General Manager
Date:
Date:
5
Report of the independent auditors
To the shareholders
Intean Poalroath Rongroeurng Ltd
We have audited the accompanying financial statements of Intean Poalroath Rongroeurng Ltd
(“the Company”), which comprise the balance sheet as at 31 December 2010, and the income
statement, the statement of changes in equity and the statement of cash flows for the year then
ended, and notes, comprising a summary of significant accounting policies and other explanatory
information as set out on pages 8 to 46.
Management's responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with Cambodian Accounting Standards and the guidelines of the National Bank of
Cambodia relating to the preparation and presentation of financial statements, and for such
internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors' responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Cambodian 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 financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on our judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the 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 financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
6
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial
position of Intean Poalroath Rongroeurng Ltd as at 31 December 2010, and its financial
performance and its cash flows for the year then ended, in accordance with Cambodian
Accounting Standards and the guidelines of the National Bank of Cambodia relating to the
preparation and presentation of the financial statements.
Emphasis of matter
Without qualifying our opinion, we draw attention to the fact that the corresponding figures
presented, excluding the adjustments described in Note 27 to the financial statements, are based
on the financial statements of the Company as at and for the year ended 31 December 2009,
which were audited by other auditors whose report dated 29 April 2010 expressed an unmodified
opinion on those financial statements. As part of our audit we audited the adjustments described
in Note 27 that were applied to restate the corresponding figures. In our opinion, such
adjustments are appropriate and have been properly applied.
KPMG Cambodia Ltd
Craig McDonald
Audit Partner
Phnom Penh
29 April 2011
7
Intean Poalroath Rongroeurng Ltd
Balance sheet
As at 31 December 2010
2010
Note
US$
2009
KHR’000
(Note 4)
(Restated)
KHR’000
(Note 4)
(Restated)
US$
Assets
Cash on hand
Deposits and placements
with banks
Loans to customers- net
Other receivables
Statutory deposits
Intangible assets
Property and equipment
Profit tax credit
5
44,519
180,436
50,154
209,092
6
7
8
9
10
11
12
1,605,964
2,979,532
142,158
86,100
11,343
216,957
57,246
6,508,972
12,076,043
576,166
348,963
45,973
879,327
232,018
218,357
3,616,414
161,090
86,100
8,823
240,314
-
910,330
15,076,830
671,584
358,951
36,783
1,001,869
-
5,143,819
20,847,898
4,381,252
18,265,439
1,075,000
114,215
42,692
-
4,356,975
462,913
173,031
-
1,700,000
112,531
34,234
3,610
7,087,300
469,142
142,721
15,050
1,231,907
4,992,919
1,850,375
7,714,213
3,088,645
823,267
12,518,278
3,336,701
1,722,000
808,877
7,179,018
3,372,208
Total shareholders’ equity
3,911,912
15,854,979
2,530,877
10,551,226
Total liabilities
and shareholders’ equity
5,143,819
20,847,898
4,381,252
18,265,439
Total assets
Liabilities and shareholders’ equity
Liabilities
Borrowings
Other liabilities
Provision for severance pay
Provision for income tax
13
14
15
12
Total liabilities
Shareholders’ equity
Share capital
Retained earnings
16
The accompanying notes form an integral part of these financial statements.
8
Intean Poalroath Rongroeurng Ltd
Income statement
for the year ended 31 December 2010
2010
Note
Interest income
17
Interest expense
18
Net interest income
Other operating income
19
Operating income
US$
1,056,131
(134,958)
2009
KHR’000
(Note 4)
(Restated)
KHR’000
(Note 4)
(Restated)
1,121,919
4,677,280
US$
4,280,499
(546,985)
(169,024)
(704,661)
921,173
3,733,514
952,895
3,972,619
136,713
554,097
33,282
138,752
1,057,886
4,287,611
986,177
4,111,371
Allowance for bad and
Doubtful loans
7
(374,069)
(1,516,101)
(414,341)
(1,727,387)
Operating and other expenses
20
(657,158)
(2,663,461)
(537,275)
(2,239,899)
Profit before income tax
Income tax expense
Net profit for the year
12
26,659
108,049
34,561
144,085
(12,269)
(49,726)
(13,330)
(55,573)
14,390
58,323
21,231
88,512
The accompanying notes form an integral part of these financial statements.
9
Intean Poalroath Rongroeurng Ltd
Statement of changes in equity
for the year ended 31 December 2010
Share capital
US$
Balance at 1 January 2009 (as previously reported)
Retained
earnings
US$
Total
US$
500,000
787,646
1,287,646
1,222,000
-
1,222,000
-
21,231
21,231
Balance as at 31 December 2009 (Restated)
1,722,000
808,877
2,530,877
Increase in share capital
1,366,645
-
1,366,645
-
14,390
14,390
Balance as at 31 December 2010
3,088,645
823,267
3,911,912
(KHR’000 equivalents) (Note 4)
12,518,278
3,336,701
15,854,979
Increase in share capital
Net profit for the year (Restated)
Net profit for the year
The accompanying notes form an integral part of these financial statements.
10
Intean Poalroath Rongroeurng Ltd
Statement of cash flows
for the year ended 31 December 2010
2010
Note
2009
KHR’000
(Note 4)
US$
US$
(Restated)
KHR’000
(Note 4)
(Restated)
Cash flows from operating activities
Net cash generated from/(used in)
operating activities
21
661,253
2,680,058
(317,257)
(1,322,644)
(112,933)
(4,252)
(470,818)
(17,727)
Cash flows from investing activities
Purchase of property and equipment
Purchase of intangible assets
Proceeds from disposals of property
and equipment
(15,379)
(5,847)
Net cash used in investing activities
(20,926)
(84,813)
(112,660)
(469,680)
(625,000)
1,366,645
(2,533,125)
5,539,012
950,000
(1,922,000)
1,222,000
3,960,550
(8,012,818)
5,094,518
741,645
3,005,887
250,000
1,381,972
5,601,132
(179,917)
268,511
1,119,422
448,428
1,830,035
-
39,461
268,511
1,119,422
300
(62,331)
(23,698)
1,216
4,525
18,865
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Proceeds from issue of shares
Net cash generated from
financing activities
Net increase/(decrease) in cash
and cash equivalents
Cash and cash equivalents at
the beginning of the year
Translation difference
Cash and cash equivalents
at the end of the year
22
1,650,483
(31,146)
6,689,408
1,042,250
(750,074)
The accompanying notes form an integral part of these financial statements.
