Pacific Islands Forum Fisheries Agency Financial statements for the year ended 30 June 2016 PACIFIC ISLANDS FORUM FISHERIES AGENCY Financial statements for the year ended 30 June 2016 Table of contents Page Directors’ report 1 Independent auditor’s report 3 Statement of financial performance 4 Statement of financial position 5 Statement of changes in equity 6 Statement of cash flows 7 Statement of comparison of budget and actual amounts 8 Notes to the financial statements 9 PACIFIC ISLANDS FORUM FISHERIES AGENCY Director General’s report The Director General of Pacific Islands Forum Fisheries Agency (‘the Secretariat’) is pleased to present the report on the financial statements of the Secretariat which comprises of the General Fund, Trust Funds, Housing Fund and Vessel Register Fund for the financial year ended 30 June 2016. In order to comply with the provisions of the Secretariat’s Financial Regulations, the Director General reports as follows: Review of operations and changes in state of affairs The Secretariat was established in August 1979 by an international convention . The Secretariat’s current membership comprises of the governments of sixteen countries and one territory member government, a total of seventeen members. It was established to help member countries maximize benefits from sustainable use of the fisheries resources within their 200 miles exclusive economic zone. As stipulated in the Secretariat Convention, the functions and responsibilities of the Secretariat are to:  collect, analyse, evaluate and disseminate to Parties relevant statistical and biological information with respect to the living marine resources of the region and in particular the highly migratory species;  collect and disseminate to Parties relevant information concerning management procedures, legislation and agreements adopted by other countries both within and beyond the region;  collect and disseminate to Parties relevant information on prices, shipping, processing and marketing of fish and fish products;  provide, on request, to any Party technical advice and information, assistance in the development of fisheries policies and negotiations, and assistance in the issue of licences, the collection of fees or in matters pertaining to surveillance and enforcement;  seek to establish working arrangements with relevant regional and international organisations, particularly the South Pacific Commission; and  undertake such other functions as the Committee may decide. The core functions of the Secretariat remained unchanged during the financial year under review. During the financial year there was no significant change in the principal activities or state of affairs of the Secretariat other than that referred to in the financial statements or notes thereto. The Secretariat reported a net deficit of US$649,687 (2015: US$1,359,170 deficit). This was an acceptable outcome noting VMS budgeted to use its reserves of $602,754 and the balance relates to exchange rate impacts on donor funding and related challenges addressed by managers throughout the year. Independent audit report The financial statements have been audited by Ernst & Young and should be read in conjunction with the independent audit report on page 3. Audit fees and non-audit fees are disclosed at Note 8. Other information Pacific Islands Forum Fisheries Agency’s registered office and its principal place of business are as follows: 1 FFA Road PO Box 629 Honiara Solomon Islands Tel: (677) 21124 Fax: (677) 23995/20092 Website: http//www.ffa.int 1 PACIFIC ISLANDS FORUM FISHERIES AGENCY Director General’s report – continued Director General’s declaration The Director General declares that: (a) the financial statements fairly present the financial position of Pacific Islands Forum Fisheries Agency (‘the Secretariat’) and its financial performance and cash flows as at the end of the 2016 financial year; (b) the financial statements of the Secretariat have been prepared using appropriate accounting policies, consistently applied and supported by reasonable judgments and estimates; (c) all relevant financial reporting and accounting standards have been followed; and (d) in the conduct of its work, the Secretariat has complied with the requirements of the Financial Regulations. ________________________________ James Movick Director General st Honiara, 31 October 2016. 2 Pacific House Tel: +679 331 4166 Level 7 Fax: +679 330 0612 1 Butt Street Suva Fiji ey.com PO Box 1359 Suva Fiji INDEPENDENT AUDIT REPORT To the members of the Pacific Islands Fisheries Forum Agency We have audited the accompanying Financial Statements of the Pacific Islands Forum Agency, which comprise the statement of financial position as at 30 June 2016, and the statement of financial performance, statement of financial position, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Director-General and Management's Responsibility for the Financial Statements The Director-General and management are responsible for the preparation and fair presentation of these Financial Statements in accordance with International Public Sector Accounting Standards, and for such internal control as the management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on the Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. 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 auditors’ judgment, 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 Secretariat’s preparation and fair presentation of the Financial Statements 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 Secretariat’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, 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 opinion. Opinion In our audit opinion: a) proper books of the account have been kept by the Secretariat, so far as it appears from our examination of those books; and b) the accompanying Financial Statements which have been prepared in accordance with Internal Public Sector Accounting Standards; i) are in agreement with books of the accounts; and ii) to the best of our information and according to the explanations given to us, give a true and fair view of the state of affairs of the Secretariat as at 30 June 2016 and of its financial performance, changes in equity, and its cash flows for the year ended on that date. We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. Suva, Fiji Ernst & Young 31 October 2016 Chartered Accountants PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of financial performance for the year ended 30 June 2016 Notes 2016 2015 US$ US$ Income Member country contributions 5 1,686,959 1,639,413 Donor funds 6 10,529,173 13,194,410 Vessel registration fees 3,567,671 2,593,281 Housing rental receipts 37,513 92,897 Interest received 26,499 138,918 Program support and cost recovery 120,498 131,999 Australia’s UST Project Development Fund donation 156,250 335,625 UST levy 314,075 156,575 Vessel levy 143,707 - Benefit from property, plant and equipment 333,479 317,987 Other income 92,160 115,183 Total income 17,007,984 18,716,288 Expenditures Output 1: High Level Advice 7 3,285,343 4,950,207 Output 2: Fisheries Management 7 1,871,607 1,250,252 Output 3: Fisheries Development 7 2,888,948 4,082,500 Output 4: Fisheries Operations 7 4,338,286 4,127,277 Output 5: Corporate Services 7 5,273,487 5,665,222 Total expenditures 17,657,671 20,075,458 Deficit for the year (649,687) (1,359,170) The above statement of financial performance should be read in conjunction with the notes to the financial statements. 4 PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of financial position as at 30 June 2016 Notes 2016 2015 US$ US$ Assets Current assets Cash and cash equivalents 21 10,072,717 9,121,360 Receivables from exchange transactions 10 836,845 825,006 Receivables from non-exchange transactions 11 624,475 151,866 Prepayments 12 189,346 529,330 Total current assets 11,723,383 10,627,562 Non-current assets Property, plant and equipment 13 5,609,172 5,924,078 Prepayments 12 78,359 68,269 Total non-current assets 5,687,531 5,992,347 Total assets 17,410,914 16,619,909 Liabilities Current liabilities Payables and accruals from exchange transactions 14 3,282,368 3,270,416 Payables and accruals from non-exchange transactions 15 6,299,624 4,545,618 Employee benefits 16 860,356 861,538 Deferred income liability 17 333,479 317,987 Total current liabilities 10,775,827 8,995,559 Non-current liabilities Employee benefits 16 142,074 150,754 Deferred income liability 17 5,115,168 5,446,064 Total non-current liabilities 5,257,242 5,596,818 Total liabilities 16,033,069 14,592,377 Net assets 1,377,845 2,027,532 Equity Accumulated surpluses 1,377,845 2,027,532 Total equity 1,377,845 2,027,532 Signed in accordance with the Financial Regulation of Pacific Islands Forum Fisheries Agency: ________________________________ James Movick Director General st Honiara, 31 October 2016. The above statement of financial position should be read in conjunction with the notes to the financial statements. 