Interest Bearing Loans And Borrowings Accounting Essay

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The names and details of Miracle Electronics Limited during the financial year till the date of this report are shown below. The details include each director's qualifications, education level, past experiences and positions.

Eng Lay Chuan

Chief Executive Officer and Managing Director

Miss Eng is a Master of Business Administration holder who graduated from University of Nottingham. She is a director of Miracle Electronics Limited since March 2002 and appointed Chief Executive Officer (CEO) in July 2004. She has a considerable experience in large-scale global business and expert in corporate reorganizing, project analysis, management, mergers and acquisitions. Besides that, she is a former Managing Director in Southcorp Limited from June 1998 to May 2000.

Goh Yoke See

Chief Operating Officer and Executive Director

Miss Goh joined Miracle Electronics Limited since February 2004 and appointed Chief Operating Officer in September 2005. She is graduated from Royal Melbourne Institute of Technology University and holds a PhD in Project Management. She has a vast experience in international business which is 18 years' experience in the production industry. Besides that, she is expert in providing strategies and advice to company and she has held different leadership roles in strategic, operational positions in different countries. She was former Chief Marketing Officer of TXU Corporation from July 2000 to November 2003.

Hoo Wen Li

Chief Financial Officer and Executive Director

Miss Hoo is the Master of International Finance holder who graduated from Deakin University and she also is a member of Financial Planning Association in Australia. She become a director of Miracle Electronics Limited since February 2005 and appointed Chief Financial Officer in July 2007. She has more than 15 years' experience in the banking and finance industry and is a former President of the Business Council of Australia. She is expert in risk management and business restructuration. Miss Hoo has been designated by The Board as the financial expert of the Risk and Audit Committee.

Director's Report

The directors of Miracle Electronics Limited present their report together with audited financial statements of the Company for the financial year ended 30 June 2010 and the Independent Audit Report thereon.

Directors

The directors of Miracle Electronics Limited at any time during or since the end of the year are:

Eng Lay Chuan

Goh Yoke See

Hoo Wen Li

Qualifications, experience, special responsibilities and other details of the directors are presented at page 3 of this annual report.

Overview of Company

Miracle Electronics Limited was formed in year 1992 in Australia and has been the leader in the development and manufacture of electronic products for a wide range of consumer, business, and industrial needs markets, especially around Asia and Australia.

Principal Activities

The principle activities of Miracle Electronics Limited during the financial period were:

Manufacturing electronic products for home and commercial use.

Marketing and retailing of electronic technology products around Asia and Australia.

Supply and servicing of electronic equipment for defense, aviation and electrical safety markets (Endeavour Limited 2009, p.14).

Providing products repair and maintenance services.

Directors' Shareholdings

The interest of the directors in shares and options of Miracle Electronics Limited as at the reporting date were:

Number of Ordinary Shares

Eng Lay Chuan

2000,000

Goh Yoke See

1000,000

Hoo Wen Li

800,000

Directors' Meetings

The number of directors' meetings held and the number of meetings attended by each director during the year ended 30 June 2010 were:

Board

Audit

Committee

Remuneration

Committee

Nomination

Committee

Operating

Activities

Number of Meeting

10

6

6

3

12

Directors' Attendance

Eng Lay Chuan

10

6

6

3

12

Goh Yoke See

10

5

4

2

10

Hoo Wen Li

10

6

5

1

9

Dividends

The following dividend has been paid in relation to the year ended 30 June 2010:

A dividend of $1300,000 which is $0.26 per share was paid by the company on 25 August 2009. This dividend has been declared on 29 June 2009 and was not subject to further authorisation.

Instead of giving out interim dividend, bonus share was issued from general reserve on 12 February 2010 to shareholders of one ordinary share for each 5 shares held. These are issued and fully paid to $4.50.

Operating and Financial Review

The current year has been quite good for Miracle Electronics Limited, the company has achieved excellent growth in both sales and profits. The current year sales revenue has been increase gradually from $XXX to $177,500,000 while the services revenue has increased to $24,000,000 from $YYY. This represents an increase of X% in sales revenue and Y% in services revenue.

The company's net profit after income tax for the year has also increased promptly by Z% to $1,253,000, compared to $ZZZ in the previous year due to a significant decrease of cost of production as the company has changed its source of raw materials for some of its products during the year. It is believes that continued market growth will allow the company to continue to improve its total profit in the future.

