YTL Power International BHD Review AR2015 TimFipps

Accounting and financial reporting
YTL Power International Berhad
Review of Annual Report 2015
July 2016
Tim Fipps
Accounting and financial reporting: YTL Power International Berhad Review AR 2015
TABLE OF CONTENT
1. Introduction .................................................................................................................... 2
2. YTL Power International Berhad ................................................................................... 2
3. Accounting basics ........................................................................................................... 6
4. Financial statements, their users and uses ...................................................................... 8
5. Statement of financial position ..................................................................................... 14
6. Compliance of YTL Power International's annual report with MFRS ......................... 21
7. Summary ....................................................................................................................... 22
8. Conclusion .................................................................................................................... 23
References ........................................................................................................................ 25
1. Introduction
In this paper, the International Financial Reporting Standards FSR101, known in Malaysia as
the Malaysian Financial Reporting Standards (MFRS101), are reviewed, and the information
disclosed in financial statements of a public listed company in Malaysia is evaluated, with
particular focus on the statement of financial position.
The selected company is YTL Power International Berhad.
2. YTL Power International Berhad

Sources:
www.ytlpowerinternational.com/
www.ytl.com/
www.ytlpowerseraya.com.sg/
YTL Power International Berhad Annual Report 2015 (abbreviated "AR2015")
Sources for market data:
http://finance.yahoo.com/q/pr?s=6742.KL
http://www.reuters.com/finance/stocks/overview?symbol=YTLP.KL
2.1. Operation businesses and countries

Headquartered in Malaysia and listed on Bursa Malaysia, YTL Power International Berhad
operates in the power and water utility and communications infrastructure sectors, in
Malaysia, the United Kingdom, Singapore, Australia and Indonesia.
YTL Power International Berhad's main businesses include:
- fossil-fueled power generation
- electricity transmission
- water supply and wastewater services
- mobile communications
2.2. Subsidiaries and interests

YTL Power International Berhad has four key operating subsidiaries and interests in two
other utility companies:
100% in YTL Power Generation: combined 1'212 MW power plants in Paka and
Pasir Gudang, both in Malaysia
100% in PowerSeraya: 3'100 MW co-generation power plant on Singapore's

Jurong Island, producing electricity as well as steam (heat) and desalinated water
100% in Wessex Water: water supply and wastewater services in the southwest of
England
60% in YTL Communications: wireless broadband service using 4G technology in

Malaysia, known as YES
20% in Jawa Power: 1'220 MW coal-fired power plant located at the Paiton Power
Generation Complex in East Java, Indonesia
33.5% in ElectraNet: power transmission in South Australia
Together with partners from Estonia and China, YTL Power International Berhad -- with a
45% stake -- is developing a USD 2.1 billion oil-shale development project in Jordan, which
includes a shale oil fired power plant with approx. 500 MW planned power output. As the
project partners seek full financial close and final approvals, expected in the course of year
2016, thereupon construction can start and the plant become operational by 2019. [The Star,
2016]
2.3. Parent
YTL Power International is a subsidiary of YTL Corporation, a Malaysian family-controlled
infrastructure conglomerate, which has global investments in utilities, power, cement,
construction, real estate, hospitality as well as information technology.
YTL Corporation Berhad was founded in 1955 by Tan Sri Dato' Seri Yeoh Tiong Lay, after
whom the group is named.
The YTL group of companies is controlled and run by members of the Yeoh Tiong Lay
family. Under Francis Yeoh, the eldest son of the founder, the YTL group "has grown from a
small but profitable business focused on cement and building into one of Malaysia's ten
largest groups" [Fagan, The Telegraph, 2002-03-31].
2.4. History of YTL Power International Berhad

After Malaysia experienced major power breakdowns in the early 1990s, the Malaysian
Government decided to privatize the country's power industry, and YTL was awarded the
first IPP (independent power producer) licence in year 1993. YTL, also, entered a power
purchase agreement (PPA) from TNB for 21 years, the only PPA that was based on a take-orpay mechanism. Under its subsidiary YTL Power Generation Sdn. Bhd., YTL built and then
operates two gas-fired combined cycle power plants with a combined capacity of 1'212 MW,
located at Paka, Terengganu, and Pasir Gudang, Johor. To finance the project, YTL raised
RM2.66 billion which was the largest private, Ringgit-denominated funding at that time.
On October 18, 1996, YTL Power International was founded, with YTL Power Generation
Sdn. Bhd. as one of its subsidiary assets.
In year 1997, YTL Power International Berhad is listed on the Main Board of the Kuala
Lumpur Stock Exchange (now the Main Market of Bursa Malaysia).
In year 2000, YTL Power International Berhad acquired its stake of Australia's ElectraNet.
In year 2002, YTL Power International Berhad acquired Wessex Water from one of the
Enron subsidiaries.
In year 2004, YTL Power International Berhad acquired its stake of PT Jawa Power. PT Jawa
Power has a 30-year PPA commencing 1995 with PT PLN (Persero), the state-owned electric
utility company.
In year 2009, YTL Power International Berhad acquired PowerSeraya from Temasek
Holdings, the investment company owned by the Singapore government.
In year 2010, YTL Power International Berhad rolled out its 4G wireless broadband service
("YES").
2.5. Operational and financial highlights

