Table of Contents
1. Executive Summary
2. About the Company 2.1 Key People 2.2 Milestones 2.3 Business Structure 3. Company Analysis of SMRT Corporation Ltd. 4. Company Financial and Data Analysis 4.1. Profitability ratio 4.1.1 Return on Capital Employed (ROCE) 4.1.2. Operating Profit Margin
4.1.3. Profit Ratio 4.1.4. Return on Equity (ROE) Ratio 4.1.5. Return on Assets (ROA) Ratio
4.2. Liquidity Ratio 4. 2. 1. Current Ratio 4.2.2. Acid-Test Ratio 4.3. Stability ratio 4.4. Efficiency Ratio 4.4.1. Sales Revenue per Employee Ratio 4.4.2. Asset Turn Over Ratio 4. 5.Investors ratios 4.5.1. Earnings per Share (EPS) 4.5.2. Price/Earnings (P/E) ratio 4.5.3. Dividend Payout Ratio 4.5.4. Dividend Cover 5. Changes in Accounting Policies 6. Key Risk Factors 7. Company's Growth and Factors Attracting Investor 8. Appendices 8.1 Accounting Policies 8.2. Financial Statements 8.3 The Bibliography
1. Executive Summary:
This assignment is designed to provide an overview of Singapore¶s premier public transport service (SMRT Corporation Ltd ) provider's financial condition and results of operations through the use of analytical review techniques. Ratio analysis is the most common form of financial analysis. It provides relative measures of the company's conditions and performance. Financial ratios analysis makes two types of comparisons such as industry comparison and trend analysis. The ratios of a company are compared with those of similar companies or with industry averages or norms to determine how the company is faring relative to its competitors. In trend analysis, a company's present ratio is compared with its past and expected future ratios to determine whether the company's financial condition is improving or deteriorating over time. All the analysis in this report is based on the resource available in the company's Annual Financial Report which is available on their website.
2. . About the Company SMRT Corporation Ltd (SMRT) is Singapore¶s premier multi-modal public transport service provider offering integrated transport services island-wide. Established in 1987, SMRT has been listed on the Singapore Exchange since July 2000. It is the second-largest public-transport company in Singapore after ComfortDelGro. It operates bus, rail, taxi and other public-transport services via several wholly owned subsidiaries. Here some information about this company is enlisted. Industry Products Revenue Operating income Net income Employees Parent Website Public transport Bus and Rail Services S$879.0 million SGD (FY2009) S$188.7 million SGD (FY2009) S$162.7 million SGD (FY2009) 6620 (2QFY10) Temasek Holdings Pte Ltd
which also operates bus. It is collaboration between Corporate Governance & Financial Reporting Centre (CGFRC) and the Business Times.1Key People: Mr Choo Chiau Beng (Chairman) Mdm Saw Phaik Hwa (President and Chief Executive Officer) Mr Yeo Meng Hin (Deputy President and Chief Operating Officer) Mdm Lim Cheng Cheng (Executive Vice-President and Chief Financial Officer)
Its major competitor in Singapore's duopoly transport system is SBS Transit Limited.
http://www. transparency and investor relations.2.channelnewsasia.com/stories/singaporebusinessnews/view/420610/1/. rail. The index measures companies' governance. taxi and other transport services. SMRT was recently ranked among the best in the Governance and Transparency Index. and is backed by CPA Australia and the Investment Management Association of Singapore.html
2.2 Milestones 2009 Received three awards including µBest Metro¶ and µBest Metro (Asia Pacific)¶ awards at international Metro Awards Circle Line Stage 3 to open from May 2009 First major overseas contract in Dubai Awarded license to operate Circle Line Acquired TIBS Holdings ± added bus and taxi services Listing of SMRT shares on SGX Awarded licence to operate Bukit Panjang light rail Commenced first revenue train service
2007 2001 2000 1999 1987
stretches over 51 stations. System will expand to include the Circle Line (33. which consists of the North South and East West lines.
