Accounting 2ND DRAFT

8/8/2019 Accounting 2ND DRAFT

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UB No: 09031809

Table of Contents

1. Executive Summary

2. About the Company2.1 Key People2.2 Milestones

2.3 Business Structure

3. Company Analysis of SMRT Corporation Ltd.

4. Company Financial and Data Analysis

4.1. Profitability ratio

4.1.1 Return on Capital Employed (ROCE)

4.1.2. Operating Profit Margin

4.1.3. Profit Ratio

4.1.4. Return on Equity (ROE) Ratio

4.1.5. Return on Assets (ROA) Ratio

4.2. Liquidity Ratio4. 2. 1. Current Ratio

4.2.2. Acid-Test Ratio

4.3. Stability ratio

4.4. Efficiency Ratio

4.4.1. Sales Revenue per Employee Ratio

4.4.2. Asset Turn Over Ratio

4. 5.Investors ratios

4.5.1. Earnings per Share (EPS) 4.5.2. Price/Earnings (P/E) ratio

4.5.3. Dividend Payout Ratio

4.5.4. Dividend Cover 5. Changes in Accounting Policies

6. Key Risk Factors

7. Company's Growth and Factors Attracting Investor

8. Appendices8.1 Accounting Policies

8.2. Financial Statements

8.3 The Bibliography



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1. Executive Summary:

This assignment is designed to provide an overview of Singapore¶s premier

public transport service (SMRT Corporation Ltd ) provider's financial condition

and results of operations through the use of analytical review techniques. Ratio

analysis is the most common form of financial analysis. It provides relative

measures of the company's conditions and performance. Financial ratios analysis

makes two types of comparisons such as industry comparison and trend analysis.

The ratios of a company are compared with those of similar companies or with

industry averages or norms to determine how the company is faring relative to its

competitors. In trend analysis, a company's present ratio is compared with its past

and expected future ratios to determine whether the company's financial condition

is improving or deteriorating over time. All the analysis in this report is based on

the resource available in the company's Annual Financial Report which is available

on their website.

2. . About the Company

SMRT Corporation Ltd (SMRT) is Singapore¶s premier multi-modal public

transport service provider offering integrated transport services island-wide.

Established in 1987, SMRT has been listed on the Singapore Exchange since July2000. It is the second-largest public-transport company in Singapore after

ComfortDelGro. It operates bus, rail, taxi and other public-transport services via

several wholly owned subsidiaries. Here some information about this company is

enlisted.

Industry Public transport

Products Bus and Rail Services

RevenueS$879.0 million SGD(FY2009)

Operatingincome

S$188.7 million SGD(FY2009)

Net incomeS$162.7 million SGD(FY2009)

Employees 6620 (2QFY10)

Parent Temasek Holdings Pte Ltd

Website www.smrt.com.sg



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2.1Key People:

Mr Choo Chiau Beng (Chairman)

Mdm Saw Phaik Hwa (President and Chief Executive Officer )

Mr Yeo Meng Hin (Deputy President and Chief Operating Officer )

Mdm Lim Cheng Cheng (Executive Vice-President and Chief Financial Officer )

Its major competitor in Singapore's duopoly transport system is SBS Transit

Limited, which also operates bus, rail, taxi and other transport services. SMRT was

recently ranked among the best in the Governance and Transparency Index. The

index measures companies' governance, transparency and investor relations. It is

collaboration between Corporate Governance & Financial Reporting Centre

(CGFRC) and the Business Times, and is backed by CPA Australia and the

Investment Management Association of Singapore.

Source:

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

2.2 Milestones

2009 Received three awards including µBest Metro¶ and µBest Metro (Asia Pacific)¶

awards at international Metro AwardsCircle Line Stage 3 to open from May 2009

2007 First major overseas contract in Dubai2001 Awarded license to operate Circle Line

Acquired TIBS Holdings ± added bus and taxi services2000 Listing of SMRT shares on SGX

1999 Awarded licence to operate Bukit Panjang light rail

1987 Commenced first revenue train service



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2.3 Business Structure

SMRT business is structured around the following units:

Subsidiary Description

SMRT Trains Ltd Incorporated in 1987 and operates the first MRT system in

Singapore. The 89.4 km MRT system, which consists of

the North South and East West lines, stretches over 51

stations. System will expand to include the Circle Line

(33.3 km), which will interchange with the North South

Line, East West Line and North East Line.

SMRT Investment Pte Ltd Set up on 9 March 2000. Principal activities are in the

marketing and leasing of media spaces as well as the

marketing, leasing and management of commercial spaces

within the SMRT network.