Significant change in the state of affairs

Particulars of the significant changes in the state of affairs of the consolidated entity during the financial year are as follows:

Revenue increases from $XXX to $201,575,000.

Profit after tax increases from $XXX to $1,253,000

Dividend per share decreases from 26 cent per share to 24 cent per share.

Total Assets decreases from $XXX to $112,685,000.

Equity increases from $XXX to $60,910,000.

Significant events after balance date

On 2 July 2010, a dividend of $0.24 per share has declared by the directors of Miracle Electronics Limited. This is not subject to further approval and will be paid in the next financial year.

On 1 October 2010, the directors recommended the company to carry out a new public share issue in January 2011 for the sake of reduces the company's debts. The amount of shares has been advised is 2,000,000 ordinary shares at an issue price of $5.20.

Likely Development and Expected Result

On 27 August 2010, plans for reposition of several operations to an offshore location are announced by the directors of the company and the further information for this plan will be disclosed in October 2010 after discussions with related parties. The company is foreseeing a reduction in the costs of operation of more than 15% by implementing this plan. Besides, it is also expected to allow the company to have a boost in total sales revenue and profit by X% and Y%. Anyhow, these plans would not be implemented until year 2012.

Environment Obligations

All the operations or activities of Miracle Electronics Limited are subject to regulation of various authorities such as Commonwealth, State, Territory and international environmental legislation. The company has formed a particular group of people which is the Safety, Health, Environment and Security Committee to monitor all the company operations and make sure they complied with the regulations. The directors are satisfied that all relevant licenses and permits are held and that appropriate monitoring procedures are in place to ensure compliance with those licenses and permits. There have been no known material breaches of the company's license conditions during the year (Qantas Group 2010, p.45).

Rounding

"The amounts contained in this report and in the financial statements have been rounded to the nearest dollars (where rounding is applicable) unless otherwise stated under the option available to the Company under ASIC Class Order 98/100. The Company is an entity to which the class order applies" (Wesfarmer Limited 2010, p.149).

Indemnification and Insurance

Under the Miracle Electronics Limited Constitution, Miracle Electronics Limited indemnifies, to the extent permitted by law, against any liability incurred by that person as an employee of the company. All directors or officer will have the benefit of an indemnity to the fullest extent permitted by law and as approved by the Board. The company has paid a premium of $XXX for directors' and officers' liability insurance policies, which cover all directors and officers of the company during the year (Qantas Group 2010, p.45).

Non-audit services

The non-audit services to the company during the year ended 30 June 2010 were provided by the Ernst & Young. An amount of $1250,000 was paid by the company to Ernst & Young for consultancy work. "The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001" (Endeavour Limited 2009, p.23). The standards in Corporations Act 2001 were applied due to the reasons below:

"The non-audit services provided do not involve reviewing or auditing the auditor's own work or acting in a management or decision-making capacity for the company;

All non-audit services were subject to the corporate governance procedures and policies adopted by the Company and have been reviewed by the Audit Committee to ensure they do not affect the integrity and objectivity of the auditor" (Wesfarmer Limited 2010, p.148).

A copy of the lead auditor's independence declaration as required under section 307C of the Corporations Act 2001 is included in page 23 (Qantas Group 2010, p.45).

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors,

Goh Yoke See

Goh Yoke See

Chief Operating Officer and Executive Director

Sydney, 21 August 2010

Miracle Electronics Limited

Statement of comprehensive income

For the year ended 30 June 2010

Notes

2010

(in $000's)

2009

(in $000's)

Revenue

5

201,575

xxx

Other Income

6

1,070

xxx

Other Expenses

7

(199,955)

xxx

Financial Cost

8

(900)

xxx

Profit Before Tax

1,790

xxx

Tax Expenses (30% of Profit)

537

xxx

Profit

1,253

xxx

Other Comprehensive Income

-

xxx

Total Comprehensive Income

1,253

xxx

Miracle Electronics Limited

Statement of Financial Position

As at 30 June 2010

Notes

2010

(in $000's)

2009

(in $000's)