SMRT Investment Pte Ltd
Set up on 9 March 2000.3 Business Structure SMRT business is structured around the following units:
100% SMRT Trains Ltd
100% SMRT Road Holdings Ltd
100% SMRT Engineering Pte Ltd
100% SMRT International Pte Ltd
100% SMRT Investment Pte Ltd
100% SMRT Far East Pte Ltd
100% SMRT Capital Pte Ltd
100% SMRT Light Rail Pte Ltd 50% 50% Bus Plus Services Pte Ltd
100% SMRT Buses Ltd
100% SMRT Taxis Ltd
100% SMRT Automobile Pte Ltd
100% SMRT Eng (Middle East) FZE
100% SMRT Eng Cayman I
SMRT Eng Cayman II
Transit Link Pte Ltd
SMRT Hong Kong Ltd
Subsidiary SMRT Trains Ltd
Description Incorporated in 1987 and operates the first MRT system in Singapore. which will interchange with the North South Line. Principal activities are in the marketing and leasing of media spaces as well as the marketing.2.
. The 89.4 km MRT system. Offers one-stop consulting services from project conceptualization to operations. East West Line and North East Line. leasing and management of commercial spaces within the SMRT network.3 km).
SMRT Engineering Pte Ltd
Set up on August 1999.
Transit Link Pte Ltd
A service company set up by SMRT and SBS Transit to ensure efficient and effective fare and network integration. SWOT analysis assesses the strategic position of a company by identifying its strength.000 taxis.
3. Company Analysis of SMRT Corporation Ltd. SMRT Automative Services Provides maintenance and repair services. SMRT Taxis Pte Ltd Manages a fleet of over 3. MRT system Operations and services subject to Licensing and Operating Agreement by LTA Subject to fluctuation in energy costs Opportunities Doubling of Rapid Transport System by 2020 Threats Deregulation and competitive bidding of public transport Services
. SMRT Light Rail Pte Ltd Set up in 1997 and operates Singapore's first fully automated LRT system.
SMRT Engineering FZE
Provision of operations and maintenance services to the Palm Jumeirah Rail Transit System for the Nakheel project in the United Arab Emirates. London taxis and SMRT SPACE MPV taxis. weakness.
Bus-Plus Services Pte Ltd
Incorporated in 1994 and operates a fleet of 47 airconditioned chartered buses. Woodlands and Kranji. Stretches over 7. beyond SMRT's control Main operator of Singapore's public transport backbone network. Operates out of Pte Ltd three workshops in Ang Mo Kio.
SMRT Buses Ltd
Operates a fleet of over 800 buses and provides bus services between Western and North-Western part of Singapore. opportunities and threat. This can be found out from the table below: Strength Proven track record Weakness Fares are regulated by PTC. including Prestige Mercedes.8 km along 14 stations in Bukit Panjang.maintenance and related assignments.
397 136.212 12.69% 18.732
Stability Ratio Gearing Ratio
68.640 18.43% 9. Ltd Profitability Ratios Return on Capital Employed (ROCE) Operating Profit Margin Profit Ratio Return on Equity (ROE) Ratio Return on Assets (ROA)Ratio 17.846
.37% 71.153 1.699 2008 2007 2006 2005 2004
2006 1.629 0.178 124.286 0.592 1.539 116.666 1.024 1.29% 77.21% 17.546 1.846 18.49% 9.54% 22.982 0.84% 22. safety and disease outbreak risks
Expansion of transport and engineering services
2005 0.617 1.51% 18. other companies.82% 76.196 11.61% 22.Various initiatives by Singapore government to promote public transport
Affected by potential security.
Financial Ratios of SMRT Corp.14% 21.587 21.56% 18.129 144. Company Financial and Data Analysis Ratio Analysis is a tool used by individuals to conduct a quantitative analysis of information in a company's financial statements.627 14.85% 10.85% 7. or even the economy to judge the performance of the company.868
2007 1.942 0.84% 10. the industry.154 6.119 20.06%
Efficiency Ratio Sales Revenue per Employee Ratio Asset Turn Over Ratio
Liquidity Ratios Current Ratio Acid-Test Ratio
2004 0.06% 81. Ratios are calculated from current year numbers and are then compared to previous years.989 11.
21% 78.385 1.9 16.Investment Ratio Earnings per Share (EPS) price/earnings (P/E) ratio Dividend Payout Ratio Dividend Cover Ratio
2007 9.9 18.7 14.232
2004 8.06% 81.225 1.30% 78.384
2006 9 16.625
The data in the following table are taken from the annual reports of the company to calculate the financial ratios listed above.277 1.281 1.55% 1.556
2005 6.4 11.64% 61.071
From the data as shown in the table above it is clear that ROCE of SMRT Corp. ROCE is tending down in recent years though it was increased in previous years impressively. A high ROCE percentage signifies that a company is profitable.
