114
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
115
DIRECTORS’
RESPONSIBILITY STATEMENT
The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which have been made out in accordance with
Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 so as to exhibit a
true and fair view of the financial position of the Group and of the Company as of 31 December 2016 and of their financial performance and cash flows for
the financial year then ended.
In preparing the financial statements, the Directors have:
•
Selected and applied the appropriate and relevant accounting policies on a consistent basis;
•
Made judgments and accounting estimates that are reasonable and prudent in the circumstances; and
•
Prepared the annual audited financial statements on a going concern basis.
The Directors are responsible to ensure that the Group and the Company keep accounting records which disclose with reasonable accuracy the financial
position of the Group and the Company.
The Directors also have the overall responsibilities to take such steps to safeguard the assets of the Group and for the establishment, designation,
implementation and maintenance of appropriate accounting and internal control systems for the prevention and detection of fraud and other irregularities
relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
116
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
DIRECTORS’
REPORT
The Directors have pleasure in submitting their report together with the audited financial statements of the Group and the Company for the financial year
ended 31 December 2016.
PRINCIPAL ACTIVITIES
The principal activities of the Group are the provision of mobile communication services and network transmission related services.
The principal activities of the Company are investment holding and provision of technical and management services on an international scale, where it has
investments in subsidiaries, joint ventures and associates.
The principal activities of the subsidiaries are set out in Note 40 to the financial statements. There has been no significant change in the nature of the activities
of the Group and the Company during the financial year.
FINANCIAL RESULTS
The results of the operations of the Group and the Company for the financial year are as follows:
Group
RM’000
Company
RM’000
- owners of the Company
504,254
1,203,302
- non-controlling interests
152,904
-
657,158
1,203,302
Profit for the financial year attributable to:
In the opinion of the Directors, the results of the operations of the Group and the Company during the financial year were not substantially affected by any
item, transaction or event of a material and unusual nature other than as disclosed in the financial statements.
SHARE CAPITAL
During the financial year, the issued and paid-up capital of the Company was increased from RM8,816.9 million comprising 8,816.9 million ordinary shares of
RM1 each to RM8,971.4 million. The increase in issued and paid-up capital of the Company was in line with the exercise of options and vesting of restricted
share awards (“RSA”) granted under the Performance-Based Employee Share Option Scheme (“ESOS”) and Restricted Share Plan (“RSP”) “Axiata Share
Scheme” by the employees of the Company and its subsidiaries as disclosed in Note 14(a) to the financial statements and implementation of Dividend
Reinvestment Scheme (“DRS”) as disclosed in Note 13(a) to the financial statements.
The above mentioned ordinary shares rank pari-passu in all respects with the existing ordinary shares of the Company.
DIVIDENDS
The dividends paid or declared or proposed since the end of the previous financial year are as follows:
Tax exempt dividend under single tier system
Type
Per ordinary
share of RM1 each
Sen
Total
RM’000
- 2015
Final
12
1,058,806
- 2016
Interim
5
446,310
17
1,505,116
In respect of financial year ended 31 December:
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
117
DIVIDENDS (CONTINUED)
The DRS as stated in Note 13(a) to the financial statements was made applicable to the dividends declared during the financial year whereby shareholders
were given the option to reinvest the whole or part of the dividend into new ordinary shares of the Company.
The Board of Directors has recommended a final tax exempt dividend under the single tier system of 3 sen per ordinary share of RM1 each of the Company
in respect of financial year ended 31 December 2016 amounting to a total of RM269.1 million, based on the issued and paid-up capital of the Company as at
31 December 2016. The proposed dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting (“AGM”).
The Board of Directors also determined that the Company’s DRS will apply to the proposed final dividend. This will be subject to the approval of shareholders
at the forthcoming AGM for the renewal of the authority for the Directors of the Company to allot and issue the new ordinary shares pursuant to the DRS
and the approval of Bursa Securities Berhad.
RESERVES AND PROVISIONS
All material transfers to or from reserves or provisions during the financial year have been disclosed in the financial statements.
AXIATA SHARE SCHEME
The Performance-Based ESOS of the Company was approved by its shareholders at the Extraordinary General Meeting (“EGM”) held on 24 March 2009 and
implemented on 16 April 2009.
On 1 June 2011, the Company’s shareholders had, at the Nineteenth (19th) AGM of the Company, approved the amendments to the Bye-Laws of the ESOS
to include a RSP. Accordingly, the existing Performance-Based ESOS was renamed as Axiata Share Scheme.
Details of the Axiata Share Scheme are disclosed in Note 14(a) to the financial statements.
No Performance-Based ESOS was granted to the employees of the Group during the financial year.
DIRECTORS
The Directors who have held office during the period since the date of last report are as follows:
Tan Sri Dato’ Azman Hj. Mokhtar
Tan Sri Jamaludin Ibrahim
Tan Sri Ghazzali Sheikh Abdul Khalid
Datuk Azzat Kamaludin
David Lau Nai Pek
Bella Ann Almeida
Kenneth Shen
Dr Muhamad Chatib Basri
Dato’ Mohd Izzaddin Idris
Juan Villalonga Navarro
Dato’ Abdul Rahman Ahmad
Appointed on 24 November 2016
Retired on 25 May 2016
Resigned on 30 September 2016
In accordance with Article 93 of the Company’s Article of Association, Dr Muhamad Chatib Basri and Kenneth Shen retire from the Board at the Twenty-fifth
(25th) AGM and being eligible, offer themselves for re-election.
In accordance with Article 99(ii) of the Company’s Article of Association, Dato’ Mohd Izzaddin Idris retires from the Board at the Twenty-fifth (25th) AGM and
being eligible, offer himself for re-election.
118
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
DIRECTORS’ REPORT
DIRECTORS' INTERESTS
In accordance with the Register of Directors’ Shareholdings, the Directors who held office at the end of the financial year and have interest in shares and/or
options over shares in the Company are as follows:
Number of ordinary shares of RM1 each of the Company
As at
1.1.2016
Additions*
Disposed
As at
31.12.2016
2,489,391
87,634
-
2,577,0251
Indirect interest
Tan Sri Jamaludin Ibrahim
1
Shares held under CIMSEC Nominees (Tempatan) Sdn Bhd for CIMB Commerce Trustee Berhad, a trustee of discretionary trust and the beneficiaries of
which are members of the family of Tan Sri Jamaludin Ibrahim subject to the terms of such discretionary trust.
*
Additions during the financial year arose from:
a) Allotment of 61,339 shares pursuant to DRS on final dividend for the financial year ended 31 December 2015; and
b) Allotment of 26,295 shares pursuant to DRS on interim dividend for the financial year ended 31 December 2016.
Number of options/shares over ordinary shares of RM1 each of the Company
As at
1.1.2016
Granted
Adjusted
Exercised/
Vested
As at
31.12.2016
3,154,800
-
-
-
3,154,800
867,900
351,900
-
-
1,219,800
-
158,400
-
-
158,400
Tan Sri Jamaludin Ibrahim2
- ESOS3
- RSA4
- RSA : special grant
2
At the EGM held on 24 March 2009, the shareholders of the Company approved the grant of options to Tan Sri Jamaludin Ibrahim to subscribe up
to 5.5 million new ordinary shares of RM1 each in the Company to be issued under the Performance-Based ESOS for the Executive Directors and
eligible employees of the Group.
Further to the above, the shareholders of the Company had at the Nineteenth (19th) AGM held on 1 June 2011, approved the grant of entitlement,
allotment and issuance of the remaining 1,198,300 new Axiata Shares to Tan Sri Jamaludin Ibrahim, under the new Axiata Share Scheme as approved
at the said EGM.
Subsequently, the shareholders of the Company at the Twenty-first (21st) AGM held on 23 May 2013, approved the grant entitlements, allotment and
issuance of up to 3.6 million new Axiata Shares to Tan Sri Jamaludin Ibrahim under the Axiata Share Scheme.
3
3,154,800 (2015: 3,154,800) options of Axiata Shares pursuant to Performance-Based ESOS.
4
The number of Axiata RSP shares that may vest is 1,219,800 provided that the performance targets for vesting are met. If not met, the amount
could be nil or a portion of the amount. However, if the super stretched individual performance targets and Axiata Group meeting superior company
performance targets at the point of vesting are met, up to 6,757,000 Axiata Shares may be vested.
Other than as disclosed above, in accordance with the Register of Directors’ Shareholdings, none of the other Directors in office at the end of the financial
year have any direct or indirect interest in any shares and options over ordinary shares in the Company or its related corporations during the financial year.
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
119
DIRECTORS' BENEFITS
Since the end of the previous financial year, none of the Director has received or become entitled to receive any benefit (except for the Directors’ fees,
remuneration and other emoluments as disclosed in Note 7(d) to the financial statements) by reason of a contract made by the Company or a related
corporation with the Director or with a firm of which he/she is a member, or with a company in which he/she has a substantial financial interest.
During and at the end of the financial year, no arrangement subsisted to which the Company or any of its related corporations, was a party, being arrangements
with the object(s) of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of the Company or
any other body corporate other than the Axiata Share Scheme of the Company, details as disclosed in Note 14(a) to the financial statements.
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS
Before the statements of comprehensive income and financial position of the Group and the Company were made out, the Directors took reasonable steps:
(a)
to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and have
satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and
(b)
to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the
accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise.
At the date of this report, the Directors are not aware of any circumstances:
(a)
which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group
and the Company inadequate to any substantial extent; or
(b)
which would render the values attributed to current assets in the financial statements of the Group and the Company misleading; or
(c)
which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and the Company misleading or
inappropriate.
No contingent or other liability of the Group and Company has become enforceable or is likely to become enforceable within the period of twelve (12) months
after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group and the Company to meet its obligations
when they fall due.
At the date of this report, there does not exist:
(a)
any charge on the assets of the Group and the Company which has arisen since the end of the year which secures the liability of any other person; or
(b)
any contingent liability of the Group and the Company which has arisen since the end of the year.
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group
and the Company, which would render any amount stated in the financial statements misleading.
In the opinion of the Directors:
(a)
the results of the Group’s and the Company's operations during the financial year were not substantially affected by any item, transaction or event
of a material and unusual nature other than as disclosed in the financial statements; and
(b)
there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and
unusual nature likely to affect substantially the results of the operations of the Group and the Company for the financial year in which this report is
made.
120
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
DIRECTORS’ REPORT
EVENTS AFTER THE REPORTING PERIOD
The events after the reporting period are disclosed in Note 46 to the financial statements.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
Signed on behalf of the Board of Directors in accordance with their resolution dated 22 February 2017.
TAN SRI DATO’ AZMAN HJ. MOKHTAR
DIRECTOR
Kuala Lumpur
22 February 2017
TAN SRI JAMALUDIN IBRAHIM
DIRECTOR
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
121
STATEMENTS OF
COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
Group
Note
Operating revenue
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
6
21,565,392
19,883,460
1,049,838
1,149,548
7(a)
(5,666,505)
(4,198,547)
Operating costs
- depreciation, impairment and amortisation
- foreign exchange (losses)/gains
(85,342)
252,791
(8,431)
889,149
-
(7,049)
2,071,791
- domestic interconnect and international outpayment
(2,096,123)
(2,158,415)
- marketing, advertising and promotion
(1,817,599)
(1,471,792)
(26,554)
(8,147)
-
- other operating costs
7(b)
(8,074,312)
(7,649,816)
(146,398)
(73,940)
- staff costs
7(c)
(1,564,710)
(1,319,383)
(113,131)
(93,621)
- other (losses)/gains - net
8
(68,161)
Other operating income - net
9
Operating profit before finance cost
Finance income
10
Finance cost excluding net foreign exchange losses on
financing activities
10
Net foreign exchange losses on financing activities
98,083
-
-
534,566
666,257
2,184
1,828
2,727,206
4,102,638
1,646,657
3,040,410
183,394
173,421
25,143
55,833
(24,819)
(1,201,184)
(831,138)
(57,000)
(599,720)
(547,342)
(392,372)
(1,800,904)
(1,378,480)
(449,372)
(95,842)
(38,587)
-
-
131,124
489,506
-
-
(17,356)
-
-
1,222,428
3,071,424
(24,819)
Joint ventures
- share of results (net of tax)
28
Associates
- share of results (net of tax)
- loss on dilution of equity interests
5(a)
Profit before taxation
Taxation and zakat
Profit for the financial year
(5,398)
1,139,580
11
(482,422)
657,158
3,331,142
(695,074)
2,636,068
(19,126)
1,203,302
(503)
3,070,921
122
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
Group
Note
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
14,867
13,906
-
-
1,708,339
1,622,510
-
-
936
-
-
-
-
-
-
Other comprehensive income:
Items that will not be reclassified to profit or loss:
- actuarial gains on defined benefits plan, net of tax
Items that may be reclassified subsequently to profit or loss:
- currency translation differences
- net cash flow hedge
(2,196)
- net investment hedge
(67,555)
- available-for-sale reserve
(125,254)
32,631
3,367
Other comprehensive income for the financial year, net of tax
1,686,086
1,515,465
-
-
Total comprehensive income for the financial year
2,343,244
4,151,533
1,203,302
3,070,921
- owners of the Company
504,254
2,554,220
1,203,302
3,070,921
- non-controlling interests
152,904
81,848
-
-
657,158
2,636,068
1,203,302
3,070,921
- owners of the Company
1,836,063
3,840,260
1,203,302
3,070,921
- non-controlling interests
507,181
311,273
-
-
2,343,244
4,151,533
1,203,302
3,070,921
Profit for the financial year attributable to:
Total comprehensive income for the financial year attributable to:
Earnings per share (sen)
- basic
12(a)
5.7
29.5
-
-
- diluted
12(b)
5.7
29.3
-
-
The above Statements of Comprehensive Income are to be read in conjunction with the notes to the financial statements on pages 129 to 248.
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
123
STATEMENTS OF
FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Group
Note
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
8,971,415
8,816,858
8,971,415
8,816,858
4,081,106
3,485,891
4,081,106
3,485,891
10,528,131
11,222,520
7,556,634
7,853,030
23,580,652
23,525,269
20,609,155
20,155,779
5,039,552
2,199,075
-
-
28,620,204
25,724,344
20,609,155
20,155,779
CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS OF
THE COMPANY
Share capital
13
Share premium
Reserves
15
Total equity attributable to owners of the Company
Non-controlling interests
Total equity
NON-CURRENT LIABILITIES
Borrowings
16
15,135,472
14,044,656
-
-
Derivative financial instruments
19
1,165,857
743
-
-
Deferred income
20
245,894
223,414
-
-
Deferred gain on sale and lease back assets
21
1,053,855
643,830
-
-
Other payables
22
1,581,353
764,667
5,157
1,513
Provision for liabilities
23
499,720
417,574
-
-
Deferred tax liabilities
24
2,241,506
1,809,316
-
-
21,923,657
17,904,200
5,157
1,513
50,543,861
43,628,544
20,614,312
20,157,292
Total non-current liabilities
NON-CURRENT ASSETS
Intangible assets
25
23,153,033
14,206,485
-
-
Property, plant and equipment
26
27,466,131
23,133,644
17,948
22,089
Subsidiaries
27
-
-
24,863,295
18,637,633
Joint ventures
28
109,254
102,974
-
-
Associates
29
8,400,152
8,208,486
-
-
63,925
31,286
-
-
Available-for-sale financial assets
Derivative financial instruments
19
398,318
229,231
-
-
Long term receivables
30
117,684
101,203
2,000
2,000
Amounts due from subsidiaries
32
-
-
95,982
2,233,856
Deferred tax assets
24
291,633
248,156
-
-
60,000,130
46,261,465
24,979,225
20,895,578
Total non-current assets
124
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Group
Company
Note
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
Inventories
31
174,747
155,125
-
-
Amounts due from subsidiaries
32
-
-
49,311
394,153
Trade and other receivables
33
4,779,575
3,954,716
8,231
8,769
Derivative financial instruments
19
2,735
113,251
-
-
18
28
-
-
199,111
122,994
-
-
5,332,414
5,510,692
732,801
321,314
10,488,600
9,856,806
790,343
724,236
CURRENT ASSETS
Financial assets at fair value through profit or loss
Tax recoverable
Deposits, cash and bank balances
34
LESS: CURRENT LIABILITIES
Trade and other payables
22
12,027,136
9,500,528
130,309
66,173
Deferred gain on sale and lease back assets
21
140,817
142,253
-
-
Borrowings
16
7,124,409
2,347,730
2,968,244
-
Derivative financial instruments
19
162,650
173,112
-
-
Amounts due to subsidiaries
32
1,396,349
Current tax liabilities
Total current liabilities
Net current liabilities
-
-
2,056,703
489,857
326,104
-
-
19,944,869
12,489,727
5,155,256
1,462,522
(9,456,269)
(2,632,921)
(4,364,913)
50,543,861
43,628,544
20,614,312
The above Statements of Financial Position are to be read in conjunction with the notes to the financial statements on pages 129 to 248.
(738,286)
20,157,292
19(f)
19(g),
(h)
7,809
(171)
567,712
-
19,865
595,215
4,081,106
2,668
146,927
-
4,962
154,557
8,971,415
-
-
3,485,891
-
Share
premium
RM’000
8,816,858
-
Share
capital
RM’000
2,288,800
-
-
-
-
-
-
1,357,689
-
1,287,217
604
69,868
1,357,689
-
931,111
-
16,598
-
-
-
-
-
-
-
-
-
16,598
-
346,774
-
-
-
-
-
-
-
-
-
346,774
-
(325,702)
-
-
-
-
-
-
(69,710)
-
(67,555)
(2,155)
(255,992)
-
(24,827)
5,418
135,647
30,245
-
-
-
-
-
-
-
-
130,229
-
11,107
-
-
-
-
-
-
11,199
11,199
-
-
(92)
-
(1,143,363)
(1,316,116)
-
-
-
-
(1,316,116)
172,753
-
-
-
-
-
(172,753)
-
35,998
-
-
-
-
-
-
32,631
32,631
-
3,367
-
(1,392,507)
9,335,025
-
(714,639)
(790,477)
(5,821)
(83,338)
(16,492)
100,147
118,113
-
504,254
-
-
10,223,278
504,254
Retained
earnings
RM’000
(1,780,680)
23,580,652
30,245
(790,477)
(5,821)
(83,338)
(16,492)
(1,316,116)
272,900
118,113
10,477
(171)
1,836,063
11,199
32,631
1,287,217
604
69,868
1,357,689
(67,555)
(2,155)
23,525,269
504,254
Total
RM’000
(112,241)
2,333,296
5,039,552
-
-
33,951
(73,375)
678,151
1,806,810
-
507,181
3,668
-
350,650
350,650
(41)
2,199,075
152,904
NCI
RM’000
(112,241)
552,616
28,620,204
30,245
(790,477)
28,130
(156,713)
661,659
(1,316,116)
272,900
1,924,923
10,477
(171)
2,343,244
14,867
32,631
1,637,867
604
69,868
1,708,339
(67,555)
(2,196)
25,724,344
657,158
Total
equity
RM’000
* Issued and fully paid-up ordinary shares of RM1 each , Employee Share Option Scheme (“ESOS”), # Restricted Share Awards (“RSA”), Available-for-sale (“AFS”), Non-controlling interests (“NCI”) , Dividend Reinvestment Scheme (“DRS”)
- Actuarial gain, net of tax
- Revaluation of AFS
Total comprehensive income for the
financial year
Transactions with owners:
- Issuance of new ordinary shares
- Share issue expenses
19(d),
- Put options over shares held
by NCI
(e)
- Extinguishment of put option
19(e)
- Acquisition of subsidiairies
5(a)
- Additional investment in a
subsidiary
(xvi)
- Right issue by a subsidiary
5(a)(i),
- Dilution of equity interests in
subsidiaries
(v)
- Dividends paid to shareholders via:
- DRS
44
- Cash
44
- Axiata Share Scheme:
- value of employees' services 14(a)
- transferred from ESOS and
RSA reserve upon exercise/
vest
- Dividends paid to NCI
Total transactions with owners
At 31 December 2016
- Net investment hedge
- Net cash flow hedge
At 1 January 2016
Profit for the financial year
Other comprehensive income
(“OCI”):
- Currency translation differences
arising during the financial year:
- subsidiaries
- joint ventures
- associates
Note
Attributable to owners of the Company
Currency <-------------------------------------------------------Reserves------------------------------------------------>
translation
Capital
ESOS^ &
Actuarial
Other
AFS
differences contribution
Merger
Hedging
RSA#
RM’000
RM’000
RM’000
RM’000
RM’000
RM’000
RM’000
RM’000
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
125
44
44
14(a)
19(e)
19(f)
19(h)
975,879
1,087,097
3,485,891
203,455
234,841
8,816,858
-
-
-
-
79,546
31,753
(81)
-
11,025
-
20,361
-
-
-
-
-
-
2,398,794
-
8,582,017
-
Share
premium
RM’000
931,111
-
-
-
-
-
-
1,397,305
1,015,655
3,598
378,052
1,397,305
-
(466,194)
-
16,598
-
-
-
-
-
-
-
-
16,598
-
Currency
Capital
translation contribution
differences
reserve
RM’000
RM’000
346,774
-
-
-
-
-
-
-
-
346,774
-
Merger
RM’000
(255,992)
-
-
-
-
-
-
(124,474)
(125,254)
780
-
(131,518)
-
Hedging
RM’000
(46,399)
130,229
-
-
(99,907)
53,508
-
-
-
-
176,628
-
ESOS &
RSA
RM’000
(92)
-
-
-
-
-
-
9,842
9,842
-
(9,934)
-
Actuarial
RM’000
(172,753)
(172,753)
-
-
-
-
-
(172,753)
-
-
-
Other
RM’000
3,367
-
-
-
-
-
-
3,367
3,367
-
AFS
RM’000
3,913
(2,178,626)
10,223,278
(1,179,334)
(722,152)
-
-
-
(281,053)
-
-
2,554,220
-
9,847,684
2,554,220
Retained
earnings
RM’000
3,913
(1,075,840)
23,525,269
(722,152)
-
-
53,508
(281,053)
-
42,778
(81)
(172,753)
3,840,260
1,015,655
3,598
378,052
1,397,305
(125,254)
780
9,842
3,367
20,760,849
2,554,220
Total
RM’000
21,804
66,319
2,199,075
-
(11,913)
-
-
(98,297)
154,725
-
311,273
225,205
225,205
156
4,064
-
1,821,483
81,848
NCI
RM’000
25,717
(1,009,521)
25,724,344
(722,152)
(11,913)
-
53,508
(379,350)
154,725
42,778
(81)
(172,753)
4,151,533
1,240,860
3,598
378,052
1,622,510
(125,254)
936
13,906
3,367
22,582,332
2,636,068
Total
equity
RM’000
FINANCIAL STATEMENTS
The above Consolidated Statement of Changes in Equity is to be read with the notes to the financial statements on page 129 to 248.
- Net investment hedge
- Net cash flow hedge
- Actuarial gain, net of tax
- Revaluation of AFS
Total comprehensive income for the
financial year
Transactions with owners:
- Issuance of new ordinary shares
- Share issue expenses
- Put option over shares held by NCI
- Additional investment in a
subsidiary
- Investment in a subsidiary
- Axiata Share Scheme:
- value of employees' services
- transferred from ESOS and RSA
reserve upon exercise
- Dividends paid to non-controlling
interests
- Dividends paid to shareholders via:
- DRS
- Cash settlement
- Dilution of equity interest in
subsidiaries
Total transactions with owners
At 31 December 2015
At 1 January 2015
Profit for the financial year
Other comprehensive income:
- Currency translation differences
arising during the financial year:
- subsidiaries
- joint ventures
- associates
Note
Share
capital
RM’000
Attributable to owners of the Company
<-----------------------------------------------Reserves--------------------------------------->
126
Axiata Group Berhad | Annual Report 2016
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
127
COMPANY STATEMENT OF
CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
Issued and fully paid-up
ordinary shares of RM1 each
Note
At 1 January 2016
Profit/Total comprehensive income for the financial
year
NonDistributable
Distributable
Number
of shares
’000
Nominal
value
RM’000
Share
premium
RM’000
Capital
contribution
reserve
RM’000
8,816,858
8,816,858
3,485,891
16,598
130,229
7,706,203
20,155,779
-
-
-
-
-
1,203,302
1,203,302
2,668
2,668
7,809
10,477
-
-
ESOS
and RSA
reserve
RM’000
Retained
earnings
RM’000
Total
RM’000
Transactions with owners:
- Issuance of new ordinary shares
- Share issue expenses
(171)
-
-
-
-
-
-
(171)
- Dividends paid to shareholders via:
- DRS
44
146,927
146,927
567,712
-
-
(714,639)
- Cash settlement
44
-
-
-
-
-
(790,477)
14(a)
-
-
-
-
30,245
(790,477)
- Axiata Share Scheme:
- value of employees' services
- transferred from ESOS reserve upon exercise/
vest
-
4,962
4,962
19,865
-
(24,827)
154,557
154,557
595,215
-
5,418
At 31 December 2016
8,971,415
8,971,415
4,081,106
16,598
135,647
7,404,389
20,609,155
At 1 January 2015
8,582,017
8,582,017
2,398,794
16,598
176,628
6,536,768
17,710,805
-
-
-
-
-
3,070,921
3,070,921
11,025
11,025
31,753
42,778
-
-
Total transactions with owners
Profit/Total comprehensive income for the financial
year
-
30,245
(1,505,116)
(749,926)
Transactions with owners:
- Issuance of new ordinary shares
- Share issue expenses
(81)
-
-
-
-
-
-
(81)
- Dividends paid to shareholders via:
- DRS
44
203,455
203,455
975,879
-
-
(1,179,334)
-
- Cash settlement
44
-
-
-
-
-
(722,152)
(722,152)
53,508
- Axiata Share Scheme:
- value of employees' services
- transferred from ESOS reserve upon exercise
Total transactions with owners
At 31 December 2015
14(a)
-
-
-
-
53,508
-
20,361
20,361
79,546
-
(99,907)
-
234,841
234,841
1,087,097
-
(46,399)
(1,901,486)
8,816,858
8,816,858
3,485,891
16,598
130,229
7,706,203
The above Company Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements on page 129 to 248.
(625,947)
20,155,779
128
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
STATEMENTS OF
CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
Group
Note
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
728,881
873,113
Cash flows from operating activities
35
6,775,101
6,290,720
Cash flows used in investing activities
35
(10,835,217)
(6,339,833)
Cash flows from/(used in) financing activities
35
4,290,912
Net increase/(decrease) in cash and cash equivalents
Effect of exchange gains on cash and cash equivalents
Net increase in restricted cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
34
(2,385,574)
(47,934)
(475,934)
1,796,562
(679,455)
230,796
(525,047)
139,869
145,724
98,104
313,879
2,458
3,027
(240,143)
(95,406)
-
-
4,560,665
4,867,239
321,314
172,563
4,649,422
4,560,665
463,641
321,314
The above Statements of Cash Flows are to be read in conjunction with the notes to the financial statements on pages 129 to 248.
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
129
NOTES TO THE
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
1.
GENERAL INFORMATION
The principal activities of the Group are the provision of mobile communication services and network transmission related services.
The principal activities of the Company are investment holding and provision of technical and management services on an international scale, where
it has investments in subsidiaries, joint ventures and associates.
The principal activities of the subsidiaries are set out in Note 40 to the financial statements. There has been no significant change in the nature of
the activities of the Group and the Company during the financial year.
The address of the registered office of the Company is Level 5, Corporate Headquarters, Axiata Tower, 9 Jalan Stesen Sentral 5, Kuala Lumpur
Sentral, 50470 Kuala Lumpur.
The address of the principal place of business of the Company is Corporate Headquarters, Axiata Tower, 9 Jalan Stesen Sentral 5, Kuala Lumpur
Sentral, 50470 Kuala Lumpur.
The financial statements have been approved for issuance in accordance with a resolution of the Board of Directors on 22 February 2017.
2.
BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS
The financial statements of the Group and the Company have been prepared in accordance with the provisions of the Malaysian Financial Reporting
Standards (“MFRS”), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.
The financial statements have been prepared under the historical cost convention except as disclosed in the summary of significant accounting
policies.
The financial statements are presented in Ringgit Malaysia (“RM”) and all values are rounded to the nearest thousand (RM’000) except when otherwise
indicated.
The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of the revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of
applying the Group’s and the Company’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge
of current events and actions, actual results may differ.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group’s and the
Company’s financial statements are disclosed in Note 4 to the financial statements.
(a)
Standards and amendments to published standards that are applicable to the Group and the Company that are effective
New and amendments to published standards
The following standards and amendments to published standards have been adopted by the Group and the Company for the first time for the
financial year beginning on or after 1 January 2016:
•
Amendments to MFRS 101 “Presentation of Financial Statements” on Disclosure Initiative aim to improve the effectiveness of disclosures
and are designed to encourage companies to apply professional judgment in determining the information to be disclosed in the financial
statements.
•
Amendment to MFRS 11 “Joint Arrangements” requires an investor to apply the principles of MFRS 3 “Business Combinations” when it
acquires an interest in a joint operation that constitutes a business. The amendments are applicable to both the acquisition of the initial
interest in a joint operation and the acquisition of additional interest in the same joint operation. However, a previously held interest is
not re-measured when the acquisition of an additional interest in the same joint operation results in retaining joint control.
130
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
2.
BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)
(a)
Standards and amendments to published standards that are applicable to the Group and the Company that are effective (continued)
•
Amendments to MFRS 10 “Consolidated Financial Statements”, MFRS 12 “Disclosure of Interests in Other Entities” and MFRS 128
“Investments in Associates and Joint Ventures” on Investment Entities: Applying the Consolidation Exception addresses issues that have
arisen in the context of applying the consolidation exception for investment entities. The amendments also provide relief in particular
circumstances, which will reduce the costs of applying the Standards, clarifying the exemption from preparing consolidated financial
statements for an intermediate parent entity, a subsidiary providing services that relate to the parent’s investment activities, application
of the equity method by a non-investment entity investor to an investment entity investee and the disclosures required.
•
Amendment to MFRS 127 “Separate Financial Statements” allows entities to use the equity method to account for investments in
subsidiaries, joint ventures and associates in their separate financial statements.
•
Annual Improvements 2012–2014 Cycle
MFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” clarifies that, when an asset (or disposal group) is
reclassified from ‘held for sale’ to ‘held for distribution’, or vice versa, this does not constitute a change to a plan of sale or
distribution, and does not have to be accounted for as such. This means that the asset (or disposal group) does not need to be
reinstated in the financial statements as if it had never been classified as ‘held for sale’ or ‘held for distribution’ simply because
the manner of disposal has changed. The amendment also rectifies an omission in the standard by explaining that the guidance
on changes in a plan of sale should be applied to an asset (or disposal group) which ceases to be held for distribution but is not
reclassified as ‘held for sale’.
MFRS 7 “Financial Instruments: Disclosures” adds specific guidance to help management determine whether the terms of an
arrangement to service a financial asset which has been transferred constitute continuing involvement. The amendment clarifies
that the additional disclosure on Offsetting financial assets and financial liabilities’ is not specifically required for all interim
periods, unless required by MFRS 134 “Interim Financial Reporting”.
MFRS 119 “Employee Benefits” clarifies that, when determining the discount rate for post-employment benefit obligations, it
is currency that the liabilities are denominated in that is important, not the country where they arise. The assessment whether
there is a deep market in high-quality corporate bonds is based on corporate bonds in that currency, not corporate bonds in a
particular country. Similarly, where there is no deep market in high-quality corporate bonds in that currency, government bonds
denominated in the relevant currency should be used.
MFRS 134 “Interim Financial Reporting” requires a cross-reference from the interim financial statements to the location of that
information.
The adoption of new, amendments to published standards did not have any material impact to the financial statements of the Group and the
Company.
(b)
Standards and amendments to published standards those are applicable to the Group and the Company but not yet effective
The Group and the Company will apply the new standards and amendments to standards in the following period.
(i)
Financial year beginning on/after 1 January 2017
•
Amendments to MFRS 107 “Statement of Cash Flows” on disclosure initiative introduce an additional disclosure on changes in
liabilities arising from financing activities.
•
Amendments to MFRS 112 “Income Taxes” on recognition of deferred tax assets for unrealised losses clarify the requirements for
recognising deferred tax assets on unrealised losses arising from deductible temporary difference on asset carried at fair value. In
addition, in evaluating whether an entity will have sufficient taxable profits in future periods against which deductible temporary
differences can be utilised, the amendments require an entity to compare the deductible temporary differences with future taxable
profits that excludes tax deductions resulting from the reversal of those temporary differences. The amendments shall be applied
retrospectively.
Axiata Group Berhad | Annual Report 2016
2.
FINANCIAL STATEMENTS
131
BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)
(b)
Standards and amendments to published standards that are applicable to the Group and the Company but not yet effective
(continued)
The Group and the Company will apply the new standards and amendments to standards in the following periods: (continued)
(ii)
Financial year beginning on/after 1 January 2018
•
MFRS 9 “Financial Instruments” will replace MFRS 139 “Financial Instruments: Recognition and Measurement”.
MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories
for financial assets: amortised cost, fair value through profit or loss and fair value through OCI. The basis of classification depends
on the entity's business model and the cash flow characteristics of the financial asset. Investments in equity instruments are
always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI
(provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it
to collect contractual cash flows and the cash flows represent principal and interest.
For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial
liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for
financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in OCI rather than to profit or loss,
unless this creates an accounting mismatch.
MFRS 9 introduces an expected credit loss model on impairment for all financial assets that replaces the incurred loss impairment
model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have
occurred before credit losses are recognised.
•
MFRS 15 “Revenue from Contracts with Customers” will replace MFRS 118 “Revenue” and MFRS 111 “Construction Contracts” and
related interpretations. The standard deals with revenue recognition and establishes principles for reporting useful information to
users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s
contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain
the benefits from the good or service. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer
of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services.
A new five-step process is applied before revenue can be recognised:
Identify contracts with customers;
Identify the separate performance obligations;
Determine the transaction price of the contract;
Allocate the transaction price to each of the separate performance obligations; and
Recognise the revenue as each performance obligation is satisfied.
Key provisions of the new standard are as follows:
Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the
contract price must generally be allocated to the separate elements.
If the consideration varies (such as for incentives, rebates, performance fees, royalties, success of an outcome etc), minimum
amounts of revenue must be recognised if they are not at significant risk of reversal.
The point at which revenue is able to be recognised may shift: some revenue which is currently recognised at a point in time
at the end of a contract may have to be recognised over the contract term and vice versa.
There are new specific rules on licenses, warranties, non-refundable upfront fees, and consignment arrangements, to name
a few.
As with any new standard, there are also increased disclosures.
132
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
2.
BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)
(b)
Standards and amendments to published standards that are applicable to the Group and the Company but not yet effective
(continued)
The Group and the Company will apply the new standards and amendments to standards in the following periods: (continued)
(ii)
Financial year beginning on/after 1 January 2018 (continued)
•
IC Interpretation 22 “Foreign Currency Transactions and Advance Consideration” applies when an entity recognises a nonmonetary asset or non-monetary liability arising from the payment or receipt of advance consideration. MFRS 121 requires an
entity to use the exchange rate at the ‘date of the transaction’ to record foreign currency transactions.
IC Interpretation 22 provides guidance how to determine ‘the date of transaction’ when a single payment/receipt is made, as well
as for situations where multiple payments/receipts are made.
The date of transaction is the date when the payment or receipt of advance consideration gives rise to the non-monetary asset
or non-monetary liability when the entity is no longer exposed to foreign exchange risk.
If there are multiple payments or receipts in advance, the entity should determine the date of the transaction for each payment
or receipt.
(iii)
•
Amendment to MFRS 2 “Share-based Payment” on Classification and Measurement of Share-based Payment Transactions. The
amendments provide guidance on how to account for the following situations:
The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
The classification of a share-based payment transaction with net settlement features for withholding tax obligations; and
A modification to the terms and conditions of a share-based payment transaction that changes the classification of the
transaction from cash-settled to equity-settled.
•
Amendments to MFRS 128 to allow:
Venture capital organisations, mutual funds, unit trusts and similar entities to elect, on an individual basis, measuring their
investments in associates and joint ventures at fair value through profit or loss.
An entity that is not an investment entity to retain the fair value measurement applied by its associates or joint ventures
(that are investment entities) when applying equity method.
Financial year beginning on/after 1 January 2019
MFRS 16 “Leases” supersedes MFRS 117 “Leases” and the related interpretations.