After contributing a steady income until expiry of the initial PPA in 2015, the Malaysian
power generation division is becoming a drag on YTL Power International: Though
Malaysia's Energy Commission (EC) awarded an almost-3-year extension of the PPA for the
plants in Paka and Pasir Gudang, YTL and TNB could not agree due to land issues with both
plants. The dispute has been brought to court ...
Wessex Water, with stable earnings due to regulated business, contributed the majority (74%)
of YTL Power International's profit before tax and accounted for almost half (41%) of its
total assets [AR2015 page 163].
Earnings contributions of PowerSeraya are in clear decline due to rising power supply glut
and competitiveness in the Singapore merchant power market, and losses of the mobile
broadband division (YTL Communications' YES) continue to drag on the company's
financial performance.
In the past 3 years, since 2013, YTL Power International has seen its revenue decreasing, to
RM11.86 billion for FY2015, but no clear trend for the profits: while pre-tax profits could
recover slightly to RM1.25 billion for FY2015, after-tax profits were the lowest since years,
at RM0.92 billion. (see attached "Financial Highlights 2011-2015)
In 2015, YTL Power International reported a dividend of RM0.10 per share, which accounts
for the major portion of the earnings (EPS = RM0.132).
The company hoards substantial cash coffers of RM9.6 billion, a good stockpile if intended to
fund new projects, but as unused asset with no returns.
But the company's net gearing is relatively high, at 135%:
Net gearing = Net debt / Owner's equity = (Total debt - Cash) / Owner's equity = (Longterm borrowings + Short-term borrowings - Cash) / Owner's equity = RM23'417'355k +
RM1'910'415k - RM9'608'348k / RM11'628'698k = RM15'719'422k / RM11'628'698k =
1.35178 = 135%
As of 13 July 2016, YTL Power International has a market capitalisation of more than RM11
billion, with over 8.1 billion shares outstanding. [Reuters market data, 2016]
With the book value of the stock at RM11.6 billion as per AR2015, the price to book value,
P/B ratio or P/BV, is almost 1:
Price to book value = P/BV = Market price per share / Book value per share = Market
capitalization / Total book value = RM11'504'270k (Reuters, 13 July 2016] /
RM11'628'698k [AR2015] = 0.99
This valuation could indicate that the market sees the company earning rather mediocre
returns on its assets, and does not expect its business conditions to spurt up any time soon.
3. Accounting basics
3.1. Accounting definition
"Accountancy is the art of communicating financial information about a business entity to
users such as shareholders and managers." [Elliott & Elliott, 2011, page 3]
In companies and organizations, accounting provides the basis for management decisions and
accountability through the processes of recording, summarizing and presenting historical and
prospective information.
3.2. Accounting purpose

Key objectives of accounting are recording, planning, analysis, decision-making,
accountability and performance appraisal:
(1) Recording
The most basic role of accounting is to record and summarize business transactions and
balances, also referred to "book-keeping".
Business transactions and balances, once recorded, can be summarized in the form of
financial statements.
(2) Planning
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For their limited resources, businesses have more allocation possibilities (opportunities) than
they have resources. The competing potential allocations and their anticipated returns are
established in budgets.
Hence, in financial terms, planning means budgeting.
(3) Analysis and decision-making
Accounting extends from analysis to decision: Historical as well as prospective information is
compiled and analyzed, for management to make decisions and to exercise control.
(4) Accountability and performance appraisal
The recorded information is used for analysis and appraisal of the company performance,
hence ultimately for performance appraisal of those in charge of the company (directors,
management).
3.3. Users of accounting information

