Caribbean Utilities Company, Ltd. Annual Report 2021

Plain-text annual report

C o u n t P l u s A n n u a l R e p o r t 2 0 2 1 Annual Report 2021 COUNTPLUS ANNUAL REPORT 20211 COUNTPLUS ANNUAL REPORT 2021Appendix 4E For the Year Ended 30 June 2021 1 Company details Name of entity CountPlus Limited ABN 11 126 990 832 Reporting period For the year ended 30 June 2021 Previous period For the year ended 30 June 2020 2 Results for announcement to the market Revenues from ordinary activities Profit from ordinary activities after tax attributable to the owners of CountPlus Limited Profit for the year attributable to the owners of CountPlus Limited down down down 3% to 69% to 69% to $’000 80,521 4,938 4,938 Comments The profit for the Group after providing for income tax and non-controlling interest amounted to $4,938,000 (30 June 2020: $15,861,000). Included in the results for the year ended 30 June 2020 is an amount of $10,952,000 relating to the gain on bargain purchase which is the excess of the fair value of the acquired identifiable assets and liabilities over the purchase price of Count Financial. 3 Net tangible assets Net tangible assets per ordinary security 4 Control gained over entities Not applicable. 5 Loss of control over entities Not applicable. Reporting period Cents Previous period Cents 37.50 35.78 2 COUNTPLUS ANNUAL REPORT 2021Appendix 4E For the Year Ended 30 June 2021 6 Dividends Current period Interim dividend – paid on 14 April 2021 Full year final dividend* – to be paid on 13 October 2021 * record date 24 September 2021 Previous period Interim dividend – paid on 15 April 2020 Full year final dividend – paid on 14 October 2020 7 Details of associates Name of associate One Hood Sweeney Pty Ltd Hunter Financial Planning Pty Ltd OBM Financial Services Pty Ltd Rundles CountPlus Pty Ltd Rundles Financial Planning Pty Ltd DMG Financial Holdings Pty Ltd Group's aggregate share of associates profit Profit from ordinary activities after income tax 8 Foreign entities Amount per security Cents Franked amount per security Cents 1.25 1.50 1.25 1.50 Amount per security Cents Franked amount per security Cents 1.25 1.25 1.25 1.25 Reporting entity's percentage holding Contribution to profit Reporting period % Previous period % Reporting period $’000 Previous period $’000 32.36% 40.00% 40.00% 40.00% 20.00% 30.00% 32.36% 40.00% 40.00% 40.00% 20.00% 30.00% 1,192 255 332 312 54 353 950 360 188 336 57 288 2,498 2,179 Australian Accounting Standards have been applied to foreign entities when compiling the Appendix 4E and Financial Statements for the year ended 30 June 2021. 3 COUNTPLUS ANNUAL REPORT 2021About CountPlus CountPlus partners with leading firms and provides valued services to a professional community of financial advisers. We will, collectively, secure the financial well being of our clients. 4 COUNTPLUS ANNUAL REPORT 2021Contents Chairman's Report CEO Report Case Studies Financial Summary CountPlus Board Directors' Report Auditor's Independence Declaration Financial Statements ASX Additional Information Investors' Information 6 8 10 12 14 16 32 33 98 99 5 COUNTPLUS ANNUAL REPORT 2021Chairman's Report The Board is pleased to report that CountPlus is now well- established to pursue and execute on its growth strategy. The business ownership model of CountPlus has now been fundamentally re-positioned (the Owner, Driver – Partner or OD-P™ initiative), as seen by the increased acquisition activity with seven OD-P™ transactions, nine tuck-in investments and the complementary business acquisition of Wealth Axis executed in FY21. CountPlus has a strong balance sheet and capital position including cash on hand of $26 million and will continue to execute on its acquisition strategy consistent with building and strengthening its service offerings to accounting firms, financial advisers, and clients. With this confidence in the business and a solid FY21 result of NPAT $7.08 million, the Board has declared a final fully franked dividend of 1.50 cents per share. The last 12 months have presented several challenges for CountPlus and its staff, clients, and the communities in which it operates. The COVID-19 virus has presented many difficulties and continues to challenge the very fabric of our society and the way we live. I am very thankful to our staff and businesses for the way they have looked after their clients and colleagues. CountPlus continues to look to the future with ambition to grow its businesses and create improved commercial and operational results, and with shareholder returns our fundamental driver as measured by return on equity and earnings per share. However, the Board is very aware of the potential downside risks that may arise from the uncertainties of the pandemic, the changing regulatory framework of financial advice and the challenges and opportunities that more sophisticated technology may bring. 