Arab Company For Drug Industries And Medical Appliances...

Annual Report

2015

Arab Company For Drug IndustriesAnd Medical Appliances

(ACDIMA)

Arab Company For Drug Industries

And Medical Appliances (ACDIMA)

Authorized Capital KD 90 Million

Headquarters

Hashemite Kingdom of Jordan

P.O. Box 925161 – Amman 11190 Jordan

Tel: +962-6-5821618 Fax: +962-6-5821649

E-mail: [email protected]

www.acdima.com

Acdima’s Regional Office – Tunis

No. 2 Rue Youssef Rouissi – Zincant No. 1

2092 El-Manar 2 – Tunisia

Tel: +216-71-870489 / 871489 Fax: +216-71-873100


Acdima’s Regional Office – Riyadh

King Khaled Intl. Airport Industrial Zone.

CAD Middle East Admin. Bldg.

P.O. Box 26721 – Al-Riyadh 11496 – Saudi Arabia

Tel: +966-11-2201164 Fax: +966-11-2201163


C O N T E N T S

Index Page

ACDIMA in Brief 4

Shareholders 5

Chairman of the Board of Directors, Board Members and Director General 6

Report of Board of Directors 7

Auditor’s Report 18

Consolidated statement of financial posi on as at December 31, 2015 20

Consolidated statment of comprehensive income for the year ended December 31, 2015 22

Consolidated statment of changes in owners equity for the year ended December 31, 2015 24

Consolidated statment of cash flows for the year ended December 31, 2015 25

Notes to the consolidated financial statements 27

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ACDIMA in Brief

- Arab Company for Drug Industries & Medical Appliances.

- A Pan-Arab shareholding company established by a resolution from the Arab Economic Unity

Council on March 6, 1976.

- Authorized Capital is: Kuwaiti Dinar (90) million.

Objectives of the Company

On the national level, ACDIMA sets up a strategy for the drug industries and medical appliances,

conducts the feasibility and technical studies for the projects to be established in the Arab World,

subscribes along with the Arab governments and other parties in these projects. On the international

level, ACDIMA builds relations with multinational bodies to assist in setting up and participating

in projects in the Arab World. It also concentrates on the field of training to create and develop

competent personnel for the drug industries and medical appliances.

ACDIMA is a Share Holder in the following companies:

1. Saudi Pharmaceutical Industries and Medical Appliances Corporation (SPIMACO-ADDWAEIH) –

Al-Qassim, Saudi Arabia.

2. Gulf Pharmaceuticals Industries (JULPHAR) – Ras Al-Khaima, U.A.E.

3. Societe Arab Des Industries Pharmaceutiques (SAIPH) – Tunisia.

4. Arab Company for Antibiotics Industries (ACAI) – Iraq.

5. Acdima For Veterinary Medicines (Acdivet) – Syria.

6. ACDIMA Center for Bioequivalence and Pharmaceutical Studies – Jordan.

7. CAD Middle East for Pharmaceutical Industries – Riyadh, Saudi Arabia.

8. The Arab Company for Veterinary Production(ACVMP) - Khartoum, Sudan.

9. Arab Company for Pharmaceutical Products (ARABIO)–Jeddah, Saudi Arabia.

10. Tassili Arab Pharmaceutical Co. (Taphco) – Algeria.

11. Shamra Pharma – Aleppo, Syria

12. Industrie Pharmaceutique Arabo – Tangier, Morocco.

13. Al-Arabiya for Medical Solutions and Medicines – Libya.

ACDIMA’s Regional Offices

1. Regional Office in Tunis

2. Regional Office in Riyadh

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Shareholders in Acdima as on 31/12/2015

ACDIMA’S authorized capital consists of (90,000,000) Ninety Million Kuwaiti Dinars distributed on (9,000) Nine Thousand indivisible shares, the par value of each is (10,000) Ten Thousand Kuwaiti Dinars.Details of paid up capital as at 31/12/2015 are as follows:

Governments and other ParticipantsNumber

of Shares

Shares Fractions

Resulted from New

Subscription

Kuwaiti

Dinars

United Arab Emirates 647 6,470,000

Kingdom of Bahrain 69 0.700 697,000

Republic of Tunisia 145 1,450,000

Kingdom of Saudi Arabia 1,666 0.800 16,668,000

Republic of Sudan 11 110,000

Syrian Arab Republic 647 6,470,000

Republic of Iraq 1,299 12,990,000

State General Reserve Fund – Ministry ofFinance/ Sultanate of Oman 61 610,000

Qatar Holding 738 0.500 7,385,000

State of Kuwait 647 6,470,000

Libyan Foreign Investment Co. 647 6,470,000

Republic of Yemen 61 610,000

State of Palestine 11 0.500 115,000

Ministry of Finance, Jordan 17 0.100 171,000

The Arab Pharmaceutical Manufacturing Co.Ltd., Jordan 10 100,000

Saidal/ Algeria 24 240,000

Arab Republic of Egypt 125 1,250,000

Total Subscribed & Paid Shares 6,825 2.600 68,276,000

Unpaid Shares 2,172 0.400 21,724,000

Total 8,997 3.000 90,000,000

N.P:● ACDIMA’s authorized capital was increased from (60) Million Kuwaiti Dinars to (90) Million Kuwaiti

Dinars upon a resolution taken by the general assembly held in ACDIMA’s headquarters in Amman on October 10th , 2013. Another assembly was held on 3/4/2014 for scheduling new subscriptions.

● A number of the existing shareholders expressed their willingness to participate in the capital increase in accordance with their original share in the paid capital, a timetable was set to effect their payments which started in the year 2015 and ends during the year 2018.

● Egypt’s contribution to ACDIMA is frozen.● Shares fractions which are mentioned in the above table have resulted from participations in the

capital increase calculated as percentages of the amount of the increase on the basis of participants Shareholding in the paid capital on 31/12/2013.

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Chairman of The Board of Directors

Board Members and Director General

Mr. Saleh Al-KhaliwiChairman of the Board of Directors

Kingdom of Saudi Arabia

Mr. Abdulhamid Al-BakushMember of the Board

Libyan Foreign Investment Co.

Dr. Mohammad Khalil MohammadDirector General

Mr. Omar Al-HamedVice Chairman of the Board

State of Qatar

Dr. Ali ZawawiMember of the Board

Kingdom of Saudi Arabia

Ms. Sheikha KhalifaBen Zaal

Member of the BoardUnited Arab Emirates

Mr. Adil KareemMember of the Board

Republic of Iraq

Dr. Hammodi Abbas HameedMember of the Board

Republic of Iraq

Dr. Salah Al AteeqiMember of the Board

State of Kuwait

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In The Name of Allah, The Most Merciful, The Most Gracious

The Fortieth Annual Report of ACDIMA Board of Directors

for the Year Ended on 31/12/2015

Dear Respected Shareholders,

Peace be Upon You,

On my behalf and on behalf of the board members of Arab Company for Drug Industries and Medical Appliances (ACDIMA), I would like to present to you the annual report of the company activities during the year 2015.

ACDIMA Activities in The Year 2015

ACDIMA continued to dedicate considerable attention to investments in Arab pharmaceutical industry by employing its funds in new pharmaceutical projects or contributing to Arab pharmaceutical companies. This is achieved by either allocating new funds to purchase shares in reputable pharmaceutical companies or supporting these companies in running their business. In addition, ACDIMA incentivized these companies to cope with the latest technologies in this field, and train technical staff to be able to keep pace with the developments in the pharmaceutical industry. The outcomes of the Company activities showed operational profit with the amount of KWD 4,011,468 in the year 2015 as compared to KWD 1,722,327 in the year 2014.

In the field of bioequivalence and other pharmaceutical studies, ACDIMA proceeded with the strategic plan to develop ACDIMA Center for Bioequivalence and Pharmaceutical Studies to be one of the most advanced and high-end centers in this field worldwide.

Thanks to the efforts exerted by ACDIMA’s Board of Directors, the efforts of the general management and ACDIMA Center for Bioequivalence and Pharmaceutical Studies; the Center was able to compete with other international centers engaged in this line of business and provides high quality studies.

Regarding boosting the Company investments; The Board of Directors is considering to contribute in a number of quality pharmaceutical projects to benefit from the 50% increase in capital of the company, which was approved in 2013.

Investments in Pharmaceutical Projects

Investments in pharmaceutical projects are instrumental to achieving the key objectives for which ACDIMA was established. Through contributions in these projects, ACDIMA seeks to stimulate Arab investors to set up joint leading pharmaceutical projects that employ advanced technologies in the Arab pharmaceutical industry in accordance with outstanding manufacturing requirements of pharmaceutical products. There are various projects distributed across the Arab World as shown in (Table 1) in which ACDIMA’s total investments is approximately KWD 87,595,214.

In addition, ACDIMA Board of Directors approved a strategy that aims at boosting investments in pharmaceutical projects in case the studies prove the feasibility of such projects. Also, the Company aims at increasing its shareholdings in the capital of companies in which it is already a shareholder.

