Problem One:

Refer to Delfi Ltd's financial statements in Appendix C (back of the textbook, pp C1-5), and their website, and answer the following:

a) General information:

1) Where is Delfi headquartered?

2) Are they a publicly accountable company? If so, how do you know?

3) Describe Delfi's products and its core markets.

b) If Delfi were a New Zealand company trading on the New Zealand Stock Exchange, would it fall under Tier I IFRS, Tier II IFRS, or no Tier at all?Explain your answer.

1) Would your answer change if Delfi were a "small" company trading on the Exchange? Why or why not?

2) Why would Delfi prefer to prepare its reports under the Tier II regime?

c) Delfi's financial statements summarise the activity of the "group." Discuss how the objective of financial reporting in the Conceptual Framework ("CF") supports preparing group accounts.

d) Answer these questions about Delfi's financial statements:

1) Delfi presents five financial statements. Two of those could have been (and, in this course, will be...) combined into one statement. Which two statements could have been combined under IFRS? Would any information be lost if the two statements were combined? If not, why do you think Delfi presents two statements instead of one?

2) Chapter 1 in the textbook claims that a Statement of Retained Earnings is a required financial statement. It is not. Yet, in effect, where does the Statement of Retained Earnings appear in Delfi's financial statements? What does it show?

e) The concept of materiality is defined as an entity specific application of the fundamental qualitative characteristic of relevance. One of the important

applications of materiality requires determining if financial information should be disclosed on the face of a financial statement or in the accompanying notes. Discuss how Delfi applied this concept to the non-current asset category of Property, Plant and Equipment.

