UB No.

09031809 Date of Submission : 04/01/2010

Programme : MBBD50909A Module Leader : Raymond Ang
Module Title : Business Accounting (MBBB8)
Attendence Mode :Full Time

I certify that this assignment is the result of my own work and does not
exceed the word count noted below.
Number of Words: 1637
(Excluding appendices/bibliography,tables and diagrams)

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UB No: 09031809
 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

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 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 Public transport
Products Bus and Rail Services
S$879.0 million SGD
Revenue (FY2009)
Operating S$188.7 million SGD
income (FY2009)
S$162.7 million SGD
Net income (FY2009)
Employees 6620 (2QFY10)
Parent Temasek Holdings Pte Ltd
Website www.smrt.com.sg

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 2.1Key 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, which also operates bus, rail, taxi and other transport services. SMRT was
recently ranked among the best in the Governance and Transparency Index. The
index measures companies' governance, transparency and investor relations. It is
collaboration between Corporate Governance & Financial Reporting Centre
(CGFRC) and the Business Times, and is backed by CPA Australia and the
Investment Management Association of Singapore.

Source:
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/420610/1/.html

2.2 Milestones

2009 Received three awards including ‘Best Metro’ and ‘Best Metro (Asia Pacific)’
awards at international Metro Awards
Circle Line Stage 3 to open from May 2009
2007 First major overseas contract in Dubai
2001 Awarded license to operate Circle Line
Acquired TIBS Holdings – added bus and taxi services
2000 Listing of SMRT shares on SGX
1999 Awarded licence to operate Bukit Panjang light rail
1987 Commenced first revenue train service

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 2.3 Business Structure
SMRT business is structured around the following units:

SMRT Corporation Ltd

100% 100% 100% 100% 100% 100% 100%

SMRT SMRT Road Holdings
SMRTLtdEngineering
SMRT International
SMRT Investment
SMRT Far East PteSMRT
Ltd Capital
Trains Ltd Pte Ltd Pte Ltd Pte Ltd Pte Ltd

100% 100% 100% 100% 100% 100%

SMRT Light Rail Pte Ltd
SMRT Buses Ltd
SMRT Taxis
SMRTLtd Automobile
SMRT Pte
Eng
Ltd(Middle East) SMRT Eng
FZE
Cayman I

50%
Bus Plus Services Pte Ltd SMRT Eng
50%
Cayman II

Transit Link Pte Ltd SMRT Hong Kong Ltd

Subsidiary
SMRT Trains Ltd
SMRT Investment Pte Ltd
SMRT Engineering Pte Ltd
SMRT Light Rail Pte Ltd
Description
Incorporated in 1987 and operates the first MRT system in
Singapore. The 89.4 km MRT system, which consists of
the North South and East West lines, stretches over 51
stations. System will expand to include the Circle Line
(33.3 km), which will interchange with the North South
Line, East West Line and North East Line.
Set up on 9 March 2000. Principal activities are in the
marketing and leasing of media spaces as well as the
marketing, leasing and management of commercial spaces
within the SMRT network.
Set up on August 1999. Offers one-stop consulting
services from project conceptualization to operations,
maintenance and related assignments.
Set up in 1997 and operates Singapore's first fully

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 automated LRT system. Stretches over 7.8 km along 14
stations in Bukit Panjang.
SMRT Taxis Pte Ltd Manages a fleet of over 3,000 taxis, including Prestige
Mercedes, London taxis and SMRT SPACE MPV taxis.
SMRT Automative Services Provides maintenance and repair services. Operates out of
Pte Ltd three workshops in Ang Mo Kio, Woodlands and Kranji.

SMRT Buses Ltd
Bus-Plus Services Pte Ltd
Transit Link Pte Ltd
SMRT Engineering FZE
Operates a fleet of over 800 buses and provides bus
services between Western and North-Western part of
Singapore.
Incorporated in 1994 and operates a fleet of 47 air-
conditioned chartered buses.
A service company set up by SMRT and SBS Transit to
ensure efficient and effective fare and network integration.
Provision of operations and maintenance services to the
Palm Jumeirah Rail Transit System for the Nakheel project
in the United Arab Emirates.