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As for existing projects, ACDIMA’s total contributions has raised the capital of subsidiaries during 2015 to an amount equivalent KWD 5,509,320, In addition to granting loan facilities worth KWD 234,000 as shown in the following table:

Granting Loans in KWD

Transferring Contributions in

KWDCompanies in which ACDIMA is a Shareholder

2,276,500Purchase of 580 thousand shares in Saiph - Tunisia

672,000Capital increase in IPharma – Morocco

2,476,500Capital increase in CAD Middle East Pharmaceutical Industries – Saudi Arabia

48,305Rehabilitation of ACDIMA for Veterinary Medicines Industry “ACDIVET” – Syria

36,015Contribution to “APICO’s” Shares - Libya

234,000Loan Grant to Saudi Ajal Company – Saudi Arabia

234,0005,509,320Total

Following is a brief summary of the activities of ACDIMA,s wholly owned companies as well as the other companies in which ACDIMA is a shareholder, in addition to the business outcomes of these companies in the year 2015:

First: ACDIMA’s Subsidiaries and Wholly Owned Investments

a. ACDIMA for Veterinary Medicines Industry “ACDIVET”/ Syria:

ACDIMA owns 100% of the Company’s capital. The value of ACDIMA’s proprietary rights in this Company is KWD 1,013,423. ACDIVET sales in 2015 amounted to SYP 77.5 Million, equivalent to KWD 108,464. Net profit amounted to SYP 18,450,563, equivalent to KWD 25,830. The company rehabilitated its building, equipment and started production in sequence with the current situation in Syria.

b. ACDIMA Center for Bioequivalence and Pharmaceutical Studies/ Jordan:

ACDIMA Center for Bioequivalence and Pharmaceutical Studies was established in 2000 as a center that conducts bioavailability, bioequivalence, clinical, pharmacokinetics and pharmaceutical studies, as well as chemical analyses of biological samples. The financial outcomes indicate that the Center has generated a net profit of USD 441,798 in 2015, equivalent to KWD 133,865 as compared to 2014 profits estimated at USD 258,122, equivalent to KWD 73,565.

Moreover, the Center has executed various bioequivalence studies in respect of various pharmaceutical products for a number of pharmaceutical factories and companies in the Arab and foreign Countries. The Center is now accredited by a large number of Arab health authorities as a reference center for these studies.

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ACDIMA provided continuous support for this project through training, qualifying technical personnel and supplying modern equipment and supplies to the Center. The strategic plan of the Center’s development was adopted, and a clinical site was set up in the Center, and its analytical instruments were upgraded to comply with the set global standards in this context.

Second: Companies in which ACDIMA is a ShareholderThe financial data stated in this part of the report gives a summary of the available information on achievements of below companies during 2014 and 2015.

a. Producing Companies

1. Saudi Pharmaceutical Industries and Medical Appliances “SPIMACO”/ Saudi Arabia:

The capital of this company is SAR 1,200,000,000 equivalent to KWD 93,600,000. ACDIMA owns 20.488% in SPIMACO’s capital.

SPIMACO is one of the major pharmaceutical companies in the Arab World, which continues to strengthen its investments. It currently has expansion projects in its factory. The Company owns several companies including ENAYA, TAPHCO, CAD, IPharma, and Dammam Pharma, Medical ARAC, Spimaco Egypt, Spimaco Algeria.

SPIMACO’s sales in 2015 amounted to SAR 1.705 Billion, with 16% increase as compared to the previous year, thus achieving a profit in the same year with the amount of SAR 357.05 Million, equivalent to KWD 29 Million, with 12.7% increase as compared to the previous financial year, 2014.

2. Gulf Pharmaceutical Industries (JULPHAR) / United Arab Emirates:

The capital of this Company is AED 1050 Million, equivalent to KWD 86.6 Million. ACDIMA owns 9.15% in JULPHAR’s capital.

In 2015, JULPHAR’s sales amounted to AED 1.47 Billion, with 5.9% increase as compared to the previous year, 2014. JULPHAR generated profits amounting to AED 226.65 Million in 2014, equivalent to KWD 18.7 Million; at 12.1% increase as compared to the previous financial year 2014.

JULPHAR is one of the leading manufacturers of pharmaceuticals in the Middle East. Its registered products exceed 3,600 products in more than 50 Countries.

Moreover, a new factory for JULPHAR was inaugurated in Ethiopia for general and topical products, as well as new projects in Saudi Arabia and injection plant in Jebal Ali in the United Arab Emirates, and participating in a drug factory in Bangladesh.

3. Société Arabe Des Industries Pharmaceutiques “SAIPH”/ Tunisia:

ACDIMA owns 68.1% in the capital of SAIPH, estimated at TND 26,920,000 equivalent to KWD 4,011,080.During 2015, the company’s sales amounted to TND 46.25 Million, the equivalent of KWD 6.9 Million, an increase of 1% from the previous year, and profits amounted to TND 378,473 for the same year, the equivalent of KWD 56,392, compared to a loss in 2014 of TND 7,931,391.

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4. Arab Company for Antibiotics Industry “ACAI”/ Iraq:

ACDIMA owns 25.66% of the authorized capital and 34.06% of the paid-up capital of this company, estimated at IQD 30,000,000 (based on the exchange rate of the Iraqi currency (Dinar) in the establishment year: IQD 1 = USD 3.224).

In 2015, ACAI’s sales amounted to IQD 13.65 Billion, equivalent to KWD 3.55 Million, with 25% decrease as against the previous year. In addition, ACAI losses in the same year totaled IQD 12.85 Billion, equivalent to KWD 3.3 Million, with a further loss increase at 374% as compared to the losses of 2014.

5. Industrie Pharmaceutique Arabo “IPharma” / Morocco:

ACDIMA owns 21% in the share capital of IPharma, estimated at MAD 150 Million, equivalent to around KWD 4,650,000.In 2015, IPharma’s sales amounted to MAD 45.3 Million, with a 46.7% increase as against the previous year. In addition, IPharma profit in the same year totaled MAD 5 Million, equivalent to KWD 155 Thousand, with an increase at 60.5% as compared to the profit of 2014.

6. Shamra Pharma Dental Anesthetic Company/ Syria:

ACDIMA owns 43.9% in the share capital of Shamra Pharma which amounts to SYP 164,640,000, equivalent to KWD 263,424. The production of the company has been suspended since June 2012, due to the prevailing circumstances in Syria.

ACDIMA’s Board of Directors took a resolution to allocate an impairment provision for the whole value of investment in this company in accordance with the generally accepted accounting principles and standards.

7. Arab Company for Pharmaceutical Products “ARABIO”/ Saudi Arabia:

ARABIO was founded in 2007 with a capital of SAR 186,000,000, equivalent to KWD 14,508,000. ACDIMA owns 31.38% in the capital of this company. ARABIO sales in 2015 amounted to SAR 162.8 Million, with a decrease at 23% as compared to the previous year. The profit of the Company for the same year amounted to SAR 5.03 Million, equivalent to KWD 407.2 Thousand, a 43% increase from the previous year.ARABIO is considered to be the leading company in the Gulf region in manufacturing and marketing vaccines and biological products, in addition to conducting research leading to the discovery of new products. The production program consists of injection lines, liquid containers, and dried containers to produce vaccines for seasonal influenza, and meningitis. Moreover, ARABIO targets producing other vaccines in the future, such as rotavirus, measles and other vaccines. The company’s factory was licensed, and certain products were registered at the Saudi Food and Drug Authority.

8. Saudi Ajal Company/ Saudi Arabia:

Saudi Ajal Company was established in 2008 in The Kingdom of Saudi Arabia, with a capital of SAR 9,000,000 equivalent to KWD 729,000, while ACDIMA owns 20% of the company’s capital. The company revenues for the year 2015 amounted to SAR 7.75 Million against SAR 1.43 Million for the year 2014 at an increase of 442% as compared to the year 2014. The company profits for the year 2015 amounted to SAR 826,843 against a profit of SAR 192,790 for the year 2014 with and increase of 329%.The company aims at acquiring, managing and maintaining hospitals, medical centers, medical laboratories, bioequivalence centers, and medical and pharmaceuticals consultation centers.

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9. CAD Middle East Pharmaceutical Industries/ Saudi Arabia:

The Company was established in 2006 with a capital of SAR 200,000,000, equivalent to KWD 16,200,000. ACDIMA owns 25% in the capital of this Company.

The company’s revenue for 2015 has amounted to SAR 148.9 Million compared to SAR 200.5 Thousand for 2014. In 2015, The company’s earnings amounted to about SAR 13.8 Million against a loss of SAR 52.4 Million in 2014.The company is considered a modern and multi-goal industrial enterprise, it was designed on the concept of separate manufacturing units using most advanced technical systems for manufacturing highest quality active raw materials (APIs) in consistence with Good Manufacturing Practices (cGMP) which is globally accredited and abides by recognized standards and stipulations set by regulatory bodies such as FDA, European Drug Quality management –European Drug Agency.This project is one of the pilot projects in the Arab World for producing active raw pharmaceuticals. As Arab pharmaceutical factories still rely on importing their demanded requirements of these materials from abroad; the products of the project will be marketed inside and outside the Arab Countries.

b. Established Non-Producing Companies

1. Tassili Arab Pharmaceutical Company “TAPHCO”/ Algeria

This Company was established in the year 2000 with a capital of DZD 1,083,482,400. ACDIMA owns 28.98% in its capital, as equivalent to

KWD 885.5 Million.

