[FULL ACCESS] Financial Statement Analysis

The provided financial statement analysis contains 17 notes that provide detailed information about a company's assets, liabilities, and equity. The notes cover various topics such as property plant and equipment, investment, intangible assets, goodwill, bank overdraft, borrowings, salaries of senior executives, and more. Each note provides specific details and calculations related to the respective topic.

Running head: ANNUAL REPORT HEALTHY CHOICES LTD
Annual Report Healthy Choices Ltd
Name of the Student:
Name of the university:
Authors Note:

ANNUAL REPORT HEALTHY CHOICES LTD1
Table of Contents
Statement Profit or Loss and Other Comprehensive Income.....................................................2
Statement of Changes in Equity.................................................................................................2
Statement of Financial Position.................................................................................................3
Notes to the Financial Statement................................................................................................4
Note 1: Reporting Entity........................................................................................................4
Note 2: Significant Accounting Policies................................................................................4
Note 3: New Standards and Interpretation Issued and not yet effective................................9
Note 4: Operating Expenses...................................................................................................9
Note 5: Income Taxes..........................................................................................................10
Note 6: Share Capital...........................................................................................................10
Note 7: Dividend..................................................................................................................11
Note 8: Accounts Receivable...............................................................................................11
Note 9: Inventory.................................................................................................................11
Note 10: property plant and equipment................................................................................12
Note 11: Investment.............................................................................................................14
Note 12: Intangible Assets...................................................................................................14
Note 12: Goodwill................................................................................................................15
Note 14: Bank Overdraft......................................................................................................15
Note 15: Borrowings............................................................................................................15
Note 16: Salaries of Senior Executives................................................................................15
Note 17: Information not reflected in financial statement...................................................16

ANNUAL REPORT HEALTHY CHOICES LTD2
Statement Profit or Loss and Other Comprehensive Income
Statement Profit or Loss and Other Comprehensive Income
For the Year Ended 31 January 2018
Particulars Notes 2018 2017
($) ('000) ($) ('000)
Operating revenue (Sales) 41268 37575
Operating Expenses 4 37400 33720
Operating profit Before Tax 3868 3855
Investment Income (Dividend Received) 275 250
Commission and royalty Received 680 750
Upward Revaluation of Investment 11 70
Profit Before Tax 4893 4855
Income Tax Expenses 5 1280 1330
Profit After Tax for the Year 3613 3525
Other Comprehensive Income
Total Comprehensive Income For the year 3613 3525
Statement of Changes in Equity
Statement of Change in Equity
For the Year Ended 31 January 2018
Particulars Not
es
Share
Capital
Retained
Earning
Asset Revaluation
reserve
Total
Equity
($) ('000) ($) ('000) ($) ('000)
($)
('000)
Balance at 1 February
2016 10075 2720 850 13645
0
Issue of shares 6 815 815
Dividend paid 7 -1000 -1000
Under valuation of
Inventory -150 -150
Current Year profit 3525 3525
Upward Adjustment 110
Adjustment 982
Balance at 31
January 2017 10890 5355 1682 17927

ANNUAL REPORT HEALTHY CHOICES LTD3
Balance at 1 February
2017 10890 5385 850 17125
Current Year profit 3613 3613
Dividend paid 7 -1325 -1325
Revaluation of land
and Building 670 670
revaluation of
Equipment -56 -56
Adjustment -1644
Balance as at 31
January 2018 10890 7673 -180 20027
Statement of Financial Position
Statement of Financial Position
For the Year Ended 31 January 2018
Equity Notes 2018 2017
($) ('000) ($) ('000)
Share Capital 6 10890 10890
Retained earning 7673 5355
Revaluation Reserve -180 1682
Total equity 18383 17927
Current Assets
Accounts receivable 8 3860 3540
Inventory 9 6310 6170
Total Current Assets 10170 9710
Non-current assets
Property Plant and Equipment 10 9502 10307
Investments 11 1420 1350
Intangible Assets 12 2492 2230
Goodwill 13 470 410
Total non-current assets 13884 14297
Total Assets 24054 24007
Current liabilities
Accounts payable 1710 2150

ANNUAL REPORT HEALTHY CHOICES LTD4
Bank overdraft 14 186 205
GST Liability 530 480
Income Tax Payable 0 110
Dividend Payable 7 375
Total current liabilities 2801 2945
Non-current liabilities
Borrowings 15 2870 3135
Total non-current liabilities 2870 3135
Total liabilities 5671 6080
Net assets 18383 17927
Notes to the Financial Statement
Note 1: Reporting Entity
Healthy Choices Ltd is an NZX-listed company based in Tauranga. The company
specialises in developing, manufacturing and distributing natural health products. The
company has no subsidiaries or associates.The directors intend to approve and sign the
financial reports for the financial year ending 31 January 2018 at their Board meeting to be
held on Friday 11 May 2018.
Note 2: Significant Accounting Policies
This section sets out the significant accounting policies upon which the Companies
financial statements are prepared as a whole. Specific accounting policies are described in
their respective Notes to the financial statements. This section also shows information on new
accounting standards, amendments and interpretations, and whether they are effective in 2017
or later years.