SMRT Engineering Pte Ltd Set up on August 1999. Offers one-stop consulting

services from project conceptualization to operations,

SMRT

Corporation Ltd

SMRTInvestmentPte Ltd

SMRTCapitalPte Ltd

SMRTBusesLtd

SMRTTaxisLtd

SMRTAutomobilePte Ltd

SMRTEngCayman I

SMRTLight RailPte Ltd

Bus PlusServices PteLtd

TransitLink PteLtd

SMRTHong

Kong Ltd

SMRTTrains Ltd

SMRT RoadHoldings Ltd

SMRTEngineeringPte Ltd

SMRT Far East PteLtd

SMRT Eng(MiddleEast) FZE

SMRTEngCayman II

SMRTInternationalPte Ltd

50%

50%

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

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



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maintenance and related assignments.

SMRT Light Rail Pte Ltd Set up in 1997 and operates Singapore's first fully

automated LRT system. Stretches over 7.8 km along 14

stations in Bukit Panjang.

SMRT Taxis Pte Ltd Manages a fleet of over 3,000 taxis, including Prestige

Mercedes, London taxis and SMRT SPACE MPV taxis.

SMRT Automative Services

Pte Ltd

SMRT Buses Ltd

Provides maintenance and repair services. Operates out of

three workshops in Ang Mo Kio, Woodlands and Kranji.

Operates a fleet of over 800 buses and provides bus

services between Western and North-Western part of

Singapore.

Bus-Plus Services Pte Ltd Incorporated in 1994 and operates a fleet of 47 air-

conditioned chartered buses.

Transit Link Pte Ltd A service company set up by SMRT and SBS Transit to

ensure efficient and effective fare and network integration.

SMRT Engineering FZE Provision of operations and maintenance services to the

Palm Jumeirah Rail Transit System for the Nakheel project

in the United Arab Emirates.

3. Company Analysis of SMRT Corporation Ltd.

SWOT analysis assesses the strategic position of a company by identifying its strength,

weakness, opportunities and threat. This can be found out from the table below:

Strength Weakness

Proven track record

Main operator of Singapore's public

transport backbone network, MRTsystem

Fares are regulated by PTC, beyond SMRT's

control

Operations and services subject to Licensingand Operating Agreement by LTA Subject to

fluctuation in energy costs

Opportunities Threats

Doubling of Rapid Transport System

by 2020

Deregulation and competitive bidding of public

transport Services



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Various initiatives by Singapore

government to promote public transport

Expansion of transport and engineering

services

Affected by potential security, safety and

disease outbreak risks

4. Company Financial and Data Analysis

Ratio Analysis is a tool used by individuals to conduct a quantitative analysis of

information in a company's financial statements. Ratios are calculated from current year

numbers and are then compared to previous years, other companies, the industry, or even

the economy to judge the performance of the company.

Financial Ratios of SMRT Corp. Ltd

Profitability Ratios 2008 2007 2006 2005 2004

Return on Capital Employed

(ROCE) 17.119 14.587 11.846 12.640 6.989

Operating Profit Margin 20.627 21.196 18.212 18.154 11.699

Profit Ratio 18.51% 18.69% 18.27% 14.56% 18.84%

Return on Equity (ROE) Ratio 22.54% 22.14% 21.21% 17.61% 22.85%

Return on Assets (ROA)Ratio 10.84% 10.43% 9.85% 7.49% 9.30%

Liquidity Ratios 2008 2007 2006 2005 2004

Current Ratio 0.942 1.546 1.592 0.629 0.982

Acid-Test Ratio 0.868 1.407 1.397 0.539 0.732

Stability Ratio 2008 2007 2006 2005 2004

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

Efficiency Ratio 2008 2007 2006 2005 2004

Sales Revenue per Employee

Ratio 141.129 144.397 136.178 124.539 116.617

Asset Turn Over Ratio 1.666 1.153 1.024 1.286 0.846



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4.1. Profitability ratio

Profitability ratios are the financial statement ratios which focus on how well a business

is performing in terms of profit. These ratios are used to find out a business¶s earnings

relevant to its expenses and other costs during a specific period of time. It can be said

that the company is doing well when they have a value higher compared to a

competitor¶s ratio or the ratio same as that of the previous period.

4.1.1 Return on Capital Employed (ROCE):

ROCE is a ratio that indicates the efficiency and profitability of a company¶s

capital investments. It indicates how a company utilizes capital to generate

revenue. A high ROCE percentage signifies that a company is profitable. From the

data as shown in the table above it is clear that ROCE of SMRT Corp. steadily

increased from 7% to 17% within last 5 years. But in case of SBS Transit Ltd,

ROCE is tending down in recent years though it was increased in previous yearsimpressively.