3. Company Analysis of SMRT Corporation Ltd.

SWOT analysis assesses the strategic position of a company by identifying its strength,
weakness, opportunities and threat. This can be found out from the table below:
Strength Weakness
Proven track record Fares are regulated by PTC, beyond SMRT's
control
Main operator of Singapore's public
transport backbone network, MRT Operations and services subject to Licensing
system and Operating Agreement by LTA Subject to
fluctuation in energy costs
Opportunities Threats
Doubling of Rapid Transport System Deregulation and competitive bidding of public
by 2020 transport Services

Various initiatives by Singapore Affected by potential security, safety and

government to promote public transport disease outbreak risks

Expansion of transport and engineering

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 services

4. 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. Ratios are calculated from current year
numbers and are then compared to previous years, other companies, the industry, or even
the economy to judge the performance of the company. 

Financial Ratios of SMRT Corp. Ltd

Profitability Ratios 2008 2007 2006 2005 2004
Return on Capital Employed
(ROCE) 17.119 14.587 11.846 12.640 6.989
Operating Profit Margin 20.627 21.196 18.212 18.154 11.699
18.69
Profit Ratio 18.51% % 18.27% 14.56% 18.84%
22.14
Return on Equity (ROE) Ratio 22.54% % 21.21% 17.61% 22.85%
10.43
Return on Assets (ROA)Ratio 10.84% % 9.85% 7.49% 9.30%

Liquidity Ratios 2008 2007 2006 2005 2004

Current Ratio 0.942 1.546 1.592 0.629 0.982
Acid-Test Ratio 0.868 1.407 1.397 0.539 0.732

Stability Ratio 2008 2007 2006 2005 2004

Gearing Ratio 68.82% 76.29% 77.37% 71.06% 81.06%

Efficiency Ratio 2008 2007 2006 2005 2004

Sales Revenue per Employee 141.12 144.39 136.17 124.53 116.61
Ratio 9 7 8 9 7
Asset Turn Over Ratio 1.666 1.153 1.024 1.286 0.846

Investment Ratio 2008 2007 2006 2005 2004

Earnings per Share (EPS) 10.7 9.9 9 6.9 8.4
price/earnings (P/E) ratio 14.299 18.384 16.556 16.232 11.071
72.21 78.06
Dividend Payout Ratio % 78.30% % 81.64% 61.55%
Dividend Cover Ratio 1.385 1.277 1.281 1.225 1.625

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The data in the following table are taken from the annual reports of the company to
calculate the financial ratios listed above.

4.1. Profitability ratio

Profitability ratios are the financial statement ratios which focus on how well a business
is performing in terms of profit. These ratios are used to find out a business’s earnings
relevant to its expenses and other costs during a specific period of time. 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.

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 4.1.1 Return on Capital Employed (ROCE):
ROCE is a ratio that indicates the efficiency and profitability of a company’s
capital investments. It indicates how a company utilizes capital to generate
revenue. A high ROCE percentage signifies that a company is profitable. From the
data as shown in the table above it is clear that ROCE of SMRT Corp. steadily
increased from 7% to 17% within last 5 years. But in case of SBS Transit Ltd,
ROCE is tending down in recent years though it was increased in previous years
impressively.

4.1.2. 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 - how
well the company can convert its sales . The higher the Operating Profit Margin,
the more efficient the company's core business.As per as the data the trend of the
operating profit margin, for last five years ,SMRT’s performance is better than SBS
transit.

4.1.3. Profit Ratio:

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 It’s a good ratio to benchmark against competitors. A low profit margin
ratio indicates that low amount of earnings, required to pay fixed costs and
profits, are generated from revenues, the business is unable to control its
production costs. Companies with higher profit margins generally have to invest
less capital back into the business to make money. The table shows that, other
than 2005, SMRT is having a steady growth in the profit ratio. Whereas SBS
Transit’s present performance are week compared to previous years as well as
SMRT’s performance.