5 PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of changes in equity for the year ended 30 June 2016 Accumulated funds US$ Balance at 1 July 2014 3,386,702 Deficit for the year (1,359,170) Balance at 30 June 2015 2,027,532 Deficit for the year (649,687) Balance at 30 June 2016 1,377,845 The above statement of changes in equity should be read in conjunction with the notes to the financial statements. 6 PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of cash flows for the year ended 30 June 2016 Notes 2016 2015 US$ US$ Cash flows from operating activities Receipts from member countries contribution 5 1,667,516 1,693,506 Donor funding 6 12,089,398 6,970,693 Receipts from vessel registration 3,382,828 3,463,395 Rental receipts 32,695 175,764 Receipts from program support 133,466 124,909 Other receipts 721,782 938,932 Inflows from receipts 18,027,685 13,367,199 Payments for staff costs (6,650,237) (7,195,062) Payments for project costs (8,970,681) (10,710,848) Payments for housing fund costs (1,380,229) (1,499,759) Outflows from payments (17,001,147) (19,405,669) Net cash generated by/(used in) operating activities 21(b) 1,026,538 (6,038,470) Cash flows from investing activities Interest received 34,061 155,291 Investment in term deposits - 1,046,068 Repayments by inter-entities - 172,330 Payments for property, plant and equipment (186,544) (277,883) Proceeds from disposal of assets 77,302 8,853 Net cash (used in)/generated by investing activities (75,181) 1,104,659 Net increase/(decrease) in cash and cash equivalents 951,357 (4,933,811) Cash and cash equivalents at the beginning of the year 9,121,360 14,055,171 Cash and cash equivalents at the end of the year 21(a) 10,072,717 9,121,360 The above statement of cash flows should be read in conjunction with the notes to the financial statements. 7 PACIFIC ISLANDS FORUM FISHERIES AGENCY Statement of comparison of budget and actual amounts for the year ended 30 June 2016 BUDGET ACTUALS VARIANCE Revised Budget less Approved Revised Approved Revised Actual Amounts 2016 2016 2015 2015 2016 2015 2016 2015 US$ US$ US$ US$ US$ US$ US$ US$ Income Member country contributions 1,686,955 1,686,955 1,617,630 1,639,412 1,686,959 1,639,413 (4) (1) Donor funds 13,488,145 13,101,792 15,391,009 15,498,696 10,529,173 13,194,410 2,572,619 2,304,286 Vessel registration fees 4,273,332 3,925,329 3,867,799 3,871,561 3,567,671 2,593,281 357,658 1,278,280 Housing rental receipts 1,234,075 1,296,939 1,296,906 1,212,132 37,513 92,897 1,259,426 1,119,235 Interest received 79,440 30,857 79,440 79,440 26,499 138,918 4,358 (59,478) Program support and cost recovery 1,965,404 1,967,206 1,509,152 1,489,013 120,498 131,999 1,846,708 1,357,014 Australia’s Project Development Fund donation 223,750 223,750 301,125 301,125 156,250 335,625 67,500 (34,500) UST levy 315,000 315,000 - 157,500 314,075 156,575 925 925 Vessel levy 255,700 261,700 - - 143,707 - 117,993 - Benefit derived from property, plant and - 351,483 95,200 95,200 333,479 317,987 18,004 (222,787) equipment Other income 809,738 811,121 658,125 850,483 92,160 115,183 718,961 735,300 Total income 24,331,539 23,972,132 24,816,386 25,194,562 17,007,984 18,716,288 6,964,148 6,478,274 Expenditures Output 1: High Level Advice 4,889,609 4,560,745 4,739,497 4,851,609 3,285,343 4,950,207 1,275,402 (98,598) Output 2: Fisheries Management 3,362,235 3,231,650 2,427,745 2,499,048 1,871,607 1,250,252 1,360,043 1,248,796 Output 3: Fisheries Development 4,441,637 4,250,706 5,567,806 5,687,509 2,888,948 4,082,500 1,361,758 1,605,009 Output 4: Fisheries Operations 6,255,255 6,398,292 6,458,567 6,463,530 4,338,286 4,127,277 2,060,006 2,336,253 Output 5: Corporate Services 5,382,803 5,530,739 5,622,771 5,692,866 5,273,487 5,665,222 257,252 27,644 Total expenditures 24,331,539 23,972,132 24,816,386 25,194,562 17,657,671 20,075,458 6,314,461 5,119,104 Net - - - - (649,687) (1,359,170) 649,687 1,359,170 The above statement of comparison of budget and actual amounts should be read in conjunction with the notes to the financial statements. 8 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 1. General information The Pacific Islands Forum Fisheries Agency (Secretariat) was established in August 1979 to support and enable members to achieve sustainable fisheries and the highest levels of social and economic benefit in harmony with the broader environment. The Secretariat’s headquarter is located in Honiara, Solomon Islands. There are seventeen members comprising of Australia, Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, New Zealand, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tokelau, Tuvalu, and Vanuatu. The addresses of its registered office and principal place of business are disclosed in the director’s report. st The financial statements were authorised for issue by the Director General on 31 October 2016. 2. Significant accounting policies 2.1 Statement of compliance and basis of preparation The financial statements of the Secretariat have been prepared on accrual basis of accounting in accordance with International Public Sector Accounting Standards (IPSAS) using the historic cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The financial statements have been prepared on a going concern basis, and the accounting policies have been applied consistently throughout the period. The functional and reporting currency of the Secretariat is expressed in United States of America Dollar (USD). Amounts in the financial statements are rounded to the nearest dollars unless otherwise stated. 2.2 Foreign currencies Transactions in currencies other than the Secretariat’s functional currency are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in surplus or deficit in the period in which they arise. 2.3 Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. 9 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 - continued 2. Significant accounting policies - continued 2.4 Financial assets The Secretariat initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Secretariat becomes a party to the contractual provisions of the instruments. Financial assets are classified into the following specified categories: financial assets ‘held -to-maturity’ investments and ‘loans and receivables’. The classification depends on the nature and p urpose of the financial assets and is determined at the time of initial recognition. Held-to-maturity investments Term deposits with fixed maturity dates that the Secretariat has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method less any impairment losses. Loans and receivables comprise cash and cash equivalents and trade and other receivables. Cash and cash equivalents comprises of cash on hand and cash at bank and short term deposits with a maturity of three months or less. Derecognition of financial assets The Secretariat derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Secretariat neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Secretariat recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Secretariat retains substantially all the risks and rewards of ownership of a transferred financial asset, the Secretariat continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. 2.5 Financial liabilities Other financial liabilities The Secretariat recognises all other financial liabilities on trade date at which the Secretariat becomes a party to the contractual provision of the instrument. Other financial liabilities are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Other financial liabilities comprise trade and other payables. Derecognition of financial liabilities The Secretariat derecognises financial liabilities when, and only when, the Secretariat’s obligations are discharged, cancelled or they expire. 10 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 - continued 2. Significant accounting policies - continued 2.6 Property, plant and equipment Initial recognition and subsequent expenditure Property, plant and equipment is measured initially at cost. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of an item of property, plant and equipment is recognised only when it is probable that future economic benefit or service potential associated with the item will flow to the Secretariat, and if the item’s cost or fair value can be measured reliably. Where an asset is acquired in a non-exchange transaction for nil or nominal consideration the asset is initially measured at its fair value. Measurement subsequent to initial recognition Subsequent to initial recognition, property, plant and equipment are measured using either the cost model or the revaluation model, as described below: Land and buildings are measured at fair value, less accumulated depreciation on leasehold land and buildings and any impairment losses recognised after the date of the revaluation. The fair value of land and buildings is their market value as determined by a registered valuer. Revaluation is performed on a class-by-class basis. If an item of property, plant and equipment is revalued, the entire class to which the asset belongs is revalued. Valuations are performed with sufficient frequency to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. The valuation cycle for revalued asset classes is normally three to five years. A revaluation surplus is recorded in other comprehensive revenue and expense and credited to the asset revaluation reserve in net assets/equity. However, to the extent that it reverses a revaluation deficit of the same class of asset previously recognised in surplus or deficit, the increase is recognised in surplus or deficit. A revaluation deficit is recognised in the surplus or deficit, except to the extent that it offsets an existing surplus on the same asset class recognized in the asset revaluation reserve. Plant and equipment are measured at cost, net of accumulated depreciation and impairment losses, if any. Depreciation Depreciation is charged on a straight-line basis over the useful life of the asset. Depreciation is charged at rates calculated to allocate the cost or valuation of the asset less any estimated residual value over its remaining useful life:  Leasehold land 50 years  Building 40 years  Office plant and equipment 4 years  Office furniture 5 years  Household equipment and furniture 5 years  Computers 3 years  Motor vehicles 5 years The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. For revalued assets, any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amounts of the assets and the net amounts are restated to the revalued amounts of the assets. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. 11 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 - continued 2. Significant accounting policies - continued 2.6 Property, plant and equipment - continued Derecognition An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits or service potential are expected from its use or disposal. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in surplus or deficit. Upon disposal or derecognition, any revaluation reserve relating to the particular asset being sold is transferred to accumulated comprehensive revenue and expense. 2.7 Employee benefits Wages, salaries and annual leave Liabilities for wages and salaries (including non-monetary benefits) and annual leave are recognised in surplus or deficit during the period in which the employee rendered the related services, and are generally expected to be settled within twelve months of the reporting date. The liabilities for these short-term benefits are measured at the amounts expected to be paid when the liabilities are settled. Retention Employees of the Secretariat become eligible for retention after completion of their contract. The liability for retention is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date depending on their signed contract. Contracted employees are entitled to 7% retention per year of service to the Secretariat. Gains and losses on the retention are fully accounted for in the statement of financial performance. 2.8 Equity Equity is the member countries’ interest in the Secretariat, measured as the difference between total assets and total liabilities. Equity is made up of accumulated comprehensive revenue and expense. Accumulated comprehensive revenue and expense is the Secretariat’s accumulated surplus or deficit since the formation of the Secretariat. 2.9 Revenue Revenue is recognised to the extent that it is probable that the economic benefits or service potential will flow to the Secretariat and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment. The specific recognition criteria described below must also be met before revenue is recognised. Revenue from non-exchange transactions: Member country contribution Member country contribution revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Secretariat and the amount of revenue can be measured reliably) and by reference to assessed computations approved at annual conference. Contributions from member countries are recognised on an accrual basis. Contributions from member countries received in advance for the next financial year are treated as advance funds. 12 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 - continued 2. Significant accounting policies - continued 2.9 Revenue - continued Revenue from non-exchange transactions: - continued Donor funds Donor funds are assistance by the government or organisation in the form of transfers of resources to the Secretariat in return for past or future compliance with certain conditions relating to the operating activities of the Secretariat. Donor funds are used only for the purposes specified by the donors and shall be accepted only if the purposes of such contributions from member governments, private organizations or other donors are consistent with the policies of the Secretariat. Donor funds are not recognised until there is reasonable assurance that the Secretariat will comply with the conditions attaching to them and the funds will be received. Donor funds are recognised on a cash basis. Donor funds whose primary condition is that the Secretariat should purchase or acquire long-term assets are recognised as deferred revenue in the statement of financial position and recognised as income on a systematic and rational basis over the useful lives of the related assets. Donor funds are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis. Donor funds that are receivable as compensation for expenses or deficits already incurred or for the purpose of giving immediate financial support to the entity with no future related costs are recognised as income of the period in which it becomes receivable. Donor funds received during the financial year that are not spent by the end of that financial year are treated as deferred income and carried forward to the next financial year. Donations Donations are funds donated to the Secretariat by member countries. Such donations do not have specific conditions and as such the donations are recorded as revenue in the statement of financial performance. Vessel levy Vessel levy are charges imposed on vessels by the Secretariat to assist with its operations and the levy received are recorded as revenue in the statement of financial performance. Revenue from exchange transactions: Vessel registration fees Vessel registration fees are often paid in advance and revenue is recognised when the license or the registration period falls within the financial year. Vessel registration fees received prior to the start of the registration period it relates to are treated as advanced funds. Housing rental income Housing rental income is recognised on a monthly basis over the term of the tenancy agreement. Rental income is accrued for properties rented out to external parties, especially to other related parties such as US Treaty and employees of FFA. Rental income also includes rental income received to pay landlords on behalf of the employees for the other related parties. 13 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 - continued 2. Significant accounting policies - continued 2.9 Revenue - continued Revenue from exchange transactions: - continued Vessel registration fees Vessel registration fees are often paid in advance and revenue is recognised when the license or the registration period falls within the financial year. Vessel registration fees received prior to the start of the registration period it relates to are treated as advanced funds. Housing rental income Housing rental income is recognised on a monthly basis over the term of the tenancy agreement. Rental income is accrued for properties rented out to external parties, especially to other related parties such as US Treaty and employees of FFA. Rental income also includes rental income received to pay landlords on behalf of the employees for the other related parties. Interest revenue Interest revenue is recognised when it is probable that the economic benefits will flow to the Secretariat and the amount of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in the statement of financial performance. Program support and cost recovery Revenue from program support is recognised based on agreement documented in Memorandum of Agreements (MOUs) between other donor funds and the Secretariat which is a management fee charged on funds received. The management fee is a percentage applied on funds received and varies from fund to fund and revenue is recognised on accrual basis. Cost recovery revenue is recognised by reference to assessed computations approved at annual conference. The approved cost recovery is calculated 66% of total staff costs and it is recognised on accrual basis. Other income Other income includes fees from hire of conference centre, office rental, foreign exchange gains or losses, realised gains and losses on the sale of PP&E held at cost, reimbursement of medical fees from insurance provider and tea money received from employees. 2.10 Retirement benefit costs Contributions to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. 