HKCAAVQ Annual Report 2011-12 年報

Independent auditor's report to

Hong Kong Council for Accreditation of Academic and Vocational Qualifications

(Established under the Hong Kong Council for Accreditation of Academic and Vocational Qualifications Ordinance)

We have audited the financial statements of Hong Kong Council for Accreditation of Academic and Vocational Qualifications (the “Council”) set out on pages 58 to 101, which comprise the balance sheet as at 31 March 2012, statement of comprehensive income, statement of changes in reserves and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information.

The Council's responsibility for the financial statements

The Council is responsible for the preparation of financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and for such internal control as the Council determines is necessary to enable the preparation of financial statements 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. This report is made solely to you, as a body, in accordance with section 15 of the Hong Kong Council for Accreditation of Academic and Vocational Qualifications Ordinance (Cap.1150), and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial statements that give a true and fair view 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 the Council, as well 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 basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the state of affairs of the Council as at 31 March 2012 and of its surplus and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards.

KPMG
Certified Public Accountants
8th Floor, Prince's Building
10 Chater Road
Central, Hong Kong
30 October 2012

Statement Of Comprehensive Income

for the year ended 31 March 2012 (Expressed in Hong Kong dollars)

NOTE

2012
HK$

2011
HK$

Income
Accreditation fees
Advisory and consultancy fees
Qualifications assessment fees
Qualifications Registry fees
Government grants
Investment income
Other income

11
3
4

40,142,924
21,467,083
6,642,736
3,850,603
559,854
1,239,761
19,101

32,528,652
13,940,060
5,616,079
2,410,200
5,644,025
1,003,743
59,685

73,922,062

61,202,444

Expenditures
Staff costs
Administrative expenses
Direct accreditation/consultancy costs
Council meeting and committee expenses
Impairment loss on available-for-sale equity securities

5(a)

40,608,199
10,645,397
7,041,106
1,072,657
763,582

30,837,714
9,608,774
9,592,462
833,969
﹣

60,130,941

50,872,919

Surplus for the year

13,791,121

10,329,525

Other comprehensive income
Available-for-sale securities:

•	Changes in fair value recognised during the year
•	Reclassification adjustment for impairment losses transferred to surplus or deficit

(1,452,066)

763,582

2,425,948

Other comprehensive income for the year

(688,484)

2,425,948

Total comprehensive income for the year

13,102,637

12,755,473

Balance sheet

as at 31 March 2012 (Expressed in Hong Kong dollars)

	NOTE	2012 HK$	2011 HK$
Non-current assets Fixed assets Investments	7 8	6,768,812 15,434,343	1,244,555 19,790,527
		22,203,155	21,035,082

Current assets Investments Accounts receivable and deposits Bank deposits and cash	8 9 10	3,903,246 16,389,295 54,420,557	2,000,000 8,628,221 42,023,041
		74,713,098	52,651,262

Current liabilities Deferred government grants Receipts in advance Other payables and accruals Provision for staff gratuities Provision for office reinstatement cost	11 12 13	13,241,433 7,283,771 4,611,272 2,474,605 2,077,558	3,748,690 9,777,596 1,161,667 3,094,645 ﹣
		29,688,639	17,782,598
Net current assets		45,024,459	34,868,664
Total assets less current liabilities		67,227,614	55,903,746
Non-current liabilities Provision for staff gratuities Provision for office reinstatement cost	13	1,340,841 ﹣	1,042,052 2,077,558
		1,340,841	3,119,610
NET ASSETS		65,886,773	52,784,136

RESERVES Accumulated surpluses Investment revaluation reserve	14	63,786,176 2,100,597	49,995,055 2,789,081
		65,886,773	52,784,136

Approved and authorised for issue by the Council on 30 October 2012


Chairman		Executive Director

Statement of changes in reserves

for the year ended 31 March 2012 (Expressed in Hong Kong dollars)