11
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements
for the year ended 31 December 2010
1.
Background and principal activities
Intean Poalroath Rongroeurng Ltd. (“the Company” or “IPR”), formerly known as a credit
unit of the Federation of the Cambodian Rice Millers Association, is engaged in the
provision of micro financing activities in six branches located in Phnom Penh/Kandal,
Takeo, Battambang and Phnom Proek (Battambang), Banteay Meanchey and Pursat.
The Company was incorporated with the Ministry of Commerce on 19 July 2005. The
Company obtained its licence from the National Bank of Cambodia (“NBC” ) to operate as
a micro finance institution on 18 August 2005. The Company obtained a permanent micro
finance licence from NBC on 24 June 2008.
The principal activity of the Company is to provide credit services and saving mobilisation
to improve the living standard in terms of rural development through its head office in
Phnom Penh and its branches in 5 provinces of Kandal, Takeo, Pursat, Battambang and
Banteay Meanchey.
As at 31 December 2010, the Company had 75 employees (2009: 61 employees).
2.
Basis of preparation
(a)
Statement of compliance
These financial statements have been prepared in accordance with Cambodian Accounting
Standards (“CAS”) and the guidelines of the National Bank of Cambodia (“NBC”) relating
to the preparation and presentation of financial statements.
The financial statements of the Company were authorised for issue by the Board of
Directors on 29 April 2011.
(b)
Basis of measurement
The financial statements have been prepared on the historical cost basis.
(c)
Functional and presentation currency
The national currency of Cambodia is the Khmer Riel (“KHR”). However, as the
Company transacts its business and maintains its accounting records primarily in United
States Dollars (“US$”), management has determined US$ to be the Company's currency for
measurement and presentation purposes as it reflects the economic substance of the
underlying events and circumstances of the Company.
12
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
2.
Basis of preparation (continued)
(c)
Functional and presentation currency (continued)
Transactions in currencies other than US$ are translated into US$ at the exchange rate
ruling at the date of the transaction. Monetary assets and liabilities denominated in
currencies other than US$ at the balance sheet date are translated into US$ at the rates of
exchange ruling at that date. Exchange differences arising on translation are recognised in
the income statement.
(d)
Use of estimates and judgements
The preparation of the financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in
any future periods affected.
Key accounting estimates and judgments applied in the preparation of the financial
statements include estimate of recoverable amount for loans to customers which have a
separate accounting policy stated in Note 3(f).
3.
Significant accounting policies
The following significant accounting policies have been adopted in the preparation of these
financial statements.
(a)
Financial instruments
The Company’s financial assets and liabilities include cash and cash equivalents, originated
loans and receivables, deposits and other receivables, borrowings and other payables. The
accounting policies for the recognition and measurement of these items are disclosed in the
respective accounting policies.
(b)
Basis of aggregation
The Company’s financial statements comprise the financial statements of the head office
and its branches. All inter-branch balances and transactions have been eliminated.
13
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
3.
Significant accounting policies (continued)
(c)
Cash and cash equivalents
Cash and cash equivalents consist of cash and bank balances, demand deposits and shortterm highly liquid investments with original maturities of three months or less when
purchased, and that are readily convertible to known amounts of cash and are subject to an
insignificant risk of changes in value.
(d)
Deposits and placements with banks
Deposits and placements with banks are carried at cost.
(e)
Loans to customers
Loans to customers are stated in the balance sheet at the amount of principal outstanding
less any amounts written off and the allowance for bad and doubtful loans.
(f)
Allowance for bad and doubtful loans
In compliance with the NBC guidelines, a specific provision for bad and doubtful loans that
are identified as non-performing is made as follows:
Classification
Number of days past due
Minimum
provision
Short-term loans (less than one year)
Sub-standard
Doubtful
Loss
31 – 60 days
61 – 90 days
Over 90 days
10%
30%
100%
Long-term loans (more than one year)
Sub-standard
Doubtful
Loss
31 – 180 days
181 – 360 days
Over 360 days
10%
30%
100%
In addition to the specific provision, an additional general provision for bad and doubtful
loans is made at the rate of 1.5% (2009: nil) of all outstanding performing loans as at year
end.
14
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
3.
Significant accounting policies (continued)
(f)
Allowance for bad and doubtful loans (continued)
The adequacy of the allowance for bad and doubtful loans is evaluated monthly by the
management. Factors considered in evaluating the adequacy of the provision include the
size of the portfolio, previous loss experience, current economic conditions and their effect
on customers, the financial position of customers and the performance of loans in relation
to contract terms.
Allowance for bad and doubtful loans are charged to the income statement when the loans
remain unpaid after 90 days for loans with maturities of one year or less and after 360 days
for loans with maturities of more than one year. Loans written off are removed from the
outstanding loan portfolio and from the allowance for bad and doubtful loans.
The allowance will be calculated as a percentage of the loan amount outstanding at the time
the loan is classified, excluding accrued interest. The allowance shall be recorded in the
Company’s accounts and charged to the income statement for the month during which the
corresponding loan has been classified below standard.
Reversal of previous provisions is disclosed as a deduction from the bad debts and doubtful
accounts expense in the income statement and recoveries on loans previously written off is
recognised in the income statement.
(g)
Interest in suspense
Interest in suspense represents interest on non-performing loans and advances, that is
recorded as a provision rather than income until it is realised on a cash basis.
Interest in suspense is disclosed as a deduction from interest receivables.
(h)
Other receivables
Other receivables are carried at estimated realisable value.
(i)
Statutory deposit
Statutory deposits are maintained with the NBC in compliance with the Cambodian Law on
Banking and Financial Institutions and are determined by defined percentages of minimum
share capital and customers’ deposits as required by NBC.
15
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
3.
Significant accounting policies (continued)
(j)
Intangible assets
Intangible assets consist of computer software and are stated at cost less accumulated
amortisation and accumulated impairment losses, if any. Intangible assets are amortised
over their useful lives of four years using the straight-line method. Costs associated with
the development or maintenance of computer software are recognised as expenses when
incurred.