ANNUAL REPORT HEALTHY CHOICES LTD5
Statement of compliance:
The entire financial statement of the company has been prepared in accordance with
the New Zealand Genially Accepted Accounting Practice (“NZ GAAP”). The statements are
in full compliance with the New Zealand’s equivalents to International Reporting
Framework. (“NZ IFRS”) and with other applicable Financial Reporting Standards. They are
also in full compliance with the International Financial Reporting Standard.
Basis of measurement:
The financial statements of the company are measured at historical cost unless
otherwise mentioned.
Significant accounting estimates and judgements:
The process of preparation of the financial statements in conformation to the NZ’s
IFRS mandates the management to apply significant amount of judgements, assumptions and
estimates. The estimates made by the management affect the policies largely. For the purpose
of authorisation of the financial statements of the company, the Directors of the company
have ensured that proper disclosures are being made for facilitating better understanding of
the financial statements of the company. It is clearly recognised by the management that it is
inherent in the application of certain policies, judgements and estimates that they might differ
from that of the estimated by the management.
Impairment of goodwill and other intangible assets with indefinite life:
It is ensured that by the management of the company that impairment testing in
respect of the carrying value of the assets to ensure that they are not impaired. The process of
judging the impairment requires the management to conduct estimation regarding the future
cash flows that are expected to be generated by the cash generating units of the company to

ANNUAL REPORT HEALTHY CHOICES LTD6
which the goodwill and other intangible assets with indefinite life have been allocated. The
estimation of future cash flows to be generated by the CGU requires significant judgements
like expected rate of growth of the revenues and the expenditure of the company, the margin
that is to be achieved and the share of the market that is to be achieved by the company in the
future.
Revenue recognition:
Sales of goods:
In respect of the sale of the sale of the commodities by the company, a record is being
recognised only when significant risk and rewards, which come along with the ownership,
have been transferred to the customer. In addition to this, it is also to be ascertained that the
value of the sales can be ascertained with absolute surety.
Taxation accounting policy:
The amount of income tax is charged to the profit and loss account of the company. It
comprises of both current tax and deferred tax. If the amount of tax is to be recognised in
respect of an item that has been already recognised in the comprehensive income statement or
statement of equity, then the amount in respect of income tax is also recognised in the
statement of comprehensive income or statement of equity. The tax pertaining to the current
period is arrived at by the application of the current income tax rates applicable on the
income of the current year’s taxable income. The current tax amount is adjusted for any under
or over accrual of tax in respect of the prior periods. Balance sheet liability method is being
used for the purpose of recognition of deferred tax liability. This method allows for any
temporary difference that may arise between the carrying amount of assets and liabilities for
the purpose of tax computation and for accounting. An amount is recognised corresponding
to the deferred asset to the extent it is possible to determine that the future taxable profits will

ANNUAL REPORT HEALTHY CHOICES LTD7
become available for the the temporary difference can be utilised. The management reviews
the deferred tax asset at the end of each reporting date and the amount is reduced to the extent
it is not probable that the related profit will be realised.
Property plant and equipment policy:
The management recognises the property, plant and equipment owned by it at cost
that is reduced by the amount of depreciation and impairment losses.
In case the management has acquired the asset in stages, the same is not recorded in
the financial statement unless it is ready for use.
For the purpose of allocation of depreciation, the management makes use of the
straight-line method of depreciation. The straight-line method depreciation is used to allocate
the cost of the asset over its useful life or in case the assets are held in lease premises, the life
of the lease is shorter. The management ensures the reviewing of the residual values of the
asset along with their remaining useful life at least on an annual basis. The current estimated
life of the various assets is as follows:
i) Land and Buildings up to 50 years
ii) Manufacturing equipment 5-15 years
iii) Office equipment 5 to 10 years
iv) Vehicles 5 to 10 years.
In case any further expenditure is incurred that enables the extension of the useful
lives of the property, plant and equipment of the company, is capitalised. All of the other
costs are being recorded by the company as expenses in the profit and loss statement as and
when they are incurred.

