Egyptian Resorts Company “Egyptian Joint Stock ... - ERC Egypt

- 11 - Translated & OriginallyIssued in Arabic31/3/2011L.EBalance as at 1/1/2011 5 941 526Less: Amortized during the period included inselling and distribution expenses(166 650)Balance as at 31/3/2011 5 774 8767- Work in ProgressThe company concluded a contract with Ernst Body Corporate Management forproviding consulting and administrative services for the management of thecommunity, As the management decided to develop a model for managing theservices rendered to the clients of the community, which permits the company toobtain fees from clients for services provided and for recovering the cost ofmanaging the community, which resulted in amending the accounting treatmentof some work in process costs, and reclassifying them to projects in progress tobe capitalized as fixed assets when completed ,considering them as assetsprovide services which will generate income in future. This treatment has beenmade based on the company’s legal consultant’s opinion dated April 14, 2009which stated the company is entitled to impose charges on clients with fees aslong as the company implemented its contractual obligations towards them.Based on the aforementioned the estimated costs necessary to develop the landsof the community have been modified based on the study prepared by thecompany's experts in 2008.The cost per estimated square meter become L.E22.36 and L.E 34.31 for both the first and second phases, respectively. Thestudy of development costs for the third phase is still in progress and there hasnot been any lands sold from this phase yet.Based on the periodic study carried out by the company for the elements of theestimated cost based on the operation, it has been clear for the company’sexperts that such measurements and studies were not accurate and there shouldbe significant amendments to be considered when calculating estimated cost ofboth first and second phases which are represented in reducing the land areasavailable for sale to both phases based on the geographical survey and themaster plan for both phases, which was prepared in 2008, though the expertsbelieved that the company should reclassify some of the projects to be includedin the costs of work in progress rather than fixed assets or projects in progressbased on the nature of these assets and its contact to the facilitation activity, asthe company has re-measured non-direct contact to the facilitation activity basedon any updates in the current or the future operating conditions. The differencesresults from this amendments in the measurement aforementioned shall becharged to the retained earnings during the previous year.The company has concluded a contract with a specialized consultancy firm toassess all elements of the estimated cost of the company's project in light of theexpected amendments to the master plan of the project and expected to becompleted accurately during the second half of the financial year of 2011.