Losses of the Company in 2015 amounted to DZD 37.6 Million, equivalent to KWD 106 Thousand. It is expected that Taphco start production in the second half of 2016.

2. The Arab Company for Veterinary Medicine Production “ACVMP”/ Sudan

The capital of this Company is USD 37,000,000, equivalent to KWD 11,211,000. ACDIMA owns 40% of ACVMP capital, together with other shareholders.

The losses of the Company in 2015 amounted to USD 361.5 Thousand, in comparison with USD 326 Thousand loss in 2014.

The Company was registered in 2006. The board of directors was formed and commenced performing its duties and functions. The Company contracted with highly experienced professionals to conduct the pharmaceutical studies and detailed engineering designs necessary for the project. The designs were actually initiated in January, 2008, and were completed by the end of December of the same year according to the scheduled timetable.

Hardware and equipments are being installed for the project, and it is expected to start trial production in the second half of 2016.

3. Al-Arabiya for Medical Solutions and Medicines/ Libya

This Company was established with a capital of LYD 1 Million, equivalent to KWD 214,000. ACDIMA owns 49% of the Company’s capital. The company aims to create and establish a factory for Intravenous solutions and medicines in accordance with the growing international standards in the field and in particular the good manufacturing (cGMP) conditions and to the production and marketing of Intravenous solutions and medicines, and exporting the surplus in accordance with the applied legislations. The company has the right of establishing or having shares in companies and projects related to its activities.

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Third: FinancialsACDIMA’s Income Statement for the year ending on 31/12/2015Pursuant to Article 32 of ACDIMA’s Articles of Association; the Board of Directors would like to present to you the Company’s income statement for the year 2015, as follows:

Item2014

Kuwaiti Dinar KWD

2015Kuwaiti Dinar

KWD

Sales 52,201 7,192,497

Cost of Sales (32,334) (6,314,440)

Gross Profit for the Year 19,867 878,057

ACDIMA’s share in associated companies’ profit

4,438,170 4,224,595

Profit from available-for-sale financial assets 552,844 1,101,740

Profit available from Investment Portfolios 57,176 21,710

Other Revenues 195,453 1,391,123

General and Administrative Expenses (2,189,064) (1,368,631)

Sales and Distribution Expenses (8,779) (1,445)

Profits (Losses) of the Bioavailability Center 73,565 133,865

Financing Expenses (159,491) (1,005,370)

Profit of the year before Deducting Taxes and Bonuses

2,979,741 5,375,644

Expenses of Foreign Taxes on Dividend Distribution

(1,138,414) (1,224,940)

Income Tax 0 (14,841)

Bonuses Provision for Members of the Board (119,000) (124,395)

Net Profit 1,722,327 4,011,468

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Recommendations of The Board of Directors

First: Approving the Financial Position and income statement accounts for theyear 2015.

Second: Distributing net profits as follows:

1. Deduct 10% of the net profit to add the same to the statutory reserve.

2. Distribute free shares at a rate of 3% of the paid-up capital (excluding the contributions of The Arab Republic of Egypt, as contributions are frozen). The differences in share fractions will be written for shareholders.

3. Determine the remunerations of the members of the Board of Directors and their discharge.

Finally, the board of directors would like to thank the management and members of the Company for their outstanding performance and diligent work in order for ACDIMA to achieve its objectives. We wish the Company further success and progress in the future.

I ask Allah for Success,

Saleh bin Manea Al-Khaliwi

Chairman of ACDIMA Board of Directors

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Table No. (1)ACDIMA Shareholdings in Projects as at 31/12/2015

Project CountryShareholding

PercentageACDIMA Share (Kuwaiti Dinar)

a. Producing Companies

1.Shamra Pharma Dental Anesthetic Company

Syria 43.900% -

2.Gulf Pharmaceutical Industries “JULPHAR”

Emirates 9.1509% 19,817,425

3.Société Arabe Des Industries Pharmaceutiques “SAIPH”

Tunisia 68.1% 4,145,207

4.Saudi Pharmaceutical Industries and Medical Appliances Corporation “SPIMACO”

Saudi Arabia 20.488% 47,332,076

5.ACDIMA for Veterinary Medicines Industry “ACDIVET”

Syria 100% 1,013,423

6.Arab Company for Antibiotics Industry “ACAI”

Iraq 34.061% 5,516,164

7.Industrie Pharmaceutique Arabo (IPharma)

Morocco 21% 1,555,795

8.Arab Company for Pharmaceutical Products “ARABIO”

Saudi Arabia 31.380% 1,851,502

9. Saudi AjalSaudi Arabia 20% 158,544

10.CAD Middle East Pharmaceutical Industries

Saudi Arabia 25% 2,476,500

b. Companies under Establishment

1.Tassili Arab Pharmaceutical Company “TAPHCO”

Algeria 28.980% 678,504

2.The Arab Company for Veterinary Medicine Production “ACVMP”

Sudan 40% 2,097,375

3.Al-Arabiya for Medical Solutions and Medicines

Libya 49% 952,699

Total 87,595,214

Arab Company For Drug IndustriesAnd Medical Appliances

(ACDIMA)

Pan – Arab Shareholding Company

Amman – The Hashemite Kingdom of Jordan

Consolidated Financial Statements and

Independent Auditors’ Report

For The Year Ended December 31, 2015

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Independent Auditor’s Report

Messes General Assembly MembersArab Company for Drug Industries and Medical Appliances (ACDIMA)Pan - Arab Shareholding CompanyAmman-The Hashemite Kingdom of JordanIntroduction

We have audited the accompanying consolidated financial statements of Arab Company for Drug Industries and Medical Appliances (ACDIMA) – Pan – Arab Shareholding Company, which comprise the consolidated statement of financial position as at December 31, 2015, the Consolidated statement of comprehensive income, Consolidated statement of changes in shareholders’ equity and Consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management Responsibility of Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing.Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free form material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement in the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

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Basis for Qualified Opinion

- The company did not recognize an impairment loss of its investment in subsidiary “ACDIMA FOR VETERINARY MEDICINES INDUSTRY (ACDIVET) Ltd” Whereas, the company’s investment in it amounts to 1,013,423 KWD as of December 31, 2015.

- We did not receive a confirmation for the following receivable balances as of December 31, 2015:● The Arab Company for Antibiotics Industry - an associate company with the balance of 17,136

Kuwaiti dinars.● Saudi Pharmaceutical Industries - an associate company with the balance of 102,848 Kuwaiti dinars.● Gulf Pharmaceutical Industries with the balance of 127,211 Kuwaiti dinars.- The company has recognized its share in the results of some associates based on the draft of

unaudited financial statements as described in detail in Note (7) to the Financial Statements “investments in associated companies” as of December 31, 2015.

- Other related parties receivable balances with an amount of KWD 1,840,531 haven’t been verified as of December 31, 2015.

- The financial statements have been consolidated based on the draft financial statements of the Arab Company for Pharmaceutical Industry - Saif, which as of December 31, 2015 were prepared in accordance with the Tunisian Accounting Standards, when they should have been prepared in accordance with International Standards for Financial Reporting for the purposes of consolidating them within the financial statements, accordingly we weren’t able to determine any impact on the consolidated financial statements as if it had been prepared in accordance with International Standards for Financial Reporting.

Qualified Opinion

In our opinion, except for the effect of the matters explained in the basis of qualified opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Arab Company for Drug Industries and Medical Appliances (ACDIMA) – Pan – Arab Shareholding Company as at December 31, 2015, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.Emphasis of matter We would like to draw attention to Note (2) to the Consolidated Financial Statements, where control over the financial and operating policies of the ARAB PARENTAL PHARMACEUTICAL INDUSTRIES COMPANY, was lost on 30 May 2015.

Other matters

We would like to note to the following:- The Company on 10 October 2013 held an extraordinary General Assembly meeting, and decided to

raise the company’s authorized capital to become 90 million Kuwaiti dinars, whereas the collection was intended as installments according to the need for cash flow to support the company’s future projects, and the legal procedures were not completed to raise the company’s capital until the financial statements’ date.

- The financial statements for the year ended 31 December 2014 were audited by another auditor, who issued his unqualified opinion on 12 May 2015.

PKF – JordanKhattab & Co.