Accounting information of an organization helps users (stakeholders) to make better financial
decisions.
Users of financial information may be internal and external to the organization.
Internal users (primary users) of accounting information include management, owners, and
employees:
- Management: for analyzing a firm's performance and position, and taking appropriate
measures to maximize the wealth of the firm's owners
- Employees: for assessing an entity's performance and profitability and its consequence on
their future remuneration and job security
- Owners (shareholders): for analyzing the value, viability and profitability of their
investment and determining any future course of action
Accounting information is presented to internal users usually in the form of management
accounts, budgets, forecasts and financial statements.
External users (secondary users) of accounting information include creditors, suppliers, tax
authorities, investors, customers, regulatory authorities and suppliers:
- Creditors, which include suppliers as well as lenders of finance such as banks: for
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determining the credit worthiness of the organization; terms of credit are set by creditors
according to the assessment of their customers' financial health
- Tax authorities: for determining the credibility of the tax returns filed on behalf of the
organization
- Investors: for analyzing the feasibility of investing in the company, as investors want to
make sure they can earn a reasonable return on their investment before they commit any
financial resources to the company
- Customers: for assessing the financial position of its suppliers which is necessary for them
to maintain a stable source of supply in the long term
- Regulatory authorities: for ensuring that the company's disclosure of accounting information
is in accordance with the rules and regulations set in order to protect the interests of the
stakeholders who rely on such information in forming their decisions
Accounting information is communicated to external users usually in the form of financial
statements.
4. Financial statements, their users and uses

4.1. Financial statements
Financial statements represent a formal record of the financial activities of an entity.
Financial statements are written reports that quantify the financial strength, performance and
liquidity of the entity.
Financial statements reflect the financial effects of business transactions and events on the
entity.
The purpose of financial statements is to cater for the needs of users of accounting
information in order to assist them in making sound financial decisions.
4.2. Types of financial statements

The four main types of financial statements are:
- Income statement (a.k.a. profit and loss statement)
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- Statement of financial position (a.k.a. balance sheet)

- Cash flow statement
- Statement of changes in equity (a.k.a. statement of retained earnings)
For large corporations, these statements are often complex and may include an extensive set
of notes to the financial statements and explanation of financial policies and management
discussion and analysis. The notes typically describe each item of the individual statements in
further detail. Notes to financial statements are considered an integral part of the financial
statements.
One differentiation between the financial statement types relates to time:
- Income statement, cash flow statement and statement of changes in equity show the sum of
transactions over a given period of time (for example annually).
- The statement of financial position gives a snapshot of holdings on a specific date, the
reporting date.
4.2.1. Income statement

The income statement is also known as the profit and loss (P&L) statement.
The income statement provides the data about the profitability of the enterprise, by detailing
the revenues (sales) and the expenses. The difference between revenues and expenses is the
net income (profit or loss).
The income statement shows how well a company buys and sells goods (or services) to make
a profit.
4.2.2. Statement of financial position

The statement of financial position is also known as the balance sheet.
The purpose of a balance sheet is to report the financial position of a company at a certain
point in time, i.e. it provides a snapshot at a point in time.
The balance sheet provides the records about available resources as well as the claims to
those resources, i.e. about what the company owns (assets) and what the company owes
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(liabilities and equity).

Another way to look at the balance sheet is in terms of the 'sources' and the 'uses' of cash:
- Equity (also known as 'net worth') and liabilities are 'sources' of cash; they are cash
provided ("injected") by investors and creditors and hence represent claims owed to these
equity and debt holders (who have supplied cash or its equivalent).
- Assets are 'uses' of cash; the company uses the cash injections to purchase assets in order to
make a profit.
As the name implies, the bottom line of the balance sheet must always 'balance', i.e. resources
and claims must match.
In other words, the total assets are equal to the total liabilities including the equity.
4.2.3. Cash flow statement

The cash flow statement presents the movement in cash and bank balances over a period.
The movement in cash flows is classified under operating, investing and financing activities.
4.2.4. Statement of changes in equity

The statement of changes in equity is also known as the statement of retained earnings.
The statement of changes in equity details the movement in owners' equity over a period.
The movement in owners' equity is derived from the following components:
- Net profit or loss during the period as reported in the income statement.
- Share capital issued or repaid during the period.
- Dividend payments.
- Gains or losses recognized directly in equity (e.g. revaluation surpluses).
- Effects of a change in accounting policy or correction of accounting error.
4.3. Users of financial statements

Users (stakeholders) of financial statements may be both internal and external to the
organization.
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4.3.1. Internal users

Owners and managers frequently use financial statements to make important business
decisions, for example:
- whether or not to continue or discontinue part of the business.
- whether to make or to purchase certain materials.
- whether to acquire or to rent/lease certain equipment in the production of goods.
The records are also helpful in making long-term decisions and as a source of historical
records.
Managers require financial statements to manage the affairs of the company by assessing its
financial performance and position and taking important business decisions.
Owners (shareholders) use financial statements to assess the risk and return of their
investment in the company and take investment decisions based on their analysis.
Employees use financial statements for assessing the company's profitability and its
consequence on their future remuneration and job security.
Employees also may use reports in making collective bargaining agreements.
4.3.2. External users