4.1.1 Return on Capital Employed (ROCE): ROCE is a ratio that indicates the efficiency and profitability of a company¶s capital investments.1. But in case of SBS Transit Ltd. It indicates how a company utilizes capital to generate revenue. It can be said that the company is doing well when they have a value higher compared to a competitor¶s ratio or the ratio same as that of the previous period.
.1. These ratios are used to find out a business¶s earnings relevant to its expenses and other costs during a specific period of time. Profitability ratio Profitability ratios are the financial statement ratios which focus on how well a business is performing in terms of profit. steadily increased from 7% to 17% within last 5 years. Operating Profit Margin: This ratio compares one output of the business(operating profit)with another output(sales revenue) This reveals the operating efficiency of the company .
other than 2005. It measures the company's ability to generate profits before leverage with its own assets. Return on Equity (ROE) Ratio This ratio shows the profit attributable to the amount invested by the owners of the business.5. SMRT and SBS transit both are having an upward trend. SMRT is having a steady growth in the profit ratio.4. The stockholders¶ equity includes share capital. Whereas SBS Transit¶s present performance are week compared to previous years as well as SMRT¶s performance.SMRT¶s performance is better than SBS transit.As per as the data the trend of the operating profit margin. 4. It also shows potential investors into the business what they might hope to receive as a return. Companies with higher profit margins generally have to invest less capital back into the business to make money.well the company can convert its sales .. A low profit margin ratio indicates that low amount of earnings. The table shows that.3. the more efficient the company's core business.. rather than by using leverage in the form of shareholders' equity or other debt liabilities. required to pay fixed costs and profits.
4.1. the profitability to ordinary shareholders is strong and showing an upward trend. share premium. Having a low percentage of ROA signals that the business is making very poor use of its assets and will have to improve its ROA or will face serious problems in future.From the table we can
. distributable and non-distributable reserves. Profit Ratio: It¶s a good ratio to benchmark against competitors. In case of SMRT. Return on Assets (ROA)Ratio Return on assets is a key profitability ratio which measures the amount of profit made per dollar of assets that they own. The higher the Operating Profit Margin.1. are generated from revenues. the business is unable to control its production costs. 4.1. which is recognized as positive sign for the companies. for last five years .
However. Current Ratio The current ratio is one of the most famous of all financial ratios.
Here. It serves as a test of a company's financial strength and relative efficiency. but the average trend is upwards
4. the table shows that both the company have maintained their current ratios within 0.The acid test ratio excludes inventories from current asset and limits assets to cash and items that the business can quickly convert to cash. this fails to take into account that different type of businesses require different current ratio. which means that liquid assets equal current liabilities.2. It is not unusual for the ratio to fall below 1. This ratio compares the liquid assets with the total current liabilities .0 without causing particular liquidity
. the more liquid the business is considered to be. 1. As liquidity is vital to the survival of a business.5 to 2 in the last five years.2. The higher the ratio. Acid-Test Ratio This test is a more severe test of a business¶s solvency than the current ratio.
4.0. Though there is a beliefe of ideal current ratio (usually 2:1). The general rule is that the acid-test ratio should be atleast 1.see that for both the companies there are some fluctuations in the last five years. a higher current ratio might be tough to be preferable to a lower one. 2.
4. By dividing total cash by total short-term borrowings it can show the number of times short-term liabilities are covered by cash. Liquidity Ratio Liquidity Ratios implies whether the company can reimburse its short term creditors out of its total cash.2.
5 that would be cause of alarm. a large amount of debt will give higher return on capital employed but the company dependent on equity financing alone is unable to sustain growth.4. Traditionally. 4. still it's in a higher range resulting in larger amount of debt.problem.
A high gearing ratio is positive. the higher the level of financial risk due to the increased volatility of profits. The table shows that SBS Transit is maintaining a gearing ratio below 50% steadily. The table shows that except in 2005 for SMRT and 2008 for SBS transit. Whereas. Gearing can be quite high for small businesses trying to become established.3.
. The higher the gearing. but in general they should not be higher than 50%. the higher the level of gearing. the higher the dependence on equity financing. the higher the dependence on borrowing and long term financing. SMRT is trying to reduce the ratio. the ratio was good regarding the business. but if the ratio falls as low as 0.
4. the lower the gearing ratio. Efficiency Ratio
Efficiency Ratios give us the information regarding to what extent the company is successful by making use of its assets to generate sales. Stability ratio Gearing Ratio measures the percentage of capital employed that is financed by debt and long term financing.