Under MFRS 16, a lease is a contract (or part of a contract) that conveys the right to control the use of an identified asset for a period
of time in exchange for consideration.
MFRS 16 eliminates the classification of leases by the lessee as either finance leases (on balance sheet) or operating leases (off balance
sheet). MFRS 16 requires a lessee to recognise a “right-of-use” of the underlying asset and a lease liability reflecting future lease
payments for most leases.
The right-of-use asset is depreciated in accordance with the principle in MFRS 116 ‘Property, Plant and Equipment’ and the lease liability
is accreted over time with interest expense recognised in the income statement.
For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all leases as either operating leases or
finance leases and account for them differently.
The impact of MFRS 9, MFRS 15 and MFRS 16 are still being assessed. Aside from MFRS 9 and MFRS 15 and MFRS 16, the adoptions of
amendments to published standards and IC Interpretation are not expected to have a material impact to the financial statements of the Group
and the Company.
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
133
SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies in the preparation of these financial statements are set out below:
(a)
Economic entities in the Group
(i)
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered
only if the rights are substantive when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition
of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity
interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired, liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group
recognises any NCI in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the NCI’s proportionate share of the
recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the carrying amount of the acquirer’s previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date, any gains or losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with MFRS 139
either in profit or loss or as a change to OCI. Contingent consideration that is classified as equity is not remeasured, and its subsequent
settlement is accounted for within equity.
The excess of the consideration transferred by the Group, the amount of any NCI in the acquiree and the acquisition-date fair value of
any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recognised as goodwill. If the
total of consideration transferred, NCI recognised and previously held interest measured is less than the fair value of the net assets of
the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the profit or loss. The accounting policy
of goodwill is stated in Note 3(b)(i) to the financial statements. Goodwill is carried at cost less accumulated impairment losses, if any.
Under the predecessor method of merger accounting, the results of subsidiaries are presented as if the merger had been effected
throughout the current and previous years. The assets and liabilities combined are accounted for based on the carrying amounts from
the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with
the values of the shares received. Any resulting credit difference is classified as equity and regarded as a non-distributable reserve. Any
resulting debit difference is adjusted against any suitable reserve. Any share premium, capital redemption reserve and any other reserves
which are attributable to share capital of the merged enterprises, to the extent that they have not been capitalised by a debit difference,
are reclassified and presented as movement in other capital reserves.
Inter-company transactions, balances and unrealised gains on transactions between the Group’s companies are eliminated. Profits and
losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
(ii)
Changes in ownership interests in subsidiaries without change of control
Transactions with NCIs that do not result in loss of control are accounted for as transactions with equity owners of the Group. A change
in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests (“NCI”) to
reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to NCI and any consideration paid
or received is recognised in equity attributable to owners of the Company.
134
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
Economic entities in the Group (continued)
(ii)
Changes in ownership interests in subsidiaries without change of control (continued)
The potential cash payments related to put options issued by the Group over the equity of subsidiaries are accounted for as financial
liabilities. The amount of financial liabilities is recognised initially at the present value of the estimated redemption amount within
derivative financial instruments with a corresponding charge directly to equity. The charge to equity is recognised separately as written
put options over non-controlling interest, adjacent to NCI in the net assets of consolidated subsidiaries.
The Group recognises the cost of writing such put options, determined as the excess of the fair value of the option over any consideration
received, as a financing cost. Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to
accrete the liability up to the amount payable under the option at the date at which is first becomes exercisable. The charge arising is recorded
as a financing cost. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity.
(iii)
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is
lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, a joint venture or financial asset. In addition, any amounts previously
recognised in OCI in respect of that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities.
This may mean that amounts previously recognised in consolidated OCI are reclassified to profit or loss.
Gains or losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the subsidiaries sold.
(iv)
Joint arrangements
A joint arrangement is an arrangement of which there is contractually agreed sharing of control by the Group with one or more parties, where
decisions about the relevant activities relating to the joint arrangement require unanimous consent of the parties sharing control. The classification
of a joint arrangement as a joint operation or a joint venture depends upon the rights and obligations of the parties to the arrangement. A
joint venture is a joint arrangement whereby the joint ventures have rights to the net assets of the arrangement. A joint operation is a joint
arrangement whereby the joint operators have rights to the assets and obligations for the liabilities, relating to the arrangement.
The Group’s interest in joint ventures are accounted for in the consolidated financial statements using the equity method as stated
in Note 3(a)(v) to the financial statements. Where necessary, in applying the equity method, adjustments are made to the financial
statements of joint venture to ensure consistency of the accounting policies with those of the Group.
Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated statement
of financial position. Under the equity method, the investment in a joint venture is initially recognised at cost, and adjusted thereafter
to recognise the Group's share of the post-acquisition profits or losses of the joint venture in profit or loss, and the Group's share of
movements in OCI of the joint venture in OCI. Dividends received or receivable from a joint venture are recognised as a reduction in
the carrying amount of the investment. When the Group's share of losses in a joint venture equals or exceeds its interests in the joint
venture, including any long-term interests that, in substance, form part of the Group's net investment in the joint venture, the Group does
not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the joint venture.
The Group determines at each reporting date whether there is any objective evidence that the investment in the joint venture is impaired.
An impairment loss is recognised for the amount by which the carrying amount of the joint venture exceeds its recoverable amount.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint
ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting
policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
When the Group ceases to equity account its joint venture because of a loss of joint control, any retained interest in the entity is
remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying
amount for the purposes of subsequently accounting for the retained interest as an associate or financial asset. In addition, any amount
previously recognised in OCI in respect of the entity is accounted for as if the Group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognised in OCI are reclassified to profit or loss.
If the ownership interest in a joint venture is reduced but joint control is retained, only a proportionate share of the amounts previously
recognised in OCI is reclassified to profit or loss where appropriate.
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
135
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
Economic entities in the Group (continued)
(v)
Associates
Associates are all entities over which the Group has significant influence, but no control or joint control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Significant influence is power to participate in the financial and operating
policy decisions of the associates but not power to exercise control or jointly control over those policies.
Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment in an
associate is initially recognised at cost, and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses
of the associate in profit or loss, and the Group’s share of movements in OCI of the associate in OCI. Dividends received or receivable
from an associate are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an
associate equals or exceeds its interests in the associate, including any long-term interests that, in substance, form part of the Group’s
net investment in the associate, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or
made payments on behalf of the associate. The Group’s investment in associates includes goodwill identified on acquisition.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired.
An impairment loss is recognised for the amount by which the carrying amount of the associate exceeds its recoverable amount.
Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the
Group’s consolidated financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are
eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have
been changed where necessary to ensure consistency with the policies adopted by the Group.
When the Group ceases to equity account its associate because of a loss of significant influence, any retained interest in the entity is
remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying
amount for the purposes of subsequently accounting for the retained interest as a financial asset. In addition, any amount previously
recognised in OCI in respect of the entity is accounted for as if the Group had directly disposed of the related assets or liabilities. This
may mean that amounts previously recognised in OCI are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts
previously recognised in OCI is reclassified to profit or loss where appropriate.
Dilution gains and losses arising in investments in associates are recognised in profit or loss.
The cost of an associate acquired in stages is measured as the sum of the fair value of the interest previously held plus the fair value of
any additional consideration transferred as of the date when the investment became an associate. Any gain or loss on re-measurement
of the previously held stake is taken to profit or loss and any OCI recognised in prior periods in relation to the previously held stake in
the acquired associate is also recognised in profit or loss.
The cost of acquiring an additional stake in an associate is added to the carrying amount of associate and equity accounted. Goodwill
arising on the purchase of additional stake is computed using fair value information at the date the additional interest is purchased. The
previously held interest is not re-measured.
Any acquisition-related costs are expensed in the periods in which the costs are incurred.
(b)
Intangible assets
(i)
Goodwill
The Group recognised goodwill based on partial goodwill method. Goodwill represents the excess of the cost of acquisition of
subsidiaries over the Group’s share of the fair value of the identifiable net assets including contingent liabilities of subsidiaries at the
date of acquisition and fair value of any pre-existing equity interest in the subsidiaries. Any shortfall is recognised in profit or loss.
136
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Intangible assets (continued)
(i)
Goodwill (continued)
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units
(“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the
goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
Goodwill is monitored at the operating segment level.
Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that
it might be impaired, and carried at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired
in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the
goodwill is monitored for internal management purposes. The carrying value of goodwill is compared to the recoverable amount, which
is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not
subsequently reversed.
(ii)
Licenses
The Group’s licenses are mainly consisting acquired telecommunication licences with allocated spectrum rights and tower operating
license. Acquired licenses are shown at cost. Licenses have finite useful lives and are carried at cost less accumulated amortisation.
Amortisation is calculated using straight-line method, from the effective date of commercialisation of services, subject to impairment, to
the end of the assignment period. Licenses are not revalued. The estimated useful lives of the acquired telecommunication licenses with
allocated spectrum rights and tower operating license of the Group are as follows:
Malaysia
Indonesia
Sri Lanka
Bangladesh
Cambodia
Nepal
(iii)
15 years
5 – 10 years
5 – 10 years
15 – 18 years
25 - 30 years
25 years
Subscriber acquisition costs
Subscriber acquisition costs incurred in providing the customer a free or subsidised handset, provided the customer signs a non-cancellable
contract for a predetermined contractual period, are amortised over the contractual period on a straight line method.
Subscriber acquisition costs are assessed at each reporting date whether there is any indication that the subscriber acquisition cost may
be impaired.
(iv)
Customer contracts and the related relationship
Customer contracts and the related customer relationship arose from the acquisition of a subsidiary. The customer contracts and the
related relationships are shown at fair value on acquisition of a subsidiary and subsequently subject to amortisation over the useful life.
The customer contracts and the related customer relationships are tested for impairment whenever indication of impairment exists.
Indonesia
Nepal
Bangladesh
Others
4 years
10 years
2.5 years
20 years
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
137
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Intangible assets (continued)
(v)
Brands
Separately acquired brands are shown at historical cost. Brands acquired in a business combination are recognised at fair value at the
acquisition date. Brands have a finite useful life and are carried at cost less accumulated amortisation and accumulated losses, if any.
Amortisation is calculated using the straight line method to allocate the cost of brands over their estimated useful lives as below:
Indonesia
Nepal
Bangladesh
(c)
2 years
10 years
3 years
Property, plant and equipment (“PPE”)
PPE are stated at cost less accumulated depreciation and impairment losses. Cost includes its purchase price and any costs that are directly
attributable to bringing to assets to the location and condition necessary for it to be capable of operating in the manner intended by
management.
(i)
Cost
The cost of telecommunication network includes cost of equipment, site surveys, contractors’ charges, materials and related overhead.
The cost of other PPE comprises their purchase cost and any incidental cost of acquisition. These costs include the costs of dismantling,
removal and restoration, the obligation which was incurred as a consequence of installing the asset.
PPE also include telecommunication equipment and maintenance spares acquired for the purpose of replacing damaged or faulty plant
or spares and supplies to be used in constructing and maintaining the network.
Borrowing costs directly incurred to finance the construction of PPE that takes more than twelve (12) months are capitalised as part of
the cost of the assets during the period of time that is required to complete and prepare the qualified asset for its intended use.
Subsequent cost is included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is
probable that the future economic benefit associated with the item will flow to the Group and the Company and the cost of the item
can be measured reliably. The carrying value of the replaced part is derecognised. All other repairs and maintenance are recognised as
expenses in profit or loss during the period in which they are incurred.
(ii)
Depreciation and residual value
Freehold land is not depreciated as it has an infinite life. Other PPE are depreciated on the straight-line method to allocate the cost of
the assets to their residual values over their estimated useful lives in years, as summarised below:
Leasehold land
Buildings
Telecommunication network equipment
Movable plant and equipment
Computer support systems
3 - 99 years
2 - 50 years
2 - 20 years
1 - 10 years
2 - 10 years
Depreciation on assets under construction or capital work-in-progress commence when the assets are ready for their intended use.
Depreciation on PPE ceases at the earlier of derecognition or classification as held-for-sale.
Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at the end of each reporting period.
(iii)
Impairment
At the end of the reporting period, the Group and the Company assess whether there is any indication of impairment. If such indication
exists, an analysis is performed to assess whether the carrying value of the asset is fully recoverable. A write down is made if the
carrying value exceeds the recoverable amount. See significant accounting policies Note 3(e) to the financial statements on impairment
of non-financial assets.
138
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c)
Property, plant and equipment (“PPE”) (continued)
(iv)
Gains or losses on disposals
Gains or losses on disposals are determined by comparing the proceeds with the carrying amount of the related asset and are included
in “other operating income – net” in profit or loss.
(v)
Asset exchange transaction
PPE may be acquired in exchange for a non-monetary asset or for a combination of monetary and non-monetary assets and is measured
at fair value unless;
•
•
the exchange transaction lacks commercial substance; or
the fair value of neither the assets received nor the assets given up can be measured reliably.
The acquired item is measured in this way even if the Group and the Company cannot immediately derecognise the assets given up. If
the acquired item cannot be reliably measured at fair value, its cost is measured at the carrying amount of the asset given up.
(vi)
Repairs and maintenance
Repairs and maintenance are charged to the profit or loss during the period in which they are incurred. The cost of major renovations
is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed
standard of performance of the existing asset will flow to the Group and the Company. This cost is depreciated over the remaining useful
life of the related asset.
(d)
Investments in subsidiaries and associates in separate financial statements
In the Company’s separate financial statements, investments in subsidiaries and associates are stated at cost less accumulated impairment
losses.
Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable
amount. See accounting policy Note 3(e) to the financial statements on impairment of non-financial assets.
On disposal of investments in subsidiaries and associates, the difference between the disposal proceed and its carrying amount of the
investment is recognised in profit or loss. Disposal-related costs are expensed as incurred.
The amount due from subsidiaries of which the Company does not expect repayment in the foreseeable future are considered as part of the
Company’s investments in the subsidiaries.
(e)
Impairment of non-financial assets (excluding goodwill)
Assets that have an indefinite useful life are not subject to amortisation and are tested for impairment annually, and as and when events or
circumstances occur indicating that an impairment may exist.
Assets with definite useful life are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell (“FVLCS”) and value-in-use (“VIU”). For the
purpose of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (“CGUs”). Assets
that suffered an impairment are reviewed for possible reversal at the end of reporting period.
For investment in associates, when assessing FVLCS, the unit of account is the investment in associate as a whole. The Group uses the
adjusted quoted price (as disclosed in Note 29 (c) to the financial statements) which reflects the management’s estimate of block discounts
on similar purchases of NCI as one of the impairment indicator.
The impairment loss is charged to profit or loss. Any subsequent increase in recoverable amount is recognised in the profit or loss.
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
139
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Financial assets
(i)
Classification
The Group and the Company classify its financial assets in the following categories: at FVTPL, loans and receivables, available-forsale (“AFS”) and held-to-maturity (“HTM”). The classification depends on the purpose for which the financial assets were acquired.
Management determines the classification at initial recognition.
(a)
Financial assets at FVTPL
The Group classifies financial assets at FVTPL if they are acquired principally for the purpose of selling in the short term, i.e. are
held for trading. Derivatives are also categorised as held for trading unless they are designated as hedges. See Note 19 to the
financial statements on derivative financial instruments and hedging activities.
The assets are presented as current assets if they are expected to be sold within twelve (12) months after the end of the reporting
period; otherwise they are presented as non-current assets.
(b)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. If collection of the amounts is expected in one year or less they are classified as current assets. If not, they are presented
as non-current assets.
(c)
AFS financial assets
AFS financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.
They are included in non-current assets unless the investment matures or management intends to dispose of it within twelve (12)
months from the end of the reporting period.
(d)
HTM financial assets
HTM financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s
and Company’s management have the positive intention and ability to hold to maturity. If the Group and the Company were to
sell other than an insignificant amount of HTM financial assets, the whole category would be tainted and reclassified as AFS. HTM
financial assets are included in non-current assets, except for those with maturities less than twelve (12) months from the end of
the reporting period, which are classified as current assets.
(ii)
Recognition and initial measurement
Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group and the Company
commit to purchase or sell the asset.
Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at FVTPL. Financial assets
carried at FVTPL are initially recognised at fair value and transaction costs are expensed in profit or loss.
(iii)
Subsequent measurement – gains and losses
AFS financial assets and financial assets at FVTPL are subsequently carried at fair value. Loans and receivables and HTM financial assets
are subsequently carried at amortised cost using the effective interest method.
Changes in the fair values of financial assets at FVTPL, including the effects of currency translation are recognised in profit or loss in the
period in which the changes arise.
Changes in the fair value of AFS financial assets are recognised in OCI, except for impairment losses (see accounting policy Note 3(f)(iv)
(b)) and foreign exchange gains and losses on monetary assets. The exchange differences on monetary assets are recognised in profit
or loss, whereas exchange differences on non-monetary assets are recognised in OCI as part of fair value change.
140
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Financial assets (continued)
(iv)
Subsequent measurement – Impairment of financial assets
(a)
Assets carried at amortised cost
The Group and the Company assess at the end of the reporting period whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of
the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
The criteria that the Group and the Company use to determine that there is objective evidence of an impairment loss include:
•
•
•
•
•
•
Significant financial difficulty of the issuer or obligor;
A breach of contract, such as a default or delinquency in interest or principal payments;
The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession
that the lender would not otherwise consider;
It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
Disappearance of an active market for that financial asset because of financial difficulties; or
Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of
financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the
individual financial assets in the portfolio, including:
(i)
(ii)
adverse changes in the payment status of borrowers in the portfolio; and
national or local economic conditions that correlate with defaults on the assets in the portfolio.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If ‘loans
and receivables’ or a ‘HTM investment’ has a variable interest rate, the discount rate for measuring any impairment loss is the
current effective interest rate determined under the contract. As a practical expedient, the Group and the Company may measure
impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the
previously recognised impairment loss is recognised in profit or loss.
When an asset is uncollectible, it is written off against the related accumulated impairment losses account. Such assets are written
off after all the necessary procedures have been completed and the amount of the loss has been determined.
(b)
Assets classified as AFS
The Group and the Company assess at the end of the reporting period whether there is objective evidence that a financial asset
or a group of financial assets is impaired.
For debt securities, the Group and the Company uses criteria and measurement of impairment loss applicable for ‘assets carried
at amortised cost’ above. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases
and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the
impairment loss is reversed through the profit or loss.
In the case of equity securities classified as AFS, in addition to the criteria for ‘assets carried at amortised cost’ above, a significant
or prolonged decline in the fair value of the security below its cost is also considered as an indicator that the assets are impaired. If
any such evidence exists for AFS financial assets, the cumulative loss that had been recognised directly in equity is removed from
equity and recognised in profit or loss. The amount of cumulative loss that is reclassified to profit or loss is the difference between
the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or
loss. Impairment losses recognised in profit or loss on equity instruments classified as AFS are not reversed through profit or loss
in subsequent period.
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
141
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Financial assets (continued)
(v)
De-recognition
Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred
and the Group and the Company have transferred substantially all risks and rewards of ownership.
Receivables that are factored out to banks and other financial institutions with recourse to the Group and the Company are not
derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The
corresponding cash received from the financial institutions is recorded as borrowings.
When available-for-sale financial assets are sold, the accumulated fair value adjustments recognised in OCI are reclassified to profit or loss.
(g)
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount presented in the statements of financial position when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the
event of default, insolvency or bankruptcy.
(h)
Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair
value at the end of each reporting period.
The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged. Derivatives that do not qualify for hedge accounting are classified as held for trading and accounted for
in accordance with the accounting policy set out in Note 3(f) to the financial statements. Derivatives that qualify for hedge accounting are
designated as either:
•
•
•
Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge);
Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge); or
Hedges of a net investment in a foreign operation (net investment hedge).
The Group and the Company document at the inception of the transaction, the relationship between hedging instruments and hedged items,
as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group and the Company also
document its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 19 to the financial statements. Movements
on the hedging reserve in OCI are shown in the statement of changes in equity of the financial statements. The full fair value of a hedging
derivative is classified as a non-current asset or liability when the remaining hedged item is more than twelve (12) months and as a current
asset or liability when the remaining maturity of the hedged item is less than twelve (12) months. Trading derivatives are classified as a current
asset or liability.
142
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h)
Derivative financial instruments and hedging activities (continued)
(i)
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the profit or loss, together
with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Group and the Company
only apply fair value hedge accounting for hedging fixed interest risk on borrowings. The gain or loss relating to the effective portion of
cross currency interest rate swaps (“CCIRS”) hedging fixed rate borrowings is recognised in the profit or loss within ‘finance costs’. The
gain or loss relating to the ineffective portion is recognised in the profit or loss within ‘other gains/(losses) - net’. Changes in the fair value
of the hedge fixed rate borrowings attributable to interest rate risk are recognised in the profit or loss within ‘finance cost’.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the
effective interest method is used and is amortised to profit or loss over the period to maturity using a recalculated effective interest rate.
(ii)
Cash ow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in OCI.
The gain or loss relating to the ineffective portion is recognised immediately in the profit or loss within ‘other gains/(losses) - net’.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example,
when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging
variable rate borrowings is recognised in the profit or loss within ‘finance costs’. The gain or loss relating to the ineffective portion is
recognised in the profit or loss within ‘other gains/(losses) – net’. However, when the forecast transaction that is hedged, results in
the recognition of a non-financial asset, the gains and losses previously deferred in equity are transferred from equity and included in
the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in cost of goods sold in the case of
inventory or in depreciation in the case of PPE.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain
or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the
profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred to the profit or loss within ‘other gains/(losses) – net’.
(iii)
Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in OCI. The gain or loss relating
to the ineffective portion is recognised immediately in the profit or loss within ‘other gains/(losses) – net’.
Gains and losses accumulated in equity are included in the profit or loss when the foreign operation is partially disposed of or sold.
(iv)
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not
qualify for hedge accounting are recognised immediately in profit or loss and are included in ‘other gains/losses – net’.
(i)
Inventories
Inventories are stated at lower of cost and net realisable value.
Certain items such as spare parts, stand-by equipment and servicing equipment shall be recognised as PPE when they meet the definition of
PPE under MFRS 116. Otherwise, the items are classified as inventory.
Cost is determined on a weighted average basis and comprises all cost of purchase and other cost incurred in bringing the inventories to their
present location.
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
143
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i)
Inventories (continued)
Net realisable value represents the estimated selling price in the ordinary course of business, less all estimated costs to completion and
applicable variable selling expenses. In arriving at the net realisable value, due allowance is made for all obsolete and slow moving items.
()
Trade receivables and other receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Other receivables
generally arise from transactions outside the usual operating activities of the Group and the Company. If collection is expected in one (1) year
or less (or in the normal operating cycle of the business if longer), they are classified as current assets. Otherwise, they are presented as noncurrent assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less accumulated impairment losses.
(k)
Cash and cash equivalents
For the purpose of the statement of cash flows, cash equivalents are held for the purpose of meeting short-term cash commitments rather
than for investment or other purposes. Cash and cash equivalents comprise cash on hand, deposits held at call with financial institutions, other
short term, highly liquid investments with original maturities of three (3) months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
Bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management are included as a component of
cash and cash equivalents in the statement of cash flows. Bank overdrafts are included within borrowings in current liabilities in the statements
of financial position.
(l)
Trade payables
Trade payables represent liabilities for goods or services provided to the Group prior to the end of financial year which are unpaid. Trade
payables are classified as current liabilities unless payment is not due within twelve (12) months after the reporting period. If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
(m)
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost using
the effective interest method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the profit
or loss over the period of the borrowings.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extend there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over
the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defer settlement of the liability
for at least twelve (12) months after the end of the reporting period.
(n)
Current and deferred tax
Tax expense for the period comprises current and deferred income tax. The income tax expense or credit for the period is the tax payable on
the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses. Tax is recognised in profit or loss, except to the extent that it
relates to items recognised in OCI or directly in equity. In this case the tax is also recognised in OCI or directly in equity, respectively.
144
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n)
Current and deferred tax (continued)
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period
in the countries where the Company and its subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the amounts attributed to assets and
liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill. Deferred tax is also not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period and are
expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, unused tax losses or unused tax credits can be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred tax liability where
the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not be
reversed in the foreseeable future. Generally the Group is unable to control the reversal of the temporary difference for associates. Only where
there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference not recognised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities
and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Tax benefit from investment tax incentive is recognised when the tax credit is utilised and no deferred tax asset is recognised when the tax
credit is claimed.
(o)
Provisions
Provisions are recognised when the Group and the Company have a present legal or constructive obligation as a result of past events, when
it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made.
Where the Group and the Company expect a provision to be reimbursed (for example, under an insurance contract), the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in a settlement is determined by considering
the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the
same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to
passage of time is recognised as finance cost.
Provision for liabilities is mainly provisions for dismantling, removal or restoration on identified sites. Provisions are reviewed at the end of
the reporting period and adjusted to PPE to reflect the current best estimation. Where the time value of money is material, the amount of a
provision is the present value of the future period expenditure expected to be required to settle the obligation.
(p)
Contingent liabilities and contingent assets
The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible
obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group or a
present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A
contingent liability also arises in the extremely rare circumstance where there is a liability that cannot be recognised because it cannot be
measured reliably.
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
145
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p)
Contingent liabilities and contingent assets (continued)
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future events beyond the
control of the Group. The Group does not recognise a contingent asset but discloses its existence where inflows of economic benefits are
probable, but not virtually certain.
In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed are measured initially at their
fair values at the acquisition date, irrespective of the extent of any NCI.
The Group recognises separately the contingent liabilities of the acquirers as part of allocating the cost of a business combination where their
fair values can be measured reliably. Where the fair values cannot be measured reliably, the resulting effect will be reflected in the goodwill
arising from the acquisitions.
Subsequent to the initial recognition, the Group measures the contingent liabilities that are recognised separately at the date of acquisition
at the higher of the amount that would be recognised in accordance with the provisions of MFRS 137 “Provisions, Contingent Liabilities and
Contingent Assets” and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with MFRS
118 “Revenue”.
(q)
Share capital
(i)
Classification
Ordinary shares and non-redeemable preference shares with discretionary dividends are classified as equity. Other shares are classified
as equity and/or liability according to the economic substance of the particular instrument.
(ii)
Share issue expenses
Incremental costs directly attributable to the issuance of new shares or options are deducted against share premium account.
(iii)
Dividends to shareholders of the Company
Liability is recognised for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the
Group, on or before the end of the reporting period but not distributed at the end of the reporting period.
Distributions to holders of an equity instrument is recognised directly in equity.
(r)
Leases
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to use an asset for
an agreed period of time.
Accounting by lessee
(i)
Finance leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as
finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the
present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other shortterm and long-term payables.
Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate of interest on the remaining
balance of the liability. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The PPE acquired under finance leases is depreciated over the shorter
of the useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of
the lease term.
146
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r)
Leases (continued)
Accounting by lessee (continued)
(i)
Finance leases (continued)
Deferred gain from sale and finance lease back transaction is amortised using straight line method over the lease period.
Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased
assets and recognised as an expense in profit or loss over the lease term on the same basis as the lease expense.
(ii)
Operating leases
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the profit or loss on a straight-line basis over the lease period.
Gain from sale and operating lease back transaction is directly recognised when the transaction occurs.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in profit or loss when incurred.
Accounting by lessor
(i)
Finance leases
When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference
between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is
recognised over the term of the lease using the net investment method so as to reflect a constant periodic rate of return.
(ii)
Operating leases
When assets are leased out under an operating lease, the asset is included in the statements of financial position based on the nature
of the asset.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in profit or loss when incurred.
(s)
Revenue recognition
The Group’s operating revenue comprises the fair value of the consideration received or receivable for the sale of products and rendering of
services net of returns, duties, sales discounts and sales taxes paid, after eliminating sales within the Group. The Group’s and the Company’s
operating revenues are recognised or accrued at the time of the provision of the products or services.
(i)
Mobile and interconnect services revenue
Revenue from mobile telephony services are recognised based on actual traffic volume, net of rebates or discounts.
Revenue from sales of prepaid starter packs and prepaid phone cards are deferred (as disclosed as deferred revenue in trade and other
payables) and recognised as revenue based on the actual use of the cards, net of taxes and discounts. Any amounts not recognised are
deferred, after which such amounts will be recognised as revenue.
Revenue from interconnection with other operators is recognised on the basis of actual recorded call traffic.
(ii)
Lease and services of passive infrastructure
Lease revenue is generated from the leasing of space on the Group’s telecommunication towers, where the customers install and
maintain their individual communication network equipment. Lease revenue from operating lease is recognised on a straight-line basis
over the fixed and non-cancellable term of the lease agreement, irrespective of when the payments are due.
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
147
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
Revenue recognition (continued)
(ii)
Lease and services of passive infrastructure (continued)
Revenue from provision of passive infrastructure services to customers is recognised on an accrual basis based on prices agreed with
customers through lease agreements.
(iii)
Interest income
Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group
and the Company reduce the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original
effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is
recognised using original effective interest rate.
(iv)
Dividend income
Dividend income from investment in subsidiaries, joint ventures, associates and other investments is recognised when a right to receive
payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested
for impairment as a consequence.
(v)
Technical and management services fees
Technical and management services fees comprise of fees for provision of support services to certain subsidiaries, which are recognised
on an accrual basis.
(vi)
Other revenues
All other revenues are recognised net of rebates or discounts upon the rendering of services or sale of products, when the transfers of
risks and rewards have been completed.
(t)
Employee benefits
(i)
Short term employee benefits
Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits that are expected to be settled wholly within
twelve (12) months after the end of the period in which the employees render the related service are recognised in respect of employees’
services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The
liabilities are presented as “Trade and other payables - payroll liabilities” in the statement of financial position.
(ii)
Contribution to Employees Provident Fund (“EPF”)
The Group’s and the Company’s contributions to EPF are charged to the profit or loss in the period to which they relate. Once the
contributions have been paid, the Group and the Company have no further payment obligations. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in the future payments is available.
(iii)
Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the
following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for
a restructuring that is within the scope of MFRS 137 and involves the payment of termination benefits. In the case of an offer made to
encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the
offer. Benefits falling due more than twelve (12) months after the end of the reporting period are discounted to their present value.
148
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t)
Employee benefits (continued)
(iv)
Share-based compensation
The Group operates a number of equity-settled and cash-settled share-based compensation plans by the Company and certain subsidiaries
under which the entity receives services from employees as consideration for equity instruments (options) of the Group/certain subsidiaries.
The fair value of the options granted in exchange for the services of the employees are recognised as employee benefit expense with a
corresponding increase to share option reserve within equity. The total amount to be expensed is determined by reference to the fair value
of the options granted:
-
including any market performance conditions;
excluding the impact of any service and non-market performance vesting conditions; and
excluding the impact of any non-vesting conditions.
Non-market vesting conditions and service conditions are included in assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to
be satisfied. At the end of the reporting period, the Group and the Company revise its estimates of the number of options that are
expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding adjustment to share option reserve in equity.
When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share premium when the options are exercised. When options are not exercised
and lapsed, the share option reserve is transferred to retained earnings.
In its separate financial statements of the Company, the grant by the Company of options over its equity instruments to the employees
of subsidiaries in the Group is treated as services provided to the subsidiaries. The fair value of options granted to employees of the
subsidiaries in exchange for the services of the employees to the subsidiaries are recognised as payables from subsidiaries, with a
corresponding credit to equity of the Company.
(v)
Post-employment benefit obligations
The Group operates various defined benefit plans in accordance with local conditions and practices in the countries in which it operates.
The plans are generally funded through payments to insurance companies or trustee-administrated funds, determined by periodic
actuarial calculations. A defined benefit plan is a pension plan that is not a defined contribution plan. Defined benefit plans define an
amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of
service and compensation.
The Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity
such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the
end of the reporting period. The liability recognised in the statement of financial position in respect of defined benefit pension plans is
the present value of the defined obligation at the end of the reporting period less the fair value of plan assets, together with adjustments
for actuarial gains/losses and unrecognised past-service costs.
The defined benefit obligation is calculated annually by independent actuaries using projected unit credit method. The present value of
the defined benefit obligation is determined by discounting the estimated future cash flows using interest rates of high-quality corporate
bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximately to the
terms of related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds
are used.
Remeasurement, comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, are
charged or credited to equity in OCI in the period in which they arise and will not be reclassified to profit or loss.
Past-service costs are recognised immediately in profit or loss.
Axiata Group Berhad | Annual Report 2016
3.
FINANCIAL STATEMENTS
149
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t)
Employee benefits (continued)
(vi)
Cash-Based Long Term Incentive (“LTI”) compensation
The Group and the Company recognise a liability and an expense for cash-based long term incentive compensation and over the vesting
period, based on a formula that takes into consideration the number of employees, a performance multiplier and discount rate. Provision
is recognised when the Group and the Company have a present legal or constructive obligation as a result of past events.
(u)
Deferred revenue
Deferred revenue comprises:
(v)
(i)
The unutilised balance of airtime, data and access fee in respect of prepaid cards sold to customers. Such revenue amounts are
recognised as revenue upon utilisation of airtime and activation of access right by the customer.
(ii)
The value of advance billings made to customers in respect of the rental of fibre optic network. Such amounts are recognised as revenue
systematically over the period covered by the advance billings.
Indefeasible right of use (“IRU”)
The Group has entered into certain IRU agreements with its customers. An IRU is a right to use a specified amount of capacity for a specific
time period that cannot be revoked or voided. Such agreements are accounted for either as lease or service transactions.
Those IRU agreements that provide the lessee with exclusive right to the purchased capacity and limit the purchased capacity to a specified
fibre are accounted as lease transactions. Other IRUs are accounted for as service contracts.
IRU agreements that transfer substantially all the risks and rewards of ownership to the lessee are classified as sale-type leases. All other IRU
leases are classified as operating leases.
(w)
Foreign currencies
(i)
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates. The consolidated financial statements are presented in RM, which is the Company’s functional
and presentation currency.
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities (inclusive of advances to subsidiaries
treated as quasi-investments) denominated in foreign currencies are recognised in profit or loss. However, exchange differences are
deferred in OCI when they arose from qualifying cash flow or net investment hedges or are attributable to items that form part of the
net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the profit or loss within ‘finance cost’. All other foreign
exchange gains and losses are presented in profit or loss within ‘foreign exchange gains/(losses)’.
Changes in the fair value of monetary securities denominated in foreign currency classified as AFS are analysed between translation
differences resulting from changes in the amortised cost of the securities and other changes in the carrying amount of the securities.
Translation differences related to changes in amortised cost are recognised in the profit or loss for the financial year, and other changes
in carrying amount are recognised in OCI.
150
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(w)
Foreign currencies (continued)
(iii)
Group companies (Consolidated financial statements)
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
•
•
•
assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that
statements of financial position;
income and expenses for each statements of comprehensive income are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the rate on the dates of the transactions); and
all resulting exchange differences are recognised as a separate component of OCI.
Goodwill and fair value adjustments arising on the acquisitions of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. Exchange differences arising are recognised in OCI.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other
financial instruments designated as hedges of such investments, are recognised in OCI.
On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss
of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint venture that includes
a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the
exchange differences relating to that foreign operation recognised in consolidated OCI and accumulated in the separate component of
equity are reclassified to consolidated profit or loss. In the case of a partial disposal that does not result in the Group losing control over
a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to NCIs
and are not recognised in consolidated profit or loss. For all other partial disposals (that is, reductions in the Group’s ownership interest
in associates or joint ventures that do not result in the Group losing significant influence or joint control) the proportionate share of the
accumulated exchange difference is reclassified to profit or loss.
(x)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision maker. The
Chief Operating Decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the Board of Directors that makes strategic decisions.
(y)
Government grants
As a Universal Service Provider (“USP”), the Group is entitled to claim certain qualified expenses from the relevant authorities in relation to
USP projects. The claim qualifies as a government grant and is recognised at fair value where there is a reasonable assurance that the grant
will be received and the Group will comply with all attached conditions.
Government grants relating to costs are recognised in the profit of loss over the period necessary to match them with the costs they are
intended to compensate.
Government grants relating to the purchase of assets are included in non-current liabilities as deferred income and are credited to the profit
or loss on the straight line basis over the expected life of the related assets.
Axiata Group Berhad | Annual Report 2016
4.