2.11 Income tax and other taxes The Secretariat is exempt from corporate income tax, goods tax, duty tax and sales tax obligations under Section 11 of the Solomon Islands Diplomatic Privileges and Immunities Act. The Secretariat is only liable for pay-as-you-earn (PAYE) tax on local employees and withholding taxes under Solomon Islands Income Tax Act. 14 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 - continued 2. Significant accounting policies - continued 2.12 Impairment of tangible asset At the end of each reporting period, the Secretariat reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Secretariat estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest company of cash- generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of 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 the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in surplus or deficit, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in surplus or deficit, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 2.13 Comparatives Where necessary comparatives have been changed to conform to the presentation in the current financial year. 2.14 Budget information The budget figures presented in these financial statements are those included in the Secretariat’s 2015/2016 Annual Work Plan (AWP). The Annual Work Plan budget figures are approved by the Pacific Islands Forum Fisheries Committee (FFC) at the beginning of each financial year following a period of consultation with the members as part of the Annual Work Plan process. These figures do include any additional expenditure subsequently approved by the FFC outside the Annual Work Plan process. The Annual Work Plan figures have been prepared in accordance with FFA’s Financial Regulation and are consistent with the above accounting policies adopted by the FFC for the preparation of these financial statements. Explanation of major variances between actual results and budgeted figures is provided in Note 24. 15 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 - continued 3. Significant accounting judgements, estimates and assumptions In the application of the Secretariat’s accounting policies, which are described in note 2, management is required to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, carrying amounts of assets and liabilities that are not readily apparent from other sources, and the accompanying disclosures. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 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. 3.1 Judgements in applying accounting policies The following are the judgements, apart from those involving estimations (see 3.2 below), that the management has made in the process of applying the Secretariat’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.  Revenue recognition – refer note 2.9.  Property, plant and equipment – refer to note 2.6. 3.2 Estimates and assumptions The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Secretariat based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Secretariat. Such changes are reflected in the assumptions when they occur. Fair value measurement of financial instruments When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 2.4 and 2.5 for further disclosures. Revaluation of property, plant and equipment The Secretariat measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive revenue and expense. The Secretariat engaged an independent valuation specialist to assess fair value as at 31 June 2011 for revalued land and buildings. Land and buildings were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property. The key assumptions used to determine the fair value of these non-financial assets and sensitivity analyses are provided in Note 13. 16 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 - continued 3. Significant accounting judgements, estimates and assumptions 3.2 Estimates and assumptions - continued Impairment of non-financial assets – non-cash-generating assets The Secretariat reviews and tests the carrying value of non-cash-generating assets (other than property, plant and equipment measured using the revaluation model) when events or changes in circumstances suggest that there may be a reduction in the future service potential that can reasonably be expected to be derived from the asset. Where indicators of possible impairment are present, the Secretariat undertakes impairment tests, which require the determination of the asset’s fair value less c ost to sell and its recoverable service amount. The asset’s fair value less costs to sell is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. In the absence of observable market evidence, fair value is measured using depreciated replacement cost (DRC). The value in use of the asset is calculated using DRC. DRC is determined by reference to the estimated cost of reproducing the asset or replacing the asset’s service potential. The estimation of these inputs into the calculation relies on the use estimates and assumptions. Any subsequent changes to the factors supporting these estimates and assumptions may have an impact on the reported carrying amount of the related asset. Useful lives and residual values The useful lives and residual values of assets are assessed using the following indicators to inform potential future use and value from disposal:  The condition of the asset based on the assessment of experts employed by the Secretariat  The nature of the asset, its susceptibility and adaptability to changes in technology and processes  The nature of the processes in which the asset is deployed  Availability of funding to replace the asset  Changes in the market in relation to the asset The estimated useful lives of the asset classes held by the Secretariat are listed in Note 2.6. 4. Capital management For the purpose of the Secretariat’s capital management, the Secretariat’s capital is its equity, including accumulated comprehensive revenue and expenses and all equity reserves attributable to the Secretariat. Equity is represented by net assets. The Secretariat manages capital largely as a by-product of managing its revenue, expenses, assets, liabilities and general financial dealings. The FFA Regulation requires the Secretariat to manage its financial resources effectively, efficiently and economically against high standards of accountability, fairness and transparency. In order to achieve this overall objective, the Secretariat has to ensure that the expenditure needs identified in the Secretariat’s Strategic Plan, Statement of Intent and Annual Work Plan are met in the manner set out in these plans. The FFC requires the Secretariat to make adequate and effective provision in its Strategic Plan, Statement of Intent and in its Annual Work Plan to meet the expenditure needs identified in those plans. The factors that the Secretariat is required to consider when determining the most appropriate sources of funding for each of its activities are set out in the Financial Regulation. The sources and levels of funding are set out in the funding and financial policies in the Secretariat’s Strategic Plan. The Secretariat monitors actual expenditure incurred against the Strategic Plan, Statement of Intent and Annual Work Plan. No changes were made in the objectives, policies or processes for managing capital during the years ended 30 June 2015 and 2016. 17 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 5. Member country contribution reconciliation 2016 2015 US$ US$ Member country: Contributions received 1,667,516 1,693,506 Less: Contribution arrears as at 1 July 32,897 88,098 Contributions received in advance (prepayment) - 49,127 32,897 137,225 Add: Contributions received in advance in prior year 49,127 50,235 Contribution arrears as at 30 June 3,213 32,897 52,340 83,132 Assessed contributions 1,686,959 1,639,413 Member Contributions Contributions Assessed Contributions Contributions Contributions countries received in in arrears – contributions received in received for in arrears – advance – 30 June 2015 for 2016 2016 2017 30 June 2016 30 June 2015 US$ US$ US$ US$ US$ US$ Australia - - 616,892 616,892 - - Cook Islands 19,597 - 19,597 - - - FSM 9,933 - 42,362 32,429 - - Fiji - 488 42,362 39,637 - 3,213 Kiribati - - 30,957 30,957 - - Marshall Islands - - 30,957 30,957 - - Nauru - - 30,957 30,957 - - New Zealand - - 616,892 616,892 - - Niue 19,597 - 19,597 - - - Palau - - 30,957 30,957 - - Papua New - - 42,362 42,362 - - Guinea Samoa - - 19,597 19,597 - - Solomon Islands - - 42,362 42,362 - - Tokelau - - 19,597 19,597 - - Tonga - - 30,957 30,957 - - Tuvalu - - 19,597 19,597 - - Vanuatu - 32,409 30,957 63,366 - - Total – 2016 49,127 32,897 1,686,959 1,667,516 - 3,213 Total – 2015 50,235 88,098 1,639,413 1,693,506 49,127 32,897 18 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 6. Donor funds income reconciliation 2016 2015 US$ US$ Total donor funds received 12,089,398 6,970,693 Add: donor funds receivable 242,908 141,001 Total funds received and receivable 12,332,306 7,111,694 Add: Opening advance fund 4,496,491 10,579,207 Total funds available 16,828,797 17,690,901 Less: Advance funds carried forward (6,299,624) (4,496,491) Total Trust Fund income 10,529,173 13,194,410 Funds Funds Funds Total Net received/ carried carried income income Donors receivable forward forward to 2016 2016 2016 2016 2017 US$ US$ US$ US$ US$ Australia (DFAT) – core funding 4,103,435 45,760 4,149,195 1,439,935 2,709,260 Australia (DAWR) 103,003 - 103,003 59,509 43,494 New Zealand (NZMFAT) – core funding 