6 COUNTPLUS ANNUAL REPORT 2021CountPlus continues to look to the future with ambition to grow its businesses and create improved commercial and operational results. The reshaping of Count Financial continued in FY21 with the cessation of grandfathered revenue in December 2020, and the continued educational reform and recruitment of advisers (and retirement of others), as the business aims to grow to obtain the benefits of scale. Through technological advancements, efficiencies have been obtained and improved business practices achieved. There remains work to be done regarding the Count Financial business including continuing to scale up our high-quality advice firm foundations. The Board is confident that Count Financial offers market compelling long-term service value and will grow its foundation of high quality, sustainable financial advice firms. The Board will continue to seek improved profitability and organic growth from its existing businesses, together with executing on its acquisition strategy directed by, and consistent with, building and strengthening the CountPlus service offering to firms, advisers, and clients. Thank you to our employees and partners for their respective contributions to CountPlus, and the Board looks forward to continuing to build the business for the benefit of shareholders and all CountPlus stakeholders. Thank you for being a CountPlus shareholder. Ray Kellerman Chairman 7 COUNTPLUS ANNUAL REPORT 2021CEO Report Dear Shareholders Teams come together when faced with a shared struggle and common purpose. FY2021 had its share of struggles for CountPlus – the impact of COVID-19, regulatory reform in financial advice and the economic impact of the transition of Count Financial to its new “clean” user pays model without grandfathered revenue. Through all this we remained focused on our core purpose: to collaborate with our partner firms for mutual success, growth, and positive client outcomes. We grew revenue in our OD-P™ Firms and improved profit margins, at the same time empathetically working with our core small business clients through their own unique set of struggles. We delivered positive outcomes for our Count Financial Member Firms by improving efficiencies in the delivery of client centric advice, focussing on productivity and utilisation, quality assurance, and the continual lift in professional standards. I was inspired when observing the tremendous collaboration and effort across the CountPlus community, how we looked out for each other, how we looked out for our clients and how we gave back to the communities we serve. 8 COUNTPLUS ANNUAL REPORT 2021Count Financial is purpose built to be a client-centric and transparently remunerated licensee offer to financial advisers and the clients they serve. I would encourage you to read the case studies in this Annual Report of the people who demonstrate our core values of teamwork, commitment, and courage. The quality of the people on our team serves to harden my resolve to stay the course on what we are building at CountPlus at a time of enormous change in financial advice. Count Financial is purpose built to be a client-centric and transparently remunerated licensee offer to financial advisers and the clients they serve. We are not subsidised through product distribution as our “product” is financial advice. We continue to attract high quality advisers to Count Financial, and the pipeline for quality professional practitioners, firms and partners is strong. Australia’s demand for quality financial advice is not diminishing. In fact, the reduced number of financial advisers will struggle to keep pace with demand. This ‘fewer advisers, more clients’ scenario is but one of the new challenges ahead in the financial advice sector. For CountPlus and Count Financial it places greater impetus on our efforts to improve efficiencies for our financial advisers, introduce new technology and streamline our administration and other back-office support services. The past year has seen strong evidence Count Financial is on the right track, with the number of advice documents produced increasing by 46% between FY2020 and FY2021, with fewer financial advisers. We enabled a 57% increase in advice documents produced per financial adviser during this time. In financial terms, the news is also positive as total fees generated by the Count Financial adviser network increased by 26% between 1 October 2019, the date CountPlus acquired Count Financial, and 30 June 2021. This is important for shareholders as the new economic model for Count Financial is a fee per adviser and a share of this growing revenue stream. The Company continues to make efficient and disciplined use of capital. CountPlus has an opportunity to invest in financial advice at a time when major institutional players have exited at significant cost to their reputation and balance sheets. I am confident that our strategy for growth within CountPlus and Count Financial will deliver sustainable returns to shareholders as more Australians seek quality advice. Our investment in the right people, culture, supporting technology and adjacent core businesses will position us well for this future. Thank you for being a