FINANCIAL STATEMENTS
151
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
(a)
Critical udgements in applying the Group’s and Company’s accounting policies
In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy could
materially affect the reported results and financial position of the Group and the Company. The following accounting policies require subjective
judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Intangible assets – Acquired telecommunication licenses with allocated spectrum rights
The Group has applied judgement in determining the treatment of the annual fees payable over ten (10) years in respect of a 3G spectrum
license granted to a foreign subsidiary. The annual fee is charged to the profit or loss when incurred based on management’s judgement that
future annual fees will no longer be payable upon the decision by the subsidiary to return the license. The Group considers the prepaid annual
payment to be usage fees based on interpretation of the license conditions, written confirmation from the Directorate General of Post and
Telecommunication, Indonesia and current financial year assessment of 3G operations. The prepaid annual fees are therefore not considered
part of the acquisition cost of the license.
Should the regulations and conditions with regards to the payment of the annual fees be amended in the future with the consequence that
payment of the remaining outstanding annual fees cannot be avoided upon the subsidiary surrendering the license, the Group will recognise
an intangible asset and a corresponding liability at the present value of the remaining annual fees at that point in time.
Intangible assets – Estimated useful life of telecommunication licenses with allocated spectrum rights
The telecommunication licenses with allocated spectrum rights acquired by a subsidiary via business combination are not subject to
amortisation and are tested annually for impairment as the Group in the opinion that the licenses can be renewed in perpetuity at negligible
cost and the associated spectrum rights, similar to land, have an indefinite economic useful life. The estimated indefinite economic useful life
reflects the Group’s expectation of the period over which the Group will continuously recover the benefits from the licenses.
(b)
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the
related actual results. The Group, and to a large extent the activities, are governed by the legal, regulatory and business environment in the
countries which the Group operates in and which the Group has investments in. The business of the Group is subject to a number of risks, many
of which are beyond the Group’s control.
The main risks relating to the Group’s business are as follows:
-
Increasing competition in the countries the Group operates in
Challenges in expanding business in certain emerging markets
Political, regulatory and social developments in the region the Group operates in
Significant expansion of capital investments required
Increasing substitution for traditional voice and data market
To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Group’s results
and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year are mentioned below.
(i)
Impairment assessment of goodwill
The Group tests goodwill for impairment annually in accordance with its accounting policy and whenever events or change in
circumstances indicate that this is necessary within the financial year. Recoverable amount is measured at the higher of the FVLCS for
that asset and its VIU.
152
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
(b) Critical accounting estimates and assumptions (continued)
(i)
Impairment assessment of goodwill (continued)
These calculations require the use of estimates. The calculations are inherently judgemental and susceptible to change from period to
period because they require the Group to make assumptions about revenue growth, exchange rates, an appropriate discount rate and
terminal growth rate.
The assumptions used, results and sensitivities of the impairment assessment of goodwill are disclosed in Note 25 to the financial
statements.
(ii)
Impairment assessment on non-financial assets (excluding goodwill)
The Group and the Company assess impairment of the assets or CGUs mentioned above whenever the events or changes in circumstances
indicate that the carrying amount of an asset or CGU may not be recoverable i.e. the carrying amount of the asset is more than the
recoverable amount. Recoverable amount is measured at the higher of the FVLCS for that asset or CGU and its VIU.
Projected future cash flows used in impairment testing of the assets or CGUs mentioned above are based on Group’s and Company’s
estimates calculated based on historical, sector and industry trends, general market and economic conditions, changes in technology
and other available information.
The recoverable amounts of the asset or CGUs have been determined based on VIU or FVLCS calculations. These calculations require
the use of estimates. The calculations are inherently judgemental and susceptible to change from period to period because they require
the Group and the Company to make assumptions about revenue growth, exchange rates, an appropriate discount rate and terminal
growth rate.
The assumptions used and results of the impairment assessment of investment in an associate are disclosed in Note 29 to the financial
statements.
(iii)
Estimated useful lives of PPE
The Group reviews the estimated useful lives of PPE based on network and information technology (“IT”) modernisation being planned
by the Group. The network and IT modernisation involves estimating when the assets will be upgraded based on the approved
modernisation plans and the useful lives of the network and IT assets are revised accordingly. Future results of operations could be
materially affected by changes in these estimates brought about by changes in the factors mentioned. A reduction in the estimated
useful lives of PPE would increase the recorded depreciation charge and decrease the PPE balance.
(iv)
Taxation
Income taxes
The Group and the Company are subject to income tax in numerous jurisdictions. Judgement is involved in determining the groupwide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain
during the ordinary course of business. The Group and the Company recognise liabilities for tax matters based on estimates of whether
additional taxes will be due. If the final outcome of these tax matters result in a difference in the amounts initially recognised, such
differences will impact the income tax and/or deferred tax provisions in the period in which such determination is made.
Deferred tax assets
Deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which temporary
differences can be utilised. This involves judgement regarding future financial performance of a particular entity in which the deferred
tax asset has been recognised.
Axiata Group Berhad | Annual Report 2016
4.
FINANCIAL STATEMENTS
153
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
(b)
Critical accounting estimates and assumptions (continued)
(v)
Contingent liabilities
Determination of the treatment of contingent liabilities is based on the Group’s view of the expected outcome of contingencies after
consulting legal counsel for litigation cases and internal and external experts of the Group for matters in the ordinary course of business.
Please refer to Note 29 and Note 36(d) to the financial statements for legal proceedings that the Group is involved in as at the end of
each reporting period.
(vi)
Fair value of derivatives and other financial instruments
Certain financial instruments such as investments and derivative financial instruments are carried on the statement of financial position
at fair value, with changes in fair value reflected in the profit or loss.
Fair values are estimated by reference in part to published price quotations and in part by using valuation techniques. The fair value of
financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation
techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market
conditions existing at the end of each financial reporting period.
(vii) Provision for dismantling, removal or restoration
Fair value estimates of provision for dismantling, removal or restoration generally involve discounted future cash flows, and periodic
accretion of such liabilities due to the passage of time is recorded as finance cost. The significant assumptions used in estimating the
provision are: timing of assets removals; cost of assets removals; expected inflation rates; and the discount rates. There can be no
assurances that actual costs and the probability of incurring obligations will not differ from these estimates.
5.
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS
(a) Incorporations, acquisitions, dissolutions and dilutions of interests during the financial year
(i)
Dilution of equity interest and additional investment in Axiata (Cambodia) Holdings Limited formerly known as Glasswool
Holdings Limited (“Glasswool”)
On 13 December 2013, Axiata Investments (Cambodia) Limited (“AIC”), a wholly-owned subsidiary of the Company entered into
a Co-operation Agreement with Glasswool (holding company of Smart Axiata Ltd.) and Southern Coast Ventures Inc. (“SCV”). In
accordance with the Co-operation Agreement, Glasswool shall issue to SCV the following additional ordinary shares in Glasswool
subject to no material adverse event as defined in the Co-operation Agreement having occurred prior to the First, Second and Third
anniversary from 19 February 2013 as below:
i)
ii)
iii)
58 Ordinary Shares following the First Completion Date;
60 Ordinary Shares following the Second Completion Date; and
64 Ordinary Shares following the Third Completion Date.
On 8 December 2015, AIC acquired 218 ordinary shares from SCV for a total consideration of RM379.4 million (USD90.0 million).
Effectively, the Group’s equity interest in Glasswool increased from 84.99% to 95.28%. The Group recorded a decrease in consolidated
retained earnings of RM281.1 million and NCI amounting to RM98.3 million in the previous financial year.
On 22 February 2016 (2015: 26 February 2015), Glasswool issued 64 (2015: 60) ordinary shares to SCV resulting in the Group’s equity
interest in Glasswool decreased from 95.28% to 92.48% (2015: 87.46% to 84.99%). As the result, the Group recorded a decrease in
consolidated retained earnings of RM8.9 million (2015: RM0.4 million) and an increase in NCI amounting to RM28.0 million (2015: RM16.9
million) during the financial year.
154
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
5.
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(a)
Incorporations, acquisitions, dissolutions and dilutions of interests during the financial year (continued)
(ii)
Incorporation of AD Video Sdn Bhd (“ADV”)
Axiata Digital Services Sdn Bhd (“ADS”), had on 25 February 2016 completed the incorporation of ADV, a private company limited by
shares, under the Companies Act, 1965.
ADV was incorporated with an authorised share capital of RM400,000 divided into 400,000 ordinary shares of RM1 each. The issued and
paid-up share capital of ADV is RM4 and its intended principal activity is to establish, maintain and operate an internet-based multimedia
services.
The incorporation above did not have any significant impact to the Group during the financial year.
(iii)
Incorporation of WSO2.Telco (Private) Limited (“WSO2.Telco SL”)
WSO2.Telco Inc., a subsidiary of ADS, had on 17 March 2016 completed the incorporation of WSO2.Telco SL, a private company limited
by shares, in Sri Lanka, under the Companies Act No.7 of 2007.
WSO2.Telco SL was incorporated with issued and paid-up capital of 1 ordinary share at value of SLR10 each. The nature of business to
be carried by WSO2.Telco SL is to develop and provide support services for software technologies, products and solutions.
The above incorporation did not have any significant impact to the Group during the financial year.
(iv)
Acquisition of edotco Pakistan (Private) Limited (“edotco PK”)
Axiata Investments (Labuan) Limited, a wholly-owned subsidiary of the Company, had on 19 December 2014 entered into a SPA with
Arif Hussain and Joozer Jiwakhan for the acquisition of the issued share capital of edotco PK at a cash consideration of PKR3,100 or
RM118. The acquisition was completed on 24 March 2016 and effectively, edotco PK became a subsidiary of the Group.
The acquisition of edotco PK did not have any significant impact to the Group during the financial year.
(v)
Dilution of equity interest in PT XL Axiata Tbk (“XL”)
On 10 March 2016 (2015:1 April), the Extraordinary General Meeting of Shareholders of XL approved the Share-based Compensation
Program Grant Date V. On 6 April 2016 (2015: 21 April), XL issued 8,986,668 (2015: 6,891,003) ordinary shares at par value of IDR100
each without pre-emptive rights to its eligible employees. Accordingly, the Group’s effective equity interest in XL diluted from 66.43%
to 66.36% (2015: 66.48% to 66.43%). The Group recorded an increase in consolidated retained earnings of RM3.1 million (2015: RM4.3
million) and NCI of RM6.0 million (2015: RM4.9 million) respectively during the financial year.
(vi)
Acquisition in Localcube Commerce Private Limited (“Localcube”)
On 7 April 2016, the Group via Axiata Investments (Mauritius) Limited, a wholly-owned subsidiary of ADS entered into a Share Subscription
Agreement with Localcube and the promoters, namely Sridhar Gundaiah and Govardhan Krishnappa Kadaliah for the issuance of 6,236
Compulsorily Convertible Preference Shares of Localcube at par value of INR10 per share representing 25.22% of issued and paid up
capital of Localcube for a total consideration of RM 51.6 million (USD 12.8 million).
The above acquisition did not have any significant impact to the Group during the financial year.
(vii) Acquisition of Reynolds Holdings Limited (“Reynolds”) by Axiata Investments (UK) Limited (“Axiata UK”)
On 21 December 2015, the Company and its wholly-owned subsidiary, Axiata UK entered into a Sale and Purchase Agreement (“SPA”)
and other ancillary agreements for the acquisition of the entire ordinary shares in issue of Reynolds, which owns 80.00% ordinary shares
in issue of Ncell Private Limited (“Ncell”). On 11 April 2016, the Group completed the acquisition of Reynolds and effectively became a
subsidiary of the Group.
Axiata Group Berhad | Annual Report 2016
5.
FINANCIAL STATEMENTS
155
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(a)
Incorporations, acquisitions, dissolutions and dilutions of interests during the financial year (continued)
(vii) Acquisition of Reynolds Holdings Limited (“Reynolds”) by Axiata Investments (UK) Limited (“Axiata UK”) (continued)
The following summarises the consideration paid on the acquisition of Reynolds at consolidated basis, the fair value of the identifiable
assets acquired, liabilities assumed and NCI at the acquisition date.
RM’000
Purchase consideration as per the SPA in cash
5,327,469
Details of the net identifiable assets acquired are as follows:
PPE
1,404,320
Intangible assets
3,559,641
Inventories
Trade and other receivables
Cash and bank balances
Deferred tax liabilities
Provision for liabilities
Trade and other payables
Tax liabilities
Total net identifiable assets
Less: NCI
4,526
853,141
1,626,407
(754,266)
(35,822)
(1,595,788)
(194,159)
4,868,000
(911,746)
Total net identifiable assets acquired, net of NCI's shares
3,956,254
Closing statement adjustments of RM980.6 million and liability incurred of RM608.4 million which were part of the
total purchase consideration for goodwill computation purpose.
1,589,037
Goodwill on acquisition
2,960,252
The Group has assessed the fair value of the identified assets acquired and liabilities assumed on the date of acquisition via purchase
price allocation (“PPA”) exercise. However MFRS 3 allows any adjustments to PPA up to twelve (12) months period from the date of
acquisition.
The goodwill arising from acquisition is attributable to the expansion of regional footprint in Nepal.
Acquisition related costs of RM25.4 million have been charged to other operating costs in the consolidated profit or loss during the
financial year.
Had Reynolds and its subsidiary been consolidated from 1 January 2016 until 10 April 2016, consolidated revenue and profit after tax of
the Group would have been increased by RM628.4 million and RM218.4 million respectively.
Since the acquisition date, revenue amounting to RM1,629.5 million and profit after tax of RM568.4 million of Ncell respectively have been
included in the consolidated statement of comprehensive income during the financial year.
(viii) Incorporation of VM Digital (Thailand) Co., Ltd. (“VM Digital”)
Axiata Digital Services Sdn Bhd (“ADS”), had on 3 May 2016 completed the incorporation of VM Digital (Registration No. 0105559069905),
a private company limited by shares, in Thailand, under the Thailand Civil and Commercial Code.
VM Digital was incorporated with a registered share capital of THB1.0 million. The nature of business to be carried by VM Digital is to
operate telecommunications and all types of communications businesses.
The above incorporation did not have any significant impact to the Group during the financial year.
156
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
5.
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(a)
Incorporations, acquisitions, dissolutions and dilutions of interests during the financial year (continued)
(ix)
Entry by XL into a Deed of Establishment with PT Indosat Tbk
XL, a subsidiary of the Company, had on 9 May entered into a Deed of Establishment (“Deed”) with PT Indosat Tbk (“Indosat Ooreedoo”)
for the establishment of a joint venture; PT One Indonesia Synergy Tbk (“JVCo”).
Under the terms of the Deed, XL subscribed 1,251 ordinary shares of IDR1.0 million totalling IDR1,251.0 million (RM0.4 million) representing
50.0% of the total issued and paid-up share capital of the JVCo with the remaining held by Indosat Ooreedoo.
The above establishment did not have any significant impact to the Group during the financial year.
(x)
Dissolution of Advantage Maximum Network Co. Ltd (“AMN”)
AMN, subsidiary of ADS had, on 16 May 2016 received the dissolution certificate from Business Registration Office, Ho Chi Minh City.
Effectively, AMN ceased to be a subsidiary of the Group.
The above dissolution has no material impact to the Group during the financial year.
(xi)
Dissolution of GSM One (L) Limited (“GSM One”) and GSM Two (L) Limited (“GSM Two”)
GSM One and GSM Two, wholly-owned subsidiaries of XL had on 15 June 2016 received the “Dissolution Certificate” from Labuan
Financial Services Authority. Effectively, GSM One and GSM Two ceased to be a subsidiary of the Group.
The above dissolution had no significant impact to the Group during the financial year.
(xii) Incorporation of Axiata Business Services Sdn Bhd (“ABS”)
On 29 July 2016, the Company incorporated its wholly-owned subsidiary, ABS (Company No. 1196307-H), a private company limited by
shares, under the Companies Act, 1965.
ABS was incorporated with an authorised share capital of RM400,000 divided into 400,000 ordinary shares of RM1 each. The issued and
paid-up share capital of ABS is RM2 and its intended principal activity is to provide international carrier services, global communications
products, managed information, communications and technology and internet of things.
The above incorporation did not have any significant impact to the Group during the financial year.
(xiii) Amalgamation/Merger of Robi Axiata Limited (“Robi”) and Airtel Bangladesh Limited (“Airtel”)
Robi, had on 28 January 2016 entered into an agreement with, inter-alia, Bharti Airtel Holdings (Singapore) Pte. Ltd. for the amalgamation
of Airtel with Robi on the terms set in the agreement and Companies Act, 1994 of Bangladesh.
On 16 November 2016 (date of acquisition), Robi and Airtel registered the Merger Filing with the Registrar of Joint Stock Companies
and Firms of Bangladesh. Pursuant to the above and in accordance with the agreement, the Proposed Amalgamation/Merger was
completed and the parties are in process to obtain the Merged License and completion of other procedural and/or administrative
formalities.
Axiata Group Berhad | Annual Report 2016
5.
FINANCIAL STATEMENTS
157
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(a)
Incorporations, acquisitions, dissolutions and dilutions of interests during the financial year (continued)
(xiii) Amalgamation/Merger of Robi Axiata Limited (“Robi”) and Airtel Bangladesh Limited (“Airtel”) (continued)
The following summarises the non-cash consideration on the acquisition of Airtel, the fair value of the identifiable assets acquired,
liabilities assumed and NCI on the date of acquisition.
RM’000
Purchase consideration issued in ordinary shares of Robi based on estimated enterprise value of Airtel
1,020,640
Contingent consideration
106,865
1,127,505
Details of the net identifiable net assets acquired are as follows:
PPE
735,823
Intangible assets
568,084
Indemnification assets*
162,352
Trade and other receivables
151,699
Advance tax
12,927
Cash and bank balances
43,906
Deferred tax assets
374,513
Borrowings
(479,552)
Trade and other payables
(441,897)
Provision for liabilities
Total net identifiable assets
(20,991)
1,106,864
Goodwill on acquisition
*
20,641
To indemnify certain corporate tax of previous tax assessment years and trade payables related to value added taxes.
The Group has assessed the fair value of the identified assets acquired and liabilities assumed on the date of acquisition via purchase
price allocation (“PPA”) exercise. However MFRS 3 allows any adjustments to PPA up to twelve (12) months period from the date of
acquisition.
The goodwill arising from acquisition is attributable to the expected synergies from the amalgamation/merger.
Acquisition related costs of RM59.9 million have been charged to other operating costs in the consolidated profit or loss during the
financial year.
Had Airtel been consolidated from 1 January 2016 until 15 November 2016, consolidated revenue and profit after tax of the Group would
have been increased by RM668.5 million and decreased by RM390.2 million respectively.
Since the acquisition date, revenue amounting to RM79.7 million and loss after tax of RM57.7 million of Airtel respectively have been
included in the consolidated statement of comprehensive income during the financial year.
With the completion of the acquisition, the Group’s effective equity interest in Robi decreased from 91.59% to 68.69%. Accordingly
the Group recorded an increase in consolidated retained earnings of RM118.1 million and non-controlling interests of RM902.5 million
respectively.
158
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
5.
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(a)
Incorporations, acquisitions, dissolutions and dilutions of interests during the financial year (continued)
(xiv) Incorporation of Dialog Business Services (Private) Limited (“DBS”)
On 21 November 2016, Dialog Axiata PLC incorporated DBS (Company No.PV 118079), a private company limited by shares, under the
Companies Act, No. 7 of 2007.
DBS was incorporated with a stated capital of SLR10. The nature of business to be carried by DBS is to carry out the business of
providing Business Process Outsourcing services including call centre services.
The above incorporation did not have any significant impact to the Group during the financial year.
(xv) Incorporation of edotco Towers (Bangladesh) Limited (“edotco Towers BD”)
edotco Investments (Labuan) Limited (“edotco Labuan”), a subsidiary of the Group, had on 17 November 2016 incorporated a new
subsidiary, edotco Towers BD (Company No. C-134238), a public company limited by shares.
The incorporation of edotco Towers BD was completed following the receipt by edotco Labuan on 29 November 2016 of the Certificate
of Incorporation from the Registrar of Joint Stock Companies and Firms, Republic of Bangladesh.
edotco Towers BD, a company duly incorporated under the Companies Act, 1994 of the Republic of Bangladesh has an authorised share
capital of BDT10.0 million represented by 1.0 million ordinary shares of BDT10 each of which BDT0.95 million has been paid-up. The
business objective of edotco Towers BD is to undertake telecommunications infrastructure and services.
The above incorporation did not have any significant impact to the Group during the financial year.
(xvi) Acquisition of additional 12.50% equity interest in edotco Investments Singapore Pte Ltd formerly known as Digicel Asian
Holdings Pte Ltd (“edotco SG”)
On 7 November 2016, edotco Investments (Labuan) Limited (“edotco Labuan”) entered into a SPA with YSH Finance Limited (“Yoma”)
for the acquisition of 250,000 ordinary shares in the share capital of edotco SG for a cash consideration of RM156.7 million or USD35.0
million. As the result, the equity interest in edotco SG increased from 75.00% to 87.50%.
The Group recognised a decrease in consolidated retained earnings of RM83.4 million and non-controlling interests of RM73.3 million
respectively during the financial year.
(xvii) Accretion/dilution on equity interest in M1 Limited (“M1”)
From 19 February 2016 until 22 March 2016, M1 had bought back its 7.5 million ordinary shares by way of market acquisition and all
the shares purchased back are held as treasury shares. As the result, the Group’s equity interest in M1, held through Axiata Investments
(Singapore) Limited, a wholly-owned subsidiary of the Company increased from 28.32% to 28.55%.
Subsequently after 22 March 2016 until 26 September 2016, M1 has resold its treasury shares to its existing employees via its ESOS’s
scheme. The Group’s equity interest in M1 diluted from 28.55% to 28.54%.
In the previous financial year, the Group’s equity interest in M1, held through Axiata Investments (Singapore) Limited, a wholly-owned
subsidiary of the Company, decreased from 28.50% to 28.32% following the issuance of new ordinary shares under M1’s ESOS.
The Group recognised a loss on dilution of equity interest amounting to RM2.3 million (2015: RM11.5 million) in the financial year.
(xviii) Dilution on equity interest in Idea Cellular Limited (“Idea”)
During the financial year, the Group’s equity interest in Idea, decreased from 19.78% to 19.77% (2015: from 19.79% to 19.78%) following
the issuance of new ordinary shares under Idea’s ESOS.
The Group recognised a loss on dilution of equity interest amounting to RM3.1 million (2015: RM5.9 million) during the financial year.
Axiata Group Berhad | Annual Report 2016
5.
FINANCIAL STATEMENTS
159
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(b)
Incorporations, acquisitions and dilutions of interests in the previous financial year
(i)
Acquisition of Adknowledge Asia Pacific Pte Ltd (“AAP”)
On 3 December 2014, Axiata Digital Advertising Sdn Bhd (“ADA”), a wholly-owned subsidiary of Axiata Digital Services Sdn Bhd (“ADS”)
entered into a Subscription and Shareholders’ Agreement with Adknowledge International, Inc and AAP for the acquisition of 80.00% equity
interest in AAP for a total cash consideration of RM19.6 million (USD5.5 million). The acquisition was completed on 19 January 2015.
The above acquisition did not have any significant impact to the Group in the previous financial year.
(ii)
Incorporation of Axiata SPV4 Sdn Bhd (“Axiata SPV4”)
The Company, had on 30 January 2015 completed the incorporation of Axiata SPV4, a private company limited by shares, under
Companies Act, 1965. Axiata SPV4 was incorporated with an authorised share capital of RM400,000 divided into 400,000 ordinary
shares of which its issued and paid-up capital is RM2. The nature of business to be carried by Axiata SPV4 is an investment holding
company.
The above incorporation did not have significant impact to the Group in the previous financial year.
(iii)
Incorporation of Axiata Digital Innovation Fund Sdn Bhd (“ADIF”)
The Group, had on 26 March 2015 completed the incorporation of ADIF, a private company limited by shares, under Companies Act,
1965. ADIF was incorporated with an authorised share capital of RM400,000 divided into 400,000 ordinary shares of which its issued and
paid-up capital is RM2. The nature of business to be carried by ADIF is as venture capital company.
The above incorporation did not have significant impact to the Group in the previous financial year.
(iv)
Additional investment in Digital Commerce Lanka (Private) Limited (“DCL”)
On 15 May 2015 (2014: 26 August 2014), Dialog Axiata Plc (“Dialog”) further increased its equity interest in DCL from 42.48% to 45.71%
(2014: from 28.32% to 42.48%) which DCL was classified as an associate of the Group.
On 15 September 2015, Dialog Holdings Lanka (Private) Limited (“DHL”), a wholly-owned subsidiary of Dialog acquired 740,000 ordinary
shares in issue of DCL for a total consideration of RM7.7 million (SLR247.9 million) which representing 54.29% equity interest in DCL.
Accordingly, the Group derecognised its investment as associate and consolidated DCL as investment in a subsidiary by the Group.
The above additional investment did not have significant impact to the Group in the previous financial year.
(v)
Incorporation of Adknowledge Asia Pacific (India) Private Limited (“AAP India”)
ADS through its 80.00% subsidiary, AAP had, on 1 June 2015, completed the incorporation of AAP India, a private company limited by
shares, under the Companies Act, 2013.
The above incorporation did not have significant impact to the Group in the previous financial year.
(vi)
Incorporation of edotco Holdings (Labuan) Limited (“edotco Holdings Labuan”)
On 20 July 2015, the Group announced the incorporation of edotco Holdings Labuan, a private company limited by shares, under the
Labuan Companies Act, 1990. edotco Holdings Labuan was incorporated with an issued paid-up share capital of USD2,000 divided
into 2,000 ordinary shares of USD1 each. The nature of business to be carried by edotco Holdings Labuan is as an investment holding
company.
The above incorporation did not have significant impact to the Group in the previous financial year.
160
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
5.
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(b)
Incorporations, acquisitions and dilutions of interests in the previous financial year (continued)
(vii) Acquisition of equity interest in Yonder Music Inc (“Yonder”)
ADS, had on 14 July 2015 entered into a Stock Purchase Agreement with Yonder, Yonder Music Partners LLC, Adam Kidron and Jim
Heindlmeyer for the proposed acquisition by ADS of 12,210,400 Series A Convertible Preference Shares with a par value of USD0.001
per share in Yonder at the purchase price of USD0.819 per share amounting to RM39.3 million (USD10.0 million).
The acquisition was completed on 24 July 2015. The above acquisition did not have significant impact to the Group in the financial year.
(viii) Acquisition of equity interest in WSO2. Telco Inc. (“WSO2. Telco”)
On 24 July 2015, ADS entered into a Subscription and Stockholders’ agreement with WSO2. Inc and WSO2. Telco for the initial
subscription by ADS of the following shares in WSO2. Telco for the total consideration as below:
i)
ii)
5,000,000 ordinary shares at USD0.0001 per share satisfied via provision of contracts and assets by ADS; and
4,615,385 preference shares at USD0.39 per share satisfied via cash settlement of RM7.6 million (USD1.8 million).
Further to the initial subscription and WSO2. Telco having achieved its pre-determined key performance indicators, ADS had, on
27 October 2016 further subscribed an additional 2,051,282 WSO2. Telco-Preferred Stocks at USD0.39 per share in cash, amounting to
RM3,330,000.
On 4 September 2015, ADS completed the initial subscription in WSO2. Telco and effectively WSO2. Telco became a 65.80% owned
subsidiary of the Group. The acquisition did not have significant impact to the Group in the financial year.
(ix)
Incorporation of edotco Services Lanka (Private) Limited (“edotco SL”)
On 7 August 2015, the Group completed the incorporation of edotco SL, a private company limited by shares in Sri Lanka, under the
Companies Act No. 7 of 2007. edotco SL was incorporated with share capital of SLR67,500,000 divided into 1,350,000 ordinary shares
of SLR50 each. The nature of business to be carried by edotco SL is the provision of end to end Integrated Infrastructure Services.
The above incorporation did not have significant impact to the Group in the previous financial year.
(x)
Acquisition of Komli Media, Inc (“Komli”)
On 7 August 2015, AAP had entered into a Sale and Purchase Agreement (“SPA”) with Komli for the acquisition of the entire issued and
paid-up share capital of Komli Asia Holding Pte. Ltd. (“Komli Asia”) for a cash consideration of RM39.3 million (USD11.3 million).
The above acquisition was completed on 2 September 2015 and effectively Komli became an 80.00% owned subsidiary of the Group.
The acquisition had no significant impact to the Group in the previous financial year.
(xi)
Incorporation of Digital Health (Private) Limited (“Digital Health”)
DHL, a wholly-owned subsidiary Dialog and Asiri Hospital Holdings PLC (“Asiri Hospital”) entered into a Memorandum of Understanding
to incorporate Digital Health with the objective of developing and operating a state-of-the-art electronic commerce infrastructure for
the healthcare sector in Sri Lanka.
Digital Health was incorporated on 14 August 2015 under the Companies Act. No.-7 of 2007 with a stated capital of SLR1,000 which
consist of 100 ordinary shares. DHL and Asiri Hospital are holding 70.00% and 30.00% stake of the initial shareholding of Digital Health
respectively.
The above incorporation did not have significant impact to the Group in the previous financial year.
Axiata Group Berhad | Annual Report 2016
5.
FINANCIAL STATEMENTS
161
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(b)
Incorporations, acquisitions and dilutions of interests in the previous financial year (continued)
(xii) Acquisition of 75.00% equity interest in edotco SG
On 2 October 2015, EIL, a wholly-owned subsidiary of edotco Group Sdn Bhd (“edotco Group”) entered into a SPA with edotco SG to
acquire a 75.00% equity interest in edotco SG, the parent of edotco Myanmar Limited.
On 4 December 2015, EIL completed the acquisition for a total cash consideration of RM528.5 million (USD125.0 million).
The following summarises the consideration paid, the fair value of the identifiable assets acquired and liabilities assumed at the
acquisition date.
RM’000
Net purchase consideration in cash
528,500
Details of the net identifiable assets acquired are as follows:
PPE
497,007
Intangible assets
358,534
Trade and other receivables
Cash and bank balances
25,228
52,520
Provision for liabilities
(66,221)
Trade and other payables
(47,745)
Tax liabilities
Borrowings
Total net identifiable assets
Less: NCI
(2,938)
(249,410)
566,975
(141,744)
Total net identifiable assets acquired, net of NCI's shares
425,231
Goodwill on acquisition
103,269
528,500
The Group has assessed the fair value of the identified assets acquired and liabilities assumed on the date of acquisition via purchase
price allocation (“PPA”) exercise. However MFRS 3 allows any adjustments to PPA up to twelve (12) months period from the date of
acquisition.
The goodwill arising from acquisition is attributable to the expansion of regional footprint in Myanmar.
Acquisition related costs of RM4.4 million have been charged to other operating costs in the consolidated profit or loss in the previous
financial year.
The impact of acquisition of edotco SG and its subsidiary had it occurred on 1 January 2015 and from the date of acquisition, was not
material to the consolidated financial statements.
In addition to the SPA, EIL also entered into a Put & Call Option Agreement with Yoma which is the NCI of edotco SG for the acquisition
of 25.00% interest in edotco SG together with shareholder's loan, owned by Yoma as disclosed in Note 19(d) to the financial statements.
(xiii) Incorporation of Axiata Investments (UK) Limited (“Axiata UK”)
On 14 December 2015, Axiata UK was incorporated with an issued and paid-up share capital of GBP1 divided into 1 ordinary share. The
nature of business to be carried by Axiata UK is as an investment holding company.
The above incorporation did not have significant impact to the Group in the previous financial year.
162
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
5.
INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS (CONTINUED)
(b)
Incorporations, acquisitions and dilutions of interests in the previous financial year (continued)
(xiv) Investment in Headstart (Private) Limited (“Headstart”)
On 4 September 2014, Dialog entered into an investment agreement with Headstart to purchase its redeemable convertible bonds
which will mature on 31 December 2021, at a nominal value of SLR85.0 million.
On 27 November 2015, Dialog transferred its investment in redeemable convertible bonds amounting to SLR60.0 million to DHL by way
of a deed of assignment. On 31 December 2015, DHL converted SLR20.0 million of its investment in redeemable convertible bonds into
equity shares of Headstart which is representing 26.00% of the issued and paid up capital of Headstart. Accordingly, Headstart became
an associate of the Group.
The above investment had no significant impact to the Group in the financial year.
6.
OPERATING REVENUE
Group
Mobile services
Interconnect services
Dividend income
Lease and services of passive infrastructure
Technical and management services fees
Others*
Total
*
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
16,938,170
16,418,299
-
-
1,627,048
1,221,636
-
-
-
-
1,002,403
1,101,406
372,141
199,456
-
-
-
-
47,435
48,142
2,628,033
2,044,069
-
-
21,565,392
19,883,460
1,049,838
1,149,548
Others include revenue from pay television transmission, sale of devices and other data services.
7(a). DEPRECIATION, IMPAIRMENT AND AMORTISATION
Group
Note
2015
RM’000
2016
RM’000
2015
RM’000
3,878,057
Depreciation of PPE
26
4,964,247
Reversal of impairment of PPE
26
-
Impairment of PPE
26
Write off of PPE
Amortisation of intangible assets
Others
Total
Company
2016
RM’000
8,431
6,623
(5,089)
-
-
62,366
10,934
-
-
26
8,916
22,653
-
426
25
630,661
291,698
-
-
315
294
-
-
5,666,505
4,198,547
8,431
7,049
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
163
7(b). OTHER OPERATING COSTS
Group
2016
RM’000
Impairment of trade and other receivables
Business license fees
Charges and commissions
Company
2015
RM’000
2016
RM’000
2015
RM’000
97,829
78,659
-
-
1,075,734
999,783
-
-
99,423
56,635
53
51
Cost of SIM and recharge cards
148,643
184,673
-
-
Revenue sharing outpayment
560,215
749,328
-
-
Leased circuit charges
236,275
221,969
-
-
1,293,709
1,331,917
12,252
8,458
Maintenance
Professional fees
298,265
219,015
51,430
22,976
1,472,323
1,282,266
5,493
4,792
Rental-equipment
186,055
181,257
253
345
Rental-others
102,365
84,797
-
-
Roaming costs
185,737
225,539
-
-
Supplies and inventories
567,828
610,189
127
546
Transportation and travelling
107,583
88,211
8,505
6,714
USP/ Obligation contribution
551,732
469,135
-
-
Utilities
329,164
277,289
507
434
Rental-land and buildings
Others1
Total
761,432
589,154
67,778
29,624
8,074,312
7,649,816
146,398
73,940
164
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
7(b). OTHER OPERATING COSTS (CONTINUED)
Group
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
- PricewaterhouseCoopers Malaysia (“PwCM”)
3,742
2,525
2,113
1,175
- Member firm of PwC International Limited (“PwCI”)*
4,667
3,656
-
-
147
60
-
-
1
Others include:
Audit fees:
- Others
Audit related fees(i):
- PwCM and PwCI
3,914
6,438
2,651
1,866
12,470
12,679
4,764
3,041
581
1,065
101
332
Other fees paid to PwCM and PwCI:
- Tax and tax related services(ii)
- Other non-audit services
12,354
4,265
884
1,750
Total
25,405
18,009
5,749
5,123
(iii)
*
Separate and independent legal entity from PwCM.
(i)
Fees incurred in connection with performance of quarterly reviews, review of purchase price allocation, agreed-upon procedures and
regulatory compliance.
(ii)
Fees incurred for assisting the Group in connection with tax compliance and advisory services.
(iii)
Fees incurred primarily in relation to due diligences on potential acquisitions, project management and other advisory services mainly incurred
by a foreign subsidiary
In order to maintain the independence of the external auditors, the Audit Committee has determined policies as to what non-audit services can be
provided by external auditors of the Group and the approval processes related to them. Under these policies and guidelines, non-audit services can
be offered by external auditors of the Group if there are clear efficiencies and value-added benefits to the Group.
7(c). STAFF COSTS (including remuneration of Executive Directors of the Company)
Group
Note
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
59,752
Staff costs excluding Directors:
- salaries, allowances, overtime and bonus
1,140,643
888,338
66,290
- termination benefits
47,992
106,977
-
-
- contribution to EPF
93,077
86,587
11,778
10,969
- other staff benefits
220,662
156,512
15,400
10,646
- ESOS and RSA expenses
14(a)
28,345
52,502
11,218
5,298
- Share based compensation expense of a subsidiary
14(b)
15,650
9,787
-
-
- Pioneer Grant of a subsidiary
14(c)
9,896
11,724
-
-
Remuneration of Executive Directors of the Company
7(d)
8,445
6,956
8,445
6,956
1,564,710
1,319,383
113,131
93,621
Total
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
165
7(d). DIRECTORS’ REMUNERATION
Group
Note
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
- salaries, allowances and bonus
5,500
5,000
5,500
5,000
- contribution to EPF
1,045
950
1,045
950
1,900
1,006
1,900
1,006
8,445
6,956
8,445
6,956
Remuneration of Executive Directors of the Company:
- ESOS and RSA expenses
14(a)
Remuneration of Non-Executive Directors of the Company:
- fees and allowances
Total
3,744
3,374
2,666
2,679
12,189
10,330
11,111
9,635
Estimated money value of benefits of Directors amounting to RM501,028 (2015: RM545,238) for the Group and the Company.