Investors ratios The Investors ratios are mainly used by the investors to find out the performance of a business as an investment. Asset Turn Over Ratio This ratio examines how effectively the assets of the business are being used to generate sales revenue. both the companies are performing well and a gradual trend of increase in the ratio is in the last five years are reflected.4. Sales Revenue per Employee Ratio This ratio relates sales revenue generated to a particular business resource.4.
4. in this case. labour.4.
4. As from the table we can see that SMRT is having a graph with upward slope which says that its employee resources are well used.1. 5.e. Higher value of asset turnover ratio is preferred because it suggests that the assets are being used in more productively in the generation of revenue.2. implying that they are using their staff efficiently. From the table we can see that. The investors will be interested in the company making some good profit from the investment made. Companies prefer to have a higher value for this ratio. It provides a measure of the productivity of the work force.
This ratio is a measure of market confidence in the future of the business concerned. It is very useful to monitor the change that occurs in this ratio for a particular business over tome. It is said to be the fundamental measure of share performance. Earnings per Share (EPS) This ratio relates the profit of the year to the number of shares issued. but the previous year's trends were quite positive. the greater the confidence in the future earning power of the business and also more investors are prepared to pay in relation to the earnings stream of the business.
4. Though the performance regarding P/E ratio of SMRT is not so well in 2008. The higher the P/E ratio. Difference in accounting policies between companies can lead to different P/E ratio figure. There is no steady trend regarding this ratio in last five years.3.1. price/earnings (P/E) ratio This ratio relates to the market value of a share to the earning per share(EPS). but it is not very helpful to compare the EPS of one company to other where there are differences in the constituents of equity (eg-in the nominal value of share issued or the relative levels of shares and reserves). Here the table shows a growing trend of EPS for SMRT from 2004 t0 2008. but the last two years performance are gradually decreasing and which is not good for the company.5.4.2. It also helps in analysing that how much amount of the profit company can use for its future growth. but there is a sudden fall in 2005. Sometimes EPS is important because it is difficult to compare companies of vast sizes. SMRTs performance regarding this ratio shows that more than 50% of the earnings are paid out bt the company to the stockholders in form of dividends. But in case of SBS transit the ratio had maintained good performance till 2006.5. Dividend Payout Ratio Measures the proportion of earnings that a business pays out to stock holers in the form of dividends.
Dividend Cover : This ratio shows the number of times that the ordinary dividend could be paid out of current earnings.5. Peer comparison (19 Mar 2009)
Source: Bloomberg.So. if the dividend is covered twice. OIR estimates For analysis. This dividend is usually described as being x times covered by the earning(where x =dividend cover).4. Then a gradual upward slope is maintained till 2008.
. the company would be paying out half of its earning as an ordinary dividend.4. The table shows that in 2004 SMRT had higher dividend cover and an immediate decrease in 2005.
The penalty for
.5. if happen. In addition. it may be terminated prematurely for various reasons. Changes in Accounting Policies
6 . this would adversely affect its financial performance and business viability. its Bus services are also subject to Quality of Service (QoS) standards. Key Risk Factors Regulatory and SMRT operates in a regulated environment in which its operations
operational risks and services have to meet operating performance and service standards specified by the respective license agreements with the Singapore government. Hence. including breaching of any provisions of the LOA and failure to meet the prescribed operating performance standards. The permission to operate the MRT System is derived from the License and Operating Agreement (LOA) signed with the LTA. which have in place a penalty framework to enforce compliance. Although the term of the LOA is for a period of 30 years starting from 1 April 1998.
This would directly affect its energy costs. To mitigate the rising electricity costs.
S$10. in line with what it has committed.Over the past three fiscal years (FY06-
Ratio Analysis From the different ratios analyzed in the assignment we can get the clear view that SMRT is is in a rising trend in its performance regarding profitability and efficiency and the investment ratios also shows a positive trend. and hence its primary influence of revenue is outside its control. for investors SMRT is a quite positive company to invest in. and in turn its profitability. it may also engage in forward currency exchange contracts to mitigate the currency risk arising from purchases of diesel in foreign currency
7. In its latest 1HFY09 results. In addition. looking ahead. Hence. is likely to remain relatively defensive despite the recessionary conditions in global economy.3% of 2QFY09 net profit). we can expect similarly attractive dividend payouts from SMRT. as well as operating cash flows. Lastly. SMRT has again proven its ability by paying an interim dividend of 1. as its profitability.75 S cents (62.6% reduction in bus and train fares from April 2009.000/month/standard. the group typically enters into electricity contracts for at least half a year or longer at fixed rates. PTC must also approve its fare adjustments. targeting a minimum payout ratio of 60% of net profit per year for its interim and final dividends. SMRT has actually delivered cash dividends with payout ratios in excess of 60%.