	Accumulated surpluses HK$	Investment revaluation reserve HK$	Total HK$
Balance at 1 April 2010	39,665,530	363,133	40,028,663
Changes in equity for 2010/2011: Surplus for the year Other comprehensive income for the year	10,329,525 ﹣	﹣ 2,425,948	10,329,525 2,425,948
Total comprehensive income	10,329,525	2,425,948	12,755,473

Balance at 31 March 2011 and 1 April 2011	49,995,055	2,789,081	52,784,136

Changes in equity for 2011/2012: Surplus for the year Other comprehensive income for the year	13,791,121 ﹣	﹣ (688,484)	13,791,121 (688,484)
Total comprehensive income	13,791,121	(688,484)	13,102,637

Balance at 31 March 2012	63,786,176	2,100,597	65,886,773

Cash flow statement

for the year ended 31 March 2012 (Expressed in Hong Kong dollars)

	NOTE	2012 HK$	2011 HK$
Surplus for the year Adjustments for: Depreciation Dividend income Interest income Gain on disposal of fixed assets Impairment loss on available-for-sale equity securities		13,791,121 912,236 (348,632) (891,128) ﹣ 763,582	10,329,525 1,037,655 (297,335) (706,408) (1,000) ﹣
Operating surplus before changes in working capital Increase in accounts receivable and deposits		14,227,179 (7,761,074)	10,362,437 (5,963,975)
Increase/(decrease) in deferred government grants (Decrease)/increase in receipts in advance Increase/(decrease) in other payables and accruals (Decrease)/increase in provision for staff gratuities		9,492,743 (2,493,825) 3,449,605 (321,251)	(1,030,271) 3,971,167 (580,683) 616,806
Cash generated from operating activities		16,593,377	7,375,481

Investing activities Payment for purchase of fixed assets Proceeds from maturity of held-to-maturity debt securities Payment for purchase of available-for-sale securities Investment in bank deposits with maturity of more than three months at acquisition Interest received Dividends received		(6,436,493) 2,000,000 (999,751) (2,873,473) 891,751 348,632	(154,185) 4,000,000 ﹣ ﹣ 702,057 297,335

Net cash (used in)/generated from investing activities		(7,069,334)	4,845,207

Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year		9,524,043 42,023,041	12,220,688 29,802,353
Cash and cash equivalents at the end of the year	10	51,547,084	42,023,041

Notes to the financial statements
(Expressed in Hong Kong dollars)

1. Status of the Council

Hong Kong Council for Accreditation of Academic and Vocational Qualifications (the “Council”) is a body corporate established under the Hong Kong Council for Accreditation of Academic and Vocational Qualifications Ordinance. Under the Accreditation of Academic and Vocational Qualifications Ordinance (Cap. 592) (the “Ordinance”) the Council assumes its statutory role as the Accreditation Authority and QR Authority under the Qualifications Framework (“QF”). As the Accreditation Authority, the Council is responsible for developing and implementing the standards and mechanisms for accreditation of academic and vocational qualifications to underpin the QF and for organising the accreditation exercises for the purposes as specified in the Ordinance. The Council also provides advice to the Government of the Hong Kong Special Administrative Region (the “HKSAR Government”) on the registration of non-local academic and professional courses, the assessment on non-local qualifications and also on educational standards and qualifications generally. The Chairman, Vice Chairman, all other Members and Executive Director of the Council are appointed by the Chief Executive of the HKSAR Government. Also, the determination of accreditation fees, the financial budget and other operating policies of the Council are approved by the HKSAR Government. Therefore the Council considered itself to be a government-related entity.

Since the Council is not profit-oriented and is not subject to any externally imposed capital requirements, its primary financial and capital management objectives are to maintain a balance between annual income and expenditure, so that it has the ability to operate as a going concern and perform its statutory roles and functions.

