SMALL-SIZED ENTITIES

ILLUSTRATIVE FINANCIAL STATEMENTS

September 2009

The Institute of
Chartered Accountants
of Pakistan
 INDEX Page No.

Introduction i

Balance Sheet 1

Income Statement 2

Cash Flow Statement 3

Notes to the Financial Statements 4

1 Status and Nature of Business

2 Statement of Compliance
3 Summary of Significant Accounting Policies
3.1 Basis of Preparation 4
3.2 Reserve 4
3.3 Borrowing Costs 5
3.4 Foreign Exchange 5
3.5 Staff Retirement Benefits 5
3.6 Taxation 5
3.7 Property, Plant and Equipment 5
3.8 Intangible Assets 6
3.9 Investments 6
3.10 Impairment of Assets 6
3.11 Stores, Spares and Loose Tools 7
3.12 Stock in Trade 7
3.13 Trade and other receivables 7
3.14 Provisions 7
3.15 Dividend 7
3.16 Cash and Cash Equivalents 7
4 Property, Plant & Equipment 8
5 Intangible Asset 8
6 Long-term Investment 9
7 Long-term Loans and Advances 10
8 Stores, Spares and Loose Tools 10
9 Stock in Trade 10
10 Trade Debts 10
11 Short Term Investments 10
12 Other Receivables 11
13 Cash & Bank Balance 11
14 Share Capital 11
15 Revenue Reserve 11
16 Long Term Borrowing-Secured 12
17 Deferred Liabilities 12
18 Trade and Other Payables 13
19 Short Term Borrowings - Secured 13
20 Current Portion of Long term Liabilities 14
21 Contingencies and Commitments 14
22 Revenue 14
23 Cost of Sales 14
24 General and Administration Expenses 15
25 Finance Costs 15
26 Other Income 15
27 Taxation 15
28 Cash Generated from Operations 16
29 Cash and Cash Equivalent 16
30 Related Party Transactions 16
31 Corresponding Figures 16
32 General 16
INTRODUCTION AND EXPLANATORY COMMENTS

This illustrative set of financial statements seeks to provide guidance to the reporting entities and
their auditors with regard to the disclosures to be made in the financial statements prepared in
accordance with the Accounting and Financial Reporting Standards for Small Sized Entities
(SSEs) as defined in the Institute’s circular No. 06/2007 dated November 02, 2007 and the
requirements of the Companies Ordinance, 1984.

The illustrative is merely a technical practice aid and in no way represents the authoritative
pronouncements of the Institute. It does not aim at interpreting the statutory disclosure
requirements set out in the Fifth Schedule and the SSE Standard of ICAP.

This illustrative seeks to represent minimum requirements and does not purport to be all inclusive
and would need review in the light of changes in statutory requirements and accounting
standards from time to time. Users may need to modify the financial statements when further
accounting standards are issued or made applicable subsequently.

The specimen disclosures should not be considered as the only acceptable form of presentation.
The form and content of each reporting entity’s financial statements are the responsibility of the
entity’s management. Alternative presentations to those proposed in this illustrative may be
equally acceptable if they comply with the specific disclosure requirements prescribed in the
accounting standards for SSEs.

Use of the illustrative requires the exercise of individual professional judgment and may require
some modification based on the circumstances of individual reporting entities.

Each disclosure requirement listed in the illustrative, wherever applicable, is denoted by relevant
reference of the Accounting and Financial Reporting Standards for Small Sized Entities (SSEs).

i
 SME illustrative Financial Statements

SSE LIMITED
BALANCE SHEET
As at December 31, 20X8
Note 20X8 20X7 SSE Para #
Rs. Rs.