SMRT will endeavour to maintain or increase its dividend payout each year. Energy cost risks SMRT is exposed to energy cost risks that is outside its control. Company's Growth and Factors Attracting Investor
Fare revenue for Train and Bus is expected to be lower due to an effective 4. such as fluctuations in oil and diesel prices. maintaining its dividend payout from the previous corresponding period.
5% from higher ridership/better utilization in its existing lines and CCL(circle line) (which will be opened up in phases). but impacted possibly by a recovery in energy prices and higher operating costs
. partially offset by higher staff and related costs from the commencement of the CCL.Energy costs and In FY10 earnings growth would outpace its revenue growth due to proactive cost a positive impact from lower energy costs and proactive cost containment.5-5.the growth in revenue and net income to stabilize in the range of 4.Expectation is . Future expectation For FY11-12.
income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.Accounting Policies Basis of Preparation The financial statements are prepared in accordance with Singapore Financial Reporting Standards (FRS) including related Interpretations promulgated by the Council on Corporate Disclosure and Governance. The preparation of financial statements in conformity with FRSs requires management to make judgements. if the revision affects both current and future periods.1. Control exists when the Company has the power. Plant and Equipment FRS 17 (revised) Leases FRS 21 (revised) The Effects of Changes in Foreign Exchange Rates FRS 24 (revised) Related Party Disclosures FRS 27 (revised) Consolidated and Separate Financial Statements FRS 28 (revised) Investments in Associates FRS 32 (revised) Financial Instruments: Disclosure and Presentation FRS 33 (revised) Earnings Per Share FRS 39 Financial Instruments: Recognition and Measurement FRS 102 Share-based Payments
The financial statements are presented in Singapore dollars and rounded to the nearest thousand. estimates and assumptions that affect the application of policies and reported amounts of assets. the Group adopted the following new/revised FRSs which are relevant to its operations: FRS 1 (revised) Presentation of Financial Statements FRS 2 (revised) Inventories FRS 8 (revised) Accounting Policies. Appendices 8. Changes in Accounting Estimates and Errors FRS 10 (revised) Events After the Balance Sheet Date FRS 16 (revised) Property. to govern the financial and operating policies of a company so as to obtain benefits from its activities.s balance sheet at cost less impairment losses. or in the period of revision and future periods.8. The estimates and underlying assumptions are reviewed on an ongoing basis.
Subsidiaries are companies controlled by the Company. the results of which form the basis of making the judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. liabilities. directly or indirectly. Investments in subsidiaries are stated in the Company. Judgements made by the management in the application of FRSs that have a significant effect on the financial statements and in arriving at estimates with a significant risk of material adjustment in the following year are discussed in Note 32. They are prepared on the historical cost basis except for certain financial assets and financial liabilities. The cost
. unless otherwise stated. Revisions to accounting estimates are recognised in the period in which the estimate is revised. Business combinations are accounted for under the purchase method. if the revision affects only that period. In the financial year ended 31 March 2006.
Revenues and expenses of foreign operations are translated at
Transactions Eliminated On Consolidation
Accounting Policies Of Subsidiaries And Associates Foreign Currency Transactions
. but not control. The excess of the Group. Unrealised gains resulting from transactions with an associate are eliminated to the extent of the Group. Associates Associates are companies in which the Group has significant influence. but only to the extent that there is no evidence of impairment Where necessary. balances and unrealised gains are eliminated on consolidation. Translation differences are included in the profit and loss account Assets and liabilities of foreign operations.s interest in the associate. When the Group. equity instruments issued and liabilities incurred or assumed at the date of exchange.s interest in the net fair value of the identifiable assets. over the financial and operating policies. from the date that significant influence commences until the date that significant influence ceases. accounting policies for subsidiaries and associates have been adjusted on consolidation to be consistent with the policies adopted by the Group Monetary assets and liabilities in foreign currencies are translated into Singapore dollars at the exchange rates approximate to those ruling at the balance sheet date. the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations or made payments on behalf to satisfy obligations of the associates that the Group has guaranteed or otherwise committed All significant intra-group transactions.s share of the total recognised gains and losses of associates on an equity accounted basis.s share of losses exceeds the carrying amount of the associates. Unrealised losses are eliminated in the same way as unrealised gains. Transactions in foreign currencies are translated at rates ruling on transaction dates. liabilities and contingent liabilities over the cost of acquisition is credited to the profit and loss account in the period of the acquisition.of an acquisition is measured at the fair value of the assets given. plus costs directly attributable to the acquisition. including goodwill and fair value adjustments arising on the acquisition of foreign operations. are translated to Singapore dollars for consolidation at the rates of exchange ruling at the balance sheet date. The consolidated financial statements include the Group.