ANNUAL REPORT HEALTHY CHOICES LTD8
In case there is a resultant gain or loss in respect of the disposal of the assets then the
same gain or loss is recognised in the profit and loss statement of the company corresponding
to the relevant period in which it has occurred.
Intangible assets accounting policy:
The company records the intangible assets at cost less accumulated amortisation and
any sort of impairment losses. The same is not applicable in case of the goodwill.
In case the intangible assets are being acquired in stages, the same are not accounted
for unless they are ready for the purpose of intended use.
The amortisation is conducted by the management on a straight-line basis, for
allocating the cost of the asset over the life of the asset. The residual life of the asset and the
remaining useful lives of the assets are reviewed by the management at least once in a year.
In case any subsequent expenditure has been undertaken to extend the useful life of
the intangible assets then the same is capitalised. All the other costs pertaining to the assets
are recognised in the profit and loss statement as and when they occur.
In case gain or loss due to the disposal of any intangible asset, the amount pertaining
to it is recognised in the profit and loss account of the company corresponding to the period
in which the intangible asset is disposed of.
Borrowings and advances accounting policy:
The borrowings and advances are recognised by the management initially at cost at
their fair value. The value of the borrowings includes any attributable transaction costs. After
the management has measured or rather recognised the borrowings initially, borrowings and
advances are subsequently measured at amortised cost via the application of the effective

ANNUAL REPORT HEALTHY CHOICES LTD9
interest method. The resultant amount is then reduced by any impairment losses on the
advances.
Note 3: New Standards and Interpretation Issued and not yet effective
There are number of standards and amendments that are issued but not yet effective.
The standards that are issued but have not been used in preparing the financial statement is
provided below:
 NZ IFRS 9 Financial Instrument
 NZ IFRS 16 leases
 NZ IFRS 15 revenue from contract with customer;
 Disclosure Initiative.
The board of directors are evaluating the impact of this standard and appropriate adjustments
will be made in the coming reporting year.
Note 4: Operating Expenses
Particular 2018 2017
$('000) $('000)
Administration expenses 1680 1230
Amortization of Intangibles 498 120
Audit Fees 1200 1050
Other services 300 350
Bad Debt 335 18
Legal fees 20
Cost of Goods sold 17860 16235
Depreciation 636 603
Directors’ fees 275 268
Donation to Red cross 35 30
Kid care Foundation 10 10
Life Flight Trust 10 10

ANNUAL REPORT HEALTHY CHOICES LTD10
Impairment Goodwill 130 60
Insurance 220 175
Interest Expenses (mortgage) 185 200
Interest Expenses (other) 2189 2298
Rates 410 370
Repair and Maintenance 1570 1120
R & D Expenditure 1200 860
Wages and Salaries 9130 8620
Loss on Inventory 630
Total 38523 33627
The classification of Auditor Expenses for providing Audit service and other services
are provided in the above table.
Note 5: Income Taxes
The Taxation Accounting Policy of the company is that the current tax amount is the
estimated amount of tax that is payable based on the current tax rate.
Particulars 2018
($000)
2017
($000)
Income Tax Paid 1300 1240
Income Tax Payable 0 110
Income Tax Expenses 1280 1330
Note 6: Share Capital
The Share Capital at 31 January 2017 is 1500000 ordinary shares. The shares that
have been issued in the public offering is 100000 shares. The price of the issue is $8.15 per
share. The shares that have been issued are all fully paid.

ANNUAL REPORT HEALTHY CHOICES LTD11
Note 7: Dividend
The dividend amount paid in 2017 is $950 and in 2018 is $1000. The solvency
test was conducted and after proper satisfaction the directors have declared dividend of 25
cents.
Note 8: Accounts Receivable
Particular 2018 ($'000) 2017 ($'000)
Account Receivable 4360 3140
Additional Bad debt -300
Provision for impairment of trade Receivable -500 400
Net Accounts Receivable 3860 3540
The receivable balance has been adjusted for the additional bad debt as a customer has
become insolvent. The provision for impairment of trade receivable is also adjusted for
calculating net receivable balance.
Note 9: Inventory
Particulars 2018 2017
$('000) ($'000)
Closing Inventory 6940 6320
Loss of Inventory -630
Reduction in the value of stock -150
Net Inventory 6310 6170
Classification
Finished Goods 2524 2468
Raw Material 1578 1543
WIP 2209 2160
Closing Inventory 6310 6170
The company follows an accounting policy of valuing inventory at cost or Net
Realisable value based on First in First out method. The inventory classification have been
provided above.