Mohammed Khattab(License No.730)

Amman - The Hashemite Kingdom of Jordan13 June 2016

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Consolidated Statement of financial position as at December 31, 2015

Exhibit – A

EQUITY AND LIABILITIES Notes 2015 Restated 2014

Assets KWDKWD

(Restated Note 22)

Non-current assets

Property and equipment 5 8,701,985 2,144,975

Assets in the Arab Republic of Egypt 6 - -

Intangible assets 272,158 -

Investment in associates 7 62,619,159 73,138,926

Investment in a financial asset at fair value through other comprehensive income

8 19,817,425 21,077,550

Loans to related parties 9 483,400 796,492

Total non-current assets 91,894,127 97,157,943

Current assets

Inventory 10 2,735,816 39,410

Accounts receivable and other debit balances 11 3,051,135 811,787

Due from related parties 9 4,984,624 5,876,652

Investment in a financial asset at fair value through profit or loss

12 183,453 395,743

Cash and cash equivalents 13 3,539,555 2,273,106

Total current assets 14,494,583 9,396,698

Total assets 106,388,710 106,554,641

Arab Company for Drug Industries and Medical Appliances (ACDIMA) Pan - Arab Shareholding Company

Amman-The Hashemite Kingdom of Jordan

The accompanying notes from 1 to 23 constitute an integral part of these consolidated financial statements and are read with them

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Consolidated Statement of financial position as at December 31, 2015

Exhibit – A

Notes 2015 2014

KWDKWD

(Restated Note 22)

Owners’ Equity and Liabilities

Owners’ equity

Authorized capital 1 90,000,000 90,000,000

Paid capital 68,276,000 61,680,000

Statutory reserve 5,082,579 4,769,692

Shares premium 86,230 86,230

Accumulated change in fair value of investments in financial assets at fair value through other comprehensive income

12,297,150 13,557,275

Accumulated change in fair value of investments in financial assets at fair value through other comprehensive income – associates

4,895,188 19,301,603

Unrealized re-measurement gains - Net 26,995 -

Foreign currency translation differences ( 262,845) (284,028)

Retained earnings 2,456,395 2,979,475

Total equity allocated to parent shareholders 92,857,692 102,517,000

Non-controlling interests 573,666 925,850

Total equity 93,431,358 103,016,097

Non- current liabilities

Loan 4,551,800 2,184,000

Financial leases contract obligations- long term 37,635 -

Total non-current liabilities 4,589,435 2,184,000

Current liabilities

Loan – current portion 14 3,764,218 546,000

Loan – accrued portion 14 66,320 99,251

Accounts payable and other credit balances 15 4,537,379 709,293

Total current liabilities 8,367,917 1,354,544

Total liabilities 12,957,352 3,538,544

Total Owners’ equity and liabilities 106,388,710 106,554,641




22

Consolidated Statement of Comprehensive Income for the Year Ended December 31, 2015

Exhibit – B

Notes 2015Restated

2014

KWDKWD

(Restated Note 22)

Net Sales 7,192,497 52,201

Cost of sales (6,314,440) ( 32,334)

Gross profit 878,057 19,867

Other revenues, net 16 1,391,123 195,453

Revenue (expenses) Bio-availability center, net 133,865 73,565

Selling and distribution expenses ( 1,445) ( 8,779)

Administrative expenses 17 ( 1,368,631) (2,189,064)

Financing cost ( 1,005,370) ( 159,491)

Impairment loss of investment in associates 7 ( 662,680) -

Change in fair value of investments in financial assets at fair value through profit or loss 21,710 57,176Distributed dividends of investments in financial assets at fair value through other comprehensive income

1,101,740 552,844

Shares of associates results 7 4,887,275 4,438,170

Profit before tax and remuneration 5,375,644 2,979,741

Foreign tax expense on distributed dividends ( 1,224,940) (1,138,414)

Income tax ( 14,841) -

Board of Directors remuneration ( 124,395) ( 119,000)

Profit 4,011,468 1,722,327

Other comprehensive income

Unrealized re-measurement gains - Net 26,995 -



23

Change in fair value of investments in financial assets at fair value through other comprehensive income

8 ( 1,260,125) ( 345,609)

Change in fair value of investments in financial assets at fair value through other comprehensive income - associates

7 (14,406,415) (6,353,440)

Foreign currency translation differences ( 22,599) ( 16,981)

Total comprehensive income (11,650,676) (4,993,703)

Profit allocated for:

Shareholders’ of parent company 3,992,995 1,722,327

Non- controlling interests 18,473 -

Total 4,011,468 1,722,327

Comprehensive income allocated for:

Shareholders’ of parent company (11,669,149) (4,993,703)

Non- controlling interests 18,473 -

Total (11,650,676) (4,993,703)

24

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25


Amman-The Hashemite Kingdom of JordanConsolidated Statement of Cash Flows for the year ended December 31, 2015

Exhibit – D

Cash Flow From Operating Activities

2015 2014

Operating Activities KWD KWD(Restated Note 22)

Profit before tax and remuneration 5,375,644 2,979,741

Adjustments:

Depreciation 661,741 128,152

Amortization 119,303 -

Gains from sale of property and equipment ( 851) ( 4,615)

Shares in associates results ( 4,887,275) (4,438,170)

Allowance for doubtful debts - 3,642

Financing cost 1,005,370 159,491

Provision of recovery revenue ( 591,182) -

Impairment loss in related parties 90,900 1,022,754

Impairment loss in intangible assets 106,112 -

Impairment loss in investments in associates 662,680 -

Working capital changes –

Investments in associates ( 3,329,663) ( 336,000)

Dividends distributions 2,876,582 1,210,122

Investments in financial assets at fair value through other comprehensive

income- (3,345,150)

Inventory ( 2,696,406) 53,141

Bank facilities deposits - 1,434,721

Due from related parties 1,483,210 (1,663,220 )

Investments in financial assets at fair value through profit and loss 212,290 237,800

Accounts receivable and other debit balances ( 2,239,348) ( 100,575)

Accounts payable and other credit balances 3,828,086 44,952

Board of Directors’ remuneration ( 124,395) ( 119,000)

Paid income tax ( 1,239,781) ( 1,138,414)

Net cash flows from (used in) operating activities 1,313,017 (3,870,628)

Investing Activities

Loans granted to associates 313,092 137,408

Proceeds from sale of property, plant and equipment 915 7,137

Additions of property and equipment (10,147,218) (303,984)

Purchase of Intangible assets ( 1,479)

Foreign currency translation differences - property, plant and equipment 418,944 297,631

Foreign currency translation differences – intangible assets 17,178 -

Net cash flows (used in) from investing activities (9,398,568 ) 138,192


26

Arab Company for Drug Industries and Medical Appliances (ACDIMA)Pan - Arab Shareholding Company


Consolidated Statement of Cash Flows for the year ended December 31, 2015

Exhibit – D

Cash Flow From Operating Activities

2015 2014

KWD KWD(Restated Note 22)

Financing Activities

Loan 5,553,087 2,669,760

Dividends’ distributions ( 112,900) ( 82,503)

Paid capital 4,896,000 -

Financing costs (1,005,370) -

Net cash flows from financing activities 9,330,817 2,587,257

Foreign currency translation differences 21,183 ( 16,981)

Net change in cash and cash equivalents 1,266,449 ( 1,162,160)

Cash and cash equivalents at the beginning of the year 2,273,106 3,435,266

Cash and cash equivalents at the end of the year 3,539,555 2,273,106


27

Arab Company for Drug Industries and Medical Appliances (ACDIMA)Pan - Arab Shareholding Company


Notes to the Consolidated financial statements

1. General

Arab Company for Drug Industries and Medical Appliances (ACDIMA) was established as a Pan Arab Shareholding Company in Cairo on March 6, 1976. The Company’s location was transferred to Amman and was registered at the Ministry of Industry and Trade in the record of Pan - Arab shareholding companies under the number (4) in 1979.

Main objectives of the Company are making agreements with interested governments and other institutions to perform all kinds of works in the field of producing and marketing pharmaceutical raw materials, medical cosmetics, production supplies and medical equipment and supplies.

The Company was granted a tax exemption according to the Prime Ministry’s decision number 11119-99-31 issued on October 18, 1979.

The financial statements need to be approved by the General Assembly of Shareholders.

The company increased its capital on October 10, 2013 to become KWD 90 million, this increase was approved by the General Assembly of Shareholders on the same date. However, the Company did not complete the legal procedures.

2. Basis of preparation

- The consolidated financial statements of the Company were prepared in accordance with International Standards for the Preparation of Financial Reports issued by the International Accounting Standards Board.

- The consolidated financial statements of the Company were prepared in accordance with the principle of historical cost.

- The Kuwaiti dinar is the currency of the consolidated financial statements, which represents the functional currency of the Company.

- On 30 May 2015 there was a loss of control over the financial and operating policies of the ARAB PARENTAL PHARMACEUTICAL INDUSTRIES COMPANY, whereas the Arab Company for Drug Industries and Medical Appliances (ACDIMA) became owner of 49% of the ARAB PARENTAL PHARMACEUTICAL INDUSTRIES COMPANY shares and therefore the Arab Company for Drug Industries and Medical Appliances (ACDIMA) lost the ability to control the decision-guidance and policy development in the Board of Directors. Therefore, the accounts of the ARAB PARENTAL PHARMACEUTICAL INDUSTRIES COMPANY weren’t consolidated when preparing the consolidated financial statements for the year ended 31 December 2015, investment in the ARAB PARENTAL PHARMACEUTICAL INDUSTRIES COMPANY is included under investments in associates, and impact of the exclusion of the assets and liabilities of the ARAB PARENTAL PHARMACEUTICAL INDUSTRIES COMPANY was adjusted within the consolidated statement of changes in owners’ equity and included under the item of impact of losing control of a subsidiary.