4.1.2. Operating Profit Margin:

This ratio compares one output of the business(operating profit)with another

output(sales revenue) This reveals the operating efficiency of the company - how



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see that for both the companies there are some fluctuations in the last five years,

but the average trend is upwards

4.2. Liquidity Ratio

Liquidity Ratios implies whether the company can reimburse its short term

creditors out of its total cash. By dividing total cash by total short-term borrowings

it can show the number of times short-term liabilities are covered by cash.

4. 2. 1. Current Ratio

The current ratio is one of the most famous of all financial ratios. It serves as a

test of a company's financial strength and relative efficiency. Though there is a

beliefe of ideal current ratio (usually 2:1). However, this fails to take into account

that different type of businesses require different current ratio.

The higher the ratio, the more liquid the business is considered to be. As liquidity isvital to the survival of a business, a higher current ratio might be tough to be

preferable to a lower one.

Here, the table shows that both the company have maintained their current ratios

within 0.5 to 2 in the last five years.

4.2.2. Acid-Test Ratio

This test is a more severe test of a business¶s solvency than the current ratio.

This ratio compares the liquid assets with the total current liabilities .The acid test

ratio excludes inventories from current asset and limits assets to cash and items that

the business can quickly convert to cash. The general rule is that the acid-test ratio

should be atleast 1.0, which means that liquid assets equal current liabilities. It is

not unusual for the ratio to fall below 1.0 without causing particular liquidity



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problem, but if the ratio falls as low as 0.5 that would be cause of alarm. The table

shows that except in 2005 for SMRT and 2008 for SBS transit, the ratio was good

regarding the business.

4.3. Stability ratio

Gearing Ratio measures the percentage of capital employed that is financed by debt and

long term financing. The higher the gearing, the higher the dependence on borrowing and

long term financing. Whereas, the lower the gearing ratio, the higher the dependence on

equity financing. Traditionally, the higher the level of gearing, the higher the level of

financial risk due to the increased volatility of profits.

A high gearing ratio is positive; a large amount of debt will give higher return on

capital employed but the company dependent on equity financing alone is unable to

sustain growth. Gearing can be quite high for small businesses trying to becomeestablished, but in general they should not be higher than 50%.

The table shows that SBS Transit is maintaining a gearing ratio below 50%

steadily. SMRT is trying to reduce the ratio, still it's in a higher range resulting in

larger amount of debt.

4.4. Efficiency Ratio

Efficiency Ratios give us the information regarding to what extent the company is

successful by making use of its assets to generate sales.



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4.4.1. Sales Revenue per Employee Ratio

This ratio relates sales revenue generated to a particular business resource, i.e,

labour. It provides a measure of the productivity of the work force.

Companies prefer to have a higher value for this ratio, implying that they are using

their staff efficiently. As from the table we can see that SMRT is having a graph

with upward slope which says that its employee resources are well used.

4.4.2. Asset Turn Over Ratio

This ratio examines how effectively the assets of the business are being used to

generate sales revenue. Higher value of asset turnover ratio is preferred because it

suggests that the assets are being used in more productively in the generation of

revenue.

From the table we can see that, in this case, both the companies are performing

well and a gradual trend of increase in the ratio is in the last five years are reflected.

4. 5.Investors ratios

The Investors ratios are mainly used by the investors to find out the performance of

a business as an investment. The investors will be interested in the company

making some good profit from the investment made.



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4.5.1. Earnings per Share (EPS)

This ratio relates the profit of the year to the number of shares issued. It is said

to be the fundamental measure of share performance. Sometimes EPS is important

because it is difficult to compare companies of vast sizes, but it is not very helpful

to compare the EPS of one company to other where there are differences in the

constituents of equity (eg-in the nominal value of share issued or the relative levels

of shares and reserves). It is very useful to monitor the change that occurs in this

ratio for a particular business over tome.

Here the table shows a growing trend of EPS for SMRT from 2004 t0 2008, butthere is a sudden fall in 2005. But in case of SBS transit the ratio had maintained

good performance till 2006, but the last two years performance are gradually

decreasing and which is not good for the company.

4.5.2. price/earnings (P/E) ratio

This ratio relates to the market value of a share to the earning per share(EPS ).

This ratio is a measure of market confidence in the future of the business

concerned. The higher the P/E ratio, the greater the confidence in the future earning

power of the business and also more investors are prepared to pay in relation to the

earnings stream of the business. Difference in accounting policies between

companies can lead to different P/E ratio figure.

Though the performance regarding P/E ratio of SMRT is not so well in 2008, but

the previous year's trends were quite positive.