Assets

Current Assets

Cash and cash equivalents

1,512

xxx

Trade and Other Receivable

9

33,960

xxx

Inventories

15,980

xxx

Total Current assets

51,452

xxx

Non Current Assets

Property, Plants and Equipment

10

50,833

xxx

Goodwill

10,400

xxx

Total Non-current Assets

61,233

xxx

Total Assets

112,685

xxx

Liabilities

Current Liabilities

Trade and Other Payables

11

22,798

xxx

Financial Liabilities

12

900

xxx

Short-term Borrowings

13

2,000

xxx

Provisions

15

5,458

xxx

Current Tax Payable

537

xxx

Total Current Liabilities

31,693

xxx

Non-current Liabilities

Long-term Borrowings

14

18,000

xxx

Provisions

15

2,802

xxx

Total Non-current Liabilities

20,802

xxx

Total Liabilities

52,495

xxx

Net assets

60,190

xxx

Equity

Share capital

16

19,975

xxx

General reserve

17

6,000

xxx

Retained earning

18

34,935

xxx

Total Equity

60,910

xxx

Miracle Electronics Limited

Statement of Changes in Equity

For the year ended 30 June 2010

Share Capital

(in $000's)

General Reserve

(in $000's)

Retained Earnings

(in $000's)

Total Equity

(in $000's)

Balance as at 1/7/2009

10,500

32,962

43,462

Issues of shares

15,475

15,475

Bonus shares

4,500

(4,500)

Total comprehensive income

1,253

1,253

Dividend paid

Balance as at 30/6/2010

19975

6000

34,935

60,910

Notes to the Financial Statement

1. Corporate Information

AASB 101.138 (a)

AASB 101.125Miracle Electronics Limited is a limited company in Australia which was incorporated in year 1992. Miracle Electronics Limited has experienced a rapid growth and became a public listed entity on the Australian Stock Exchange (ASX).

The principal place of business and its registered office of Miracle Electronics Limited is situated at:

AASB 101.138 (b)

AASB 101.1257 Lowanna Place Hornsby,

New South Wales 2077,

Australia.

AASB 101.17

AASB 101.125The nature of the company's operations and its principal activities are described and reported in Director's report. The financial report of Miracle Electronic Limited for the year ended 30 June 2010 was authorized for issue in accordance with a resolution of the Board of Directors on 15 September 2010.

AASB 101.112(a)

AASB 101. Aus 15.4

AASB101.117

AASB101.51 (d)

AASB101.51 (e)

AASB101. Aus 15.2

AASB101.16

2. Basis of Preparation

The company's financial report is adopted Australian Accounting Standard standards board (AASB) makes Australian Accounting Standards. It is applied by the company in accordance with the corporations Act 2001 in order to prepare a financial report.

The financial statements have been prepared on a historical cost basic. On the other hand, the amount of the financial statement should be showed in Australian dollars and it must be rounded to the nearest thousand dollars ($'000).

The financial statements have been prepared in accordance with Australian Accounting Standards and are complying with International Financial Reporting Standards (IFRS).

(Endeavour Limited 2009, p.65)

AASB 101.1173. Summary of Significant Accounting Policies

a) Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet comprise of cash at bank (net of bank overdraft) and in hand and short-term, highly liquid investments or deposits with an maturity periods of three months or less when purchased that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value (Wesfarmers Limited 2010, p.76).

b) Trade and Other Receivables

AASB 101.122

AASB 101.125

AASB 101.118"Trade receivables, which generally have 30-60 day terms, are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less an allowance for impairment" (Endeavour Limited 2009, p.74).

AASB 101.125

AASB 101.125An allowance for doubtful debts is a contra account to accounts receivable, which is used to estimate the amount of accounts receivable that will unlikely to be collected in the future and will be eliminated directly against the carrying amount and written off as bad debts when it is identified to remain uncollectible. Bad debts appear as an expense in the comprehensive income statement and thus reduce the net income (Leo, Hoggett, Sweeting & Radford 2009, pg.484).

c) Inventories

AASB 101.118Inventories are calculated at the lower of cost and net realizable value. The cost of inventory items is normally determined on either the first-in first-out basis or weighted average basis depending on the nature of inventory. This includes the cost of purchase of the raw materials and expenditure incurred in retailing and wholesaling the finished goods. On the other hand, in the case of finished goods, the manufacturing cost includes an appropriate share of production overheads based on normal operating capacity (Dutch Lady Milk Industries Berhad 2009, p.29).