- Basis of Consolidation

- The consolidated financial statements comprise the financial statements of the parent (Arab Company for Drug Industries and Medical Appliances (ACDIMA)) and the following subsidiaries which are controlled by the entity:

28

2015

Name of subsidiary Legal Status Ownership

ACDIVET – Syria Limited Liability Co. 100%

Arab Company for Pharmaceutical Products Co. – Tunis Hidden 68.1%

2014

Name of subsidiary Legal Status Ownership

ACDIVET – Syria Limited Liability Co. 100%

Arab Parental & Pharmaceutical Industries Company - Libya Joint-Stock 55%

3. Changes in accounting policies and disclosures

- The accounting policies adopted are consistent with those used in the previous year financial period except that the Company has adopted the following new and amended to IFRS’s as of 1 January 2015:

Accounting for Acquisitions of Interests in Joint Operations

Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) was issued in May 2014. IFRS 11 Joint Arrangements addresses the accounting for interests in joint ventures and joint operations. The amendments add new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. The amendments are required to be applied to acquisitions occurring from the start of the first annual period beginning on or after 1 January 2016. Earlier application is permitted.

Clarification of Acceptable Methods of Depreciation and Amortisation

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) was issued in May 2014. IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets both establish the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset. This amendment clarifies that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. It also clarifies that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. The amendments are required to be applied for annual periods beginning on or after 1 January 2016. Earlier application is permitted.

Agriculture: Bearer PlantsAgriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) was issued in June 2014. Before these amendments IAS 41 Agriculture required all biological assets related to agricultural activity to be

29

measured at fair value less costs to sell based on the principle that their biological transformation is best reflected by fair value measurement. However, there is a subset of biological assets, known as bearer plants, which are used solely to grow produce over several periods. At the end of their productive lives they are usually scrapped. Plants such as grape vines, rubber trees and oil palms will normally meet the definition of a bearer plant. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates. The IASB decided that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16 property, plant and equipment, because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants remains within the scope of IAS 41. The amendments are required to be applied for annual periods beginning on or after 1January 2016. Earlier application is permitted.

Equity Method in Consolidated Financial StatementsEquity Method in Separate Financial Statements (Amendments to IAS 27) was issued in August 2014. The amendments to IAS 27 Separate Financial Statements will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. The amendments are required to be applied for annual periods beginning on or after 1 January 2016 retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Error. Earlier application is permitted.

Sale or Contribution of Assets between an Investor and its Associate or Joint VentureSale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) was issued in September 2014. The amendments address the conflict between the requirements in IFRS 10 Consolidated Financial Statement and IAS 28 Investments in Associates and Joint Venture or associate (resulting in the loss of control of the subsidiary). The amendments are required to applied for annual periods beginning on or after 1 January 2016. Earlier application is permitted.

Investment Entities: Applying the Consolidation ExceptionInvestment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) was issued in December 2014. The amendments clarify which subsidiaries of an investment entity should be consolidated instead of being measured at fair value through profit or loss. The amendments also clarify that the exemption from presenting consolidated financial statements continues to apply to subsidiaries of an investment entity that are themselves parent entities. This is so even if that subsidiary is measured at fair value through profit or loss by the higher level investment entity parent. In addition, the amendments provide relief whereby a non-investment entity investor can, when applying the equity method, choose to retain the fair value through profit or loss measurement that is applied by its investment entity associates and joint ventures to their subsidiaries. The amendments are required to be applied for annual periods beginning on or after 1 January 2016. Earlier application is permitted.

30

Disclosure InitiativeDisclosure Initiative (Amendments to IAS 1) was issued in December 2014. The amendments address concerns expressed about some of the existing presentation and disclosure requirements in IAS 1 Presentation of Financial Statements and ensure that entities are able to use judgment when applying those requirements. As a result, it introduces five, narrow-focus improvements to the disclosure requirements that relate to materiality, order of the notes, subtotals, accounting policies and disaggregation. The amendments also clarify the requirements in paragraph 82A of IAS for presenting an entity’s share of items of other comprehensive income of associates and joint ventures accounted for using the equity method. These amendments are required to be applied for annual periods beginning on or after 1 January 2016. Earlier application is permitted.

Annual ImprovementsAnnual Improvement to IFRSs 2012-2014 Cycle was issued in September 2014. The five amendments are related to four Standards. The amendments are required to be applied for annual periods beginning on or after 1 January 2016. Earlier application of each amendment is permitted.

IFRS Subject of amendment

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Changes in methods of disposal.

IFRS 7 Financial Instruments: Disclosures

Servicing contracts.

Applicability of the amendments to IFRS 7 to condensed interim financial statements.

IAS 19 Employee Benefits Discount rate: regional market issue.

IAS 34 Interim Financial ReportingDisclosure of information ‘elsewhere in the interim financial report’.

4. Summary of significant accounting policies

Financial instruments

Financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.

Financial assets

− A financial asset is any asset that is:

(a) Cash; or

(b) An equity instrument of another entity; or

(c) A contractual right to receive cash or another financial asset from another entity, or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favorable to the entity; or

(d) A contract that may or will be settled in the entity’s own equity instruments.

− Financial assets are initially measured at fair value in addition to, in the case of a financial asset not measured at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.

31

− After primary recognition, all financial assets are subsequently measured either at amortized cost or fair value, on the basis of both:

(a) The entity’s business model for managing the financial assets, and

(b) The contractual cash flow characteristics of the financial asset.

− A financial asset is measured at amortized cost if both of the following conditions are met:

(a) The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows.

(b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

− All other financial assets are measured later at fair value.

− A gain or loss on a financial asset that is measured at fair value and that is not part of a hedging relationship is recognized in profit or loss unless the financial asset is an investment in an equity instrument and the entity has elected to present gains and losses on that investment in other comprehensive income.

Cash and cash equivalentsCash comprises cash on hand and, current accounts at banks.

Cash equivalents are short- term investments which are not subject to significant risk of changes in value and which are readily convertible to known amounts of cash.

Trade receivablesTrade receivables are non-derivative financial assets with fixed or determined payments that are not priced in an active market.

Trade receivables are stated at claims’ net amount after deducting a provision for doubtful receivables, whereas provision for doubtful receivables is generated where there is objective evidence indicating the probability of not being able to collect accounts receivables. Accounts receivable are written-off when collecting is improbable.

Impairment of financial assetsFinancial assets, other than those at fair value through profit or loss, are assessed by searching for indicators of impairment at the end of each period. For financial assets carried at amortized cost, the amount of impairment loss is the difference between asset’s amount in the statement of financial position and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. Asset’s amount in the statement of financial position is reduced by the impairment loss directly for all financial assets. The amount of the impairment loss is recognized as loss.

Financial liabilities− Financial liability is any liability that is:

(a) A contractual obligation to deliver cash or another financial asset to another entity, or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity.

(b) A contract that may or will be settled in the entity’s own equity instruments.

− Financial liabilities are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition or issuance of these financial liabilities which are classified at fair value through profit or loss, and which are initially measured at fair value.

32

− After initial recognition, the entity measures all financial liabilities at amortized cost using the effective interest method, except for financial liabilities classified at fair value through profit or loss which are measured at fair value, and other specific financial liabilities which aren’t measured at amortized cost.

− Financial liabilities within this category are recognized at fair value, and gain or loss resulting from change in fair value are recognized through profit or loss.

Trade payables and accrualsTrade payables and accruals are liabilities to pay for goods or services that have been received or supplied and have been either invoiced or formally agreed with the suppliers or not.

Investments in associates

− An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor a share in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over these policies.

− The entity’s investment in its associate is accounted for under the equity method of accounting. Under the equity method, the investment in an associate is initially recognized at cost and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition. The investor’s share of the profit or loss of the investee is recognized in the investor’s profit or loss. Distributions received from an investee Are deducted from the investment amount.

− Adjustment to the carrying amount may also be necessary upon changes in the share in the inventee which resulted from changes in the other comprehensive income. The investor’s share in these changes is recognized in his relevant other comprehensive income.

Property and equipment Property and equipment are stated at cost less accumulated depreciation and any impairment in value, depreciation in property and equipment (except lands) is calculated on a straight line basis over the estimated useful lives of the assets as follows:

Depreciation rate

%

Buildings 5

Computers 25

Electrical equipment 25

Buildings’ equipment 20

Fixtures 33

Furniture and office equipment 20-33

Vehicles 25

Bio-availability equipment 5-33

The useful lives and depreciation methods are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property and equipment.

33

The carrying values of property and equipment are reviewed periodically, when events or changes in circumstances indicate that the assets are recorded at values exceeding their recoverable amounts, consequently, the assets are written down to their recoverable amounts, and impairment is recognized in the statement of consolidated comprehensive income.Property and equipment are disposed at the event of their sale or when there are no economic future benefits. Any profits or losses from disposal are stated in the consolidated comprehensive income statement.