ANNUAL REPORT HEALTHY CHOICES LTD12
The company had an uninsured inventory loss that have been recorded in P/L and has
been deducted from inventory value. The company sold a large volume stock at considerable
lower price the value of the stock has been lowered.
Note 10: property plant and equipment
Land and Building 2018 2017
$('000) $('000)
Opening Cost 7230 7930
Additions 700 0
Disposal/ Upward revaluation 670
Disposal
Closing Cost 7930 8600
Opening Accumulated Depreciation 620 480
Depreciation for the Period 140 135
Disposal
Closing Accumulated Depreciation 760 615
Closing Book value 7170 7985
Manufacturing Equipment 2018 2017
$('000) $('000)
Opening Cost 2580 2360
Additions 400 280
Disposal/Under valuation 56
Closing Cost 2924 2640
Opening Accumulated Depreciation 1192 950
Depreciation for the Period 242 236
Disposal
Closing Accumulated Depreciation 1434 1186
Closing Book value 1490 1454

ANNUAL REPORT HEALTHY CHOICES LTD13
Office Equipment 2018 2017
$('000) $('000)
Opening Cost 1360 1290
Additions 150 60
Disposal
Closing Cost 1510 1350
Opening Accumulated Depreciation 774 620
Depreciation for the Period 154 142
Disposal
Closing Accumulated Depreciation 928 762
Closing Book value 582 588
Vehicles 2018 2017
$('000) $('000)
Opening Cost 620 550
Additions 70 50
Disposal
Closing Cost 690 600
Opening Accumulated Depreciation 330 230
Depreciation for the Period 100 90
Disposal
Closing Accumulated Depreciation 430 320
Closing Book value 260 280
The Property plant and equipment are stated in the financial statement at cost less
depreciation and impairment loss. The depreciation has been calculated using the straight line
method of depreciation. The estimated useful life of all the assets except land and building is
5 to 10 years. The estimated useful life of land and building is 50 years. The directors have
revaluated the land and building and this has resulted in the gain that have been recorded in

ANNUAL REPORT HEALTHY CHOICES LTD14
the revaluation reserve. The assets that is expected not to produce any further economic
benefit should be written off. The manufacturing equipment has been written off as it is
expected not to produce any economic benefit.
Note 11: Investment
Particular 2018 ($'000) 2017 ($'000)
Opening 1350 1350
Upward Revaluation 70
Closing 1420 1350
The investment made by the company consists of shares. The company followed a
policy of recording investment cost. The company has changed the policy of recording the
investment at current market price and any loss or gain to be adjusted against profit or loss.
The adjustments has been according to the policy of the company.
Note 12: Intangible Assets
Capitalized Product Development Cost
Particular 2018 ($'000) 2017 ($'000)
Opening 2230 2500
Addition 400
Amortization (240+240) 480 270
Closing 2150 2230
Patent
Particular 2018 ($'000) 2017 ($'000)
Opening 0 0
Purchased 360
Amortization 18
Closing 342
The intangible assets of the company are recognised at cost less accumulated amortisation.
The amortisation are provided on a straight line basis. The estimated use life of the Patent is
of 5 years.

ANNUAL REPORT HEALTHY CHOICES LTD15
Note 12: Goodwill
Particular 2018 ($'000) 2017 ($'000)
Goodwill 750 750
Opening Accumulated Impairment 150 280
Impairment during the year 130 60
Closing Accumulated Impairment 280 340
Net Good will 470 410
The Goodwill was originally costing $750000 and it was impaired by $130000 in 2018 and
$60000 in 2017. This further impairment was appropriately adjusted.
Note 14: Bank Overdraft
The company followed a bank overdraft of $50000 and it is secured by the security
arrangement over the assets. The rate of interest is 8.3% and it was 8.7% in 2017.
Note 15: Borrowings
The borrowings are classified into mortgage loan and bank loans. The mortgage loan is
secured by land and building and the interest rate of 8.75% p.a is applicable. The bank loan
has a range of interest rate from 9.6% to 9.9%.
Note 16: Salaries of Senior Executives
Designation Name Amount ($ 000)
CEO Hugh Brett 210
General
Manager
Sales and
Marketing
Colin Scott 195

ANNUAL REPORT HEALTHY CHOICES LTD16
General
Manager
Technical
Rex Salter 197
CFO Adrian Hall 159
General
Manager
Supply
Chain
Neville Smith
159
Note 17: Information not reflected in financial statement
The company has provided guarantee of $2 million. It is a contingent liability it is
secured by register of charge. The company has entered into a contract of $1250000 for the
extension of the existing building.

ANNUAL REPORT HEALTHY CHOICES LTD17