co-shareholder in CountPlus. Matthew Rowe CEO and Managing Director 9 COUNTPLUS ANNUAL REPORT 2021Case Studies Culture complements growth strategy at AdviceCo READ Best interest focus sparks a new direction for dmca advisory READ Ascent chooses Count Financial READ Merged 4Front a model of empowered success READ 10 COUNTPLUS ANNUAL REPORT 2021Back office takes centre stage READ Professionalism, people, and pride READ Small town firm with a big presence READ 11 COUNTPLUS ANNUAL REPORT 2021Financial Summary Revenue from contracts with customers Other income Total operating expenses EBITA before profit from associates Associates Earnings before interest, tax and amortisation (EBITA) Interest income Interest expense Amortisation Profit before tax Income tax expense Gain on bargain purchase # 1 2 3 4 5 6 7 8 9 Net profit from operations after income tax 10 Profit attributable to owners of CountPlus Profit attributable to non-controlling interest Basic earnings per share (cents) Diluted earnings per share (cents) 11 12 13 14 15 Current assets Current liabilities Current ratio Non-Current assets Non-Current liabilities Net assets Net cash 12 2020 $'000 82,607 2,141 (76,067) 8,681 2,179 10,860 163 (1,108) (1,402) 8,513 (2,017) 10,952 17,448 15,861 1,587 14.30 14.24 255,707 236,473 1.08 98,316 39,438 78,112 21,111 2021 $'000 2020 / 2021 change % 80,521 3,530 (74,603) 9,448 2,498 11,946 53 (1,059) (1,377) 9,563 (2,479) – 7,084 4,938 2,146 4.43 4.39 321,451 299,725 1.07 95,212 35,116 81,822 21,911 (3%) 65% (2%) 9% 15% 10% (67%) (4%) (2%) 12% 23% (100%) (59%) (69%) 35% (69%) (69%) 26% 27% (1%) (3%) (11%) 5% 4% COUNTPLUS ANNUAL REPORT 2021Notes to Financial Summary 1. Revenue from contracts with customers Revenue is generated from accounting services, financial planning services and financial services. Accounting related revenue represents 65% of revenue from contracts with customers and was up on the prior period by 1%. Financial planning revenue makes up 14% of revenue from contracts with customers which is consistent with the prior year. Financial services revenue makes up 11% of revenue from contracts with customers and was down 30% on prior period. Revenue from contracts with customers was lower than the prior year by 3% primarily due to grandfathered commissions no longer being received from January 2021. 2. Total operating expenses Total operating expenses were 2% lower than the prior period. This was primarily due to savings in other operating expenses. 3. Share of net profit from associates Share of net profit from associates increased by 15% due to the full year earnings of DMG Financial Holdings Pty Ltd which was acquired in FY20. 4. EBITA Included in EBITA is the receipt of government grants of $2.79M in FY21 ($1.74M in FY20). Interest income 5. The 67% decrease in interest income was driven by reductions in the cash interest rate in the current period. Interest expense 6. Interest expense remained consistent with the prior year and includes finance costs recognised in line with accounting standard AASB 16 Leases. 7. Amortisation Amortisation (non-cash) of $1.38M (2020: $1.40M) relates primarily to an accounting requirement to write down the value of intangible assets, acquired client relationships and adviser networks, over their expected lifetime. Income tax expense 8. Income tax expense exceeded the prior year due to the taxable capital gains on the disposal of shares when partaking in OD-P™ transactions and the sale of fee parcels in subsidiary firms. Gain on bargain purchase 9. The gain on bargain purchase of $11M recognised in FY20, represents the excess of the fair value of the acquired identifiable assets and liabilities over the purchase price of Count Financial. 10. Net profit from operations after income tax Net profit after tax decreased in the current year due to recognition of the gain on bargain purchase of $11M in relation to the acquisition of Count Financial. Profit attributable to CountPlus Ltd shareholders was $4.94M. 11. Current assets Current assets increased due the indemnity asset increasing by $65M to $260M which is due from the Commonwealth Bank of Australia. 12. Current liabilities The increase in current liabilities was due largely to the increase in the remediation provision within Count Financial by $65M to $260M. 13. Non-current assets Non-current assets are in line with the prior period. 14. Non-current liabilities Non-current liabilities decreased compared to last year due to a reduction Ongoing insurance trail commission payable in Count Financial. 15. Net cash Net cash (cash and cash equivalent less interest bearing liabilities) has increased to $21.91M (2019: $21.11M) due predominantly to operating cash flows generated by member firms. 