Customers use financial statements to assess whether a supplier has the resources to ensure
the steady supply of goods in the future. This is especially vital where a customer is
dependent on a supplier for a specialized component.
Suppliers and vendors need financial statements to assess the creditworthiness of a business
and ascertain whether to supply goods on credit. Suppliers need to know if they will be
repaid. Terms of credit are set according to the assessment of their customers' financial
health.
Prospective investors need financial statements to perform financial analysis, in the course of
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their investment decision-making, to assess the viability of investing in a company. Investors

may predict future returns based on the earnings disclosed in the financial statements.
Furthermore, risks associated with the investment may be gauged from the financial
statements; for instance, fluctuating earnings indicate higher risk. Therefore, financial
statements provide a basis for the investment decisions of potential investors.
Philanthropies may use financial statements of a non-profit organization as a component in
determining whether to donate funds.
Lending institutions (e.g. banks) examine the financial health of a person or an organization
and use the financial statements to decide whether or not to lend funds. Any decision to lend
must be supported by a sufficient asset base and liquidity. Potential lenders, therefore, assess
the financial health of a business to determine the probability of a bad loan.
Government entities, i.p. tax authorities, need financial statements to ascertain the propriety
and accuracy of taxes and other duties declared and paid by an organization. Tax authorities
require financial statements to determine the correctness of tax declared in the tax returns.
Government also keeps track of economic progress through analysis of financial statements
of businesses from different sectors of the economy.
By law, companies are expected to produce financial statements each year, at legal entity
level, and also for tax requirements. Public companies have to publish these statements.
General public may be interested in the effects of a company on the economy, environment
and the local community.
Competitors compare their performance with rival companies to learn and develop strategies
to improve their competitiveness.
4.4. Requirements on financial statements

Users - readers - of financial statements seek to understand key facts about the performance
and the disposition of a business. They will make decisions about this business based on their
understanding of the statements. Because financial statements are widely relied upon, they
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should be straightforward to read and understand.

Given the diversity of users and the plethora of uses, and to fulfill the fundamental
characteristics required from accounting information (i.e. to be relevant, reliable, comparable,
consistent, material, understandable, and timely), financial reporting requires rules and
standards. Hence, financial statements are subject to accounting and reporting rules and
standards.
4.5. Reporting rules and standards for financial statements

Reporting rules and standards serve to understand and to compare the performance and the
value of companies, over periods, across industries, across countries, across the world, and by
the cognizant eyes of law and order and the general public.
The rules and standards aim to ensure comparability both with the entity's financial
statements of previous periods and with the financial statements of other entities.
With the Financial Reporting Act 1997, Malaysian lawmakers have given birth and
commissioned the Malaysian Accounting Standards Board (MASB) as an independent
authority to develop and issue accounting and financial reporting rules and standards to be
used for statutory financial statements by companies registered in Malaysia. The Financial
Reporting Act 1997 gives legal authority to the standards issued by the MASB. [Deloitte IAS
Plus, 2014]
This refers to financial statements that are not requested by users which are in a position to
require financial reports tailored to their particular information needs, such as a company's
management; however, such tailored reports do not replace the required statutory financial
statements.
On 1 August 2008, the Financial Reporting Foundation, which oversees the operations of
MASB, and the MASB issued a statement on their plan for full convergence of the financial
reporting standards used in Malaysia with the International Financial Reporting Standards
(IFRS) by 1 January 2012. Such adoption serves to reduce barriers to investment and
financing for the businesses in the country by cutting down on due diligence and reducing
compliance costs. The IFRS are issued by the International Accounting Standards Board
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(IASB) and help to harmonize basic guidelines on financial reporting throughout the world.
With this commitment, FRF and MASB created a local adaptation of the IFRS (International
Financial Reporting Standards): the Malaysian Financial Reporting Standards (MFRS).
[Deloitte IAS Plus, 2014]
On 17 November 2011, the MASB issued a new MASB-approved accounting framework, the
MFRS Framework, which is a fully IFRS-compliant framework and equivalent to the IFRS,
since word-for-word in agreement with the existing standards set by the IASB. The MFRS
Framework comprises standards as issued by the IASB that are effective on 1 January 2012.
The adoption of the MFRS Framework allows Malaysian entities to be able to assert that their
financial statements are in full compliance with IFRS. [Deloitte IAS Plus, 2014]
The MFRS Framework is to be applied by all entities other than private entities for annual
periods beginning on or after 1 January 2012, however, with a few defined exceptions for the
application date.
The MASB plans to implement accordingly also possible future amendments to the IFRS.
[Bernama, 2015a/b]
With regard to all entities preparing financial statements in compliance with the MFRS, the
MASB has also set in place a requirement that these statements include an explicit and
unreserved statement of compliance with IFRS.
The International Accounting Standards Board (IASB), whose IFRS (International Financial
Reporting Standards) guidelines are used in more than 100 countries mainly in Asia and
Europe, and the U.S. Financial Accounting Standards Board (FASB) have engaged in talks to
align their rules. They have achieved "convergence" in many areas. [Jones, 2012]
5. Statement of financial position