1,951,998 8,516 1,960,514 31,895 1,928,619 NZMFAT – Investment, Export Facilitation 635,190 308,073 943,263 506,743 436,520 NZMFAT – Pacific Fisheries Training 540,427 755,752 1,296,179 889,386 406,793 NZMFAT – Infrastructure - 222,407 222,407 104,396 118,011 NZMFAT – Information & Management 681,733 609,956 1,291,689 652,405 639,284 NZMFAT – Te Vaka Moana - 826,833 826,833 502,401 324,432 NZMFAT – Leaders Input 423,872 - 423,872 219,490 204,382 Taiwan (ROC) - 4,852 4,852 - 4,852 Japan Promotion Fund (JPF) 889,357 1,072,472 1,961,829 1,073,651 888,178 Oceanic Fisheries Management Project - 605,599 605,599 107,844 497,755 (OFMP)/UNDP OFMP/FAO 609,348 - 609,348 - 609,348 European Union (EU)/DevFish2 1,094,105 - 1,094,105 - 1,094,105 National Marine Fisheries Service (NMFS) - 8,594 8,594 8,594 - Australian Centre for International - 12,264 12,264 12,264 - Agricultural Research (ACIAR) SciCOFish - 9,419 9,419 9,419 - Food & Agriculture Organisation (FAO) 179,972 20,580 200,552 - 200,552 World Bank-IDA PROP - 399,997 399,997 224,083 175,914 World Bank-GEF PROP - 99,997 99,997 99,997 - World Bank-GEF OPP 199,997 - 199,997 199,997 - FFA/PNA Corporation 68,576 - 68,576 46,508 22,068 Environmental Defense Fund (EDF) 100,000 - 100,000 41,823 58,177 Wide World Fund – New Zealand 97,897 - 97,897 - 97,897 Other 47,797 91,019 138,816 69,284 69,532 Total – 2016 12,332,306 4,496,491 16,828,797 6,299,624 10,529,173 Total – 2015 7,111,694 10,579,207 17,690,901 4,496,491 13,194,410 19 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 7. Expenditures by outputs 2016 2015 US$ US$ Output 1: High level advice Staff costs and benefits 2,409,868 2,487,734 Project expenditures 875,475 2,462,473 3,285,343 4,950,207 Output 2: Fisheries management Staff costs and benefits 709,540 735,730 Project expenditures 1,162,067 514,522 1,871,607 1,250,252 Output 3: Fisheries development Staff costs and benefits 1,037,812 1,200,462 Project expenditures 1,851,136 2,882,038 2,888,948 4,082,500 Output 4: Fisheries operations Staff costs and benefits 1,231,736 1,352,007 Project expenditures 3,106,550 2,775,270 4,338,286 4,127,277 Output 5: Corporate services Staff costs and benefits 1,416,675 1,606,778 Operating expenditures 3,360,547 3,502,872 Capital expenditures 40,439 109,621 Depreciation 455,826 445,951 5,273,487 5,665,222 Total expenditures 17,657,671 20,075,458 8. Audit fees and non-audit fees Audit fees 8,000 8,000 Other charges relating to the audit 15,000 12,000 23,000 20,000 9. Commitments for expenditure The Secretariat is not aware of any capital commitments as at the end of the financial year (2015: Nil). 20 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 10. Receivables from exchange transactions 2016 2015 US$ US$ Rental receivable 13,037 12,777 Interest receivable 2,701 10,262 Inter-entity receivables 393,410 338,015 Sundry recoverable 475,360 463,952 Total receivables 884,508 825,006 Provision for doubtful debts (47,663) - Net receivables 836,845 825,006 Receivables from exchange transactions are non-interest bearing and are generally on terms of 30 to 2 years. As at 30 June, the ageing analysis of receivables from exchange transactions is as follows: Ageing of past due but not impaired Less than 30 days 276,999 26,642 30 – 60 days 34,622 93,537 60 – 90 days 2,874 5,764 90 days and over 570,013 699,063 Total 884,508 825,006 11. Receivables from non-exchange transactions Membership contribution receivable 3,213 32,897 Donor fees receivable 621,262 118,969 624,475 151,866 Receivables from non-exchange transactions are non-interest bearing and are generally on terms of 30 days to 1 year. As at 30 June, the ageing analysis of receivables from non-exchange transactions is as follows: Ageing of past due but not impaired Less than 30 days 617,828 118,968 30-60 days 3,213 - 90 days and over 3,434 32,898 Total 624,475 151,866 12. Prepayments Prepayments 189,346 529,330 Rental bonds receivable 78,359 68,269 267,705 597,599 Current 189,346 529,330 Non-current 78,359 68,269 267,705 597,599 21 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 13. Property, plant and equipment Plant, equipment Leasehold Buildings and Motor Land at fair at fair furniture at vehicles at value value cost cost Total US$ US$ US$ US$ US$ Cost or valuation Balance at 30 June 2014 2,250,600 4,140,935 568,419 179,982 7,139,936 Additions - - 245,982 31,902 277,884 Disposals - - (3,480) - (3,480) Balance at 30 June 2015 2,250,600 4,140,935 810,921 211,884 7,414,340 Additions - 13,189 151,748 21,606 186,543 Disposals - (40,865) (41,121) (34,147) (116,133) Balance at 30 June 2016 2,250,600 4,113,259 921,548 199,343 7,484,750 Accumulated depreciation Balance at 30 June 2014 (367,927) (265,880) (289,972) (122,575) (1,046,354) Disposal - - 2,043 - 2,043 Depreciation expense (122,643) (103,523) (190,813) (28,972) (445,951) Balance at 30 June 2015 (490,570) (369,403) (478,742) (151,547) (1,490,262) Disposal - 3,497 32,866 34,147 70,510 Depreciation expense (122,643) (103,505) (208,913) (20,765) (455,826) Balance at 30 June 2016 (613,213) (469,411) (654,789) (138,165) (1,875,578) Net book value Balance as at 30 June 2016 1,637,387 3,643,848 266,759 61,178 5,609,172 Balance as at 30 June 2015 1,760,030 3,771,532 332,179 60,337 5,924,078 13.1 Leasehold land and buildings carried at valuation The leasehold land was donated by Solomon Islands and the buildings were donated by various donors to Pacific Islands Forum Fisheries Agency. These had previously not been recorded. On transition to IFRS, and now IPSAS, the leasehold land and buildings and the related deferred income were brought to account. The leasehold land was not recorded in the financial statements for prior years since valuation. The leasehold land was included in the financial statements in 2015. An independent valuation of the Secretariat’s buildings was performed by Value Solutions Appraisal Ltd to determine the fair value of the buildings. The valuation, which conforms to International Valuation Standards, was determined by reference to discounted cash flows using a discount rate of 10%. The effective date of the valuation is 1 July 2011. 22 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 2016 2015 US$ US$ 14. Payables and accruals from exchange transactions Other creditors and accruals 1,070,593 870,565 Advance vessel registration fees 2,054,275 2,239,119 Inter-entity payables - 3,959 Others 157,500 156,773 3,282,368 3,270,416 Terms and conditions of the above financial liabilities:  Other creditors and accruals are non-interest bearing and are normally settled on 30-day terms; and  Advance vessel registration fees reflect fees received from vessel owners during the year towards the fiscal year for 2016/2017 registration fees.  Others comprise payables for employee costs especially taxes to Solomon Islands Government, superannuation contributions, credit union contributions and fees to Honiara City Council. The Secretariat has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms or within 30 days of receiving the invoice. 15. Payables and accruals from non-exchange transactions Advance member countries contributions - 49,127 - 49,127 Advance donor funds DFAT - program funding 1,439,935 45,760 DAWR 59,509 - NZMFAT - program funding 31,895 8,516 NZMFAT - Pacific Fisheries Training 889,386 755,752 NZMFAT - Investment & Export Facilitation 506,743 308,073 NZMFAT - Information Management 613,093 609,956 NZMFAT - Infrastructure 143,708 222,407 NZMFAT – Te Vaka Moana 502,401 826,833 NZMFAT – Input into Leaders Report 219,490 - Japan Promotion Fund/OFCF 1,073,651 1,072,472 Taiwan (ROC) - 4,852 OFMP-UNDP/GEF 107,844 - ACIAR 12,264 12,264 NMFS 8,594 8,594 SCICOFISH 9,419 9,419 Food & Agriculture Organisation (FAO) - 20,580 World Bank/GEF PROP 99,997 99,997 World Bank/IDA PROP 224,083 399,997 World Bank/GEF OPP 199,997 - FFA/PNA Coorporattion 46,508 - Environmental Defense Funds 41,823 - Others 69,284 91,019 Total donor funds 6,299,624 4,496,491 Grand total 6,299,624 4,545,618 23 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 15. Payables and accruals from non-exchange transactions - continued Advanced member country contribution No advanced member country contributions were received for financial year 2016/2017. Advance donor funds Advance donor funds relates to donor funds received from various donors for specific projects. The total amount received in 2016 was $12,089,398 (2015: $6,970,693) – refer note 6. The Secretariat recognises as a liability conditions attached to donor funds. Conditions may be imposed by donors on the use of contributions, and include both a performance obligation to use the donation in a specified manner, and an enforceable return obligation to return the donation if it is not used in the specified manner. The amount recognised as a liability is the best estimate of the amount that would be required to settle the obligation at the reporting date. As the Secretariat satisfies the conditions on the donations through performance in the specified manner, the carrying amount of the liability is reduced and an amount of revenue equal to that reduction is recognized. 