< PreviousANNUAL REPORT 2022 – 2023 Preserving and advancing the highest international standards for the profession of architecture ANNUAL REPORT 2022 – 2023 98 The standard also incorporates a forward looking ‘expected loss’ impairment model. The standard contains requirements in the following areas: (i) Classification and measurement Financial assets are classified by reference to the business model within which they are held and their contractual cash flow characteristics. (ii) Impairment of financial assets IFRS 9 requires an expected credit loss model to be used in impairing financial assets. This model requires the Council to account for expected credit losses and changes thereto at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. It is no longer necessary for a credit loss event to have occurred before impairments are recognised. In assessing collective impairment, the Council uses historical trends if the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. (iii) Derecognition The requirements for the derecognition of financial assets and liabilities are carried forward from IAS 39. The Council has applied IFRS 9 principles in the current financial year. All recognised financial assets that are within the scope of IFRS 9 are required to be subsequently measured at amortised cost or fair value based on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. There however is no significant difference between the application of IAS 39 and IFRS 9 to the financial instruments identified in the 2023 financial year for classification and measurement. Although the impact of impairment is immaterial, the expected credit loss simplified approach to trade receivables was applied. Trade receivables are mostly current and the impact of that default would be immaterial. 3.3.2 Accounts receivables Accounts receivables are carried as financial assets at amortised cost. A credit loss account is used to recognise impairments on accounts receivables. For accounts receivables and contract assets, a simplified approach is applied in calculating expected credit losses. Instead of tracking changes in credit risk, a loss allowance is recognised based on lifetime expected credit losses at each reporting date, except for the following receivables: • Interest-free loans made to related parties without any fixed repayment terms or the effect of discounting being immaterial, that are measured at cost less impairment losses for bad and doubtful debt, if any; and • Short-term receivables with no stated interest rate and the effect of discounting being immaterial, that are measured at their original invoice amount less impairment losses for bad and doubtful debt, if any. At each reporting date, the Council assesses whether there is any objective evidence that a receivable or group of receivables is impaired. IFRS 9 requires an expected credit loss model to be used in impairing financial assets. This model requires the Council to account for expected credit losses and changes thereto at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. It is no longer necessary for a credit loss event to have occurred before impairments are recognised. 3.3.3 Cash and cash equivalents Cash comprises cash on hand and at bank and demand deposits with the bank. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of statement of cash flows, bank overdrafts do not form an integral part of the Council’s cash management as a result they are not included as a component of cash and cash equivalents. 3.4 Financial liabilities 3.4.1 Accounts payables Accounts payables are obligations to pay for goods and services that have been acquired in the ordinary course of business. Accounts payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. 3.4.2 Lease liabilities A lease is a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration. At inception of a contract, it is assessed to determine whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If the terms and conditions of a contract have changed, it is reassessed to once again determine if the contract is still or now contains a lease.South African Council for the Architectural Profession PART E FINANCIAL INFORMATION 99 The lease term of a lease is determined as the non-cancellable period of the lease, together with the periods covered by an option to extend the lease where there is reasonable certainty that the option will be exercised, and periods covered by an option to terminate the lease if there is reasonable certainty that the option will not be exercised. At inception, a right-of-use asset and a lease liability is recognised. Right-of-use of assets are included in the statement of financial performance within a classification relevant to the underlying asset, and not as a separate line item. Right of-use assets are initially measured at cost, comprising the following: • The amount of the initial measurement of the lease liability; • Any lease payments made at or before the commencement date, less any lease incentives received; • Any initial direct costs incurred; and • An estimate of costs to be incurred in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The obligation for those costs are incurred either at the commencement date or as a consequence of having used the underlying asset during a particular period. Subsequently, right-of-use of assets are measured using the cost model. The lease liability is initially measured at the present value of the lease payments that are not yet paid at the commencement date. Lease payments are discounted using the relevant Council’s incremental borrowing rate. Subsequently, the lease liability is measured by: • Increasing the carrying amount to reflect interest on the lease liability; • Reducing the carrying amount to reflect the lease payments made; and • Re measuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in substance fixed lease payments. 