Meanwhile, the net realizable value represents the estimated selling price in the ordinary course of business, less costs of completion and estimated selling expenses necessary to be incurred in marketing, selling and distribution (Wesfarmers Limited 2010, p.76)

AASB 101.118d) Income Tax

Current tax assets and liabilities shall be measured at the amount expected to be paid to the taxation authorities according to the tax laws of each jurisdiction during the current and the prior financial period. The tax rates used to measure based upon the taxable income enacted at the end of the year (Genting Berhad 2010, p.73).

e) Property, Plant and Equipment

AASB 101.122

AASB 101.125

AASB 101.118Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. All the cost of repairs and maintenance will be charged to the income statement during the financial period that they are incurred.

Property, plant and equipment are depreciated using straight line basis to write off the cost of the assets to their residual values over their estimated useful lives. In addition, if significant parts of an item of the property, plant and equipment have different useful lives, they have to be depreciated separately from the property, plant and equipment. Besides, freehold land is not depreciated as it has infinite life residual values over their estimated useful lives (Dutch Lady Milk Industries Berhad 2009, p.28).

Gains and losses from the disposal of property, plant and equipment are determined by comparing the net amount of the proceeds of disposal with the carrying amount of the disposal assets. The net different will be reported in the statement of comprehensive income as a gain or loss on disposal.

f) Intangible Assets - Goodwill

AASB 101.118Goodwill is measured at cost less any accumulated amortization and impairment losses. Impairment losses of goodwill will not be reserved. Goodwill also represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired (Qantas Group 2010, p.57).

"Goodwill is allocated to cash-generating units for the purpose of annual impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from the business combination in which the goodwill arose" (Genting Berhad 2009, p.70).

g) Interest-Bearing Loans and Borrowings

AASB 101.118Interest-bearing loans and borrowings are initially recorded at the amount of fair value of the consideration received less directly attributable transaction costs. The interest-bearing loans and borrowings are recorded at amortized cost after initial recognition, using the effective interest basis.

AASB 101.69

AASB 101.125Besides, borrowings will be classified as current liabilities if the company doesn't have the right to put off settlement of the liability for at least 12 months after the reporting date (Endeavour Limited 2009, p.81).

h) Trade and other payables

Trade and other payables are carried at amortized cost and are recorded when future payments are required as a result of purchases of assets or services.

AASB 101.122

AASB 101.118

AASB 101.122Besides, trade and other payables are not discounted because of their short term nature. Trade and other payables are also liabilities and take place when the company is required to make a payment for the goods and services provided to them earlier to the end of the financial year that haven't been paid. They are usually paid within 30 days of recognition as the amounts are unsecured (Endeavour Limited 2009, p.81).

i) Provisions

AASB 137.14Provisions are recognized when there is a present legal or constructive obligation as a result of a past event. It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation (Genting Berhad 2009, p.73).

AASB 137.53

AASB 137.54"When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement" (Endeavour Limited 2009, p.82).

j) Revenue

AASB 101.118Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when the services have been rendered or the amount of revenue flow into the company during the financial period. It includes only the entity received and receivable the gross inflows of economic benefit by own its account. Also, these inflows will lead to increase in equity and it is usually determined by agreement between the entity and the buyer (Genting Berhad 2009, p.74).

Sale of Goods

Revenue from the sale of goods is measured at fair value of the consideration received or receivable, net of returns and allowances, trade discounts and rebates. Revenue from the sale of goods is recognized as the entities transferred the significant risk and rewards of the goods or performance of services to the buyer and the economic benefits will be associated with the transaction flow into the entity (Dutch Lady Milk Industries Berhad 2009, p.30).

Rendering of Services

Revenue from rendering of services is recognised when a contract is completed or still in progress at reporting date or at the time of completion of the contract and billing to the customer (Endeavour Limited 2009, p.84).

Rental Earned

Revenue from rental is normally recognized on a straight-line basis over lease term (Yeo Hiap Seng Limited 2009, p.34).

Sale of Development Properties

"The sales relating to property development projects are recognised progressively as the project activity progresses and are in respect of sales where agreements have been finalised. The recognition of sales is based on the percentage of completion method and is consistent with the method adopted for profit recognition" (Genting Berhad 2010, p.74).