4.1.4. Return on Equity (ROE) Ratio

This ratio shows the profit attributable to the amount invested by the owners of
the business. It also shows potential investors into the business what they might
hope to receive as a return. The stockholders’ equity includes share capital, share
premium, distributable and non-distributable reserves. In case of SMRT, the
profitability to ordinary shareholders is strong and showing an upward trend.
SMRT and SBS transit both are having an upward trend, which is recognized as
positive sign for the companies..

4.1.5. 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.  It measures the company's ability to
generate profits before leverage with its own assets, rather than by using leverage
in the form of shareholders' equity or other debt liabilities. 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
see that for both the companies there are some fluctuations in the last five years,
but the average trend is upwards

4.2. Liquidity Ratio

Liquidity Ratios implies whether the company can reimburse its short term
creditors out of its total cash. By dividing total cash by total short-term borrowings
it can show the number of times short-term liabilities are covered by cash.

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 4. 2. 1. Current Ratio
The current ratio is one of the most famous of all financial ratios. It serves as a
test of a company's financial strength and relative efficiency. Though there is a
beliefe of ideal current ratio (usually 2:1). However, this fails to take into account
that different type of businesses require different current ratio.
The higher the ratio, the more liquid the business is considered to be. As liquidity is
vital to the survival of a business, a higher current ratio might be tough to be
preferable to a lower one.

Here, the table shows that both the company have maintained their current ratios
within 0.5 to 2 in the last five years.

4.2.2. Acid-Test Ratio

This test is a more severe test of a business’s solvency than the current ratio.
This ratio compares the liquid assets with the total current liabilities .The acid test
ratio excludes inventories from current asset and limits assets to cash and items that
the business can quickly convert to cash. The general rule is that the acid-test ratio
should be atleast 1.0, which means that liquid assets equal current liabilities. It is
not unusual for the ratio to fall below 1.0 without causing particular liquidity
problem, but if the ratio falls as low as 0.5 that would be cause of alarm. The table
shows that except in 2005 for SMRT and 2008 for SBS transit, the ratio was good
regarding the business.

4.3. Stability ratio

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Gearing Ratio measures the percentage of capital employed that is financed by debt and
long term financing. The higher the gearing, the higher the dependence on borrowing and
long term financing. Whereas, the lower the gearing ratio, the higher the dependence on
equity financing. Traditionally, the higher the level of gearing, the higher the level of
financial risk due to the increased volatility of profits.

A high gearing ratio is positive; 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. Gearing can be quite high for small businesses trying to become
established, but in general they should not be higher than 50%.
The table shows that SBS Transit is maintaining a gearing ratio below 50%
steadily. SMRT is trying to reduce the ratio, still it's in a higher range resulting in
larger amount of debt.
4.4. 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.

4.4.1. Sales Revenue per Employee Ratio

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 This ratio relates sales revenue generated to a particular business resource, i.e,
labour. It provides a measure of the productivity of the work force.
Companies prefer to have a higher value for this ratio, implying that they are using
their staff efficiently. 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.

4.4.2. Asset Turn Over Ratio

This ratio examines how effectively the assets of the business are being used to
generate sales revenue. 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.
From the table we can see that, in this case, both the companies are performing
well and a gradual trend of increase in the ratio is in the last five years are reflected.

4. 5.Investors ratios
The Investors ratios are mainly used by the investors to find out the performance of
a business as an investment. The investors will be interested in the company
making some good profit from the investment made.

4.5.1. Earnings per Share (EPS)

This ratio relates the profit of the year to the number of shares issued. It is said
to be the fundamental measure of share performance. Sometimes EPS is important

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 because it is difficult to compare companies of vast sizes, 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). It is very useful to monitor the change that occurs in this
ratio for a particular business over tome.
Here the table shows a growing trend of EPS for SMRT from 2004 t0 2008, but
there is a sudden fall in 2005. But in case of SBS transit the ratio had maintained
good performance till 2006, but the last two years performance are gradually
decreasing and which is not good for the company.