Impairment of assets

At the consolidated statements’ date, the company reviews the carrying amounts of its assets to determine whether there is any indication that these assets have been impaired.If any such indication or when conducting yearly inspection of impairment in assets, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, The recoverable amount is the higher of the asset/ cash generating unit’s fair value less costs to sell or the value in use. It is calculated for each asset separately unless it has a separate cash generating unit. In the event the carrying values exceed the recoverable amounts, each cash generating unit is written down to its recoverable amount.The value in use is calculated by reducing the expected cash flows to their present value using the average discount before tax which reflects the current market estimates of the cash period value and the assets’ relative risks.When calculating the fair value less sale costs, new market transactions are taken into consideration, if any, in the event no such transactions exist; suitable assessment methods are used, and losses are recognized in the statement of consolidated comprehensive income.Assets are reviewed at the financial statements’ date to determine if the aforementioned impairment still exists or is less, the Company estimates the recoverable amount of the asset or cash generating unit. The aforementioned impairment loss is recovered only in the event of change in theories which were used to calculate the recoverable amount of that asset from the previously recognized date of impairment. When reversing, the asset’s carrying amount should not exceed the recoverable amount or the carrying amount.Impairment loss is reversed in the statement of consolidated comprehensive income.

Borrowing costs

Borrowing costs directly related to the purchase or manufacturing of assets take long period to be ready for use or sale, and are capitalized as a cost of these assets.Other Borrowing costs are expensed in the period in which they are incurred.Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.

Provisions

Provisions are recognized when the Company has obligations (legal or contractive) at the consolidated financial position date resulting from past events, whereas the settlement of the obligations might result in an external flow of economic benefits and the amount of these obligations can be estimated reliably.

Revenue recognition

Revenue from sales is recognized at delivery of goods and their acceptance by the buyer according to original invoices.Other revenues are recognized based on the accrual basis.

34

Foreign currencies

In preparing the financial statements, transactions in currencies other than the functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each statement of financial position date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the statement date (closing rate). Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary items that are measured in terms of fair value in a foreign currency are translated using the exchange rate at the date of specifying the fair valueExchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those used upon on initial recognition during the period or in previous financial statements shall be recognized in profit or loss in the period in which they arise.For the purpose of presenting the financial statements in currencies other than the functional currency, assets and liabilities of the entity (including comparatives) are translated at closing rate at the date of the statement of financial position. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. The resulting exchange differences are recognized as a separate component of equity.The above rule applies, as well, when the results and financial position of a foreign operation are translated into the presentation currency so that the foreign operation can be included in the financial statements of the entity by consolidation, proportionate consolidation or the equity method. The exchange differences recognized previously as a separate component of equity are recognized as profit and loss in the period in which the foreign operation is disposed off.

Statutory reserve

Statutory reserve is allocated according to Article (58) of the company’s articles of association by deducting 10% of the annual net profit until the reserve equals the Company’s paid capital. Such reserve is not available for dividends’ distribution.Statutory reserve of the subsidiary “limited liability company” (Acdivet – Syria) is allocated according to the company’s articles of association by deducting 10% of the annual net profit until the reserve equals half of the Company’s paid capital.

Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:− The entity has transferred to the buyer the significant risks and rewards of ownership of the goods.− The entity retains neither continuing managerial involvement to the degree usually associated

with ownership nor effective control over the goods sold.− The amount of revenue can be measured reliably.− It is probable that the economic benefits associated with the transaction will flow to the entity.− The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Dividend and interest revenue

Dividend revenue from investments is recognized when the shareholder’s right to receive payment is established. Interest revenue is accrued on a time basis, by reference to the principal outstanding amount and at the effective interest rate applicable.

Contingent liabilities

Contingent liabilities are possible obligations depending on whether some uncertain future events

35

occur, or they are present obligations but payments are not probable or the amounts cannot be measured reliably.Contingent liabilities are not recognized in the financial statements.

Use of estimates When preparing financial statements and applying the accounting policies, management needs to make assessments and assumptions that affect the amounts of assets and liabilities, revenue and expenses. Management may be specifically required to make important judgments and assumptions to assess the amounts and times of future cash flows resulting from the circumstances and status of these assumptions in the future. The estimates and assumptions in the financial statements are detailed as follows:− The formation of the provision for accounts receivable depends on the bases and assumptions

that are approved by the management of the group to assess the required provision.− The fiscal year is loaded with its pertinent income tax expense in accordance with the laws,

regulations and accounting standards. Deferred tax assets and liabilities and the necessary tax allowance are calculated and proven.

− The management assesses if there are indications of the low value of projects under construction and real estate investments and lands under development, and in the event of any such indication, the value used for these projects is calculated using the projected discounted cash flow method for the purposes of calculating the amount of impairment, if any.

− The management reassesses the useful lives of property and equipment on a regular basis for the purpose of calculating the annual depreciations depending on the general condition of the property and equipment and estimates of the expected useful lives in the future. Recognized impairment losses are calculated as an expense in the statement of comprehensive income.

− Provision is made for the cases filed against the company according to a legal study prepared by the company lawyer in whom the lawyer assesses the potential risks in the future. The study is revised periodically.

− The management regularly reviews financial assets stated at cost to estimate the decline in value and this decline is recorded as a loss in the statement of comprehensive income.

36

(5)

Prop

erty

, pla

nt a

nd

eq

uip

men

t

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ds

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ldin

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uter

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ures

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icle

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DK

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ance

as

of 1

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uar

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4,76

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835

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190

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( 5

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s:

37

2015 2014

KWD KWD

Bio-availability Center 585,463 88,963

Administrative expenses 46,570 39,189

Total 632,033 128,152

(6) Assets in the Arab Republic of Egypt

The net assets of the Company in the Arab Republic of Egypt is equal to 17,027,997 Kuwaiti dinars, noting that the company was transferred from Cairo to implement the decisions made by the Extraordinary General Meeting of the company in the city of Tunis on 15 August 1979. Since then there was no transfer of accounting records and other from Cairo to Amman and the following is the movement incurred on the assets:

2015 2014

KWD KWD

Cost 17,027,997 17,027,997

Provision of assets impairment (17,027,997) (17,027,997)

Total - -

38

(7) Investments in associates

2015Country of incor-poration

Owner-ship

Beginning of year

balanceAdditions

Shares in results

disposals during the

year

change in fair value of invest-ments in financial

assets

Distributed dividends

End of year Balance

% KWD KWD KWD KWD KWD KWD

Saudi Pharmaceutical Industries

& Medical Appliances

Saudi

Arabia20,5 58,643,204 - 5,925,409 - (14,359,955) (2,876,582) 47,332,076

Arab Company for Antibiotics

IndustryIraq 25,66 6,653,499 - (1,137,335) - - - 5,516,164

CAD Middle East

Pharmaceutical (***)

Saudi

Arabia25 - 2,476,500 - - - - 2,476,500

Arab Company for Veterinary

Medicine ProductionSudan 40 2,187,731 - (43,815) - (46,541) - 2,097,375

Arab Company for

Pharmaceutical Products -

Arabio (****)

Saudi

Arabia31,38 1,723,713 - 127,789 - - - 1,851,502

Industrie Pharmaceutique

Arabo - Marocaine (****)Morocco 21 851,173 672,000 32,541 - 81 - 1,555,795

Tassili Arab Pharmaceutical

Co. (****)Algeria 28,98 709,214 - (30,710) - - - 678,504

Shamra Farma Syria 43,9 486,408 - - - - - 486,408

Saudi Ajal Company for Health

Services and Commercial

Investment

Saudi

Arabia20 - 145,148 13,396 - - - 158,544

Arab Parental &

Pharmaceutical Industries

Company (*)

Libya 49 - 1,128,971 - - - - 1,128,971

Société Arabe des Industries

PharmaceutiquesTunis 68,1 1,883,984 - - (1,883,984) - - -

Total 73,138,926 4,422,619 4,887,275 (1,883,984) (14,406,415) (2,876,582) 63,281,839

Provision of investment impairment

in Shamra Farma Co. (**)- (486,408 ) - - - - (486,408)

Provision of investment

impairment in Intravenous Fluids

Co.

- (176,272) - - - - (176,272)

73,138,926 3,759,939 4,887,275 (1,883,984) (14,406,415) (2,876,582) 62,619,159

(* ) Shares in associate result were not recorded due to not being able to obtain audited financial statements of these companies.

(** ) The company took a provision of investment impairment in Shamra Pharma Company amounting to 486,408 dinar due to inability to communicate with the company, as it does not conduct business because of the security situation in Syria.

(***) The Company did not recognize any gains from investing in CAD Middle East Pharmaceutical despite of achieving profits in 2015 based on the fact that CAD Company had heavy losses which exceeded its capital, which calls for non-recognition of ACDIMA company’s share in CAD profits until all the unrecorded losses in ACDIMA company accounts are covered.

(****) The share of associated results was recorded based on the draft financial statements.