8.
OTHER (LOSSES)/GAINS - NET
Group
2016
RM’000
Finance assets at fair value through profit or loss
(10)
2015
RM’000
14
Derivative financial instruments:
- Forward foreign currency contracts (“FFC”)
- CCIRS
- Interest rate swap contracts (“IRS”)
- Put option over share held by NCI
- Call spread options
Total
(27,201)
(94,940)
(15,609)
88,724
(14,282)
-
53,990
39,236
(68,161)
98,083
166
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
9.
OTHER OPERATING INCOME - NET
Group
Note
2015
RM’000
2016
RM’000
2015
RM’000
Loss on disposal of PPE
(31,240)
(10,410)
-
2
Gain on tower sale and lease back*
275,032
511,182
-
-
Fair value gain arose from derecognition of an investment
in an associate
-
226
-
13,938
11,426
-
-
Others
276,836
153,833
2,184
1,826
Total
534,566
666,257
2,184
1,828
Bad debts recovered
*
10.
2016
RM’000
Company
5(b)(iv)
On 30 June 2016 (2015: 23 December 2014), XL disposed of certain towers which were subject to the fulfillment of certain survival period
clauses as set out in the agreement. In December 2016 (2015: September), the gain amounting to RM275.0 million (2015: RM511.2 million) or
IDR 0.9 trillion (2015: IDR1.8 trillion) was recognised upon the fulfillment of these clauses.
FINANCE INCOME/(COST)
Group
2016
RM’000
Company
2015
RM’000
2016
RM’000
2015
RM’000
Finance income
Islamic Financial Instruments
49,299
64,733
14,392
8,824
Other deposits, cash and bank balances
134,095
108,688
10,751
47,009
Total
183,394
173,421
25,143
55,833
Other borrowings
(831,657)
(637,976)
(57,000)
(24,819)
Profit on Sukuks
(373,128)
(204,879)
Finance cost
-
-
-
-
-
11,717
-
Finance expense on CCIRS:
- cash flow hedge
- net investment hedge
Total
(4,515)
8,116
(1,201,184)
(831,138)
(57,000)
(24,819)
Axiata Group Berhad | Annual Report 2016
11.
FINANCIAL STATEMENTS
167
TAXATION AND ZAKAT
Group
Note
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
119,926
461,949
-
-
Current taxation:
- Malaysian income tax
- Overseas taxation
Deferred taxation
24
Total taxation
Zakat
437,163
269,817
19,126
503
557,089
731,766
19,126
503
(76,477)
(36,955)
480,612
694,811
-
-
19,126
503
1,810
263
-
-
482,422
695,074
19,126
503
- Current year
155,848
460,090
-
-
- Prior year
(35,922)
1,859
-
-
119,926
461,949
-
-
421,055
218,308
3,018
503
16,108
51,509
16,108
-
437,163
269,817
19,126
503
Total taxation and zakat
Current taxation:
Malaysia
Income tax:
Overseas
Income tax:
- Current year
- Prior year
Deferred taxation:
- Net origination of temporary differences
Total taxation
Zakat
Total taxation and zakat
24
(76,477)
(36,955)
480,612
694,811
-
-
19,126
503
1,810
263
-
-
482,422
695,074
19,126
503
168
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
11.
TAXATION AND ZAKAT (CONTINUED)
Numerical reconciliation between taxation and the product of accounting profit multiplied by the Malaysian tax rate:
Group
Profit before taxation
Taxation calculated at the applicable Malaysian tax rate of 24%
(2015: 25%)
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
1,139,580
3,331,142
1,222,428
3,071,424
273,499
832,786
293,383
767,856
(150,671)
(336,521)
(362,361)
(805,073)
(31,470)
(122,377)
Tax effects of:
- income not subject to tax
- share of results of associates
- share of results of joint ventures
- different tax rates in other countries
23,002
9,647
(48,541)
83,803
-
-
-
-
-
- utilisation of previously unrecognised tax losses
(3,444)
- unrecognised tax losses
27,697
34,440
5,328
7,625
410,354
139,679
54,489
15,095
-
-
15,600
15,000
53,368
16,108
-
1,810
263
-
-
482,422
695,074
19,126
503
- expenses not deductible for tax purposes
- group relief
- prior year income tax
- zakat
Total taxation and zakat
(19,814)
(14)
-
(3,421)
-
Included in the taxation of the Group are tax savings amounting to RM20.4 million (2015:RM15.0 million) due to Group Relief which allows companies
with tax losses to surrender those losses to profit-making companies within the Group in the same year of assessment as provided under the
taxation law of Malaysia.
12.
EARNINGS PER SHARE
(a)
Basic earnings per share (“EPS”)
Basic EPS of the Group is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary
shares of the Company in issue during the financial year.
Group
Profit attributable to owners of the Company (RM’000)
Weighted average number of shares in issue ('000)
Basic EPS (sen)
2016
2015
504,254
2,554,220
8,877,928
8,668,700
5.7
29.5
Axiata Group Berhad | Annual Report 2016
12.
FINANCIAL STATEMENTS
169
EARNINGS PER SHARE (CONTINUED)
(b)
Diluted earnings per share
For the diluted EPS calculation, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. The Company has share options and RSA granted to employees under the Axiata Share Scheme as disclosed in Note
14(a) to the financial statements which are dilutive potential ordinary shares and is assumed to have been converted into ordinary shares.
In respect of share options over the ordinary shares and RSA of the Company, a calculation is performed to determine the number of shares
that could have been acquired at fair value based on the monetary value of the subscription rights attached to outstanding share options. The
calculation serves to determine the unexercised share options and RSA outstanding for the purpose of computing the dilution. No adjustment
is made to profit attributable to owners of the Company for the share options and RSA calculation.
Group
Profit attributable to owners of the Company (RM’000)
Weighted average number of ordinary shares in issue ('000)
Adjusted for ESOS and RSA ('000)
Weighted average number of ordinary shares for the purpose of computing diluted EPS ('000)
2016
2015
504,254
2,554,220
8,877,928
8,668,700
36,642
51,931
8,914,570
8,720,631
5.7
29.3
Diluted EPS (sen)
13.
SHARE CAPITAL
Group and Company
2016
Note
2015
No. of shares
'000
Nominal value
RM’000
No. of shares
'000
Nominal value
RM’000
12,000,000
12,000,000
12,000,000
12,000,000
8,816,858
8,816,858
8,582,017
8,582,017
525
525
2,842
2,842
Ordinary shares of RM1 each:
Authorised:
At the beginning/end of the financial year
Issued and paid-up:
At the beginning of the financial year
Performance-Based ESOS at an exercise price of:
14(a)
- RM1.81
- RM3.15
12
12
90
90
- RM3.45
813
813
2,273
2,273
- RM5.07
Restricted Share Awards
Dividend Reinvestment Scheme
At the end of the financial year
14(a)
(a)
1,318
1,318
5,820
5,820
2,668
2,668
11,025
11,025
4,962
4,962
20,361
20,361
146,927
146,927
203,455
203,455
8,971,415
8,971,415
8,816,858
8,816,858
170
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
13.
SHARE CAPITAL (CONTINUED)
(a)
Dividend Reinvestment Scheme
The shareholder of the Company via AGM approved the renewal of the authority for the Directors of the Company to allot and issue new
ordinary shares of RM1 each of the Company in relation to the DRS that provided the shareholders of the Company the option to elect to
reinvest their full or partial of the cash dividend entitlement in new ordinary shares of the Company. In the event that only part of the electable
portion is reinvested, the shareholders shall receive the remaining portion of the dividend in cash.
The Company has issued the new ordinary shares pursuant to DRS at the conversion price disclosed in Note 44 to the financial statements.
The above mentioned ordinary shares rank pari-passu in all respects with the existing ordinary shares of the Company.
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme”
The Performance-Based Employee Share Option Scheme (“ESOS”) of the Company was approved by its shareholders at an Extraordinary
General Meeting (“EGM”) held on 24 March 2009 and implemented on 16 April 2009.
On 1 June 2011, the Company’s shareholders had, at the Nineteenth (19th) AGM of the Company, approved the amendments to the Bye-Laws
of the ESOS to include a RSP. Accordingly, the existing Performance-Based ESOS was renamed as Axiata Share Scheme.
Effective from 15 July 2011, the Company implemented the Axiata Share Scheme and started to offer eligible employees the entitlement to
receive Restricted Share Awards (“RSA”) under the Restricted Share Plan in the Company on 18 July 2011 instead of ESOS.
The total number of the Performance-Based ESOS granted, percentage exercisable and the vesting period is as follows:
Options over the Company’s shares
ESOS
% of options
Number of
exercisable1 options granted
Exercise
price RM
Grant date
Vesting date
Tranche 1
16 April 2009
15 April 2011
50
34,555,750
1.81
Tranche 2
16 April 2009
15 April 2012
50
34,555,750
1.81
Tranche 1
18 January 2010
17 January 2012
50
2,088,050
3.15
Tranche 2
18 January 2010
17 January 2013
50
2,088,050
3.15
Tranche 1
24 February 2010 23 February 2012
50
24,688,750
3.45
Tranche 2
24 February 2010 23 February 2013
50
24,688,750
3.45
Tranche 1
23 February 2011 22 February 2013
50
32,121,450
5.07
Tranche 2
23 February 2011 22 February 2014
50
32,121,450
5.07
Grant 1(a), 2009
Grant 1(b), 20102
Grant 2, 2010
Grant 3(a), 2011
1
The Performance-Based ESOS/RSA granted shall become exercisable/vested only upon the fulfilment of certain performance criteria
for the Company and individuals.
2
The grant was made to newly hired employees who did not receive the main cycle grants and have been confirmed as at reporting date.
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
171
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The total number of RSA granted, percentage of shares to be vested and the vesting period is as follows:
Entitlement over the Company’s shares
RSA
% of shares
to be vested1
Number of
shares
granted3
Reference
price5
RM
Reference date
Vesting date
Tranche 1
18 July 2011
18 July 2013
50
243,350
5.03
Tranche 2
18 July 2011
18 July 2014
50 - 100
526,450
5.03
Tranche 1
30 Nov 2011
30 Nov 2013
50
23,700
5.10
Tranche 2
30 Nov 2011
30 Nov 2014
50 - 100
183,600
5.10
Tranche 1
30 Mar 2012
30 Mar 2014
50
6,890,050
5.20
Tranche 2
30 Mar 2012
30 Mar 2015
50 - 100
10,603,550
5.20
Tranche 1
31 July 2012
31 July 2014
50
122,150
5.86
Tranche 2
31 July 2012
31 July 2015
50 - 100
444,350
5.86
Tranche 1
30 Nov 2012
30 Nov 2014
50
131,400
5.92
Tranche 2
30 Nov 2012
30 Nov 2015
50 - 100
252,500
5.92
Tranche 1
20 Feb 2013
20 Feb 2015
50
6,585,950
6.27
Tranche 2
20 Feb 2013
20 Feb 2016
50 - 100
10,374,750
6.27
Tranche 1
15 Aug 2013
15 Aug 2015
50
268,100
6.90
Tranche 2
15 Aug 2013
15 Aug 2016
50 - 100
440,500
6.90
Tranche 1
15 Feb 2014
15 Feb 2016
50
6,790,450
6.55
Tranche 2
15 Feb 2014
15 Feb 2017
50 - 100
10,466,650
6.55
Tranche 1
15 Aug 2014
15 Aug 2016
50
121,950
6.95
Tranche 2
15 Aug 2014
15 Aug 2017
50 - 100
406,650
6.95
Grant 7(a), 20156
15 Feb 2015
15 Feb 2018
100
3,617,000
7.11
Grant 7(b), 20154&6
15 Aug 2015
15 Aug 2018
100
317,200
5.92
Grant 8, 20164&6
15 Feb 2016
15 Feb 2019
100
5,338,000
5.68
Grant 3(b), 20114
Grant 3(c), 20114
Grant 4(a), 2012
Grant 4(b), 20124
Grant 4(c), 20124
Grant 5(a), 2013
Grant 5(b), 20134
Grant 6(a), 2014
Grant 6(b), 20144
172
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
3
Senior and top management can only vest the RSA at the end of the third (3rd) year or contract period whichever is earlier. Number
of shares originally granted are excluding the multiplier effects to be offered to management upon fulfilment of certain performance
conditions on the day of vesting.
4
The grant was made to newly hired employees who did not receive the main cycle grant and have been confirmed as at reporting dates.
5
Refers to the price at reference date for the purpose of granting the number of shares to the employees.
6
Effective from financial year 2015, general employees of the Group were awarded a new cash based long term incentive plan instead of
Axiata Share Scheme.
The salient terms and conditions of the Axiata Share Scheme are as follows:
(i)
Maximum number of new ordinary shares of the Company available under the Axiata Share Scheme
The maximum amount of shares which may be:
(a)
Offered for subscription and allotted on the exercise of the total amount of Share Options under this Axiata Share Scheme; and
(b)
Allotted upon the vesting of RSA under a RSP, (collectively referred to as “Aggregate”) shall not be more than 7% of the issued and
paid–up ordinary share capital of the Company at any point of time during the duration of this Axiata Share Scheme.
If the Company undertakes a share buy-back exercise or any other corporate proposal resulting in the total number of the Company’s
shares issued and/or to be issued under the Axiata Share Scheme exceeding 7% of the Company’s issued and fully paid-up ordinary
share capital, all shares under the Axiata Share Scheme offered and/or granted prior to the said variation of the issued and paid-up
ordinary share capital of the Company shall remain valid and exercisable in accordance with the provisions of this Axiata Share Scheme
as if that reduction had not occurred.
(ii)
Basis of allocation and maximum allowable allotment
The total number of new ordinary shares of the Company that can be offered and allotted to any Eligible Employees (as defined in
the Bye-Laws in relation to the Axiata Share Scheme shall be at the absolute discretion of the Board (or the Axiata Share Scheme
Committee which was folded under the Board Remuneration Committee effective from financial year 2014) that has been established to
administer the Axiata Share Scheme from time to time) after taking into consideration such criteria as may be determined by the Board
or the Axiata Share Scheme Committee in its/their absolute discretion.
Further, not more than 50% of the Company’s new ordinary shares made available under the Axiata Share Scheme shall be allocated, in
aggregate, to Eligible Employees who are Executive Directors of the Company or any corporation within the Group or who are in senior
management. In addition, not more than 10% of the Company’s new ordinary shares available under the Axiata Share Scheme will be
allocated to any individual Eligible Employee who, either singly or collectively through persons connected with the Eligible Employees,
holds 20% or more of the Company’s issued and fully paid-up share capital.
(iii)
Eligibility
Any employee of the Group (other than subsidiaries which are dormant) shall be eligible to participate in the Axiata Share Scheme if the
employee, as at the dates of the respective offers of options:
(a)
has attained the age of eighteen (18) years;
(b)
has entered into a full-term contract of employment with, and is on the payroll of, a corporation within the Group and whose
service has been confirmed;
(c)
is not a non-executive or independent Director of the Company; and
(d)
fulfils any other criteria as may be set by the Board or the Axiata Share Scheme Committee in its absolute discretion.
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
173
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The salient terms and conditions of the Axiata Share Scheme are as follows: (continued)
(iii)
Eligibility (continued)
Eligibility under the Axiata Share Scheme does not confer on any Eligible Employee any claim, right to participate in, or any other right
whatsoever under the Axiata Share Scheme, and an Eligible Employee does not acquire or have any right over, or in connection with,
any Performance-Based ESOS or the RSA under this Axiata Share Scheme unless an Offer has been made by the Board to that Eligible
Employee and that Eligible Employee has accepted the Offer in accordance with the terms of the Offer and the Bye-Laws governing the
Axiata Share Scheme.
(iv)
Option price and RSA reference price
The subscription price payable for each of the Company’s shares upon exercise of options is the five (5) day volume weighted average
market price of the Company’s shares immediately preceding the date of the Offer and is not lower than the nominal value of the
Company’s shares.
The reference price at which the Grantees shall be allotted new Shares pursuant to a RSA will be based on the fair value of the shares
on the date of offer, but shall not in any event be lower than the nominal value of the ordinary shares.
(v)
Duration of the Axiata Share Scheme
The Axiata Share Scheme shall be in force for a period of eight (8) years from the effective date of implementation of the PerformanceBased ESOS and RSP, being a date of full compliance with the relevant requirements of the Main Market Listing Requirements of Bursa
Malaysia Securities Berhad (“Bursa Securities”) in relation to the initial Long Term Performance-Based ESOS. All Share Options, whether
or not exercisable, shall forthwith lapse upon the expiry of the Scheme. All unvested Shares under the RSA which are not vested shall
forthwith lapse upon the expiry of the Scheme on 15 April 2017. On 20 May 2014, the shareholders of the Company via AGM approved
the extension of the scheme from eight (8) years to ten (10) years until 15 April 2019.
(vi)
Retention period
The new ordinary shares of the Company allotted and issued pursuant to the exercise of any Performance-Based ESOS or upon the
vesting of RSA under the Axiata Share Scheme will not be subject to any retention period.
(vii) Ranking of the new shares to be issued under the Axiata Share Scheme
The Company’s new shares to be issued pursuant to Axiata Share Scheme shall, upon allotment and issuance, rank pari-passu in all
respects with the existing issued shares of the Company except that they shall not be entitled to any dividend, right, allotment and/or
other distribution in respect of which the entitlement date is before the date of allotment of such new ordinary shares.
Eligible Employees who are residents in Malaysia and who have been granted share options have the option to elect whether to exercise the
options by way of:
(i)
Selling Flexibility; or
(ii)
To directly subscribe for shares.
Whichever option once selected shall be applicable to the exercise of the Share Options for the full duration of the Axiata Share Scheme unless
otherwise determined by the Board in their sole discretion but subject always to the provisions of the Bye-Laws and the terms of the Selling
Flexibility.
Eligible Employees who are not residents in Malaysia and who have been granted Share Options shall exercise their Share Options by way of
Selling Flexibility for the full duration of the Axiata Share Scheme but subject always to the provisions of the Bye-Laws and the terms of the
Selling Flexibility for Foreign Guarantees.
174
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the financial year and its comparative in the number of options over the new ordinary shares of RM1 each of the
Company, in which the employees of the Group and the Company are entitled to, is as follows:
Performance-Based ESOS
Exercise
price
RM
At 1
January
2016
Exercised
Lapsed/
forfeited/
adjusted*
At 31
December
2016
Fair
value at
grant date
RM
Group
Grant 1(a), 2009
Tranche 1
1.81
-
(113,950)
1,072,211
958,261
0.54
Tranche 2
1.81
2,431,955
(411,200)
288,158
2,308,913
0.57
2,431,955
(525,150)
1,360,369
3,267,174
Grant 1(b), 2010
Tranche 1
3.15
54,350
(100)
(50,750)
3,500
0.93
Tranche 2
3.15
145,650
(11,600)
(29,350)
104,700
0.98
200,000
(11,700)
(80,100)
108,200
Grant 2, 2010
Tranche 1
3.45
2,874,232
(276,650)
(26,232)
2,571,350
1.09
Tranche 2
3.45
3,870,816
(536,100)
245,422
3,580,138
1.15
6,745,048
(812,750)
219,190
6,151,488
Grant 3(a), 2011
Tranche 1
5.07
7,364,240
(611,400)
(727,040)
6,025,800
1.05
Tranche 2
5.07
8,124,000
(707,300)
475,300
7,892,000
1.10
15,488,240
(1,318,700)
(251,740)
13,917,800
24,865,243
(2,668,300)
Grand total
*
1,247,719
Refer to adjustments related to grant, vesting, lapse and forfeited for the previous financial years.
The related weighted average share price at the time of exercise was RM3.93 (2015: RM3.88).
23,444,662
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
175
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the financial year and its comparative in the number of options over the new ordinary shares of RM1 each of the
Company, in which the employees of the Group and the Company are entitled to, is as follows: (continued)
Performance-Based ESOS
At 31
December
2015
Fair
value at
grant date
RM
-
-
0.54
-
2,431,955
0.57
(2,842,050)
-
2,431,955
Exercise
price
RM
At 1
January
2015
Exercised
Tranche 1
1.81
1,016,600
(1,016,600)
Tranche 2
1.81
4,257,405
(1,825,450)
5,274,005
Lapsed/
forfeited/
adjusted
Group
Grant 1(a), 2009
Grant 1(b), 2010
Tranche 1
3.15
80,400
(26,050)
-
54,350
0.93
Tranche 2
3.15
209,500
(63,850)
-
145,650
0.98
289,900
(89,900)
-
200,000
Grant 2, 2010
Tranche 1
3.45
3,612,282
(738,050)
-
2,874,232
1.09
Tranche 2
3.45
5,406,366
(1,535,550)
-
3,870,816
1.15
9,018,648
(2,273,600)
-
6,745,048
Grant 3(a), 2011
Tranche 1
5.07
9,711,290
(2,347,050)
-
7,364,240
1.05
Tranche 2
5.07
11,596,850
(3,472,850)
-
8,124,000
1.10
21,308,140
(5,819,900)
-
15,488,240
35,890,693
(11,025,450)
-
24,865,243
Grand total
The related weighted average share price at the time of exercise was RM3.88 (2014: RM4.48).
176
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the financial year and its comparative in the number of options over the new ordinary shares of RM1 each of the
Company, in which the employees of the Group and the Company are entitled to, is as follows: (continued)
Performance-Based ESOS
At 31
December
2016
Fair
value at
grant date
RM
(48,650)
222,950
0.54
(303,450)
337,450
0.57
Exercise
price
RM
At 1
January
2016
Adjusted
Exercised
Tranche 1
1.81
271,600
-
-
Tranche 2
1.81
640,900
-
-
912,500
-
-
(352,100)
560,400
Lapsed/
forfeited
Company
Grant 1(a), 2009
Grant 1(b), 2010
Tranche 1
3.15
16,150
-
-
(16,150)
-
0.93
Tranche 2
3.15
124,950
-
-
(79,150)
45,800
0.98
141,100
-
-
(95,300)
45,800
Grant 2, 2010
Tranche 1
3.45
1,257,675
-
-
(81,675)
1,176,000
1.09
Tranche 2
3.45
1,898,475
-
-
(650,375)
1,248,100
1.15
3,156,150
-
-
(732,050)
2,424,100
Grant 3(a), 2011
Tranche 1
5.07
2,217,650
-
(87,000)
(338,750)
1,791,900
1.05
Tranche 2
5.07
2,473,350
-
(87,000)
(492,650)
1,893,700
1.10
4,691,000
-
(174,000)
(831,400)
3,685,600
8,900,750
-
(174,000)
(2,010,850)
6,715,900
Grand total
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
177
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the financial year and its comparative in the number of options over the new ordinary shares of RM1 each of the
Company, in which the employees of the Group and the Company are entitled to, is as follows: (continued)
Performance-Based ESOS
Exercise
price
RM
At 1
January
2015
Adjusted
Exercised
Lapsed/
forfeited
At 31
December
2015
Fair
value at
grant date
RM
Company
Grant 1(a), 2009
Tranche 1
1.81
857,350
-
(585,750)
-
271,600
0.54
Tranche 2
1.81
1,375,650
-
(734,750)
-
640,900
0.57
2,233,000
-
(1,320,500)
-
912,500
Grant 1(b), 2010
Tranche 1
3.15
16,150
-
-
16,150
0.93
Tranche 2
3.15
131,750
-
(6,800)
-
-
124,950
0.98
147,900
-
(6,800)
-
141,100
Grant 2, 2010
Tranche 1
3.45
1,413,525
-
(155,850)
-
1,257,675
1.09
Tranche 2
3.45
2,147,925
-
(249,450)
-
1,898,475
1.15
3,561,450
-
(405,300)
-
3,156,150
Grant 3(a), 2011
Tranche 1
5.07
2,313,850
-
(96,200)
-
2,217,650
1.05
Tranche 2
5.07
2,675,250
-
(201,900)
-
2,473,350
1.10
Grand total
4,989,100
-
(298,100)
-
4,691,000
10,931,450
-
(2,030,700)
-
8,900,750
178
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the financial year in the number of RSA shares of RM1 each of the Company, in which the employees of the Group are
entitled to, is as follows:
RSP
Closing
price at
grant date
RM
At 1
January
2016
Granted
Adjusted
Vested
Lapsed/
forfeited
At 31
December
2016
Fair
value at
grant date
RM
3.90
Group
Grant 3(b), 2011
Tranche 2
5.03
20,000
-
-
-
-
20,000
20,000
-
-
-
-
20,000
Grant 4(a), 2012
Tranche 1
5.39
62,050
-
-
-
62,050
4.39
Tranche 2
5.39
283,850
-
-
(67,700)
-
-
216,150
4.26
345,900
-
-
(67,700)
-
278,200
Grant 4(b), 2012
Tranche 1
6.00
24,350
-
-
-
-
24,350
4.93
Tranche 2
6.00
52,050
-
-
-
-
52,050
4.69
76,400
-
-
-
-
76,400
Grant 4(c), 2012
Tranche 1
6.19
2,300
-
-
-
2,300
4.46
Tranche 2
6.19
145,200
-
-
(10,600)
-
-
134,600
4.11
147,500
-
-
(10,600)
-
136,900
Grant 5(a), 2013
Tranche 1
6.60
250,300
-
-
250,300
4.76
Tranche 2
6.60
9,695,700
-
-
(4,881,200) (1,474,850)
-
-
3,339,650
4.28
9,946,000
-
-
(4,881,200) (1,474,850)
3,589,950
Grant 5(b), 2013
Tranche 1
6.90
56,050
-
-
Tranche 2
6.90
272,700
-
-
328,750
-
-
(2,250)
(2,250)
53,800
4.88
(37,450)
-
235,250
4.10
(37,450)
289,050
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
179
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the financial year in the number of RSA shares of RM1 each of the Company, in which the employees of the Group are
entitled to, is as follows: (continued)
RSP
Closing
price at
grant date
RM
At 1
January
2016
Granted
Adjusted
Vested
Lapsed/
forfeited
At 31
December
2016
Fair
value at
grant date
RM
Group
Grant 6(a), 2014
Tranche 1
6.69
6,434,700
-
-
-
(29,500)
6,405,200
4.77
Tranche 2
6.69
9,826,300
-
-
-
(3,097,600)
6,728,700
4.20
16,261,000
-
-
-
(3,127,100) 13,133,900
Grant 6(b), 2014
Tranche 1
6.94
112,950
-
-
-
(7,850)
105,100
4.72
Tranche 2
6.94
397,650
-
-
-
(24,450)
373,200
3.97
510,600
-
-
-
(32,300)
478,300
(201,300)
3,390,500
4.46
Grant 7(a), 2015
7.06
3,591,800
-
-
-
Grant 7(b), 2015
6.29
317,200
-
-
-
-
317,200
4.35
Grant 8, 2016
5.88
-
5,338,000
-
-
-
5,338,000
3.79
31,545,150
5,338,000
-
Grand total
(4,961,750) (4,873,000) 27,048,400
180
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the previous financial year in the number of RSA shares of RM1 each of the Company, in which the employees of the
Group are entitled to, is as follows:
RSP
Closing
price at
grant date
RM
At 1
January
2015
Granted
Adjusted7
Vested
Lapsed/
forfeited
At 31
December
2015
Fair
value at
grant date
RM
3.90
Group
Grant 3(b), 2011
Tranche 2
5.03
20,000
-
-
-
-
20,000
20,000
-
-
-
-
20,000
Grant 3(c), 2011
Tranche 2
5.10
3,950
-
9,500
(13,450)
-
-
3,950
-
9,500
(13,450)
-
-
-
(32,550)
3.74
Grant 4(a), 2012
Tranche 1
5.39
94,600
-
62,050
4.39
Tranche 2
5.39
9,791,900
-
4,424,400 (13,520,800)
(411,650)
-
283,850
4.26
9,886,500
-
4,424,400 (13,553,350)
(411,650)
345,900
24,350
-
Grant 4(b), 2012
Tranche 1
6.00
Tranche 2
6.00
-
-
-
24,350
4.93
4.69
403,000
-
55,700
(401,700)
(4,950)
52,050
427,350
-
55,700
(401,700)
(4,950)
76,400
Grant 4(c), 2012
Tranche 1
6.19
16,200
-
-
(13,900)
2,300
4.46
Tranche 2
6.19
234,900
-
-
(87,900)
(1,800)
-
145,200
4.11
251,100
-
-
(101,800)
(1,800)
147,500
6,327,550
-
13,700
(6,041,150)
(49,800)
250,300
4.76
4.28
Grant 5(a), 2013
Tranche 1
6.60
Tranche 2
6.60
9,818,050
-
4,700
(57,900)
(69,150)
9,695,700
16,145,600
-
18,400
(6,099,050)
(118,950)
9,946,000
(174,150)
Grant 5(b), 2013
7
Tranche 1
6.90
232,450
-
-
Tranche 2
6.90
301,250
-
-
533,700
-
-
(174,150)
(2,250)
56,050
4.88
(28,550)
272,700
4.10
(30,800)
328,750
Adjusted refer to the additional number of shares vested to the senior management due to multiplier effects or pro-rated shares offered
at the time of vesting.
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
181
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the previous financial year in the number of RSA shares of RM1 each of the Company, in which the employees of the
Group are entitled to, is as follows: (continued)
RSP
Closing
price at
grant date
RM
At 1
January
2015
Granted
Adjusted7
Vested
Lapsed/
forfeited
At 31
December
2015
Fair
value at
grant date
RM
Group
Grant 6(a), 2014
Tranche 1
6.69
6,538,950
-
-
Tranche 2
6.69
9,925,950
-
-
16,464,900
-
-
(17,400)
(17,400)
(86,850)
6,434,700
4.77
(99,650)
9,826,300
4.20
(186,500)
16,261,000
Grant 6(b), 2014
Tranche 1
6.94
121,200
-
-
-
(8,250)
112,950
4.72
Tranche 2
6.94
405,900
-
-
-
(8,250)
397,650
3.97
527,100
-
-
-
(16,500)
510,600
-
3,617,000
-
-
(25,200)
3,591,800
4.46
317,200
4.35
Grant 7(a), 2015
7.06
Grant 7(b), 2015
6.29
Grand total
7
-
317,200
-
44,260,200
3,934,200
4,508,000
(20,360,900)
(796,350)
31,545,150
Adjusted refer to the additional number of shares vested to the senior management due to multiplier effects or pro-rated shares offered
at the time of vesting.
182
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the financial year in the number of RSA shares of RM1 each of the Company, in which the employees of the Company
are entitled to, is as follows: (continued)
RSP
Closing
price at
grant date
RM
At 1
January
2016
Granted
Adjusted
Vested
Lapsed/
forfeited
At 31
December
2016
Fair
value at
grant date
RM
4.26
Company
Grant 4(a), 2012
Tranche 2
5.39
132,800
-
-
-
-
132,800
132,800
-
-
-
-
132,800
Grant 4(b), 2012
Tranche 2
6.00
22,600
-
-
-
-
22,600
22,600
-
-
-
-
22,600
4.69
Grant 4(c), 2012
Tranche 2
6.19
103,600
-
-
-
-
103,600
103,600
-
-
-
-
103,600
4.11
Grant 5(a), 2013
Tranche 1
6.60
15,000
-
-
15,000
4.76
Tranche 2
6.60
1,914,500
-
-
(286,650)
-
(44,700)
-
1,583,150
4.28
1,929,500
-
-
(286,650)
(44,700)
1,598,150
Grant 5(b), 2013
Tranche 1
6.90
41,250
-
-
-
-
41,250
4.88
Tranche 2
6.90
58,350
-
-
-
-
58,350
4.10
99,600
-
-
-
-
99,600
Grant 6(a), 2014
Tranche 1
6.69
564,600
-
-
-
(22,750)
541,850
4.77
Tranche 2
6.69
2,540,800
-
-
-
(107,550)
2,433,250
4.20
3,105,400
-
-
-
(130,300)
2,975,100
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
183
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the financial year in the number of RSA shares of RM1 each of the Company, in which the employees of the Company
are entitled to, is as follows: (continued)
RSP
Closing
price at
grant date
RM
At 1
January
2016
Granted
Adjusted7
Vested
Lapsed/
forfeited
At 31
December
2016
Fair
value at
grant date
RM
Company
Grant 6(b), 2014
Tranche 1
6.94
71,300
-
-
-
(7,850)
63,450
4.72
Tranche 2
6.94
290,500
-
-
-
(7,850)
282,650
3.97
361,800
-
-
-
(15,700)
346,100
(39,100)
1,801,800
4.46
-
109,000
4.35
-
3,033,900
3.79
Grant 7(a), 2015
7.06
1,840,900
-
-
-
Grant 7(b), 2015
6.29
109,000
-
-
-
Grant 8, 2016
5.88
Grand total
-
3,033,900
-
7,705,200
3,033,900
-
(286,650)
(229,800) 10,222,650
The movement during the previous financial year in the number of RSA shares of RM1 each of the Company, in which the employees of the
Company are entitled to, is as follows:
RSP
Closing
price at
grant date
RM
At 1
January
2015
Granted
Adjusted7
Vested
Lapsed/
forfeited
At 31
December
2015
Fair
value at
grant date
RM
4.26
Company
Grant 4(a), 2012
Tranche 2
5.39
2,085,750
-
2,224,000
(4,039,000)
(137,950)
132,800
2,085,750
-
2,224,000
(4,039,000)
(137,950)
132,800
Grant 4(b), 2012
Tranche 2
6.00
243,600
-
8,800
(229,800)
-
22,600
243,600
-
8,800
(229,800)
-
22,600
4.69
Grant 4(c), 2012
Tranche 2
7
6.19
118,450
-
-
(14,850)
-
103,600
118,450
-
-
(14,850)
-
103,600
4.11
Adjusted refer to the additional number of shares vested to the senior management due to multiplier effects or pro-rated shares offered
at the time of vesting.
184
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The movement during the previous financial year in the number of RSA shares of RM1 each of the Company, in which the employees of the
Company are entitled to, is as follows: (continued)
RSP
Closing
price at
grant date
RM
At 1
January
2015
Granted
Adjusted7
Vested
Lapsed/
forfeited
At 31
December
2015
Fair
value at
grant date
RM
Company
Grant 5(a), 2013
Tranche 1
6.60
279,850
-
-
(220,500)
(44,350)
15,000
4.76
Tranche 2
6.60
2,036,850
-
4,700
(57,900)
(69,150)
1,914,500
4.28
2,316,700
-
4,700
(278,400)
(113,500)
1,929,500
(6,200)
Grant 5(b), 2013
Tranche 1
6.90
49,700
-
-
Tranche 2
6.90
86,900
-
-
136,600
-
-
(6,200)
(17,400)
-
(2,250)
41,250
4.88
(28,550)
58,350
4.10
(30,800)
99,600
Grant 6(a), 2014
Tranche 1
6.69
668,850
-
-
Tranche 2
6.69
2,640,450
-
-
3,309,300
-
-
(17,400)
(86,850)
564,600
4.77
(99,650)
2,540,800
4.20
(186,500)
3,105,400
Grant 6(b), 2014
Tranche 1
6.94
79,550
-
-
-
(8,250)
71,300
4.72
Tranche 2
6.94
298,750
-
-
-
(8,250)
290,500
3.97
378,300
-
-
-
(16,500)
361,800
-
1,866,100
-
-
(25,200)
1,840,900
4.46
109,000
4.35
Grant 7(a), 2015
7.06
Grant 7(b), 2015
6.29
Grand total
7
-
109,000
-
8,588,700
1,975,100
2,237,500
(4,585,650)
(510,450)
7,705,200
Adjusted refer to the additional number of shares vested to the senior management due to multiplier effects or pro-rated shares offered
at the time of vesting.
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
185
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The fair value of the Performance-based ESOS granted in which MFRS 2 applies, were determined using the Black-Scholes valuation model.