AASB 101.122

AASB 101.125(a)4. Significant Accounting Judgments, Estimates and Assumptions

a) Estimation of Short Term Provision

Provision for Warrantees (Note 15)

A provision for warrantees is estimated based upon historical warranty data, expected performance of the product and the attributed expenditure for settling the warranties (Woolworth Limited 2009, p.82).

Estimation of Provision for Annual Leave (Note 15)

"They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognized when the leave is taken and are measured at the rates paid or payable" (Endeavour Limited 2009, p.82).

Estimation of Provision for Long Service Leave (Note 15)

Long service leave is a liability which is calculated at the present value of expected future increases in wage and salary rates including related on‑costs and expected settlement dates in the accounting period (Woolworth Limited 2009, p.82).

b) Estimation of Long Term Provision

Provision for Damages

Provision for damages is recognized relating to the claim made against the company for breach patent. The expected amount to be paid is estimated based on legal advice. The case was decided in court in November 2009 and results in an increment in provision payment.

5. Revenue

Revenue comprises of:

Details

2010

(in $000's)

2009

AASB 101.102

AASB 101.102

AASB 101.97(in $000's)

Sales Revenue

177,500

xxx

Services Revenue

24,000

xxx

Rental Revenue

75

xxx

TOTAL

210,575

xxx

6. Other Income

Other income comprises of:

Details

2010

(in $000's)

2009

AASB 101.98 (c)(in $000's)

Gain from Sale of Machine

1,070

xxx

TOTAL

1,070

xxx

The machine had been used previously that was sold out during the financial period and gain worth$1070, 000 from the sales.

7. Analysis of Expenses (Excluding Finance Cost)

Details

2010

(in $000's)

2009

(in $000's)

Cost of sales

134,600

xxx

Sales and wages

25,970

xxx

Annual leave expense

3,350

xxx

Long service expense

868

xxx

Warranties

1,800

xxx

Utility expense

34

xxx

Bonuses paid to sales staff

1,275

xxx

Repairs& maintenance expenses

2,980

xxx

Printing, postage and stationary

650

xxx

Advertising and marketing expenses

6,300

xxx

Insurance expense

2,720

xxx

Depreciation expense-equipment

910

xxx

Depreciation expense-machinery

4,100

xxx

Depreciation expense-vehicles

1,880

xxx

Depreciation expense-buildings

375

xxx

Goodwill

600

xxx

Audit fee

630

xxx

Consultancy

1,250

xxx

Doubtful debts expense

950

xxx

Legal damages expense

740

xxx

Miscellaneous expenses

7,713

xxx

Loss on sale of land

260

xxx

TOTAL EXPENSES

199,955

xxx

AASB101.103

AASB 101.102

AASB 101.97

AASB 101.97

AASB 101.97

AASB 101.103

AASB 101.102

AASB 101.97

AASB 101.103

AASB 101.102

AASB 101.97

AASB 101.102

AASB 101.102

AASB 101.102

AASB 101.102

AASB 101.118

AASB 138.1(a)

AASB138.1 (b)

AASB 101.97

AASB 101.98(f)

AASB 101.102

AASB 101.98(c)

Miscellaneous expenses includes of Christmas party for the end of the year as well as other insignificant cost incurred throughout the financial period.

8. Financial Cost

Financial cost comprises of:

Details

2010

(in $000's)

2009

AASB 101.97(in $000's)

Interest on Loan

900

xxx

TOTAL

900

xxx

AASB 101.779. Trade and Other Receivable

AASB 101.78 (b)Trade and Other Receivable comprise of:

Details

2010

(in $000's)

2009

(in $000's)

Accounts Receivable

35,820

xxx

Less: Allowance for Doubtful Debts

2,420

xxx

33,400

xxx

Prepaid Insurance

560

xxx

TOTAL

33,960

xxx

AASB 101.77

AASB 101.78 (a)10. Property, Plant and Equipment

Property, Plant and Equipment comprise of:

Details

2010

(in $000's)

2009

(in $000's)

Equipment (at cost net of depreciation)

11,490

xxx

Machinery (at cost net of depreciation)

13,640

xxx

Land (at cost)

14,773

xxx

Building (at cost net of depreciation)