Non-current assets 29, 30

Property, plant and equipment 4 XXX XXX 32a
Intangible assets 5 XXX XXX 32b
Long-term investments 6 XXX XXX 32c
Long Term Loans and Advances 7 XXX XXX 33
Long term Deposits and prepayments XXX XXX 33
XXX XXX
Current assets 29, 30
Store , Spare & Loose tools 8 XXX XXX 32d
Stock in Trade 9 XXX XXX 32d
Trade Receivables 10 XXX XXX 32e
Short Term Loans and Advances XXX XXX 33
Short Term Deposits and Prepayments XXX XXX 33
Short term investment 11 XXX XXX 33
Other Receivables 12 XXX XXX 33
Cash and bank balances 13 XXX XXX 32f
XXX XXX

Share Capital & Reserves

Authorised: xxxx ordinary shares of Rs.10 each XXX XXX

Issued, subscribed & paid up capital 14 XXX XXX 32k

Reserves 15 XXX XXX 32k
(XXX) (XXX)

Non-current liabilities 29, 31

Long term Borrowing - Secured 16 (XXX) (XXX) 32j
Deferred Liabilities 17 (XXX) (XXX) 29
(XXX) (XXX)

Current liabilities 29, 31

Trade and other payables 18 (XXX) (XXX) 32g
Income tax payable (XXX) (XXX) 32h
Due to related parties (XXX) (XXX) 33
Interest and Markup Accrued (XXX) (XXX) 29,33
Short term Borrowing - Secured 19 (XXX) (XXX) 29,33
Current portion of long term liabilities 20 (XXX) (XXX)
(XXX) (XXX)

Contingencies & Commitments 21

XXX XXX

The annexed notes 1 to 32 from an integral part of these financial statements.

____________________ ____________________ _________________

Chairman Chief Executive Director

The Institute of Chartered Accountants of Pakistan 1

 SME Illustrative Financial Statements

SSE LIMITED
INCOME STATEMENT
For the year ended December 31, 20X8

Note 20X8 20X7 SSE Para #

Rs. Rs. 23(b)

Revenue 22 XXX XXX 35(a)

Cost of sales 23 (XXX) (XXX)

Gross Profit XXX XXX

General and Administrative Expenses 24 (XXX) (XXX)

Other operating expenses (XXX) (XXX)

Profit /Loss from Operating Activities XXX XXX 35(b)

Finance costs 25 (XXX) (XXX) 35( c)

XXX XXX

Other income 26 XXX XXX

Profit before tax XXX XXX

Taxation 27 (XXX) (XXX) 35(d)

Profit after tax XXX XXX 35(e)

The annexed notes 1 to 32 form an integral part of these financial statements.

____________________ ____________________ ____________________

Chairman Chief Executive Director

Institute of Chartered Accountants of Pakistan 2

SSE LIMITED
CASH FLOW STATEMENT (Optional)
For the year ended December 31, 20X8

Note 20X8 20X7 SSE Para#

Rs. Rs.
24
CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 28 XXX XXX

Finance cost paid (XXX) (XXX)
Income tax paid (XXX) (XXX)
PGratuity paid (XXX) (XXX)
Net cash from operating activities XXX XXX

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed capital expenditure (XXX) (XXX)

Proceeds from sale of property, plant and equipment XXX XXX
Interest received XXX XXX
(Increase) /Decrease in Investment XXX XXX
Dividend received XXX XXX
Net cash generated from investing activities XXX XXX

CASH FLOWS FROM FINANCING ACTIVITIES

Long term financing - proceeds XXX XXX

- repayments (XXX) (XXX)
Long term loans - repayments (XXX) (XXX)
Long term murabaha - repayments (XXX) (XXX)
Increase / (decrease) in short term borrowings XXX (XXX)
Dividend paid (XXX) (XXX)
Net cash used in financing activities (XXX) (XXX)

Net increase in cash and cash equivalents XXX XXX

Cash and cash equivalents at beginning of the year XXX XXX

Cash and cash equivalents at end of the year 29 XXX XXX

The annexed notes 1 to 32 form an integral part of these financial statements.

____________________ ___
_____________ ______________
Chairman Chief Executive Director

Institute of Chartered Accountants of Pakistan 3

SSE LIMITED SSE Illustrative Financial
NOTES TO THE FINANCIAL STATEMENTS Statements
For the year ended December 31, 2008 .
SSE Para No

1. STATUS AND NATURE OF BUSINESS

SSE Limited is a company incorporated in Pakistan under the Companies Ordinance 27, 28
1984. The company’s registered office is located at xxx Pakistan. The principal activity
of the company is xxxx. The company has adopted a ‘Registered’ trade name xxx for
its business. The Company is a subsidiary of ABC Ltd (the holding company) with
shareholding of xxx%.

2. STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with the Accounting
and Financial reporting standards for Small Sized Entities as applicable in Pakistan
and the requirements of the Companies Ordinance, 1984. In case requirements differ,
the provisions or directives of the Companies Ordinance, 1984 shall prevail.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation

These financial statements have been prepared under the historical cost convention
except as other wise stated in the respective policies and notes given hereunder.

25, 26
Significant Accounting Estimates and Judgments

The preparation of financial statements in conformity with the Accounting and

Financial Reporting Standards for Small-Sized Entities issued by the Institute of
Chartered Accountants of Pakistan requires management to make judgments,
estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgments about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these
estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognised in the period in which the estimates
are revised.

Significant areas requiring the use of management estimates in these financial

statements relate to the useful life of depreciable assets, provision for doubtful
receivables and slow moving inventory. However, assumptions and judgments made
by management in the application of accounting policies that have significant effect on
the financial statements are not expected to result in material adjustment to the
carrying amounts of assets and liabilities in the next year.

3.2 Revenue

Revenue is recognised when it is probable that the economic benefits associated with 46
the transaction will flow to the company and the amount of revenue and the
associated cost incurred or to be incurred can be measured reliably, on the following
bases:

The Institute of Chartered Accountants of Pakistan 4

SSE LIMITED SSE Illustrative Financial
NOTES TO THE FINANCIAL STATEMENTS Statements
For the year ended December 31, 2008 .
SSE Para No

(i) sale of goods is recognised when the goods are delivered and the risks and 47
rewards of ownership have passed to the customer;

(ii) interest income is recognised on a time proportion basis taking into account
the principal outstanding and the interest applicable; and

(iii) dividend income is recognised when the shareholder’s right to receive

payment is established.

3.3 Borrowing costs

Borrowing costs are recognised as an expense in the period in which these are
incurred except to the extent of borrowing cost that is directly attributable to the
acquisition, construction or production of a qualifying asset. Such borrowing costs, if
any are capitalized as part of the cost of the asset.

3.4 Foreign exchange

Foreign currency transactions are recognised at the exchange rate applicable at the
transaction date. Monetary assets and liabilities are translated into rupees using
exchange rates applicable at the balance sheet date. Gains and losses on
settlement and translation at the year end are recognised in the income statement.

3.5 Staff Retirement benefits

Gratuity Scheme

The company operates a funded/ unfunded gratuity scheme for its employees who
have completed the qualifying period as defined under the respective scheme.

The amount of liability of each employee at year end is computed by number of

years completed multiplied by the last drawn monthly gross salary. The difference
between the current and the previous liability is charged to profit and loss account
as expense for the year.
OR
The entity operates a funded/ unfunded gratuity scheme for its employees who have
completed the qualifying period as defined under the respective scheme. The
charge for the year is based on actuarial valuation conducted on December 31,
20XX using the “Projected Unit Credit Method”.

The amount recognized in the balances sheet represents the present value of
defined benefit obligation as adjusted for unrecognized actuarial gains and losses.

3.6 Taxation

Income tax expense represents current tax expense. Provision for current taxation
is based on taxable income at the current rates of taxation after taking into account
tax credits and tax rebates, if any.

Deferred tax where applicable is accounted for using the liability method.

3.7 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and 36, 38
accumulated impairment losses except freehold land and capital work in progress,
The Institute of Chartered Accountants of Pakistan 5
SSE LIMITED SSE Illustrative Financial
NOTES TO THE FINANCIAL STATEMENTS Statements
For the year ended December 31, 2008 .
SSE Para No

which are stated at cost. Cost comprises acquisition and other directly attributable
costs.

Depreciation is charged to income on straight line basis or reducing balance basis 37

or cost of asset is written off over its estimated useful life. Depreciation on additions
to property, plant and equipment is charged from the month in which an item is put
to use while no depreciation is charged for the month in which the item is
derecognized /disposed off.

Gains and losses on disposal of fixed assets are included in income currently.

Maintenance and repairs are charged to profit and loss account as and when
incurred. Major renewals and improvements are capitalised and the assets so
replaced, if any, are written off. Gains and losses on disposal of assets, if any, are
included in profit and loss account currently.