The significant inputs in the model are as follows:
Options over the Company's shares
Grant 1(a)
Exercise price
Grant 1(b)
Grant 2
Grant 3(a)
RM1.81
RM3.15
RM3.45
RM5.07
- Tranche 1
5.0 years
4.5 years
4.5 years
4.0 years
- Tranche 2
5.5 years
5.0 years
5.0 years
4.5 years
RM1.81
RM3.15
RM3.45
RM5.07
1%
1%
1%
2%
3.0% - 3.7%
3.0% - 3.7%
3.0% - 3.9%
3.3% - 3.6%
31.3%8
31.1%8
34.4%
24.7%
Option expected term:
Weighted average share price at grant date
Expected dividend yield
Risk free interest rates
(Yield of Malaysian Government securities)
Expected volatility
8
The expected volatility rate of the Company’s options was derived after considering the pattern and level of historical volatility of
entities in the same industry since the Company did not have sufficient information on historical volatility as it was only listed on the
Bursa Securities on 28 April 2008.
186
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The fair value of the RSA granted in which MFRS 2 applies, were determined using the Monte Carlo valuation model. The significant inputs in
the model are as follows:
Entitlement over the Company's shares
Grant 3(b)
Reference price
Grant 3(c)
Grant 4(a)
Grant 4(b)
Grant 4(c)
RM5.03
RM5.10
RM5.20
RM5.86
RM5.92
18 Jul 2011
30 Nov 2011
16 Apr 2012
17 Aug 2012
10 Dec 2012
- Tranche 1
18 Jul 2013
30 Nov 2013
30 Mar 2014
31 Jul 2014
30 Nov 2014
- Tranche 2
18 Jul 2014
30 Nov 2014
30 Mar 2015
31 Jul 2015
30 Nov 2015
RM5.03
RM5.10
RM5.39
RM6.00
RM6.19
2.54%
3.12%
4.23%
4.06%
4.15%
3.19% - 3.32%
2.92% - 3.23%
3.09% - 3.18%
2.97% - 3.04%
3.00% - 3.08%
19.9%
18.7%
27.5%
19.2%
18.6%
Valuation at grant date*
Vesting date:
Closing share price at grant date*
Expected dividend yield
Risk free interest rates
(Yield of Malaysian Government Securities)
Expected volatility#
#
*
The expected volatility rate of the Company's RSA was derived using three (3) years historical volatility due to availability of data with
more data points to increase the credibility of assumptions.
Grant date refers to the date where majority of employees accepted the offer.
Axiata Group Berhad | Annual Report 2016
14.
FINANCIAL STATEMENTS
187
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The fair value of the RSA granted in which MFRS 2 applies, were determined using the Monte Carlo valuation model. The significant inputs in
the model are as follows: (continued)
Entitlement over the Company's shares
Grant 5(a)
Reference price
Grant 5(b)
Grant 6(a)
Grant 6(b)
Grant 7(a)
Grant 7(b)
Grant 8
RM6.27
RM6.90
RM6.55
RM6.95
RM7.11
RM5.92
RM5.68
29 Mar 2013
15 Aug 2013
07 Apr 2014
02 Sep 2014
09 Apr 2015
17 Sep 2015
14 Apr 2016
- Tranche 1
20 Feb 2015
15 Aug 2015
15 Feb 2016
15 Aug 2016
-
-
-
- Tranche 2
20 Feb 2016
15 Aug 2016
15 Feb 2017
15 Aug 2017
15 Feb 2018
15 Aug 2018
15 Feb 2019
Closing share price
at grant date*
RM6.60
RM6.90
RM6.69
RM6.94
RM7.06
RM6.29
RM5.88
Expected dividend
yield
4.58%
4.20%
3.79%
3.89%
3.96%
3.96%
4.08%
2.88% - 3.09%
3.17% - 3.36%
3.00% - 3.38%
3.46%
3.57%
3.76%
3.22%
18.7%
17.4%
16.5%
15.8%
14.26%
15.20%
16.1%
Valuation at grant
date*
Vesting date:
Risk free interest
rates
(Yield of Malaysian
Government
Securities)
Expected volatility#
#
*
The expected volatility rate of the Company's RSA was derived using three (3) years period on daily basis historical volatility due to
availability of data with more data points to increase the credibility of assumptions.
Grant date refers to the date where majority of employees accepted the offer.
188
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
14.
EMPLOYEE SHARE OPTION AND SHARE SCHEME (CONTINUED)
(a)
Performance-Based Employee Share Option Scheme and Restricted Share Plan “Axiata Share Scheme” (continued)
The amounts recognised in the financial statements as disclosed in Note 7(c) and 7(d) to the financial statements for all employees (including
Directors) arising from the Performance-Based ESOS and RSA are summarised as below:
Group
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
30,245
53,508
13,118
6,304
Equity settlement arrangement:
- ESOS and RSA granted to employees under the Scheme
(b)
Share-based compensation plan of XL
In April 2010, the Nomination and Remuneration Committee of XL approved a share-based compensation plan for certain employees under
which XL’s shares are to be given as a compensation for services provided by the employees with no cash consideration. Members of the
Board of Directors and certain employees of XL who have been employed during the performance year and met certain criteria are eligible to
participate in the program.
Under the program, on each end of fourth (4th) month subsequent to completion of the performance year, XL issues shares to the eligible
employees upon XL achieving specific performance target and the employees satisfying certain performance conditions and remain in the
employment at the share issuance date. Shares issued by XL vest in two (2) equal proportions and will become employees’ rights if the
employees remain in employment for two (2) years and three (3) years as of respective share issuance date.
The program was approved in the EGM of Shareholders on 14 April 2011. The execution of the program covers performance year 2011 up to
2015 with grant cycles divided into six (6) periods.
On 10 December 2015, Board of Commissioners of XL approved a long term incentive programme 2016-2020 under which XL’s shares without
pre-emptive rights or cash consideration are to be awarded. This programme was approved by the EGM on 10 March 2016.
Total share-based compensation expense recognised in the consolidated profit or loss for the financial year ended 31 December 2016 was
RM15.7 million (2015: RM9.8 million) as disclosed in Note 7(c) to the financial statements.
(c)
Pioneer Grant of edotco Group
On 8 December 2014, edotco Group approved edotco Pioneer Grant to the eligible employees of edotco Group, its subsidiary and national
tower companies which are currently held by the Group in Bangladesh, Cambodia, Sri Lanka and Pakistan. The plan is to motivate the
employees to drive value creation for edotco Group.
On 31 March 2015, edotco issued grant letters to eligible employees. The movement in the number of shares over the new ordinary shares of
RM1 each of edotco Group, in which the employees are entitled to are as follows:
Group
At
1 January
Grant
Adjustments9
13,183,700
-
747,000
(747,400)
13,183,300
-
14,037,400
-
(853,700)
13,183,700
Lapsed/
forfeited
At
31 December
2016
Pioneer Grant
2015
Pioneer Grant
9
Adjusted refers to re-allocation of grant which was lapsed/forfeited previously to certain new/existing employees under similar terms
and conditions.
The total share-based compensation expense recognised in the consolidated profit or loss for the financial year ended 31 December 2016 was
RM9.9 million (2015:RM11.7 million).
Axiata Group Berhad | Annual Report 2016
15.
FINANCIAL STATEMENTS
189
RESERVES
Group
Note
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
9,335,025
10,223,278
7,404,389
7,706,203
Distributable
Retained earnings
(a)
Non-distributable
Capital contribution reserve
(b)
16,598
16,598
16,598
16,598
Merger reserve
(c)
346,774
346,774
-
-
Hedging reserve
(d)
(325,702)
(255,992)
-
-
ESOS and RSA reserve
(e)
135,647
130,229
135,647
130,229
(92)
-
-
(172,753)
-
-
Actuarial reserve
Other reserve
AFS reserve
11,107
(f)
(1,316,116)
35,998
3,367
-
-
1,989,249
702,032
-
-
4,202
3,598
-
-
295,349
225,481
-
-
2,288,800
931,111
-
-
10,528,131
11,222,520
7,556,634
7,853,030
Currency translation differences arising from translation of:
- subsidiaries
- joint venture
- associates
Total
(a)
The Company can also distribute tax exempt dividends from its tax exempt income account. The Company has tax exempt income accounts
as at 31 December 2016 amounting to approximately RM260.1 million (2015: RM249.9 million) available for distribution as tax exempt dividends
to shareholders subject to the availability of retained profits. The tax exempt income accounts are subject to agreement by the Inland Revenue
Board.
(b)
The Group’s and the Company’s capital contribution reserve relates to the ESOS of Telekom Malaysia Berhad, former holding company, which
were made available to the employees of the Group and the Company.
(c)
The Group’s merger reserve relates to the credit difference arising from the business combination accounted under the predecessor method
of accounting upon completion of a Group’s restructuring exercise on 25 April 2008.
(d)
The Group’s hedging reserve consists of net investment hedge and cash flow hedge arising from effective hedges as disclosed in Note 19(f, g & h)
to the financial statements.
(e)
The Group’s and the Company’s ESOS and RSA reserve relates to the Axiata Share Scheme of the Company, which were made available to
the employees of the Group and the Company as disclosed in Note 14(a) to the financial statements.
(f)
The Group’s other reserve relates to the put option liabilities over shares held by NCI as disclosed in Note 19(d & e) to the financial statements.
190
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
16.
BORROWINGS
2016
Note
2015
W.A.R.F
%
Noncurrent
RM’000
Current
RM’000
Total
RM’000
W.A.R.F
%
Noncurrent
RM’000
Current
RM’000
Total
RM’000
4.00
633,166
177,082
810,248
5.46
490,008
175,068
665,076
Group
Overseas
Secured:
- Borrowings from
financial institutions
(a)
Unsecured:
- Borrowings from
financial institutions
- Sukuk Ijarah
- Bank overdrafts
6.15
4,139,369
2,646,475
6,785,844
6.69
5,359,759
1,849,538
7,209,297
(c)(iii)
10.55
334,998
2,972
337,970
10.02
312,866
153,634
466,500
34
4.19
-
62,067
62,067
4.47
-
89,908
89,908
5.66
5,107,533
2,888,596
7,996,129
6.20
6,162,633
2,268,148
8,430,781
(e)
2.54
247,038
156,706
403,744
-
-
-
-
(b)
5.36
1,337,866
12,719
1,350,585
5.36
1,277,922
12,102
1,290,024
Malaysia
Secured:
- Borrowings from
financial institutions
Unsecured:
- Notes
- Borrowing from
financial institution
- Sukuk
(d)
3.47
-
2,968,244
2,968,244
-
-
-
-
(c)(i),(ii)
3.91
8,443,035
1,098,144
9,541,179
3.69
6,604,101
67,480
6,671,581
Total
3.92
10,027,939
4,235,813
14,263,752
3.96
7,882,023
79,582
7,961,605
4.54
15,135,472
7,124,409
22,259,881
5.12
14,044,656
2,347,730
16,392,386
3.47
-
2,968,244
2,968,244
-
-
-
-
Company
Unsecured:
- Borrowing from
financial institution
(d)
Axiata Group Berhad | Annual Report 2016
16.
FINANCIAL STATEMENTS
191
BORROWINGS (CONTINUED)
(a)
Secured by way of fixed charge on certain PPE and deposits with financial institutions of certain subsidiaries, as disclosed in Note 26(a) and
Note 34 to the financial statements respectively.
(b)
The USD300.0 million Guaranteed Notes (“Notes”) will mature on 28 April 2020, and is guaranteed by the Company. The Notes, which were
issued at 99.94%, carry a coupon rate of 5.375% per annum (“p.a.”) (payable semi-annually in arrears) and have a tenure of 10 years from the
date of issuance.
(c)
Sukuk of the Group consist of a Multi-Currency Sukuk Programme, a Sukuk Murabahah Programme and a Sukuk Ijarah issued as follows:
(i)
Multi-currency Sukuk
The Group established a Multi-Currency Sukuk Programme involving the issuance of up to USD1.5 billion (or its equivalent in other
currencies based on Islamic Principle). On 12 November 2015, the Group successfully priced the issuance USD denominated 500 million
Sukuk pursuant to the Sukuk Programme. The Sukuk, which was issued at par, carries a coupon rate of 3.466% p.a. (payable semiannually
in arrears) and has tenure of five (5) years from the date of issuance.
On 19 November 2015, the Sukuk was listed and quoted on Bursa Malaysia (under the Exempt Regime) and on the Singapore Exchange
Securities Trading Limited.
On 24 March 2016, the Group successfully priced the issuance USD denominated 500 million Sukuk pursuant to the Sukuk Programme.
The Sukuk, which was issued at par, carries a coupon rate of 4.357% p.a. (payable semiannually in arrears) and has tenure of ten (10)
years from the date of issuance.
Subsequently 25 March 2016, the Sukuk was listed and quoted on Bursa Malaysia (under the Exempt Regime) and on the Singapore
Exchange Securities Trading Limited.
(ii)
Sukuk Murabahah
On 14 August 2012, the Group established a Sukuk Murabahah Programme of up to RM5.0 billion in nominal value. RM3.0 billion of the
Sukuk Murabahah was successfully priced via a book building process with the remaining RM2.0 billion privately allocated to strategic
investors.
On 28 October 2016, the Group completed the issuance of RM500.0 million nominal value of rated Sukuks under a private offering.
The details of the Sukuk Murabahah are as follow:
Contractual
profit rate1
%
Maturity
date
Amount
RM’million
Series 2
3.60
29 Aug 2017
1,000
Series 3
3.75
29 Aug 2019
1,500
Series 4
3.90
28 Aug 2020
1,200
Series 5
4.05
27 Aug 2021
400
Series 6
4.20
29 Aug 2022
400
Series 7
4.85
28 Oct 2021
150
Series 8
5.27
28 Oct 2026
350
5,000
1
payable semiannually
192
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
16.
BORROWINGS (CONTINUED)
(c)
Sukuk of the Group consist of a Multi-Currency Sukuk Programme, a Sukuk Murabahah Programme, and a Sukuk Ijarah issued as follows:
(continued)
(iii)
Sukuk Ijarah
On 28 October 2015, XL established a Sukuk Ijarah Programme of up to IDR5.0 trillion in nominal value. The Sukuk Programme was
established under a 2-year shelf registration programme. The issuance of Shelf Sukuk Ijarah 1 XL Axiata Tranche I Year 2015 (“Tranche
I Sukuk”) amounting up to IDR1.5 trillion was based on the Shariah principle of Ijarah with the payment of Ujrah to be made quarterly
in arrears. On 2 December 2015, Tranche I Sukuk was listed and quoted on Indonesian Stock Exchange (“IDX”). The detail of Tranche 1
Sukuk as below:
Annual fixed
Ijarah return
Maturity date
Nominal value
(IDR million)
Series B
26,445
2 Dec 2018
258,000
Series C
33,915
2 Dec 2020
323,000
Series D
46,750
2 Dec 2022
425,000
1,006,000
Revenue sharing of Sukuk Ijarah is paid on quarterly basis with the first payment is due on 2 March 2016 and the last payment is paid
simultaneously with payment of principal of each series of the Sukuk Ijarah.
(d)
On 31 March 2016, the Company undertook a total of RM3,587.2 million (or USD910.0 million) loan from Bank of Tokyo Mitsubishi UFJ, Labuan.
The loan has tenure of twelve (12) months from the date of the Facility Agreement and carries a contractual interest rate of LIBOR + applicable
interest margin payable at the option of the Company either on one (1), two (2) or three (3) months basis. On 29 July 2016 and 30 September
2016, the Company had early settled a total amount of RM689.0 million (USD170.0 million) and RM321.5 million (USD78.0 million) respectively.
(e)
The borrowings are secured by charges over shares of edotco SG.
(f)
The borrowings of the Group are subject to certain covenants. The covenants require that certain ratios (Debts over Assets, Earnings before
interest, tax, depreciation and amortisation (“EBITDA”) to Borrowing/Finance Costs and Debts to EBITDA) to be met, limitation to certain
assets sales or transferred and maintaining majority ownerships in certain subsidiary by the Group. The Group is in compliance with the
covenants of its borrowings at each reporting date.
(g)
The total floating interest rate borrowings of the Group are RM9,715.1 million (2015: RM7,766.4 million) as at the reporting date.
Axiata Group Berhad | Annual Report 2016
16.
FINANCIAL STATEMENTS
193
BORROWINGS (CONTINUED)
The currency profile of the borrowings of the Group is as follows:
2016
Functional currency
RM
RM’000
IDR
RM’000
SLR
RM’000
2015
Functional currency
BDT
RM’000
Others
RM’000
Total
RM’000
RM
RM’000
IDR
RM’000
SLR
RM’000
BDT
RM’000
Others
RM’000
Total
RM’000
-
5,035,432
4,526,427
-
-
-
-
4,526,427
67,194 12,251,782
3,689,447
1,942,656
637,810
384,545
231,806
6,886,264
4,411,853
Group
RM
5,035,432
-
-
-
USD
9,228,322
1,608,958
675,140
672,168
IDR
-
3,372,189
-
-
-
3,372,189
-
4,411,853
-
-
-
SLR
-
-
353,555
-
-
353,555
-
-
78,349
-
-
78,349
BDT
-
-
-
1,193,680
-
1,193,680
-
-
-
439,888
-
439,888
53,243
53,243
-
-
-
-
49,605
49,605
120,437 22,259,881
8,215,874
6,354,509
716,159
824,433
-
-
-
-
PKR
-
-
-
-
Total
14,263,754
4,981,147
1,028,695
1,865,848
2,968,244
-
-
-
281,411 16,392,386
Company
USD
-
2,968,244
-
-
USD: United State Dollars
IDR: Indonesian Rupiah
SLR: Sri Lankan Rupee
BDT: Bangladeshi Taka
PKR: Pakistani Rupee
The carrying amounts and fair value of the Group’s non-current borrowings are as follows:
2016
Carrying
amount
RM’000
2015
Fair value
RM’000
Carrying
amount
RM’000
Fair value
RM’000
4,772,535
4,772,535
5,849,767
5,849,767
334,998
371,148
312,866
494,372
5,107,533
5,143,683
6,162,633
6,344,139
- Notes3
1,337,866
1,444,407
1,277,922
1,411,956
- Multi-currency Sukuk3
4,470,565
4,534,516
2,104,101
2,146,236
- Sukuk Murabahah2
3,972,470
3,949,362
4,500,000
4,434,946
247,038
247,038
-
-
10,027,939
10,175,323
7,882,023
7,993,138
15,135,472
15,319,006
14,044,656
14,337,277
Group
Overseas:
- Borrowings2
- Sukuk Ijarah3
Malaysia:
- Borrowings2
2
The fair values are calculated based on cash flows discounted using a rate based on the borrowing rate which ranges from 1.10% to 12.10%
(2015: 1.10%% to 11.25% ) p.a. and are within level 2 of the fair value hierarchy.
3
The fair value is based on quoted price in an active market and is within level 1 of the fair value hierarchy.
The fair value of current borrowings approximates their carrying amount, as the impact of discounting is not significant.
194
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
17.
FINANCIAL INSTRUMENTS BY CATEGORIES
2016
Note
Loan and
receivables
RM’000
Assets at
FVTPL
RM’000
2015
AFS
RM’000
Total
RM’000
Loan and
receivables
RM’000
Assets at
FVTPL
RM’000
AFS
RM’000
Total
RM’000
Group
Financial assets
Derivative financial
instruments
19
-
401,053
-
401,053
-
342,482
-
342,482
Long term receivables
30
3,469
-
-
3,469
3,586
-
-
3,586
-
-
63,925
63,925
-
-
31,286
31,286
2,488,126
-
-
2,488,126
1,998,642
-
-
1,998,642
-
18
-
18
-
28
-
28
Available-for-sale
financial asset
Trade and other
receivables
Financial assets at
FVTPL
Deposits, cash and bank
balances
34
Total
5,332,414
-
-
5,332,414
5,510,692
-
-
5,510,692
7,824,009
401,071
63,925
8,289,005
7,512,920
342,510
31,286
7,886,716
2016
Note
2015
Liabilities
at FVTPL
RM’000
Other
financial
liabilities
RM’000
Total
RM’000
Liabilities
at FVTPL
RM’000
Other
financial
liabilities
RM’000
Total
RM’000
Group
Financial liabilities
Borrowings
16
-
22,259,881
22,259,881
-
16,392,386
16,392,386
Derivative financial instruments
19
1,328,507
-
1,328,507
173,855
-
173,855
Trade and other payables excluding statutory
liabilities
Total
-
9,911,830
9,911,830
-
7,086,448
7,086,448
1,328,507
32,171,711
33,500,218
173,855
23,478,834
23,652,689
Axiata Group Berhad | Annual Report 2016
17.
FINANCIAL STATEMENTS
195
FINANCIAL INSTRUMENTS BY CATEGORIES (CONTINUED)
2016
Note
2015
Loans and
receivables
RM’000
Total
RM’000
Loans and
receivables
RM’000
Total
RM’000
Company
Financial assets
Amounts due from subsidiaries
32
145,293
145,293
2,628,009
2,628,009
Long term receivables
30
2,000
2,000
2,000
2,000
Other receivables
33
7,333
7,333
7,964
7,964
Deposits, cash and bank balances
34
732,801
732,801
321,314
321,314
887,427
887,427
2,959,287
2,959,287
Total
RM’000
Other
financial
liabilities
RM’000
Total
RM’000
50,757
Total
Note
Other
financial
liabilities
RM’000
Financial liabilities
Other payables
127,245
127,245
50,757
Borrowings
16
2,968,244
2,968,244
-
-
Amounts due to subsidiaries
32
2,056,703
2,056,703
1,396,349
1,396,349
5,152,192
5,152,192
1,447,106
1,447,106
Total
196
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
18.
CREDIT QUALITY OF FINANCIAL ASSETS
Group
Note
2016
RM’000
2015
RM’000
Trade receivables
Counterparties with external credit ratings*
A+
91
5,867
A-
21,822
13,035
A-2
17
8,351
A-1
370
4,315
A-1+
545
4,874
25,921
18,725
BB+
BBB-
1,976
8,091
DRSK
22,116
45,956
NR
13,220
33,708
P1
9,220
4,602
Others
4,412
7,703
99,710
155,227
Group 1
899,032
547,837
Group 2
240,710
306,034
Group 3
156,708
104,812
Counterparties without external credit ratings
Total
*
33
Credit rating by Standard & Poor’s, Moody’s, Fitch, Bloomberg and other local credit rating agencies.
1,296,450
958,683
1,396,160
1,113,910
Axiata Group Berhad | Annual Report 2016
18.
FINANCIAL STATEMENTS
197
CREDIT QUALITY OF FINANCIAL ASSETS (CONTINUED)
Group
Note
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
A-1
67,821
162,789
-
-
A-1+
119,333
135,361
-
-
A3
260,017
1,204,998
-
-
A-2
1,562,185
1,964,496
9,448
401
AA
480,677
-
-
-
AA-
587,900
-
-
-
68,663
84,597
-
-
NR
223,479
312,690
192
-
P1
269,857
484,456
169,591
173,693
P-2
287,788
224,526
284,245
121,842
Deposits, cash and bank balances
B
WR
20,100
71,963
-
-
idAA
186,686
124,781
-
-
Others
321,717
337,596
-
-
Without external credit ratings
876,191
402,439
269,325
25,378
5,332,414
5,510,692
732,801
321,314
63,925
31,286
-
-
Total
34
AFS financial asset
Without external credit ratings
Derivative financial instrument assets
A-1
-
129,909
-
-
A-1+
71,510
30,093
-
-
A+
36,357
-
-
-
A-2
154,326
174,137
-
-
P-1
24,156
-
-
-
NR
106,361
-
-
-
8,343
8,343
-
-
401,053
342,482
-
-
Without external credit ratings
Total
19
Company
Note
2016
RM’000
2015
RM’000
32
145,293
2,628,009
Amounts due from subsidiaries
Group 2
Group 1 - new customers/related parties less than six (6) months
Group 2 - existing customers/related parties more than six (6) months with no defaults in the past
Group 3 - existing customers/related parties more than six (6) months with some defaults in the past. All defaults were fully recovered.
None of the loans to related parties is past due but not impaired.
198
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
19.
DERIVATIVE FINANCIAL INSTRUMENTS
Group
2016
Note
2015
Assets
RM’000
Liabilities
RM’000
Assets
RM’000
Liabilities
RM’000
Non-current
Non-hedging derivative financial instruments:
- CCIRS
(a)
61,567
-
72,330
-
- Call spread options
(b)
107,867
-
46,751
-
- Convertible warrants in an associate
(c)
8,343
-
8,343
-
- Put option over shares held by NCI
(d)
-
(1,165,420)
-
-
177,777
(1,165,420)
127,424
-
Derivative designated as hedging instruments:
- CCIRS
(f),(g)
- IRS
220,541
(h)
Total non-current
-
101,807
-
-
(437)
-
(743)
398,318
(1,165,857)
229,231
(743)
Current
Non-hedging derivative financial instruments:
- CCIRS
(a)
-
- Put option over shares held by NCI
(e)
-
(157,010)
-
113,251
-
(172,753)
-
-
(157,010)
113,251
(172,753)
(359)
Derivative designated as hedging instruments:
- IRS
(h)
-
(465)
-
- CCIRS
(f)
2,735
(5,175)
-
2,735
(162,650)
113,251
(173,112)
401,053
(1,328,507)
342,482
(173,855)
Total current
Total
-
Non-hedging derivatives are classified as current/non-current assets or liabilities. The full fair value of a hedging derivative is classified as a noncurrent asset or liability if the remaining maturity of the hedged item is more than twelve (12) months and, as a current asset or liability, if the
maturity of the hedged items is less than twelve (12) months.
Non-hedging derivatives financial instruments
(a)
Cross currency interest rate swaps
The information relating to the derivative financial instruments of a subsidiary of the Group as at 31 December 2016 is as follows:
Counterparties
Standard Chartered
Bank
Notional
amount
USD’ million
50.0
Period
13 June 2013 13 June 2018
Swap
amount
IDR’ billion
Exchange
period
Fixed
interest
rate paid
Exchange
rate per
1USD:
495.9
Quarterly
7.60%
IDR9,918
Interest
rate received
Fixed rate
2.3%
Axiata Group Berhad | Annual Report 2016
19.
FINANCIAL STATEMENTS
199
DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Non-hedging derivatives financial instruments (continued)
(b)
Call spread options
The information relating to the derivative financial instruments of a subsidiary of the Group as at 31 December 2016 is as follows:
Counterparties
(c)
Notional
amount
USD’ million
Period
Strike/
cap rate
1USD:
Premium
per annum
Start of
optional
termination
date
Bank of America Merrill Lynch - Singapore
100.0
29 May 2014 9 Jan 2019
IDR11,580IDR14,580
3.33%
9 Oct 2015
DBS Bank Ltd. Singapore
200.0
30 May 2014 14 March 2019
IDR11,600IDR14,600
3.22%
17 March 2015
Convertible warrants in an associate
Sacofa Sdn Bhd (“Sacofa”), an associate company of the Group undertook a refinancing exercise which entails amongst others, the issuance
of up to RM400.0 million Islamic Medium Term Notes, the issuance of up to RM50.0 million Islamic Commercial Paper and the 64.2 million bonus
issue of warrants on the entitlement basis of one (1) free warrant for every one (1) existing Sacofa ordinary share held.
Counterparty
Sacofa
(d)
Underlying
number
of shares
12,834,327
Period
Strike price
28 Jan 2009 25 Jan 2019
RM1.50/share
+ any
adjustments
Put option over shares held by NCI in Robi
In conjunction with the amalgamation/merger of Airtel with Robi as disclosed in Note 5(a)(xiii) to the financial statements, the Group granted
a non-controlling shareholder, a put option which requires the Group to purchase all shares held by this non-controlling shareholder, at a price
determined to be the lower of EBITDA with a fixed multiple or EBITDA with comparable companies’ multiple. The put option is exercisable four
(4) years from 16 November 2016, for a period of two (2) years.
The Group recognised a derivative liability and other reserve of RM1,159.4 million on initial recognition.
(e)
Put option over shares held by NCI in edotco SG
(i)
In conjunction with the acquisition of edotco SG as disclosed in Note 5(b)(xii) to the financial statements, EIL has granted Yoma an option
to sell, which would require EIL to buy all the shares of Yoma together with shareholders loan at a price higher of fixed price of USD40.3
million or price determined based on EBITDA multiple. Accordingly, the Group recognised a total of RM172.8 million in other reserve on
date of the agreement entered.
The put option was to be exercised at any time by Yoma during the option period which is five (5) years from 4 December 2015. In
addition to that, Yoma had also granted EIL an option to buy all the shares of Yoma together with the shareholder loan at a price higher
of fixed price or price determined based on EBITDA multiple.
200
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
19.
DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Non-hedging derivatives financial instruments (continued)
(e)
Put option over shares held by NCI in edotco SG (continued)
(i)
On 19 December 2016, the Put Option and Call Option Agreement was terminated upon the completion of the acquisition of 12.50%
stake in edotco SG as disclosed in Note 5(a)(xvi) to the financial statements. Accordingly, the Group extinguished the put option
amounting to RM272.9 million from other reserve of RM172.8 million and RM100.1 million from retained earnings respectively.
(ii)
On 19 December 2016, a revised shareholder’s agreement was entered with Yoma of edotco SG comprising, amongst others, the
following:
(a)
a right of first offer over the remaining edotco SG shares in the event of a proposed sale of the remaining shares held by Yoma;
(b)
grants of a put option by the Group to Yoma to require the Group to purchase the remaining shares held by Yoma together with
shareholder’s loan for a purchase price equivalent of USD35.0 million, or such other price as both parties may agree; and
(c)
grants of a call option by Yoma to the Group to require Yoma to sell to the Group, the remaining shares held by Yoma together
with shareholder’s loan for a purchase price at higher of USD35.0 million and fair market value of the shares.
The Group recognised a derivative liability and other reserve of RM156.7 million on initial recognition.
Derivative designated as hedging instrument
(f)
Net investment hedge – Cross currency interest rate swaps
The underlying debt instrument for the CCIRS is the Group’s Notes as disclosed in Note 16(b) to the financial statements. The hedge is
designed to hedge against foreign currency and interest rate risks.
The information relating to the derivatives of a subsidiary of the Group as at 31 December 2016 is as follows:
Notional
amount
USD’ million
300.0
Notional
amount
SGD’ million
421.3
Period
28 Oct 2010 28 Apr 2020
Exchange
period
Semi-annually
Fixed
interest
rate paid
Fixed
interest
rate received
4.315% and
4.350% on
SGD notional
5.375%
on USD
notional
Fair value assets
2016
RM’000
2015
RM’000
92,759
101,807
The payment of the Group’s SGD notional amounts of USD300.0 million is designated as a hedge of net investment in the Group’s investment
in its associate. The hedge has been fully effective from inception and for the financial year.
The Group recognised a loss of RM67.6 million (2015: RM125.3 million) in OCI after reclassification of an unrealised foreign exchange loss of
RM58.2 million (2015: RM238.1 million) on the underlying Notes from the profit or loss to OCI.
The fair value changes of the derivative are attributable to future exchange rates and interest rate movements.
Axiata Group Berhad | Annual Report 2016
19.
FINANCIAL STATEMENTS
201
DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
(g)
Cash ow hedge – Cross currency interest rate swaps
The underlying debt instrument for the CCIRS is the Group’s Notes as disclosed in Note 16(c) to the financial statements. The hedge is
designed to hedge against foreign currency and interest rate risks.
Notional
amount
USD’ million
255.0
Notional
amount
RM’ million
Period
Exchange
period
Fixed interest
rate paid on RM
Notional
Fixed interest
rate received on
USD Notional
Fair value
assets 2016
RM’000
1,025.3
30 Sep 2016 19 Nov 2020
Semi-annually
5.440%
3.466%
99,789
30.0
122.5
8 Sep 2016 19 Nov 2020
Semi-annually
5.350%
3.466%
10,090
130.0
545.1
20 Dec 2016 24 Mar 2026
Semi-annually
6.656%
4.357%
2,027
20.0
83.2
28 Oct 2016 24 Mar 2026
Semi-annually
6.730%
4.357%
799
154.0
640.7
27 Dec 2016 24 Mac 2026
Semi-annually
6.641%
4.357%
12,638
The borrowing is designated as cash flow hedge to hedge the currency risk of the borrowings denominated in USD. The hedge has been fully
effective from inception and during the financial year.
The Group recognised a gain of RM1.9 million in other comprehensive income after reclassification of an unrealised foreign exchange loss of
RM113.8 million on the underlying Multi-Currency Sukuk Programme from the profit or loss to other comprehensive income.
The fair value changes of the derivative are attributable to future exchange rates and interest rate movements.
(h) Cash ow hedge – Interest rate swap
The IRS is used to hedge cash flow risk arising from a floating rate borrowing of a subsidiary. The hedge is designed to hedge against interest
rate risks.
The information relating to the derivative as at 31 December 2016 is as follows:
Notional
amount
USD’ million
70.0
Period
13 Jan 2014
- 29 July 2018
Exchange
period
Floating
interest
rate paid
Floating
interest
rate received
Quarterly
2.6075% p.a.
3 months’
LIBOR +1.45%
p.a.
The fair value changes of the derivative are attributable to interest rate movements.
Fair value liabilities
2016
RM’000
2015
RM’000
902
1,102
202
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
20.
DEFERRED INCOME
Group
At 1 January
Received during the financial year
Released to profit or loss
2016
RM’000
2015
RM’000
223,414
254,304
65,409
-
(42,147)
Currency translation differences
(782)
At 31 December
245,894
(37,150)
6,260
223,414
The deferred income relates to the government grants received by subsidiaries for the purchase of certain qualifying assets.
21.
DEFERRED GAIN ON SALE AND LEASE BACK ASSETS
Deferred gain arising from tower sale and finance lease back transaction where the gain is deferred and amortised over lease back period of ten (10)
years.
22.
TRADE AND OTHER PAYABLES
Group
Note
2016
RM’000
Company
2015
RM’000
2016
RM’000
2015
RM’000
Non-current:
Defined benefits plans
(a)
107,937
110,785
-
-
Finance lease payables
(b)
1,121,659
629,179
-
-
Other payables
351,757
24,703
5,157
1,513
1,581,353
764,667
5,157
1,513
Trade payable
2,315,013
1,934,145
-
-
Accrued expenses
3,416,849
2,481,950
35,849
15,865
Customer deposits
92,332
85,135
-
-
Business license payable
95,341
87,847
-
-
302,147
241,408
15,367
18,270
Total non-current
Current:
Payroll liabilities
Other accruals
784,137
241,210
-
-
Other payables
3,743,111
3,302,531
79,093
32,038
109,044
114,356
-
-
Finance lease payables
Deferred revenue
(b)
1,169,162
1,011,946
-
-
Total current
12,027,136
9,500,528
130,309
66,173
Total trade and other payables
13,608,489
10,265,195
135,466
67,686
Axiata Group Berhad | Annual Report 2016
22.
FINANCIAL STATEMENTS
203
TRADE AND OTHER PAYABLES (CONTINUED)
(a)
Defined benefits plans
The Group operates defined benefits plans in Indonesia and Sri Lanka respectively. The defined benefit plans of the Group recognised in the
consolidated statements of financial position is as follows:
The movement in present value of obligations of the defined benefit plans is as follows:
Group
2016
RM’000
2015
RM’000
110,785
95,982
-
174
- current service cost
13,179
12,171
- interest costs
10,098
9,183
At 1 January
Acquisition of a subsidiary
Charge to profit or loss:
- past service cost
Benefit paid
Settlement loss
(10,845)
(206)
12,432
21,148
(19,045)
(5,297)
15,193
3,604
(17,202)
(17,351)
Charge to OCI:
- actuarial gains
Currency translation differences
At 31 December
5,774
12,525
107,937
110,785
Present value of the defined benefits obligation of the Group is calculated annually by independent actuaries using the projected unit credit
method. The principal actuarial valuation assumption used was as follows:
Group
2016
2015
Discount rate (p.a.)
8.5% - 12.8%
9.0% - 10.8%
Salary increment rate (p.a.)
9.0% - 12.0%
10.0% - 12.0%
204
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
22.
TRADE AND OTHER PAYABLES (CONTINUED)
(b)
Finance lease payables are payables related to the sale and lease back of tower assets of a subsidiary.