(k)
Property and equipment
(i)
Items of property and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses, if any. When parts of an item of property and equipment
have different useful lives, they are accounted for as separate items (major components) of
property and equipment.
(ii)
Freehold land is not depreciated.
Depreciation of property and equipment is charged to the income statement on a straightline basis over the estimated useful lives of the individual assets as follows:
Years
Buildings
Leasehold improvements
Computer and office equipment
Furniture and fixtures
Motor vehicles
20
4
4
4
5
(iii) Subsequent expenditure relating to an item of property and equipment that has already been
recognised is added to the carrying amount of the asset when it is probable that future
economic benefits, in excess of the originally assessed standard of performance of the
existing asset, will flow to the Company. All other subsequent expenditure is recognised as
an expense in the period in which it is incurred.
(iv)
Gains or losses arising from the retirement or disposal of an item of property and
equipment are determined as the difference between the estimated net disposal proceeds
and the carrying amount of the assets and are recognised in the income statement on the
date of retirement or disposal.
(v)
Fully depreciated items of property and equipment are written off from the financial
statements.
16
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
3.
Significant accounting policies (continued)
(l)
Impairment
(i)
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any
objective evidence that it is impaired. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have had a negative effect on the
estimated future cash flows of that asset. This does not apply to loans to customers which
has a separate accounting policy stated in Note 3(f).
Individually significant financial assets are tested for impairment on an individual basis.
The remaining financial assets are assessed collectively in groups that share similar credit
risk characteristics.
All impairment losses are recognised in the income statement.
An impairment loss is reversed if the reversal can be related objectively to an event
occurring after the impairment loss was recognised.
(ii)
Non-financial assets
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting
date to determine whether there is any indication of impairment. If any such indication
exists, the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use
and its fair value less cost to sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the
purpose of impairment testing, assets are grouped together into the smallest group of assets
that generates cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash-generating
unit exceeds its estimated recoverable amount. Impairment losses are recognised in the
income statement.
(m) Borrowings
Borrowings are stated at cost.
17
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
3.
Significant accounting policies (continued)
(n)
Provisions
A provision is recognised if, as a result of a past event, the Company has a legal or
constructive obligation that can be estimated reliably, 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.
(o)
Provision for severance pay
The Company provides its employees with benefits under the severance pay which is
calculated based on a pro-rata basis at the rate of one month’s salary for every year worked.
Staff are entitled to benefits based on their length of service (having worked for the
Company for 3 years or more) on regular employment and the related percentage of
computed benefits.
(p)
Income and expense recognition
Interest income on loans is recognised on an accrual basis. Where a loan becomes nonperforming, the recording of interest as income is suspended until it is realised on a cash
basis. Interest on loans is calculated using the declining balance method on monthly
balance of the outstanding principal amount.
Expenses are recognised on an accruals basis.
(q)
Fee and commission income
The Company earns fee and commission income from a diverse range of services it
provides to its customers, mainly from loan processing.
Fee and commission income is recognised when the service is provided.
(r)
Operating leases
Leases where substantially all the risks and rewards of ownership of assets remain with the
leasing Company are accounted for as operating leases. Payments made under operating
leases are recognised in the income statement on a straight-line basis over the term of the
lease. Lease commitments are not recognised as liabilities until the obligation to pay
becomes due.
18
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
3.
Significant accounting policies (continued)
(s)
Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax
is recognised in the income statement except to the extent that it relates to items recognised
directly in equity, in which case it is recognised to equity.
Current tax is the expected tax payable on the taxable income for the year using tax rates
enacted or substantively enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
Deferred tax is provided using the balance sheet method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable
profits will be available against which the temporary difference can be utilised. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
(t)
Related parties
Parties are considered to be related to the Company has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making
financial and operating decisions, or where the Company and the other party are subject to
common control or significant influence. Related parties may be individuals or corporate
entities and include close family members of any individual considered to be a related
party.
Under the Law on Banking and Financial Institutions, related parties include individuals
who hold directly or indirectly a minimum of 10 percent of the capital of the Company or
voting rights therefore, or who participates in the administration, direction, management or
the design and implementation of the internal controls of the Company.
19
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
3.
Significant accounting policies (continued)
(u)
New standards, amendments and interpretations not yet adopted
The National Accounting Council of Cambodia, as mandated by Prakas (Circular)
No. 068-MEF-Pr dated 8 January 2009 issued by the Ministry of Economy and Finance of
Cambodia on the adoption of Cambodian Financial Reporting Standards, has decided to
adopt International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB) effective for financial statements with periods
beginning on or after 1 January 2012. The new standards will be referred to as
“Cambodian International Financial Reporting Standards” (CIFRS). The management is
currently in the process of evaluating the potential effect of this CIFRS adoption.
4.
Translation of United States Dollars into Khmer Riel
The financial statements are stated in United States Dollars (“US$”). The translations of
US$ amounts into Khmer Riel (“KHR”) are included solely for the compliance with the
guidelines of the National Bank of Cambodia relating to the preparation and presentation of
the financial statements and have been made using the prescribed official exchange rate of
US$1: KHR4,053 published by the NBC on 31 December 2010 (2009: US$1: KHR4,169).
These translations should not be construed as representations that the US$ amounts have
been, could have been, or could in the future be, converted into KHR at this or any other
rate of exchange.
5.
Cash on hand
2010
US$
Head office (Phnom Penh)
Provincial branches
Banteay Meanchey
Battambang
Kandal
Phnom Proek
Pursat
Takeo
2009
KHR’000
(Note 4)
US$
KHR’000
(Note 4)
4,222
17,112
4,774
19,903
12,757
7,146
4,418
5,445
1,404
9,127
51,704
28,963
17,906
22,069
5,690
36,992
13,246
6,586
2,643
7,958
1,423
13,524
55,223
27,457
11,019
33,177
5,932
56,381
44,519
180,436
50,154
209,092
20
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
5.
Cash on hand (continued)
The above amounts are analysed by currency as follows:
2010
KHR’000
(Note 4)
US$
US Dollars
Khmer Riel
Thai Baht
6.