The cost of self-constructed assets includes the cost of materials.
. 6.67 years Plant and machinery . they are accounted for as separate items of property. plant and equipment that has already been recognised is added to 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.67 to 7. 3 to 30 years Buses . lease period ranging from 6 to 30 years Furniture and fittings. accumulated translation differences are recognised in the consolidated profit and loss account as part of the gain or loss on sale. plant and equipment and major components that are accounted for separately over their estimated useful lives as follows: Leasehold land and properties . Exchange differences arising on translation are recognised directly in equity. 3 to 10 years Motor vehicles . 15 to 30 years No depreciation is provided on unregistered buses and taxis.exchange rates ruling at the dates of the transactions. All other subsequent expenditure is recognised as an expense in the period in which it is incurred Gains or losses arising from the retirement or disposal of property. Owned Assets Plant And Equipment Property. will flow to the Group. 5 to 6 years Rolling stock . 20 to 25 years Signalling. 10 to 17 years Taxis and vehicles for rental . 15 to 30 years Power supply equipment . plant and equipment comprises major components having different useful lives. plant and equipment are stated at cost less accumulated depreciation and impairment losses. plant and equipment Subsequent expenditure relating to an item of property. direct labour and an appropriate proportion of production overheads. Property. 3 to 12 years Other operation equipment . office equipment and computers . communication and automatic fare collection systems . plant and equipment are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised in the profit and loss account on the date of retirement or disposal Depreciation is provided on a straight-line basis so as to write off the cost of the property. Where an item of property. On disposal.
Goodwill is stated at cost less impairment losses. With a robust regular maintenance programme and a planned midlife upgrade.No depreciation is provided on assets under construction until such assets are completed and put into operational use. determined as the quoted bid price at the balance sheet date. the cumulative gain or loss previously recognised directly in equity is recognised in the profit and loss account. Equity securities held by the Group are classified as being available-for-sale and are stated at fair value. the reliability of these buses will extend beyond the current 12 years to the statutory life of 17 years. Unquoted equity and other investments are held at cost because of the lack of quoted market prices and the inability to reliably estimate fair value. interest calculated using the effective interest method is recognised in the profit and loss account. The exceptions are impairment losses and foreign exchange gains and losses on monetary items such as debt securities.000 per item are expensed off as and when they are purchased. Management believes that the carrying amounts
AvailableFor-Sale Financial Assets
.11. During the financial year. the estimated useful life for selected bus models was changed from 12 years to 17 years with effect 1 April 2005. Property. if not insignificant. Goodwill on the acquisition of associates is presented together with investments in associates. When these investments are derecognised.7 million for 2006. Arising from this change in the estimated useful life for selected bus models.s share of the identifiable net assets acquired. Any resultant gain or loss is recognised directly in equity. Goodwill is tested for impairment on an annual basis in accordance with Note 3. Goodwill on the acquisition of subsidiaries is presented as intangible assets. the reduction in depreciation of the buses amounted to $8. are reassessed annually. The useful lives and residual values. Intangible Assets Goodwill in a business combination represents the excess of the cost of acquisition over the fair value of the Group. Where these investments are interest-bearing. plant and equipment costing less than $1. which are recognised in the profit and loss account.