3.8 Intangible assets

Intangible assets are stated at cost less accumulated amortisation and accumulated
impairment losses and are amortised on a systematic basis over their estimated
useful lives using the straight-line method.

3.9 Investments

Investments available for sale

These are recorded at fair value. Gains or losses from changes in fair values are
taken to equity until disposal at which time these are written off to profit and loss
account.

Investments held to maturity

Investments with fixed or determinable payments and fixed maturity, which the
Company has the positive intent and ability to hold to maturity, are carried at
amortised cost, using the effective interest rate method less impairment losses, if so
determined.

Investments at fair value through profit or loss

Investments which are acquired principally for the purpose of selling in the near
term or the investments that are part of a portfolio of financial instruments exhibiting
short term profit taking are classified as investments at fair value through profit or
loss. These are stated at fair values with any resulting gains or losses recognized
directly in the profit and loss account. The fair value of such investments
representing listed equity securities is determined on the basis of prevailing market
prices.

3.10 Impairment of assets 38

An assessment is made at each balance sheet date to determine whether there is

any indication of impairment or reversal of previous impairment, including items of
property, plant and equipment, intangible assets and long-term investments. In the
event that an asset’s carrying amount exceeds its recoverable amount, the carrying
amount is reduced to recoverable amount and an impairment loss is recognised in
The Institute of Chartered Accountants of Pakistan 6
SSE LIMITED SSE Illustrative Financial
NOTES TO THE FINANCIAL STATEMENTS Statements
For the year ended December 31, 2008 .
SSE Para No

the income statement. A previously recognised impairment loss is reversed only if

there has been a change in the estimates used to determine the recoverable
amount, however not to an amount higher than the carrying amount that would have
been determined (net of amortisation or depreciation), had no impairment losses
been recognised for the asset in prior years. Reversal of impairment loss is
restricted to the original cost of the asset.

3.11 Stores, spares and loose tools

These are valued at the lower of cost and net realisable value 43

3.12 Stock in Trade

Stocks are valued at the lower of cost and net realisable value except for stock in 43, 44
transit which is valued at invoice price and related expenses incurred upto the
balance sheet date. Cost includes applicable purchase cost and manufacturing
expenses. Cost is determined using weighted average/FIFO cost method.

Net realisable value signifies the estimated selling price in the ordinary course of
business less net of estimated cost of completion and selling expenses.

3.13 Trade and other receivables

Trade and other receivables are stated at estimated realisable value after each debt 49
has been considered individually. Where the payment of a debt becomes doubtful a
provision is made and charged to the income statement.

3.14 Provisions

Provisions are recognised when the Company has a present legal or constructive 49
obligation as a result of past events, it is probable that an out flow of resources
embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of obligation.

3.15 Dividend

Dividend liability is recognized in the period in which it is approved.

3.16 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose
of cash flow statement, cash and cash equivalents comprise cash in hand, cash
with banks on current, saving and deposit accounts and short term running finance

The Institute of Chartered Accountants of Pakistan 7

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008

4. Property, Plant & Equipment

Land & Furniture & Depreciation

Vehicles CWIP Total
Buildings Equipment rates

At January 1, 20X7
Cost XXX XXX XXX XXX XXX
Accumulated depreciation (XXX) (XXX) (XXX) (XXX) (XXX)
Net book amount XXX XXX XXX XXX XXX

Year ended December 20X7

Opening net book amount XXX XXX XXX XXX XXX
Additions XXX XXX XXX XXX XXX
Disposals (XXX) (XXX) (XXX) (XXX) (XXX)
Depreciation charge (XXX) (XXX) (XXX) (XXX) (XXX)
Exchange rate adjustments XXX XXX XXX XXX XXX
Closing net book amount XXX XXX XXX XXX XXX

At December 31, 20X7

Cost XXX XXX XXX XXX XXX
Accumulated depreciation (XXX) (XXX) (XXX) (XXX) (XXX)
Net book amount

Year ended December 20X8

Opening net book amount XXX XXX XXX XXX XXX
Additions XXX XXX XXX XXX XXX
Disposals (XXX) (XXX) (XXX) (XXX) (XXX)
Depreciation charge (XXX) (XXX) (XXX) (XXX) (XXX)
Exchange rate adjustments XXX XXX XXX XXX XXX
Closing net book amount XXX XXX XXX XXX XXX