2009
KHR’000
(Note 4)
US$
16,590
14,180
13,749
67,239
57,472
55,725
24,567
17,733
7,854
102,420
73,929
32,743
44,519
180,436
50,154
209,092
Deposits and placements with banks
2010
Head office - Phnom Penh
Provincial branches
Banteay Meanchey
Battambang
Kandal
Phnom Proek
Pursat
Takeo
2009
US$
KHR’000
(Note 4)
US$
KHR’000
(Note 4)
1,373,142
5,565,345
39,209
163,463
61,088
34,063
3,389
41,985
114
92,183
247,590
138,057
13,735
170,165
462
373,618
16,545
41,142
13,271
47,101
58,475
2,614
68,976
171,520
55,327
196,364
243,782
10,898
1,605,964
6,508,972
218,357
910,330
Deposits and placements with banks are analysed as follows:
2010
(a)
2009
US$
KHR’000
(Note 4)
1,446,208
111,335
48,421
5,861,481
451,241
196,250
163,019
11,521
43,817
679,626
48,031
182,673
1,605,964
6,508,972
218,357
910,330
US$
KHR’000
(Note 4)
By currency:
US Dollars
Khmer Riel
Thai Baht
21
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
6.
Deposits and placements with banks (continued)
2010
(b)
KHR’000
(Note 4)
KHR’000
(Note 4)
1,605,964
6,508,972
218,357
910,330
Acleda Bank Plc
240,833
Rural Development Bank
173
National Bank of
Cambodia
1,364,958
976,096
701
216,763
172
903,685
717
5,532,175
1,422
5,928
1,605,964
6,508,972
218,357
910,330
US$
By maturity:
Within 1 month
(c)
2009
US$
By type:
Current accounts:
(d)
By interest rate (per annum):
2010
Current accounts
7.
2009
Nil
2% - 4%
Loans to customers - net
2010
US$
Individual loans
Allowance for bad and
doubtful loans
Specific
General
3,497,035
2009
KHR’000
(Note 4)
14,173,483
(Restated)
KHR’000
(Note 4)
(Restated)
3,998,599
16,670,159
US$
(472,533)
(44,970)
(1,915,176)
(182,264)
(382,185)
-
(1,593,329)
-
(517,503)
(2,097,440)
(382,185)
(1,593,329)
2,979,532
12,076,043
3,616,414
15,076,830
22
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
7.
Loans to customers – net (continued)
The movements in allowance for bad and doubtful loans to customers were as follows:
2010
US$
2009
KHR’000
(Note 4)
US$
(Restated)
At beginning of year
Provision during the year
Written off during the year
Exchange difference
At end of year
KHR’000
(Note 4)
(Restated)
382,185
374,069
(243,047)
4,296
1,593,329
1,516,101
(985,069)
(26,921)
6,290
414,341
(39,662)
1,216
25,669
1,727,387
(165,351)
5,624
517,503
2,097,440
382,185
1,593,329
231,624
808,603
1,991,614
465,194
938,772
3,277,268
8,072,012
1,885,431
242,531
959,578
2,586,463
210,027
1,011,112
4,000,481
10,782,964
875,602
3,497,035
14,173,483
3,998,599
16,670,159
1,419,760
1,036,180
1,041,095
5,754,287
4,199,638
4,219,558
2,205,448
1,063,921
729,230
9,194,513
4,435,486
3,040,160
3,497,035
14,173,483
3,998,599
16,670,159
3,283,523
213,512
13,308,119
865,364
3,652,461
346,138
15,227,110
1,443,049
3,497,035
14,173,483
3,998,599
16,670,159
Loans to customers are analysed as follows:
(a)
By maturity
Within 1 month
2 to 3 months
4 to 12 months
More than 12 months
(b)
By currency:
US Dollars
Khmer Riel
Thai Baht
(c)
By economic sector:
Agriculture loans
Small business loans
23
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
7.
Loans to customers - net (continued)
Loans to customers are analysed as follows (continued):
2010
US$
(d)
3,497,035
14,173,483
3,998,599
16,670,159
3,497,035
14,173,483
3,998,599
16,670,159
2,998,027
12,151,004
3,417,800
14,248,808
17,775
72,042
205,497
856,717
14,969
60,669
19,524
81,396
466,264
1,889,768
355,778
1,483,238
3,497,035
14,173,483
3,998,599
16,670,159
By performance:
Standard loans
Secured
Sub-standard loans
Secured
Doubtful loans
Secured
Loss loans
Secured
(g)
(Restated)
KHR’000
(Note 4)
(Restated)
US$
By relationship:
External customers
(f)
KHR’000
(Note 4)
By residency status:
Residents
(e)
2009
By interest rate (per annum):
Individual loans
2010
2009
24% - 45.6%
24% - 45.6%
24
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
7.
Loans to customers - net (continued)
2010
(h)
(Restated)
KHR’000
(Note 4)
(Restated)
US$
By location:
Banteay Meanchey
Battambang
Kandal
Phnom Proek
Pursat
Takeo
8.
2009
KHR’000
(Note 4)
US$
442,597
289,924
791,876
801,453
164,532
1,006,653
1,793,846
1,175,062
3,209,473
3,248,289
666,848
4,079,965
440,342
315,431
1,336,397
679,737
252,294
974,398
1,835,786
1,315,031
5,571,439
2,833,824
1,051,814
4,062,265
3,497,035
14,173,483
3,998,599
16,670,159
KHR’000
(Note 4)
US$
Other receivables
2010
US$
2009
(Restated)
Interest receivable
Interest in suspense
Net interest receivable
Prepayments
Advance payments
Others
9.
418,387
(305,391)
1,695,723
(1,237,750)
KHR’000
(Note 4)
(Restated)
324,585
(197,946)
1,353,195
(825,237)
112,996
22,915
1,980
4,267
457,973
92,874
8,025
17,294
126,639
22,083
7,200
5,168
527,958
92,064
30,017
21,545
142,158
576,166
161,090
671,584
Statutory deposits
The statutory deposits are maintained with the NBC in compliance with Prakas No. B7-00006 and B7-06-209 on the Licensing of Micro-Finance Institutions, the amounts of which
are determined by defined percentages of the Company’s registered share capital.
The statutory deposit on registered share capital is refundable when the Company
voluntarily liquidates and has no deposit liabilities.
25
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
9.
Statutory deposits (continued)
The statutory deposit on registered capital placed with NBC earns interest at the rate of 3/8
of the six-month period SIBOR (2009: 3/8 of the six-month period SIBOR) per annum.