4.5.3. Dividend Payout Ratio

Measures the proportion of earnings that a business pays out to stock holers in

the form of dividends.

SMRTs performance regarding this ratio shows that more than 50% of the earnings

are paid out bt the company to the stockholders in form of dividends. There is no

steady trend regarding this ratio in last five years. It also helps in analysing that

how much amount of the profit company can use for its future growth.



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4.5.4. Dividend Cover :

This ratio shows the number of times that the ordinary dividend could be paid

out of current earnings. This dividend is usually described as being x times covered

by the earning(where x =dividend cover ).So, if the dividend is covered twice, the

company would be paying out half of its earning as an ordinary dividend. The table

shows that in 2004 SMRT had higher dividend cover and an immediate decrease in

2005. Then a gradual upward slope is maintained till 2008.

Peer comparison (19 Mar 2009)

Source: Bloomberg, OIR estimates For analysis.



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5. Changes in Accounting Policies

6 . Key Risk Factors

Regulatory and

operational risks

SMRT operates in a regulated environment in which its operations

and services have to meet operating performance and service

standards specified by the respective license agreements with the

Singapore government. The permission to operate the MRT System

is derived from the License and Operating Agreement (LOA) signed

with the LTA. Although the term of the LOA is for a period of 30

years starting from 1 April 1998, it may be terminated prematurely

for various reasons, including breaching of any provisions of the

LOA and failure to meet the prescribed operating performance

standards. Hence, if happen, this would adversely affect its financial

performance and business viability. In addition, its Bus services are

also subject to Quality of Service (QoS) standards, which have in

place a penalty framework to enforce compliance. The penalty for



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non-compliance ranges from S$100/day/bus service to

S$10,000/month/standard. Lastly, PTC must also approve its fare

adjustments, and hence its primary influence of revenue is outside its

control.

Energy cost

risks

SMRT is exposed to energy cost risks that is outside its control, such

as fluctuations in oil and diesel prices. This would directly affect its

energy costs, and in turn its profitability. To mitigate the rising

electricity costs, the group typically enters into electricity contracts

for at least half a year or longer at fixed rates. In addition, it may also

engage in forward currency exchange contracts to mitigate the

currency risk arising from purchases of diesel in foreign currency

7. Company's Growth and Factors Attracting Investor

Revenue are revenue for Train and Bus is expected to be lower due to an

effective 4.6% reduction in bus and train fares from April 2009.

Dividend payout SMRT will endeavour to maintain or increase its dividend payout each

year, targeting a minimum payout ratio of 60% of net profit per year for

its interim and final dividends.Over the past three fiscal years (FY06-

08), SMRT has actually delivered cash dividends with payout

ratios in excess of 60%, in line with what it has committed. In its

latest 1HFY09 results, SMRT has again proven its ability by

paying an interim dividend of 1.75 S cents (62.3% of 2QFY09 net

profit), maintaining its dividend payout from the previous

corresponding period. Hence, looking ahead, we can expect

similarly attractive dividend payouts from SMRT, as its

profitability, as well as operating cash flows, is likely to remain

relatively defensive despite the recessionary conditions in global

economy.

Ratio Analysis From the different ratios analyzed in the assignment we can get the clear

view that SMRT is is in a rising trend in its performance regarding

profitability and efficiency and the investment ratios also shows a

positive trend. So, for investors SMRT is a quite positive company to

invest in.



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Energy costs and

proactive cost

In FY10 earnings growth would outpace its revenue growth due to

a positive impact from lower energy costs and proactive cost

containment, partially offset by higher staff and related costs from

the commencement of the CCL.

Future

expectation

For FY11-12,Expectation is ,the growth in revenue and net income

to stabilize in the range of 4.5-5.5% from higher ridership/better

utilization in its existing lines and CCL(circle line) (which will be

opened up in phases), but impacted possibly by a recovery in

energy prices and higher operating costs



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8. Appendices

8.1.Accounting Policies

Basis of PreparationThe financial statements are prepared in accordance with Singapore Financial ReportingStandards (FRS) including related

Interpretations promulgated by the Council on Corporate Disclosure and Governance.In the financial year ended 31 March 2006, the Group adopted the following new/revisedFRSs which are relevant to itsoperations:FRS 1 (revised) Presentation of Financial StatementsFRS 2 (revised) InventoriesFRS 8 (revised) Accounting Policies, Changes in Accounting Estimates and ErrorsFRS 10 (revised) Events After the Balance Sheet DateFRS 16 (revised) Property, Plant and EquipmentFRS 17 (revised) LeasesFRS 21 (revised) The Effects of Changes in Foreign Exchange RatesFRS 24 (revised) Related Party Disclosures

