Financial Statements 2010-11

FH CANADA

Financial Statements

September 30, 2011

Table of Contents Page

Independent Auditors' Report 1

Statement of Operations 3

Statement of Net Assets 4

Statement of Financial Position 5

Statement of Cash Flows 6

Notes to Financial Statements 7

INDEPENDENT AUDITORS' REPORT

To the members of:FH CANADA

We were engaged to audit the accompanying financial statements of FH Canada which are comprisedof the balance sheet as at September 30, 2011, and the statements of operations, net assets andcash flow for the year then ended, along with a summary of significant accounting policies and otherexplanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements inaccordance with Canadian generally accepted accounting principles for private enterprise, and forsuch internal control as management determines is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with Canadian generally accepted auditing standards. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor's judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity'spreparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by management, aswell as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.

Basis for Qualified Opinion

In common with many charitable organizations, the society derives part of its revenue from the generalpublic in the form of donations; the completeness of which is not susceptible to satisfactory auditverification. Accordingly, our verification of these revenues was limited to the amounts recorded in therecords of the society and we were not able to determine whether any adjustment might be necessaryto contributions, excess of revenue over expenses, current assets, and net assets.

1

INDEPENDENT AUDITORS' REPORT (Continued)

Qualified Opinion

In our opinion, except for the effects of the preceding paragraph,these financial statements presentfairly, in all material respects, the financial position of FH Canada as at September 30, 2011 and itsfinancial performance and its cash flows for the year then ended, in accordance with Canadiangenerally accepted accounting principles.

CERTIFIED GENERAL ACCOUNTANTS

Abbotsford, B.C.January 30, 2012

2

FH CANADAStatement of OperationsFor the year ended September 30, 2011

Operating Capital 2011 2010

REVENUEContributions - program donations $ 2,742,832 $ - $ 2,742,832 $ 3,253,477Contributions - sponsorships 1,595,928 - 1,595,928 1,599,051Grants - government 362,493 - 362,493 527,476Donated commodities (Note 1.d) 2,757,785 - 2,757,785 3,632,348Gifts in kind (Note 1.e) 208,680 - 208,680 53,767Investment income 6,048 - 6,048 3,856Grants - other charities - - - 4,720

7,673,766 - 7,673,766 9,074,695

EXPENSESCommodities sent to the field (Note 1.d) 2,746,131 - 2,746,131 3,676,591Commodity shipping and other costs 206,575 - 206,575 192,667Salaries and related costs 1,363,397 - 1,363,397 1,235,915Direct international program payments 1,577,671 - 1,577,671 2,326,971CIDA grants remitted 311,051 - 311,051 517,282Grants to qualified donees 20,700 - 20,700 25,300Media and events 400,812 - 400,812 346,227Postage 26,167 - 26,167 26,468Travel - general 108,216 - 108,216 68,569Travel - team and vision trips 262,345 - 262,345 123,679Data processing and communications 96,646 - 96,646 72,650Occupancy 98,652 - 98,652 95,483Office supplies 42,075 - 42,075 41,779Professional and third party fees 55,747 - 55,747 108,280Insurance 11,497 - 11,497 10,609Meals, entertainment and related expenses 14,294 - 14,294 10,868Amortization - 71,514 71,514 74,025

7,341,976 71,514 7,413,490 8,953,363

EXCESS OF REVENUE/(EXPENSES)BEFORE OTHER ITEMS 331,790 (71,514) 260,276 121,332

Foreign exchange loss (14,779) - (14,779) (464)Loss on disposal of capital asset - (950) (950) (5,789)Investment (loss)/gain (13,807) - (13,807) 2,337

EXCESS OF REVENUE/(EXPENSES) $ 303,204 $ (72,464)$ 230,740 $ 117,416

See accompanying Notes to Financial Statements and Auditor's Report 3

FH CANADAStatement of Net AssetsFor the year ended September 30, 2011


NET ASSETS - Open $ 1,073,223 $ 451,430 $ 1,524,653 $ 1,407,237

Excess of Revenue/(Expenses) 303,204 (72,464) 230,740 117,416

Investment in capital assets (44,456) 44,456 - -

NET ASSETS - Close $ 1,331,971 $ 423,422 $ 1,755,393 $ 1,524,653


FH CANADAStatement of Financial PositionFor the year ended September 30, 2011


ASSETS

CURRENT ASSETSCash and short-term deposits $ 832,617 $ - $ 832,617 $ 512,116Investments 187,039 - 187,039 151,970Accounts receivable 46,417 - 46,417 21,569Inventory (Note 4) 989,371 - 989,371 768,959Prepaid expenses 148,103 - 148,103 61,881Sales taxes refundable 22,765 - 22,765 12,433

