XYZ COMPANY      (A Limited Liability Company)ILLUSTRATIVE FINANCIAL STATEMENTS         December 31, 2008               wi...
INDEPENDENT AUDITORS’ REPORTTo:   The Partners      XYZ Company      _____, Kingdom of Saudi ArabiaWe have audited the acc...
In our opinion, the financial statements taken as a whole:    1) present fairly, in all material respects, the financial p...
XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE BALANCE SHEETAs at December 31, 2008Expressed in thousands of Saudi A...
XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE STATEMENT OF INCOMEFor the year ended December 31, 2008Expressed in t...
XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE STATEMENT OF CASH FLOWSFor the year ended December 31, 2008Expressed ...
XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE STATEMENT OF CHANGES IN PARTNERS’ EQUITYFor the year ended December 3...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands ...
Illustrative socpa financial statements template    limited liability co english
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Illustrative socpa financial statements template limited liability co english

  1. 1. XYZ COMPANY (A Limited Liability Company)ILLUSTRATIVE FINANCIAL STATEMENTS December 31, 2008 with INDEPENDENT AUDITORS’ REPORT
  2. 2. INDEPENDENT AUDITORS’ REPORTTo: The Partners XYZ Company _____, Kingdom of Saudi ArabiaWe have audited the accompanying financial statements of XYZ Company (“the Company”) whichcomprise the balance sheet as at ______________ and the related statements of income, cash flows andchanges in partners’ equity for the year then ended and the attached notes (1) through (30) which form anintegral part of the financial statements.Management is responsible for the preparation and fair presentation of these financial statements inaccordance with generally accepted accounting standards in the Kingdom of Saudi Arabia and incompliance with Article 175 of the Regulations for Companies and the Company’s Articles of Association.This responsibility includes: designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement, whetherdue to fraud or error; selecting and applying appropriate accounting policies; and making accountingestimates that are reasonable in the circumstances. Management has provided us with all the informationand explanations that we require relating to our audit of these financial statements.Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with generally accepted auditing standards in Saudi Arabia. Those standardsrequire that we comply with relevant ethical requirements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free of material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on our judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making thoserisk assessments, we consider internal control relevant to the entitys preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An auditalso includes evaluating the appropriateness of accounting principles used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the financialstatements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion. 1
  3. 3. In our opinion, the financial statements taken as a whole: 1) present fairly, in all material respects, the financial position of the Company as at _____________, and of its results of operations and its cash flows for the year then ended in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia appropriate to the circumstances of the Company; and 2) comply with the requirements of the Regulations for Companies and the Company’s Articles of Association with respect to the preparation and presentation of the financial statements.For KPMG Al Fozan & Al SadhanSignature:Name:License No.:Date:Corresponding to: 2
  4. 4. XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE BALANCE SHEETAs at December 31, 2008Expressed in thousands of Saudi Arabian Riyal Note 2008 2007ASSETSCurrent assets: Cash and cash equivalents 4 Trade receivables 5 Inventories 6 Current investments 9 Prepayments and other current assets 7 Total current assets Non-current assets: Investments in equity accounted investees 8 Other investments 9 Deferred tax assets 26 Intangible assets 10 Leased assets 11 Property, plant and equipment 12Total non-current assetsTotal assets ============= =============LIABILITIES AND PARTNERS’ EQUITYCurrent liabilities: Short-term bank debts 13 Current portion of finance lease obligation 11 Current portion of long-term bank debts 13 Current portion of SIDF loan 14 Trade payables 15 Accrued Zakat and income-tax 26 Provisions 16 Accrued expenses and other current liabilities 17Total current liabilitiesNon-current liabilities: Deferred tax liabilities 26 Finance lease obligation 11 Long-term bank debts 13 SIDF loan 14 Employees’ end of service benefitsTotal non-current liabilitiesTotal liabilitiesPARTNERS’ EQUITY Share capital 18 Statutory reserve 19 Other reserve (specify) 20 Unrealized gain (loss) on investments Retained earningsTotal partners’ equityTotal liabilities and partners’ equity ============== ============== The accompanying notes 1 through 30 form an integral part of these illustrative financial statements. 3