FRS 27 (revised) Consolidated and Separate Financial StatementsFRS 28 (revised) Investments in AssociatesFRS 32 (revised) Financial Instruments: Disclosure and PresentationFRS 33 (revised) Earnings Per ShareFRS 39 Financial Instruments: Recognition and MeasurementFRS 102 Share-based PaymentsThe financial statements are presented in Singapore dollars and rounded to the nearest thousand,unless otherwise stated. They are prepared on the historical cost basis except for certain financialassets and financial liabilities. The preparation of financial statements in conformity with FRSsrequires management to make judgements, estimates and assumptions that affect the applicationof policies and reported amounts of assets, liabilities, income and expenses. The estimates andassociated assumptions are based on historical experience and various other factors that are

believed to be reasonable under the circumstances, the results of which form the basis of makingthe judgements about carrying amounts of assets and liabilities that are not readily apparent fromother sources. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision and future periods, if the revisionaffects both current and future periods. Judgements made by the management in the applicationof FRSs that have a significant effect on the financial statements and in arriving at estimates witha significant risk of material adjustment in the following year are discussed in Note 32.

Consolidation Subsidiaries Subsidiaries are companies controlled by theCompany. Control exists when the Company has the

power, directly or indirectly, to govern the financialand operating policies of a company so as to obtain

benefits from its activities.Investments in subsidiaries are stated in theCompany.s balance sheet at cost less impairmentlosses. The financial statements of subsidiaries areincluded in the consolidated financial statementsfrom the date that control commences until the datethat control ceases. Business combinations areaccounted for under the purchase method. The cost



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of an acquisition is measured at the fair value of theassets given, equity instruments issued and liabilitiesincurred or assumed at the date of exchange, pluscosts directly attributable to the acquisition.The excess of the Group.s interest in the net fair value of the identifiable assets, liabilities and

contingent liabilities over thecost of acquisition is credited to the profit and lossaccount in the period of the acquisition.

Associates Associates are companies in which the Group hassignificant influence, but not control, over thefinancial and operating policies. The consolidatedfinancial statements include the Group.s share of thetotal recognised gains and losses of associates on anequity accounted basis, from the date that significantinfluence commences until the date that significantinfluence ceases. When the Group.s share of losses

exceeds the carrying amount of the associates, thecarrying amount is reduced to nil and recognition of further losses is discontinued except to the extentthat the Group has incurred obligations or made

payments on behalf to satisfy obligations of theassociates that the Group has guaranteed or otherwise committed

Transactions

Eliminated On

Consolidation

All significant intra-group transactions, balances andunrealised gains are eliminated on consolidation.Unrealised gains resulting from transactions with anassociate are eliminated to the extent of the Group.s

interest in the associate. Unrealisedlosses are eliminated in the same way as unrealisedgains, but only to the extent that there is no evidenceof impairment

Accounting

Policies Of

Subsidiaries

And Associates

Where necessary, accounting policies for subsidiaries and associates have been adjusted onconsolidation to be consistent with the policiesadopted by the Group

Foreign

Currencies

Foreign

Currency

Transactions

Monetary assets and liabilities in foreign currenciesare translated into Singapore dollars at the exchange

rates approximate to those ruling at the balance sheetdate. Transactions in foreign currencies are

translated at rates ruling on transaction dates.Translation differences are included in the profit and

loss account

Foreign

Operations

Assets and liabilities of foreign operations, includinggoodwill and fair value adjustments arising on theacquisition of foreign operations, are translated toSingapore dollars for consolidation at the rates of exchange ruling at the balance sheet date. Revenuesand expenses of foreign operations are translated at



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exchange rates ruling at the dates of the transactions.Exchange differences arising on translation arerecognised directly in equity. On disposal,accumulated translation differences are recognisedin the consolidated profit and loss account as part of the gain or loss on sale.

Property,

Plant And

Equipment

Owned Assets Property, plant and equipment are stated at cost lessaccumulated depreciation and impairment losses.The cost of self-constructed assets includes the costof materials, direct labour and an appropriate

proportion of production overheads. Where an itemof property, plant and equipment comprises major components having different useful lives, they areaccounted for as separate items of property, plantand equipment

Subsequent

Expenditure

Subsequent expenditure relating to an item of

property, plant and equipment that has already beenrecognised is added to the carrying amount of theasset when it is probable that future economic

benefits, in excess of the originally assessed

standard of performance of the existing asset, willflow to the Group. All other subsequent expenditureis recognised as an expense in the period in which itis incurred

Disposals Gains or losses arising from the retirement or disposal of property, plant and equipment aredetermined as the difference between the estimatednet disposal proceeds and the carrying amount of the

asset and are recognised in the profit and lossaccount on the date of retirement or disposal