2,226,312 - 2,226,312 1,528,928

CAPITAL ASSETS (Note: 5) - 423,422 423,422 451,430

TOTAL ASSETS $ 2,226,312 $ 423,422 $ 2,649,734 $ 1,980,358

LIABILITIES & NET ASSETS

CURRENT LIABILITIESAccounts payable and accruals $ 169,086 $ - $ 169,086 $ 83,829Wages payable 11,559 - 11,559 22,611Deferred revenue (Note: 1.b)(Note: 6) 713,696 - 713,696 349,265

894,341 - 894,341 455,705

NET ASSETS 1,331,971 423,422 1,755,393 1,524,653

TOTAL LIABILITIES & NET ASSETS $ 2,226,312 $ 423,422 $ 2,649,734 $ 1,980,358

APPROVED ON BEHALF OF THE BOARD:

Director Director


FH CANADAStatement of Cash FlowsFor the year ended September 30, 2011


OPERATING ACTIVITIESExcess of Revenue/(Expenses) from operations $ 303,204 $ (72,464)$ 230,740 $ 117,416Add: non-cash items affecting operations

Amortization - 71,514 71,514 74,025Accounts receivable (24,848) - (24,848) (5,411)Inventory (220,412) - (220,412) 15,080Prepaid expenses (86,221) - (86,221) (34,944)Accounts payable and accruals 85,256 - 85,256 36,991Sales taxes (10,332) - (10,332) (6,987)Wages payable (11,052) - (11,052) 5,987Deferred revenue 364,431 - 364,431 4,752Loss on disposal of capital assets - 950 950 5,789

400,026 - 400,026 212,698

FINANCING ACTIVITIESAcquisition of capital assets - (44,456) (44,456) (138,635)

INVESTING ACTIVITIESInvestments (35,069) - (35,069) (19,714)

INCREASE IN CASH OR EQUIVALENTS 364,957 (44,456) 320,501 54,349

INTERFUND TRANSFERS (44,456) 44,456 - -

CASH - OPEN 512,116 - 512,116 457,767

CASH - CLOSE $ 832,617 $ - $ 832,617 $ 512,116

CASH REPRESENTED BY:Cash and banks $ 832,617 $ - $ 832,617 $ 512,116

$ 832,617 $ - $ 832,617 $ 512,116


FH CANADANotes to Financial StatementsFor the year ended September 30, 2011

1. ACCOUNTING POLICIES

(a) Revenue Recognition

The society uses the deferral method of accounting for contributions. Contributions arerecognized as revenue when received or receivable if the amount to be received can bereasonably estimated and collection is reasonably assured. Contributions related toexpenses of future periods are deferred and recognized as revenue in the period whenthe related expenses are incurred.

(b) Deferred Revenue

Deferred revenue represents funds received during the year for projects that are tocommence or continue in future fiscal periods. These funds will be included in incomewhen expenses are incurred for the projects for which the funds have been received.

(c) Contributed Services

A substantial number of volunteers contribute a significant amount of their time eachyear. Because of the difficulty of determining the fair value, contributed services are notrecognized in the financial statements.

(d) Commodity Values

Commodity values represent the fair market value of donated and purchased suppliesshipped to various areas of need around the world. Commodities donated to the societyare stored at the society's warehouse until shipped. They are recognized as income whenthey are brought to full working order and shipped.

(e) Gift in Kind Donations

Donations of goods and supplies are recognized in the accounts of the society atestimated fair market value when the goods and supplies are used in the normal courseof the society's operations and would otherwise have been acquired for distribution inaccordance with the society's purpose and objectives. The total donations in kindreceived during the year was $2,966,465 (2010 - $3,686,115).

See accompanying Auditor's Report 7


SIGNIFICANT ACCOUNTING POLICIES (Continued)

(f) Amortization

Capital assets are recorded at cost and are being amortized on the declining balancebasis over the estimated useful life of the assets, with current year additions amortized athalf of the usual rate, as follows:

Buildings 5 %Motor vehicles 20 %Computer equipment 40 %Furniture and fixtures 20 %

Leasehold improvements are being amortized on the straight-line basis over their estimat-ed useful life. Computer software is being amortized on the straight-line basis over threeyears. Current year additions to Leasehold improvements and Computer software areamortized at half of the usual rate.

(g) Fund Accounting

The society uses fund accounting procedures to account separately for resources thathave been designated for specific purposes and to maintain stewardship responsibility.Established funds are as follows:

Operating

A central fund that bears the costs of conducting the society's primary functions, intowhich all unrestricted funds flow.

Capital

A fund in which the resources are intended for use in capital improvements or toacquire and finance new capital assets.

(h) Use of estimates

The preparation of the financial statements in conformity with Canadian generally accept-ed accounting principles requires management to make estimates that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities as atthe date of the financial statements, as well as reported amounts of revenues and ex-penses during the reporting period. These estimates are subject to measurement uncer-tainty and the effect on the financial statements of changes in such estimates in futureperiods could be significant.