3.5 Post-employment benefits and short-term employee benefits Post-employment benefit plans The Council provides post-employment benefits through a defined contribution plan. Short-term employee benefits The Council pays fixed contributions into independent entities in relation to individual employees. The Council has no legal or constructive obligations to pay contributions in addition to its fixed contributions, which are recognised as an expense in the period that relevant employee services are received. 3.6 Revenue Recognition Revenue comprises net invoiced sales to customers excluding VAT and other non-operating income. The Council’s revenue with customers comprises primarily of the following types of revenue collected from individuals: Annual and Administration Fees Revenue from subscriptions, members’ entrance fees and professional development is recognised when services are rendered. Exam Fee Revenue is recognised when Council’s right to receive the payments is established, which is generally the time a person is eligible to stand for an exam and has paid the fee. Revenue comprises net invoiced sales to customers excluding VAT and other non-operating income. Registration and Re-registrations Revenue is recognised when the registration or re-registration takes effect. Renewals Revenue is recognised when renewals takes effect. Continuing Professional Development (CPD) Revenue is recognised when the registration for a CPD takes effect. Upgrades Revenue is recognised when the upgrade application has been approved. Recognition of Prior Learning (RPL) Revenue is recognised when the applications is received by online registration.ANNUAL REPORT 2022 – 2023 Preserving and advancing the highest international standards for the profession of architecture ANNUAL REPORT 2022 – 2023 100 IFRS 15 established a comprehensive framework for determining and reporting the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The standard outlines the principles that must be applied to measure and recognise revenue with the core principle being that revenue should be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchanged for fulfilling its performance obligations to a customer. The principles in IFRS 15 must be applied using the following five-step model: 1. Identify the contract(s) with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognise revenue when or as the entity satisfies its performance obligations The Council has adopted IFRS 15 using the cumulative effect method with the effect of initially applying this standard recognised at the date of initial application (being 1 January 2018). Accordingly, the information presented for the prior period has not been restated. Additionally, the disclosure requirements in IFRS 15 have generally been applied to comparative information. Apart from providing more qualitative disclosures on the Council’s revenue transactions, the application of IFRS 15 has not had a significant impact on the Council. As at the date of initial application, no adjustments were required to the Council’s Statement of Profit or Loss and Other Comprehensive Income or Statement of Financial Position. The Council recognises revenue from customers at a point in time by recognising the cash value of income received on a monthly basis. No element of financing is deemed to be present and no adjustment for time value of money are made to the transaction price. 3.7 Finance income Interest income is recognised using the effective interest method. 3.8 Other income Other income comprises mainly professional misconduct fines and recoveries. 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The Council’s management makes assumptions, estimates and judgements in the process of applying the Council’s accounting policies that affect the assets, liabilities, income and expenses in the consolidated annual financial statements prepared in accordance with IFRSs. The assumptions, estimates and judgements are based on historical experience and other factors that are believed to be reasonable under the circumstances. While the management reviews their judgements, estimates and assumptions continuously, the actual results will seldom equal to the estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates recognised in the period in which the estimate is revised if the revision policy affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Useful lives of property, plant and equipment As described above, the Council reviews the estimated useful lives of property, plant and equipment at the end of each reporting period. During the current year, the Council determined that the useful lives of certain items of equipment should be extended due to the current assets still being in use. 5. ANNUAL FINANCIAL STATEMENTS 5.1 The Education Fund is established in accordance with section 15 (5) of the Architectural Profession Act of 2000 and is administered by the Council. All financial results are included in the annual financial statements of the Council. 