Depreciation Depreciation is provided on a straight-line basis soas to write off the cost of the property, plant andequipment and major components that are accountedfor separately over their estimated useful lives asfollows: Leasehold land and properties . lease periodranging from 6 to 30 years

Furniture and fittings, office equipment andcomputers . 3 to 10 years

Motor vehicles . 5 to 6 yearsRolling stock . 15 to 30 years

Power supply equipment . 20 to 25 yearsSignalling, communication and

automatic fare collection systems . 3 to 30 yearsBuses . 10 to 17 years

Taxis and vehicles for rental . 6.67 to 7.67 yearsPlant and machinery . 3 to 12 years

Other operation equipment . 15 to 30 years No depreciation is provided on unregistered busesand taxis.



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No depreciation is provided on assets under construction until such assets are completed and putinto operational use.Property, plant and equipment costing less than$1,000 per item are expensed off as and when theyare purchased.

The useful lives and residual values, if notinsignificant, are reassessed annually.During the financial year, the estimated useful life

for selected bus models was changed from 12 yearsto 17 years with effect

1 April 2005. With a robust regular maintenance programme and a planned midlife upgrade, the

reliability of these buses will extend beyond thecurrent 12 years to the statutory life of 17 years.

Arising from this change in the estimated useful lifefor selected bus models, the reduction in

depreciation of the buses amounted to $8.7 million

for 2006.

Intangible

Assets

Goodwill in a business combination represents theexcess of the cost of acquisition over the fair valueof the Group.s shareof the identifiable net assets acquired. Goodwill isstated at cost less impairment losses. Goodwill onthe acquisition of subsidiaries is presented asintangible assets. Goodwill on the acquisition of associates is presented together with investments inassociates.Goodwill is tested for impairment on an annual basisin accordance with Note 3.11.

Available-

For-Sale

Financial

Assets

Equity securities held by the Group are classified as

being available-for-sale and are stated at fair value,determined as the quoted bid price at the balance

sheet date. Any resultant gain or loss is recogniseddirectly in equity. The exceptions are impairment

losses and foreign exchange gains and losses onmonetary items such as debt securities, which are

recognised in the profit and loss account. Whenthese investments are derecognised, the cumulative

gain or loss previously recognised directly in equityis recognised in the profit and loss account. Wherethese investments are interest-bearing, interestcalculated using the effective interest method isrecognised in the profit and loss account.Unquoted equity and other investments are held atcost because of the lack of quoted market prices andthe inability to reliably estimate fair value.Management believes that the carrying amounts



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Other

Receivables

at fair value and subsequently measured at amortisedcost using the effective interest method, lessallowance for impairment

Cash And

Cash

Equivalents

Cash and cash equivalents comprise cash balancesand bank deposits.

Impairment The carrying amounts of the Group.s assets arereviewed at each balance sheet date to determinewhether there is any indication of impairment. If anysuch indication exists, the assets recoverable amountis estimated. Goodwill is tested for impairmentannually and as and when indicators of impairmentare identified.

An impairment loss is recognized whenever thecarrying amount of an asset or its cash-generating

unit exceeds itsrecoverable amount. All impairment losses are

recognized in the profit and loss account.When a decline in the fair value of an available-for-sale financial asset has been recognized directly inequity and there is objective evidence that the value

of the assets is impaired, the cumulative loss thathad been recognized directly in equity is recognizedin the profit and loss account even though thefinancial asset has not been derecognized. Theamount of the cumulative loss that is recognized inthe profit and loss account is the difference betweenthe acquisition cost and current fair value, less anyimpairment loss on that financial asset previously

recognized in the profit and loss account Calculation

Of

Recoverable

Amount

The recoverable amount of the Group¶s receivablescarried at amortized cost is calculated as the presentvalue of estimated future cash flows, discounted atthe original effective interest rate (i.e. the effectiveinterest rate computed at initial recognition of thesefinancial assets). Receivables with a short durationare not discounted.The recoverable amount is the greater of the assets.net selling price and value in use. In assessing valuein use, the estimated future cash flows arediscounted to their present value using a pre-tax

discount rate that reflects current marketassessments of the time value of money and the risksspecific to the asset. For an asset that does notgenerate cash inflows largely independent of thosefrom other assets, the recoverable amount isdetermined for the cash generating unit to which theasset belongs.