39

(******) The following is a summary of the financial information of the associate companies as at 31 Decem-ber 2015:

Total assets Total liabilities Revenues Profit (loss)

KWD KWD KWD KWD

Saudi Pharmaceutical Industries & Medical Appliances 228,779,660 88,855,768 138,109,122 28,921,364

Arab Company for Antibiotics Industry 19,243,346 2,439,972 3,549,388 (3,339,213)

Arab Company for Veterinary Medicine Production 7,400,568 42,992 - (109,538)

Arab Company for Pharmaceutical Products- Arabio 25,270,751 19,145,696 13,188,152 407,233

CAD Middle East Pharmaceutical 33,927,152 27,257,785 12,061,773 1,115,228

Industrie Pharmaceutique Arabo - Marocaine 6,860,789 3,928,215 1,483,014 154,957

Tassili Arab Pharmaceutical Co. 8,562,193 8,562,193 49,430 (105,973)

Saudi Ajal Company for Health Services and Commercial investment

2,726,956 1,936,897 627,911 66,974

2014

Coun-

try of

incorpo-

ration

Owner-

ship

Beginning

of year

balance

Addi-

tions

Shares in

results

change in

fair value

of invest-

ments in

financial

assets

Distrib-

uted divi-

dends

End of

year Bal-

ance

% KWD KWD KWD KWD KWD KWD

1 (Restated) (Restated)

Saudi Pharmaceutical Industries & Medical Appliances

Saudi Arabia

20,5 61,131,170 - 5,063,516 (6,341,360) (1,210,122) 58,643,204

Arab Company for Antibiotics Industry

Iraq 34,06 6,889,880 - (236,381) - - 6,653,499

Arab Company for Veterinary Medicine Production

Sudan 40 2,233,091 - (38,212) (7,148) - 2,187,731

Societe Arabe Des Industries Pharmaceutiques

Tunisia 35,988 2,310,737 - (426,753) - - 1,883,984

Arab Company for Pharmaceutical Products- Arabio

Saudi Arabia

31,38 1,637,783 - 85,930 - - 1,723,713

Industrie Pharmaceutique Arabo - Marocaine

Morocco 21 505,971 336,000 14,134 (4,932) - 851,173

Tassili Arab Pharmaceutical Co.

Algeria 28,98 733,278 - (24,064) - - 709,214

Shamra Farma Syria 43,9 486,408 - - - - 486,408

CAD Middle East Pharmaceutical

Saudi Arabia

25 - - - - - -

Total 75,928,318 336,000 4,438,170 (6,353,440) (1,210,122) 73,138,926

40

(8) Investments in financial assets at fair value through other comprehensive income:

2015 2014

KWD KWD

Beginning of year balance 21,077,550 18,078,009

Change in fair value (1,260,125) ( 345,609)

Net sales and purchase - 3,345,150

End of year balance 19,817,425 21,077,550

(9) Related parties’ transactions

(*) Loans to related parties consist of loans granted to associate companies as follows:

2015 2014

KWD KWD

Saudi Ajal Company for Health Services and Commercial Investment

243,000 -

Arab Company for Pharmaceutical Products 212,100 205,100

Shamra Farma 90,900 87,900

Industrie Pharmaceutique Arabo - Marocaine 28,300 210,492

Société Arabe des Industries Pharmaceutiques - 293,000

Total 574,300 796,492

Provision of doubtful loans for associate companies ( 90,900) -

Net 483,400 796,492

(**) Due from related parties consist of the following:

2015 2014

KWD KWD

Tassili Arab Pharmaceutical Co. 2,886,864 2,620,046

CAD Middle East Pharmaceutical 671,020 3,122,669

Gulf Pharmaceutical Industries - Julphar 127,211 -

Saudi Pharmaceutical Industries & Medical Appliances 102,848 69,479

Arab Company for Antibiotics Industry 17,136 12,882

Saudi Ajal Company for Health Services and Commercial Investment

5,492 -

41

Industrie Pharmaceutique Arabo - Marocaine 3,848 3,973

Arab Company for Veterinary Medicine Production 476 483

Arab Parental & Pharmaceutical Industries Company - Subsidiary

- 15,822

Société Arabe des Industries Pharmaceutiques - 25,526

Others 1,840,531 1,267,756

Total 5,655,426 7,138,636

Provision of related parties’ doubtful receivables (*) ( 670,802) (1,261,984)

Net 4,984,624 5,876,652

(*) in 2014, the Company recognized a provision of its share in CAD Middle East Pharmaceutical Company losses, whereas these losses exceeded the capital, therefore a provision was recognized to avoid any losses that could be incurred, and in 2015 the capital of CAD Middle East Pharmaceutical Company was increased through a granted loan and it accomplished profits so the provision was decreased, Movement on provision for receivables of related parties during the year was as follows:

2015 2014

KWD KWD

Beginning of year balance 1,261,984 239,230

Recognized during the year - 1,022,754

Revenues of associates receivable provision recovery (591,182) -

End of year balance 670,802 1,261,984

(10) Inventory

2015 2014

KWD KWD

Raw materials 991,976 22,235

Packing materials 10,989 12,303

Filters 2,593 3,123

Finished goods 624,685 1,405

Semi-manufactured goods 842,691 344

Spare parts 262,882 -

Total 2,735,816 39,410

42

(11) Accounts receivable and other debit balances

2015 2014

KWD KWD

Trade receivable bio-availability center 574,680 500,744

Trade receivables 1,904,668 51,138

Checks under collection - 826

Provision of doubtful debts (*) (919,925) (30,209)

Net trade receivables 1,559,423 522,499

Loans 998,198 -

Employees housing loans 173,902 145,695

Accrued revenues 74,250 -

Employees› receivable 44,724 38,836

Prepaid expenses 21,214 24,519

Interest receivable 15,269 15,484

Refundable deposits 3,251 3,172

Travel advances 421 3,614

Advance payments on shares purchase 16 16

Contractor advances - 9,915

Advance payments to income tax - 3,680

Other 160,466 44,357

Total 3,051,135 811,787

* The movement on the provision during the year was as follows:

2015 2014

KWD KWD

Beginning of year balance 30,209 33,927

Re-evaluating differences 80,620 -

Provided during the year - 3,642

Additions resulting from controlling an associate company 819,527 -

Bad debts ( 1,371) -

Foreign currency translation differences ( 9,060) ( 7,360)

Total 919,925 30,209

43

(12) Investments in financial assets at fair value through profit or loss:

2015 2014

KWD KWD

Beginning of year balance 395,743 633,543

Change in fair value 21,710 57,176

Net selling and purchasing (234,000) (294,976)

End of year balance 183,453 395,743

(13) Cash and cash equivalents

2015 2014

KWD KWD

Deposit at bank – US Dollar (*) 2,800,919 72,412

Current accounts at banks 676,986 2,176,899

Cash on hand 61,650 23,795

Total 3,539,555 2,273,106

(*) the deposit was tied for 30 days with an interest rate of 0,25% during the year

(14) Loan A. This item represents the Murabaha loan granted by Al-Bilad Bank with the amount of SR

80,000,000, it will be repaid over five years, the first payment was due in June 30, 2015 and the last payment is due in June 30, 2020 at an interest rate of (3% + SIBOR (year)), the loan is guaranteed by mortgaging the company’s shares portfolio at the Bank, the loan balance was 1,701,000 as of 31 December 2015.

B. There are bank loans amounting to 2,850,800 Kuwaiti Dinar on the subsidiary company “Arab Company for Pharmaceutical Products”.

44

(15) Accounts payable and other credit balances

2015 2014

KWD KWD

Accounts payable 2,292,038 3,137

Provisions (*) 875,653 473,431

Other accounts payable 815,115 23,266

Shareholders’ dividends deposits 299,191 97,100

Social security deposits 113,654 -

Former employees payable 69,670 67,545

Accrued expenses 45,736 27,501

Un-cleared cheques 26,322 17,313

Total 4,537,379 709,293

(*) Movements on provisions during the year were as follows:

2015

Beginning

of year

balance

Provided

during

the year

Additions

resulting

from

controlling

associate

company

Paid

during

the year

End of

year

balance

KWD KWD KWD KWD KWD

End of service indemnity 190,370 79,233 - (11,929) 257,674

Board of Directors remuneration

120,000 120,000-

(120,000) 120,000

Labor cases 97,655 3,075 - - 100,730

Vacations 55,826 15,612 - ( 8,852 ) 62,586

Unfinished goods 8,182 - - - 8,182

Income tax 690 - - - 690

Others - - 325,791 - 325,791

Total 472,723 217,920 325,791 (140,781) 875,653

45

2014

Beginning

of year

balance

Provided

during the

year

Paid during

the year

End of

year

balance

KWD KWD KWD KWD

End of service indemnity 199,906 31,021 (40,557) 190,370

Board of Directors remuneration

120,000 119,000 (119,000) 120,000

Labor cases 94,581 3,074 - 97,655

Vacations 54,497 8,295 ( 6,966 ) 55,826

Unfinished goods 20,000 - (11,818) 8,182

Income tax 3,580 - ( 2,182 ) 1,398

Total 492,564 161,390 (180,523) 473,431

(16) Other revenues

2015 2014

KWD KWD

Provision for recovery of related party receivables (Note – 9) 591,182 -

Currency exchange differences 392,143 149,426

Interests on loans granted to associate companies 104,785 -

Interest payable 14,692 36,344

Profit from sale of property, machines and equipment 851 -

Others 287,470 9,683

Total 1,391,123 195,453

(17) Administrative expenses

2015 2014

KWD KWD

Salaries, wages and rewards 366,134 353,500

Company’s contribution in social security 29,087 28,317

Company’s contribution in employees’ saving fund 19,567 18,551

Provision of doubtful loans and related parties’ receivables (Note 9) 90,900 1,022,754

Travel and transportations allowance 407,410 375,443

Expenses of external representation offices 87,457 87,237

End of service indemnity and vacations 79,233 28,040

46

Depreciations 46,570 39,189

Maintenance 43,615 29,104

Insurance 43,562 38,382

Professional fees and legal consultations 32,904 9,770

Fuel, electricity and water 28,196 32,162

Bad debts 16,362 -

Public affairs 15,935 10,388

Training courses and conferences 11,572 27,318

Stationary and printings 10,622 6,791

Postage and communications 8,678 9,656

Vehicles and transportations expenses 8,529 7,416

Property tax 6,155 6,046

Bank expenses 1,522 9,038

Studies, researches and backup - 16,638

Miscellaneous 14,621 33,324

Total 1,368,631 2,189,064

(18) Lawsuits

As stated in the lawyers’ letter there are cases filed by others against the company amounting to 115,815 Kuwaiti Dinar, and are still being heard before the competent courts.