these instruments are remeasured at fair value. The amount of any allowance for write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. being the present value of the quoted forward price. buses and taxis and which are not intended for resale. The fair value is their quoted market price at the balance sheet date. costs of conversion and other costs incurred in bringing the inventories to their present location and condition. are stated at cost less allowance for obsolete inventories. Inventories comprising engineering spares and consumables used for the maintenance of the MRT and LRT systems. and derecognised on the date a sale is committed.recorded at balance sheet date reflect the corresponding fair values. the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. Trade and other receivables are recognised initially
. is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Subsequent to initial recognition. Cost is calculated using the weighted average cost formula and comprises all costs of purchase. The Group does not hold or issue derivative financial instruments for trading purposes. Financial assets classified as available-for-sale are recognised by the Group on the date it commits to purchase the investments. Forward foreign exchange contracts are recognised initially at fair value. All other inventories are stated at the lower of cost and net realisable value. The amount of any reversal of any allowance for write-down of inventories. When inventories are sold. Derivatives Financial Instruments The Group uses forward foreign exchange contracts to partially hedge its exposure to foreign exchange risks arising from operational activities. arising from an increase in net realisable value. The gain or loss on remeasurement to fair value is recognised immediately in the profit and loss account.
For an asset that does not generate cash inflows largely independent of those from other assets. net selling price and value in use. In assessing value in use. the recoverable amount is determined for the cash generating unit to which the asset belongs. less any impairment loss on that financial asset previously recognized in the profit and loss account The recoverable amount of the Group¶s receivables carried at amortized cost is calculated as the present value of estimated future cash flows. less allowance for impairment Cash and cash equivalents comprise cash balances and bank deposits. Goodwill is tested for impairment annually and as and when indicators of impairment are identified. the assets recoverable amount is estimated.Other Receivables Cash And Cash Equivalents Impairment
at fair value and subsequently measured at amortised cost using the effective interest method. If any such indication exists. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. the cumulative loss that had been recognized directly in equity is recognized in the profit and loss account even though the financial asset has not been derecognized. The recoverable amount is the greater of the assets. An impairment loss in respect of a held-to-maturity
Calculation Of Recoverable Amount
. The carrying amounts of the Group. the effective interest rate computed at initial recognition of these financial assets). discounted at the original effective interest rate (i. The amount of the cumulative loss that is recognized in the profit and loss account is the difference between the acquisition cost and current fair value. Receivables with a short duration are not discounted.e. All impairment losses are recognized in the profit and loss account. the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. When a decline in the fair value of an available-forsale financial asset has been recognized directly in equity and there is objective evidence that the value of the assets is impaired.
provisions are determined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and where appropriate. with the amount of the reversal recognized in the profit and loss account. Subsequent to initial recognition. and it is probable that an outflow of economic benefits will be required to settle the obligation. net of depreciation or amortization. trade and other payables and interest-bearing liabilities are stated at amortized cost with any difference between cost and redemption value being recognized in the profit and loss account over the period of the borrowings on an effective interest basis A provision is recognised in the balance sheet when the Group and the Company has a legal or constructive obligation as a result of a past event. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. The amount of provision is based on the claims outstanding and estimated amounts payable. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined. if no impairment loss had been recognized Trade and other payables are recognized initially at fair value.Impairment
Liabilities And InterestBearing Borrowings
security or receivable carried at amortized cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. Interest-bearing liabilities are recognized initially at fair value less attributable transaction costs. If 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 recognized in the profit and loss account. If the effect is material. The expected reimbursement from insurance policies and other parties in respect of the expenses required to settle a
. the risks specific to the liability A provision for accident claims is recognised when an accident has occurred. the impairment loss shall be reversed. An impairment loss in respect of an investment in an equity instrument classified as available-for-sale is not reversed through the profit and loss account. However. an impairment loss in respect of goodwill is not reversed.
included in . the portion of the increased benefit relating to past service by employees is recognised as an expense in the profit and loss account on a straight-line basis over the average period until the benefits become vested. that benefit is discounted to determine the present value. At each balance sheet date. The calculation is performed using the projected unit credit method. the company revises its estimates of the number of options that are expected to become exercisable.Other receivables.Recoverable in respect of accident claims.
Defined Benefit The Group¶s net obligation in respect of defined benefit plans is calculated by estimating the amount Plans of future benefit that employees have earned in return for their service in the current and prior periods. any actuarial gain or loss is recognised in the profit and loss account in the period that the gain or loss arises Provision is made when services are rendered by Short-Term employees that increase their entitlement to future Accumulating compensated absences Compensated Absences The SMRT Employee Share Option Plan (. To the extent that the benefits vest immediately. When the benefits of a plan change. Compensated Benefits The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. deposits and prepayments Obligations for contributions to defined contribution plans are recognised as an expense in the profit and loss account as incurred.Employee Benefits
Defined Contribution Plans
provision.) allows the Group¶s employees to acquire shares of the Company. The discount rate is the market yield of quoted Singapore Government Bonds at balance sheet date. the expense is recognised immediately in the profit and loss account. The proceeds received net of any directly attributable transactions costs are credited to share
. is recognised as a separate asset disclosed as .SMRT Equity And Equity Related ESOP. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. In calculating the Group¶s obligation in respect of a plan. It recognises the impact of the revision of original estimates in employee expense and a corresponding adjustment to equity over the remaining vesting period.