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



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Impairment security or receivable carried at amortized cost isreversed if the subsequent increase in recoverableamount can be related objectively to an eventoccurring after the impairment loss was recognized.An impairment loss in respect of an investment in anequity instrument classified as available-for-sale is

not reversed through the profit and loss account. If the fair value of a debt instrument classified asavailable-for-sale increases and the increase can be

objectively related to an event occurring after theimpairment loss was recognized in the profit and

loss account, the impairment loss shall be reversed,with the amount of the reversal recognized in the

profit and loss account.An impairment loss is reversed if there has been a

change in the estimates used to determine therecoverable amount.

However, an impairment loss in respect of goodwill

is not reversed.An impairment loss is reversed only to the extentthat the assets carrying amount does not exceed thecarrying amount that would have been determined,net of depreciation or amortization, if no impairmentloss had been recognized

Liabilities

And Interest-

Bearing

Borrowings

Trade and other payables are recognized initially atfair value. Interest-bearing liabilities are recognizedinitially at fair value less attributable transactioncosts. Subsequent to initial recognition, trade andother payables and interest-bearing liabilities arestated at amortized cost with any difference betweencost and redemption value being recognized in the

profit and loss account over the period of the borrowings on an effective interest basis

Provisions A provision is recognised in the balance sheet whenthe Group and the Company has a legal or

constructive obligation as a result of a past event,and it is probable that an outflow of economic

benefits will be required to settle the obligation. If the effect is material, provisions are determined by

discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of

the time value of money and where appropriate, therisks specific to the liability

Accident

Claims

A provision for accident claims is recognised whenan accident has occurred. The amount of provision is

based on the claims outstanding and estimatedamounts payable.The expected reimbursement from insurance

policies and other parties in respect of the expensesrequired to settle a



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provision, is recognised as a separate asset disclosedas .Recoverable in respect of accident claims.included in .Other receivables, deposits and prepayments

Employee

Benefits

Defined

Contribution

Plans

Obligations for contributions to defined contribution plans are recognised as an expense in the profit and

loss account as incurred.

Defined Benefit

Plans

The Group¶s net obligation in respect of defined benefit plans is calculated by estimating the amountof future benefit that employees have earned inreturn for their service in the current and prior

periods, that benefit is discounted to determine the

present value. The discount rate is the market yieldof quoted Singapore Government Bonds at balance

sheet date. The calculation is performed using the projected unit credit method.

When the benefits of a plan change, the portion of the increased benefit relating to past service byemployees isrecognised as an expense in the profit and loss

account on a straight-line basis over the average period until the benefits become vested. To theextent that the benefits vest immediately, theexpense is recognised immediately in the profit andloss account.In calculating the Group¶s obligation in respect of a

plan, any actuarial gain or loss is recognised in the profit and loss account in the period that the gain or

loss arises Short-Term

Accumulating

Compensated

Absences

Provision is made when services are rendered byemployees that increase their entitlement to futurecompensated absences

Equity And

Equity Related

Compensated

Benefits

The SMRT Employee Share Option Plan (.SMRTESOP.) allows the Group¶s employees to acquireshares of the Company.

The fair value of options granted is recognised as anemployee expense with a corresponding increase in

equity. The fair value is measured at grant date andspread over the period during which the employees

become unconditionally entitled to the options. Ateach balance sheet date, the company revises its

estimates of the number of options that are expectedto become exercisable. It recognises the impact of

the revision of original estimates in employeeexpense and a corresponding adjustment to equity

over the remaining vesting period. The proceedsreceived net of any directlyattributable transactions costs are credited to share



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capital when the options are exercised.The SMRT Corporation Restricted Share Plan(.SMRT RSP.) and the SMRT CorporationPerformance Share Plan (.SMRT PSP) allow theGroup to award employees fully paid shares, their equivalent cash value or combination thereof, free of

charge, provided that certain prescribed performancetargets are met and, in the case of awards under theSMRT RSP, upon expiry of the prescribed vesting

period. For shares granted pursuant to awards under these plans, and the amount of cash which may be

paid upon the release of such awards, the fair valueof the awards is measured at grant date and spread

over the vesting period. At each balance sheet date,the Company may revise the fair value of the awards

basedon actual performance achieved. It recognises the

impact of the revision of original estimates in

employee expense and a corresponding adjustmentto equity over the remaining vesting period.

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

previous years.

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

method, on temporary differences arising betweenthe tax bases of assets and liabilities and their

carrying amounts in the financial statements.Temporary differences are not recognised for

goodwill not deductible for tax purposes and theinitial recognition of assets or liabilities that affect

neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected

manner of realisation or settlement of the carryingamount of assets and liabilities, using tax ratesenacted or substantively enacted at the balance sheetdate.A deferred tax asset is recognised only to the extentthat it is probable that future taxable profits will beavailable against which the temporary differencescan be utilised.Deferred tax is provided on temporary differences



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arising on investments in subsidiaries and associates,except where the timing of the reversal of thetemporary difference can be controlled and it is

probable that the temporary differences will not bereversed in the foreseeable future

Fuel

EqualisationAccount

(.Fea.)