The statement of financial position reports an entity's assets, liabilities and owner's equity at a
specific point in time, i.e. the end of the reporting period.
5.1. Information presented in the statement of financial position
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The statement of financial position consists of 3 main segments: (1) assets, (2) liabilities, and
(3) owners' equity.
The accounts under these three segments are connected: a firm has to pay for all the things it
owns (assets) by either borrowing money (taking on liabilities) or taking it from investors
(issuing owners' equity).
This relationship reflects the basic accounting equation: Assets = Liabilities + Owners' equity
The statement of financial position, or balance sheet, gets its name from the fact that the two
sides of the equation above assets on the one side and liabilities plus owners' equity on the
other must balance out.
5.2. Disclosure requirements on information presented in the statement of

financial position
The information to be presented in the statement of financial position as stipulated by
MFRS101 and IFRS shall include line items that present the following accounts:
(A) Assets
(A1) Cash and cash equivalents
(A2) Trade and other receivables
(A3) Financial assets, either short-term (current) or long-term (non-current), excluding
amounts shown under (A1) cash and cash equivalents, (A2) trade and other receivables, and
(A9) investments accounted for using the equity method
(A4) Inventories
(A5) Property, plant and equipment
(A6) Investment property carried at fair value through profit or loss (such as real estate held
for investment purposes)
(A7) Intangible assets
(A8) Biological assets, which are living plants or animals, (A8i) carried at cost less
accumulated depreciation and impairment, or (A8ii) carried at fair value through profit or loss
(A9) Investments accounted for using the equity method, i.e. (A9i) investments in associates,
and (A9ii) investments in jointly controlled entities
(L) Liabilities
(L1) Trade and other payables
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(L2) Financial liabilities, either short-term (repayment less than 12 months) or long-term
(repaid over a period that exceeds one year), excluding amounts shown under (L1) trade and
other payables and (L5) provisions)
(L3) Liabilities and assets for current tax
(L4) Deferred tax liabilities and deferred tax assets
(L5) provisions (for liabilities and charges)
(E) Equity
(E1) Non-controlling interests
(E2) Equity attributable to owners of the parent
5.3. Explanation of accounts presented in the statement of financial position