5.2 During the 2021/22 financial year, SACAP was appointed a Secretariat of Canberra Accord. All activities and impact thereof have been included in the annual financial statements.South African Council for the Architectural Profession PART E FINANCIAL INFORMATION 101 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 6. PROPERTY, PLANT AND EQUIPMENT 2023 2022 Figures in Rand Cost Accumulated depreciation 2023 Carrying value Cost Accumulated depreciation 2022 Carrying value Owned assets Buildings16,026,899(2,129,704)13,897,19516,012,259(1,809,312)14,202,947 Motor vehicles759,827(537,005)222,822537,005(537,005)– Furniture and fittings768,010(585,255)182,755989,783(731,423)258,360 Office equipment211,073(150,014)61,059220,834(196,161)24,673 IT equipment3,075,135(2,586,282)488,8533,472,782(2,825,712)647,070 20,840,944(5,988,260)14,852,68421,232,663(6,099,613)15,133,050 Right of use assets IT Equipment258,314(179,385)78,929258,314(90,410)167,904 Total property, plant and equipment21,099,258(6,167,645)14,931,61321,490,977(6,190,023)15,300,954ANNUAL REPORT 2022 – 2023 Preserving and advancing the highest international standards for the profession of architecture ANNUAL REPORT 2022 – 2023 102 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 6. PROPERTY, PLANT AND EQUIPMENT continued The carrying amounts of property, plant and equipment can be reconciled as follows: 2023 Reconciliation Figures in Rand Carrying value at beginning of year Additions Depreciation on disposal/ scrapped Disposal/ Scrapped Depreciation 2023 Carrying value at end of year Owned assets Buildings14,202,94714,640––(320,392)13,897,195 Motor vehicles–222,822–––222,822 Furniture and fittings258,36021,155210,659(242,927)(64,492)182,755 Office equipment24,67355,62965,055(65,390)(18,908)61,059 IT equipment647,070168,101546,025(565,748)(306,595)488,853 15,133,050482,347821,739(874,065)(710,387)14,852,684 Right of use assets IT Equipment167,904–––(88,975)78,929 167,904–––(88,975)78,929 Total property, plant and equipment15,300,954482,347821,739(874,065)(799,362)14,931,613 The carrying amounts of property, plant and equipment can be reconciled as follows: 2022 Reconciliation Figures in Rand Carrying value at beginning of year Additions Depreciation on disposal/ scrapped Disposal/ Scrapped Depreciation 2022 Carrying value at end of year Owned assets Buildings14,523,193–––(320,246)14,202,947 Motor vehicles-––––– Furniture and fittings317,1799,160––(67,979)258,360 Office equipment36,6351,599356(356)(13,561)24,673 IT equipment1,222,207143,314147,470(147,647)(718,274)647,070 16,099,214154,073147,826(148,003)(1,120,060)15,133,050 Right of use assets IT Equipment254,009–––(86,105)167,904 254,009 ––– (86,105)167,904 Total property, plant and equipment16,353,223154,073147,826(148,003)(1,206,165)15,300,954South African Council for the Architectural Profession PART E FINANCIAL INFORMATION 103 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 7. INTANGIBLES ASSETS 2023 2022 Figures in Rand Cost Accumulated Amortisation 2023 Carrying value Cost Accumulated Amortisation 2022 Carrying value Intangible assets (software)1,349,001(1,225,414)123,5871,788,854(1,594,433)194,421 Total intangible assets1,349,001(1,225,414)123,5871,788,854(1,594,433)194,421 The carrying amounts of intangible assets can be reconciled as follows: 2023 Reconciliation Figures in Rand Carrying value at beginning of year Additions Amortisation disposalDisposal Amortisation 2023 Carrying value Intangible assets (software)194,42126,157452,023(460,405)(88,609) 123,587 Total intangible assets194,42126,157452,023(460,405)(88,609)123,587 The carrying amounts of intangible assets can be reconciled as follows: 2022 Reconciliation Figures in Rand Carrying value at beginning of year Additions Amortisation disposalDisposal Amortisation 2022 Carrying value Intangible assets (software)473,33423,909––(302,822)194,421 Total intangible assets473,33423,909––(302,822)194,421 8. FINANCIAL ASSETS Figures in Rand20232022 Investments with banks– * 1,022,234 Financial Assets – 1,022,234 * Education funds, amounting to R1.0 million, were re-invested in a twelve (12) months fixed interest instrument during March 2022.ANNUAL REPORT 2022 – 2023 Preserving and advancing the highest international standards for the profession of architecture ANNUAL REPORT 2022 – 2023 104 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 9. TRADE AND OTHER RECEIVABLES Figures in Rand20232022 Net trade receivables828,308620,346 Trade receivables 4,106,7653,289,426 Allowance for credit losses (3,278,457)(2,669,080) Value Added Tax–392,941 Staff advances12,70040,667 841,0081,053,954 Movements in expected credit losses of trade and other receivables are as follows: Figures in Rand20232022 At start of the year2,669,0803,240,300 Increase in loss allowance2,979,1494,006,250 Amounts written off(2,369,772)(4,577,470) At end of the year3,278,4572,669,080 Credit quality of trade and other receivables The credit quality of debtors that are neither past due nor impaired are assessed by reference to historical repayment trends of individual debtors. Credit terms are offered only to members registered on the Council’s database with valid details. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Council has a wide membership base, therefore, the credit quality of debtors that are not impaired are considered to be higher. Fair value of trade and other receivables The carrying value of accounts receivable approximates fair value as this amount is short term in nature, and the loss allowance takes into account long outstanding amounts owed by members for whom the recoverability is unlikely. In determining the recoverability of debtors, the Council considers the ageing of the receivable, the debtor’s membership status and historical payment trends. The concentration of credit risk is higher due to the large membership base and that the Council do not hold any collateral in respect of members. Exposure to credit risk Trade receivables inherently expose the Council to credit risk, being the risk that the Council will incur financial loss if members fail to make payments as they fall due. A loss allowance is recognised for all trade receivables, in accordance with IFRS 9 Financial Instruments, and is monitored at the end of each reporting period. In addition to the loss allowance, trade receivables are written off when there is no reasonable expectation of recovery, for example, when a debtor has been placed under liquidation. Trade receivables which have been written off are not subject to enforcement activities. The Institute measures the loss allowance for trade receivables by applying the simplified approach which is