  5. 5. XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE STATEMENT OF INCOMEFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal Note 2008 2007Revenue / SalesCost of salesGross profit Selling and marketing expenses 21 General and administrative expenses 22 Impairment loss 23 Realized gain (loss) on sale of investments – net Unrealized gain / loss from valuation of trade securities Income from held-to-maturity investments Share of profit of equity accounted investees Rental income – net 24 Other income 25Operating incomeFinance incomeFinance expensesNet finance expensesIncome (loss) before ZakatZakat (applicable for 100% Saudi owned company) 26Net income (loss) ============= ============= The accompanying notes 1 through 30 form an integral part of these illustrative financial statements. 4
  6. 6. XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE STATEMENT OF CASH FLOWSFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal Note 2008 2007Cash flows from operating activities: Net income (loss) for the year Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization of intangible assets Impairment loss Loss/gain on sale of property, plant and equipment Impairment loss Realized gain (loss) on sale of investments – net Unrealized gain / loss from valuation of trade securities Income from held-to-maturity investments Share of profit of equity accounted investees Zakat charge for the year Finance expenses for the year Changes in operating assets and liabilities: Decrease (increase) in trade receivables Decrease (increase) in inventories (Increase) decrease in prepayments and other current assets Increase (decrease) in trade payables Increase (decrease) in accrued expenses and other liabilities Net increase (decrease) in employees’ end of service benefitsFinance expenses paidZakat paidTotal adjustmentsNet cash provided by (used in) operating activitiesCash flows from investing activities: Additions to intangible assets Additions to property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of investments Investment income received Proceeds from sale of investmentsNet cash provided by (used in) investing activitiesCash flows from financing activities: Dividend paid *Zakat and income tax paid on behalf of the partners *Zakat and income tax reimbursed by the partners Net movement in short-term bank debts Net movement in long term bank debts Net movement in finance lease obligation Net movement in SIDF loanNet cash provided by (used in) financing activitiesNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of the yearCash and cash equivalents at end of the year ================ ================Non-cash items (described if applicable)*Applicable to mixed company The accompanying notes 1 through 30 form an integral part of these illustrative financial statements. 5
  7. 7. XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE STATEMENT OF CHANGES IN PARTNERS’ EQUITYFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal Unrealized Share Statutory Other reserve gain/(loss) on Retained Capital reserve (specify) investments earnings TotalBalance at December 31, 2006Net income (loss) for the year 2007Transfer to statutory reserveZakat and income tax (applicable to a mixed company): Charge for the year Reimbursed/reimbursable by the partnersNet effect of adjustments in unrealized gain/(loss) on investmentsOther movement (specify)Dividend paidBalance at December 31, 2007Net income for the year 2008Transfer to statutory reserveZakat and income tax (applicable to a mixed company): Charge for the year Reimbursed/reimbursable by the partnersDividend paidOther movement (specify)Net effect of adjustments in unrealized gain (loss) on investmentsBalance at December 31, 2008 ========== ========== ========== ========== ========== ========== The accompanying notes 1 through 30 form an integral part of these financial statements. 6
  8. 8. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal1. ORGANIZATION AND PRINCIPAL ACTIVITIES XYZ Company (the Company) is a limited liability company formed under the Regulation for Companies in the Kingdom under Commercial Registration No. ____________ dated ____________, corresponding to ____________. [Describe activities such as] The principal activities of the Company are to manufacture and sell ____________in the local, Middle East and other export markets. The Company’s registered office is located at the following address: _________________ _________________ _________________ _________________2. BASIS OF PREPARATION (a) Statement of compliance The accompanying financial statements have been prepared in accordance with the generally accepted accounting standards in Saudi Arabia issued by the Saudi Organization for Certified Public Accountants (SOCPA). The financial statements were authorized for issue by the Board of Directors / management (specify) on (date) (b) Basis of measurement The financial statements have been prepared on historical cost basis (except for available- for-sale investments which are stated at their fair values), using the accrual basis of accounting and the going concern concept. 7