(A) Assets
An asset is something that an entity owns or controls in order to derive economic benefits
from its use.
Assets must be classified in the balance sheet as current or non-current, depending on the
duration over which the reporting entity expects to derive economic benefit from its use: An
asset which will deliver economic benefits to the entity over the long term is classified as
non-current asset, whereas an asset which is expected to be realized within one year from
reporting date is classified as current asset.
Current assets are assets that are expected to be realized within a year or normal operating
cycle, whichever is longer.
The statement of financial position must distinguish between and present separately current
and non-current assets.
(A1) Cash and cash equivalents
Cash and cash equivalents include cash in hand along with any short-term investments that
are readily convertible into known amounts of cash.
Cash and cash equivalents are the most liquid current assets found on a business's balance
sheet. Cash equivalents are short-term commitments "with temporarily idle cash and easily
convertible into a known cash amount" [Hermanson, 1998, p. 150]
An investment normally counts to be a cash equivalent when it has a short maturity period of
90 days or even less from date of acquisition and when it carries an insignificant risk of
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changes in value. If maturity period is more than 90 days, for example 100 days, then it will
not be considered as cash equivalent.
Cash can be currency, coins, bank overdrafts, cash in savings accounts, cash in checking
accounts, petty cash.
Cash equivalents can be Treasury bills, commercial papers, marketable securities, money
market funds.
(A2) Trade and other receivables
Trade receivables include the amounts that are recoverable from customers upon credit sales.
Trade receivables are presented in the statement of financial position after the deduction of
allowance for bad debts.
Accounts receivable is a legally enforceable claim for payment held by a business against its
customer/client for goods supplied and/or services rendered in execution of the customer's
order. These are generally in the form of invoices raised by a business and delivered to the
customer for payment within an agreed time frame.
Other items include prepayments and deposits.
(A3) Financial assets, either short-term (current) or long-term (non-current), excluding
amounts shown under (A1) cash and cash equivalents, (A2) trade and other receivables, and
(A9) investments accounted for using the equity method
Notes receivable represent claims for which formal instruments of credit are issued as
evidence of debt, such as a promissory note.
(A4) Inventories
Inventories include goods that are held for sale in the ordinary course of the business, or to be
converted into finished goods. Inventories may include raw materials, finished goods and
works in progress.
(A5) Property, plant and equipment
Property, plant and equipment is stated in the long-term or non-current asset section of the
balance sheet. Included in this classification are land, buildings, machinery, office equipment,
vehicles, furniture and fixtures used in a business. Also included in property, plant and
equipment is the accumulated depreciation for these assets (except for land, which is not
depreciated).
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The assets reported as property, plant and equipment are described as long-lived, tangible
assets. They are also described as fixed assets or as plant assets.
Generally, the property, plant and equipment assets are reported at their cost followed by a
deduction for the accumulated depreciation that applies to all of these assets.
(A6) Investment property carried at fair value through profit or loss
Such investment property is often real estate held for investment purposes.
(A7) Intangible assets
Assets without any physical substance are classified as intangible assets. Goodwill is a type
of an intangible asset.
An intangible asset is an asset that lacks physical substance (unlike physical assets such as
machinery, software and buildings) and usually is very hard to evaluate. It includes patents,
copyrights, franchises, goodwill, trademarks, trade names, the general interpretation also
includes software and other intangible computer based assets.
(A8) Biological assets
Biological assets are living plants or animals, which bear agricultural produce for harvest,
such as mango trees grown to produce mango fruits and cows raised to produce milk. They
are either carried at cost less accumulated depreciation and impairment, or carried at fair
value through profit or loss.
(A9) Investments accounted for using the equity method, i.e. investments in associates,
and investments in jointly controlled entities
Equity accounting is usually applied where the investor holds 2050% of voting stock, since
this implies significant influence on the decisions of the associate by the holding company,
though ultimately depends on the nature of the actual relationship between investor and
investee.
The ownership of more than 50% of voting stock creates a subsidiary; its financial statements
consolidate into the parent's. The ownership of less than 20% creates an investment position
carried at historic book or fair market value (if available for sale or held for trading) in the
investor's balance sheet.
In equity accounting, the investor's proportional share of the associate company's net income
increases the investment (and a net loss decreases the investment), and proportional payments
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of dividends decrease it. In the investors income statement, the proportional share of the
investors net income or net loss is reported as a single-line item.
(L) Liabilities
A liability is an obligation that a business owes to someone and its settlement involves the
transfer of cash or other resources.
Liabilities must be classified in the statement of financial position as current or non-current
depending on the duration over which the entity intends to settle the liability: A liability
which will be settled over the long term is classified as non-current whereas a liability that is
expected to be settled within one year from reporting date is classified as current liability.
Current liabilities are liabilities that are expected to liquidate within a year or normal
operating cycle, whichever is longer.
The statement of financial position must distinguish between and present separately current
and non-current liabilities.
(L1) Trade and other payables
Trade and other payables primarily include liabilities due to suppliers and contractors for
credit purchases.
Other payables include accrued expenses.
Accounts payable is money owed by a business to its suppliers shown as a liability on a
company's balance sheet. It is distinct from notes payable liabilities, which are debts created
by formal legal instrument documents.
(L2) Financial liabilities, either short-term (repayment less than 12 months) or long-term
(repaid over a period that exceeds one year), excluding amounts shown under (L1) trade and
other payables and (L5) provisions)
Short-term borrowings typically include bank overdrafts and short-term bank loans with a
repayment schedule of less than 12 months.
Long-term borrowings comprise of loans which are to be repaid over a period that exceeds
one year. Current portion of long-term borrowings include the installments of long-term
borrowings that are due within one year of the reporting date.
Examples for financial liabilities (excluding provisions and accounts payables) are
promissory notes and corporate bonds.
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(L3) Liabilities and assets for current tax

Current tax payable is usually presented as a separate line item in the statement of financial
position due to the materiality of the amount.
(L4) Deferred tax liabilities and deferred tax assets
Deferred tax liabilities and assets shall always be classified as non-current.
An asset that may be used to reduce any subsequent period's income tax expense. Deferred
tax assets can arise due to net loss carry-overs, which are only recorded as asset if it is
deemed more likely than not that the asset will be used in future fiscal periods.
(L5) Provisions (for liabilities and charges)
In financial accounting, a provision is an account which records a present liability of an
entity. The recording of the liability in the entity's balance sheet is matched to an appropriate
expense account in the entity's income statement.
Instead of provision, sometimes the term "reserve" is used, but this terminology can be
ambiguous.
(E) Equity
Equity is what the business owes to its owners.
Equity is derived by deducting total liabilities from the total assets: Equity therefore
represents the residual interest in the business that belongs to the owners.
Share capital represents the amount invested by the owners in the entity.
Retained earnings comprise the total net profit or loss retained in the business after
distribution to the owners in the form of dividends.
Revaluation reserve contains the net surplus of any upward revaluation of property, plant and
equipment recognized directly in equity.
(E1) Non-controlling interests
Non-controlling interests are to be presented within equity separately from the equity
attributable to the owners of the parent.
(E2) Equity attributable to owners of the parent
20
Regarding issued share capital and reserves, the following disclosures are required:
- numbers of shares authorized, issued and fully paid, and issued but not fully paid
- par value
- number of shares outstanding at the beginning and the end of the period
- description of rights, preferences, and restrictions
- treasury shares, including shares held by subsidiaries and associates
- shares reserved for issuance under options and contracts
- description of the nature and purpose of each reserve within equity
6. Compliance of YTL Power International's annual report with MFRS