The Council is primarily financed through the charging of fees for academic and vocational accreditation services rendered which include validations, revalidations, institutional reviews, qualifications assessments and advisory/consultancy services. Any operating surplus shall be carried forward to the following financial year to meet future expenditure required for the operations of the Council.

2. Significant accounting policies

(a)

Statement of compliance

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and accounting principles generally accepted in Hong Kong. A summary of the significant accounting policies adopted by the Council is set out below.

The HKICPA has issued a number of amendments to HKFRSs and one new Interpretation that are first effective for the current accounting period of the Council. Of these, the following developments are relevant to the Council's financial statements:

-	HKAS 24 (revised 2009), Related party disclosures
-	Improvements to HKFRSs (2010)

The impacts of these developments are discussed below:

HKAS 24 (revised 2009) revises the definition of a related party. As a result, the Council has re-assessed the identification of related parties and concluded that the revised definition does not have any material impact on the Council's related party disclosures in the current and previous period. HKAS 24 (revised 2009) also introduces modified disclosure requirements for government-related entities. The relevant information is disclosed in note 17.

Improvements to HKFRSs (2010) omnibus standard introduce a number of amendments to the disclosure requirements in HKFRS 7, Financial instruments: Disclosures. The disclosures about the Council's financial instruments in note 15 have been conformed to the amended disclosure requirements. These amendments do not have any material impact on the classification, recognition and measurements of the amounts recognised in the financial statements in the current and previous periods.

The Council has not applied any new standard or interpretation that is not yet effective for the current accounting period (note 19).

(b)

Basis of preparation of the financial statements

The measurement basis used in the preparation of the financial statements is the historical cost basis except that the investments in equity securities are stated at fair value as explained in the accounting policies set out below.

The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgement made by the Council in the application of HKFRSs that have significant effect on the financial statements is discussed in note 18.

(c)

Investments in debt and equity securities

Investments are recognised/derecognised on the date the Council commits to purchase/sell the investments or they expire. Investments in debt and equity securities are initially stated at fair value, which is their transaction price unless fair value can be more reliably estimated using other valuation techniques. Cost includes attributable transaction costs. These investments are subsequently accounted for as follows, depending on their classification:

(i)

Held-to-maturity debt securities

Dated debt securities that the Council has the positive ability and intention to hold to maturity are classified as held-to-maturity securities. Held-to-maturity securities are stated in the balance sheet at amortised cost less impairment losses.

Impairment losses for held-to-maturity securities are recognised when there is objective evidence of impairment and are measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition of the asset). Objective evidence of impairment includes observable data that comes to the attention of the Council about events that have an impact on the asset's estimated future cash flows such as:

-	significant financial difficulty of the debtor; or
-	significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through surplus or deficit. A reversal of an impairment loss shall not result in the asset's carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

(ii)

Available-for-sale securities

Other investments in securities, being those held for non-trading purposes, are classified as available-for-sale securities. At the balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised in other comprehensive income and accumulated separately in equity in the investment revaluation reserve, except foreign exchange gains and losses resulting from changes in the amortised cost of monetary items such as debt securities which are recognised directly in surplus or deficit.

Dividend income from these investments is recognised in accordance with the policy set out in note 2(l)(vii) and, where these investments are interest-bearing, interest calculated using the effective interest method is recognised in surplus or deficit in accordance with the policy set out in note 2(l)(vi). When these investments are derecognised, the cumulative gain or loss is reclassified from equity to surplus or deficit.

When there is objective evidence that available-for-sale securities are impaired, the cumulative loss that has been recognised in the investment revaluation reserve is reclassified to surplus or deficit. The amount of the cumulative loss that is recognised in surplus or deficit is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in surplus or deficit. Objective evidence of impairment includes observable data that comes to the attention of the Council concerning the underlying financial stability of the investee as well as a significant or prolonged decline in the fair value of an investment below its cost.

Impairment losses recognised in surplus or deficit in respect of available-for-sale equity securities are not reversed through surplus or deficit. Any subsequent increase in the fair value of such assets is recognised directly in other comprehensive income.