  9. 9. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal2. BASIS OF PRESENTATION (continued) (c) Functional and presentation currency These financial statements are presented in Saudi Arabian Riyals (SR) which is the functional currency. All financial information presented in SR has been rounded to the nearest thousand. (d) Use of estimates and judgements The preparation of financial statements requires management to make judgment, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in future periods affected. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes: [Specify note with reference of balance sheet item, if applicable.]3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in the financial statements. Certain comparative amounts have been reclassified to conform with the current year’s presentation (give reference of note where reclassification was done). (a) Trade receivables Trade receivables are stated at original invoice amount less provisions made for amounts which in the opinion of the management may not be received. Bad debts are written off when identified. 8
  10. 10. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal3. SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is principally based on the weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (c) Investments (i) Investment in trade securities Investment in trade securities which are purchased for trading purposes are initially recorded at cost and then re-measured and stated in the balance sheet at market value and included under current assets. Realized gain or loss on sale of trade securities and changes in market value at balance sheet date are credited or charged to income statement. (ii) Held to maturity investments Investment in securities held to maturity is measured at annualized cost using the effective interest method, less any impairment loss. 9
  11. 11. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal3. SIGNIFICANT ACCOUNTING POLICIES (continued) (iii) Investments in associates and jointly controlled entities (equity accounted investees) Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity. Jointly controlled entities are those entities over whose activities the Company has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decision. Associates and jointly controlled entities are accounted for using the equity method (equity accounted investee) and are initially recognized at cost. The Company’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The financial statements include the Company’s share of income and expenses and equity movement of the equity accounted investees from the date that significant influence commences until the date that significant influence ceases. When the Company’s share of losses exceeds its interest in an associate, the Company’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of an associate. The Companys share of profits or losses of the investee companies is credited or charged to the income currently. (iv) Available-for-sale investments The Company has less than 20% equity investments in locally listed companies and various companies which are not for trading purposes and where the Company does not have any significant influence or control and, accordingly, these are classified as investments available for sale and subsequent to initial recognition, they are measured at fair value and changes therein other than impairment losses (see Note __) are recognized in equity. Fair value is determined by reference to the market value in the open market if exists. In the absence of an open market, the cost is considered to be the fair value for these investments. 10
  12. 12. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal3. SIGNIFICANT ACCOUNTING POLICIES (continued) Permanent diminution in value of the above mentioned investments, if any, is charged to the statement of income. (d) Intangible assets i) Pre-operating costs Pre-operating costs includes all costs and expenses incurred during the pre-operating stage and have the future economic benefits. Such costs are amortized using the straight-line method over the related economic benefit periods not exceeding _______ years. ii) Research and development costs Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss when incurred. Development activities involve a plan or design for the production of new or substantially improved products, services and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product, service or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalized includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Borrowing costs related to the development of qualifying assets are recognized in profit or loss as incurred. Other development expenditure is recognized in profit or loss as incurred. Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. Capitalized development cost is amortized using the straight-line method over the related benefit periods not exceeding __ years. 11
  13. 13. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal3. SIGNIFICANT ACCOUNTING POLICIES (continued) iii) Other intangible assets (Specify nature and amortization policy) (e) Leased assets The Company accounts for tangible assets obtained under finance lease by recording the asset and the related liability. The amounts are determined on the basis of lower of fair value of assets and discounted value of minimum lease payments. Finance charges are allocated to accounting period in a manner so as to provide a constant periodic rate of charge on the outstanding liability. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated. Depreciation is charged applying the straight-line method using the following annual depreciation rates: Assets category Year -- -- -- -- -- -- (f) Property, plant and equipment Property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the asset. Finance costs on borrowings to finance the construction of the assets are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognized in the income statement when incurred. 12
