Ekolamp - Annual report

Annual Report 2014

2. Significant accounting policies

The (unconsolidated) financial statements attached have been prepared in compliance with Act No. 563/1991 Sb., providing for accounting, as amended (“the Accounting Act”) and in compliance with Decree no. 500/2002 Sb., implementing certain provisions of Act No. 563/1991 Sb., providing for accounting, as amended, with respect to accounting units who are entrepreneurs using double-entry accounting, as amended in 2014 and 2013.

a) Tangible and Intangible Fixed Assets:

Purchase intangible and tangible fixed assets are initially recorded at acquisition cost, which includes all cost related with its acquisition.

Tangible fixed assets with acquisition costs less than TCZK 10 and intangible fixed assets with acquisition costs less than TCZK 20 are expensed in the year of acquisition and are recorded in the off-balance sheet.

Regardless of the amount of acquisition cost per unit, the Company recorded containers for collection of luminaires and lamps under fixed tangible assets. The total investment in containers is significant for the Company and their usable life exceed one year.

Assets

Basis

Period

Containers

Straight-line

5 years

Motor vehicles

Straight-line

5 years

Equipment

Straight-line

2-5 years

Software

Straight-line

18-24 months

Incorporation expenses

Straight-line

5 years

The fixed assets are depreciated for accounting purposes starting on the date they are put in use. The yearly depreciation rates differ from those allowable for taxation purposes. The depreciation / amortisation plan is updated during the usable life of the intangible and tangible fixed assets based on the expected usable life.

Technical improvement on leased assets is depreciated using the straight-line method over the contractual period of the lease agreement.

A provision for impairment is created if the carrying value of an asset is higher than its estimated recoverable amount.

b) Long-term Financial Assets:

Short-term financial assets are disclosed in nominal value and include especially term deposits. Revenues from these short-term assets are disclosed as interest revenues.

The company has no long-term financial assets in its accounting evidence.

c) Inventory:

The company has no inventory or work in progress in its accounting evidence.

d) Adjustments Establishment:

The company accounts for adjustments net way, it is by recording the difference between the opening and closing balance in the profit and loss account at the balance sheet date.

Adjustment for accounts receivable – the Company establishes adjustments for doubtful receivables based on an own analysis of the credit status of customers.

e) Provisions, recycling fees, revenues:

The fees for collecting, recycling and disposal of luminaires and lamps are billed to the participants in the system through a tax document. It is issued based on the number of luminaires and lamps introduced to the market, which is reported by the individual manufacturers or importers. The date of taxable supply is deemed to be the last day of the period when the pieces introduced to the market were reported.

The fee is calculated and updated by the Company based on a calculation model developed by the European Lamp Companies Federation. The model is used in most EU member states and is maintained by a consulting company Ernst & Young (previously Grant Thornton) that provides consultations on the results. For luminaires the Company used an adjusted model.

Fees for collection, recycling and disposal of luminaires and lamps billed by the Company are recorded under revenues. The costs of collection, recycling and disposal of luminaires and lamps and overhead associated with the operation of the collective system are charged to the profit and loss account in the period in which they incurred. At the end of the accounting period the Company creates a provision for the difference between the fees contributed by the participants and the current period expenses recorded in the profit and loss account. The provision is created for future costs of collecting, recycling and disposal of luminaires and lamps and future costs associated with the operation of the collective system.

The provision for future disposal of electrical and electronic equipment is calculated for a range of lamps based on their expected useful life, expected share of the company in the collection of lamps and estimated costs associated with the liquidation and operation of the collective system.

The exact calculation of the provision for a range of luminaires was not possible due to the very long useful life cycle and secondary use. Given these facts, it is clear that the existing provision for luminaires does not exceed the potential future liabilities of the Company for the collection and disposal of luminaires which will be launched in the Czech Republic in subsequent periods.

The Company does not book this provision in gross yet. Due to continuing development of the collecting and recycling system, the Company uses incremental method to account for the provision as the volume of luminaires and lamps sold not yet returned for recycling is continually increasing.

f) Foreign currency translation:

Transactions denominated in a foreign currency are translated and recorded at official exchange rate of the Czech National Bank as at the transaction date. During the year, foreign exchange gains and losses are only recognised when realised at the time of settlement.

Cash, receivables and liabilities balances denominated in foreign currencies have been translated at the exchange rate published by the Czech National Bank as at the balance sheet date. All unrealised foreign exchange gains and losses on cash, receivables and liabilities balances are recorded in the profit and loss account.

g) Research and Development:

The company has no expenses on research and development.

h) Leases:

The company does not account for any leased assets.

i)  Hedge accounting:

The company does not use hedge accounting.

j) Income tax:

Income tax for the period consists of current income tax only. Considering the special tax treatment, the Company does not account for deferred tax, as no temporary taxable differences arise.

Current income tax consists of tax payable calculated using the tax rate valid as at the balance sheet date and any adjustment to the tax payable for previous years.

In accordance with sec. 19 (1) (zo) of Act No. 586/92 Sb. on Income Taxes, as amended, (“ITA”) income from collected fees connected with collecting, processing and use of electronic equipment and electronic waste is exempt from corporate income tax. Income from operating revenues and financial revenues is taxed and is not exempt from corporate income tax.

In accordance with sec. 23 (3) (a) (2) and sec. 23 (5) of ITA, the company’s costs are divided into:

  • Costs relating to tax-exempt income that is not included in the tax base;
  • Costs relating to income that is not tax exempt and that is included in the tax base providing that the costs are not otherwise non-tax deductible; costs relating to income that is subject to tax and that is not tax exempt were for the purposes of determining the tax base taken into account in a documentable amount.

Reserve for income tax is recorded at the date the Financial Statements are prepared before the Corporate Income Tax Return is submitted to the Tax Authority. The amount of tax liability is determined in compliance with the expected tax liability as at the balance sheet date. If the accounting unit reports paid advances for income tax, the advance payments are offset against the reserve for due income tax; then the reserve is reported in the amount of the outstanding amount of due income tax. If the advance payments exceed expected tax due, no reserve for income tax is reported, and the expected overpayment of income tax arising from paid advances for income tax (i.e. the difference between the paid advances and the booked reserve) is entered to the assets of the company, namely receivables.

k) Components of Cash and Cash Equivalents (as reported in the CF statement):

For the purposes of the cash flow statement, cash and cash equivalents are defined to include cash on hand, cash in transit, cash at bank and other financial assets whose valuation can be reliably determined and which can be readily converted to cash.

l) Derivatives:

The company does not have any derivatives.

m) Estimates:

The drawing up of the financial statements requires that the management of the company uses estimates and assumptions which affect the reported amounts of assets and liabilities as at the balance sheet date, and affect the reported amounts of revenues and expenses for the reporting period. The management of the company made the estimates and assumptions based on all available information. However, in compliance with the nature of estimates, the actual numbers may differ from the estimates in the future.

n) Accounting for revenues and expenses:

Revenues and expenses are booked in compliance with the accrual principle, i.e. to the period to which they relate with respect to time and facts.

o) Classification of payables:

The company classifies as short-term payables a part of long-term payables, bank loans and financial assistance where the maturity date is shorter than one period with respect to the balance sheet date.

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