Details of the lease payables according to the maturity schedule are as follows:
Group
2016
RM’000
2015
RM’000
Within one (1) year
109,044
114,356
Between one (1) and five (5) years
508,571
306,135
613,088
323,044
1,230,703
743,535
More than five (5) years
Finance lease payables
The currency profile of trade and other payables is as follows:
2016
Functional currency
RM
RM’000
IDR
RM’000
SLR
RM’000
BDT
RM’000
2015
Functional currency
NPR
RM’000
Others
RM’000
Total
RM’000
RM
RM’000
IDR
RM’000
SLR
RM’000
BDT
RM’000
Others
RM’000
Total
RM’000
Group
RM
USD
IDR
3,863,884
16
-
-
-
- 3,863,900
3,195,899
499
-
-
- 3,196,398
138,532
210,165
53,830
-
151,011
512,816 1,066,354
206,444
552,329
50,380
-
362,935 1,172,088
359 4,336,754
SLR
-
-
BDT
-
-
NPR
SDR*
Others
Total
-
-
-
- 4,337,113
983,909
-
-
-
983,909
324 3,516,957
-
-
- 1,868,651
-
- 1,868,651
-
-
-
-
- 3,517,281
994,542
-
-
- 1,182,383
994,542
- 1,182,383
-
-
-
- 1,260,461
- 1,260,461
-
-
-
-
-
-
29,525
-
-
-
-
-
29,525
37,097
-
-
-
-
37,097
1,319
319
-
-
3,593
193,345
198,576
554
362
-
-
164,490
165,406
4,033,619 4,547,254 1,037,739 1,868,651 1,415,065
706,161 13,608,489 3,440,318 4,070,147 1,044,922 1,182,383
527,425 10,265,195
Company
RM
44,419
-
-
-
-
-
44,419
26,058
-
-
-
-
26,058
USD
89,370
-
-
-
-
-
89,370
40,750
-
-
-
-
40,750
IDR
Others
Total
*
359
-
-
-
-
-
359
324
-
-
-
-
324
1,318
-
-
-
-
-
1,318
554
-
-
-
-
554
135,466
-
-
-
-
-
135,466
67,686
-
-
-
-
67,686
SDR: Special Drawing Rights
NPR: Nepalese Rupee
Credit terms of trade and other payables for the Group and the Company vary from 30 to 90 days (2015: 30 to 90 days) depending on the terms of
the contracts respectively.
Axiata Group Berhad | Annual Report 2016
23.
FINANCIAL STATEMENTS
205
PROVISION FOR LIABILITIES
Group
At 1 January
2016
RM’000
2015
RM’000
417,574
295,005
Provision for the financial year
28,432
45,548
Acquisition of subsidiaries
56,813
66,221
Accretion of interest
10,114
7,512
Currency translation differences
24,024
24,557
536,957
438,843
Utilised during the financial year
(37,237)
(21,269)
At 31 December
499,720
417,574
The provision for liabilities relates to provision for dismantling costs of existing telecommunication network and equipment as disclosed in the
significant accounting policies in Note 3(o) to the financial statements.
24.
DEFERRED TAXATION
Deferred tax assets and liabilities of the Group are offsetted when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when the deferred taxes related to the same tax authority. The following amounts, determined after appropriate offsetting, are shown
in the statements of financial position:
Group
2016
RM’000
Deferred tax assets
(291,633)
2015
RM’000
(248,156)
Deferred tax liabilities
2,241,506
1,809,316
Net deferred tax liabilities
1,949,873
1,561,160
The movement in net deferred tax liabilities of the Group during the financial year is as follows:
Group
Note
At 1 January
2016
RM’000
2015
RM’000
1,561,160
1,379,073
Charge/(credit) to profit or loss:
- PPE
- tax losses
- provision and others
11
Acquisition of subsidiaries
180,082
107,338
(162,092)
(208,936)
(94,467)
64,643
(76,477)
(36,955)
432,209
(799)
Debit to OCI:
- actuarial reserve
Currency translation differences
At 31 December
2,335
3,445
30,646
216,396
1,949,873
1,561,160
206
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
24.
DEFERRED TAXATION (CONTINUED)
Breakdown of cumulative balances by each type of temporary differences of the Group:
Group
2016
RM’000
2015
RM’000
- PPE and intangible assets
594,515
15,839
- Tax losses
475,948
368,163
- Provision and others
388,384
577,764
Deferred tax assets:
Before offsetting
Offsetting
After offsetting
1,458,847
961,766
(1,167,214)
(713,610)
291,633
248,156
3,369,004
2,464,733
39,716
58,193
3,408,720
2,522,926
Deferred tax liabilities:
- PPE and intangible assets
- Others
Before offsetting
Offsetting
(1,167,214)
After offsetting
2,241,506
(713,610)
1,809,316
The amounts of deductible temporary differences and unutilised tax losses for which no deferred tax asset is recognised in the statements of
financial position are as follow:
Group
Company
2016
RM’000
2015
RM’000
Deductible temporary differences
170,056
145,887
47,229
48,959
Unutilised tax losses
506,216
405,161
133,032
125,086
676,272
551,048
180,261
174,045
162,305
137,762
43,263
43,511
Tax effect
2016
RM’000
2015
RM’000
The benefits of these tax losses and credit will only be obtained if the Company or the relevant subsidiaries derive future assessable income of a
nature and amount sufficient for the benefits to be utilised. The unutilised tax losses have no expiry date.
Axiata Group Berhad | Annual Report 2016
25.
FINANCIAL STATEMENTS
207
INTANGIBLE ASSETS
Group
Note
Goodwill
RM’000
Licenses
RM’000
Others*
RM’000
Total
RM’000
At 1 January 2016
9,958,252
3,839,027
409,206
14,206,485
Acquisition of subsidiaries
3,007,732
4,127,725
112,042
7,247,499
-
1,003,045
120,016
1,123,061
Net book value
Additions
Amortisation
7(a)
Currency translation differences
At 31 December 2016
At 1 January 2015
Acquisition of subsidiaries
Reclassification
Amortisation
Currency translation differences
At 31 December 2015
7(a)
-
(531,409)
(99,252)
537,866
642,852
25,931
1,206,649
(630,661)
13,503,850
9,081,240
567,943
23,153,033
9,533,874
3,393,601
50,146
12,977,621
168,891
-
358,875
527,766
-
180,421
52,634
233,055
-
(239,249)
(52,449)
(291,698)
255,487
504,254
-
759,741
9,958,252
3,839,027
409,206
14,206,485
13,581,347
11,365,681
971,854
25,918,882
At 31 December 2016
Cost
Accumulated amortisation
Accumulated impairment losses
Net book value
(77,497)
13,503,850
(2,284,441)
(403,911)
(2,688,352)
-
-
9,081,240
567,943
23,153,033
(77,497)
4,975,843
711,334
15,722,926
(1,136,816)
(302,128)
(1,438,944)
At 31 December 2015
Cost
10,035,749
Accumulated amortisation
Accumulated impairment losses
Net book value
*
(77,497)
9,958,252
-
-
3,839,027
409,206
(77,497)
14,206,485
Others mainly represent subscriber acquisition costs, brands and customer contracts and the related customer relationship.
During the financial year, Malaysian Communications and Multimedia Commission assigned to Celcom Mobile Sdn Bhd (a subsidiary of Celcom Axiata
Berhad), spectrum of 2 x 10 MHz in 900 MHz and 2 x 20 MHz in 1800 MHz bands respectively amounting to RM816.8 million.
The remaining amortisation period of acquired telecommunication licenses with allocated spectrum rights range from two (2) years to twenty seven
(27) years 2015:three (3) years to twenty eight (28) years .
The carrying amount of the telecommunication licenses of a subsidiary which have indefinite useful life is RM1,902.2 million (2015: RM1,776.5 million).
208
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
25.
INTANGIBLE ASSETS (CONTINUED)
Impairment tests for goodwill
The Group undertakes an annual test for impairment of its goodwill allocated to the CGUs identified according to operating segment.
The following CGUs, being the lowest level of asset for which the management monitors the goodwill of the Group:
2016
RM’000
2015
RM’000
Malaysia
4,031,110
4,031,110
Indonesia
5,439,695
5,292,704
Sri Lanka
271,173
269,693
225,415
215,667
Cambodia
Nepal
Others
Total
3,338,045
-
198,412
149,078
13,503,850
9,958,252
Key assumptions used
The recoverable amount of the Malaysia’s, Indonesia’s, Sri Lanka’s and Cambodia’s CGU including goodwill in this test is determined based on VIU
calculation and Nepal’s CGU is based on FVLCS. Malaysia’s, Indonesia’s, Nepal’s and Cambodia’s CGU consist of mobile business meanwhile Sri
Lanka’s CGUs consist of fixed telecommunication business (consist of fixed telephone, data and infrastructure) and television business respectively.
The VIU and FVLCS calculations apply a discounted cash flow model using cash flow projections based on forecasts and projections approved by
the management covering:
a three (3) year period for the mobile business in Malaysia, Nepal and Cambodia;
a five (5) year period for mobile business in Indonesia, and
a ten (10) years period for the fixed telecommunication and television business in Sri Lanka due to the long term nature and intensive capital
required in the initial phase of the business.
These forecasts and projections reflect the management’s expectation of revenue growth, operating costs and margins based on past experience
and future outlook of the CGUs.
Cash flows beyond third (3rd) year for the mobile business in Malaysia, Nepal and Cambodia, fifth (5th) year for the mobile business in Indonesia,
meanwhile tenth (10th) for fixed telecommunication business and television business in Sri Lanka are extrapolated in perpetuity using estimated
terminal growth rate which takes into consideration the current Gross Domestic Product, inflation and average growth rate for the telecommunication
industry. These rates have been determined with regards to projected growth rates for the market in which the CGUs participates and are not
expected to exceed the long term average growth rates for this market.
Axiata Group Berhad | Annual Report 2016
25.
FINANCIAL STATEMENTS
209
INTANGIBLE ASSETS (CONTINUED)
Impairment tests for goodwill (continued)
Key assumptions used (continued)
Pre-tax discount rate applied to the cash flow forecasts are derived from the pre-tax CGU at the date of the assessment of the respective CGU that
reflects the risk of the CGU.
The following assumptions have been applied in the VIU and FVLCS calculations:
FVLCS
VIU
Nepal
Cambodia
Malaysia
Sri Lanka
Indonesia
2016
2016
2015
2016
2015
2016
2015
2016
2015
17.3%
19.4%
19.0%
11.9%
12.5%
14.7%
15.2%
12.0%
13.1%
Terminal growth rate
4.0%
2.0%
2.0%
0%
0%
3.0%
3.0%
3.0%
3.0%
Revenue growth rate
2.1% to
4.2%
over
3 years
5.3% to
5.6%
over
5 years
5.2% to
6.7%
over
5 years
2.0% to
3.9%
over
3 years
3.0% to
4.6%
over 3
years
7.0% to
25.3%
over
10 years
4.5% to
11.0%
over
10 years
6.7% to
7.1%
over
5 years
6.8% to
7.4%
over
5 years
Pre-tax adjusted
discount rate
Based on the above test, the Malaysia, Indonesia, Sri Lanka, Nepal and Cambodia CGUs’ goodwill are not impaired as the recoverable amounts
exceeds the carrying amounts included in the financial statements.
The Group’s review includes an impact assessment of changes in key assumptions. Based on the sensitivity analysis performed, the Directors
concluded that no reasonable change in the base case assumptions would cause the carrying amounts of the CGUs to exceed its recoverable
amounts.
26.
PROPERTY, PLANT AND EQUIPMENT
Note
Land
RM’000
Buildings
RM’000
Telecommunication
network
equipment
RM’000
533,917
206,828
18,941,971
548,635
690,716
-
28,925
5,767,792
143,289
346,797
36,742
19,813
1,761,716
5,047
-
Movable
plant and
equipment
RM’000
Computer
support
systems
RM’000
Capital
workin progress
RM’000
Total
RM’000
2,211,577
23,133,644
Group
Net book value
At 1 January 2016
Addition
Acquisition of subsidiaries
Disposal
Written off
7(a)
Depreciation
7(a)
Impairment
7(a)
Sale and lease back assets
Currency translation differences
At 31 December 2016
-
(7)
-
-
(93,873)
(31,479)
-
-
-
-
(145,584)
6,141,219
208,662
2,031,980
(63,980)
(28,437)
58
(20,061)
(772)
(1,413)
(9)
(6,722)
(4,315,390)
(134,797)
(388,708)
(7,077)
(2,474)
(1,014)
336,488
-
-
(51,801)
-
(112,427)
(8,916)
(4,964,247)
(62,366)
336,488
32,045
5,686
819,699
3,495
10,243
99,588
970,756
508,831
229,766
23,240,447
533,345
658,083
2,295,659
27,466,131
210
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
26.
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Land
RM’000
Building
RM’000
Telecommunication
network
equipment
RM’000
At 1 January 2015
420,952
132,568
16,299,845
320,072
679,300
1,897,591
19,750,328
Addition
172,622
90,146
4,302,378
228,837
399,847
115,131
5,308,961
Acquisition of subsidiaries
-
-
395,304
102,504
813
-
498,621
Disposal
-
(1,072)
(454,986)
(4,003)
(49)
-
(460,110)
-
(41)
(9,605)
(624)
(19)
(25,087)
(3,218,354)
(127,115)
(410,742)
Note
Movable
plant and
equipment
RM’000
Computer
support
systems
RM’000
Capital
workin progress
RM’000
Total
RM’000
Group
Net book value
Written off
7(a)
Depreciation
7(a)
7(a)
-
-
-
-
-
Reversal of impairment
7(a)
-
-
4,848
241
-
-
5,089
37,102
10,314
1,622,541
28,723
21,566
222,153
1,942,399
533,917
206,828
18,941,971
548,635
690,716
2,211,577
23,133,644
514,960
51,008,596
2,471,415
At 31 December 2015
-
(22,653)
Impairment
Currency translation differences
(96,759)
(12,364)
(10,934)
(3,878,057)
(10,934)
At 31 December 2016
Cost
Accumulated depreciation
Accumulated impairment losses
Net book value
1,405,964
(890,068)
(7,065)
508,831
(257,853) (27,382,945)
(27,341)
(385,204)
1,665,528
3,873,887
(1,123,266)
(3,203,493)
(8,917)
(12,311)
229,766
23,240,447
533,345
451,481
39,264,832
1,360,029
(175,756)
658,083
2,295,659
3,436,960
2,276,602
60,940,350
(32,857,625)
(616,594)
27,466,131
At 31 December 2015
Cost
Accumulated depreciation
Accumulated impairment losses
Net book value
1,277,945
(736,963)
(7,065)
533,917
(217,323) (19,944,903)
(27,330)
206,828
(377,958)
18,941,971
(804,950)
(6,444)
548,635
(2,734,950)
(11,294)
690,716
(65,025)
2,211,577
48,067,849
(24,439,089)
(495,116)
23,133,644
Axiata Group Berhad | Annual Report 2016
26.
FINANCIAL STATEMENTS
211
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(a)
Net book value of PPE of certain subsidiaries pledged as security for borrowings (Note 16(a) to the financial statements) are as follows:
Group
Telecommunication network
Movable plant and equipment
Computer support system
Land
Buildings
(b)
2016
RM’000
2015
RM’000
5,311,014
4,137,730
237,467
180,394
6,643
5,412
22,572
18,576
12,773
6,590
5,590,469
4,348,702
XL owns land located throughout Indonesia with Building Use Rights (Hak Guna Bangunan or “HGB”) for periods of 20-30 years (2015: 20-29
years) which will expire between 2017 and 2046 (2015: 2016 and 2045).
As at 31 December 2016, there are 83 locations (2015: 100 locations) with a total book value by RM14.3 million (2015: RM18.2 million) and for
which HGB certificates are in the process.
(c)
There had been a change in the expected pattern of consumptions of future economic benefits embodied in certain telecommunication
network equipment of subsidiaries within the Group due to assets replacement plans. The revision was accounted for as a change in accounting
estimate and has increased the depreciation charge during the financial year of the Group by RM581.5 million.
(d)
The Group’s carrying amount of land including:
Group
2016
RM’000
Freehold
Leasehold
(e)
2015
RM’000
85,007
42,883
423,824
491,034
508,831
533,917
Included in the net book value of telecommunication network equipment of the Group are leased assets amounting to RM1,465.7 million
(2015: RM860.2 million).
212
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
26.
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Movable plant and equipment
Note
Office
equipment
RM’000
Furniture
and fitting
RM’000
Mobile
equipment
RM’000
Motor
vehicle
RM’000
Total
RM’000
16,950
4,680
99
360
22,089
3,857
923
-
-
4,780
-
-
-
-
-
-
Company
Net book value
At 1 January 2016
Addition
Written off
7(a)
Disposal
Depreciation
7(a)
(35)
(455)
(7,058)
(490)
(1,187)
(52)
(134)
At 31 December 2016
13,714
3,961
47
226
17,948
At 1 January 2015
12,476
3,989
158
494
17,117
9,845
2,266
-
-
12,111
(426)
-
-
(80)
(10)
-
-
(5,291)
(1,139)
(59)
(134)
(6,623)
16,950
4,680
99
360
22,089
38,070
10,599
Addition
Written off
7(a)
Disposal
Depreciation
At 31 December 2015
7(a)
-
(8,431)
(426)
(90)
At 31 December 2016
Cost
Accumulated depreciation
Net book value
558
671
49,898
(24,356)
(6,638)
(511)
(445)
(31,950)
13,714
3,961
47
226
17,948
At 31 December 2015
Cost
Accumulated depreciation
Net book value
34,295
10,191
558
671
45,715
(17,345)
(5,511)
(459)
(311)
(23,626)
16,950
4,680
99
360
22,089
Axiata Group Berhad | Annual Report 2016
27.
FINANCIAL STATEMENTS
213
SUBSIDIARIES
2016
2015
Malaysia
RM’000
Overseas
RM’000
Total
RM’000
Malaysia
RM’000
Overseas
RM’000
Total
RM’000
6,757,283
182,925
6,940,208
6,756,283
182,925
6,939,208
Company
Unquoted shares, at cost
Accumulated impairment
losses
Advances to subsidiaries
treated as quasi-investment
(3,996)
(185,847)
(3,996)
(181,851)
(185,847)
1,074
6,754,361
6,752,287
1,074
6,753,361
9,876,965
10,008,948
19,885,913
3,981,722
9,123,921
13,105,643
(1,776,979)
(1,776,979)
(1,221,371)
(1,221,371)
Accumulated impairment
losses
Total
(181,851)
6,753,287
-
-
9,876,965
8,231,969
18,108,934
3,981,722
7,902,550
11,884,272
16,630,252
8,233,043
24,863,295
10,734,009
7,903,624
18,637,633
The Group’s and the Company’s equity interests in subsidiaries, their respective principal activities and countries of incorporation are listed in
Note 40 to the financial statements.
(a)
The currency profile of advances to subsidiaries treated as quasi-investment is as follows:
Company
2016
RM’000
2015
RM’000
RM
5,053,392
3,292,837
USD
13,055,542
8,591,435
18,108,934
11,884,272
The advances are unsecured and are non-interest bearing with no fixed terms of repayment. The Company does not anticipate any repayment
of the advances and are treated as an extension of its investments in subsidiaries.
(b)
Non-controlling interests
The total NCI of the Group as at reporting date is RM 5,039.6 million (2015: RM2,199.1 million), of which RM2,374.0 million (2015: RM1,462.0
million) is attributed to Indonesia, RM1,039.2 million is attributed to Nepal and RM1,106.7.0 million (2015: RM221.0 million) is attributable to
Bangladesh. The remaining NCI of the Group are immaterial individually.
The information below is before inter-company eliminations.
(i)
The summarised statement of comprehensive income for the financial year ended 31 December are as follows:
Indonesia
Profit/(loss) for the financial year
Note
2016
RM’000
38
Bangladesh
Nepal
2015
RM’000
2016
RM’000
2015
RM’000
2016
RM’000
112,933
(10,932)
(205,630)
200,438
568,446
OCI
530,867
430,145
127,043
455,932
322,907
Total comprehensive income
643,800
419,213
(78,587)
656,370
891,353
(56,596)
186,884
113,689
-
79,512
Profit/(loss) for the financial year attributable
to NCI
Dividend paid to NCI
48,445
-
(3,584)
-
-
214
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
27.
SUBSIDIARIES (CONTINUED)
(b)
Non-controlling interests (continued)
(ii)
The summarised statement of financial position as at 31 December are as follows:
Indonesia
2015
RM’000
2016
RM’000
2015
RM’000
2016
RM’000
15,908,980
15,064,170
7,506,954
5,605,304
2,128,101
2,300,888
3,150,593
861,461
536,894
2,605,428
Non-current liabilities
(6,396,965)
(6,875,268)
(901,762)
(993,948)
(338,416)
Current liabilities
(4,792,280)
(6,990,497)
(3,506,777)
(2,480,452)
(1,572,934)
7,020,623
4,348,998
3,959,876
2,667,798
2,822,179
Current assets
Net assets
The summarised statement of cash flows for the financial year ended 31 December are as follows:
Indonesia
2016
RM’000
Net cash flow from operating activities
Bangladesh
2015
RM’000
2016
RM’000
2,434,893
2,334,493
(1,432,306)
Net cash flow (used in)/from financing activities
(1,787,718)
(2,038,980)
954,370
488,063
(409,896)
(634,593)
(1,136,793)
130,284
(43,916)
(190,382)
123,487
203,125
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at the end of financial year
(1,295,753)
882,920
2016
RM’000
(1,281,768)
Effect of exchange rate changes on cash and cash
equivalents
471,667
Nepal
2015
RM’000
Net cash flow used in investing activities
Net (decrease)/increase in cash and cash equivalent
28.
Nepal
2016
RM’000
Non-current assets
(iii)
Bangladesh
(1,414,899)
394,199
(174,685)
70,773
213,465
4,466
1,029,991
1,953,319
106,343
26,772
1,591,614
466,171
1,029,991
241,093
106,343
1,604,357
JOINT VENTURES
Group
Unquoted investments
Share of post-acquisition reserves
Currency translation differences
Share of net assets of joint ventures
2016
RM’000
2015
RM’000
274,079
172,561
(169,027)
(73,185)
105,052
99,376
4,202
3,598
109,254
102,974
Axiata Group Berhad | Annual Report 2016
28.
FINANCIAL STATEMENTS
215
JOINT VENTURES (CONTINUED)
The summarised statement of comprehensive income for the financial year ended 31 December are as follows:
Group
Revenue
Loss for the financial year
Group's share of loss for the financial year
2016
RM’000
2015
RM’000
737,474
785,724
(213,035)
(77,540)
(95,842)
(38,587)
The Group’s equity interests in the joint ventures, their respective principal activities and countries of incorporation are listed in Note 42 to the
financial statements.
29.
ASSOCIATES
2016
2015
Malaysia
RM’000
Overseas
RM’000
Total
RM’000
Malaysia
RM’000
Overseas
RM’000
Total
RM’000
-
8,762,053
8,762,053
-
8,762,053
8,762,053
184,868
58,773
243,641
101,397
1,353
102,750
Group
Quoted investments
Unquoted investments
Share of post-acquisition
results and reserves
(58,794)
126,074
883,568
824,774
2,552
841,318
843,870
9,704,394
9,830,468
103,949
9,604,724
9,708,673
Accumulated impairment
losses
-
(1,085,035)
(1,085,035)
-
(1,085,035)
(1,085,035)
Currency translation
differences
-
(345,281)
(345,281)
-
(415,152)
(415,152)
Share of net assets of
associates
126,074
8,274,078
8,400,152
103,949
8,104,537
8,208,486
The Group’s equity interest in the associates, their respective principal activities and countries of incorporation are listed in Note 41 to the financial
statements.
216
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
29.
ASSOCIATES (CONTINUED)
The summarised financial information presented in the financial statements (after adjusted for differences in accounting policies between the Group
and the associates) of material associates of the Group are as follows:
(a)
The summarised statement of comprehensive income for the financial year ended 31 December are as follows:
2016
2015
Idea
RM’000
M1
RM’000
Idea
RM’000
M1
RM’000
22,772,636
3,183,225
21,217,853
3,139,939
329,135
451,254
1,864,338
557,083
Group's share of profit for the financial year
65,070
128,788
368,766
157,766
Dividend received from associates
26,592
118,229
28,336
136,755
Revenue
Profit for the financial year
The Group’s share of loss of other immaterial associates is RM62.8 million (2015: RM37.0 million).
(b)
The summarised statement of financial position of material associates of the Group as at 31 December are as follow:
2016
Non-current assets
Current assets
(c)
2015
Idea
RM’000
M1
RM’000
Idea
RM’000
M1
RM’000
62,267,152
2,849,429
51,592,482
2,504,244
2,510,000
705,077
2,299,631
Current liabilities
(10,356,631)
(1,163,346)
(6,736,229)
Non-current liabilities
(35,153,111)
(1,141,020)
(28,504,752)
19,267,410
1,250,140
18,651,132
791,137
(1,706,490)
(336,804)
1,252,087
The adjusted fair value of material associates of the Group as at 31 December are as follows:
2016
Adjusted fair value
2015
Idea
RM’000
M1
RM’000
Idea
RM’000
M1
RM’000
3,173,885
1,467,779
6,012,567
1,995,137
The adjusted fair value of quoted investments are within Level 2 of the fair value hierarchy.
Axiata Group Berhad | Annual Report 2016
29.
FINANCIAL STATEMENTS
217
ASSOCIATES (CONTINUED)
The details of carrying amount of the associates of the Group are as follows:
2016
Idea
RM’000
2015
M1
RM’000
Others
RM’000
Total
RM’000
Idea
RM’000
M1
RM’000
Others
RM’000
Total
RM’000
Group's share of net assets
3,809,167
356,790
148,735
4,314,692
3,689,194
354,591
105,656
4,149,441
Goodwill
3,929,683
1,142,521
40,511
5,112,715
3,929,181
1,134,190
688
5,064,059
(1,027,255)
(1,005,014)
8,400,152
6,613,361
Accumulated impairment
losses (net of currency
translation differences)
At 31 December
(1,027,255)
6,711,595
-
-
1,499,311
189,246
-
-
1,488,781
106,344
(1,005,014)
8,208,486
List of contingent liabilities of an associate, Idea as at 31 December are as follows:
Potential exposure
Description
1.
One-off excess spectrum charges
2016
RM’million
2015
RM’million
1,396.2
1,365.3
990.9
2,519.4
On 8 January 2013, the local regulator, the Department of Telecommunications (“DoT”) had issued
demand notices towards one time spectrum charges:
(a)
(b)
for spectrum beyond 6.2 MHz in respective service areas for retrospective period from
1 July 2008 to 31 December 2012, amounting to INR3,691.3 million, and
for spectrum beyond 4.4 MHz in respective service areas effective 1 January 2013 till expiry of
the period as per respective licenses amounting to INR17,443.7 million.
In the opinion of the Directors, inter-alia, the above demand amounts to alteration of financial terms
of the licenses issued in the past. The Directors believe, based on independent legal opinion and its
evaluation, it is not probable that the claim will materialise and therefore, pending outcome of this
matter, no provision has been recognised.
2.
Tax notice
The Income Tax Department (‘‘Tax Department’’) had issued a INR15.0 billion and INR24.0 billion notice
on an associate. The Tax Department alleged that the licenses, assets and liabilities transferred in
between the companies in 2009 resulted in taxable capital gains which Idea and its subsidiary did not
treat as taxable.
On 19 October 2016, the Income Tax Appellate Tribunal has given its verdict in favour of ABTL which
there is no INR24.0 billion capital gain tax arising from the transfer of licenses, assets and liabilities. The
INR15.0 billion claim from the Tax Department remains outstanding as at year end.
In the opinion of the Directors, based on independent legal opinion and its evaluation, it is not probable
that the claim will materialise and therefore, pending outcome of this matter, no provision has been
recognised.
218
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
29.
ASSOCIATES (CONTINUED)
List of contingent liabilities of an associate, Idea as at 31 December are as follows: (continued)
Potential exposure
Description
3.
Revenue share license fee assessment
2016
RM’million
2015
RM’million
1,096.6
1,072.4
4,620.1
2,619.9
4,849.0
3,641.3
12,952.8
11,218.3
2,562.1
2,219.0
In 2014, the DoT has raised a demand notice to an associate for further payment of license fee in
respect of years of assessment (“YA”) 2011-2012 amounting to INR1.1 billion.
In previous financial year, the DoT has raised a demand notice to an associate for further payment of
license fee in respect of YA 2007-2008 amounting to INR1.5 billion and a demand cum show cause
notice for YA 2009-2012 amounting to INR14.0 billion.
In the opinion of the Directors, based on independent legal opinion and its evaluation, it is not probable
that the claim will materialise and therefore, pending outcome of matters, no provision has been
recognised.
4.
Income tax demands
In 2015, an associate of the Group received two demands from income tax authorities in respect of
its income tax returns for the financial years 2008/09 and 2009/10 amounting to INR34,147.0 million
and INR6,408.0 million respectively. The tax demands are mainly on the difference between fair value
of investment made in Indus Towers Limited and net book value of the assets transferred to Idea
Infrastructure Services Limited (a 100.0% subsidiary of the associate, which further through a scheme
of merger got merged with Indus Towers Limited under High Court approved scheme). The associate
has filed an appeal against these demands at the Commissioner of Income Tax appeals.
During the financial year, the associate has received from income tax authorities in respect of its
income tax returns for the financial year 2011/12, 2013/14 and 2014/15 amounting to INR580.0 million,
INR9,900.0 million and INR18,900.0 million respectively. The tax demands are mainly on the account
of the amortisation of spectrum and revenue share license fee disallowed for tax purpose and nondeduction of tax on distributors’ margin.
5.
Other taxes, custom duties and demands under ad udication, appeal or disputes
As at 31 December 2016, other taxes, custom duties and demands under adjudication, appeal or
disputes amounted to approximately INR73.7 billion (2015: INR56.4 billion).
In the opinion of the Directors, based on independent legal opinion and its evaluation, it is not probable
that the claim will materialise and therefore, pending outcome of matters, no provision has been
recognised.
Total exposure
Total exposure of the Group
Axiata Group Berhad | Annual Report 2016
29.
FINANCIAL STATEMENTS
219
ASSOCIATES (CONTINUED)
Impairment test
During the financial year, the Group had undertaken the test of impairment of its investment in Idea following an impairment indicator arising from
the shortfall between the carrying value and adjusted fair value. No additional impairment loss was required for the carrying amount of Idea as at
31 December 2016 as its recoverable amount exceeded its carrying amount.
Key assumptions used
The recoverable amount was determined based on VIU calculation, which apply a discounted cash flow model based on the forecasts and projections
approved by the management. These forecasts and projections reflect management’s expectations based on the current assessment of market
share, expectations of market growth and industry growth as benchmarked with external sources.
The key assumptions used in determining the VIU are:
Assumptions
Basis of determination
Projection period
2017-2021 (2015: 2016-2020) years cash flow forecast is used.
Cost of equity
13.40% (2015:16.40%) was used in line with market analysis.
Terminal growth rate
Long term terminal growth rate is estimated to be 4.50% (2015: 3.00%)
applied beyond the fifth (5th) year cash flows to perpetuity.
Blended Earnings Before Interest, Tax, Depreciation and Amortisation
(“EBITDA”) margin
Ranging from 27.00% in 2018 to 35.00% in 2021 (2015: ranging from
33.70% in 2017 to 36.86% in 2021).
Effective tax rate
34.60% (2015: 34.00%).
Capital expenditure
The cash flow forecasts for capital expenditure are based on past
experience and include the on-going capital expenditure required to
continue to roll out networks in emerging markets to provide voice
and data products and services and to meet the population coverage
requirements of certain licenses of Idea.
Based on the sensitivity analysis performed, the Directors concluded that no reasonable change in the base case assumptions would cause the
carrying amount of the investment in Idea to exceed its recoverable amount.
220
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
30.
LONG TERM RECEIVABLES
Group
Company
Note
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
Finance lease receivables
(a)
83,620
97,617
-
-
Lease revenue equalisation
(b)
30,595
-
-
-
3,469
3,586
2,000
2,000
117,684
101,203
2,000
2,000
Others
(a)
Finance lease receivables are receivables related to the lease of fiber optic cable of a subsidiary.
(b)
Lease revenue equalisation is related to the effect of fixed escalation clauses that is spread on a straight-line basis over the lease term.
Details of the lease receivables according to the maturity schedule are as follows:
Group
Note
2016
RM’000
2015
RM’000
Within one (1) year
27,915
26,496
Between one (1) and five (5) years
71,541
78,089
More than five (5) years
30,552
43,943
130,008
148,528
Unearned finance lease income
(26,140)
(33,210)
Finance lease receivables
103,868
115,318
20,248
17,701
Classified as:
- Current
- Non-current
Finance lease receivables
31.
33
83,620
97,617
103,868
115,318
INVENTORIES
Group
Trading inventories
Inventories mainly comprise of SIM cards, handsets and other consumables.
2016
RM’000
2015
RM’000
174,747
155,125
Axiata Group Berhad | Annual Report 2016
32.
FINANCIAL STATEMENTS
221
AMOUNTS DUE FROM/TO SUBSIDIARIES
The currency profiles of the amounts due from/to subsidiaries are as follows:
2016
2015
RM
RM’000
USD
RM’000
Others
RM’000
Total
RM’000
RM
RM’000
USD
RM’000
Others
RM’000
Total
RM’000
-
95,982
-
95,982
-
2,233,856
-
2,233,856
Amounts due from subsidiaries:
- Non-current1
- Current
6,206
43,105
-
49,311
260,087
113,369
20,697
394,153
6,206
139,087
-
145,293
260,087
2,347,225
20,697
2,628,009
1,437,201
619,502
-
2,056,703
1,330,718
65,631
-
1,396,349
Amounts due to subsidiaries:
- Current2
1
W.A.R.F. as at 31 December 2015 was 2.41% p.a..
2
Amounts due to subsidiaries include an amount of RM807.7 million (2015: RM807.7 million) which bears interest at 3.05% (2015: 3.05%) p.a..
Except as disclosed otherwise above, amounts due from/to subsidiaries are unsecured, interest free and have no fixed terms of repayment.
33.
TRADE AND OTHER RECEIVABLES
Group
Note
Trade receivables
Less: Provision for impairment
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
1,793,966
1,466,094
-
-
-
-
(397,806)
(352,184)
1,396,160
1,113,910
-
-
253,110
188,355
-
-
Other receivables:
Deposits
Less: Provision for impairment
Prepayments
Staff loans
Finance lease receivables
Other receivables
Less: Provision for impairment
30
(27,030)
(27,030)
-
-
226,080
161,325
-
-
2,025,869
1,749,383
898
805
2,458
837
-
-
20,248
17,701
-
-
1,109,365
915,477
7,333
7,964
-
-
(605)
(3,917)
1,108,760
911,560
7,333
7,964
Total other receivables after provision for impairment
3,383,415
2,840,806
8,231
8,769
Total trade and other receivables after provision for
impairment
4,779,575
3,954,716
8,231
8,769
A total fair value of trade receivables of RM228.2 million, which were acquired via business combination during the financial year as disclosed in Note
5(a) to the financial statements. The gross contractual amount for those trade receivables is RM247.1 million, of which RM18.9 million is expected to
be uncollectible.
222
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
33.
TRADE AND OTHER RECEIVABLES (CONTINUED)
The currency profile of trade and other receivables after impairment as follows:
2016
Functional currency
RM
RM’000
IDR
RM’000
SLR
RM’000
BDT
RM’000
2015
Functional currency
NPR
RM’000
Others
RM’000
Total
RM’000
RM
RM’000
IDR
RM’000
SLR
RM’000
BDT
RM’000
- 1,580,922
1,095,330
-
-
-
49,465
149,780
71,537
1,646
- 1,801,427
-
-
Others
RM’000
Total
RM’000
Group
RM
1,580,922
-
-
-
-
88,203
50,585
67,988
3,162
173,800
31 1,693,478
-
-
-
USD
IDR
151,135
534,873
- 1,693,509
- 1,095,330
107,814
380,242
- 1,801,427
SLR
-
-
275,126
-
-
-
275,126
-
-
201,804
-
-
201,804
BDT
-
-
-
606,455
-
-
606,455
-
-
-
419,615
-
419,615
NPR
-
-
-
-
43,298
-
43,298
-
-
-
-
-
-
717
55
-
-
-
44,620
45,392
436
54
-
-
55,808
56,298
1,669,873 1,744,118
343,114
609,617
217,098
1,145,231 1,951,261
273,341
421,261
Others
Total
195,755 4,779,575
163,622 3,954,716
Company
RM
USD
790
-
-
-
-
-
790
5,441
-
-
-
-
5,441
6,693
-
-
-
-
-
6,693
2,892
-
-
-
-
2,892
Others
Total
748
-
-
-
-
-
748
436
-
-
-
-
436
8,231
-
-
-
-
-
8,231
8,769
-
-
-
-
8,769
The movement of provision for impairment of trade and other receivables are as follows:
Group
Note
2016
RM’000
2015
RM’000
352,184
284,759
Trade receivables
At 1 January
Provision for impairment
7(b)
Written off
Currency translation differences
At 31 December
97,829
75,992
(66,308)
(42,387)
14,101
33,820
397,806
352,184
30,947
28,280
-
2,667
Other receivables
At 1 January
Provision for impairment
7(b)
Currency translation differences
(3,312)
At 31 December
27,635
The carrying amounts of trade and other receivables approximate their fair value.