The FEA has been set up in accordance with the

directive of the Public Transport Council (.PTC.) as part of the mechanism for regulating public transportfares. The FEA is computed based on the referenceelectricity tariff and diesel price for the year asdetermined by the PTC.In the year where the actual electricity tariff anddiesel price is below the reference electricity tariff and diesel price for that year, a fuel equalisationaccount is set up as a charge to the profit and lossaccount for that year. In the year where the actualelectricity tariff and diesel price is above thereference electricity tariff and diesel price for that

year, the fuel equalisation account previously set upis released to that year.s profit and loss account. Theamount that can be released to the profit and lossaccount is limited to the maintenance of a minimum

balance (or such other amount as may be approved by PTC) inthe FEA equivalent to one year.s fuel consumptioncalculated based on the reference electricity tariff and diesel price.All transfers to and from the FEA must be approved

by the PTC. The PTC may also direct such transfersthat it considers necessary and has the obligation toensure that the benefits relating to the balance in theFEA will be passed back to the commuting public.

Grants Asset-related grants received from the LandTransport Authority for the purchase of eligible

operating assets are deferred and amortised in the profit and loss account using the straight-line

method and over the same periods in which therelated property, plant and equipment are

depreciated.

Dividends Dividends on ordinary shares are recognised as a

liability in the period in which they are declared.

Revenue

Recognition

Passenger

Revenue

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

Taxi Rental

And Rental

Revenue

Rental revenue receivable under operating leases isrecognised in the profit and loss account on astraight-line basis over the terms of the leases



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Advertising

Revenue

.Advertising revenue is recognised on an accrual

basis over the terms of the contract

Engineering

And Other

Services

Revenue from short-term workshop and other services is recognised upon completion of services

rendered.Revenue from engineering consultancy and projectmanagement services is recognised on the

percentage of completion method. The stage of completion is recognised upon completion of work done at designated phases of the contracts.Provision for foreseeable losses, on contracts not yetcompleted, is made as soon as such losses aredeterminable

Sales Of Goods Revenue is recognised when the significant risks andrewards of ownership have been transferred to the

buyers. Revenue excludes goods and services or other sales taxes and is after deduction of any tradediscounts. No revenue is recognised if there aresignificant uncertainties regarding recovery of the

consideration due, associated costs or the possiblereturn of goods.

Operating

Leases

Where the Group has the use of assets under operating leases, payments made under the leasesare recognised in the profit and loss account on astraight-line basis over the terms of the leases

Finance

Costs

Interest expense and similar charges are expensed inthe profit and loss account in the period in which

they are incurredInterest And

Investment

Income

Interest income from bank deposits and other debtsecurities is accrued on a time-apportioned basis.Dividend income from equity investments isrecognised in the profit and loss account at gross ona receipt basis.Gain or loss on disposal of investment is accountedfor in the profit and loss account as they arise

Segment

Reporting

A segment is a distinguishable component of theGroup that is engaged either in providing productsor services (business segment), or in providing

products or services within a particular economic

environment (geographical segment), which issubject to risks and rewards that are different from

those of other segments.



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APPENDIX B



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APPENDIX C

8.3 Bibliography

1.www.ocbcresearch.com/pdf_reports/.../SMRT-090320-OIR.pdf

2.www.smrt.com.sg/

3.http://www.bized.co.uk/compfact/ratios/index.htm

4.http://www.bizwiz.ca/ratioslist.html

5.http://www.bigfatpurse.com/2009/12/smrt-fundamental-analysis/

6.http://en.wikipedia.org/wiki/SBS_Transit

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

8.www.ocbcresearch.com/pdf_reports/.../SMRT-090320-OIR.pdf

9.http://www.investopedia.com/

10.http://www.sias.org.sg/index9.php?handler=ir&action=ir_content&ir_content_title_id=25

11.http://www.smrt.com.sg/main/index.asp

12.http://tutor 2u.net/business/accounts/main_ratios.htm

13.http://beginnersinvest.about.com/od/financialratio/tp/financial-ratios.htm

14. Atrill P. and McLaney E. (2008) Accounting and finance for Non-specialists(6th

edition).London : Prentice Hall

15. Dyson J. R. (2004) Accounting for Non-accounting students(6th edition ) London :

Prentice Hall

16. Tracy J.A ( 1997 ) Accounting for Dummies .USA : IDG Books Worldwide Inc.

Accounting 2ND DRAFT

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