10,930

xxx

TOTAL

50,833

xxx

AASB 101.7711. Trade and Other Payables

Trade and Other Payables comprise of:

Details

2010

(in $000's)

2009

(in $000's)

Account payable

21,368

xxx

Revenue received in advance

1,430

xxx

TOTAL

22,798

xxx

12. Financial Liabilities

AASB 101.77Financial Liabilities comprise of:

Details

2010

(in $000's)

2009

(in $000's)

Accrual Interest

900

xxx

TOTAL

900

xxx

13. Short-term Borrowings

Short-term Borrowings comprise of:

Details

2010

(in $000's)

2009

(in $000's)

Loan payable

2,000

xxx

TOTAL

2,000

xxx

14. Long-term Borrowings

Long-term Borrowings comprise of:

Details

2010

(in $000's)

2009

(in $000's)

Loan payable

18,000

xxx

TOTAL

18,000

xxx

AASB 101.78 (d)15. Provisions

a) Provisions comprise of:

Details

2010

( in $000's)

2009

(in $000's)

Provision for warranties

3,740

xxx

Provision for annual leave

2,720

xxx

Provision for long service leave

1,680

xxx

Provision for damages

120

xxx

TOTAL

8,260

xxx

Current Provisions consist of:

Details

2010

(in $000's)

2009

(in $000's)

Provision for warranties

2,618

xxx

Provision for annual leave

2,720

xxx

Provision for damages

120

xxx

TOTAL

5,458

xxx

Non-current Provisions consist of:

Details

2010

(in $000's)

2009

(in $000's)

Provision for warranties

1,122

xxx

Provision for long service leave

1,680

xxx

TOTAL

2,802

xxx

Reconciliations of movements in provisions:

Details

Warranties

(in $000's)

Annual Leave

(in $000's)

Long Service Leave

(in $000's)

Damages

AASB 137.84 (a)( in $000's)

Balance as at 1/7/2009

2,400

2,220

1,050

AASB 137.84 (b)

Additional provisions made

1,800

3,350

868

AASB 137.84 (c)120

Amount used

(460)

(2,850)

(238)

AASB 137.84 (d)

Unused amount reserved

0

0

0

0

Balance as at 30/6/2010

3,740

2,720

1,680

120

AASB 101.85 (a)

AASB 101.85 (b)b) Nature of Short Term Provision and Expected Timing

Provision for Warrantees

The company has provided a 3-year warranty on its products and it is expected that 70% of the provision as at the reporting date will be met next year.

Provision of Annual Leave

"Salaries, wages, paid annual leave, commission paid and non-monetary benefits are expected to be settled within 12 months of the reporting date in which the associated services are rendered by the employees of the company" (Endeavour Limited 2009, p.82).

Provision for Long Service Leave

No long service leave is expected to be paid until February 2012.

c) Nature of Long Term Provision and Expected Timing

Provision for Damages

Provision for damages is expected to be reconciled after 12 months of the reporting date. The provision of damage are also increased from $380,000 to $1000,000 result from the court decision.

AASB 101.79(a)(ii)16. Share capital

a) Share capital

The balance of share capital as at 30 June 2010 is 6,000,000 ordinary shares. It comprised of 5,000,000 ordinary shares issued in January 2007 at an issue price of $3.10 and fully paid in September 2009. The amount of share capital is deducted due to $25,000 shares issued costs were incurred. On the other hand, 1,000,000 bonus shares are issued on 14 February 2010 from the general reserve and fully paid at $4.50. Hence, the total amount of share for the year is $19,975,000.

AASB 101.79(a)(iv)

b) Reconciliation of the number of shares

2010

2009

Number of shares issued

Amount

($)

Number of shares issued

Amount

($)

Balance as at 1 July 2009 (i)

5,000,000

15,475,000

xxx

xxx

Bonus shares issued

1,000,000

4,500,000

xxx

xxx

Balance as at 30 June 2010

6,000,000

19,975,000

xxx

xxx

(i) The amount of shares issued has been deducted by $25,000 of shares issue costs.