Impairment losses in respect of available-for-sale debt securities are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised. Reversals of impairment losses in such circumstances are recognised in surplus or deficit.

(d)

Fixed assets

Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses.

Depreciation is calculated to write off the cost of items of fixed assets, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

-	Leasehold improvements	Over the remaining term of the lease
-	Furniture and equipment	5 years

Both the useful life of an asset and its residual value, if any, are reviewed annually.

The carrying amounts of fixed assets are reviewed for indications of impairment at the balance sheet date. An impairment loss is recognised in surplus or deficit if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. The recoverable amount of an asset, or of the cash-generating unit to which it belongs, is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the assets. An impairment loss is reversed if there has been a favourable change in estimates used to determine the recoverable amount.

Gains or losses arising from the retirement or disposal of an item of fixed assets are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in surplus or deficit on the date of retirement or disposal.

(e)

Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Council determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i)

Classification of assets leased to the Council

Assets that are held by the Council under leases which transfer to the Council substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Council are classified as operating leases.

(ii)

Operating lease charges

Where the Council has the use of assets under operating leases, payments made under the leases are charged to surplus or deficit in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in surplus or deficit as an integral part of the aggregate net lease payment made.

(f)

Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less allowance for impairment of doubtful debts, except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

Impairment losses for bad and doubtful debts are recognised when there is objective evidence of impairment and are measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the asset's original effective interest rate where the effect of discounting is material. Objective evidence of impairment included observable data that comes to the attention of the Council about events that have an impact on the asset's estimated future cash flows such as significant financial difficulty of the debtor.

Impairment losses for trade and other receivables whose recovery is considered doubtful but not remote are recorded using an allowance account. When the Council is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in surplus or deficit.

(g)

Trade and other payables

Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(h)

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(i)

Employee benefits

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(j)

Income tax

The Council is exempted from Hong Kong Profits Tax by virtue of section 87 of the Inland Revenue Ordinance.

(k)

Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Council has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(l)

Income recognition

Income is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Council and the income and costs, if applicable, can be measured reliably, income is recognised in surplus or deficit as follows:

(i)	fees for rendering of accreditation services to institutions are recognised in the period to the extent the accreditation work is completed;

(ii)	advisory fees and consultancy fees are recognised in the period in which such services are rendered;
(ii)
(iii)	fees for rendering of qualifications assessment services are recognised in the period in which such assessment work is completed;
(iii)
(iv)	qualifications registry fees are recognised in the period in which such services are rendered;

(v)	government grants are recognised in the balance sheet initially as deferred income when there is reasonable assurance that they will be received and that the Council will comply with conditions attached to them. Grants that compensate the Council for expenses incurred are recognised as income in surplus or deficit on a systematic basis in the same periods in which the expenses are incurred;

(vi)	interest income is recognised as it accrues using the effective interest method; and

(vii)	dividend income from listed investments is recognised when the share price of the investment goes ex-dividend.

(m)

Related parties

(1)

A person, or a close member of that person's family, is related to the Council if that person:

(i)	has control or joint control over the Council;
(ii)	has significant influence over the Council; or
(iii)	is a member of the key management personnel of the Council.

(2)

An entity is related to the Council if any of the following conditions applies:

(i)	The entity and the Council are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii)	One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii)	Both entities are joint ventures of the same third party.
(iv)	One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v)	The entity is a post-employment benefit plan for the benefit of employees of either the Council or an entity related to the Council.
(vi)	The entity is controlled or jointly controlled by a person identified in (1).
(vii)	A person identified in (1)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

3. Investment income

	2012 HK$	2011 HK$
Interest income Dividend income	891,128 348,632	706,408 297,335
	1,239,760	1,003,743

4. Other income

	2012 HK$	2011 HK$
Review of non-QF Accreditation Consultancy fee from external activities Gain on disposal of fixed assets Miscellaneous income	11,459 ﹣ ﹣ 7,642	18,000 20,843 1,000 19,842
	19,101	59,685

