2007 / 2008 Annual Report - Eastern Cape Development Corporation

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0831 Prior period errorsGrant incomeA subsidiary, East London Industrial Development Zone, incorrectly accounted for interest on grant funds as income.The grant agreement specifies that interest earned on these funds may only be used for the purposes of the grant andthese amounts should consequently be accounted for in the same manner as the underlying grant. This resulted in anincrease of R 6,477,817 (2006: R 9,273,299) in deferred income for the year ended 31 March 2007 and a decrease ofR 3,078,913 (2006: R Nil) in tax expense for the same period. Further, a reduction in minority interest of R 535,384resulted from the above adjustments for the year ended 31 March 2007.Property, plant and equipmentDuring the year, the Corporation performed a comprehensive revision of its equipment registers. This resulted in adecrease in depreciation expense of R 1,260,100 for the year ended 31 March 2007 and the derecognition of certainequipment amounting to R 2,728,138 for the year ended 31 March 2006.Investments in associatesDuring the previous financial year, the Group accounted for its investment in a hotel group based on limited financialinformation. Additional information became available during the current financial year and resulted in an increase ofR 1,908,700 (2006: R 351,330) in investments in associates and income from equity-accounted investments.Interest revenueIn accordance with the accounting policy, the Corporation recognises income only to the extent that an inflow ofeconomic benefits is probable. Interest revenue of R 10,233,000 was incorrectly recognised on impaired rental debtorsfor the year ended 31 March 2007. Consequently, interest revenue of R 10,233,000 was derecognised for that period.The consolidated annual financial statements have been restated to correct the effects of these errors. This resulted inthe following adjustments.Balance sheetInvestment propertyProperty, plant and equipmentInvestment in associatesTrade and other receivablesAccumulated lossMinority interestDeferred tax liabilityCurrent tax payableTrade and other payablesDeferred incomeEffect on 2007Effect on periods priorto 2007Effect on 2007Effect on periods priorto 2007R’000 R’000 R’000 R’000-1,2601,909(1,641)-535(105)3,097(45)(6,477)1,000(2,728)351-(1,000)---(317)(9,273)-1,260---------(2,728)--------Decrease /(increase) in accumulated loss (1,467) (11,967) 1,260 (2,728)Income statementRevenueOther incomeDepreciation expenseOperating expensesIncome from equity accounted investmentsIncome tax expenseMinority interest expense10,2336,477(1,260)(8,547)(1,909)(2,992)(535)-9,273-3,045(351)--10,233-(1,260)(10,233)---(Decrease) /increase in accumulated loss 1,467 11,967 (1,260) 2,728---2,728---97