  14. 14. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal3. SIGNIFICANT ACCOUNTING POLICIES (continued) Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of individual item of property, plant and equipment. The estimated useful lives of assets for current and comparative periods are as follow: Years Buildings Leasehold improvements Plant and equipment Furniture and office equipment Motor vehicles (g) Impairment of assets Financial assets, property, plant and equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss, if any, is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. (h) Provisions (Applicable to the warranties, restructuring, onerous contracts, etc. and not for accrual) A provision is recognized if, as a result of past events, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefit, will be required to settle the obligation. 13
  15. 15. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal3. SIGNIFICANT ACCOUNTING POLICIES (continued) i) Warranties A provision for warranties is required when the underlying products and services are sold. The provision is based on historical working data and a weighing of all possible outcomes against their associated probabilities. ii) Other (specify) (i) Employees’ end of service benefits Employees’ end of service benefits, calculated in accordance with Saudi Arabian labour regulations, are accrued and charged to statement of income. The liability is calculated at the current value of the vested benefits to which the employee is entitled, should his services are terminated at the balance sheet date. (j) Revenue recognition Revenue from sales is recognized upon delivery or shipment of products to customers, and is recorded net of returns, trade discounts and volume rebates. Revenue from services is recognized when services are performed. Rental income is recognized in the statement of income on a straight-line basis over the term of the lease. (k) Operating leases Payments under operating leases are recognized in the statement of income on a straight- line basis over the term of the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense over the term of the lease. 14
  16. 16. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal3. SIGNIFICANT ACCOUNTING POLICIES (continued) (l) Expenses Selling and marketing expenses are those arising from the Company’s efforts underlying the marketing, selling and distribution functions. All other expenses, excluding direct costs and financial charges, are classified as general and administrative expenses. Allocations of common expenses between cost of sales and selling, marketing, general and administrative expenses, when required, are made on a consistent basis. (m) Zakat and income-tax [For 100% Saudi owned companies] Zakat, computed in accordance with Saudi Arabia Tax and Zakat regulations, is accrued and charged to statement of income currently. [For mixed companies] Zakat and income tax, computed in accordance with the Saudi Arabian fiscal regulations, are accrued and charged to retained earnings. Since the partners have agreed to reimburse Zakat and income tax from the proceeds of the future dividend, such amount receivable from the partners are credited to retained earnings; [OR if applicable] Zakat and income tax, computed in accordance with Saudi Arabian fiscal regulations, are accrued and charged to retained earnings. Zakat and income tax, when reimbursed by the partners, are credited to retained earnings. Deferred tax liabilities and assets are recognized for all temporary differences at current rates of taxation. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available in the near future to allow all or part of the deferred tax asset to be utilized. 15
  17. 17. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal3. SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Foreign currency translation Transactions denominated in foreign currencies are translated to the functional currency of the Company at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currency at the balance sheet date are translated to the functional currency of the Company at the foreign exchange rate ruling at that date. Exchange differences arising on translation are recognized in the statement of income currently. (o) Dividends Interim dividends are recorded as liability in the period in which they are approved by the Board of Directors. Final dividends are recorded in the period in which they are approved by the shareholders. (p) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash with banks and other short-term highly liquid investments, if any, with original maturities of three months or less, which are available to the Company without any restrictions.4. CASH AND CASH EQUIVALENTS Cash and cash equivalents at December 31 comprise the following: 2008 2007 Cash in hand Cash at bank on current accounts Short term bank deposits Other (specify) ============ ============ 16
  18. 18. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal5. TRADE RECEIVABLES Trade receivables at December 31 comprise the following: 2008 2007 Related parties Other customers Total Provision for doubtful accounts ============ ============6. INVENTORIES Inventories at December 31 comprise the following: 2008 2007 Raw and packing materials Work-in-process Finished goods Spare parts and consumables In-transit inventories Total Provision for slow moving items ============ ============ 17