4.5.2. price/earnings (P/E) ratio

This ratio relates to the market value of a share to the earning per share(EPS).
This ratio is a measure of market confidence in the future of the business
concerned. The higher the P/E ratio, 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. Difference in accounting policies between
companies can lead to different P/E ratio figure.
Though the performance regarding P/E ratio of SMRT is not so well in 2008, but
the previous year's trends were quite positive.

4.5.3. Dividend Payout Ratio

Measures the proportion of earnings that a business pays out to stock holers in
the form of dividends.
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. There is no
steady trend regarding this ratio in last five years. It also helps in analysing that
how much amount of the profit company can use for its future growth.

4.5.4. Dividend Cover :

This ratio shows the number of times that the ordinary dividend could be paid
out of current earnings. This dividend is usually described as being x times covered
by the earning(where x =dividend cover).So, if the dividend is covered twice, the
company would be paying out half of its earning as an ordinary dividend. The table

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 shows that in 2004 SMRT had higher dividend cover and an immediate decrease in
2005. Then a gradual upward slope is maintained till 2008.
Peer comparison (19 Mar 2009)

Source: Bloomberg, OIR estimates For analysis.

5. Changes in Accounting Policies

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6 . 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. The permission to operate the MRT System
is derived from the License and Operating Agreement (LOA) signed
with the LTA. Although the term of the LOA is for a period of 30
years starting from 1 April 1998, it may be terminated prematurely
for various reasons, including breaching of any provisions of the
LOA and failure to meet the prescribed operating performance
standards. Hence, if happen, this would adversely affect its financial
performance and business viability. In addition, its Bus services are
also subject to Quality of Service (QoS) standards, which have in
place a penalty framework to enforce compliance. The penalty for
non-compliance ranges from S$100/day/bus service to
S$10,000/month/standard. Lastly, PTC must also approve its fare

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 adjustments, and hence its primary influence of revenue is outside its
control.
Energy cost SMRT is exposed to energy cost risks that is outside its control, such
risks as fluctuations in oil and diesel prices. This would directly affect its
energy costs, and in turn its profitability. To mitigate the rising
electricity costs, the group typically enters into electricity contracts
for at least half a year or longer at fixed rates. In addition, it may also
engage in forward currency exchange contracts to mitigate the
currency risk arising from purchases of diesel in foreign currency

7. Company's Growth and Factors Attracting Investor

Revenue Fare revenue for Train and Bus is expected to be lower due to an
effective 4.6% reduction in bus and train fares from April 2009.
Dividend payout SMRT will endeavour to maintain or increase its dividend payout each
year, targeting a minimum payout ratio of 60% of net profit per year for
its interim and final dividends. Over the past three fiscal years (FY06-
08), SMRT has actually delivered cash dividends with payout
ratios in excess of 60%, in line with what it has committed. In its
latest 1HFY09 results, SMRT has again proven its ability by
paying an interim dividend of 1.75 S cents (62.3% of 2QFY09 net
profit), maintaining its dividend payout from the previous
corresponding period. Hence, looking ahead, we can expect
similarly attractive dividend payouts from SMRT, as its
profitability, as well as operating cash flows, is likely to remain
relatively defensive despite the recessionary conditions in global
economy.
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. So, for investors SMRT is a quite positive company to
invest in.
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, partially offset by higher staff and related costs from
the commencement of the CCL.

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 Future For FY11-12,Expectation is ,the growth in revenue and net income
expectation to stabilize in the range of 4.5-5.5% 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

8. Appendices

8.1.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.

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In the financial year ended 31 March 2006, 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, Changes in Accounting Estimates and Errors
FRS 10 (revised) Events After the Balance Sheet Date
FRS 16 (revised) Property, 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,
unless otherwise stated. They are prepared on the historical cost basis except for certain financial
assets and financial liabilities. The preparation of financial statements in conformity with FRSs
requires management to make judgements, estimates and assumptions that affect the application
of policies and reported amounts of assets, liabilities, 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 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. The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised, if
the revision affects only that period, or in the period of revision and future periods, if the revision
affects both current and future periods. 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.