5. Surplus for the year

Surplus for the year is arrived at after charging/(crediting):

2012
HK$

2011
HK$

(a) Staff costs

Salaries, wages and other benefits
Contributions to Mandatory Provident Funds

39,774,090
834,109

30,261,409
576,305

40,608,199

30,837,714

For the year ended 31 March 2011, the above staff costs did not include salaries, wages and other benefits of $4,575,483 and contributions to Mandatory Provident Funds of $124,429 relating to the Qualifications Framework project, which were included in direct accreditation/consultancy costs in the statement of comprehensive income.

2012
HK$

2011
HK$

(b) Other items

Auditor's remuneration
Depreciation
Operating lease charges in respect of properties
Interest income from held-to-maturity debt securities

122,000
912,236
5,436,508
(469,824)

99,000
1,037,655
5,115,352
(600,278)

6. Taxation

No provision for Hong Kong Profits Tax is required to be made in these financial statements as the Council is exempted from taxation pursuant to section 87 of the Inland Revenue Ordinance.

7. Fixed assets

	Leasehold improvements HK$	Furniture and equipment HK$	Total HK$
Cost: At 1 April 2011 Additions	4,907,593 4,600,310	3,481,645 1,836,183	8,389,238 6,436,493
At 31 March 2012	9,507,903	5,317,828	14,825,731
Accumulated depreciation: At 1 April 2011 Charge for the year	4,105,039 648,656	3,039,644 263,580	7,144,683 912,236
At 31 March 2012	4,753,695	3,303,224	8,056,919

Net book value: At 31 March 2012	4,754,208	2,014,604	6,768,812

Cost: At 1 April 2010 Additions Disposal	4,146,403 761,190 ﹣	3,395,528 93,995 (7,878)	7,541,931 855,185 (7,878)
At 31 March 2011	4,907,593	3,481,645	8,389,238

Accumulated depreciation: At 1 April 2010 Charge for the year Written back on disposals	3,454,412 650,627 ﹣	2,660,494 387,028 (7,878)	6,114,906 1,037,655 (7,878)
At 31 March 2011	4,105,039	3,039,644	7,144,683

Net book value: At 31 March 2011	802,554	442,001	1,244,555

Included within the cost of leasehold improvements is estimated cost of $1,876,485 (2011: $1,876,485) relating to office reinstatement.

8. Investments

	2012 HK$	2011 HK$
Unlisted held-to-maturity debt securities, at amortised cost Available-for-sale equity securities listed in Hong Kong, at market value	7,885,519 11,452,070	9,886,142 11,904,385
	19,337,589	21,790,527
Less: Unlisted held-to-maturity debt securities, at amortised cost - classified as current asset	(3,903,246)	(2,000,000)
	15,434,343	19,790,527
Fair value of held-to-maturity debt securities	8,081,275	10,554,911

Fair value of individually impaired available-for-sale equity securities	2,164,805	-

As at 31 March 2012, the Council's available-for-sale equity securities were individually determined to be impaired on the basis of significant or prolonged decline in their fair value below cost. Impairment losses on these investments were recognised in surplus or deficit in accordance with the policy set out in note 2(c)(ii).

9. Accounts receivable and deposits

2012
HK$

2011
HK$

Accounts receivable

Deposits and other receivables

Interest receivable

13,251,315
2,911,765
226,215

6,709,707
1,718,741
199,773

16,389,295

8,628,221

All of the accounts receivable and deposits, apart from rental and utility deposits of $1,670,371 (2011: $1,670,371), are expected to be recovered within one year.

Accounts receivables are due on presentation of billings. Further details on the Council's credit policy is set out in note 15(a).