  19. 19. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal6. INVENTORIES (inventories) 1. Disclose inventory included in the financial statements that is pledged as security for liabilities of the Company. 2. Disclose the difference between the value of cost of goods sold and similarly for ending inventory computed according to the method applied by the Company and the weighted average methods in case the Company used LIFO or FIFO.7. PREPAYMENTS AND OTHER CURRENT ASSETS Prepayments and other current assets at December 31 comprise the following: 2008 2007 Prepayments Margin deposits with banks Supplier advances Employee housing and other advances Zakat and income tax reimbursable by the partners Other ============ ============ 18
  20. 20. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal8. INVESTMENTS IN EQUITY ACCOUNTED INVESTEES Investments in associates and jointly controlled entities described as equity accounted investees at December 31 comprise the following: Effective ownership interest Name (%) 2008 2008 -- -- -- -- -- -- -- -- -- -- -- Total Less: Impairment loss (Disclose reason for not using equity method on investments (with name) where investment is 20 – 50% of interest.) 19
  21. 21. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal9. OTHER INVESTMENTS a) Other investments at December 31 comprise of the following: 2008 2007 Investments in trade securities Held-to-maturity investments Available for sale (AFS) investments Miscellaneous (specify) Total Less: Investments classified under current assets: Investments in trade securities Current portion of held-to-maturity investments Current investments Non-current investments ============ ============ b) Investments in trade securities at December 31, comprise the following: 2008 2007 Cost Unrealized gain (loss) Fair value ============ ============ c) Held-to-maturity at December 31, comprise the following: 2008 2007 Cost Impairment loss Revised cost Amortization or premium / discount Fair value ============ ============ 20
  22. 22. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal9. OTHER INVESTMENTS (continued) d) Investments available for sale at December 31, comprise the following: 2008 2007 Cost Impairment loss Revised cost Unrealized gain (loss) Fair value ============ ============ e) Miscellaneous [Specify and give details.]10. INTANGIBLE ASSETS a) Intangible assets at December 31 comprise the following: 2008 2007 Pre-operating expenses Product development or other intangible assets (specify) ============ ============ b) Pre-operating expenses The movement in pre-operating expenses for the year ended December 31 is as follows: 2008 2007 Total Total Cost Balance at beginning of the year Additions during the year Cost fully amortized Balance at end of the year 21
  23. 23. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal10. INTANGIBLE ASSETS (continued) Accumulated amortization and impairment Balance at beginning of the year Amortization charge for the year Cost fully amortized Impairment loss adjustments Balance at end of the year Net balance at December 31 ============ ============ [Disclose any significant movement during the year.] c) Product development or Other intangible assets (specify) The movement in other intangible assets (specify) for the year ended December 31 is as follows: 2008 2007 Total Total Cost Balance at beginning of the year Additions during the year Cost fully amortized during the year Balance at end of the year Accumulated amortization and impairment Balance at beginning of the year Amortization charge for the year Cost fully amortized during the year Impairment loss adjustments Balance at end of the year Net balance at December 31 ============ ============ [Disclose any significant movement during the year.] 22
  24. 24. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal11. LEASED ASSETS a) Leased assets at December 31 acquired under finance lease terms and detailed as under: 2008 2007 Cost Balance at beginning of the year Addition during the year Disposal during the year Balance at end of the year Accumulated depreciation: Balance at beginning of the year Charge for the year Relating to disposal Balance at end of the year Net leased assets ============ ============ b) The lease assets have been acquired under a finance lease agreement for a total lease value of SR __________ payable SR __________in advance and balance SR __________payable in __ equal monthly instalments effective [date]. The aggregate fair value of the leased assets was estimated to be SR __________which has been capitalized as part of leased assets cost. 23
  25. 25. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal11. LEASED ASSETS (continued) At December 31 the net present value of the finance lease obligation is presented in the financial statements as follows: 2008 2007 Current portion shown under current liabilities Non-current portion shown under non-current liabilities ============ ============ The future minimum lease payments as of December 31, for the future years are analyzed as follows: 2008 2008 Year 2009 2010 2011 2012 2013 and thereafter 24