At December 31, 20X8

Cost XXX XXX XXX XXX XXX
Accumulated depreciation (XXX) (XXX) (XXX) (XXX) (XXX)
Net book amount XXX XXX XXX XXX XXX

CWIP includes net carrying values at:

20X8 XXX XXX XXX XXX XXX
20X7 XXX XXX XXX XXX XXX

Note 20X8 20X7

4.1 Depreciation charge has been allocated as follows:
Cost of sales XXX XXX
General & Administrative Expenses XXX XXX

XXX XXX

5. Intangible assets

Software 5.1 XXX XXX

Others (brands etc) XXX XXX
XXX XXX

The Institute of Chartered Accountants of Pakistan 8

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008
Outside Internal
5.1 Cost model / Revaluation model purchased development Total
software software

Balance as at January 1, 20X8 XXX XXX XXX

Acquisition XXX XXX XXX
Internal development XXX XXX XXX
Exchange difference on foreign currency translation XXX XXX XXX
Balance as at December 31, 20X8 XXX XXX XXX

Balance as on January 1, 20X7 XXX XXX XXX

Acquisition XXX XXX XXX
Internal development XXX XXX XXX
Exchange difference on foreign currency translation XXX XXX XXX
Balance as at December 31, 20X7 XXX XXX XXX

Amortisation and Impairment Amortisation Impairment Total

Balance as at January 1, 20X8 XXX XXX XXX
Amortisation for the period XXX XXX XXX
Impairment loss recognised / (reversed) XXX XXX XXX
Balance as at December 31, 20X8 XXX XXX XXX

Balance as at January 1, 20X7 XXX XXX XXX

Amortisation for the period XXX XXX XXX
Impairment loss recognised / (reversed) XXX XXX XXX
Balance as at December 31, 20X7 XXX XXX XXX

Carrying Amount
Balance as at January 1, 20X7 XXX XXX XXX
Balance as at December 31, 20X7 XXX XXX XXX
Balance as at December 31, 20X8 XXX XXX XXX

Note 20X8 20X7

Rs. Rs.
5.2 The amortization charge for the year has been allocated as follows:

Cost of sales XXX XXX

General & Administrative Expenses XXX XXX
XXX XXX

Note 20X8 20X7

Rs. Rs.
6. Long-term investments
Investments available for sale
National Savings Certificates 6.1 XXX XXX

Investments held to maturity

Term Finance Certificates 6.2 XXX XXX
Less: current portion shown in current assets (XXX ) (XXX )
XXX XXX
XXX XXX

6.1 Investments available for sale

National Saving Certificates were issued for 5 years. Monthly profit accrues on these certificates at the rate of xx% per
annum. These were fully encashed during the year. Investments available for sale include Rs. xxx (2007: Rs. XXX ) under lien
of financial institutions against long term loans and short term loans.

The Institute of Chartered Accountants of Pakistan 9

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008

6.2 Investments held to maturity

Investment in TFC represents XXX certificates of Rs XXX each of ABC Commercial Bank Limited. Half yearly profit accrues
on these TFCs at the rate of six months' KIBOR + xx% per annum. Fair value of the TFCs as at December 31, 2008 is
Rs. XXX.
Note 20X8 20X7
Rs. Rs.
7. Long Term Loans and Advances

Loans and advances, considered good, to:

Executives XXX XXX

Other employees XXX XXX
Suppliers XXX XXX

Less: Amount due within twelve months, shown under (XXX) (XXX)
current loans and advances
XXX XXX

These represent secured loans for house building and vehicle which are repayable within one to ten and one to five years
respectively. Mark-up at xx% per annum (2007: xx% per annum) was charged on loans for house building and vehicle during
the year.

The maximum amount of advances to executives outstanding at the end of any month during the year was Rs.xxx(2007: Rs xxx).