The ageing analysis of accounts receivable is as follows:

	2012 HK$	2011 HK$
Current	4,613,797	4,888,766
Less than 1 month past due More than 1 month past due	134,300 8,503,218	514,600 1,306,341
	8,637,518	1,820,941
	13,251,315	6,709,707

All of the Council's accounts receivable are not impaired as at 31 March 2012 and 2011. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there was no recent history of default and there has not been a significant change in credit quality of the customers. The Council does not hold any collateral over these balances.

10. Cash and cash equivalents

	2012 HK$	2011 HK$
Deposits with banks Cash at bank and in hand	44,163,201 10,257,356	33,344,524 8,678,517
Bank deposits and cash in the balance sheet Less: Bank deposits with maturity of more than three months at acquisition	54,420,557 (2,873,473)	42,023,041 ﹣
Cash and cash equivalents in the cash flow statement	51,547,084	42,023,041

11. Deferred government grants

	2012 HK$	2011 HK$
Balance as at 1 April Grants received and receivable Interest thereon Recognised as income during the year	3,748,690 10,000,000 52,597 (559,854)	4,778,961 4,599,600 14,154 (5,644,025)
Balance as at 31 March	13,241,433	3,748,690

The grants are for meeting development costs of the Qualifications Framework project and relocation costs of the new office of the Council.

12. Receipts in advance

Receipts in advance represent amounts received for programme accreditation, advice on the registration of non-local courses and qualifications assessment, less amounts recognised as income during the year.

13. Provision for staff gratuities

	2012 HK$	2011 HK$
At 1 April Provision made Provision utilised	4,136,697 3,656,212 (3,977,463)	3,519,891 2,902,285 (2,285,479)
At 31 March Less: Amount included in “current liabilities”	3,815,446 (2,474,605)	4,136,697 (3,094,645)
Amount included in “non-current liabilities”	1,340,841	1,042,052

14. Reserves

(a) Components of the Council's reserves

The opening and closing balances of each component of the Council's reserves and a reconciliation between these amounts are set out in the statement of changes in reserves.

(b) Investment revaluation reserve

The investment revaluation reserve comprises the cumulative net change in the fair value of available-for-sale securities held at the balance sheet date and is dealt with in accordance with the accounting policies in note 2(c)(ii).

15. Financial risk management and fair values

Exposure to credit and liquidity risks arises in the normal course of the Council's operations. The Council is also exposed to equity price risk arising from its equity investments in other entities.

The Council's exposure to these risks and the financial risk management policies and practices used by the Council to manage these risks are described below.

(a) Credit risk

The Council's credit risk is primarily attributable to bank deposits, accounts receivables and investments in debt securities. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

In respect of accounts receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These take into account the customer's past payment history, financial position and other factors. These receivables are due on presentation of billings. Normally, apart from certain customers with good credit ratings, advances are requested from customers to cover the service fee before rendering of services by the Council.

The Council's exposure to credit risk is influenced mainly by the individual characteristics of each customer. At the balance sheet date, the Council had a certain concentration of credit risk as 72% and 91% (2011: 84% and 100%) of the total accounts receivables were due from the largest customer and the four largest customers.

Bank deposits are normally placed with financial institutions which have good credit ratings. Investments in debt securities are with counterparties of sound credit ratings. Given their high credit ratings, management does not expect any investment counterparty to fail to meet its obligations.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. The Council does not provide any other guarantees which would expose it to credit risk.

Further quantitative disclosures in respect of the Council's exposure to credit risk arising from accounts receivable are set out in note 9.

(b) Liquidity risk

The Council's policy is to regularly monitor its liquidity requirements to ensure that it maintains sufficient reserves of cash and readily realisable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and long term.

The earliest settlement dates of the Council's financial liabilities at the balance sheet date are all within one year or on demand and the contractual amounts of the financial liabilities are all equal to their carrying amounts.

The Council is exposed to equity price changes arising from equity investments classified as available-for-sale equity securities (see note 8).