prescribed by IFRS 9. In accordance with this approach, the loss allowance on trade receivables is determined as the lifetime expected credit losses on trade receivables. These lifetime expected credit losses are estimated using a provision matrix, which is presented below. The provision matrix has been developed by making use of past default experience of debtors but also incorporates forward looking information and general economic conditions of the industry as at the reporting date.South African Council for the Architectural Profession PART E FINANCIAL INFORMATION 105 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Expected credit loss provision matrix: 31 March 2023<30 DAYS31-60 DAYS61-90 DAYS91-120 DAYS>120 DAYSTOTAL Weighted average expected credit loss rate40%57%49%100%93% Estimated gross carrying amount 296,293126,94275,89836,1463,257,2843,792,563 Lifetime ECL118,88571,91737,02936,1463,014,4803,278,457 Expected credit loss provision matrix: 31 March 2022<30 DAYS31-60 DAYS61-90 DAYS 91-120 DAYS >120 DAYS TOTAL Weighted average expected credit loss rate55%37%32%91%89% Estimated gross carrying amount281,746113,542146,10398,8422,623,1783,263,411 Lifetime ECL154,18942 01546,71189,6772,336,4882,669,080 10. CASH AND CASH EQUIVALENTS Figures in Rand20232022 Cash balances Banks - Council Ʌ 23,925,037 21,435,580 Banks - Canberra Accord 605,156 638,072 Sub-total (Council and Canberra) 24,530,193 22,073,652 Banks - Education Fund * 1,109,988 453,162 Total Cash and Cash equivalent 25,640,181 22,526,814 Ʌ The Council’s cash and cash equivalent balance included the fixed interest instrument which was due to mature in April 2023. An amount totaling R13 million was subsequently re-invested in a twelve (12) months fixed interest instrument in April 2023. * Education funds investment, amounting to R1.0 million, matured on 31 March 2023 and was subsequently re-invested in a twelve (12) months fixed interest instrument in April 2023. Fair value of cash and cash equivalents. The fair value of cash and cash equivalents approximates their carrying amounts. Credit quality of cash at bank and short term deposits, excluding cash on hand The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or historical information about counterparty default rates. None of the financial institutions with which bank balances are held defaulted in prior periods and as a result a credit rating of high is ascribed to the financial institutions. The company’s maximum exposure to credit risk as a result of the bank balances held is limited to the carrying value of these balances as detailed above.ANNUAL REPORT 2022 – 2023 Preserving and advancing the highest international standards for the profession of architecture ANNUAL REPORT 2022 – 2023 106 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 11. FINANCE LEASE LIABILITIES SACAP entered into a rental agreement with Konica Minolta for a period of 36 months commencing in March 2021 and will end in February 2024 and the total monthly instalments, payable in advance, are R 7,976 with a 0% escalation per annum. Figures in Rand20232022 Future minimum lease payment fall due as follows - no later than one year87,73695,712 - later than one year but no later than five years–87,736 Future finance cost(2,995)(12,240) Lease liability84,741171,208 Analysed as follows: Current portion84,74186,467 Long term portion–84,741 84,741171,208 The lease liability is secured over capitalised leased assets of property, plant and equipment disclosed in (Note 6). Commitments SACAP entered into an agreement with ES Solutions for a period of 5 years to provide the new Membership System . The New System is expected to go live in September 2023. Figures in Rand20232022 Future minimum commitments fall due as follows - no later than one year 706,000– - later than one year but no later than five years 3,517,417 – Total Commitments 4,223,417 – 12. TRADE AND OTHER PAYABLES Figures in Rand20232022 Trade and other payables* 2,588,4811,416,526 Sundry Creditors Ʌ 2,573,4372,211,728 Employee savings126,221105,059 Accrual for leave pay1,389,8801,064,392 Value Added Tax22,614– 6,704,8634,797,705 * Trade and other payables are interest-free and are also unsecured. The increase in trade and other payables was as a result of accruals relating to pre- implementation cost for the My Membership project amounting to R0.4 million. The company has not defaulted on any of the capital or interest instalment on trade and other payables during the year. The fair value of trade and other payables approximates its carrying value, due to the short-term nature of trade and other payables. Ʌ Sundry creditors include credit balances as a result of payments received in advance as well as payments from registered persons who remained suspended at the end of the financial year. The increase in the credit balances was mainly due to more registered persons paying annual fees after cancellation in the current year in comparison to the previous financial year. The credit balances for those who paid post cancellation will be offset against their re-registration fees on request.South African Council for the Architectural Profession PART E FINANCIAL INFORMATION 107 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 13. REVENUE Figures in Rand20232022 Annual Fees31,253,60329,734,230 Administration Fees928,1221,422,934 Registration and Re-registrations2,151,0922,374,696 Renewals963,4561,247,261 Exams and CPD2,680,4862,624,351 Upgrades1,009,8321,124,442 RPL226,811290,145 Canberra Accord Membership780,573687,698 39,993,97539,505,757 Registration is cancelled when the Registered Persons do not pay their annual fees within 60 days. The fees are then recognised in the year in which they are received. 14. OTHER INCOME Figures in Rand20232022 Recoveries728,780249,063 Professional Misconduct Fines431,200472,500 1,159,980721,563 Next >