16. Employee benefits 2016 2015 US$ US$ Annual leave 635,872 660,239 Retention 366,558 352,053 1,002,430 1,012,292 Current 860,356 861,538 Non-current 142,074 150,754 1,002,430 1,012,292 17. Deferred income liability Current Arising from fixed asset (i) - General Fund 102,078 102,096 - Trust Fund 107,331 91,821 - Housing Fund 124,070 124,070 333,479 317,987 Non-current Arising from fixed asset (i) - General Fund 2,489,433 2,615,672 - Trust Fund 60,082 140,669 - Housing Fund 2,565,653 2,689,723 5,115,168 5,446,064 5,448,647 5,764,051 (i) An amount of US$333,479 was released from the deferred revenue which represents the depreciation charge for the year on the related property, plant and equipment (2015: US$317,987). 24 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 18. Retirement benefit plans The local employees of the Secretariat are members of a state-managed retirement benefit plan operated by the government of Solomon Islands. Other employees of the Secretariat voluntarily become members of the state-managed retirement benefit plan. The Secretariat is required by Solomon Islands National Provident Fund Act (SINPF) to contribute a fixed percentage of 7.5% as an employer contribution to the retirement benefit scheme to fund the benefits. The only obligation of the Secretariat with respect to the retirement benefit plan is to ensure compliance with the SINPF Act regarding the employer’s contributions. The total expense of US$365,345 (2015: US$362,785) is recognised in the statement of financial performance represents contributions payable to these plans by the Secretariat at rates specified in the rules of the plans. As at 30 June 2016, contributions of US$11,366 (2015: US$14,091) due in respect of the reporting period had not been paid over to the plans. The amounts were paid subsequent to the end of the reporting period. 19. Financial risk management objectives and policies The Secretariat’s principal financial liabilities, other than derivatives, comprise of loans and trade and other payables. The main purpose of these financial liabilities is to finance and provide guaranteed support for the Secretariat’s operations and commitments. The Secretariat’s principal financial assets include loans, trade and other receivables, and cash and short-term deposits that derive directly from its operations. The Secretariat is exposed to foreign currency risk, interest rate risk, credit risk and liquidity risk. The Secretariat’s senior management oversees the management of these risks. The Secretariat’s senior management is supported by a finance team that advises on financial risks and the appropriate financial risk governance framework for the Secretariat. The Secretariat’s financial risk activities are governed by appropriate policies and procedures. Financial risks are identified, measured and managed in accordance with the Secretariat’s policies and risk objectives. It is the Secretariat’s policy that no trading in derivatives for speculative purposes may be undertaken. The Secretariat’s Executive reviews and agrees policies for managing each of these risks, which are summarised below. 19.1 Foreign currency risk management The Secretariat undertakes transactions denominated in foreign currencies; consequently exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy. The carrying amounts of the Secretariat’s foreign currency denominated monetary assets and mo netary liabilities at the end of the reporting period are as follows: Liabilities Assets 2016 2015 2016 2015 US$ US$ US$ US$ Currency of Solomon Islands 508,442 377,945 645,716 876,173 Currency of Australia 12,246 55,016 27,902 211,312 Currency of New Zealand - - 136,411 862,258 Foreign currency sensitivity analysis The Secretariat is mainly exposed to the currencies of Solomon Islands, Australia and New Zealand. The following table details the Secretariat’s sensitivity to a 10% increase and decrease in the US$ against the relevant foreign currencies. Sensitivity rate of 10% was used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in surplus and accumulated funds where the US$ strengthens 10% against the relevant currency. For a 10% weakening of the US$ against the relevant currency, there would be a comparable impact on the surplus and accumulated funds, and the balances below would be negative. 25 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 19. Financial assets and financial liabilities - continued 19.1 Foreign currency risk management - continued Total impact 2016 2015 US$ US$ Indicative foreign currency gain or (i) 28,934 151,678 loss (i) This is mainly attributable to the exposure outstanding on SB$, AU$ and NZ$ cash and cash equivalents, receivables and payables in the Secretariat at the end of the reporting period. The Secretariat’s sensitivity to foreign currency has decreased during the current period mainly due to the depreciation of SB$, AU$ and NZ$ against US$ during the year. In management’s opinion, the sensitivity analysis does not adequately capture the current trends in foreign exchange movements in terms of prudent budget management. The Secretariat will continue to seek advice and take action to reduce future exposure where possible to the impacts of ongoing exchange rate variations. 19.2 Interest rate risk management The Secretariat is exposed to interest rate risk because the Secretariat invests in term deposits at fixed interest rates. The risk is managed by the Secretariat by maintaining an appropriate mix between fixed rates from different banks. The Secretariat’s exposures to interest rates on fin ancial assets and financial liabilities are detailed in the liquidity risk management section of this note. Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. The interest rate profile of the entity’s interest-bearing financial instruments are as follows: 2016 2015 Fixed-rate instruments US$ US$ Short-term deposits 3,720,610 4,489,462 Long-term deposits 63,754 - 3,784,364 4,489,462 If interest rates had been 50 basis points higher/lower and all other variables were held constant, the outcome would be as follows:  outcome for the year ended 30 June 2016 would increase/decrease by US$253 (2015: increase/decrease by USD266). This is mainly attributable to the Secretariat’s exposure to interest rates on its variable rate borrowings; and The Secretariat’s sensitivity to interest rates has decreased during the current period mainly due to th e reduction in interest rates. 26 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 19.3 Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Secretariat. The Secretariat has adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Secretariat’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Trade receivables consist of member country contributions, funds receivable from donors, fees from vessel registration and funds from other managed funds. Ongoing credit evaluation is performed on the financial condition of accounts receivable in order to reduce any exposure to bad debts. The Secretariat does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Secretariat’s maximum exposure to credit risk without taking account of the val ue of any collateral obtained. 19.4 Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Director General, who has established an appropriate liquidity risk management framework for the management of the Secretariat’s short -, medium- and long-term funding and liquidity management requirements. The Secretariat manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The entity’s exposure to liquidity risk is considered not material. 20. Related party transactions The Secretariat has a related party relationship with its managed funds and its executive officers. During the year the following funds were managed by the Secretariat:  Multilateral Fisheries Treaty with the United States of America (UST) Details of transactions between the Secretariat and other related parties are disclosed below. 20.1 Transactions between FFA and its related parties During the financial year, the following transactions occurred between the Secretariat and its related parties: 2016 2015 US$ US$ Rent received from UST Funds 17,733 26,802 Housing allowance received from UST Funds 19,780 22,148 Cost recovery received from UST Administration Fund 120,498 131,999 158,011 180,949 In addition, the net closing balances of accounts receivable and accounts payable arising from transactions between the Secretariat and its related parties are: 27 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 20. Related party transactions - continued 20.1 Transactions between FFA and its related parties - continued 2016 2015 US$ US$ Receivables US Treaty Administration Fund 374,722 296,839 US Treaty Project Development Fund 15,715 6,728 US Treaty Observer Placement Fund 2,351 113 US Treaty Observer Training Fund - 32,241 US Treaty Observer Administration Fund 622 2,094 393,410 338,015 Payables US Treaty Administration Funds - (3,959) - (3,959) 393,410 334,056 All amounts advanced to or payable to related parties are unsecured. The amounts outstanding will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties. 20.2 Key management personnel During the year the following persons were the executives identified as key management personnel with the greatest authority and responsibility for planning, directing and controlling the activities of the Secretariat:  James Movick - Director General  Wez Norris - Deputy Director General  Dr. Tim Adams - Director Fisheries Management.  