Alpa Pionaer Manden, Inc.

Extract of financial statements

Alpa Pionaer Manden, Inc.
Statement of Financial Position
as at 31 December 2010
2010 2009

Assets

Current
Cash and cash equivalents 2,863,979 2,966,877
Accounts receivable 1,506,079 1,155,368
Inventory 5,763,861 5,084,093
Investments 1,245,439 1,205,439
Prepaid expenses 46,735 66,735
11,426,093 10,478,512

Non-current assets
Property, plant, and equipment 3,027,358 3,285,935
Investment property 1,848,000 0
4,875,358 3,285,935
Total Assets 16,301,451 13,764,447

Liabilities and Equity

Liabilities

Current
Accounts payable and accrued charges 4,611,983 4,256,738
Income taxes payable 166,566 44,159
4,778,549 4,300,897

Deferred income taxes 94,000 33,100

Total liabilities 4,872,549 4,333,997

Equity
Share capital 100,000 100,000
Retained earnings 11,328,902 9,330,450
11,428,902 9,430,450
Total Liabilities and Equity 16,301,451 13,764,447
Alpa Pionaer Manden, Inc.
Statement of Income and Retained Earnings
as at 31 December 2010
2010 2009

Continuing operations
Sales 56,429,598 50,417,406
Cost of sales (44,854,505) (39,492,553)
Gross profit 11,575,093 10,924,853

Salaries and employee benefits (3,666,682) (3,663,312)

Owner-manager incentive pay (500,515) (316,492)
General office (1,787,620) (1,683,363)
Advertising and promotion (614,067) (417,555)
Transportation (211,179) (195,218)
Amortization (1,008,674) (1,048,014)
Employee profit sharing plan (460,415) (522,828)
(8,249,152) (7,846,782)
Operating Income 3,325,941 3,078,071

Interest income 38,462 43,208

Lease income 10,000 0
Gain/(Loss) on disposal of property, plant, and equipment (2,057) (5,829)
46,405 37,379
(Loss) earnings before income taxes 3,372,346 3,115,450

Income taxes
Current (955,237) (1,313,837)
Future (65,700) 18,900
(1,020,937) (1,294,937)

Net (loss) earnings 2,351,409 1,820,513

Retained earnings, beginning of year 9,330,450 9,309,937
Gain arising on changes in fair value of investment property 1,447,043 0
Dividends (1,800,000) (1,800,000)
Retained earnings, end of year 11,328,902 9,330,450
Summary of significant accounting policies
Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS).
Basis of preparation
The financial statements have been prepared on the historical cost basis except for the revaluation of
certain non-current assets and financial instruments. Historical cost is generally based on the fair value of
the consideration given in exchange for assets.
Inventories
Inventories are stated at the lower of cost and net realizable value, with cost being determined as follows:
 New and pre-owned vehicles–FIFO (first in, first out)
 Parts–weighted average
Net realizable value is the estimated selling price in the ordinary course of business.
The cost of inventories comprises all costs of purchase and other costs incurred in bringing the
inventories to their present location and condition. The costs of purchase include the purchase price, non-
recoverable taxes, transport, handling, and other costs directly attributable to the acquisition of finished
goods.
Inventory is recognized as follows:
 New vehicles–when shipped from the manufacturer
 Pre-owned vehicles and parts–when the vehicle or part is received by the Company.
Property, plant, and equipment
Land and buildings are carried at fair value at the date of the revaluation less any subsequent accumulated
depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient
regularity such that the carrying amounts do not differ materially from those that would be determined
using fair values at the end of the reporting period. Accumulated depreciation is then eliminated against
the gross carrying amount of the asset and the net value is restated to the revalued amount of the asset.
With respect to subsequent revaluations, increases in value are recognized in other comprehensive income
and credited to equity under “revaluation surplus.” In the event of decrease in value, the loss is charged
to profit or loss unless the decrease in value reverses a previously recognized increase, in which case the
amount is debited to other comprehensive income up to the amount of the previous increase, while the
remainder is expensed. The revaluation surplus is reclassified in retained earnings when the asset is
disposed of.
All other items of property, plant, and equipment are stated at historical cost, less any accumulated
depreciation and any accumulated impairment losses. Historical cost includes all costs directly
attributable to the acquisition.
Land is not depreciated. Depreciation of other items of property, plant, and equipment is provided over
the estimated useful life of the asset on a declining-balance basis at the following rates per annum except
as stated below:
 Building–20 years straight-line
 Equipment–20%
 Furniture and fixtures–20%
  Computer equipment–20%
Useful lives, components, the depreciation method, and residual amounts are reviewed biannually. Such
a review takes into consideration the nature of the assets, and their intended use.
Gains or losses on disposals are determined by comparing the proceeds with the carrying amount and are
recognized as “gains (losses) on sale of capital assets” in the income statement.
Investment property
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment
properties are measured initially at cost, including transaction costs. Subsequent to initial recognition,
investment properties are measured at fair value. Gains and losses arising from changes in the fair value
of investment properties are included in profit or loss in the period in which they arise.
An investment property is derecognized upon disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss
arising on de-recognition of the property (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in profit or loss in the period in which the property is
derecognized.
Revenue recognition
Revenue from the sale of new and pre-owned vehicles is recognized when goods are delivered and title
has passed. Revenue is measured at the fair value of the consideration received or receivable and
represent amounts receivable for goods sold in the normal course of business, net of discounts and sales
related taxes.
Revenue from the sale of parts and services is recognized upon delivery of parts to the customer, or at the
time the vehicle service or repair work is completed.
Extended warranties are recorded as multiple element arrangement contracts and the appropriate amount
of revenue is allocated to each element of the package.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the interest rate
applicable.
Operating lease income
Operating lease income relates to the investment property owned by the Company with lease terms of
between 5 to 7 years, with an option to extend for a further 5 to 7 years. All operating lease contracts
contain review clauses. The lessee does not have an option to purchase the property at the expiry of the
lease period.
Impairment of tangible assets
Non-current assets with definite useful lives are tested for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. An impairment loss is
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of the fair value less costs to sell and value in use. Noncurrent assets,
other than goodwill that have been impaired, are reviewed for possible reversal of the impairment loss at
the reporting date.
Income taxes
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as
reported in the income statement because of items of income or expense that are taxable or deductible in
other years and items that are never taxable or deductible. The Company’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting
period.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets
are generally recognized for all deductible temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible temporary differences can be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities
and assets reflects the tax consequences that would follow from the manner in which the Company
expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred taxes are recognized as an expense or income in the income statement.
Critical judgments in applying accounting policies
The following are the critical judgments, apart from those involving estimations (see below), that
management has made in the process of applying the entity’s accounting policies, and that have the most
significant effect on the amounts recognized in financial statements.
Revenue recognition
In making its judgment, management considered the detailed criteria for the recognition of revenue from
the rendering of goods set out in IAS 18 Revenue, and in the particular, whether the company has
transferred to the buyer the significant risks and rewards of ownership of goods. The directors are
satisfied that the recognition of revenue in the current year is appropriate.
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amount of income and
expenses during the reporting period. These estimates are reviewed periodically, and as adjustments
become necessary, they are reported in profit or loss in the period in which they become known.