  26. 26. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal12. PROPERTY, PLANT AND EQUIPMENT The movement in property, plant and equipment during the year ended December 31, 2008 is analyzed as under: [modify the class of assets as appropriate] Furniture Plant and and office Motor Capital work Land Buildings equipment equipment vehicles in progress TotalCost:Balance at January 1, 2008AdditionsTransfers from capital work in progressReclassificationDisposalsBalance at December 31, 2008Accumulated depreciation and impairment:Balance at January 1, 2008Depreciation charge for the yearImpairment loss adjustmentsReclassificationDisposalsBalance at December 31, 2008Net book value:At December 31, 2008 ========== ========== ========== ========== ========== ========== ==========At December 31, 2008 ========== ========== ========== ========== ========== ========== ========== 25
  27. 27. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal12. PROPERTY, PLANT AND EQUIPMENT (continued) a) Additions include SR ___________ in respect of interests capitalized during 2008 (2008: SR _____________). The rate used to determine the amount of finance costs capitalized during 2008 was ___% (2008: ___%). b) Capital work in progress - [Disclose nature of major work] c) The building is situated on plot of land leased from the Industrial Estate Administration, [city] for ____ years commencing from _______________ for nominal annual rental. The lease is renewable for a similar period on the same conditions and such other conditions as agreed by the parties concerned. d) See Note 13 with respect to the pledge of certain fixed assets of the Company as collateral to Saudi Industrial Development Fund. e) Buildings at December 31, 2008 include properties having cost SR ______________ and book value SR ______________ leased to third parties under operating lease arrangements. f) Depreciation charge for the year ended December 31, has been allocated as follows: 2008 2007 Cost of sales Selling and marketing expenses General and administrative expenses ============ ============ 26
  28. 28. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal13. BANK DEBTS a) Short-term bank debts Short-term bank debts represent amounts outstanding under bank overdraft and short-term loan facilities with certain commercial banks to finance the working capital requirement of the Company. [Describe security and covenants, etc. for the facilities, if these are specific to short-term bank debts only] b) Long-term bank loans Long-term bank loans at December 31 comprise of the following: 2008 2008 [Name of banks] __ __ ============ ============ Presented in the balance sheet as follows: Current portion shown under current liabilities Non-current portion shown under non-current liabilities ============ ============ [Disclosure (modify as necessary)] 27
  29. 29. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal13. BANK DEBTS (continued) Short and long-term bank loans, overdrafts, guarantees and other facilities from the banks are secured by _____________________________________. All bank borrowings bear commission at agreed commercial rates. The facility agreements with the banks contains covenants which, among other things, limits distribution of dividends in order to maintain a minimum net worth and require that certain financial ratios be maintained. [Describe guarantees, if applicable.]14. SIDF LOAN The loan from Saudi Industrial Development Fund (SIDF) was obtained to finance the acquisition / expansion of the manufacturing facilities. Against the total approved loan facility of SR __________ at December 31, 2008, a sum of SR __________ was received and the balance unavailed facility amounted to SR __________. The loan is secured by a mortgage on the Company’s fixed assets and the personal and corporate (if applicable) guarantees of the partners in the proportion to their ownership interest in the Company. The loan agreement contains covenants which, among other things, limits future capital expenditure and requires certain financial ratios to be maintained. [Describe any non-compliance of loan covenants and its impact.] Based on the repayment schedule, the outstanding SIDF loan balance at December 31 is calculated in the balance sheet as follows: 2008 2007 Current portion shown under current liabilities Non-current portion shown under non-current liabilities Total ============ ============ 28
  30. 30. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal15. TRADE PAYABLES Trade payables at December 31 comprise of the following: 2008 2007 Related parties Other parties ============ ============16. PROVISIONS (Provide details of provisions)17. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities at December 31 comprise of the following: 2008 2007 Accrued expenses Customers’ advances Unearned rental income Other [specify] ============ ============ 29
  31. 31. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal18. SHARE CAPITAL At December 31, 2008, the share capital of the Company was SR ________ (2007: SR ________) divided into ____ shares (2007: ________ shares) of SR ___ each, which are fully paid and owned as follows: No. of shares % Amount Name of significant partners -- -- -- Total ========== ========== ==========[Describe any change in share capital during the year]19. STATUTORY RESERVE In accordance with Company’s Articles of Association and the Regulations for Companies in the Kingdom of Saudi Arabia, the Company is required to transfer 10% of its net income each year to a statutory reserve until such reserve equals 50% of its share capital. This reserve is not available for distributions to the shareholders. [Add the following sentence if statutory reserve reached to 50% of the capital and no more allocation:] The statutory reserve requirement has been fulfilled and, accordingly, the Company is not required to transfer any additional amount towards this reserve.20. OTHER RESERVE (specify) [Disclose details of the reserve. How it is created and will be utilized.] 30