Mike Batty - Director Fisheries Development.  Noan Pakop - Director Fisheries Operations.  David Rupokets - Director Corporate Services (contract ended in November 2016). The position was vacant till January 2016 when Perry Head was appointed.  Perry Head – Director Corporate Services (appointed in January 2016). The position of Director Corporate Services (DCS) was vacant from November to December 2015 and Perry Head was appointed as the new DCS in January 2016.  Dr. Manu Tupou-Roosen – Legal Counsel The aggregate compensation of the key management personnel comprises of short term benefits only and is set out below: 2016 2015 US$ US$ Short-term benefits 1,741,826 1,823,738 1,741,826 1,823,738 28 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 20. Related party transactions - continued 20.2 Key management personnel - continued The remuneration of key management personnel is determined by the human resources section and approved in the annual Forum Fisheries Committee meeting having regard to the performance of individuals and market trends. The amounts disclosed in the table are the amounts recognised as expenses during the reporting period related to key management personnel. The Director General is provided a vehicle and housing benefits during the year. Key management personnel did not receive any remuneration or compensation other than in their capacity as key management personnel (2015: nil). The Secretariat did not provide any compensation at non-arm’s length terms to close family members of key management personnel during the year (2015: nil). The Secretariat did not provide any loans to key management personnel or their close family members. 21. Cash and cash equivalents (a) Reconciliation of cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in term deposits with a maturity of three months or less. Cash and cash equivalents at the end of the reporting period as shown in the statement of cash flows can be reconciled to the related items in the statement of financial position as follows: 2016 2015 US$ US$ Petty cash 250 54 Cash at bank 6,288,103 4,631,844 Term deposits 3,784,364 4,489,462 10,072,717 9,121,360 Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Secretariat, and earn interest at the respective short-term deposit rates. The cash and cash equivalents balance of the Secretariat includes an amount of $6,299,624 (2015: $4,496,491) that relates to unspent donor funds that are subject to restrictions. The unspent funds relate to activities funded under Trust Fund. The restrictions attached to these donor funds specify that the funds must be spent for the aforementioned respective purposes, and provide a timeframe within which the agreed-upon deliverables required for achieving the purpose of the funds must be completed. 29 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 21. Cash and cash equivalents - continued (b) Reconciliation of surplus for the year to net cash flows from operating activities 2016 2015 US$ US$ Deficit for the year (649,687) (1,359,170) Less: Interest received classified as investing activities (34,061) (155,291) Add: Depreciation 455,826 445,951 Less: Gain on disposal of assets (31,678) (7,417) Movement in assets and liabilities: Increase in receivables from exchange transactions (11,840) (30,127) (Increase)/decrease in receivables from non-exchange (472,609) 82,607 transactions Increase in prepayment 329,894 210,431 Increase in payables and accruals from exchange transactions 11,952 1,124,600 Increase/(decrease) in payables and accruals from non-exchange 1,754,005 (6,183,824) transactions (Decrease) in employee benefits (9,863) (6,895) (Decrease) in deferred income liabilities (315,403) (159,335) 1,026,538 (6,038,470) 22. Contingent liabilities and contingent assets The Secretariat is not aware of any contingent liabilities as at the end of the financial year (2015: Nil). 23. Events after the reporting period There are no material non-adjusting events after the reporting date (2015: Nil). 24. Explanation of major variances against budget The Secretariat’s net deficit was $649,687. The net effect of the followin g items contributed to this variation - those major variations of income and expenses or projects which have overspend (underspend) by more (less) than 5% Income: Donor revenue was lower than budgeted by $2,572,619. This is due to the Secretariat’s deferral of some projects to the next financial year. Vessel registration fees were lower than budgeted by $357,658. This is due to over budgeting of fees and does not consider the discounts given to member country flagged vessels and vessels that pay in advance using the old rate. Housing rental receipts and program support and cost recovery income were lower than budgeted due to elimination of inter-entity transactions of $1,259,426 and $1,846,708 respectively. FFA vessel levy is lower than budget by $117,993 due to the late implementation of the levy, not levy for Kiribati flagged vessels and decrease in number of vessels registration during the financial year. Most vessels paid the registration fees earlier before the implementation of the levy. Other income was lower than budgeted by $718,961 as a result of some projects been funded through reserves. For instance, VMS budgeted to use $605,755 from reserves which indicated that they will be in deficit in this financial year – actually making a deficit of $623,789. 30 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 24. Explanation of major variances against budget - continued Expenditures: Output 1: High Level Advise (HLA) HLA expenses were lower than budgeted by $1,275,402 and constitutes 26% of the Output 1 budget. This is mainly due to ‘project funded’ activities being rolled over into the 2016/17 FY for implementation including funding for the attendance of international meetings, legal capacity building and fisheries training. Output 2: Fisheries Management (FM) FM expenses were lower than budgeted by $1,360,044 which is 54% of the Output 2 budget. The main reason for the shortfall in expenditure against the budget is further delay in implementation of World Bank projects and GEF OFMP2 projects. Output 3: Fisheries Development (FD) FD expenses were lower than budgeted by $1,361,758 and constitutes 24% of the Output 3 budget. The decrease in project is due to the following:  reduced demand for FD planning;  No manager to drive the Investment Facilitation project. The funds mainly carry overs from slow start in year 1;  Trade news project and advice on trade negotiations extended to cover work in following year; and  There was low demand for services from TVM members. In addition, no substantive project coordinator for much of the period. Overall, the underspending is mainly due to lack of flexibility in project funding which resulted in delays in implementation, especially when staff posts are not filled. Output 4: Fisheries Operations (FO) FO expenses were lower than budgeted by $2,060,006 which is 32% of the Output 4 budget. Staff costs and project expenses were lower than budgeted by $256,136 and $1,803,870 respectively. The decrease in staff costs is due to delays in recruiting of VMS Operation Assistants and Subregional Arrangement Officer and savings from other staff costs. The decrease in project expenses is due to the following:  No observer placements, debriefings and related activities due to the suspension of the US Treaty Observer Programme;  Members did not fully utilise the VMS financial assistance funds available to them during the financial year;  No additional Mobile Transceiver Units (MTUs) requested from members (Cook Islands, Samoa, Tonga) for domestic fleet monitoring;  Members did not fully utilize VMS and MCS fellowships and attachment programs throughout the year.;  Still awaiting site confirmation from Kiribati where the VSAT will be installed;  Limited travel by VMS staff for onsite support and no consultancies were engaged during the year;  Left over funds for ongoing WCPFC/members VMS support services relating to claims made for transport and communications costs by on-call staff; and  IT project funds were under-utilised because there were a number of positions / vacancies that were yet to be filled.at that time Output 5: Corporate Services (CS) CS expenses were lower than budgeted by $257,251 which constitute 5% of the Output 5 budget. Staff costs and project expenses were lower than budgeted by $231,937 and $25,314 respectively. 