using the liability method. in the case of awards under the SMRT RSP. Income tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly to equity. Temporary differences are not recognised for goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. Income Tax Income tax on the profit and loss for the year comprises current and deferred tax. For shares granted pursuant to awards under these plans. Current tax is the expected tax payable on the taxable income for the year. the fair value of the awards is measured at grant date and spread over the vesting period. and the amount of cash which may be paid upon the release of such awards. Deferred tax is provided on temporary differences
. At each balance sheet date.SMRT PSP) allow the Group to award employees fully paid shares. upon expiry of the prescribed vesting period. It recognises the impact of the revision of original estimates in employee expense and a corresponding adjustment to equity over the remaining vesting period. using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.SMRT RSP. The SMRT Corporation Restricted Share Plan (. the Company may revise the fair value of the awards based on actual performance achieved. using tax rates enacted or substantively enacted at the balance sheet date.) and the SMRT Corporation Performance Share Plan (. free of charge. on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities.capital when the options are exercised. provided that certain prescribed performance targets are met and. their equivalent cash value or combination thereof. and any adjustment to tax payable in respect of previous years. Deferred tax is provided in full. in which case it is recognised in equity.
Passenger Revenue Taxi Rental And Rental Revenue Passenger revenue from MRT and LRT systems and buses is recognised at the end of the ride. The FEA is computed based on the reference electricity tariff and diesel price for the year as determined by the PTC.s profit and loss account. The amount that can be released to the profit and loss account is limited to the maintenance of a minimum balance (or such other amount as may be approved by PTC) in the FEA equivalent to one year. In the year where the actual electricity tariff and diesel price is below the reference electricity tariff and diesel price for that year. In the year where the actual electricity tariff and diesel price is above the reference electricity tariff and diesel price for that year.Fuel Equalisation Account (.) as part of the mechanism for regulating public transport fares. Asset-related grants received from the Land Transport Authority for the purchase of eligible operating assets are deferred and amortised in the profit and loss account using the straight-line method and over the same periods in which the related property. Dividends on ordinary shares are recognised as a liability in the period in which they are declared.Fea. The PTC may also direct such transfers that it considers necessary and has the obligation to ensure that the benefits relating to the balance in the FEA will be passed back to the commuting public. the fuel equalisation account previously set up is released to that year.)
arising on investments in subsidiaries and associates.s fuel consumption calculated based on the reference electricity tariff and diesel price.PTC. Rental revenue receivable under operating leases is recognised in the profit and loss account on a straight-line basis over the terms of the leases
. All transfers to and from the FEA must be approved by the PTC. except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future The FEA has been set up in accordance with the directive of the Public Transport Council (. plant and equipment are depreciated. a fuel equalisation account is set up as a charge to the profit and loss account for that year.
No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due. is made as soon as such losses are determinable Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyers. Dividend income from equity investments is recognised in the profit and loss account at gross on a receipt basis. which is subject to risks and rewards that are different from those of other segments. on contracts not yet completed. Advertising revenue is recognised on an accrual basis over the terms of the contract Revenue from short-term workshop and other services is recognised upon completion of services rendered. Where the Group has the use of assets under operating leases. Revenue from engineering consultancy and project management services is recognised on the percentage of completion method. The stage of completion is recognised upon completion of work done at designated phases of the contracts. payments made under the leases are recognised in the profit and loss account on a straight-line basis over the terms of the leases Interest expense and similar charges are expensed in the profit and loss account in the period in which they are incurred Interest income from bank deposits and other debt securities is accrued on a time-apportioned basis. Revenue excludes goods and services or other sales taxes and is after deduction of any trade discounts. Gain or loss on disposal of investment is accounted for in the profit and loss account as they arise A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment).Advertising Revenue Engineering And Other Services
. or in providing products or services within a particular economic environment (geographical segment).
Sales Of Goods
Finance Costs Interest And Investment Income
. associated costs or the possible return of goods. Provision for foreseeable losses.
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