13 COUNTPLUS ANNUAL REPORT 2021CountPlus Board Ray Kellerman Ray has over 30 years of experience in the financial services industry including in the funds management, financial advisory, life insurance and corporate and structured finance industries. Previous appointments include Independent Chairman of ClearView Wealth, an ASX listed life insurance and financial services company, and Independent Chairman of Credit Suisse Asset Management Australia. Prior to this he was with Perpetual Trustees Australia for 10 years before establishing his own financial services and compliance advisory business in 2001. Ray is an owner and Executive Director of Quentin Ayers, an implemented asset advisor specialising in alternative private market investments. He holds qualifications in law, economics, investment securities and management. Ray currently acts as a director for Goodman Funds Management Australia, Foundation Life New Zealand and Ryder Capital. He is also active in a number of governance related roles for some major fund managers operating in Australia. Ray was appointed a Director of CountPlus in January 2017 and Chairman in April 2017. Alison Ledger Alison has more than 30 years of experience in the financial services industry. She has held senior operational and strategic roles in banking, funds management and insurance with Chase, Bankers Trust and IAG. As a Partner with McKinsey & Company, Alison advised leading global and Australian banks on strategy, performance improvement and organisational change. Alison’s more recent experience has been in digital transformation and customer experience (CX). As Executive General Manager of Product, Pricing and eBusiness, Alison ran IAG’s digital business and CX for the consumer brands including NRMA, SGIO and SGIC. Alison is Chair of CountPlus’ Remuneration and Nominations Committee and a member of the Audit and Risk Committee. She is also a Non-Executive Director of Audinate Group Limited (ASX:AD8) and Latitude Group Holdings Limited (ASX: LFS) as well as Hallmark Insurance, a Latitude subsidiary. Alison holds a Bachelor of Arts (Hons) in Economics from Boston College and an MBA from Harvard University. She is also a graduate of the Australian Institute of Company Directors. Kate Hill Kate has over 20 years’ experience as an audit partner with Deloitte Touche Tohmatsu, working with ASX listed and privately-owned clients. She has worked extensively in regulated environments including assisting with Initial Public Offerings, capital raising and general compliance, as well as operating in an audit environment. She held a variety of leadership and executive roles in Deloitte and served for a period on the Board of Partners of the Australian firm. Kate Hill is an independent Non-Executive Director, chair of the Audit and Risk Committee and member of the Acquisitions Committee. She is also an Independent Non-Executive Director of Elmo Software Limited (ASX: ELO) where she serves as Chair of the Audit and Risk Committee, and is a member of the Remuneration and Nominations Committee. She is the Chair of Seeing Machines Limited (AIM: SEE) as well as being a member of the Finance and Risk Committee, and the People and Culture Committee. Kate holds a Bachelor of Science (Hons) from Bristol University, is a member of the Institute of Chartered Accountants in Australia and New Zealand, and a graduate of the Australian Institute of Company Directors. 14 COUNTPLUS ANNUAL REPORT 2021Andrew McGill Andrew has more than 30 years’ financial markets experience, including investment and management experience within the alternative asset sector and the funds management industry generally. He was previously Managing Director and CEO of ASX-listed Pacific Current Group Limited and in this capacity also served on the Board of a number of affiliated companies. Prior to joining Pacific Current Group, he was a founding partner of Crescent Capital Partners, an independent mid-market private equity firm where he worked from 2000 to 2010. Earlier in his career, Andrew held executive roles within Macquarie Bank’s Corporate Finance and Direct Investment teams. He was also a consultant with The LEK Partnership, an international firm of business strategy consultants. Andrew is currently Chairman of the advisory board of Besen Pty Ltd. Andrew holds a Bachelor of Commerce and a Bachelor of Laws from the University of New South Wales and a Graduate Diploma in Applied Finance (FinSIA). He is also a Fellow of the Financial Services Institute of Australasia. Carolyn Colley Carolyn has more than 30 years leadership experience spanning financial services, product development and innovation. Carolyn was most recently a co-founder and Chief Operating Officer of Faethm Pty Ltd, a global Software-as-a-Service augmented analytics platform which enables companies, governments and educators to understand the impact of emerging technologies on the Future of Work. She was the Chief Operating Officer of Asgard Wealth Solutions and St. George’s Wealth Management business and was the Head of Strategy for Macquarie Advisor Services and the Head of Personal Banking at Macquarie Bank. Carolyn was also the CEO of formerly listed software business, Decimal Software Limited. Carolyn is an Independent Non-Executive Director of the subsidiary settlement and clearing boards of the Australian Securities Exchange (ASX:ASX). An Independent Non-Executive Director, Member of the Audit and Risk Committees and Remuneration and Nominations Committee and Chair of the Claims Review Committee of OnePath Custodians, Oasis Fund Management and IOOF Investment Management , IOOF’s Superannuation businesses. An Independent Non- Executive Director and a Member of the Information Technology committee and Remuneration and Nominations Committee of ASX listed salary packaging and leasing business Smartgroup (ASX: SIQ). An independent Non-Executive Director and Chair of the Digital Committee of Chartered Accountants Australia and New Zealand. Carolyn is also a Director and Deputy Chair of Liverpool Neighbourhood Connections, a community based (NFP). Matthew Rowe Matthew Rowe joined the CountPlus Board in October 2016 and was appointed CEO and Managing Director in February 2017. He has led CountPlus through its turnaround strategy and guided the successful acquisition and integration of Count Financial in October 2019. Mr Rowe holds a Bachelor of Economics, Graduate Diploma in Accounting, Graduate Diploma in Financial Planning and is a graduate of Harvard Business School. His professional designations include CFP(Life), FCA, FCPA and GAICD. Mr Rowe is a recognised change agent in financial services with a track record in leading high-performing teams. He embodies a genuine values-based leadership with a particular focus on people and culture, and drives commercial results based on strong commercial and regulatory experience. In 2017, Matthew was appointed by the Minister for Revenue and Financial Services to the Board of the Financial Adviser Standards and Ethics Authority and served in this capacity until late 2019. Prior to this Matthew was Chairman of the Financial Planning Association of Australia and represented Australia on the Global Standards Body. He is the former Managing Director of Hood Sweeney, a CountPlus member firm, and the 30th largest accounting firm in Australia and twice a BRW top 10 fastest growing firm. 15 COUNTPLUS ANNUAL REPORT 2021Directors' Report The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of CountPlus Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2021. Board of Directors and Company Secretaries Name Ray Kellerman Alison Ledger Kate Hill Andrew McGill Carolyn Colley Matthew Rowe Position Chairman Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Date of Appointment 27 April 2017 1 October 2016 26 June 2017 4 December 2017 6 October 2020 Executive Director / Chief Executive Officer / Managing Director 24 February 2017 Laurent Toussaint Narelle Wooden Company Matters Pty Ltd (William Hundy) Company Secretary Company Secretary Company Secretary Robert Alan Shedden Company Secretary Doug Richardson Company Secretary 29 June 2018 30 November 2018 30 April 2020 Resigned 30 October 2020 10 November 2020 Resigned 16 March 2021 8 June 2021 Information on the current Directors including their experience, expertise and other current directorships (including former directorships) of publicly listed companies, is contained in the Board Profile Report on pages 14 to 15. Meetings of Directors Board of Directors Name Position Ray Kellerman Non-Executive Chair Alison Ledger Non-Executive Director Kate Hill Non-Executive Director Andrew McGill Non-Executive Director Carolyn Colley* Non-Executive Director Matthew Rowe Managing Director and CEO Audit and Risk Committee Acquisitions Committee Remuneration and Nominations Committee Technology and Innovation Committee Meetings Attended Position Meetings Attended Position Meetings Attended 2/2^ 4/4 4/4 Member Chair Member 2/2^ 6/6 6/6 5/6 6/6 4/4 6/6 Position Member Chair Meetings Attended Position Meetings Attended 5/5 5/5 Member Chair 4/4 4/4 Member 4/4 Member 4/5 Member Chair Member 3/3 3/3 3/3 * Carolyn Colley was appointed as Director on 6 October 2020 ^ Carolyn Colley was appointed as a member of the Audit and Risk Committee, replacing Ray Kellerman on 1 December 2020 16 COUNTPLUS ANNUAL REPORT 2021Principal activities Capital management During the financial year the principal continuing activities of the Group consisted of: Î accounting, tax and audit services; Î financial advice in relation to investment, superannuation and personal insurance; and Î financial services being the operator of financial advice licence business. Review of operations The profit for the Group after providing for income tax and non-controlling interest amounted to $4,938,000 (30 June 2020: $15,861,000). The management team has been focussed on working with our member firms to improve the key financial, cultural and strategic drivers and grow by acquisitive activity which is reflected in the improved financial results for the year ending 30 June 2021. COVID-19 There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the Australian and international economies. COVID-19 has had an initial adverse financial impact on the CountPlus business, however, in the year ended 30 June 2021 this has improved as clients accelerate work normally done in the second