2010
US$
Statutory deposits on:
Registered share capital
86,100*
2009
KHR’000
(Note 4)
348,963
US$
86,100
KHR’000
(Note 4)
358,951
*On 29 March 2010, the Company increased its registered share capital from
US$1,722,000 to US$3,088,645 through the issuance of an additional 8,735 shares with the
par value being increased from US$100 to US$119 each to IPR (HK) Limited. On 13
August 2010, the Company obtained the approval from the NBC for this increase (Note
16). However, additional statutory deposit had not been maintained until first week of
January 2011.
10. Intangible assets
Computer software
US$
KHR’000
(Note 4)
Cost
At 1 January 2010
Additions
Translation difference
9,411
5,847
-
39,234
23,698
(1,091)
At 31 December 2010
15,258
61,841
Less: accumulated amortisation
At 1 January 2010
Charge for the year
Translation difference
588
3,327
-
2,451
13,485
(68)
At 31 December 2010
3,915
15,868
Net book value
At 31 December 2010
11,343
45,973
At 31 December 2009
8,823
36,783
26
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
11. Property and equipment
Computer
and office
equipment
US$
Furniture
and fixtures
US$
27,164
-
33,319
8,466
(7,220)
(240)
-
21,054
5,393
(3,293)
-
57,023
1,520
(1,043)
-
303,942
15,379
(11,556)
(240)
-
1,267,134
62,331
(46,836)
(973)
(35,257)
130,382
27,164
34,325
23,154
57,500
307,525
1,246,399
-
24,475
6,519
-
5,659
6,791
-
17,018
8,562
(7,190)
(184)
-
9,066
5,325
(3,294)
-
7,410
11,454
(1,043)
-
63,628
38,651
(11,527)
(184)
-
265,265
156,652
(46,718)
(746)
(7,381)
At 31 December 2010
-
30,994
12,450
18,206
11,097
17,821
90,568
367,072
Net book value
At 31 December 2010
35,000
99,388
14,714
16,119
12,057
39,679
216,957
879,327
At 31 December 2009
35,000
105,907
21,505
16,301
11,988
49,613
240,314
1,001,869
Freehold
land
US$
Buildings
US$
Cost
At 1 January 2010
Additions
Disposals
Written off
Translation difference
35,000
-
130,382
-
At 31 December 2010
35,000
Accumulated depreciation
At 1 January 2010
Charge for the year
Disposals
Written off
Translation difference
Leasehold
improvements
US$
Motor
vehicles
US$
Total
US$
KHR'000
(Note 4)
27
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
12. Income tax
(a)
Provision for income tax
2010
2009
KHR’000
(Note 4)
US$
US$
(Restated)
KHR’000
(Note 4)
(Restated)
Balance at beginning of year
Income tax expense
Income tax paid
Translation difference
3,610
12,269
(73,125)
-
15,050
49,726
(296,376)
(418)
73,613
13,330
(83,333)
-
300,415
55,573
(347,415)
6,477
Balance at end of year
(57,246)
(232,018)
3,610
15,050
In accordance with Cambodian law, the Company has an obligation to pay corporate
income tax of either the profit tax at the rate of 20% of taxable profits or the minimum tax
at 1% of gross revenues, whichever is higher.
(b)
Income tax expense
The reconciliation of income tax computed at the statutory tax rate to the income tax
expense in the income statement is shown as follows:
2010
Profit before income tax
Tax at applicable income
tax rate (20%)
Effect of non taxable income
/non-deductible expense
and temporary difference
Tax losses not recognised
Over provision during the year
Minimum income
tax at 1% of revenue
Income tax expense
2009
26,659
108,049
(Restated)
34,561
KHR’000
(Note 4)
(Restated)
144,085
5,332
21,611
6,912
28,816
(15,295)
9,963
-
(61,991)
40,380
-
7,544
(1,126)
31,451
(4,694)
12,269
49,726
-
-
12,269
49,726
13,330
55,573
US$
KHR’000
(Note 4)
US$
The calculation of income tax is subject to the review and assessment of the tax authorities.
28
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
13. Borrowings
2010
US$
KHR’000
(Note 4)
875,000
3,546,375
1,250,000
5,211,250
-
-
250,000
1,042,250
200,000
810,600
200,000
833,800
1,075,000
4,356,975
1,700,000
7,087,300
US$
Rural Development
Bank
(i)
Crédit Suisse
Microfinance
Luxembourg Microfinance
Development Funds (ii)
(i).
2009
KHR’000
(Note 4)
Note
Rural Development Bank
Terms
Total credit facilities
First loan:
48 months, from 18 November 2008 to 17
November 2012
Second loan:
48 months, from 26 October 2009 to 25 October
2013.
First loan:
US$1,000,000
US$500,000
Second loan:
Repayment
First loan:
The principal of the loan will be repaid in four
equal instalments of US$250,000 at 13 months
after the first disbursement and every 12 months
thereafter. Interest shall be paid in advance on a
monthly basis starting from the month of the
withdrawal over the period of the loan.
Second loan: The principal of the loan will be repaid in four
equal instalments of US$250,000 at 13 months
after the first disbursement and every 12 months
thereafter. Interest shall be paid in advance on a
monthly basis starting from the month of the
withdrawal over the period of the loan.
Security
These loans are secured by collateral No. A6/0236, A6/0412,
A6/0666, A6/672 and A6/0712 owned by a shareholder.
29
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
13. Borrowings (continued)
(ii). Luxembourg Microfinance Development Funds
Terms
48 months, from 18 August 2009 to 18 May 2013.
Total credit facilities
US$200,000
Repayment
The principal of the loan will be repaid in two installments of
US$50,000 on 18 May 2012 and the remaining balance will be
paid on the maturity date. Interest is paid quarterly.
Security
This loan is unsecured.