30,947
Axiata Group Berhad | Annual Report 2016
33.
FINANCIAL STATEMENTS
223
TRADE AND OTHER RECEIVABLES (CONTINUED)
Trade receivables which are due as at the end of the reporting period are as follows:
Not past due
Past due
Specifically
impaired
Total
Not specifically impaired
RM’000
RM’000
0-3
months
RM’000
2016
568,931
12,262
491,306
118,441
37,870
167,350
1,396,160
2015
438,580
49,556
354,129
97,891
56,555
117,199
1,113,910
3-6
months
RM’000
6-12
months
RM’000
Over 12
months
RM’000
RM’000
The Group is not exposed to major concentration of credit risk due to the diverse customer base. In addition, credit risk is mitigated to a certain
extent by cash deposits and bankers' guarantee obtained from customers. The Group considers the accumulated impairment losses of trade
receivables at the end of the reporting period to be adequate to cover the potential financial loss.
Credit terms of trade receivables for the Group range from 5 to 90 days (2015: 5 to 90 days).
34.
DEPOSITS, CASH AND BANK BALANCES
Group
Note
Company
2016
RM’000
2015
RM’000
2,469,770
2,564,105
-
-
431,086
1,295,000
201,085
245,000
Total deposits
2,900,856
3,859,105
201,085
245,000
Cash and bank balances
2,431,558
1,651,587
531,716
76,314
Total deposits, cash and bank balances
5,332,414
5,510,692
732,801
321,314
Deposits with licensed banks
Deposits under Islamic principles
2016
RM’000
2015
RM’000
Less:
Deposits pledged
16(a)
(29,775)
(17,655)
-
-
(63,721)
(92,033)
-
-
Deposit on investment in a subsidiary of the Group
(320,717)
(64,380)
Deposits maturing more than three (3) months
(206,712)
(686,051)
-
-
(62,067)
(89,908)
-
-
463,641
321,314
Deposit in Escrow Account
Bank overdrafts
Total cash and cash equivalents at the end of the
financial year
16
4,649,422
4,560,665
(269,160)
-
The deposits are placed mainly with a number of creditworthy financial institutions. There is no major concentration of deposits in any single
financial institution. Maturity range of deposits is as follows:
From
Group
To
Company
To
Financial year ended 31 December 2016
Overnight
365
91
Financial year ended 31 December 2015
Overnight
366
92
(In days)
224
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
34.
DEPOSITS, CASH AND BANK BALANCES (CONTINUED)
The currency profile of deposits, cash and bank balances is as follows:
2016
Functional currency
RM
RM’000
IDR
RM’000
SLR
RM’000
2015
Functional currency
BDT
RM’000
NPR
RM’000
-
Others
RM’000
Total
RM’000
RM
RM’000
IDR
RM’000
SLR
RM’000
BDT
RM’000
Others
RM’000
Total
RM’000
-
- 1,760,969
3,679,910
-
-
-
9,434 1,471,547
317,143 2,431,177
68,612
512,808
13,759
9,054
373,840
978,073
-
534,696
-
-
-
534,696
194,626
Group
RM
1,760,969
-
-
482,796
78,284
71,973
IDR
-
417,252
-
SLR
1,321
-
169,373
-
-
-
170,694
-
-
194,626
-
-
BDT
-
-
-
231,659
-
-
231,659
-
-
-
97,289
-
97,289
71,895
-
-
-
222,422
26,346
320,663
-
-
-
-
26,098
26,098
2,316,981
495,536
241,346
3,748,522 1,047,504
208,385
106,343
USD
Others
Total
-
-
241,093 1,693,969
-
417,252
343,489 5,332,414
- 3,679,910
399,938 5,510,692
Company
RM
250,723
-
-
-
-
-
250,723
291,547
-
-
-
-
USD
482,078
-
-
-
-
-
482,078
29,767
-
-
-
-
291,547
29,767
Total
732,801
-
-
-
-
-
732,801
321,314
-
-
-
-
321,314
Axiata Group Berhad | Annual Report 2016
35.
FINANCIAL STATEMENTS
225
CASH FLOWS FROM/(USED IN) OPERATING, INVESTING AND FINANCING ACTIVITIES
Group
Note
Receipt from customers
Payments to suppliers and employees
Dividends received
2016
RM’000
Payment of zakat
Payment of income taxes (net of refunds)
Total cash flows from operating activities
21,480,090
19,580,656
(11,955,294)
-
(1,153,868)
(525,032)
(2,000)
(263)
(744,903)
(809,347)
6,775,101
Proceeds from disposal of PPE
2015
RM’000
(12,804,218)
-
Payment of finance costs
Company
81,187
6,290,720
21,140
2016
RM’000
(245,925)
1,002,403
(27,583)
(14)
728,881
-
(202,971)
1,101,406
(24,819)
(503)
873,113
92
Purchase of PPE
(5,564,249)
(4,860,775)
Acquisition of intangible assets
(1,003,074)
(232,984)
-
-
(570,786)
-
-
(521,464)
-
-
Investments in deposits maturing more than three (3)
months
479,338
Investment in subsidiaries (net of cash acquired)
(5,247,127)
(4,656)
2015
RM’000
(12,111)
Proceed from sale and lease back transactions of a
subsidiary
564,141
-
-
Investment in an associate
(57,421)
(7,747)
-
-
Additional investment in associate
(83,471)
(16,871)
-
-
(384)
(39,324)
-
-
Additional investment in joint ventures
(96,162)
(43,178)
-
-
Interest received
186,804
171,133
25,457
54,939
Settlement of deferred purchase consideration of an
investment in a subsidiary
(54,794)
-
Investment in a joint venture
Other investments
Dividends received from a joint venture
(Advances to)/repayments from employees
Additional investment in a subsidiary
-
-
(26,677)
-
-
118,229
165,091
-
-
-
1,800
-
-
159
-
-
-
Dividends received from associates
(1,622)
5(b)
-
(156,612)
(379,350)
-
Advances to subsidiaries
-
-
Repayments from subsidiaries
-
-
186,692
Investment in long term receivable
-
-
-
Total cash flow used in investing activities
(10,835,217)
(6,339,833)
(2,593,067)
(2,385,574)
(175,430)
86,576
(2,000)
(47,934)
226
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
35.
CASH FLOWS FROM/(USED IN) OPERATING, INVESTING AND FINANCING ACTIVITIES (CONTINUED)
Group
Note
2015
RM’000
2016
RM’000
2015
RM’000
Proceeds from borrowings
6,532,538
2,753,483
3,587,220
-
Repayments of borrowings
(4,672,168)
(4,696,143)
(1,010,487)
-
Repayment of Sukuk
Proceeds from Sukuk (net of transaction costs)
Additional investment in a subsidiary by NCI
Repayment of finance lease creditors
Net proceed from sale and lease back assets
Proceeds from issuance of shares under Axiata Share
Scheme
Share issue expenses
-
-
2,489,687
(164,502)
2,649,714
-
-
900
8,380
-
-
(122,145)
-
-
-
531,235
-
-
-
10,477
42,778
10,477
42,778
(171)
(500,000)
(81)
(171)
(81)
Pre-acquisition dividend of a subsidiary paid to a NCI
(79,835)
-
-
-
Net proceed from right issue of a subsidiary
667,614
-
-
-
Dividends paid to NCI
(112,241)
(11,913)
Dividends paid to shareholders
(790,477)
(722,152)
Total cash flows from/(used in) financing activities
36.
2016
RM’000
Company
4,290,912
(475,934)
(790,477)
1,796,562
(722,152)
(679,455)
CONTINGENCIES AND COMMITMENTS
(a)
Capital commitments
Group
2016
RM’000
2015
RM’000
2,144,717
1,702,994
PPE
Commitments in respect of expenditure:
- Approved and contracted for
- Approved but not contracted for
(b)
730,275
229,451
2,874,992
1,932,445
Operating lease commitments
The Group entered into non-cancellable office and tower rental and lease of head office agreements with various terms and the total
commitment are as follows:
Group
2016
RM’000
2015
RM’000
Payable with one (1) year
417,143
301,030
Payable more than one (1) year and no later than five (5) years
741,222
648,007
Payable more than five (5) years
346,142
134,871
1,504,507
1,083,908
Total
The rental expenses related to the commitment for the financial year ended 31 December 2016 and 2015 amounted to RM427.2 million and
RM260.9 million respectively.
Axiata Group Berhad | Annual Report 2016
36.
FINANCIAL STATEMENTS
227
CONTINGENCIES AND COMMITMENTS (CONTINUED)
(c)
3G annual fees commitment
XL has committed to pay annual fees within ten (10) years, as long as XL holds the 3G license. The amount of annual payment is based on
the scheme of payment set out in Regulation No. 07/PER/M.KOMINFO/2/2006 of the Minister of Communication & Information and Decree
No.323/KEP/M.KOMINFO/09/2010 of the Minister of Communication & Information. No penalty will be imposed in the event that XL returns
the license.
(d)
List of contingent liabilities of subsidiaries of the Group as at 31 December are as follows:
Potential exposure
Description
1.
Celcom Trading Sdn Bhd formerly known as Rego Multi-Trades Sdn Bhd (“Celcom Trading”)
vs Aras Capital Sdn Bhd (“Aras Capital”) and Tan Sri Dato’ Ta udin Ramli (“TSDTR”)
2016
RM’million
2015
RM’million
100.0
100.0
63.7
63.7
7,215.0
-
In 2005, Celcom Trading, a wholly-owned subsidiary of Celcom Resources Berhad formerly known
as Technology Resources Industries Berhad (“Celcom Resources”), commenced proceedings
against Aras Capital and TSDTR for amounts due to Celcom Trading pursuant to an investment
agreement with Aras Capital and an indemnity letter given by TSDTR. TSDTR filed its defence and
instituted a counterclaim against Celcom Trading, Celcom Resources and its directors to void or
rescind the indemnity letter and claim damages.
The Board of Directors, based on legal advice received, are of the view that it has good prospects
of succeeding on the claim and successfully defending the counterclaim if both were to proceed
to trial.
2.
VIP Engineering and Marketing Limited (“VIPEM”) vs Celcom Resources on TRI
Telecommunications Tanzania (“Tritel”)
In December 2001, vide Civil Case No. 427 of 2001, VIPEM claimed a sum of USD18.6 million from
Celcom Resources as its share of loss of profits for the mismanagement of Tritel, a joint venture
company between Celcom Resources and VIPEM. In light of the winding-up order made against
Tritel, Celcom Resources filed its claims of RM123.4 million with the liquidator of Tritel in July 2003.
The Board of Directors, based on legal opinion received, are of the view that the allegations
of mismanagement, are rhetorical and unsubstantiated. In view of the winding up proceedings,
there is also a possibility that VIPEM will not pursue its claim.
3.
Celcom (Malaysia) Berhad now known as Celcom Axiata Berhad (“Celcom”) &
Technology Resources Industries Berhad now known as Celcom Resources Berhad
(“Celcom Resources”) vs TSDTR & 6 others (Conspiracy Suit)
In 2008, Celcom and Celcom Resources initiated a claim against five (5) of its former directors,
DeTeAsia Holding GmbH, and Beringin Murni Sdn Bhd (“Defendants”) for conspiring with each
other to injure Celcom and Celcom Resources by causing and/or committing them to enter
into various agreements in relation to certain rights issue shares in Celcom Resources. Celcom
and Celcom Resources are seeking damages for conspiracy against the Defendants. Two of the
Defendants, TSDTR and Dato’ Bistamam Ramli (“DBR”) filed a counterclaim against Celcom and
Celcom Resources for damages for breach of an alleged global settlement involving, inter alia, the
present action, and also for conspiracy and misrepresentation in inducing TSDTR to withdraw a
counterclaim in another suit.
The Directors, based on legal advice received, are of the view that it has good prospects of
successfully defending the counterclaim.
228
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
36.
CONTINGENCIES AND COMMITMENTS (CONTINUED)
(d)
List of contingent liabilities of subsidiaries of the Group as at 31 December are as follows: (continued)
Potential exposure
Description
4.
Celcom & Celcom Resources vs TSDTR & 8 others (Indemnity Suit)
2016
RM’million
2015
RM’million
7,215.0
-
236.7
226.9
358.5
339.5
In 2006, Celcom and Celcom Resources initiated a claim against nine of its former directors
(“Defendants”) seeking inter alia, for indemnity in respect of the sums paid out to DeteAsia
under the Award dated 2 August 2005 handed down by the Tribunal of the International Court of
Arbitration of the International Chamber of Commerce in Paris and damages for breach of their
fiduciary duties.
Two of the Defendants, TSDTR and DBR filed a counterclaim against Celcom and Celcom
Resources for damages for breach of an alleged global settlement involving, inter alia, the
present action, and also for conspiracy and misrepresentation in inducing TSDTR to withdraw a
counterclaim in another suit.
The Directors, based on legal advice received, are of the view that it has good prospects of
successfully defending the counterclaim.
5.
Claim on Robi by National Board of Revenue of Bangladesh (“NBR”)
The Large Tax Unit of NBR issued a show case letter dated 23 February 2012 to Robi demanding
payment of supplementary duty and VAT levied on the issuance of a certain number of SIM
cards to new customers of Robi on the pretext that the issuance was replacement purposes with
regards to Robi’s existing customers. The total demand amounted to BDT4,150.6 million.
The Board of Directors, based on legal advice received, are of the view that it has good prospects
of succeeding on the claim.
6.
Robi’s tax position
Robi has claimed for SIM tax subsidy as a deductible expense in its tax provision computations
for FY 2005 to 2016 (2015: FY 2005 to 2015). The National Board of Revenue has challenged this
claim and regarded the SIM tax subsidy as non-deductible, on grounds that the subsidies are
collectible from the customers and hence is not a ‘business expense’. The case has been taken to
the local court whereby the proceeding is still ongoing with no decision reached to-date.
Based on legal opinion received, the Board of Directors are of the view that Robi has good
prospects of succeeding on the claim.
Axiata Group Berhad | Annual Report 2016
36.
FINANCIAL STATEMENTS
229
CONTINGENCIES AND COMMITMENTS (CONTINUED)
(d)
List of contingent liabilities of subsidiaries of the Group as at 31 December are as follows: (continued)
Potential exposure
Description
7.
Access Promotion Contribution (“APC”) of Multinet Pakistan (Private) Limited (“Multinet”)
2016
RM’million
2015
RM’million
180.8
172.6
15,369.7
902.7
Multinet filed a suit during the financial year ended 31 December 2010 in the Honourable High
Court of Sindh against the Federation of Pakistan, Pakistan Telecommunications Authority (“PTA”),
Pakistan Telecommunication Company Limited (“PTCL”) and the Universal Service Fund Company
inter alia challenging the legality and enforcement of APC applicable on international incoming
calls. Multinet has stopped paying APC to PTA from 30 September 2009. In the event a clawback
is required, the estimated amount as per PTA monthly demand notice from January 2010 to
December 2012 is PKR4.2 billion (2015: PKR4.2 billion).
Based on legal opinion received, the Board of Directors are of the view that Multinet has good
prospects of succeeding on the claim.
Total exposure
The Company does not have any contingent liability as at 31 December 2016 and 31 December 2015.
(e)
Fund commitment
The Company has committed to invest in ADIF for a total amount of RM50.0 million over the period of eight (8) years. As of 31 December 2016,
the amount yet to be invested amounted to RM31.2 million (2015:RM42.3 million).
37.
SIGNIFICANT NON-CASH TRANSACTIONS
Significant non-cash transactions are as follows:
Group
Asset swap arrangements
Vesting of RSA
DRS
2016
RM’000
2015
RM’000
-
428,560
22,262
89,700
714,639
1,179,334
230
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
38.
SEGMENTAL REPORTING
By key operating companies of the Group
Management has determined the operating segments based on the reports reviewed by the Board of Directors (Chief Operating decision maker).
The Board of Directors considers the business from a geographic perspective. The Group’s operating companies operate in many countries as shown
in Note 40 to the financial statements. Accordingly, the Group’s operations by key operating companies are segmented into these main geographic
segments: Malaysia, Indonesia, Bangladesh, Sri Lanka, Nepal, Cambodia and Others. Others comprise of investment holding entities and other
operating companies in other countries that contributed less than 10% of consolidated revenue.
The reportable segments derive their revenue primarily from the provision of mobile services, lease and services of passive infrastructure, and others
such as provision of interconnect services, pay television transmission services and provision of other data services. Revenue is based on the country
in which the customers are located.
The Board of Directors assesses the performance of the operating segment, before its respective tax charge or tax credits, based on a measure
of EBITDA. EBITDA is derived after operating revenue less other operating costs, domestic interconnect and international outpayment, marketing,
advertising and promotion, and staff costs.
Malaysia
RM’000
Indonesia Bangladesh
RM’000
RM’000
Sri Lanka
RM’000
Nepal
RM’000
Cambodia
RM’000
6,637,183
2,459,995
1,629,543
1,088,840
Others#
RM’000
Consolidation
ad ustments/
eliminations
RM’000
Total
RM’000
22,205,039
Financial year ended
31 December 2016
Operating revenue:
Total operating revenue
Inter-segment*
External operating revenue
6,613,328
(8,636)
(33,013)
2,783,435
(41)
(37,562)
(16,507)
(10,442)
992,715
-
(533,446)
-
459,269
-
(639,647)
6,604,692
6,604,170
2,783,394
2,422,433
1,613,036
1,078,398
21,565,392
2,304,248
2,612,231
758,352
828,420
1,021,197
538,012
(31,641)
(18,171)
8,012,648
76,140
63,313
5,848
10,408
4,579
8,380
132,883
(118,157)
183,394
Results:
EBITDA
Finance income
Finance expense
(189,153)
(607,202)
(53,721)
(44,288)
(18,988)
(5,227)
(395,704)
113,099
(1,201,184)
Depreciation of PPE
(785,189)
(2,527,400)
(821,735)
(432,202)
(167,603)
(149,244)
(98,675)
17,801
(4,964,247)
(78,130)
(67,819)
(141,557)
(29,847)
(77,655)
(4,385)
(24,869)
(206,399)
(2,775)
(79,213)
Amortisation of intangible
assets
(630,661)
Joint ventures:
- share of results (net of tax)
-
-
-
-
(13,854)
-
(95,842)
-
-
192,672
-
131,124
-
-
(5,398)
-
(5,398)
-
(13,145)
-
(62,366)
Associates:
- share of results (net of tax)
(61,318)
- loss on dilution of equity
interests
-
Impairment of PPE, net of
reversal
-
Other non-cash income/
(expenses)
Taxation
Segment profit/(loss) for the
financial year
-
-
-
-
(230)
-
(19,965)
(2,032)
(1,338)
(25,886)
25,303
679,918
(13,729)
(31,912)
24,793
(34,821)
(1,114,001)
236,561
(227,888)
(312,858)
59,070
62,944
(43,034)
(191,991)
(74,273)
(58,737)
76,457
(482,422)
976,268
112,933
(205,630)
255,977
568,446
278,442
(1,430,469)
101,191
657,158
#
Share of associates' results contributed by Idea Cellular Limited (RM65.1 million) and M1 Limited (RM128.8 million).
*
Inter-segment operating revenue has been eliminated in arriving at respective segment operating revenue. The inter-segment operating
revenue was entered into in the normal course of business and at prices negotiated and agreed between the parties.
Axiata Group Berhad | Annual Report 2016
38.
FINANCIAL STATEMENTS
231
SEGMENTAL REPORTING (CONTINUED)
Malaysia
RM’000
Indonesia Bangladesh
RM’000
RM’000
Sri Lanka
RM’000
Cambodia
RM’000
2,120,731
907,419
Consolidation
ad ustments/
Others#
eliminations
RM’000
RM’000
Total
RM’000
Financial year ended
31 December 2015
Operating revenue:
Total operating revenue
Inter-segment*
External operating revenue
7,337,574
(7,397)
6,656,969
2,622,987
(37,003)
(143)
(38,896)
(17)
7,330,177
6,619,966
2,622,844
2,081,835
907,402
848,953
-
(527,717)
-
321,236
-
20,494,633
(611,173)
19,883,460
Results:
EBITDA
2,719,163
2,512,587
944,179
684,315
450,746
2,085
(29,021)
Finance income
98,666
55,645
7,343
13,920
6,932
147,575
(156,660)
173,421
Finance expense
(194,687)
(540,526)
(37,182)
(23,886)
(7,993)
(175,902)
149,038
(831,138)
Depreciation of PPE
(758,748)
(2,101,158)
(433,521)
(377,993)
(160,244)
(88,884)
42,491
(3,878,057)
(56,492)
(71,549)
(116,667)
(30,684)
(4,287)
(845)
6,693
(42,782)
Amortisation of intangible assets
7,284,054
(11,174)
(291,698)
Joint ventures:
- share of results (net of tax)
-
-
-
(2,498)
-
(38,587)
-
489,506
Associates:
- share of results (net of tax)
-
Impairment of PPE (net of
reversal)
-
Other non-cash income/
(expenses)
Taxation
Segment profit for the financial
year
#
39.
(35,494)
- loss on dilution of equity
interests
-
-
-
3,745
(14,604)
(943)
-
525,943
-
-
-
6,182
-
(1,168)
(17,356)
(17,356)
-
(5,845)
(3,109)
15,345
(1,655)
(77,318)
(2,499)
508,461
7,617
446,842
(474,681)
176,110
(165,804)
(95,012)
(62,205)
(59,945)
(13,537)
(695,074)
(10,932)
200,438
98,581
220,450
854,822
(28,602)
1,301,311
2,636,068
Share of associates' results contributed by Idea Cellular Limited (RM368.8 million) and M1 Limited (RM157.8 million).
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(a)
Market risks consist of:
(i)
foreign currency exchange risk – risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
(ii)
fair value interest rate risk – risk that the value of a financial instrument will fluctuate due to changes in market interest rates.
(iii)
cash flow interest rate risk – risk that future cash flows associated with a financial instrument will fluctuate. In the case of a floating
rate debt instrument, such fluctuations result in a change in the effective interest rate of the financial instrument, usually without a
corresponding change in its fair value.
(iv)
price risk – risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are
caused by factors specific to the individual instrument or its issuer or factors affecting all instrument traded in the market.
232
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
39.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
(b)
credit risk – risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.
(c)
liquidity risk (funding risk) – risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial
instruments.
The Group’s and the Company’s overall financial risk management programme focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the financial performance of the Group and the Company. Financial risk management is carried out
through risk reviews, internal control systems, insurance programmes and adherence to the Group’s and the Company’s financial risk management
policies. The Board of Directors regularly reviews these risks and approves the treasury policies, which covers the management of these risks.
Hedging transactions are determined in the light of commercial commitments. Derivative financial instruments are mainly used to hedge underlying
commercial exposures.
(a)
Market risks
(i)
Foreign currency exchange risk
Group
The foreign exchange risk of the Group predominately arises from borrowings denominated in foreign currencies. The main currency
exposure from borrowings denominated in foreign currency is USD. The Group has cross currency swaps and call spread options that
are primarily used to hedge selected foreign currency borrowings to reduce the foreign currency exposures on these borrowings.
The Group has certain investment in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency
exposure arising from the net assets of the Group’s foreign operation is managed primarily through borrowings denominated in the
relevant foreign currency and also the use of cross currency swap.
As at 31 December 2016, if USD has strengthen/weakened by 5% against IDR, BDT, SLR and RM with all other variables held constant,
this will result in foreign exchange losses/gains to the profit or loss of RM328.5 million for the Group on translation of USD denominated
non-hedged borrowings.
Company
The foreign exchange risk of the Company predominately arises from advances to subsidiaries treated as quasi investment and nonhedged borrowings denominated in USD.
As at 31 December 2016, if USD has strengthen/weakened by 5% against RM with all other variables held constant, this will result in
foreign exchange gains/losses to the profit or loss of RM580.4 million for the Company, on translation of USD denominated advances to
subsidiaries treated as quasi investment and non-hedged borrowings.
(ii)
Cash ow and fair value interest rate risk
The Group and the Company have deposits, cash and bank balances including deposits placed with creditworthy licensed banks and
financial institutions. The Group and the Company manage its interest rate risk by actively monitoring the yield curve trend and interest
rate movement for the various deposits, cash and bank balances.
The Group’s borrowings comprise borrowings from financial institutions, Sukuks and Notes. The Group's interest rate risk objective
is to manage an acceptable level of rate fluctuation on the interest expense. In order to achieve this objective, the Group targets a
composition of fixed and floating borrowings based on assessment of its existing exposure and desirable interest rate profile. To obtain
this composition, the Group uses hedging instruments such as interest rate swap contracts and cross currency interest rate swaps.
Group
As at 31 December 2016, if interest rate on different foreign currencies denominated floating interest rates non-hedged borrowings had
been lower/higher by 5% with all other variables held constant, this will result in a lower/higher interest expense of the Group amounting
to RM22.9 million.
Axiata Group Berhad | Annual Report 2016
39.
FINANCIAL STATEMENTS
233
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
(a)
Market risks (continued)
(ii)
Cash ow and fair value interest rate risk (continued)
Company
As at 31 December 2016, if interest rate on different foreign currencies denominated floating interest rates non-hedged borrowings
had been lower/higher by 5% with all other variables held constant, this will result in a lower/higher interest expense of the Company
amounting to RM5.1 million.
(iii)
Price risk
The Group is exposed to equity securities price risk because of the investments held by the Group classified on the consolidated
statement of financial position as AFS and FVTPL. The Group is not exposed to commodity price risk. No financial instruments or
derivatives have been employed to hedge this risk, as the equity securities price risk is deemed as insignificant.
(b)
Credit risk
Credit risk arises from trade receivables, cash and cash equivalents and financial instruments used in hedging activities.
The Group has no significant concentration of credit risk due to its diverse customer base. Credit risk is managed through the application of
credit assessment and approval, credit limit and monitoring procedures. Where appropriate, the Group obtains deposits or bank guarantees
from customers.
The Group and the Company place its cash and cash equivalents with a number of creditworthy financial institutions. The Group’s and the
Company’s policy limit the concentration of financial exposure to any single financial institution.
All hedging instruments are executed with creditworthy financial institutions with a view to limit the credit risk exposure of the Group and the
Company. The Group and the Company, however, are exposed to credit-related losses in the event of non-performance by counterparties to
financial derivative instruments, but do not expect any counterparties to fail to meet their obligations.
The maximum credit risk exposure of the financial assets of the Group and the Company are approximately their carrying amounts as at the
end of the reporting period.
The credit quality of the financial assets that are neither past due nor impaired is shown in Note 18 to the financial statements.
The carrying amount of trade receivables that are past due is shown in Note 33 to the financial statements.
(c)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient liquid funds to meet its financial obligations.
In the management of liquidity risk, the Group and the Company monitor and maintain a level of cash and cash equivalents deemed adequate
by the management to finance the Group's and the Company’s operations and to mitigate the effects of fluctuations in cash flows. Due to the
dynamic nature of the underlying business, the Group and the Company aims at maintaining flexibility in funding by keeping both committed
and uncommitted credit lines available.
234
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
39.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
(c)
Liquidity risk (continued)
The table below analyses the Group’s and the Company’s non-derivative financial liabilities and net settled derivative financial liabilities into
relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. As amounts
included in the table are contractual undiscounted cash flows, these amounts may not be reconciled to the amounts disclosed on the statement
of financial position for borrowings, trade and other payables and derivative financial instruments.
2016
Trade and
other
payables
RM’000
2015
Net settled
derivative
financial
Borrowings instruments
RM’000
RM’000
Total
RM’000
Trade and
other
payables
RM’000
Net settled
derivative
financial
Borrowings instruments
RM’000
RM’000
Total
RM’000
Group
Below 1 year
9,911,830
7,251,151
918
17,163,899
7,086,448
2,660,050
10,101
9,756,599
-
1,309,129
513
1,309,642
-
3,011,189
8,303
3,019,492
1-2 years
2-3 years
-
3,570,170
-
3,570,170
-
1,413,299
4,972
1,418,271
3-4 years
-
6,165,877
-
6,165,877
-
3,375,272
-
3,375,272
4-5 years
-
665,273
-
665,273
-
6,161,900
-
6,161,900
Over 5 years
-
2,875,624
-
2,875,624
-
1,036,194
-
1,036,194
Total contractual undiscounted
cash flows
9,911,830
21,837,224
1,431
31,750,485
7,086,448
17,657,904
23,376
24,767,728
Total carrying amount
9,911,830
22,259,881
902
32,172,613
7,086,448
16,392,386
1,102
23,479,936
2016
Financial
guarantee Borrowings
RM’000
RM’000
2015
Amounts
Other
due to
payables subsidiaries
RM’000
RM’000
Total
RM’000
Financial
guarantee
RM’000
Amounts
Other
due to
payables subsidiaries
RM’000
RM’000
Total
RM’000
Company
Below 1 year
72,337
2,995,465
122,088
2,056,703
5,246,593
69,142
49,244
1,396,349
1-2 years
72,337
-
-
-
72,337
69,142
-
-
69,142
2-3 years
72,337
-
5,157
-
77,494
69,142
1,513
-
70,655
3-4 years
1,381,968
-
-
-
1,381,968
69,142
-
-
69,142
4-5 years
-
-
-
-
-
1,322,204
-
-
1,322,204
Total contractual
undiscounted cash
flows
Total carrying amounts
1,514,735
1,598,979
2,995,465
127,245
2,056,703
6,778,392
1,598,772
50,757
1,396,349
3,045,878
-
2,968,244
127,245
2,056,703
5,152,192
-
50,757
1,396,349
1,447,106
Financial guarantee represents the maximum amount of a guarantee provided by Company to its subsidiary as disclosed in Note 16(b) to
the financial statements. It is based on the earliest period in which the guarantee could be called. No exposure form financial guarantee was
recognised by the Group.
Axiata Group Berhad | Annual Report 2016
39.
FINANCIAL STATEMENTS
235
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
(d)
Capital risk management
The primary objective of the Group’s capital risk management is to ensure that it maintains a strong credit rating and healthy capital ratios in
order to support its business and maximise shareholder’s value.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the
capital structure, the Group may or may not make dividend payments to shareholders, return capital to shareholders or issue new shares or
other instruments.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratios. This ratio is calculated as total borrowings
over total equity. Total borrowings including non-current and current borrowings as shown in the consolidated statement of financial position.
Total equity is calculated as ‘equity’ in the consolidated statement of financial position.
Note
Borrowings
16
Total equity
Gearing ratio
2016
RM’000
2015
RM’000
22,259,881
16,392,386
28,620,204
25,724,344
0.78
0.64
The Group’s capital management strategy was to obtain and maintain an investment grade credit rating.
(e)
Fair value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
•
Quoted prices (unadjusted) in active markets for identified assets or liabilities (Level 1).
•
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly that is, as prices or
indirectly that is, derived from prices (Level 2).
•
Inputs for the asset or liability that are not based on observable market data that is unobservable inputs (Level 3).
The Group measured the financial instruments based on published price quotations (Level 1) and market approach valuation technique (Level 2)
with inputs of valuation technique such as interest rates and yield curves observable at commonly quoted intervals; implied volatilities; and
credit spreads that are observable direct or indirectly as at reporting date.
There were no transfers between Level 1 and Level 2 during the financial year.
236
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
39.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
(e)
Fair value estimation (continued)
The following table represents the fair value level of the financial assets and liabilities that are measured at fair value as at reporting date.
2016
Level 1
RM’000
Level 2
RM’000
2015
Level 3
RM’000
Total
RM’000
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
Group
Assets
Financial assets at FVTPL:
18
-
-
18
28
-
-
28
- Non-hedging derivatives
- Trading securities
-
177,777
-
177,777
-
240,675
-
240,675
- Derivatives used for
hedging
-
223,276
-
223,276
-
101,807
-
101,807
Financial assets at AFS:
- Equity securities
Total assets
-
62,675
1,250
63,925
-
-
31,286
31,286
18
463,728
1,250
464,996
28
342,482
31,286
373,796
Liabilities
Financial liabilities at FVTPL:
- Non-hedging derivatives
-
(1,322,430)
-
(1,322,430)
-
(172,753)
-
(172,753)
- Derivatives used for
hedging
-
(6,077)
-
(6,077)
-
(1,102)
-
(1,102)
Total liabilities
-
(1,328,507)
-
(1,328,507)
-
(173,855)
-
(173,855)
(i)
Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is
regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service,
or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
(ii)
Financial instruments in level 2
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined
by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as
little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Specific valuation techniques used to value financial instruments include:
•
•
•
(iii)
Quoted market prices or dealer quotes for similar instruments;
The fair value of cross currency interest rate swaps and interest rate swaps is calculated as the present value of the estimated
future cash flows based on observable market curves; and
The fair value of forward foreign exchange contracts is determined using forward exchange rates at the reporting date, with the
resulting value discounted back to present value.
Financial instruments in level 3
The movement of the financial instruments in level 3 has no material impact to the results of the consolidated financial statements.
Axiata Group Berhad | Annual Report 2016
39.
FINANCIAL STATEMENTS
237
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
(f)
Offsetting financial assets and financial liabilities
The following financial assets and financial liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements.
Gross
amounts
RM’000
Gross amounts of recognised
(financial liabilities)/
financial assets set off
RM’000
Net
amounts
RM’000
Group
2016
Trade receivables
971,725
Trade payables
(526,075)
(2,770,398)
526,075
445,650
(2,244,323)
2015
Trade receivables
668,308
Trade payables
40.
(361,286)
(2,082,704)
361,286
307,022
(1,721,418)
LIST OF SUBSIDIARIES
The Group had the following subsidiaries as at 31 December 2016:
Name of company
Axiata Investments (Labuan) Limited1
Ownership
interest
directly held
by the parent
Ownership
interest held
by the Group
Ownership
interest held
by NCI
(%)
(%)
(%)
100.00
100.00
-
Principal activities
Investment holding
Country
and place of
incorporation
Federal Territory,
Labuan, Malaysia
Axiata Investments 1 (India) Limited2
100.00
100.00
-
Investment holding
Mauritius
Axiata Management Services
Sdn Bhd1
100.00
100.00
-
Provision of services under
Axiata’s Service Assurance
Centre to telecommunication
service providers
Malaysia
Celcom Axiata Berhad1
100.00
100.00
-
Telecommunication network
capacity, infrastructure and
services
Malaysia
Axiata Investments (Singapore)
Limited1
100.00
100.00
-
Investment holding
Federal Territory,
Labuan Malaysia
Axiata SPV1 (Labuan) Limited1
100.00
100.00
-
Financing
Federal Territory,
Labuan, Malaysia
-
-
-
Develop and nurture talent pool Malaysia
and foster, develop and improve
education
100.00
100.00
-
Financing
Axiata Foundation1 and 5
Axiata SPV2 Berhad1
Malaysia
238
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
40.
LIST OF SUBSIDIARIES (CONTINUED)
The Group had the following subsidiaries as at 31 December 2016: (continued)
Ownership
interest
directly held
by the parent
Ownership
interest held
by the Group
Ownership
interest held
by NCI
(%)
(%)
(%)
edotco Group Sdn Bhd1
100.00
100.00
-
Investment holding and
Malaysia
provision of technical and
operations support services in
the telecommunications and
related industries in local and/or
international markets
Axiata Investments (Cambodia)
Limited1
100.00
100.00
-
Investment holding
Federal Territory,
Labuan, Malaysia
Axiata Digital Services Sdn Bhd1
100.00
100.00
-
Investment holding
Malaysia
Hello Axiata Company Limited2 and 5
100.00
100.00
-
Dormant
Cambodia
Axiata SPV4 Sdn Bhd1
100.00
100.00
-
Investment holding
Malaysia
Axiata Investments (UK) Limited
100.00
100.00
-
Investment holding
United Kingdom
Axiata Business Services Sdn Bhd
100.00
100.00
-
Provide international carrier
Malaysia
services, global communications
products, managed information,
communications and
technology and internet of
things.