31 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 25. Segment Reporting 25.1 Statement of financial performance General Fund Trust Fund Housing Fund VMS Elimination Grand Total US$ US$ US$ US$ US$ US$ INCOME Member country contributions 1,686,959 - - - - 1,686,959 Donor funds - 10,176,382 - - 352,791 10,529,173 Vessel registration fees - - - 3,567,671 - 3,567,671 Housing rental receipts - - 1,215,787 - (1,178,274) 37,513 Interest received 709 20,694 70 5,026 - 26,499 Program support and cost recovery 1,693,098 - - - (1,572,600) 120,498 Australia Project Development Fund donation 156,250 - - - - 156,250 UST levy 314,075 - - - - 314,075 Vessel levy 143,707 - - - - 143,707 Benefit from property, plant and equipment 102,078 107,331 124,070 - - 333,479 Other income 58,366 - 79,516 33,794 (79,516) 92,160 Total income 4,155,242 10,304,407 1,419,443 3,606,491 (2,477,599) 17,007,984 EXPENDITURES Output 1: High Level Advice 1,354,286 2,160,253 - 132,948 (362,144) 3,285,343 Output 2: Fisheries Management - 2,035,019 - - (163,412) 1,871,607 Output 3: Fisheries Development - 3,202,886 - - (313,938) 2,888,948 Output 4: Fisheries Operations - 1,754,939 - 3,892,567 (1,309,220) 4,338,286 Output 5: Corporate Services 2,798,556 1,183,504 1,415,547 204,765 (328,885) 5,273,487 Total expenditures 4,152,842 10,336,601 1,415,547 4,230,280 (2,477,599) 17,657,671 Deficit for the year 2,400 (32,194) 3,896 (623,789) - (649,687) 32 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 25. Segment Reporting - continued 25.2 Statement of financial position General Fund Trust Fund Housing Fund VMS Elimination Grand Total US$ US$ US$ US$ US$ US$ Assets Current assets Cash and cash equivalents 547,810 6,593,177 157,164 2,774,566 - 10,072,717 Receivables from exchange transactions 1,201,411 1,117,839 48,533 683,387 (2,214,325) 836,845 Receivables from non-exchange transactions 3,213 621,262 - - - 624,475 Prepayments 36,667 22,819 77,580 52,280 - 189,346 Total current assets 1,789,101 8,355,097 283,277 3,510,233 (2,214,325) 11,723,383 Non-current assets Property, plant and equipment 2,652,717 167,413 2,719,536 69,506 - 5,609,172 Prepayments - - 78,359 - - 78,359 Total non-current assets 2,652,717 167,413 2,797,895 69,506 - 5,687,531 Total assets 4,441,818 8,522,510 3,081,172 3,579,739 (2,214,325) 17,410,914 33 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 25. Segment Reporting - continued 25.2 Statement of financial position - continued General Fund Trust Fund Housing Fund VMS Elimination Grand Total US$ US$ US$ US$ US$ US$ Liabilities Current liabilities Payables and accruals from exchange transactions 1,015,757 955,892 367,529 3,157,515 (2,214,325) 3,282,368 Payables and accruals from no-exchange transactions - 6,299,624 - - - 6,299,624 Employee benefits 255,012 458,770 70 146,504 - 860,356 Deferred revenue 102,078 107,331 124,070 - - 333,479 Total current liabilities 1,372,847 7,821,617 491,669 3,304,019 (2,214,325) 10,775,827 Non-current liabilities Employee benefits 44,772 74,094 1,326 21,882 - 142,074 Deferred revenue 2,489,433 60,082 2,565,653 - - 5,115,168 Total non-current liabilities 2,534,205 134,176 2,566,979 21,882 - 5,257,242 Total liabilities 3,907,052 7,955,793 3,058,648 3,325,901 (2,214,325) 16,033,069 Net assets 534,766 566,717 22,524 253,838 - 1,377,845 Equity Accumulated funds 534,766 566,717 22,524 253,838 - 1,377,845 Total equity 534,766 566,717 22,524 253,838 - 1,377,845 34 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 26. Summary of Trust Fund expenditures 2016 2016 2015 % of % of % of Donors Budget Actual Actual Total Total Total USD USD USD DFAT Output 1: High level advice 1,063,879 863,705 1,348,263 Output 2: Fisheries management 527,849 407,395 597,005 Output 3: Fisheries development 575,288 530,260 23,689 Output 4: Fisheries operations 362,159 266,070 223,196 Output 5: Corporate services 278,736 417,874 311,645 2,807,911 21.19% 2,485,304 24.06% 2,503,798 18.89% DFAT XB Output 1: High level advice - - 583,216 Output 2: Fisheries management - - 185,956 Output 3: Fisheries development - - 675,648 Output 4: Fisheries operations - - 452,018 - 0.00% - 0.00% 1,896,838 14.31% DAWR Output 1: High level advice 62,367 43,494 104,146 62,367 0.47% 43,494 0.42% 104,146 0.78% NZAID Output 1: High level advice 652,237 637,457 779,763 Output 2: Fisheries management 296,981 288,542 557,601 Output 3: Fisheries development 674,890 609,543 748,420 Output 4: Fisheries operations - - 328,284 Output 5: Corporate services 8,516 393,077 29,802 1,632,624 12.32% 1,928,619 18.67% 2,443,870 18.42% NZAID XB - Observer Program Output 4: Fisheries operation - - 82,896 - 0.00% - 0.00% 82,896 0.63% NZAID XB - Investment, Export Facilitation Output 3: Fisheries development 808,073 436,520 582,477 808,073 6.10% 436,520 4.23% 582,477 4.39% NZAID XB - Pacific Fisheries Training Output 1: High level advice 677,812 406,793 715,908 677,812 5.12% 406,793 3.94% 715,908 5.40% 35 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 26. Summary of Trust Fund expenditure - continued 2016 2016 2015 % of % of Donors Budget % of Total Actual Actual Total Total USD USD USD NZAID XB – Information Management Output 4: Fisheries operation 812,070 639,284 519,821 812,070 6.13% 639,284 6.19% 519,821 3.92% NZAID XB – Infrastructure Investment Output 4: Fisheries operation 60,503 96,731 39,001 Output 5: Corporate services 161,431 21,280 757,275 221,934 1.68% 118,011 1.14% 796,276 6.01% NZAID XB – Te Vaka Moana Output 3: Fisheries development 558,888 227,540 120,431 Output 4: Fisheries operations 192,359 96,892 10,021 751,247 5.67% 324,432 3.14% 130,452 0.98% NZ MFAT - Input to Leaders Report Output 3: Fisheries development - 156,923 - - 0.00% 156,923 1.52% - - OFCF/JPF Output 1: High level advice 478,674 208,312 280,393 Output 2: Fisheries management - - 62,350 Output 3: Fisheries development 598,640 243,116 385,663 Output 4: Fisheries operations 444,843 355,373 256,170 1,522,157 11.49% 806,801 7.81% 984,576 7.43% UNDP/GEF Output 2: Fisheries management 1,306,820 1,104,991 9,215 Output 4: Fisheries operations - 2,112 - 1,306,820 9.86% 1,107,103 10.72% 9,215 0.07% EU/DEVFISH Output 3: Fisheries development 1,004,219 996,764 1,753,840 Output 5: Corporate services 48,313 97,701 18,088 1,052,532 7.94% 1,094,465 10.60% 1,771,928 13.37% ROC/Taiwan Output 1: High level advice 1,549 492 - Output 3: Fisheries development 710 2,219 9,766 Output 4: Fisheries operation 2,593 2,140 1,950 Output 5: Corporate services - - 26,157 4,852 0.04% 4,851 0.05% 37,873 0.29% SCICOFISH Output 3: Fisheries development 9,419 - 4,775 9,419 0.07% - 0.00% 4,775 0.04% 36 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 26. Summary of Trust Fund expenditure - continued 2016 2016 2015 Donors Budget % of Total Actual % of Total Actual % of Total USD USD USD FAO Output 3: Fisheries development 20,580 - - Output 4: Fisheries operation 264,032 200,552 101,760 284,612 2.15% 200,552 1.94% 101,760 0.77% WB-IDA PROP Output 2: Fisheries management 1,100,000 175,914 - 1,100,000 8.30% 175,914 1.70% - - FFA/PNA Coorporation Output 5: Corporate services - 22,068 - - 0.00% 22,068 0.21% - - WWF Output 4: Fisheries operation - 97,897 - - 0.00% 97,897 0.95% - - EDF Output 4: Fisheries operation - 58,177 - - 0.00% 58,177 0.56% - - Other Output 4: Fisheries operations 25,793 - 102,252 Output 5: Corporate services 168,202 220,834 405,549 193,995 1.46% 220,834 2.14% 507,801 4.30% Total donor funding 13,248,425 100.00% 10,328,042 100.00% 13,194,410 100.00% 37 PACIFIC ISLANDS FORUM FISHERIES AGENCY Notes to the financial statements for the year ended 30 June 2016 – continued 27. Recognition of interest from bonds provided by Japan Background The Pacific Islands Forum Fisheries Agency (“FFA”) signed a Memorandum of Understanding (“MOU”) with Overseas Fishery Co-oporation Foundation (“OFCF”) dated 20 June 2008 involving an income stream to the FFA for a period up to ten years. Under the Agreement, OFCF purchased Japanese Government Bonds (JGB) with a face value of Y$8,300,000,000 at a cost of Y$8,130,929,000, on behalf of FFA. The loan arrangement states in particular that:  The proceeds of the loan can only be used by Japanese Government bonds that are to be held by a custodian (Mitsubishi UFJ Securities);  FFA is required to pledge the bonds as security for the loan and it is expected that FFA will repay the loan by surrendering the bonds;  The interest on the bond, less commissions, remittance fees and custodian fees, can only be paid into a Promotion Fund account at the Toranomon Branch of The Bank of Tokyo-Mitsubishi UFJ, established under the MOU between FFA and OFCF;  FFA must use this income stream for projects set out in the MOU, being projects that accord the FFA’s Strategic Plan 2020 and business plan, recommended by a Joint (FFA-OFCF) Committee and approved by the Forum Fisheries Committee (FFC);  FFA is not able to sell the bonds or use them for other purposes. Accounting treatment of the bond, loan and interest. Bond and loan Due to the substance of loan arrangement, the bond and the loans do not meet the definition of an asset and liability respectively because FFA does not control the economic benefits of the bond and obligations of the loan. Interest The net interest from Japanese Government Bonds financed by the Overseas Fishery Co-oporation Foundation (OFCF) and paid into an account at the Bank of Tokyo-Mitsubishi UFJ Limited is accounted for when the funding conditions are met and the interest is received. 38