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Fashion House Ltd
Notes to the financial statements for the year ended 28 February 2015
2. Profit before tax
Profit before tax includes the following:
Income
Expenses This is not a related party transaction
Depreciation (J8) 260 000 as the CEO is married to a junior
Finance costs (J7) 83 761 accountant. A junior accountant is
not a key management personnel.
3. Related party transactions
The lease entered into between Fashion House & Super Photo leads to a related party & transaction
being identified. The CEO of Super Photo is married to a junior accountant of Fashion House.
3.1 Related parties
Fashion House Ltd is related to Repair Shop Ltd, because Fashion House controls Repair Shop.
The CFO of Fashion House is a related party of Fashion House as she is part of the key management
personnel of Fashion House.
Easy Transport Ltd is a related party of Fashion House as the owner of Easy Transport is the husband
of a KMP member (CFO) of Fashion House.
3.2 Transactions
The following transactions occurred between related parties of Fashion House:
2015
R
Repair cost paid to Repair Shop 50,000
Transport cost incurred – Easy Transport 7,000
3.3 Outstanding balances
Included in accounts payable is R7 000, owed to Easy Transport.
Fashion House entered into a finance lease with Super Photo on 1 September 2013 for photographic
equipment (note 4.1).
The lease period is 5.5 years with bi-annual payments in arrears of R134 696, payable on28 February
and 31 August. The first payment was made on 28 February 2014. The nominal interest rate is 8%
p.a. Ownership of the equipment will pass to Fashion House at the end of the lease term at no cost.
4..1 Right of use asset
Photo Total
equipment
Carrying amount at beginning of year 1 430 000 1 430 000
Cost (1 500 000(J1) + 45 000(J3) + 15 000(J4)) 1 560 000 1 560 000
Accumulated depreciation (J6) (130 000) (130 000)
Depreciation (J8) (260 000) (260 000)
Carrying amount at end of year 1 170 000 (1 170 000)
Cost 1 560 000 1 560 000
Accumulated depreciation (390 000) 390 000
The leased equipment serves as security for the lease liability.
4.2. Maturity analysis
Undiscounted Calculations
lease
payments
2016 269 392 (4-5) (134 696 x 2)
2017 269 392 (6-7)
2018 269 392 (8-9)
2019 269 392 (10-11) Per 4-11,
1 077 568 Amort
Total future interest - 170 695 Prin = 906 873
Total principle outstanding 906 873 Int = 170 695
Bal = 0
Current portion 200 779 Per 4-5, Amort
Non-current portion 706 094 Prin = 200 799
Bal = 706 094
Bal = 0
4.3. Total cash outflows relating to leases
Presented under financing activities
Cash payments for principal portion of lease liabilities 185 631 (J7)
Presented under operating activities
Cash payments for interest portion of lease liabilities 83 761 (J7)
Total cash outflow relating to leases 269 392 (J7)
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