Consolidation Subsidiaries Subsidiaries are companies controlled by the

Company. Control exists when the Company has the
power, directly or indirectly, to govern the financial
and operating policies of a company so as to obtain
benefits from its activities.
Investments in subsidiaries are stated in the
Company.s balance sheet at cost less impairment
losses. The financial statements of subsidiaries are
included in the consolidated financial statements
from the date that control commences until the date
that control ceases. Business combinations are
accounted for under the purchase method. The cost
of an acquisition is measured at the fair value of the
assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus
costs directly attributable to the acquisition.
The excess of the Group.s interest in the net fair
value of the identifiable assets, liabilities and
contingent liabilities over the

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 cost of acquisition is credited to the profit and loss
account in the period of the acquisition.

Associates Associates are companies in which the Group has

significant influence, but not control, over the
financial and operating policies. The consolidated
financial statements include the Group.s share of the
total recognised gains and losses of associates on an
equity accounted basis, from the date that significant
influence commences until the date that significant
influence ceases. When the Group.s share of losses
exceeds the carrying amount of the associates, 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
Transactions All significant intra-group transactions, balances and
Eliminated On unrealised gains are eliminated on consolidation.
Consolidation Unrealised gains resulting from transactions with an
associate are eliminated to the extent of the Group.s
interest in the associate. Unrealised
losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence
of impairment
Accounting Where necessary, accounting policies for
Policies Of subsidiaries and associates have been adjusted on
Subsidiaries consolidation to be consistent with the policies
And Associates adopted by the Group
Foreign Foreign Monetary assets and liabilities in foreign currencies
Currencies Currency are translated into Singapore dollars at the exchange
Transactions rates approximate to those ruling at the balance sheet
date. Transactions in foreign currencies are
translated at rates ruling on transaction dates.
Translation differences are included in the profit and
loss account
Foreign Assets and liabilities of foreign operations, including
Operations 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. Revenues
and expenses of foreign operations are translated at
exchange rates ruling at the dates of the transactions.
Exchange differences arising on translation are
recognised directly in equity. On disposal,
accumulated translation differences are recognised
in the consolidated profit and loss account as part of
the gain or loss on sale.

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Property, Owned Assets Property, plant and equipment are stated at cost less
Plant And accumulated depreciation and impairment losses.
Equipment The cost of self-constructed assets includes the cost
of materials, direct labour and an appropriate
proportion of production overheads. Where an item
of property, plant and equipment comprises major
components having different useful lives, they are
accounted for as separate items of property, plant
and equipment
Subsequent Subsequent expenditure relating to an item of
Expenditure 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, will
flow to the Group. All other subsequent expenditure
is recognised as an expense in the period in which it
is incurred
Disposals Gains or losses arising from the retirement or
disposal of property, 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 Depreciation is provided on a straight-line basis so
as to write off the cost of the property, plant and
equipment and major components that are accounted
for separately over their estimated useful lives as
follows: Leasehold land and properties . lease period
ranging from 6 to 30 years
Furniture and fittings, office equipment and
computers . 3 to 10 years
Motor vehicles . 5 to 6 years
Rolling stock . 15 to 30 years
Power supply equipment . 20 to 25 years
Signalling, communication and
automatic fare collection systems . 3 to 30 years
Buses . 10 to 17 years
Taxis and vehicles for rental . 6.67 to 7.67 years
Plant and machinery . 3 to 12 years
Other operation equipment . 15 to 30 years
No depreciation is provided on unregistered buses
and taxis.
No depreciation is provided on assets under
construction until such assets are completed and put
into operational use.
Property, plant and equipment costing less than
$1,000 per item are expensed off as and when they
are purchased.
The useful lives and residual values, if not

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 insignificant, are reassessed annually.
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. With a robust regular maintenance
programme and a planned midlife upgrade, the
reliability of these buses will extend beyond the
current 12 years to the statutory life of 17 years.
Arising from this change in the estimated useful life
for selected bus models, the reduction in
depreciation of the buses amounted to $8.7 million
for 2006.