SIGNIFICANT ACCOUNTING POLICIES (Continued)

(i) Foreign Currency

Foreign-currency-denominated monetary assets and liabilities are translated to Canadiandollars at the exchange rate in effect at the balance sheet date. Foreign-currency-denom-inated non-monetary assets and liabilities are translated to Canadian dollars at the ex-change rate in effect on the transaction date. Revenue and expense items are translatedat the exchange rate in effect at the time of the transaction. Amortization and propertywrite-downs are translated at the same exchange rate as the assets to which they relate.Foreign exchange gains or losses are included in the determination of net earnings forthe year.

(j) Change in Accounting Policies

In February 2011, the Canadian Accounting Standards Board adopted new financialreporting requirements for Canadian not-for-profit entities. Not-for-profit entities mayadopt either accounting standards for not-for-profit organizations in Part III of theCanadian Institute of Chartered Accountants (CICA) Handbook or International FinancialReporting Standards in Part I of the CICA Handbook effective for fiscal years beginningon or after January 1, 2012. The society is currently assessing the impact of the adoptionof these standards on its financial statements, and the timing of the transition to thesestandards.

2. DEFINITION OF ENTITY

FH Canada is incorporated under Part II of the Canada Corporations Act as a corporationwithout share capital and is registered as a charity for income tax purposes, andaccordingly, is exempt from income taxes on its operations.

The objectives of FH Canada are to provide sustainable development and disaster reliefto the needy and destitute of the world, and to provide educational programs and in-formation in Canada to enhance public understanding of the issues surrounding poverty.

3. FINANCIAL INSTRUMENTS

Financial instruments are defined as a contractual right to either receive or deliver cash oranother financial instrument to another party. The company's financial instruments consistof the following items:



FINANCIAL INSTRUMENTS (Continued)

Cash and short-term depositsInvestmentsAccounts receivableAccounts payable & accruals

Fair Value

The carrying amount of cash and short term deposits, investments, accounts receivable, accounts payable and accrued liabilities approximates their fair value because of theshort-term nature of these items.

Credit Risk

The society's financial assets that are exposed to credit risk are cash, investments andaccounts receivable. Credit risk associated with cash and investments is minimized sub-stantially by ensuring these assets are invested in accounts at a Schedule I bank withinvestment grade ratings. Credit risk associated with accounts receivable is minimized byrestricting the granting of credit and by application of internal collection policies andprocedures.

Interest Rate Risk

The society is not exposed to interest rate risk.

Foreign Currency Risk

The society is exposed to foreign exchange risk on cash, and accounts payable, which aretransacted in US dollars.

4. INVENTORY

Inventory consists of donated equipment and supplies awaiting shipment and is recordedat estimated fair market value.



5. CAPITAL ASSETS

Original CostAccumulatedAmortization 2011 2010

Land $ 48,230 $ - $ 48,230 $ 48,230Buildings 372,666 (124,631) 248,035 261,091Motor vehicles 5,500 (4,854) 646 704Computer software 129,782 (60,209) 69,573 100,349Computer hardware 49,462 (31,631) 17,831 10,958Furniture and fixtures 91,480 (76,694) 14,786 19,008Leasehold improvements 41,813 (17,492) 24,321 11,092

$ 738,933 $(315,511) $ 423,422 $ 451,432The society has written off obsolete capital assets of $18,154 in furniture and fixtures, and$15,693 in computer hardware resulting in net losses of $950.

6. DEFERRED REVENUE

Deferred revenue represent unspent resources externally restricted for operating fundingreceived in the current period that is related to the subsequent fiscal year. Changes in thedeferred contributions balance are as follows:

2011 2010

Opening balance $ 349,265 $ 344,512Less: amounts recognized as revenue in the year (169,265) (321,397)Add: amounts received related to next year 533,696 326,150

$ 713,696 $ 349,265

7. LEASES

The society has entered into operating leases for the use of its Abbotsford premises andsome office equipment.

Under the terms of the leases, the minimum annual lease payments required are:

Year Operating2012 $ 99,4022013 $ 88,9582014 $ 88,9582015 $ 88,9582016 $ 88,958



8. INCOME TAXES

The society is registered as a charity under the Part II of the Canada Corporations Act andextra-provincially under the Society Act of British Columbia. The society is also registeredwith Canada Revenue Agency as a charitable organization and, as such, is not subject toincome taxes.

9. GLOBAL HUNGER FOUNDATION

In February 2008 the society gained control of Global Hunger Foundation. This occurredas a result of the majority of Global Hunger Foundation's board of directors also beingmembers of the board of FH Canada. The following financial information of the GlobalHunger Foundation has been taken from the society's unaudited financial statements forthe year ending June 30, 2011. There have been no significant events or transactions inthe intervening period from July 1, 2011 to September 30, 2011. There are no restrictionson the resources of the controlled entity and there are no significant differences in theaccounting policies followed.

2011 2010

Total assets $ 1,085 $ 910Net assets 1,085 910Total revenue 200 1Total expenses $ 25 $ 12,025

10. COMPARATIVE FIGURES

Comparative figures have been reclassified where necessary to conform to current pre-sentation.


Financial Statements 2010-11

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Transcript of Financial Statements 2010-11