  32. 32. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal21. SELLING AND MARKETING EXPENSES Selling and marketing expenses for the year ended December 31 comprise the following: 2008 2007 [Disclose major item of expenses such as any amount which is 5-10% of the total expenses.] (Modify expense headings as appropriate to the company) Employee costs Advertising and sales promotion Rent Depreciation Bad and doubtful debts Repairs, maintenance and consumables Other ============ ============ 31
  33. 33. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal22. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses for the year ended December 31 comprise the following: 2008 2007 [Disclose material expenses such as any amount which is 5-10% of the total expenses.] (Modify expense headings as appropriate to the company) Employee costs Amortization of intangible assets Travel Depreciation Training Utilities, telephone and communication Insurance Computer-related Rent Repairs and maintenance Other ============ ============23. IMPAIRMENT LOSS (Provide detailed note in that respect) 32
  34. 34. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal24. RENTAL INCOME – NET Rental income for the year ended December 31 comprises the following: 2008 2008 Total rental income Costs and expenses: Operating costs Depreciation Total costs and expenses Rental income, net ============ ============25. OTHER INCOME (EXPENSE) – NET Other income (expense) – net for the year ended December 31 comprises the following: [Disclose material amount.] 2008 2007 Profit (loss) on disposal of property, plant and equipment Scrap sales Miscellaneous ============ ============ 33
  35. 35. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal26. ZAKAT AND INCOME-TAX a) Charge for the year i) Zakat and income-tax charge for the year ended December 31 comprises the following: 2008 . 2007 . Income- Zakat Income-tax Total Zakat tax Total For current year For previous year _________ _________ _________ _________ _________ ________ ======= ======= ======= ======= ======= = ======== = = = = ii) The significant components of Zakat base for the current year ended December 31, 2008 are as follow: [Summarize information from Zakat calculation sheet such as:] 2008 2007 Capital Adjusted net income Adjusted equity and provision at beginning of year Deduction for property, plant and equipment Deduction for investment Deduction for intangible assets Deduction from dividend paid iii) Income-tax charge for the current year is based on the adjusted taxable income calculated on the portion of equity owned by the foreign partner. 34
  36. 36. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal26. ZAKAT AND INCOME-TAX (continued) iv) Zakat and income-tax for previous years relates to certain amounts disallowed at the time of final assessment by the Department of Zakat and Income Tax. [Explain based on information in assessment order.] b) Accrued Zakat and income tax The movement in accrued zakat and income-tax during the year ended December 31 is as follows: 2008 . 2007 . Income- Zakat Income-tax Total Zakat tax Total Balance at beginning of the year Add: Charge for the year Less: Payments during the year _________ _________ _________ _________ _________ ________ Balance at end ======= ======= ======= ======= ======= of the year = ======== = = = = c) Status of assessments Zakat assessments have been finalized with the Department of Zakat and Income Tax (DZIT) and final zakat certificates obtained for the years up to ___. [Disclose assessment under appeal, etc. and any contingent liability in that respect] 35
  37. 37. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal26. ZAKAT AND INCOME-TAX (continued) d) Deferred tax assets and liabilities (i) Recognized deferred tax Recognized deferred tax assets and liabilities at December 31 are attributable to the following: 2008 2007 Property, plant and equipment Intangible assets Investments Employee termination benefits Provisions Other [specify] Net deferred tax assets (liabilities) ============ ============ The movement in recognized deferred tax assets (liabilities) during the year ended December 31, 2008 is summarized as under: 2008 2007 Balance at beginning of the year Provided during the year Released during the year Balance at end of the year ============ ============ 36
  38. 38. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal26. ZAKAT AND INCOME-TAX (continued) (ii) Unrecognized deferred tax Unrecognized deferred tax liability Disclose any unrecognized deferred tax liability with reason for non-accrual. Unrecognized deferred tax assets Disclose nature, amount and reason for non-accrual OR No deferred tax asset has been recognized as it is not possible to determine when such timing difference will reverse.27. COMMITMENTS AND CONTINGENCIES a) At December 31, the Company has the following commitments: 2008 2007 For capital expenditures For Investments Other (specify) b) At December 31, 2008, the Company has a contingent liability of SR __________ (2007: SR _________) in respect of bank guarantees issued by the Company’s bank in respect of bid bonds, contracts advance payments and performance bonds. [Disclose other contingent liabilities.] 37