APPENDIX C Specimen Financial Statements: Delfi Limited CONSOLIDATED INCOME STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 The Group Note 2016 2015 US$'00 USS'000 Revenue A 402,083 405,862 Cost of sales (262,352) (285,052) Gross profit 139,731 120,810 Other operating income A 4,549 4.906 Expenses Selling and distribution costs (78,756) (72,641) Administrative expenses (19,462) (19,330) Finance costs 6 (4,088 (4,219) Other operating (473) (2,138) Exceptional items 10 (2,000) (20,066) Share of results of associated companies 19(a) (266) 64 Profit before income tax 39,235 7,386 Income tax expense 8 (13,082) 12,126) Total profit/(loss) 26,153 (4,740) Profit/(loss) attributable to: Equity holders of the Company 26,156 (4,726) Non-controlling interest (3 ) (14) 26,153 (4.740) Earnings/(Losses) per ordinary share (1) (expressed in US cents per share) Basic and Diluted 11 4.28 (0.77) Note: " Diluted earnings per share for financial years 2016 and 2015 are the same as basic earnings per share as there were no potentially dilutive ordinary shares. The accompanying notes form an integral part of these financial statements. C-1C-2 APPENDIX C Specimen Financial Statements: Delfi Limited CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 The Group 2016 2015 US$'000 JSS'000 Profit/(loss) for the year 26,153 (4,740) Other comprehensive income/(loss): Items that may be reclassified to profit or loss: Foreign currency translation reserve Currency translation differences arising from consolidation 1,835 (16,398) Items that will not be reclassified to profit or loss: Defined pension benefits obligation - Remeasurements of defined pension benefits obligation (Note 29(a)) (753) 160 - Tax on remeasurements (Note 8(b)) 185 (43) - Share of other comprehensive income of associated companies 8 51 (560) 168 Other comprehensive income/(loss), net of tax 1,275 (16,230) Total comprehensive income/(loss) for the year 27,428 (20,970) Total comprehensive income/(loss) attributable to: Equity holders of the Company 27,434 (20,947) Non-controlling interest (6) (23) 27,428 (20,970) The accompanying notes form an integral part of these financial statements.Specimen Financial Statements: Delfi Limited C-3 BALANCE SHEETS AS AT 31 DECEMBER 2016 The Group The Company Note 2016 2015 2016 2015 US$'000 USS'000 US$'000 US$'000 ASSETS Current assets Cash and cash equivalents 12 67,737 119,547 60,030 111,654 Derivative assets 16 Trade receivables 13 61,756 56,280 1,337 1,254 Loan to subsidiary 14 700 Inventories 15 54,685 59,592 Tax recoverable 5,792 7,631 Other current assets 17 12,697 13,437 888 3,088 202,671 256,487 52,955 115,996 Non-current assets Investments in subsidiaries 18 35,935 35,935 Investments in associated companies and joint ventures 19 2.769 2,947 3,000 3,000 ans to associated company and joint venture 20 932 1,382 Property, plant and equipment 21 126,768 116,604 905 728 Intangible assets 22 5,243 4,810 5,167 4,613 Deferred income tax assets 8 (b ) 775 342 Other non-current assets 24 3,173 5,021 139,660 131,106 45,007 44,276 Total assets 342,331 387,593 107,962 160,272 LIABILITIES Current liabilities Trade payables 25 34,689 25,925 332 800 Other payables 26 37,820 30,205 4,086 2,741 Current income tax liabilities 1,382 489 129 Derivative liabilities 16 91 24 91 Borrowings 27 44,197 59,453 95 90 118,179 116,096 4,604 3,760 Non-current liabilities Borrowings 27 9,578 15,199 190 246 Deferred income tax liabilities 8 (b) 1,628 4,447 Provisions for other liabilities and charges 29 11,654 9.697 22,860 29,343 190 246 Total liabilities 141,039 145,439 4,794 4,006 NET ASSETS 201,292 242, 154 103,168 156,266 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 30 95,936 155,951 95,936 155,951 Foreign currency translation reserve 31(a) (60,228) (62,066 Other reserves 31(b) 1,760 2,245 Retained earnings 32 163,710 145,904 7,232 315 201,178 242,034 103,168 156,266 Non-controlling interest 114 120 TOTAL EQUITY 201,292 242,154 103,168 156,266 The accompanying notes form an integral part of these financial statements.:4 APPENDIX C Specimen Financial Statements: Del Limited CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 Attributable to equity holders of the Company Foreign Defined currency pension Non- Share translation General benefits Retained controlling Total Note capital reserve reserve obligation earnings Total interest equity USS'OOO US$000 US$000 USS'000 US$000 US$000 US$000 US$'000 The Group Balance at 1 January 2016 155.951 (62.066) 2.14? 98 145.904 242.034 120 242.154 Profit for the year 26.156 26,156 {3} 25.153 Other comprehensive incomeloss} for the year 1.838 [560} 1.2?8 [3} 1.2?5 Total comprehensive income;r {loss} for the year 1,353 {560] 26,156 22,434 (6] 22,428 Transfer to general reserve 32la} 75 IFS} Capital reduction 30 (60.015) - - (60.0151 - [60.015]I Interim dividend relating to 2016 Eaid 33 - - - {8.225} $3.225] (8,2?51' Total transactions with owners, recognised directly in equity {60.015} 75 (8,350] (68,290) - 58,290] Balance at 31 December 2016 95 936 60 228 2 222 {462] 163 210 201 128 1.14 20 292 Balance at 1 January 2015 155.951 I45.6??I 2.0?2 ITO} 184.90? 291183 143 292,326 Loss for the year [4,?26} H.726] :14: {4340) Other comprehensive (loss);i income for the year {16,389} 168 {16.221} l9! {16,230} Total comprehensive [loss];I income for the year {16.389} 153 [4,725] (20.94?) (23} {20.920} Transfer to general reserve 32la) 3'5 {7'5} Final and special dividend relating to 2014 paid 33 {21.39511 {2135?} {2135?} Interim and special div id end relating to 2015 eld 33 {12.445} (12,445} {12.445} Total transactions with owners. recognised directly in eguity 75 (34.22?) I34.202i - {34.202} Balance at 51 December 2015 155.951 {62.066} 2.14? 98 145.904 242.034 120 242.154 The accompanying notes form an integral part of these financial statements. Specimen Financial Statements: Delfi Limited C-5 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 Note 2016 2015 US$'000 US$'000 Cash flows from operating activities Total profit/(loss) 26,153 (4,740) Adjustments: Income tax expense 8(a) 13,082 12,126 Depreciation and amortisation 9,177 7,584 Property, plant and equipment written off 73 124 Impairment loss on brands 265 Gain on disposal of property, plant and equipment (104) (1,470) Exceptional items 10 2,000 20,066 Interest income (3,918) (2,053) Interest expense 4,088 4,219 Fair value 63 64 Share of results of associated companies 266 (64) Operating cash flow before working capital changes 50,880 36,121 Changes in working capital Inventories 4,907 13,158 Trade and other receivables (2,889) 27,893 Trade and other payables 16,293 16,246) Cash generated from operations 69,191 60,926 Interest received 3,918 2.053 Income tax paid (13,454) (19,731) Net cash provided by operating activities 59,655 43,248 Cash flows from investing activities Purchases of property, plant and equipment (16,674) (23,479) Payments for patents and trademarks (691) (341) Payment for final settlement of dispute 10 (38,800) Proceeds from disposal of property, plant and equipment 315 1,530 Net cash used in investing activities (17,050) (61,090) Cash flows from financing activities Capital reduction 30 (60,015) Proceeds from bank borrowings 22,836 Proceeds from/(repayment of) trade finance 114 (4,613) Repayment of bank borrowings (22,044) (7,113) Repayment of lease liabilities (2,802) (5,200) Interest paid (4,088 (4,232) Dividends paid to equity holders of the Company (8,275 34,202) Net cash used in financing activities (97,110) (32,524) Net decrease in cash and cash equivalents (54,505) (50,366) Cash and cash equivalents Beginning of financial year 12 100,550 149,212 Effects of currency translation on cash and cash equivalents (810 1,704 End of financial year 12 45,235 100,550 The accompanying notes form an integral part of these financial statements