Note 20X8 20X7

Rs. Rs.
8. Stores, Spares and Loose Tools

Stores XXX XXX

Spares XXX XXX
Provision for slow moving and surplus items (XXX) (XXX)
XXX XXX
Loose tools XXX XXX
Items in transit XXX XXX
XXX XXX

9. Stock In Trade

Raw materials XXX XXX

Work in process XXX XXX
Finished goods XXX XXX
XXX XXX

10. Trade Debts

Considered good XXX XXX

Considered doubtful XXX XXX
Provision for doubtful debts (XXX) (XXX)
XXX XXX

11. Short Term Investments

Investments available for sale

National Savings Certificates XXX XXX

Investments held to maturity

Term Finance Certificates XXX XXX
XXX XXX

The Institute of Chartered Accountants of Pakistan 10

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008

Note 20X8 20X7

Rs. Rs.
12. Other Receivables

Accrued income on investments and bank deposits XXX XXX

Advance tax XXX XXX
Sales tax refundable XXX XXX
Other receivables – considered good XXX XXX
– considered doubtful XXX XXX
XXX XXX

Provision for doubtful receivables (XXX) (XXX)

XXX XXX

13. Cash and Bank Balances

Cash at banks:
Deposit accounts XXX XXX
Current accounts XXX XXX
XXX XXX
Cash in hand XXX XXX
XXX XXX

14. Share Capital

Authorised Share Capital

This represents XXX (2007: XXX) ordinary shares of Rs 10 each.

Issued, Subscribed and Paid Up Capital

xxx shares (2007: xxx) Ordinary shares of Rs.10 each fully paid in cash XXX XXX

xxx shares (2007: xxx) Ordinary shares of Rs.10 each issued 14.1 XXX XXX
for consideration other than cash
xxx shares (2007: xxx) Ordinary shares as fully paid bonus shares of XXX XXX

XXX XXX

14.1 This represent the issuance of shares against the purchase of plant, machinery and other assets.

14.2 Reconciliation of issued, Subscribed and Paid Up Capital

Opening balance XXX XXX

Issued fully paid bonus shares XXX XXX
XXX XXX

15. Revenue Reserves

General reserve XXX XXX

Unappropriated profit XXX XXX
XXX XXX

16. Long Term Borrowing - Secured

Long term financing - secured 16.1 XXX XXX

Long term murabaha - secured 16.2 XXX XXX
Loan from related party 16.3 XXX XXX
XXX XXX

The Institute of Chartered Accountants of Pakistan 11

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008

Note 20X8 20X7

Rs. Rs.
16.1 Long term financing – secured

Loans from banking companies

i) ABC Bank 16.1.1 XXX XXX

ii) XYZ Bank 16.1.2 XXX XXX
XXX XXX
Other loans XXX XXX
XXX XXX
Less: Current Portion shown under current liabilities (XXX) (XXX)
XXX XXX

16.1.1 Finance are secured by an equitable mortgage on the assets of the Company and hypothecation of all
assets including plant, machinery, tools and spares, and all other moveable properties situated at xxxx
including stocks and book debts ranking pari passu with each other. These loans have been obtained for
the acquisition of plant and machinery.

16.1.2 Finance has been obtained to meet the permanent working capital requirements of the Company. Finance
is secured by an equitable mortgage on the assets of the Company and hypothecation of all assets
including plant, machinery, tools and spares, and all other moveable properties situated at xxx stocks
and book debts ranking pari passu with each other.

16.1.3 Terms and conditions of long term finances are given below:

Lender Mark-up No of half- Date of final

rate p.a. yearly repayment
(%) installments
Outstanding
ABC xxx xxx xxx
XYZ xxx xxx xxx

16.2 Long term murabaha – secured

Faysal Bank Limited 19.2.1 XXX XXX

Less: Current portion shown under current liabilities (XXX) (XXX)
XXX XXX

16.2.1 The above murabaha financing carries mark-up at xx% p.a. Principal and mark-up are repayable in half
yearly instalments. This is secured by a registered charge on all present and future fixed and current
moveable assets of the Company

16.3 The Company has obtained a loan from XYZ Ltd company. The loan is repayable in 10 equal installment
payable semiannually.