Intangible Goodwill in a business combination represents the

Assets excess of the cost of acquisition over the fair value
of the Group.s share
of the identifiable net assets acquired. Goodwill is
stated at cost less impairment losses. Goodwill on
the acquisition of subsidiaries is presented as
intangible assets. Goodwill on the acquisition of
associates is presented together with investments in
associates.
Goodwill is tested for impairment on an annual basis
in accordance with Note 3.11.

Available- Equity securities held by the Group are classified as

For-Sale being available-for-sale and are stated at fair value,
Financial determined as the quoted bid price at the balance
Assets sheet date. Any resultant gain or loss is recognised
directly in equity. The exceptions are impairment
losses and foreign exchange gains and losses on
monetary items such as debt securities, which are
recognised in the profit and loss account. When
these investments are derecognised, the cumulative
gain or loss previously recognised directly in equity
is recognised in the profit and loss account. Where
these investments are interest-bearing, interest
calculated using the effective interest method is
recognised in the profit and loss account.
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.
Management believes that the carrying amounts
recorded at balance sheet date reflect the
corresponding fair values.
Financial assets classified as available-for-sale are
recognised by the Group on the date it commits to
purchase the investments, and derecognised on the
date a sale is committed.

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Derivatives The Group uses forward foreign exchange contracts
Financial to partially hedge its exposure to foreign exchange
Instruments risks arising from operational activities. The Group
does not hold or issue derivative financial
instruments for trading purposes. Forward foreign
exchange contracts are recognised initially at fair
value. Subsequent to initial recognition, these
instruments are remeasured at fair value. The fair
value is their quoted market price at the balance
sheet date, being the present value
of the quoted forward price. The gain or loss on
remeasurement to fair value is recognised
immediately in the profit and loss account.

Inventories Inventories comprising engineering spares and

consumables used for the maintenance of the MRT
and LRT systems, buses and taxis and which are not
intended for resale, are stated at cost less allowance
for obsolete inventories.
All other inventories are stated at the lower of cost
and net realisable value.
Cost is calculated using the weighted average cost
formula and comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the
inventories to their present location and condition.
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.
When inventories are sold, the carrying amount of
those inventories is recognised as an expense in the
period in which the related revenue is recognised.
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. The amount of
any reversal of
any allowance for write-down of inventories, arising
from an increase in net realisable value, is
recognised as a reduction in the amount of
inventories recognised as an expense in the period in
which the reversal occurs.
Trade And Trade and other receivables are recognised initially
Other at fair value and subsequently measured at amortised
Receivables cost using the effective interest method, less
allowance for impairment
Cash And Cash and cash equivalents comprise cash balances
Cash and bank deposits.
Equivalents
Impairment The carrying amounts of the Group.s assets are

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UB No: 09031809
 reviewed at each balance sheet date to determine
whether there is any indication of impairment. If any
such indication exists, the assets recoverable amount
is estimated. Goodwill is tested for impairment
annually and as and when indicators of impairment
are identified.
An impairment loss is recognized whenever the
carrying amount of an asset or its cash-generating
unit exceeds its
recoverable amount. All impairment losses are
recognized in the profit and loss account.
When a decline in the fair value of an available-for-
sale financial asset has been recognized directly in
equity and there is objective evidence that the value
of the assets is impaired, 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
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, less any
impairment loss on that financial asset previously
recognized in the profit and loss account
Calculation The recoverable amount of the Group’s receivables
Of carried at amortized cost is calculated as the present
Recoverable value of estimated future cash flows, discounted at
Amount the original effective interest rate (i.e. the effective
interest rate computed at initial recognition of these
financial assets). Receivables with a short duration
are not discounted.
The recoverable amount is the greater of the assets.
net selling price and value in use. In assessing value
in use, 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. For an asset that does not
generate cash inflows largely independent of those
from other assets, the recoverable amount is
determined for the cash generating unit to which the
asset belongs.