The Council's equity investments are blue-chip companies listed on the Stock Exchange of Hong Kong. These equity investments have been chosen based on their longer term growth potential and are monitored regularly for performance against expectations.

At 31 March 2012, it is estimated that an increase/(decrease) of 10% (2011: 10%) in the market price of the Council's available-for-sale equity securities, with all other variables held constant, would not affect the Council's surplus or deficit unless there are impairments. The Council's total reserves would have increased/decreased by $1,145,207 (2011: $1,190,439).

The sensitivity analysis above indicates the instantaneous change in the Council's surplus for the year (and accumulated surpluses) and investment revaluation reserve that would arise assuming that changes in the market value had occurred at the balance sheet date and had been applied to re-measure those financial instruments held by the Council which expose the Council to equity price risk at balance sheet date. It is also assumed that none of the Council's available-for-sale equity securities would be considered impaired as a result of a decrease in the prices of respective equity securities and that all other variables remain constant. The analysis is performed on the same basis for 2011.

(d) Fair values

(i)

Financial instruments carried at fair value

HKFRS 7, Financial instruments: Disclosures, requires disclosures relating to fair value measurements of financial instruments across three levels of a “fair value hierarchy”. The fair value of each financial instrument is categorised in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:

Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments

Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which all significant inputs are directly or indirectly based on observable market data

Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data

At 31 March 2012, the only financial instruments of the Council carried at fair value were available-for-sale equity securities of $11,452,070 (2011: $11,904,385) listed on the Stock Exchange of Hong Kong (see note 8). These instruments fall into Level 1 of the fair value hierarchy described above.

During the year, there were no transfers among instruments in Level 1, Level 2 or Level 3.

(ii)

Fair values of financial instruments carried at other than fair value

The carrying amounts of the Council's financial instruments carried at cost or amortised cost are not materially different from their fair values as at 31 March 2012 and 2011 except as follows:

	2012 Carrying amount HK$	2012 Fair value HK$	2011 Carrying amount HK$	2011 Fair value HK$
Held-to-maturity debt securities	7,885,519	8,081,275	9,886,142	10,554,911

(e) Estimation of fair values

The fair value of available-for-sale equity securities held by the Council is based on quoted market prices at the balance sheet date. The quoted market price used for available-for-sale equity securities held by the Council is the current bid price.

16. Commitments

(a) Capital commitments

Capital commitments outstanding at 31 March 2012 in respect of leasehold improvements not provided for in the financial statements were as follows:

	2012 HK$	2011 HK$
Authorised but not contracted for	23,503,902	-

(b) Operating lease commitments

At 31 March 2012, the total future minimum lease payments under non-cancellable operating leases in respect of properties are payable as follows:

	2012 HK$	2011 HK$
Within 1 year After 1 year but within 5 years	2,318,370 ﹣	5,453,848 2,318,370
	2,318,370	7,772,218

The Council leases its office premises under operating leases. The lease runs for an initial period of five to six years, with an option to renew the lease when all terms are renegotiated. The lease does not include contingent rentals.

17. Related party transactions

Except as disclosed in (iv), all transactions related to the procurement of goods and services involving organisations in which a member of the Council, key management personnel and the HKSAR Government may have an interest are conducted in the normal course of business and in accordance with the Council's financial obligations and normal procurement procedures.

All transactions related to the provision of accreditation services to organisations in which a member of the Council, key management personnel and the HKSAR Government may have an interest are conducted in the normal course of business and in accordance with the Council's fee charging policy and fee schedule as prescribed by the Ordinance.

In addition to the transactions and balances disclosed elsewhere in these financial statements, the Council had the following related party transactions:

(i) Honorarium paid to Council members in the capacity of

	2012 HK$	2011 HK$
Non-local Council members	312,000	312,000

Local Council members are not remunerated.