Note 20X8 20X7

Rs. Rs.
17. Deferred Liabilities

Gratuity Payable 17.1 XXX XXX

XXX XXX

17.1 Gratuity Payable

Movements in the liability recognized in the balance sheet

Balance at beginning of the year XXX XXX
Charge for the year XXX XXX
Benefits paid during the year (XXX) (XXX)
Net liability at end of the year XXX XXX

The Institute of Chartered Accountants of Pakistan 12

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008

Note 20X8 20X7

Rs. Rs.
18. Trade and Other Payables
Creditors XXX XXX
Accrued liabilities XXX XXX
Sales tax payable XXX XXX
Murabaha XXX XXX
Deposits XXX XXX
Advances from customers XXX XXX
Workers' Profit Participation Fund 18.1 XXX XXX
Workers' Welfare Fund XXX XXX
Other liabilities XXX XXX
XXX XXX

18.1 Workers' Profit Participation Fund

Balance at beginning of the year XXX XXX

Interest on funds utilised in Company's business XXX XXX
Allocation for the year XXX XXX
Payment to the fund during the year (XXX) (XXX)
XXX XXX

19. Short Term Borrowings – Secured

From banking companies

Short term loan -secured 19.1 XXX XXX
Short term import credit XXX XXX
Short term running finance 19.2 XXX XXX
XXX XXX

19.1 Short term loan - secured

This represents short term loan facility available from a bank by partial conversion of Running Finance line
amounting to Rs. XXX (2007: Rs xxx). This is secured by first pari passu charge on the current assets of
the Company. This facility carries mark-up at the rate of Rs.xxx (2007: Rs.xxx) per Rs. 1,000 per day.

19.2 Short term running finances - secured

Short term running finance facilities available from various banks under mark-up arrangements amounting to
Rs.xxx (2007 Rs.xxx) which represent the aggregate of sale prices of all mark-up agreements between the
Company and the banks.

These facilities are secured by hypothecation of present and future current assets and fixed assets of the
Company ranking pari passu in all respects with the first charge holders. The rates of mark-up range from
one month to xxx p.a. to xxx p.a (2007: xxx p.a to xxx p.a )

Note 20X8 20X7

Rs. Rs.

20. Current portion of Long term Liabilities

Long term financing - secured 16 XXX XXX

Long term murabaha - secured 16 XXX XXX
Loan from Related party 16 XXX XXX
Liabilities against assets subject to Finance Leases XXX XXX
XXX XXX

The Institute of Chartered Accountants of Pakistan 13

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008
Note 20X8 20X7
Rs. Rs.
21. Contingencies and Commitments

a) Contingencies

i) Guarantees issued by banks on behalf of the Company. XXX XXX

ii) Disputed demands for Income tax decided in favour of the XXX XXX
Company by the Income Tax Appellate authorities, are currently
in appeal by the department. The Company is confident that
there are reasonable grounds for a favorable decision.

iii) Income tax demands, not acknowledged as debt, have been XXX XXX
challenged by the Company and are currently in appeal; the
Company expects favourable outcome of appeal.

b) Commitments in respect of:

i) Capital expenditure XXX XXX

ii) Rentals under lease agreements: XXX XXX

Vehicles - not later than one year XXX XXX

- later than one year and not later than five years
2008 XXX XXX
2009 XXX XXX
2010 XXX XXX
2011 XXX XXX
2012 XXX XXX
- later than five years XXX XXX
XXX XXX
22. Revenue

Revenue include Rs xxxx million (2007: Rs xxxx) in respect of sale of goods inclusive of commission but exclusive of trade
allowances and sales tax of Rs xxxx and Rs xxxx respectively (2007: Rs xxxx and Rs xxxx).

23. Cost of Sales

Raw materials consumed XXX XXX

Fuel and power XXX XXX
Stores and supplies XXX XXX
Salaries, wages and benefits 23.1 XXX XXX
Rent, rates and taxes XXX XXX
Lease rentals
Insurance XXX XXX
Travel and conveyance XXX XXX
Repairs and maintenance XXX XXX
(includes stores and spares consumed of Rs.xxx; 2005: Rs xxx)

Note 20X8 20X7

Rs. Rs.