Reversals Of An impairment loss in respect of a held-to-maturity

Impairment 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.
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. If

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UB No: 09031809
 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, the impairment loss shall be reversed,
with the amount of the reversal recognized in the
profit and loss account.
An impairment loss is reversed if there has been a
change in the estimates used to determine the
recoverable amount.
However, an impairment loss in respect of goodwill
is not reversed.
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,
net of depreciation or amortization, if no impairment
loss had been recognized
Liabilities Trade and other payables are recognized initially at
And Interest- fair value. Interest-bearing liabilities are recognized
Bearing initially at fair value less attributable transaction
Borrowings costs. Subsequent to initial recognition, 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
Provisions 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,
and it is probable that an outflow of economic
benefits will be required to settle the obligation. If
the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-
tax rate that reflects current market assessments of
the time value of money and where appropriate, the
risks specific to the liability
Accident A provision for accident claims is recognised when
Claims an accident has occurred. The amount of provision is
based on the claims outstanding and estimated
amounts payable.
The expected reimbursement from insurance
policies and other parties in respect of the expenses
required to settle a
provision, is recognised as a separate asset disclosed
as .Recoverable in respect of accident claims.
included in .Other
receivables, deposits and prepayments
Employee Defined Obligations for contributions to defined contribution
Benefits Contribution plans are recognised as an expense in the profit and
Plans loss account as incurred.

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UB No: 09031809
 Defined Benefit The Group’s net obligation in respect of defined
Plans benefit plans is calculated by estimating the amount
of future benefit that employees have earned in
return for their service in the current and prior
periods, that benefit is discounted to determine the
present value. The discount rate is the market yield
of quoted Singapore Government Bonds at balance
sheet date. The calculation is performed using the
projected unit credit method.
When the benefits of a plan change, 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. To the
extent that the benefits vest immediately, the
expense is recognised immediately in the profit and
loss account.
In calculating the Group’s obligation in respect of a
plan, any actuarial gain or loss is recognised in the
profit and loss account in the period that the gain or
loss arises
Short-Term Provision is made when services are rendered by
Accumulating employees that increase their entitlement to future
Compensated compensated absences
Absences
Equity And The SMRT Employee Share Option Plan (.SMRT
Equity Related ESOP.) allows the Group’s employees to acquire
Compensated shares of the Company.
Benefits The fair value of options granted is recognised as an
employee expense with a corresponding increase in
equity. The fair value is measured at grant date and
spread over the period during which the employees
become unconditionally entitled to the options. At
each balance sheet date, the company revises its
estimates of the number of options that are expected
to become exercisable. It recognises the impact of
the revision of original estimates in employee
expense and a corresponding adjustment to equity
over the remaining vesting period. The proceeds
received net of any directly
attributable transactions costs are credited to share
capital when the options are exercised.
The SMRT Corporation Restricted Share Plan
(.SMRT RSP.) and the SMRT Corporation
Performance Share Plan (.SMRT PSP) allow the
Group to award employees fully paid shares, their
equivalent cash value or combination thereof, free of
charge, provided that certain prescribed performance

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UB No: 09031809
 targets are met and, in the case of awards under the
SMRT RSP, upon expiry of the prescribed vesting
period. For shares granted pursuant to awards under
these plans, and the amount of cash which may be
paid upon the release of such awards, the fair value
of the awards is measured at grant date and spread
over the vesting period. At each balance sheet date,
the Company may revise the fair value of the awards
based
on actual performance achieved. It recognises the
impact of the revision of original estimates in
employee expense and a corresponding adjustment
to equity over the remaining vesting period.

Income Tax Income tax on the profit and loss for the year
comprises current and deferred tax. Income tax is
recognised in the profit and loss account except to
the extent that it relates to items recognised directly
to equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted
or substantively enacted at the balance sheet date,
and any adjustment to tax payable in respect of
previous years.