(ii) Key management personnel remuneration

	2012 HK$	2011 HK$
Salaries and other emoluments Retirement scheme contributions	6,848,553 25,000	6,012,654 24,959
	6,873,553	6,037,613

Key management personnel comprise of the Executive Director, Deputy Executive Director, Director of Accreditation and Assessment, Director of Corporate Services and Financial Controller. The above remuneration is included in “staff costs” (see note 5(a)).

(iii)	During the year ended 31 March 2012, approximately 33% (2011: 25%) of the Council's total income are derived from services provided to the HKSAR Government, and approximately 21% (2011: 28%) of it are derived from services provided to other government-related entities. All the services are conducted in the normal course of business and in accordance with the Council's fee charging policy and fee schedule as prescribed by the Ordinance.

(iv)	Effective 1 September 2011, the Council has entered into a lease with the HKSAR Government and rented a vacant school premises in Siu Sai Wan Estate, Chai Wan, Hong Kong at a charge of $1 per month as its new office for an initial term of five years. The Council completed the relocation of its office in July 2012. The HKSAR Government also provided $10 million funding support for conversion and renovation of the new office of the Council (see note 11).

18. Critical accounting judgement

Certain critical accounting judgement in applying the Council's accounting policies is described below.

Impairment of held-to-maturity financial assets and available-for-sale financial assets

The Council follows the guidance of HKAS 39 in determining when an investment is other-than-temporarily impaired. This determination requires significant judgment. In making this judgement, the Council evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

19. Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 31 March 2012

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments and new standards which are not yet effective for the year ended 31 March 2012 and which have not been adopted in these financial statements. These include the following which may be relevant to the Council.

Effective for accounting periods beginning on or after

Amendments to HKFRS 7, Financial instruments: Disclosures - Transfers of financial assets

Amendments to HKAS 1, Presentation of financial statements - Presentation of items of other comprehensive income

HKFRS 13, Fair value measurement

HKFRS 9, Financial instruments

1 July 2011

1 July 2012

1 January 2013

1 January 2015

The Council is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Council's results of operations and financial position.

Analysis of expenditure

for the year ended 31 March 2012 (Expressed in Hong Kong dollars)

	2012 HK$	2011 HK$
Staff costs Salaries Allowances and other staff costs	35,991,787 4,616,412	26,989,232 3,848,482
	40,608,199	30,837,714

Administrative expenses
Auditor's remuneration Bank charges Cleaning Community relations Consultancy fees Depreciation Incidental expenses Insurance Legal advisory fees Light and power Membership fee Overseas visits and conferences Periodicals, newspapers and books Photocopying Postage Printing Publicity Recruitment and training Rent and rates Repairs and maintenance Securities transaction charges Stationery and consumables Telephone and facsimile Tools and equipment Translation expenses Transport and travelling Work compensation Administrative expenses	122,000 19,239 118,471 27,722 154,751 912,236 4,909 194,736 498,567 182,440 61,966 163,444 35,199 30,950 39,974 141,848 194,607 137,550 6,786,363 62,743 13,110 203,123 201,561 317,385 1,379 19,124 ﹣	99,000 18,067 109,493 32,926 122,058 1,007,655 29,329 109,522 36,544 161,523 66,827 139,052 38,339 27,359 72,994 151,850 276,118 81,433 6,435,723 84,308 7,448 179,260 222,131 67,437 14,473 16,855 1,050
	10,645,397	9,608,774


Direct accreditation/consultancy costs
Accreditation costs Qualifications Register costs Qualifications Framework project costs	5,612,712 1,278,247 150,147	3,565,067 383,370 5,644,025
	7,041,106	9,592,462

Council meeting and committee expenses

Air passages Honorarium payments Hotel accommodation Working lunches and dinners Subsistence allowance Transport and miscellaneous expenses	549,599 312,000 80,784 79,952 35,100 15,222	312,842 312,000 55,044 115,444 29,250 9,389
	1,072,657	833,969

Others

Impairment loss on available-for-sale equity securities	763,582	﹣
Total expenditure	60,130,941	50,872,919