Tanzania Cotton Board Annual Report And Accounts

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FINANCIAL STATEMENTSAnnual Report and Accounts for the year ending on 30 th June 2010The estimated monetary liability for employees’ accrued annual leave entitlement atbalance sheet date is recognized as an expense accrued.(k) ProvisionsProvisions are recognized when the Board has a present legal or constructive obligationas a result of past events, it is probable that an outflow of resources will be required tosettle the obligation, and a reliable estimate of the amount can be made.(l) Accounting for LeasesLeases under which the risks and benefits of ownership are effectively retained by thelessor are classified as operating leases. Obligation incurred under operating leases arecharged to the profit and loss account on a straight-line basis over the period of the lease,except when an alternative method is more representative of the time pattern from whichbenefits are derived.(m) Income TaxIncome tax expense is the total of the charge to the profit and loss account in respect ofcurrent income tax and deferred income tax. Current income tax is the amount of incometax payable on the taxable profit for the year determined in accordance with the TanzaniaIncome Tax Act, 2004.Deferred income tax is provided in full using the liability method on temporary differencesarising between the tax bases of assets and liabilities and their carrying values for financialreporting purposes. However, if the deferred income tax arises from the initial recognitionof an asset or liability in a transaction other than a business combination that at the timeof the transaction affects neither accounting nor taxable profit nor loss, it is not accountedfor. Deferred income tax is determined using tax rates (and laws) that have been enactedor substantially enacted at the balance sheet date and are expected to apply when therelated deferred income tax asset is realized or the deferred income tax liability is settled.Deferred income tax assets are recognized to the extent that the directors considerthat it is probable that future taxable profit will be available against which the temporarydifferences can be utilized. Deferred income tax is recognized as income tax benefit orexpense in the year in which it arises.(n) Trade ReceivablesTrade receivables are recognized initially at fair value and subsequently measured atamortized costs using the effective interest method, less provision for impairment. Aprovision for impairment of the trade receivables is established when there is objectiveevidence that the Board will not be able to collect all amounts due according to theoriginal terms of the receivables.The amount of the provision is the difference between the asset’s carrying amount andthe present value of estimated future cash flows, discounted at the effective interest rate.The carrying amount of the assets is reduced through the use of a provision account,and the amount of the loss is recognized in the income and expenditure account withinadministrative expenses. When a trade receivable is uncollectible, it is written off againstthe provision account for trade receivables. Subsequent recoveries of amounts previouslywritten off are credited against administrative expenses in the income and expenditureaccount.32
FINANCIAL STATEMENTSAnnual Report and Accounts for the year ending on 30 th June 2010(o) PayablesPayables are recognized initially at fair value and subsequently measured at amortizedcost using the effective interest method.3 FINANCIAL RISK MANAGEMENT3.1 Financial Risk FactorsThe Board’s activities expose it to a variety of financial risks: foreign currency risk,credit risk, and liquidity risk. The Board’s overall risk management plan seeks tominimize potential adverse effects on the Board’s financial performance. Risksmanagement is carried out by the management under the policies approved by theBoard of Directors.Foreign Currency RiskThe Board’s exposure to foreign exchange risks arises from rental income, purchases,assets and liabilities denominated in currency other than the functional currencymainly with respect to the US dollar. At the year end, the Board has financial assetsand liabilities denominated in United States Dollars (USD). As a result, the Board issubject to transaction and translation exposure from fluctuations in foreign currencyexchange rates. Exposure to foreign currency risk is mitigated by the fact that theBoard maintains certain part of its income in US Dollars bank accounts. The effectof foreign currency risk is not significant and therefore management does not hedgeagainst foreign currency risk.Credit RiskCredit risk arises from trade receivables, cash and cash equivalents as well asdeposits with banks. Significant concentration of credit risk is with rental receivables.A significant part of the trade and other receivable is made up of customers occupyingthe Board’s investment properties. Based on Board’s policy, management has madeadequate provision where the recoverability is doubtful. Only reputable banks areused by the Board for banking services. The amount that best represents the Board’smaximum exposure to credit risk at 30 June 2009 is made up as follows:2009/2010 2008/2009TZSTZSCash at bank 3,297,359,255 1,983,885,213Trade receivables 489,399,535 433,396,090VAT receivable 11,313,035 42,950,247Staff debtors 38,115,310 41,193,733Receivable from a related party - 290,378,212Other receivables 16,668,809 12,934,1983,852,855,944 2,804,737,693No collateral is held for any of the above assets. The company does not grade the creditquality of receivables. All receivables that are neither past due nor impaired are within theirapproved credit limits, and no receivables have had their terms renegotiated.33
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Tanzania Cotton Board Annual Report And Accounts

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