Deferred Tax Deferred tax is provided in full, using the liability

method, on temporary differences arising between
the tax bases of assets and liabilities and their
carrying amounts in the financial statements.
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. The amount of
deferred tax provided is based on the expected
manner of realisation or settlement of the carrying
amount of assets and liabilities, 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.
Deferred tax is provided on temporary differences
arising on investments in subsidiaries and associates,
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
Fuel The FEA has been set up in accordance with the
Equalisation directive of the Public Transport Council (.PTC.) as

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UB No: 09031809
Account part of the mechanism for regulating public transport
(.Fea.) fares. The FEA is computed based on the reference
electricity tariff and diesel price for the year as
determined by the PTC.
In the year where the actual electricity tariff and
diesel price is below the reference electricity tariff
and diesel price for that year, a fuel equalisation
account is set up as a charge to the profit and loss
account 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, the fuel equalisation account previously set up
is released to that year.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.s fuel consumption
calculated based on the reference electricity tariff
and diesel price.
All transfers to and from the FEA must be approved
by the PTC. 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.

Grants 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, plant and equipment are
depreciated.
Dividends Dividends on ordinary shares are recognised as a
liability in the period in which they are declared.

Revenue Passenger Passenger revenue from MRT and LRT systems and
Recognition Revenue buses is recognised at the end of the ride.

Taxi Rental Rental revenue receivable under operating leases is

And Rental recognised in the profit and loss account on a
Revenue straight-line basis over the terms of the leases

Advertising .
Revenue Advertising revenue is recognised on an accrual
basis over the terms of the contract
Engineering
And Other Revenue from short-term workshop and other
Services services is recognised upon completion of services
rendered.

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UB No: 09031809
 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.
Provision for foreseeable losses, on contracts not yet
completed, is made as soon as such losses are
determinable
Sales Of Goods Revenue is recognised when the significant risks and
rewards of ownership have been transferred to the
buyers. Revenue excludes goods and services or
other sales taxes and is after deduction of any trade
discounts. No revenue is recognised if there are
significant uncertainties regarding recovery of the
consideration due, associated costs or the possible
return of goods.
Operating Where the Group has the use of assets under
Leases operating leases, payments made under the leases
are recognised in the profit and loss account on a
straight-line basis over the terms of the leases
Finance Interest expense and similar charges are expensed in
Costs the profit and loss account in the period in which
they are incurred
Interest And Interest income from bank deposits and other debt
Investment securities is accrued on a time-apportioned basis.
Income Dividend income from equity investments is
recognised in the profit and loss account at gross on
a receipt basis.
Gain or loss on disposal of investment is accounted
for in the profit and loss account as they arise
Segment A segment is a distinguishable component of the
Reporting Group that is engaged either in providing products
or services (business segment), or in providing
products or services within a particular economic
environment (geographical segment), which is
subject to risks and rewards that are different from
those of other segments.

APPENDIX B

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UB No: 09031809
APPENDIX C

8.3 Bibliography

1.www.ocbcresearch.com/pdf_reports/.../SMRT-090320-OIR.pdf
2.www.smrt.com.sg/
3.http://www.bized.co.uk/compfact/ratios/index.htm
4.http://www.bizwiz.ca/ratioslist.html
5.http://www.bigfatpurse.com/2009/12/smrt-fundamental-analysis/
6.http://en.wikipedia.org/wiki/SBS_Transit
7.http://www.channelnewsasia.com/stories/singaporebusinessnews/view/420610/1/.html
8.www.ocbcresearch.com/pdf_reports/.../SMRT-090320-OIR.pdf
9.http://www.investopedia.com/
10.http://www.sias.org.sg/index9.php?
handler=ir&action=ir_content&ir_content_title_id=25
11.http://www.smrt.com.sg/main/index.asp
12.http://tutor2u.net/business/accounts/main_ratios.htm
13.http://beginnersinvest.about.com/od/financialratio/tp/financial-ratios.htm
14. Atrill P. and McLaney E. (2008) Accounting and finance for Non-specialists(6th
edition).London : Prentice Hall
15. Dyson J. R. (2004) Accounting for Non-accounting students(6th edition) London :
Prentice Hall
16. Tracy J.A ( 1997 ) Accounting for Dummies .USA : IDG Books Worldwide Inc.

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