Dialog Axiata PLC2
-
83.32
16.68
Telecommunication services,
infrastructure and e-commerce
Sri Lanka
Robi Axiata Limited3
-
68.69
31.31
Mobile telecommunication
services
Bangladesh
Axiata Lanka (Private) Limited2
-
100.00
-
Property development
and letting of property for
commercial purposes
Sri Lanka
Multinet Pakistan (Private) Limited3
-
89.00
11.00
Cable television services,
information technology and
multimedia services
Pakistan
edotco Pakistan (Private) Limited
-
99.33
0.67
Telecommunication
infrastructure and services
Pakistan
Axiata Investments (Indonesia)
Sdn Bhd1
-
100.00
-
Investment holding
Malaysia
-
66.36
33.64
Mobile telecommunication
services
Indonesia
Name of company
Principal activities
Country
and place of
incorporation
Subsidiaries held through Axiata
Investments (Labuan) Limited
Subsidiary held through Axiata
Investments (Indonesia)
Sdn Bhd
PT XL Axiata Tbk2
Axiata Group Berhad | Annual Report 2016
40.
FINANCIAL STATEMENTS
LIST OF SUBSIDIARIES (CONTINUED)
The Group had the following subsidiaries as at 31 December 2016: (continued)
Name of company
Ownership
interest
directly held
by the parent
Ownership
interest held
by the Group
Ownership
interest held
by NCI
(%)
(%)
(%)
Principal activities
Country
and place of
incorporation
Subsidiaries held through Dialog
Axiata PLC
Dialog Broadband Networks (Private)
Limited2
-
83.32
16.68
Data and backbone, fixed
wireless and transmission
infrastructure
Dialog Television (Private) Limited2
-
83.32
16.68
Television broadcasting
Sri Lanka
generated services and direct –
to –home satellite pay television
services
Digital Holdings Lanka (Private)
Limited2 (“DHL”)
-
83.32
16.68
Investment holding
Sri Lanka
Dialog Business Services (Private)
Limited
-
83.32
16.68
Providing business process
outsourcing services including
call centre services
Sri Lanka
Communiq Broadband Network
(Private) Limited2
-
83.32
16.68
Dormant
Sri Lanka
Dialog Television Trading (Private)
Limited2
-
83.32
16.68
Trading of electronic consumer
products
Sri Lanka
Digital Health (Private) Limited2
-
58.32
41.68
Developing and operating a
Sri Lanka
state-of-the-art electronic
commerce infrastructure for the
healthcare sector
Digital Commerce Lanka (Private)
Limited2
-
83.32
16.68
e-commerce and digital
marketing services
Sri Lanka
-
83.32
16.68
Dormant
Sri Lanka
-
84.03
15.97
Telecommunication
infrastructure and services
Bangladesh
-
100.00
-
Investment holding
Mauritius
Sri Lanka
Subsidiaries held through Dialog
Television (Private) Limited
Subsidiaries held through DHL
Subsidiary held through Dialog
Broadband Networks (Private)
Limited
Telecard (Private) Limited2
Subsidiary held through Robi
Axiata Limited
edotco Bangladesh Co. Ltd3
Subsidiary held through Axiata
Investments 1 (India) Limited
Axiata Investments 2 (India) Limited2
239
240
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
40.
LIST OF SUBSIDIARIES (CONTINUED)
The Group had the following subsidiaries as at 31 December 2016: (continued)
Ownership
interest
directly held
by the parent
Ownership
interest held
by the Group
Ownership
interest held
by NCI
(%)
(%)
(%)
-
92.48
7.52
Celcom Mobile Sdn Bhd1
-
100.00
Celcom Networks Sdn Bhd1
-
Celcom Properties Sdn Bhd1
Escape Axiata Sdn Bhd1
Celcom Retail Holding Sdn Bhd1
Name of company
Principal activities
Country
and place of
incorporation
Subsidiary held through Axiata
Investments (Cambodia)
Limited
Investment holding
Federal Territory,
Labuan, Malaysia
-
Mobile communication, network
and application services and
content
Malaysia
100.00
-
Network telecommunication,
capacity and services
Malaysia
-
100.00
-
Property investment
Malaysia
-
100.00
-
Over-The-Top and other on
demand content services
Malaysia
-
100.00
-
Strategic and business
development, management,
administrative, support services
and investment holding
Malaysia
Celcom Intelligence Sdn Bhd1 and 5
-
100.00
-
Investment holding
Malaysia
Celcom Timur (Sabah) Sdn Bhd1
-
80.00
20.00
Fibre optic transmission
network services
Malaysia
Axiata (Cambodia) holdings Limited
formerly known as Glasswool
Holdings Limited 1
Subsidiaries held through Celcom
Axiata Berhad
Celcom eCommerce Sdn Bhd1
-
100.00
-
Electronic wallet services
Malaysia
Celcom Resources Berhad1
-
100.00
-
Investment holding
Malaysia
-
100.00
-
Trading and distribution of
communication devices and
related products and managing
retail stores
Malaysia
-
100.00
-
Dealing in marketable securities
Malaysia
-
92.48
7.52
Mobile telecommunication
services
Cambodia
Subsidiary held through Celcom
Retail Holding Sdn Bhd
Celcom Retail Sdn Bhd1
Subsidiary held through Celcom
Resources Berhad
Celcom Trading Sdn Bhd1 and 5
Subsidiary held through Axiata
(Cambodia) Holdings Limited
formerly known as Glasswool
Holding Limited
Smart Axiata Co., Ltd2
Axiata Group Berhad | Annual Report 2016
40.
FINANCIAL STATEMENTS
LIST OF SUBSIDIARIES (CONTINUED)
The Group had the following subsidiaries as at 31 December 2016: (continued)
Ownership
interest
directly held
by the parent
Ownership
interest held
by the Group
Ownership
interest held
by NCI
(%)
(%)
(%)
-
92.48
7.52
Axiata Digital Advertising Sdn Bhd1
-
100.00
-
WSO2 Telco Inc4
-
70.00
30.00
Axiata Investments (Mauritius)
Limited2
-
100.00
AD Video Sdn Bhd1
-
VM Digital (Thailand) Co Ltd
Name of company
Principal activities
Country
and place of
incorporation
Subsidiary held through Smart
Axiata Co., Ltd
Telecommunication
infrastructure and services
Cambodia
Investment holding
Malaysia
Technology Enabler Service
Provider
United States of
America
-
Investment holding
Mauritius
100.00
-
Establish, maintain and operate
an internet-based multimedia
services
Malaysia
-
100.00
-
Telecommunications and all
types of communications
businesses.
Thailand
-
80.00
20.00
Advertising service provider
and investment holding
Singapore
Komli Asia Holdings Pte Ltd2
-
80.00
20.00
Investment holding and
provision of IT products and
services for online media
companies
Singapore
Adknowledge Asia Pacific (India)
Private Limited
-
80.00
20.00
Dormant
India
-
80.00
20.00
Investment holding and
provision of IT products and
services for online media
companies
Hong Kong
edotco (Cambodia) Co., Ltd2
Subsidiaries held through Axiata
Digital Services Sdn Bhd
Subsidiary held through Axiata
Digital Advertising Sdn Bhd
Adknowledge Asia Pacific Pte Ltd2
Subsidiaries held through
Adknowledge Asia Pacific
Pte Ltd
Subsidiary held through Komli
Asia Holdings Pte Ltd
Adknowledge Asia Hong Kong
Limited (“AAP Hong Kong”)2
241
242
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
40.
LIST OF SUBSIDIARIES (CONTINUED)
The Group had the following subsidiaries as at 31 December 2016: (continued)
Ownership
interest
directly held
by the parent
Ownership
interest held
by the Group
Ownership
interest held
by NCI
(%)
(%)
(%)
Adknowledge Asia (Thailand)
Co Ltd2 and 7
-
79.88
20.12
Provision of IT products and
services for online media
companies
Komli Network Philippines, Inc2 and 8
-
80.00
20.00
Being principal and agent to
Philippines
engage in marketing and sale of
digital publication, advertising
inventory both locally and
abroad, using the internet or
mobile technology
PT Komli Indonesia2
-
79.20
20.80
Provision of IT products and
services for online media
companies
Indonesia
Adknowledge Asia Malaysia Sdn
Bhd2
-
80.00
20.00
Being consultants, specialists
and agents in multimedia
advertising and other related
activities
Malaysia
Adknowledge Asia Singapore Pte Ltd
(formerly known as Komli Media
Pte Ltd)2
-
80.00
20.00
Provision of IT products and
services for online media
companies
Singapore
-
70.00
30.00
Develop and provide support
services for software
technologies products and
solutions
Sri Lanka
edotco Malaysia Sdn Bhd1
-
100.00
-
Telecommunication
infrastructure and services
Malaysia
edotco Investments (Labuan)
Limited1
-
100.00
-
Investment holding
Federal Territory,
Labuan Malaysia
edotco Holdings (Labuan) Limited1
-
78.15
21.85
Investment holding
Federal Territory,
Labuan Malaysia
Name of company
Principal activities
Country
and place of
incorporation
Subsidiaries held through AAP
Hong Kong
Thailand
Subsidiaries held through AAP
Hong Kong
Subsidiary held through WSO2
Telco Inc
WSO2. Telco (Private) Limited
Subsidiaries held through edotco
Group Sdn Bhd
Axiata Group Berhad | Annual Report 2016
40.
FINANCIAL STATEMENTS
243
LIST OF SUBSIDIARIES (CONTINUED)
The Group had the following subsidiaries as at 31 December 2016: (continued)
Ownership
interest
directly held
by the parent
Ownership
interest held
by the Group
Ownership
interest held
by NCI
(%)
(%)
(%)
edotco Towers (Bangladesh) Limited
-
100.00
-
Telecommunication
infrastructure and services
Bangladesh
edotco Services Lanka (Private)
Limited2
-
100.00
-
Provision of end to end
Integrated Infrastructure
Services
Sri Lanka
edotco Investments Singapore Pte Ltd
(“edotco SG”) (formerly known as
Digicel Asian Holdings Pte Limited)2
-
87.50
12.50
Investment holding
Singapore
Asian Towers Holdings Pte Limited2
-
87.50
12.50
Investment holding
Singapore
edotco Myanmar Limited2
-
87.50
12.50
Telecommunication
infrastructure and services
Myanmar
-
100.00
-
Investment Holding
St Kitts and Nevis
-
80.00
20.00
Telecommunication services
Nepal
Name of company
Principal activities
Country
and place of
incorporation
Subsidiaries held through edotco
Investments (Labuan) Limited
Subsidiaries held through edotco
SG
Subsidiary held through Axiata
Investments (UK) Limited
Reynolds Holdings Limited
Subsidiary held through Reynolds
Holdings Limited
Ncell Private Limited3 and 9
1
Audited by PricewaterhouseCoopers Malaysia.
2
Audited by member firms of PricewaterhouseCoopers International Limited which are a separate and independent legal entity from
PricewaterhouseCoopers Malaysia.
3
Audited by a firm other than a member firm of PricewaterhouseCoopers International Limited.
4
No audit is required as allowed by the laws of the perspective country in incorporation.
5
Inactive as at 31 December 2016.
6
In accordance with IC 112-Consolidation: “Special Purpose Vehicles”, AF is consolidated in the Group as the substance of the relationship
between the Company and the special purpose entity indicates that the entity is controlled by the Company.
7
AAP Hong Kong and MGMG Venture Co Ltd hold 255,200 ordinary shares and 382,800 preference shares respectively in the entity. One (1)
ordinary share is entitled to one (1) vote and one thousand (1,000) preference shares are entitled to one (1) vote. Accordingly AAP Hong Kong
maintains its control over the entity.
8
AAP Hong Kong is holding 3,125 ordinary shares in the entity and 9,375 ordinary shares via Trust Deed.
9
Ncell Private Limited has a financial year end in accordance with the calendar year of Nepal in every mid of July.
244
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
41.
LIST OF ASSOCIATES
The investments in associates are as follows:
Group’s effective ownership
interest
Name of company
Principal activities
Country
and place of
incorporation
2016
2015
(%)
(%)
15.12
15.12
Telecommunication
infrastructure and services
Malaysia
49.00
49.00
e-commerce platform
business
Malaysia
28.54
28.32
Mobile telecommunication
services, sales of
telecommunication
equipment and accessories
Singapore
19.77
19.78
Mobile telecommunication
services
India
21.66
21.66
Information technology
enabled services
Sri Lanka
21.66
21.66
Creating and providing
e-learning content
Sri Lanka
71.07
71.07
Venture capital
Malaysia
25.22
-
e-commerce
India
Associate held through Celcom Axiata Berhad
Sacofa Sdn Bhd
Associate held through Celcom Intelligence Sdn Bhd
Celcom Planet Sdn Bhd
Associate held through Axiata Investments
(Singapore) Limited
M1 Limited
Associate held through Axiata Investments 1 (India)
Limited and Axiata Investments 2 (India) Limited
Idea Cellular Limited
Associate held through Dialog Axiata PLC
Firstsource Dialog Solutions (Private) Limited
Associate held through Dialog Holding Lanka
(Private) Limited
Headstart (Private) Limited
Associate held through Axiata SPV4 Sdn Bhd
Axiata Digital Innovation Fund Sdn Bhd
Associate held through Axiata Digital Services
Sdn Bhd
Localcube Commerce Private Limited (“Localcube”)
All associates have co-terminous financial year end with the Group except for Idea and Localcube with financial year ended on 31 March.
Axiata Group Berhad | Annual Report 2016
42.
FINANCIAL STATEMENTS
245
LIST OF JOINT VENTURES
The investments in joint ventures are as follows:
Group’s effective ownership
interest
Name of company
Principal activities
Country
and place of
incorporation
2016
2015
(%)
(%)
PLDT Malaysia Sdn Bhd
49.00
49.00
Mobile virtual network
operator
Malaysia
Digital Milestone Sdn Bhd1
51.00
51.00
Special purpose investment
company
Malaysia
Tune Talk Sdn Bhd
35.00
35.00
Mobile communication
services
Malaysia
Merchantrade Asia Sdn Bhd
20.00
20.00
Provision of money service
business, i.e. remittance
and money changing and
operator of mobile virtual
network
Malaysia
PT XL Planet Digital
33.18
33.21
PT One Indonesia Synergy Tbk
33.18
-
27.03
27.03
Joint ventures held through Celcom Axiata Berhad
Joint ventures held through PT XL Axiata Tbk
e-commerce
Indonesia
Consultancy services
in future network
collaboration
Indonesia
Mobile-only digital music
download service
United States Of
America
Joint venture held through Axiata Digital Services
Sdn Bhd
Yonder Music Inc
1
43.
On 20 April 2015, Digital Milestone commenced members’ voluntary winding-up pursuant to Section 254(1)(b) of the Companies Act, 1965. The
Winding-Up of Digital Milestone is expected to be completed upon obtaining the tax clearance from Inland Revenue Board of Malaysia.
RELATED PARTY TRANSACTIONS
All related party transactions were entered into in the normal course of business and at prices available at negotiated terms. The names of these
related parties, nature of these transactions and their total value have been set out in accordance with the provisions of MFRS 124: “Related Party
Disclosure”.
The Government of Malaysia and bodies controlled or jointly controlled by the Government of Malaysia are related parties of the Group. The
Government of Malaysia has significant influence over the Group. The Group enters into transactions with many of these bodies, which includes but
is not limited to:
–
–
–
receiving telecommunications services, including interconnection revenue/charges
purchasing of goods, including use of public utilities and amenities, and
placing of bank deposits
The Group has established its procurement policies and approval processes for purchases of products and services, which do not depend on
whether the counterparties are government-related entities or not.
The Group provides telecommunications services as part of its ordinary operations. The Group has collectively, but not individually significant
transactions with Government-related entities. These telecommunication services are carried out on commercial terms that are negotiated and
agreed upon between the parties.
246
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
43.
RELATED PARTY TRANSACTIONS (CONTINUED)
Key management personnel are the persons who have authority and responsibility for planning, directing and controlling the activities of the Group
or the Company either directly or indirectly. Key management personnel of the Group and the Company include the Senior Leadership Team who
report directly to the Group Chief Executive Officer.
Whenever exist, related party transactions also includes transaction with entities that are controlled, joint ventures or significantly influenced
directly by any key management personnel or their close family members.
In addition to related party transactions and balances mentioned elsewhere in the financial statements, set out below are significant related party
transactions and balances which were carried out on terms and conditions negotiated amongst the related parties.
Group
2016
RM’000
(a)
Company
2015
RM’000
2016
RM’000
2015
RM’000
Sale of goods and services:
Associates:
- International roaming revenue
14,312
13,635
-
-
258,946
233,222
-
-
273,258
246,857
-
-
406,285
611,463
-
-
- Interconnection charges
11,751
13,979
-
-
- Leaseline charges, maintenance and others
69,220
63,799
-
-
80,971
77,778
-
-
96,815
220,898
-
-
- Technical and management services
-
-
47,435
48,142
(d)
Dividends received from subsidiaries/associates
-
-
1,002,403
1,101,406
(e)
Repayments from/(advances to) subsidiaries
- Advances
-
-
(2,593,067)
- Repayments
-
-
- Interest income
-
-
10,657
47,006
- Interest expense
-
-
(24,701)
(24,819)
- Telecommunication services
Joint ventures:
- Telecommunication services
(b)
Purchase of goods and services:
Associates:
Joint ventures:
- Revenue sharing
(c)
(f)
Intercompany service agreement with subsidiaries:
186,692
(175,430)
86,576
Interest income/(expense) on advances (from)/to subsidiaries
The outstanding balances as at reporting date are disclosed in Note 27 and Note 32 to the financial statements.
Axiata Group Berhad | Annual Report 2016
43.
FINANCIAL STATEMENTS
247
RELATED PARTY TRANSACTIONS (CONTINUED)
Group
(g)
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
23,525
18,578
23,525
18,578
2,383
2,132
2,383
2,132
47
44
47
44
171
285
171
285
4,708
1,797
4,708
1,797
Key management compensation short term employee benefits:
- Salaries, allowances and bonus
- Contribution to EPF
- Estimated money value of benefits
- Other staff benefits
Share- based compensation:
- ESOS and RSA expenses
Included in key management compensation is the Executive Directors’ remuneration of the Company as disclosed in Note 7(d) to the financial
statements.
44.
DIVIDENDS
Tax exempt dividend under single tier system
2016
2015
Per ordinary
share of
RM1 each
Total
Sen
RM’000
-
-
-
- 20151
Final
12
- 20162
Interim
Type
Per ordinary
share of
RM1 each
Total
Sen
RM’000
Final3
14
1,205,001
1,058,806
Interim4
8
696,485
5
446,310
-
-
-
17
1,505,116
22
1,901,486
Type
In respect of financial year
ended 31 December:
- 2014
1
Out of the total dividend distribution, a total RM496.9 million was converted into 102.0 million new ordinary shares of the Company at a
conversion price of RM4.87 per ordinary share pursuant to DRS of the Company.
2
Out of the total dividend distribution, a total RM217.7 million was converted into 44.9 million new ordinary shares of the Company at a
conversion price of RM4.85 per ordinary share pursuant to DRS of the Company.
3
Out of the total dividend distribution, a total RM575.4 million was converted into 94.6 million new ordinary shares of the Company at a
conversion price of RM6.08 per ordinary share pursuant to DRS of the Company.
4
Out of the total dividend distribution, a total RM603.9 million was converted into 108.8 million new ordinary shares of the Company at a
conversion price of RM5.55 per ordinary share pursuant to DRS of the Company.
The Board of Directors has recommended a final tax exempt dividend under the single tier system of 3 sen per ordinary share of RM1 each of the
Company in respect of financial year ended 31 December 2016 amounting to a total of RM269.1 million, based on the issued and paid-up capital of
the Company as at 31 December 2016. The proposed dividend is subject to approval by the shareholders at the forthcoming AGM.
The Board of Directors also determined that the Company’s DRS will apply to the Proposed Final Dividend. This will be subject to the approval of
shareholders at the forthcoming AGM for the renewal of the authority for the Directors of the Company to allot and issue the new ordinary shares
pursuant to the DRS and the approval of Bursa Securities Berhad.
248
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
45.
RE-PRESENTATION
The Group comparatives of the following components have been re-presented to better reflect the nature of the transaction:
As previously
reported Re-presentation
RM'000
RM'000
As
re-presented
RM'000
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
- other reserve
(172,753)
172,753
-
(172,753)
172,753
-
Consolidated statement of changes in equity:
Other comprehensive income
Transaction with owners:
- put option over NCI
46.
-
(172,753)
(172,753)
EVENTS AFTER REPORTING PERIOD
(a)
Incorporation of Axiata Digital Ecode Sdn Bhd (“ADE”)
Axiata Digital Services Sdn Bhd (“ADS”), a wholly-owned subsidiary of the Company, had on 9 January 2017 completed the incorporation of
ADE (Company No. 1214970-T), a private company limited by shares, under the Companies Act, 1965.
ADE was incorporated with an authorised share capital of RM400,000 divided into 400,000 ordinary shares of RM1 each. The issued and paidup share capital of ADE is RM2 and its intended principal activities are to carry out the business of researching and developing internet services
and mobile applications.
(b)
Acquisition of 31.01% additional interest in edotco Bangladesh Co. Ltd.
The Call Option exercise to acquire 31.01% of the issued and paid up capital of edotco Bangladesh Co Ltd (“edotco BD”) pursuant to SPA
dated 5 November 2014 was completed on 19 January 2017 by edotco Group. Accordingly, the Group’s effective interest in edotco BD
increased from 84.03% to 93.74% before the private exercise mentioned below.
(c)
Proposed private placement of edotco Group and proposed share divestment on edotco Group
On 18 January 2017, the following agreements were signed:
i.
Share Subscription Agreement between edotco Group and Innovation Network Corporation of Japan (“INCJ”) on the subscription
by INCJ of up to 546,539,249 ordinary Shares of RM1 each in edotco Group for a total cash consideration of up to USD400.0 million
(equivalent to RM1,778.2 million); and
ii.
Share Purchase Agreement between the Company and Mount Bintang Ventures Sdn. Bhd. (“MBVSB”), a wholly owned subsidiary
of Khazanah Nasional Berhad for the purchase by MBVSB of 273,269,624 edotco’s ordinary shares at a purchase consideration of
USD200.0 million (equivalent to RM899.1 million).
The private placement and the divestment were completed on 27 January 2017 with 409,904,436 edotco Group’s ordinary shares were issued
to INCJ, at a cash consideration of USD300.0 million (equivalent to RM1,329.1 million) and 273,269,624 edotco Group’s ordinary shares were
disposed to MBVSB at a purchase consideration of USD200.0 million (equivalent to RM888.9 million). On the date of completion, each of the
Company, INCJ and Khazanah holds 69.88%, 18.07% and 12.05% respectively in edotco Group.
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
249
SUPPLEMENTARY INFORMATION DISCLOSED PURSUANT TO BURSA SECURITIES LISTING REQUIREMENTS
The following analysis of realised and unrealised retained profits/(accumulated losses) is prepared in accordance with Guidance on Special Matter No. 1,
Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to “Bursa Securities” Listing Requirements, as issued by
the Malaysian Institute of Accountants whilst the disclosure is based on the prescribed format by the Bursa Securities.
Group
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
12,804,667
11,689,640
6,855,824
5,635,604
Total retained profit/(accumulated losses):
- realised
- unrealised
(1,469,419)
(1,627,354)
11,335,248
10,062,286
548,565
2,070,599
7,404,389
7,706,203
-
-
Total retained profit/(accumulated losses) from joint ventures:
- realised
(155,668)
(59,827)
Total retained profit/(accumulated losses) from associates:
- realised
- unrealised
Less: consolidation adjustments
Total consolidated retained profits
2,046,811
(193,887)
2,037,753
(310,555)
-
-
-
-
1,852,924
1,727,198
-
-
13,032,504
11,729,657
7,404,389
7,706,203
(3,697,479)
(1,506,379)
9,335,025
10,223,278
-
-
7,404,389
7,706,203
The disclosure above is solely for compliance with the directive issued by the Bursa Securities and should not be used for any other purpose.
250
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
STATEMENT BY DIRECTORS
PURSUANT TOSECTION 169(15) OF THE COMPANIES ACT, 1965
We, Tan Sri Dato’ Azman Hj. Mokhtar and Tan Sri Jamaludin Ibrahim, two of the Directors of Axiata Group Berhad, do hereby state that, in the opinion of
the Directors, the financial statements set out on pages 121 to 248 are drawn up in accordance with Malaysian Financial Reporting Standards, International
Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the
Group and of the Company as of 31 December 2016 and of their financial performance and cash flows for the financial year then ended.
The supplementary information set out on page 249 have been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised
and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian
Institute of Accountants.
Signed on behalf of the Board of Directors in accordance with their resolution dated 22 February 2017.
TAN SRI DATO’ AZMAN HJ. MOKHTAR
DIRECTOR
TAN SRI JAMALUDIN IBRAHIM
DIRECTOR
STATUTORY DECLARATION
PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965
I, Yap Wai Yip, being the person primarily responsible for the financial management of Axiata Group Berhad, do solemnly and sincerely declare that the
financial statements set out on pages 121 to 248 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true,
and by virtue of the provisions of the Statutory Declarations Act, 1960.
YAP WAI YIP
Subscribed and solemnly declared by the above named Yap Wai Yip at Kuala Lumpur in Malaysia on 22 February 2017, before me.
COMMISSIONER FOR OATHS
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
251
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF AXIATA GROUP BERHAD
(INCORPORATED IN MALAYSIA)
(COMPANY NO. 242188-H)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Our opinion
In our opinion, the financial statements of Axiata Group Berhad (“the Company”) and its subsidiaries (“the Group”) give a true and fair view of the financial
position of the Group and of the Company as at 31 December 2016, and their financial performance and their cash flows for the year then ended in
accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in
Malaysia.
What we have audited
We have audited the financial statements of the Group and of the Company, which comprise the statements of financial position as at 31 December 2016 of
the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group
and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on
pages 121 to 248.
Basis for opinion
We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under
those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements” section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence and other ethical responsibilities
We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian
Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA
Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.
Our audit approach
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements of the Group and the
Company. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management
override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into
account the structure of the Group and of the Company, the accounting processes and controls, and the industry in which the Group and the Company
operate.
252
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF AXIATA GROUP BERHAD
(INCORPORATED IN MALAYSIA)
(COMPANY NO. 242188-H)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and
of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
There are no key audit matters in relation to the Financial Statements of the Company.
Key audit matter
How our audit addressed the key audit matter
Significant acquisitions during the year
RefertoNote3(a)(i)-SignificantAccountingPolicies-SubsidiariesandNote We performed the following procedures:
5(a) - Incorporations, acquisitions, dissolutions and dilutions of interests
during the financial year
•
Management’s identification of intangible assets acquired was
checked by way of understanding the rationale of the acquisitions and
The Group completed the acquisition of Reynolds Holdings Limited
benchmarking to other telecommunication acquisition transactions.
(“Reynolds”) on 11 April 2016 and the acquisition of Airtel Bangladesh
Limited's (“Airtel”) business on 16 November 2016.
•
We read Share Purchase Agreement for Reynolds acquisition,
Merger Agreement for Airtel’s business and board minutes to agree
Management performed a Purchase Price Allocation (“PPA”) exercise for
the purchase consideration and corroborate the identifiable assets
each of the acquisition to determine the fair values of identifiable assets
acquired and liabilities assumed.
acquired and liabilities assumed.
•
We used our valuation expert to independently check the valuations
Provisional goodwill of RM2,960.3 million for the acquisition of Reynolds and
prepared by management.
RM20.6 million for the acquisition of Airtel’s business has been recognised in
the financial statements on dates of acquisition.
•
We tested the valuation of the identifiable assets acquired and
liabilities assumed as follows:
We focused on the PPA exercises performed because of the significant
Assessed the appropriateness of the methodology adopted by
management judgement involved in the identification of intangible assets
management for calculating the fair values in relation to the
acquired and the valuation of the assets and liabilities acquired as it involved
PPA in accordance with MFRS 13 “Fair Value Measurement”;
the use of estimated future cash flows.
Assessed the discount rate, Earnings Before Interest, Tax,
Depreciation and Amortisation (“EBITDA”) margin and revenue
growth rate by reference to the comparable companies and
the industries in the respective territories.
Based on the procedures performed, we found the methodology used
to be acceptable and the assumptions not materially different from our
expectations based on comparable industry data.
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
253
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of goodwill in Indonesia
RefertoNote3(b)(i)-SignificantAccountingPolicies Goodwill,Note4(b)(i) We performed the following audit procedures:
Critical accounting estimates and assumptions – Impairment assessment of
•
We were assisted by our valuation expert in assessing the
goodwillandNote25-Intangibleassets
appropriateness of the methodology adopted by management for
As at 31 December 2016, the Group’s goodwill arising from its acquisitions in
impairment assessment in accordance with MFRS 136 “Impairment
Indonesia was RM5,439.7 million.
of Assets”. We found that the methodology used is acceptable;
The Group is required to at least annually, test goodwill for impairment.
•
We assessed discount rate, terminal growth rate and revenue growth
rate by reference to the comparable companies and the industries
in the same territory. We found that these assumptions used were
not materially different from our expectations based on comparable
industry data.
Management’s assessment of the ‘value-in-use’ of this CGU involves •
significant judgement about the future cash flows of the CGU.
We compared the revenue growth rate to the historical performance
of the CGU and found this assumption to be materially consistent
with historical performance.
•
We re-performed on the sensitivity analysis performed by
management by stress-testing the discount rate, terminal growth
rate and revenue growth rate. We found no shortfall between the
stress-tested value in use calculations and the carrying value of the
CGU in the financial statements.
This area is important to our audit as the related CGU is experiencing
continued losses. Additionally the carrying amount of net assets of the
Indonesia subsidiary is higher than its market capitalisation.
As indicated in Note 25, the impairment assessment is not sensitive to a range
of reasonable changes in assumptions which we found to be consistent with
the results of our stress test.
Impairment assessment of investment in an associate, Idea Cellular
Limited (“Idea”)
Refer to Note 3(e) - Significant Accounting Policies Impairment of non- We performed the following audit procedures:
financial assets (excluding goodwill), Note 4(b)(ii) Critical accounting
estimates and assumptions - Impairment assessment on non-financial •
We were assisted by our valuation expert in assessing the
assets(excludinggoodwill)andNote2 -Associates
appropriateness of the methodology adopted by management for
impairment assessment in accordance with MFRS 136 “Impairment of
The Group has an investment in Idea, a listed associate, with a carrying
Assets”. We found that the methodology used is acceptable;
amount of RM6,711.6 million.
•
We assessed discount rate, terminal growth rate and EBITDA margin by
As of 31 December 2016, the carrying amount of the investment in
reference to the comparable companies and the industries in the same
associate is higher than its fair value. The fair value was based on its share
territory. We found that these assumptions used were not materially
price adjusted for block discount in accordance with its accounting policy as
different from our expectations based on comparable industry data.
stated in Note 3(e) to the financial statements. Accordingly, the Group had
tested the carrying amount of the investment in associate for impairment.
•
We compared the EBITDA margin to the historical performance of the
associate and found this assumption to be materially consistent with
We focused on this area as management’s assessment of the recoverable
the historical performance.
amount of the investment in associate involves significant judgement in
estimating the future cash flows.
•
We re-performed on the sensitivity analysis performed by
management by stress-testing the discount rate, terminal growth rate
and EBITDA margin. We found no shortfall between the stress-tested
value in use calculations and the carrying amount of the investment in
associate in the financial statements.
As indicated in Note 29, the impairment assessment is not sensitive to a range
of reasonable changes in assumptions which we found to be consistent with
the results of our stress test.
254
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF AXIATA GROUP BERHAD
(INCORPORATED IN MALAYSIA)
(COMPANY NO. 242188-H)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Key audit matter
How our audit addressed the key audit matter
Accuracy of telecommunication service revenue recorded given the
complexity of systems
Refer to Note 3(s) Significant Accounting Policies Revenue recognition We performed the following audit procedures:
andNote6-Operatingrevenue
•
We evaluated the relevant IT systems and the design of controls, and
tested the operating effectiveness of controls over the:
Telecommunication service revenue amounting to RM18.6 billion represents
–
capture and recording of revenue transactions;
a significant component of the Group’s revenue.
–
authorisation of rate changes and the input of this information
to the billing systems; and
We focused on the accuracy of this area as telecommunication services
–
accuracy of calculation of amounts billed to customers;
revenue is an inherent risk because it involves multiple element arrangements,
the revenue is processed by billing systems that are complex, it involves
We read and understood the key terms and conditions of significant
large volumes of data with a combination of different products sold and •
new revenue agreements entered into during the financial year to
there were price changes during the financial year.
check the accuracy of revenue recognition;
•
We checked the accounting treatment for significant new products
and promotions launched with multiple element arrangements and
tested that they are appropriately incorporated in the billing system
for new products and products changes; and
•
We examined material non-standard journal entries and other
adjustments posted to revenue accounts.
Based on the procedures performed above, we did not find any material
exceptions in the accuracy of telecommunication services revenue
recorded during the year.
Capitalisation policy and useful lives of property, plant and equipment
(“PPE”)
Refer to Note 3(c) Significant Accounting Policies Property, plant and We performed the following audit procedures:
equipment, Note 4(b)(iii) Critical accounting estimates and assumptions •
We evaluated the design and tested the operating effectiveness of
EstimatedusefullivesofPPEandNote26-Property,plantandequipment
controls around the property, plant and equipment cycle, including
the controls over whether engineering (labour) activity is capital or
As at 31 December 2016, the Group recorded PPE of RM27.5 billion which
operating in nature. We determined that the operation of the controls
comprised mainly telecommunication equipment.
provided us with audit evidence in respect of the capitalisation
practices.
We focused on this area due to the following:
•
certain costs capitalised involve estimates and significant judgement •
in determining whether the capitalisation criteria under MFRS 116 –
Property, Plant and Equipment are met; and
We assessed the nature of costs incurred in capital projects through
testing of amounts recorded and assessing whether the nature of the
expenditure met capitalisation criteria.
We tested whether the Directors’ decisions on asset lives are
the useful lives assigned to telecommunication equipment are •
appropriate by considering our knowledge of the business and
areas of significant judgement by management, and management
practice in the wider telecommunication industry. We also tested
regularly reviews the useful lives due to the network and information
whether approved asset life changes were appropriately applied
technology (“IT”) modernisation being undertaken by the Group. The
prospectively to the fixed asset register.
network and IT modernisation involves estimating when the assets
will be upgraded based on the approved modernisation plans and
the useful lives of the network and IT assets are revised accordingly. Based on the procedures performed above, we did not find any material
exceptions in the capitalisation policy and management’s assessment of
The estimated useful lives of PPE are reviewed annually by management as useful lives for PPE.
disclosed in Note 3(c)(ii) and Note 4(b)(iii) to the financial statements.
•
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
255
Information other than the financial statements and auditors’ report thereon
The Directors of the Company are responsible for the other information. Other information comprising the Directors’ Report and Statement of Risk
Management and Internal Control were obtained by us prior to the date of this auditors’ report. Other sections of the 2016 Annual Report are expected to be
made available to us after that date. Other information does not include the financial statements of the Group and of the Company and our auditors’ report
thereon.
Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained
in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditors’ report, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial statements
The Directors of the Company are responsible for the preparation of the financial statements of the Group and of the Company that give a true and fair view
in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in
Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements
of the Group and of the Company that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group’s and the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
(a)
Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(b)
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.
(c)
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the
Directors.
(d)
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures
in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company
to cease to continue as a going concern.
(e)
Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and
whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair
presentation.
(f)
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an
opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
256
FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF AXIATA GROUP BERHAD
(INCORPORATED IN MALAYSIA)
(COMPANY NO. 242188-H)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Auditors’ responsibilities for the audit of the financial statements (continued)
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of
the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated
in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
(a)
In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we
have acted as auditors have been properly kept in accordance with the provisions of the Act.
(b)
We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are
indicated in Note 40 to the financial statements.
(c)
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form
and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory
information and explanations required by us for those purposes.
(d)
The auditors’ reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section
174(3) of the Act.
OTHER REPORTING RESPONSIBILITIES
The supplementary information set out on page 249 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial
statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1,
Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as
issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary
information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
OTHER MATTERS
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no
other purpose. We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS
(No. AF: 1146)
Chartered Accountants
Kuala Lumpur
22 February 2017
IRVIN GEORGE LUIS MENEZES
02932/06/2018 J
Chartered Accountant