YTL Power International's Annual Report 2015 ("AR2015") complies with the MFRS
requirements.
The AR2015 comprises of a complete set of financial statements, including a statement of
financial position (balance sheet), providing information about the firm's assets, liabilities,
and equity: page 60/61 of AR2015 (see also attached).
The financial statement in AR2015 "presents fairly" the financial position as per statutory
information:
AR2015 (page 56) stipulates that bad debts are recognized, current assets and receivables are
stated at their value that can be expected to be realized, and assets and liabilities are
appropriately valuated.
Applied accounting policies are explained in Note 3 to the financial statement (pages 72-89
AR2015).
Information about reporting entity, period and currency is displayed prominently:
- the name of the reporting entity and any change in the name (Note 1, page 68 AR2015)
- whether the financial statements are a group of entities or an individual entity (Note 1, page
68 AR2015)
- information about the reporting period (the "year ended 30 June 2015" -- e.g. pages 4, 46,
68 AR2015)
- the presentation currency (Ringgit Malaysia -- Note 2, page 68 AR2015)
21
- the level of rounding used (thousands -- Note 2, page 68 AR2015)

To ensure comparability and consistency in the financial reporting, the presentation and
classification of items in the financial statements shall be retained from one period to the next
unless a change is justified either by a change in circumstances or a requirement of a new
IFRS. This is demonstrated by presenting the FY2014 records next to those of the reported
year (FY2015), furthermore by the comparative presentation of the financial highlights of the
past five years (page 2 AR2015), including restated FY2013 and FY2012 results.
The AR2015 (page 24, Statement of Directors' Responsibilities) contains an explicit and
unreserved statement of compliance for the financial statements with MFRS and IFRS.
7. Summary
The AR2015 provides information as required by MFRS, and also additional information:
1. Exposure to financial risk
The AR2015 (pages 152-159) explains in detail that and how the firm's activities "expose it to
a variety of financial risks, including market risk (comprising of foreign currency exchange
risk, interest rate risk and price risk), credit risk, liquidity risk and capital risk".
2. Segmental information
The AR2015 (pages 163-165) informs how the group's businesses are broken down in "five
reportable segments", and elaborates extensively how they fared individually:
(i) Power generation (contracted)
(ii) Multi utilities business (merchant)
(iii) Water and sewerage
(iv) Mobile broadband network
(v) Investment holding activities
The group's management "monitors the operating results of operating segments separately for
the purpose of making decisions about resources to be allocated and of assessing
performance".
However, the AR is short of elaborating how lumping these "segments" together under the
22
roof of YTL Power International provides benefits across the segments or for the overall
organization.
3. Segment contributions to profitability
The segmental presentation of the results and the descriptive outlook show how much the
company's profitability depends on the group's water segment, Wessex Water. Or, in other
words, how little the remainder segments contribute.
However, the AR does not reveal whether the group is changing its business focus, for
example exploring new areas (besides the Jordan project), or expanding the water business.
4. Historical record
The historical record extensively elaborated in the annual report shows how much the
company has gained from acquisitions, after initially developing the two power plants in
Malaysia. However, it shows also how much the growth of YTL Power International has
come to a halt, as these acquisitions date back several years. Only the communications
segment appears to develop new business, though with arguable success, as the losses made
show. Accordingly, the earnings per share (EPS) have dropped.
8. Conclusion
The purpose of financial reports is to cater for the needs of users of accounting information in
order to assist them in making sound financial decisions. Financial statements serve to
provide key facts about the performance and the disposition of a business to parties external
to this business. To fulfill the fundamental characteristics required from accounting
information (i.e. to be relevant, reliable, comparable, consistent, material, understandable,
and timely), financial statements are subject to accounting and reporting rules and standards.
With the Financial Reporting Act 1997, Malaysian lawmakers have commissioned the
Malaysian Accounting Standards Board (MASB) as an independent authority to develop and
issue accounting and financial reporting rules and standards to be used for statutory financial
statements by companies registered in Malaysia. The Financial Reporting Act 1997 gives
legal authority to the standards issued by the MASB.
In the meantime, the MASB has adopted the International Financial Reporting Standards
23
(IFRS) as the financial reporting standards to be used in Malaysia.

