Long Term Assets: Fixed and Intangible

Three types of Long trm assets are shown in the statement of financial position of Nishat Power
Ltd under the following headings

1. Fixed Assets (Note 13)

2. Investments (Accounted for under equity method) (Note 14)
3. Long term Loans and advances (Note 15)

The relevant notes to the financial statements provide following detail about the accounting
treatment of these long term assets

Fixed Assets

This class of asset contains two main and many sub categories explained below.

Operating fixed Assets

Capital work in progress
Property Plant Major Spare Parts and stand by equipments
and
 Equipment
Freehold land

Computer Software
Intengible
asstes

Operating fixed assets consists of the following sub classes

 Buildings and roads on freehold land

 Plant and Machinery
 Improvements on leasehold property
 Electric installations
 Computer equipment
 Furniture and fixtures
 Office equipment
  Vehicles

Methods of Depreciation Used

According to depreciation schedule the depreciation is charged using following methods

1. Freehold land is a non-depreciable asset

2. Straight line method is used for building and roads on freehold land @ 4 to 5.24%
per anum
3. Plant and machinery is being depreciated either by using double declining
method @ 4 to 5.85% per anum or in some cases units of activity method is being
used based on the number of hours used
4. Improvements on leasehold property, Furniture and fixtures and Office
equipment are also being depreciated using straight line @ 10% per anum
5. Electric installations, Computer equipment and Vehicles are depreciated using double
declining method @ 10%, 33% and 20 % respectively

Repairs and improvements

Notes to the financial statement 13.1.1 shows that improvements on leasehold property was
done during the year. These costs of improvement were incurred on property owned by Nishat
(Aziz Avenue) Hotels and Properties Limited, a related party and were capitalized in statement
of financial position.

Disposal of Fixed Assets

 Plant and machinery costing PKR 488705000 were disposed during the year having
accumulated depreciation of PKR 381940000.
 Computer equipment of cost PKR 1734000 were disposed during the year having
accumulated depreciation of PKR 1573000.
 Computer equipment costing PKR 2735000 were disposed during the year having
accumulated depreciation of PKR 2248000.

Gain or Loss on Disposal

Total loss on disposal of operating fixed assets was PKR 14,018,000 (Note 24) and is reported in
the income statement under other expenses head. There was no gain on disposal during the
year.

Amortization of Intangible Fixed Assets

Computer software was amortized using straight line method (Note 13.4 and note 22) by PKR
1,508,000 over five years life period or 20% per anum rate.

Important Note:

All property, plant and equipment and intangible asset of the group are pledged as security for
long term financing as disclosed in note 8 to these consolidated financial statements.

Reporting of Depreciation in Income statement

 The depreciation charge for the year on Operating fixed assets was apportioned
between cost of sales and administrative expenses (Note 13.1.2)
 PKR 9,042,000 was charges to profit for capital work in progress (Note 13.2)
 Amortization of intangible assets was charged to cost of sales (Note 22)

Fixed Asset Turnover Ratio

Sales PKR 15,581,918,000

Book Value of fixed Assets at start of year PKR 10,662,869,000
Book Value of fixed Assets at end of year PKR 10,010,357,000
 Fixed asset turn over 1.51 times

Fixed asset turnover of Nishat power limited shows that it is making sales of PKR 1.51 for every
PKR 1 investment in its fixed assets. In order to assess whether this fixed asset turnover is good
enough or not up to the mark it can be compared to industry average or company’s last year’s
turnover.

Corporations: Organization, Stock Transactions and Dividends

Nishat Power Ltd is a public limited company listed in Pakistan stock exchange since February
2007.

Stockholders’ Equity

Ordinary Share Capital

 Its authorized share capital consists of 500,000,000 shares of PKR 10 par value each.
 Its issued, subscribed and paid up share capital consists of 354,088,500 (2018:
354,088,500) ordinary shares of Rs 10 each fully paid in cash.
 Out of theses, 180,632,955 (2018: 180,632,955) ordinary shares are held by Nishat Mills
Limited, the holding company (51% holdings).

Preference Share Capital

Business have not issued any preference shares.

Capital Reserves

 The reserve is not available for distribution of profits through dividend and will be
utilized on actual occurrence of expenditure.
 The company’s capital reserve amount to PKR 3,153,633,000. This represents
maintenance reserve set aside from retained earnings for the purpose of meeting repair
and maintenance costs associated with major maintenance of the plant in coming years.

Revenue Reserves (Retained Earnings)

The company’s un-appropriated profits amounted to PKR 12,413,549,000. These are the profits
ploughed back into the business after payment of dividends and after amounts transferred to
special reserves. Future dividends are paid out of these reserves.

According to note 7 business have certain restrictions on the distribution of dividends from this
reserve due to the terms of agreement with the lenders of long term finances.
Issue of stock

Company have not issued any common, preferred and no par stock during the financial year
ended 30 June 2019.

Dividends

Two dividend payments were made during the accounting year ending at 30 June 2019.

1. Final dividend for the year ended June 30, 2018 were paid and reported in statement of
changes equity @ Rupees 1.5 per share
2. Interim dividend for the quarter ended March 31, 2019 @ Rupees 1.5 per share were
also paid during the year and deducted from retained earnings in statement of changes
in equity.
3. Unclaimed dividends of PKR 21,666,000 were reported as a current liability in statement
of financial position
4. No stock dividend were paid by the business during the accounting period ended 30
June 2019.

Earnings Per Share

Company’s Basic earnings per share is PKR 10.646 that has been calculated by dividing profits
attributable to shareholders to weighted average number of shares.

Diluted earnings per share

A diluted earnings per share has not been presented as the group does not have any
convertible instruments in issue as at June 30, 2019 and June 30, 2018 which would have any
effect on the earnings per share if the option to convert is exercised.

Investments and Fair Value Accounting