  39. 39. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal28. RELATED PARTY TRANSACTIONS AND BALANCES [Follow guidance of related party definition from SOCPA standards for identification of related party] a) Related party transactions mainly represent purchases and sales of goods and services which are undertaken at mutually agreed terms and approved by management from the following entities: Name of entity Relationship b) Disclose material transactions with individual related party other than purchase and sales if it is necessary to understand the effort of the related party transaction on the enterprises financial statements. Related party transactions for the year ended December 31 and balances arising-there from are described as under: Nature of Amount of transaction Closing balance Transactions with transaction during the year Receivable/(Payable) 2008 2007 2008 2007 [Specify affiliate, Sale of products partner, other Purchase of goods related party] Management fees Others (specify) 38
  40. 40. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal29. OPERATING LEASES [Disclosure as lessee - modify as appropriate] a) The Company has various operating leases for office space, warehouse, retail outlets, employees accommodations [Disclose as appropriate]. The leases are for initial period for one year to _____ years with options to renew the leases after lease periods. Lease payments are either fixed or increase annually to reflect market rentals. Rental expenses for the year ended December 31, 2008 amounted to SR ___ (2008: SR ___). b) At December 31, the Company’s obligations under non-cancellable operating leases are payable as follow: 2008 2007 Within one year Between two and five years More than five years Total ============ ============ [Disclosure as lessor (modify as appropriate)] a) The Company has rented certain properties to third parties under operating lease arrangement. [Disclose as appropriate]. The leases are for initial period for one year to _____ years with options to renew the leases after lease periods. Lease payments are either fixed or increase annually to reflect market rentals. The cost and book value of the leased assets at December 31, 2008 amounted to SR __________ (2008: SR ______) and SR _______ (2008: SR ____________) respectively. 39
  41. 41. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal29. OPERATING LEASES (continued) b) At December 31, the minimum lease payments for non-cancellable leases are as follow: 2008 2007 2009 2010 2011 2012 2013 and thereafter Total ============ ============30. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Financial instruments carried on the balance sheet include cash and cash equivalents, trade and other accounts receivable, investments, short-term borrowings, accounts payable, other liabilities, and long-term debt. Credit risk is the risk that one party will fail to discharge an obligation and will cause the other party to incur a financial loss. The Company has no significant concentration of credit risks. Cash and cash equivalents are placed with national and international banks with sound credit ratings. Trade and other accounts receivable are mainly due from local customers and related parties and are stated at their estimated realizable values. Fair value and cash flow interest rate risks are the exposures to various risks associated with the effect of fluctuations in the prevailing interest rates on the Companys financial position and cash flows. The Company’s interest rate risk arise mainly from short term bank deposits and bank debts and long term debts, which are at floating rates of interest. All deposits and debts are subject to re-pricing on a regular basis. Management monitors the changes in interest rates and believes that the fair value and cash flow interest rate risks to the Company are not significant. 40
  42. 42. XYZ COMPANY(A Limited Liability Company)NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal30. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from the inability to sell a financial asset quickly at an amount close to its fair value. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to meet the Companys future commitments. Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Companys transactions are principally in Saudi riyal and United States dollar. Other transactions in foreign currencies are not material. Currency risk is managed on regular basis. Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arms length transaction. As the accompanying financial statements are prepared under the historical cost method, except for the revaluation of the available-for-sale and trade securities at fair value through equity, differences may arise between the book values and the fair value estimates. Management believes that the fair values of the Companys financial assets and liabilities are not materially different from their carrying values. 41

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