With this commitment, FRF and MASB created a local adaptation of the IFRS (International
Financial Reporting Standards): the Malaysian Financial Reporting Standards (MFRS).
The review of YTL Power International Berhad's Annual Report 2015 has shown compliance
to the MFRS.
In regards the content of the Annual Report, the descriptions of the company's existing
investments, together with finance ratios such as EPS and gearing, and valuation ratios such
as price to book value, suggest a rather staid outlook for the next few years.
If the company engages in new major projects, the gearing ratio can be expected to increase
further, as revenue and profits from its existing operations are not expected to leap (though
steady: Wessex Water, ElectraNet, Jawa Power), while some are expected to dwindle
(PowerSeraya) or even run dry (Paka, Pasir Gudang), or hard to make profit (YTL
Communications). However, to overcome this dilemma in the longer term, the company has
to develop and invest in new projects, or make new rewarding acquisitions.
Fortunately, with stable earnings due to regulated business, the group's water segment,
Wessex Water, contributed the majority (74%) of profits before tax and accounted for almost
half (41%) of its total assets, however, attributed with some currency risk.
24
References
Bernama (2015, December 6). Malaysian companies to adopt international financial reporting
standards by 2018. Astro Awani. Retrieved from http://english.astroawani.com/businessnews/malaysian-companies-adopt-international-financial-reporting-standards-2018-83989
Bernama (2015, December 1). Malaysia to fully converge with IFRS in 2018. Borneo Post
online. Retrieved from http://www.theborneopost.com/2015/12/01/malaysia-to-fullyconverge-with-ifrs-in-2018/
Deloitte IAS Plus (2014, February 14), Malaysia. Retrieved from
http://www.iasplus.com/en/jurisdictions/asia/malaysia
Elliott, B. & Elliott, J (2011). Financial accounting and reporting (14th edition). London:
Financial Times / Prentice Hall.
Fagan, M. (2002, March 31). Who the hell are YTL? The Telegraph. Retrieved from
http://www.telegraph.co.uk/finance/2758352/Who-the-hell-are-YTL.html
Hermanson, R. (1998). Accounting - a business perspective. USA: McGraw-Hill.
Jones, H. (2012, April 29). Long push for new accounting standards. Reuters, The Star.
Retrieved from
http://thestar.com.my/news/story.asp?file=/2012/4/29/nation/11193657&sec=nation
Menkhoff, T. & Gerke, S. (2002). Chinese Entrepreneurship and Asian Business Networks.
Research Collection Lee Kong Chian School of Business. Available at:
http://ink.library.smu.edu.sg/lkcsb_research/4795
The Star (2016, May 9). YTL Power increases stake in Jordans Attarat Power Co to 45%
Retrieved from http://www.thestar.com.my/business/business-news/2016/05/09/ytl-powerincreases-stake-in-jordans-attarat-power-co-to-45/
25
26
Attachment 1:
YTL Power International Berhad: "Annual Report 2015", Statement of Financial Position,
page 60
27
28
Attachment 2:
YTL Power International Berhad: "Annual Report 2015", Statement of Financial Position,
page 61
29
30
Attachment 3:
YTL Power International Berhad: "Annual Report 2015", Financial Highlights 2011 - 2015,
page 2
31
32

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Accounting and financial reporting

YTL Power International Berhad

Review of Annual Report 2015

2. YTL Power International Berhad

2.1. Operation businesses and countries

2.2. Subsidiaries and interests

100% in PowerSeraya: 3'100 MW co-generation power plant on Singapore's

60% in YTL Communications: wireless broadband service using 4G technology in

33.5% in ElectraNet: power transmission in South Australia

2.4. History of YTL Power International Berhad

2.5. Operational and financial highlights

3.2. Accounting purpose

3.3. Users of accounting information

4. Financial statements, their users and uses

4.2. Types of financial statements

- Statement of financial position (a.k.a. balance sheet)

4.2.1. Income statement

4.2.2. Statement of financial position

(liabilities and equity).

4.2.3. Cash flow statement

4.2.4. Statement of changes in equity

4.3. Users of financial statements

4.3.1. Internal users

4.3.2. External users

their investment decision-making, to assess the viability of investing in a company. Investors

4.4. Requirements on financial statements

should be straightforward to read and understand.

4.5. Reporting rules and standards for financial statements

5. Statement of financial position

5.1. Information presented in the statement of financial position

5.2. Disclosure requirements on information presented in the statement of

5.3. Explanation of accounts presented in the statement of financial position

(L3) Liabilities and assets for current tax

6. Compliance of YTL Power International's annual report with MFRS

- the level of rounding used (thousands -- Note 2, page 68 AR2015)

(IFRS) as the financial reporting standards to be used in Malaysia.

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