Borrowings are analysed as follows:
2010
(a)
US$
KHR’000
(Note 4)
375,000
700,000
1,519,875
2,837,100
250,000
375,000
1,075,000
1,042,250
1,563,375
4,481,675
1,075,000
4,356,975
1,700,000
7,087,300
1,075,000
4,356,975
1,700,000
7,087,300
By maturity:
1 to 3 months
4 to 12 months
1 to 5 years
(b)
By currency:
US Dollars
(c)
2009
KHR’000
(Note 4)
US$
2010
2009
8.50% - 9.00%
9.00% - 13.37%
By interest rate (per annum):
US Dollars
30
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
14. Other liabilities
2010
Interest payable
Deferred interest income
Other tax payables
Professional fees
Other payables
2009
KHR’000
(Note 4)
US$
KHR’000
(Note 4)
US$
2,509
101,273
1,621
4,400
4,412
10,169
410,459
6,570
17,833
17,882
13,005
84,394
1,708
7,814
5,610
54,218
351,838
7,121
32,577
23,388
114,215
462,913
112,531
469,142
15. Provision for severance pay
2010
2009
KHR’000
(Note 4)
US$
KHR’000
(Note 4)
US$
Balance at beginning of year
Charge during the year
Translation difference
34,234
8,458
-
142,721
34,280
(3,970)
34,234
-
142,721
-
Balance at end of year
42,692
173,031
34,234
142,721
16. Share capital
2010
Registered, issued and
fully paid 25,955 shares
(2009: 17,220 shares)
shares of US$119 each
(2009: US$100 each)
2009
US$
KHR’000
(Note 4)
US$
KHR’000
(Note 4)
3,088,645
12,518,278
1,722,000
7,179,018
31
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
16. Share capital (continued)
As at 31 December 2010, the Company’s shareholders and their respective interest are as
follows:
Oknha Phou Puy
IPR (HK) Limited
Number
of shares
Amount
US$
% of
shareholding
17,220
8,735
2,049,180
1,039,465
66.35%
33.65%
25,955
3,088,645
100.00%
On 17 February 2010, the Board of Directors approved to issue share of 8,735 or 33.65% to
IPR (HK) Limited, a new shareholder incorporated in Hong Kong. The new shareholder is
wholly owned by the Leopard Cambodia Fund, L.P.
On 15 July 2010, Mrs. Hao Simorn, a shareholder holding 35% of total shares, has entered
into agreement to transfer her entire shareholding in the Company to Oknha Phou Puy with
effect from the date of capital injection in the Company from IPR (HK) Limited.
On 29 March 2010, the Company increased its registered share capital from US$1,722,000
to US$3,088,645 through the issuance of an additional 8,735 shares with the par value
being increased from US$100 to US$119 each to IPR (HK) Limited. On 13 August 2010,
the Company obtained the approval from the NBC for this increase.
17. Interest income
2010
US$
Loans to customers
Deposits with banks
2009
KHR’000
(Note 4)
(Restated)
KHR’000
(Note 4)
(Restated)
US$
1,056,028
103
4,280,082
417
1,114,832
7,087
4,647,735
29,545
1,056,131
4,280,499
1,121,919
4,677,280
32
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
18. Interest expense
2010
US$
Borrowings
134,958
KHR’000
(Note 4)
546,985
2009
(Restated)
KHR’000
(Note 4)
(Restated)
169,024
704,661
US$
19. Other operating income
2010
US$
Recovery of loans written off
Exchange gains-net
Other income
KHR’000
(Note 4)
2009
US$
KHR’000
(Note 4)
7,391
122,486
6,836
29,956
496,436
27,705
12,020
21,262
50,111
88,641
136,713
554,097
33,282
138,752
20. Operating and other expenses
2010
US$
Personnel costs
Rental and utilities
Depreciation and amortisation
Fuel and vehicle
operating expenses
Travel
Professional fees
Rebate expenses
Commission and fees
Office supplies
Printing and stationery
Communication
Licensing fee
Repairs and maintenance
Loss on disposals of
property and equipment
Written off suspense account
Other expenses
KHR’000
(Note 4)
2009
US$
KHR’000
(Note 4)
296,471
57,059
41,978
1,201,597
231,260
170,137
301,262
54,548
33,195
1,255,961
227,411
138,390
31,721
20,415
19,350
11,490
8,750
8,147
7,271
5,224
3,663
2,322
128,565
82,742
78,425
46,569
35,464
33,020
29,469
21,173
14,846
9,411
31,799
16,021
38,419
12,488
12,500
6,265
4,544
6,870
1,746
2,389
132,570
66,792
160,169
52,062
52,112
26,119
18,944
28,641
7,279
9,960
132,034
11,263
535,134
45,649
1,012
14,217
4,219
59,270
657,158
2,663,461
537,275
2,239,899
33
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
21. Net cash used in operating activities
2010
Profit before income tax
2009
KHR’000
(Note 4)
US$
(Restated)
KHR’000
(Note 4)
(Restated)
US$
26,659
108,049
34,561
144,085
41,978
170,137
33,195
138,390
1,012
4,219
Adjustments for:
Depreciation and amortisation
(Gain)/loss on disposals of
property and equipment
Property and equipment
written off
Allowance for bad and
doubtful loans
Severance pay
(271)
(1,098)
56
227
-
-
374,069
8,458
1,516,101
34,280
414,341
34,234
1,727,387
142,721
450,949
1,827,696
517,343
2,156,802
Loans to customers
Other receivables
Statutory deposits
Other liabilities
262,813
18,932
1,684
1,065,181
76,732
6,825
(808,900)
38,994
(61,100)
79,739
(3,372,304)
162,566
(254,726)
332,433
Income tax paid
734,378
(73,125)
2,976,434
(296,376)
(233,924)
(83,333)
(975,229)
(347,415)
Net cash generated from/
(used in) operating
activities
661,253
2,680,058
(317,257)
(1,322,644)
Changes in:
22. Cash and cash equivalents
2010
Cash on hand
Deposits with banks
2009
Note
US$
KHR’000
(Note 4)
5
6
44,519
1,605,964
180,436
6,508,972
50,154
218,357
209,092
910,330
1,650,483
6,689,408
268,511
1,119,422
US$
KHR’000
(Note 4)
34
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management
The guidelines and policies adopted by the Company to manage the risks that arise in the
conduct of business activities are as follows:
(a)
Credit risk
Credit risk is the financial loss to the Company if a borrower or counterparty fails to meet
its contractual obligations, and arises principally from the loans and advances.
(i)
Management of credit risk
The lending activities are guided by the Company’s credit policy to ensure that the overall
objectives in the area of lending are achieved; i.e., that the loan portfolio is strong and
healthy and credit risks are well diversified. The credit policy documents the lending
policy, collateral policy and credit approval processes, including the Company’s own
internal grading system, and procedures implemented to ensure compliance with NBC
Guidelines.