(19) Fair value of financial instruments

− Financial instruments comprise of financial assets and financial liabilities.− Financial assets consist of cash on hand, current accounts and deposit at banks, accounts

receivable, due from related parties, and the other debit balances.− Financial liabilities consist of accounts payable and other credit balances and short and

current term loan.− The fair values of financial instruments are not materially different from their carrying values.

(20) Risk management

Exchange rate risk

Currency risk is the risk which results from the fluctuation of the fair value or future cash flows of a financial instrument because of changes in foreign exchange rates.

Exchange rate risk arises as a result of transactions in foreign currencies, which imposes a type of risk due to fluctuations in exchange rates during the year.

These risks are managed by certain exchange rates’ procedures.

The following is a summary of the foreign currency accounts as at December 31, 2015:

47

Description Currency Exchange

rate

Amounts in

foreign currency

Amounts in

local currency

Current accounts at banks US dollar 0,293 346,345 101,479

Current accounts at banksJordanian

Dinar0,413 227,260 93,858

Current accounts at banks Saudi Riyal 0,078 3,178,426 247,917

Current accounts at banks Euro 0,356 388,412 138,274

Loan Saudi Riyal 0,078 36,272,449 2,829,251

Current account at bank Tunisian Dinar 0,157 583,825 91,661

Current account at bank Syrian Lira 0,0014 6,288,800 8,804

Current account at bank Tunisian Dinar 0,149 2,976,671 443,524

Loans Tunisian Dinar 0,149 24,184,852 3,603,543

Interest rate risk Interest rate risk is the risk which results from the fluctuation of the fair value or future cash flows of a financial instrument because of changes in market interest rates.The risk arises as a result to changes in market interest rates resulting from borrowings or depositing in banks. The following table illustrates the sensitivity of consolidated comprehensive income statement to the possible reasonable changes in interest rates as of 31, December while keeping all other affecting variables fixed.

As at December 31, 2015 increase in interest rateImpact on profit (loss)

and owner equity

% KWD

1

Deposit at bank 0,5± 14,005 ±

Loans 0,5± 41,912 ±

As at December 31, 2014

1

Deposit at bank 0,5 ± 362 ±

Loans 0,5 ± 13,650 ±

Other price risks:Other price risk is the risk which results from the fluctuation of fair value or future cash flows of a financial instrument due to changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors related to the individual financial

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instrument or its issuer, or factors affecting all similar financial instruments traded in the market. Other price risk on financial instruments arises from investing in equity instruments.The following table illustrates profit or loss and equity sensitivity to the changes in the listed prices of investments in equity instruments, provided that all other variables are fixed:

As at December 31, 2015Increase in

interest rate

Impact on

profit (Loss)

and owner

equity

% KWD

Investments in financial assets at fair value through profit or loss 5 ± 917

Investments in financial assets at fair value through other comprehensive income

5 ± 99,087

Total 100,004

Credit risk

Credit risk is the risk which results from the failing or inability of debtors and other parties to fulfil their obligations towards the company.

The company sees that it is not exposed to credit risk in a big degree whereas it seeks to limit its credit risk by assigning credit limit for each customer and continually monitoring accounts. Moreover, the Company only deals with reputable banks.

Liquidity risks

Are the risks that cause difficulty in meeting the obligations associated with financial instruments, the Company seeks to limit its liquidity risk by ensuring the availability of the necessary bank facilities and funding from shareholders.The following table shows the maturity dates of financial assets and liabilities:

Financial assets Less than a year More than a year

2015 2014 2015 2014

KWD KWD KWD KWD

1

Investments in associates - - 62,619,159 75,928,318

Investments in financial assets at fair value through other comprehensive income

- - 19,817,425 18,078,009

loans granted to related parties - - 483,400 933,900

Accounts receivables and other debit balances

3,029,905 691,291 - -

Bank facilities deposits - 1,434,721 - -

Due from related parties 4,984,624 5,236,186 - -

Investments in financial assets at fair value through profit or loss

183,453 633,543 - -

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Cash and cash equivalents 3,539,555 3,435,266 - -

Total 11,737,537 11,431,007 82,919,984 94,940,227

Financial liabilities

Loans 3,830,538 645,251 4,551,800 2,184,000

Accounts payable and other credit balances

3,661,726 235,862 - -

Total 7,492,264 881,113 4,551,800 2,184,000

(21) Capital managementThe primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximize shareholder value; the Company manages its capital structure and makes adjustments to it in light of changes in business conditions. No changes were made in the objectives, policies or processes during the current year and prior year. The Company’s capital comprises of the paid capital, shares premium, statutory reserve and retained earnings which amount to 75,901,204 KWD as at 31 December 2015 (2014: 69,515,397 KWD).

(22) Prior years adjustments The financial statements for the year ended 31 December 2014 have been adjusted to comply with the International Accounting Standard number (8), as a result to the introduction of the company’s share of its associates’ results, as the financial statements of the Arab Company for Pharmaceutical Industries were not received until the date of issuance of the financial statements and the auditor’s report.

The following are the adjustments made on the financial statements:

Financial position as at 31 December

2014

Balance

before

adjustment

Balance after

adjustmentDifferences

KWD KWD KWD

Investments in associates 73,565,679 73,138,926 (426,753)

Retained earnings (3,772,544) (3,345,791) 426,753

Income statements as at 31 December

2014

Balance

before

adjustment

Balance after

adjustmentDifferences

KWD KWD KWD

Share in results of associates 4,864,923 4,438,170 (426,753)

(23) New International Financial Reporting Standards and InterpretationsFollowing the details of the new standards and revised and amended and new interpretations and amendments to International Financial Reporting Standards covered in this release.

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IFRS 9 Financial InstrumentsIFRS 9 Financial Instruments sets out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items.IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement.The IASB had always intended that IFRS 9 would replace IAS 39 in its entirety. However, in response to requests from interested parties that the accounting for financial instruments should be improved quickly, the IASB divided its project to replace IAS 39 into three main phases. As the IASB completed each phase, it issued chapters in IFRS 9 that replaced the corresponding requirements in IAS 39.In July 2014 that work culminated when the IASB issued the completed version of IFRS 9, which includes:a) A model for classifying financial assets that is driven by an asset’s cash flow characteristics and

the business model in which it is held;b) A model for classifying financial liabilities, including recognition in other comprehensive income,

rather than in profit or loss, of gains (and losses) that are due to the deterioration (improvement) in an entity’s own credit risk on financial liabilities that an entity has elected to measure at fair value;

c) A single, forward-looking ‘expected loss’ impairment model for financial assets not measured at fair value through profit or loss that requires entities to account for expected credit losses from when the financial assets are first recognized,1 and to recognize full lifetime expected losses when credit risk has increased significantly since initial recognition; and

d) A hedge accounting model that more closely aligns the accounting treatment with the entity’s risk management activities and (in IFRS 7 Financial Instruments: Disclosures) provides enhanced disclosures about risk management activity.

IFRS 9 is effective for annual periods beginning on or after 1 January 2018 with earlier application permitted.

IFRS 14 Regulatory Deferral AccountsIFRS 14 Regulatory Deferral Accounts was issued in January 2014. It defines regulatory deferral account balances as amounts of expense or income that would not be recognized as assets or liabilities in accordance with other standards, but that qualify to be deferred in accordance with IFRS 14 because the amount is included, or is expected to be included, by the rate regulator in establishing the price(s) that an entity can charge to customers for rate-regulated goods or services, such as gas, electricity and water. The scope of IFRS 14 is limited to first-time adopters that recognized regulatory deferral account balances in their financial statements in accordance with their previous GAAP. The Standard permits such entities to continue to account for regulatory deferral account balances in their first and subsequent IFRS financial statements in accordance with their previous GAAP, but must present them separately. IFRS 14 is effective for entities whose first annual IFRS financial statements are for a period beginning on or after 1 January 2016. Earlier application is permitted.

IFRS 15 Revenue from Contracts with CustomersIFRS 15 Revenue from Contracts with Customers was issued in May 2014. It establishes a comprehensive framework for determining when to recognize revenue and how much revenue to recognize. The core principle in that framework is that an entity should recognize revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Standard sets out five steps to follow: identify the contact(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017. Earlier application is permitted. IFRS 15 replaces IAS 11 Constrution Contracts and IAS 18 Revenue, IFRS 13 Customer Loyalty Programmes. IFRS 15 Agreement for the Construction of Real Estate and IFRS 18 Transfers of Assets from Customers and SIC-31 Revenue - Barter Transactions Involving Advertising Services.

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