Amortization of intangible assets XXX XXX

Depreciation XXX XXX
Communication, establishment and other expenses XXX XXX
Provision for doubtful trade debts XXX XXX
Provision for obsolete and slow moving inventory XXX XXX
Provision / (reversal of provision) for doubtful advances XXX XXX
Opening stock - work in process XXX XXX
Closing stock - work in process XXX XXX
Cost of goods manufactured XXX XXX

Opening stock of Finished goods XXX XXX

Closing stock of Finished goods XXX XXX
XXX XXX

23.1 Inclusive provision for gratuity Rs.XXX (2007:XXX)

The Institute of Chartered Accountants of Pakistan 14

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008

Note 20X8 20X7

Rs. Rs.
24. General and Administration Expenses

Salaries, wages and benefits 24.1 XXX XXX

Travelling and transportation XXX XXX
Repairs and maintenance XXX XXX
Rent and taxes XXX XXX
Lease rentals XXX XXX
Communication XXX XXX
Utilities XXX XXX
Legal services XXX XXX
Auditors' remuneration 24.2 XXX XXX
Insurance XXX XXX
Depreciation XXX XXX
Amortisation of Intangible assets XXX XXX
Travel and conveyance XXX XXX
Sale promotion and advertising XXX XXX
Warehousing expenses XXX XXX
Other expenses XXX XXX
XXX XXX

24.1 These include amount in respect of employee retirement benefits of Rs XXX (2007: Rs XXX ).

25. Finance costs

Interest on bank loan and overdraft XXX XXX

Mark up on short term borrowings XXX XXX
Interest on Workers' Profit Participation Fund XXX XXX
Bank charges XXX XXX
XXX XXX

26. Other Income

Income from financial assets

Income on loans, deposits and investments XXX XXX

Dividend Income XXX XXX

Note 20X8 20X7

Rs. Rs.
Income from non-financial assets
Gain on sale of property, plant and equipment XXX XXX

Other income
Scrap sales XXX XXX
Others XXX XXX
XXX XXX

27. Taxation

Provision for taxation - current year XXX XXX

- prior year XXX XXX
XXX XXX

The Institute of Chartered Accountants of Pakistan 15

 SSE Limited SME Illustrative Financial Statements
Notes to the Financial Statements
For the Year Ended December 31, 2008
Note 20X8 20X7
Rs. Rs.
28. Cash Generated From Operations

Net profit before taxation XXX XXX

Adjustments for:
Depreciation XXX XXX
Amortisation of goodwill and intangible asset XXX XXX
Provision for slow moving and surplus spares (XXX) XXX
Provision / (reversal of provision) for doubtful advances XXX (XXX)
Finance cost XXX XXX
Income on loans, deposits and investments (XXX) (XXX)
Gain on sale of property, plant and equipment (XXX) (XXX)
Property, plant and equipment written off XXX XXX
Provision for gratuity XXX XXX
XXX XXX
XXX XXX
Changes in working capital
(Increase) / decrease in current assets:
Stores and spares (XXX) (XXX)
Stock in trade (XXX) XXX
Trade debts XXX XXX
Loans and advances XXX (XXX)
Deposits and prepayments (XXX) (XXX)
Other receivables XXX XXX
Increase in current liabilities: XXX XXX
Trade and other payables XXX XXX
XXX XXX

Changes in long term loans and advances XXX XXX

Changes in long term deposits and prepayments XXX XXX
XXX XXX

Note 20X8 20X7

Rs. Rs.
29. Cash and Cash Equivalents
Cash and bank balances XXX XXX
Short term highly liquid investments XXX XXX
XXX XXX
30. Related party transactions

The Company had the following transactions with related parties:

Goods sold to related companies XXX XXX

Goods purchased from related companies XXX XXX
Purchase of services from related companies XXX XXX
XXX XXX

The amounts due to related parties are unsecured, interest-free and have no fixed terms of repayment.

31. Corresponding Figures

The comparative figures have been rearranged and/or reclassified, wherever necessary, for the purpose of comparison in the
financial statements.

32. General

32.1 Figures have been rounded to the nearest thousand of rupees, unless otherwise stated.

32.2 The Board of Directors proposed final dividend at the rate of Rs xxx per share in their meeting held on xxx

32.3 These financial statements were authorized for issue by the Board of Directors in their meeting held on xxx.

____________________ ____________________ ____________________

Chairman Chief Executive Director

The Institute of Chartered Accountants of Pakistan 16