(ii). Exposure to credit risk
2010
US$
2009
KHR’000
(Note 4)
US$
KHR’000
(Note 4)
Loans to customers
Individually impaired
Past due but not impaired
Neither past due
nor impaired
Allowance for doubtful loans
and advances
499,008
8,588
2,022,479
34,807
580,799
21,227
2,421,351
88,495
2,989,439
12,116,197
3,396,573
14,160,313
3,497,035
14,173,483
3,998,599
16,670,159
(517,503)
2,979,532
(2,097,440)
12,076,043
(382,185)
3,616,414
(1,593,329)
15,076,830
35
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management (continued)
(a)
Credit risk (continued)
Impaired loans and advances
Individually impaired loans to customers are loans to customers for which the Company
determines that there is objective evidence of impairment and it does not expect to collect
all principal and interest due according to the contractual terms of the loans to customers.
In compliance with NBC Guidelines, an allowance for doubtful loans to customers is made
for loan to customers with payment overdue more than 30 days for short-term loans and 90
days for long term loans. A minimum level of specific provision for impairment is made
depending on the classification concerned, unless other information is available to
substantiate the repayment capacity of the counterparty. Refer to separate accounting
policy stated in Note 3(f).
Past due but not impaired loans and advances
Past due but not impaired loans to customers are those for which contractual interest or
principal payments are past due less than 30 days for both short-term loans and long-term
loans, unless other information is available to indicate otherwise.
(b)
Operational risk
The operational risk losses which would result from inadequate or failed internal processes,
people and systems or from external factors is managed through established operational
risk management processes, proper monitoring and reporting of the business activities by
control and support units which are independent of the business units and oversight
provided by the management.
The operational risk management entails the establishment of clear organisational structure,
roles and control policies. Various internal control policies and measures have been
implemented. These include the establishment of signing authorities, defining system
parameters controls, streamlining procedures and documentation. These are reviewed
continually to address the operational risks of its micro-finance business.
(c)
Market risk
Market risk is the risk of loss arising from adverse movement in the level of market prices
or rates, the two key components being foreign currency exchange risk and interest rate
risk.
Market risk arising from the trading activities is controlled by marking to market the
trading positions against their predetermined market risk limits.
36
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management (continued)
(c)
Market risk (continued)
(i)
Foreign currency exchange risk
The Company is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the Khmer Riel and Thai Baht. Foreign exchange risk arises from
future commercial transactions and recognised assets and liabilities. Management does not
enter into any currency hedging transaction since it considers that the cost of such
instruments outweighs the potential risk of exchange rate fluctuations.
Concentration of currency risk
The aggregate amounts of assets and liabilities, by currency denomination, are as follows:
US$
US$ equivalent
KHR’000
THB
Total
US$
31 December 2010
Assets
Cash on hand
Deposits and placements
with banks
Statutory deposits
Loans to customers
Other assets
Liabilities
Borrowings
Other liabilities
Provision for severance pay
Net assets position
16,590
14,180
13,749
44,519
1,446,208
86,100
997,310
66,582
111,335
965,693
32,145
48,421
1,016,529
43,431
1,605,964
86,100
2,979,532
142,158
2,612,790
1,123,353
1,122,130
4,858,273
1,075,000
35,744
42,692
18,033
-
60,438
-
1,075,000
114,215
42,692
1,153,436
18,033
60,438
1,231,907
1,459,354
1,105,320
1,061,692
3,626,366
37
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management (continued)
(c)
Market risk (continued)
(i)
Foreign currency exchange risk (continued)
Concentration of currency risk (continued)
The aggregate amounts of assets and liabilities, by currency denomination, are as follows:
US$
US$ equivalent
KHR’000
THB
Total
US$
31 December 2009
Total assets
Total liabilities
Net asset position
(ii)
2,273,759
1,788,184
1,057,384
27,324
800,972
31,257
4,132,115
1,846,765
485,575
1,030,060
769,715
2,285,350
Interest rate risk
Interest rate risk refers to the volatility in net interest income as a result of changes in the
levels of interest rate and shifts in the composition of the assets and liabilities. The
exposure to interest rate risk relate primarily to its loan and bank deposits.
The following table indicates the effective interest rates at the balance sheet date and the
periods in which the financial instruments re-price or mature, whichever is earlier
38
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management (continued)
(c)
Market risk (continued)
(ii)
Interest rate risk (continued)
31 December 2010
Assets
Cash on hand
Deposits and placements
with banks
Loans to customers
- Performing
- Non performing
- Allowance
Other receivables
Statutory deposits
Liabilities
Borrowings
Other liabilities
Provision for severance pay
1–3
months
US$
Up to
1 month
US$
3 – 12
months
US$
1–5
years
US$
Over
5 years
US$
Non interest
sensitive
US$
Total
US$
Weighted average
Interest
%
-
-
-
-
-
44,519
44,519
-
-
-
-
-
-
1,605,964
1,605,964
-
225,874
5,750
-
796,289
12,314
-
1,972,514
19,100
-
3,350
461,844
-
86,100
231,624
808,603
1,991,614
465,194
86,100
1,275,138
4,858,273
-
-
375,000
-
700,000
-
-
114,215
42,692
1,075,000
114,215
42,692
-
-
375,000
700,000
-
156,907
1,231,907
(517,503)
142,158
-
2,998,027
499,008
(517,503)
142,158
86,100
34.8%
0.48%
12.55%
-
39
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management (continued)
(c)
Market risk (continued)
(ii)
Interest rate risk (continued)
31 December 2009
Assets
Cash on hand
Deposits and placement
with banks
Loans to customers
- Performing
- Non performing
- Allowance
Other receivables
Statutory deposits
Liabilities
Borrowings
Other liabilities
Provision for severance pay
1–3
months
US$
Up to
1 month
US$
3 – 12
months
US$
1–5
years
US$
Over
5 years
US$
Non interest
sensitive
US$
Total
US$
Weighted average
Interest
%
-
-
-
-
-
50,154
50,154
-
218,357
-
-
-
-
-
218,357
3.33%
198,950
43,581
-
903,696
55,882
-
2,315,154
271,309
-
210,027
-
86,100
(382,185)
161,090
-
3,417,800
580,799
(382,185)
161,090
86,100
34.8%
0.48%
460,888
959,578
2,586,463
210,027
86,100
(170,941)
4,132,115
-
250,000
-
375,000
-
1,075,000
-
-
112,531
34,234
1,700,000
112,531
34,234
-
250,000
375,000
1,075,000
-
146,765
1,846,765
10.25%
-
40
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
41
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management (continued)
(c)
Market risk (continued)
(ii)
Interest rate risk (continued)
Fair value sensitivity analysis for fixed rate instruments
The Company does not account for any fixed rate liabilities at fair value through profit or
loss, and the Company does not have derivatives as at the year end. Therefore, a change in
interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable-rate instruments
The Company does not have significant variable-rate instruments. Therefore, no cash flow
sensitivity analysis for variable-rate instruments is presented.