AASB 101.79 (b)17. General reserve

A general reserve is always created through the transfer of retained earnings account. It usually is used to put aside the profits for some unforeseen events (Leo, Hoggett, Sweeting & Radford 2009, p. 108). However, it also can be used to pay out dividends or bonus shares. On 14 February 2010, the company issued 1,000,000 bonus shares from general reserve instead of dividends. Hence, the amount of general reserve is deducted by $450,000.

Details

2010

($)

2009

($)

Balance as at 1 July 2009

10,500,000

xxx

Bonus shares issued

(450,000)

xxx

Balance as at 30 June 2010

6,000,000

xxx

AASB 101.10618. Retained Earnings

Details

2010

($)

2009

($)

Balance as at 1 July 2009

32,962,000

xxx

Total comprehensive income for the year

1,253,000

xxx

Balance as at 30 June 2010

34,215,000

xxx

AASB 101.10719. Dividends

On 25 August 2009, $1,300,000 of dividends was paid by the company. The dividend had been declared on the previous accounting period and was not subject to further approval.

On 2 July 2010, a dividend of $0.24 per share also declared by the directors. Hence, the total amount of dividend for 6,000,000 shares is $1,440,000. However, it cannot be recognized yet as distributions to shareholders because it is declared after the reporting date of financial year.

AASB 110.2120. Events after Balance Sheet Date

a) Declaration of dividend

On 2 July 2010, a dividend of $0.24 per share is declared by the directors of company.

b) Relocation of several operations to an offshore location

Several plans are announced by the directors of the company on 27 August 2010 in order to improve profitability and reduce costs of company. Besides that, further information will be provided in October 2010 after completed the discussion with related parties. By implementing the plans, the company is expected to reduce more than 15% of the costs for the following year after year 2012.

c) New public share issue

On 1 October 2010, the directors advised that the company planned to carry out a new public share issue in January 2011 for the sake of reduce its debts. The amount of shares will be issued is 2,000,000 ordinary shares at an issue price of $5.20.

Directors' Declaration

In accordance with a resolution of the directors of Miracle Electronics Limited, we state that:

1. In the opinion of the directors:

the financial statements, notes and the additional disclosures included in the directors' report, designated as audited, of the consolidated entity are in accordance with the Corporations Act 2001, including:

Giving a true and fair view of the consolidated entity's financial position as at 30 June 2010 and of its performance for the year ended on that date; and

Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001(Wesfarmers Limited 2010, p.166).

There are reasonable grounds to believe that Future Machines Limited will have the ability to pay its debts as and when they are due and become payable (Endeavour Limited 2009, p.227).

2. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and the Chief Financial Officer for the year ended 30 June 2010 (Qantas Group 2010, p.104).

On behalf of the Board of Directors

Goh Yoke See

Goh Yoke See

Chief Operating Officer and Executive Director

Sydney, 21 August 2010

Auditors' Report

We conducted our audit in accordance with corporations Act 2001 complied by the Australian Accounting Standards. Also, we were engaged to audit the statement of comprehensive income and statement of changes in equity for the year ended on that date, statement of financial position as at 30 June 2010,a summary of significant policies, director's reports and notes to financial statement. Basically, these financial statements used to stand for a company's management. So, we are responsible to express opinion on the financial report based on our audit. We should plan the audit in order to provide an effective assurance about the amount and free from any error or fraud. An audit involves performing procedure to evaluate the accounting policies made by directors and present the overall financial statement. Therefore, we believed that our audit able to render the full opinion about the company's procedure and stated that we shall provides an appropriate and complete basis on our opinion (Bank of Tanzania 2005, p.11).

Management's responsibility

The directors should prepare a fair view presentation of the financial statements according to the Australian Accounting Standards. The Board of directors is responsible for the arrangement and maintaining the internal control of the company's financial statement. The director need to ensure that the preparation and the presentation free from material misstatement, applying reasonable accounting policies and its financial affairs have been given in a reliable manner (Nokia Corporation 2009, p.68).

Auditor's Opinion

In our opinion, the financial report of Miracle Electronics Limited is in according with the Corporation Act 2001 which is includes:

Presenting fairly and accurately of the Miracle Electronics Limited financial position as at 30 June 2010 and the performance of the entity during the financial period ending on that date.

Prepared a financial report based on the Australian Accounting Standards and the Corporations Regulations 2001.

Ernst & Young D.G Brown

Ernst & Young D.G Brown

Partner

Melbourne, 30 August 2010