(d)
Liquidity risk
Liquidity risk relates to the ability to maintain sufficient liquid assets to meet its financial
commitments and obligations when they fall due at a reasonable cost.
In addition to full compliance of all liquidity requirements, the management of the
Company closely monitors all inflows and outflows and the maturity gaps through
periodical reporting. Movements in loans are monitored and liquidity requirements
adjusted to ensure sufficient liquid assets to meet its financial commitments and obligations
as and when they fall due.
The following table provides an analysis of the financial assets and liabilities of the
Company into relevant maturity groupings based on the remaining periods to repayment.
42
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management (continued)
(d)
Liquidity risk (continued)
Up to
1 month
US$
1–3
months
US$
3 – 12
months
US$
1–5
years
US$
No
Fixed term
date
US$
Over
5 years
US$
Total
US$
31 December 2010
Liabilities
Borrowings
Other liabilities
Provision for severance pay
5,045
-
6,909
-
375,000
-
700,000
-
164
-
102,097
42,692
1,075,000
114,215
42,692
5,045
6,909
375,000
700,000
164
144,789
1,231,907
88,711
-
250,000
16,006
375,000
7,814
-
1,075,000
-
-
34,234
1,700,000
112,531
34,234
88,711
266,006
382,814
1,075,000
-
34,234
1,846,765
31 December 2009
Liabilities
Borrowings
Other liabilities
Provision for severance pay
43
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
23. Financial risk management (continued)
(e)
Capital management
(i)
Regulatory capital
The Company’s lead regulator, the National Bank of Cambodia (“NBC”), sets and monitors
capital requirements for the Company as a whole.
The Company’s policy is to maintain a strong capital base so as to maintain market
confidence and to sustain further development of the business. The impact of the level of
capital on shareholders’ return is also recognised and the Company recognised the need to
maintain a balance between the higher returns that might be possible with greater gearing
and advantages and security afforded by a sound capital position.
The Company and its individually regulated operations have complied with all externally
imposed capital requirement throughout the year.
(ii)
Capital allocation
The allocation of capital between specific operations and activities is, to a large extent,
driven by optimisation of the return achieved on the capital allocated. The amount of
capital allocated to each operation or activity is based primarily upon the regulatory capital.
24. Related party transactions
During the year there were the following significant transactions with related parties:
2010
US$
Interest expense
Salary expense
57,000
2009
KHR’000
(Note 4)
231,021
US$
10,375
104,100
KHR’000
(Note 4)
43,253
433,993
44
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
25. Commitments and contingencies
(a)
Operating lease
The Company has commitments in respect of the office rental agreement for five years
expiring in 2016 as follows:
2010
US$
Within one year
From two to five years
(b)
2009
KHR’000
(Note 4)
US$
KHR’000
(Note 4)
53,022
58,501
214,898
237,105
46,390
84,000
193,400
350,196
111,523
452,003
130,390
543,596
Taxation contingencies
The taxation system in Cambodia is relatively new and is characterised by numerous taxes
and frequently changing legislation, which is often unclear, contradictory, and subject to
interpretation. Often, differing interpretations exist among numerous taxation authorities
and jurisdictions. Taxes are subject to review and investigation by a number of authorities,
who are enabled by law to impose severe fines, penalties and interest charges.
These facts may create tax risks in Cambodia substantially more significant than in other
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.
26. Fair values of assets and liabilities
The aggregate fair values of financial assets and liabilities carried on the balance sheet are
approximately equal to their carrying values as at 31 December 2010.
45
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
27. Prior year adjustments and corresponding figures
In the 31 December 2009 financial statements, there was an error in loan classification
which resulted in differences in loan classification by performance in accordance with
National Bank of Cambodia guidelines, “B7-02-186 Pro Kor”. In addition, during the year,
the Company introduced a new accounting policy for severance pay. The basis of
calculation is based on the employee’s length of service (having worked for the Company
for 3 years or more) on regular employment.
During the preparation of the financial statements for the year ended 31 December 2010,
the Company has restated and reclassified its 31 December 2009 financial statements as
follows:
31 December 2009
As
As
previously
restated
stated
US$
US$
(overstated)/
understated
US$
Assets
Loans to customers
Standard loans
Sub-standard loans
Doubtful loans
Loss loans
3,417,800
205,497
19,524
355,778
3,614,444
180,031
3,676
200,448
Interest receivable
Interest in suspense
3,998,599
-
3,998,599
324,585
163,400
3,998,599
4,159,784
382,185
219,554
3,616,414
3,940,230
324,585
197,946
-
324,585
197,946
126,639
-
126,639
Allowance for bad and
doubtful loans
Other receivables
Interest receivable
Interest in suspense
(196,644)
25,466
15,848
155,330
(324,585)
(163,400)
(161,185)
162,631
(323,816)
46
Intean Poalroath Rongroeurng Ltd
Notes to the financial statements (continued)
for the year ended 31 December 2010
27. Prior year adjustments and corresponding figures (continued)
31 December 2009
As
As
previously
restated
stated
US$
US$
Liabilities
Provision for income tax
Provision for severance pay
Income statement
Interest income
Allowance for bad and doubtful loans
Personnel costs
Income tax expense
(overstated)/
understated
US$
3,610
34,234
61,789
-
(58,179)
34,234
37,844
61,789
(23,945)
1,121,919
414,341
301,262
13,330
1,156,465
251,710
267,028
71,509
(34,546)
162,631
34,234
(58,179)
392,986
566,218
173,232
47