half of the financial year. CountPlus received $2,389,000 in COVID-19 related government grants in this reporting period. Note that CountPlus’ clientele is comprised of small, Australian-based businesses from a broad cross-section of industries. Going forward, the Group is unable to determine if COVID-19 will have a material impact on its operations. The Company is managing the downside risk presented by COVID-19 via tight management of costs, a focus on working capital management and targeted deployment of capital and resources. Interest-bearing debt has decreased from $4,731,000 at 30 June 2020 to $4,328,000 at 30 June 2021. CountPlus continues to focus on prudent capital management by improving cashflows generated by Partner firms, paying dividends from operating cashflows and investing in earnings accretive acquisitions after undergoing a rigorous acquisition process. Significant changes in the state of affairs Significant changes in the state of affairs of the Group during the financial year were as follows: On 1 July 2020, CountPlus Limited’s accounting and business advisory firm Twomeys Group Pty Ltd, acquired various client accounting-based revenues of Cultiv8 Accounting Pty Ltd for $0.30M. Twomeys also completed a 40% equity buy back by Key Management Personnel under the CountPlus ‘Owner, Driver – Partner’ model in two tranches for $1.17M. CountPlus retains a 60% shareholding in Twomeys. On 17 September 2020, CountPlus Limited’s accounting and business advisory firm AdviceCo Pty Ltd, acquired the accounting revenue of Arch Capital Pty Ltd for $0.40M. On 30 September 2020, CountPlus Limited’s wholly owned subsidiary, Cooper Reeves Pty Ltd, acquired the financial advice revenues of CBD Wealth Solutions Pty Ltd for $0.59M. On 6 October 2020, CountPlus Limited’s accounting and business advisory firm Mogg Osborne Pty Ltd, acquired the NSW based business Freedom Accounting Group Pty Ltd for $0.71M. On 8 December 2020, CountPlus Limited's accounting and business advisory firm O'Brien Accountants and Advisors Pty Ltd acquired the accounting business of Hillard O'Donnell and Associates for $0.57M. On 19 March 2021, CountPlus Limited's accounting and business advisory firm Bentley's (WA) Pty Ltd, acquired 50% of Stirling Partners from Onesixtwo Pty Ltd for $1.09M. There were no other significant changes in the state of affairs of the Group during the financial year. 17 COUNTPLUS ANNUAL REPORT 2021 Dividends Dividends paid / declared during the financial year were as follows: Financial year ended Franking 2020 2021 2021 Fully franked Fully franked Fully franked Status Paid Paid Cents per share Payment date 1.25 (per fully paid share) 14 October 2020 1.25 (per fully paid share) 14 April 2021 Declared 1.50 (per fully paid share) 13 October 2021 Matters subsequent to the end of the financial year Likely developments and expected results of operations On 14 July 2021, CountPlus Limited accounting and business advisory firm, NSW based Unite Advisory Pty Ltd (Unite) finalised terms to acquire 100% of the business of Bentley Brett & Vincent Pty Ltd. Simultaneously with this transaction, Unite will proceed with an equity buy- back program by Key Management Personnel, under the CountPlus OD-P™ model. On 30 July 2021, CountPlus Limited finalised terms to sell the Audit and Corporate business units of accounting and business advisory firm Bentleys (WA) Pty Ltd to Hall Chadwick (WA) Pty Ltd. On 26 August 2021, the Directors resolved to declare a full year final dividend for FY21 of 1.50 cents (fully franked) to be paid on 13 October 2021 (Record date 25 September 2021). No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect: a) the consolidated entity’s operations in future financial years; b) the results of those operations in future financial years; or c) the consolidated entity’s state of affairs in future financial years. A letter has been sent to shareholders providing a report into the operational and strategic initiatives being driven by the Group. We are continuing to build the capacity to undertake merger and acquisition opportunities at a time of unprecedented change in our core business segments. Our core business The Group's core business is accounting, tax and audit services, financial advice in relation to investment, superannuation and personal insurance; and financial services being the operator of financial advice licence business. The Group will continue to align, build, and grow its core business through organic and acquisitive growth. Material business risks The main risks for the Group are classified into two categories, operational and legislative. Group risks are regularly assessed by the Board and the Board’s Audit and Risk Committee. Risks are addressed in an appropriate manner and are reflected through changes in Group policies as required. As part of the Group's operational risk, we are focused on the impact of COVID-19. 18 COUNTPLUS ANNUAL REPORT 2021Operational risk Legislative risk The main operational risk for our accounting and business advisory firms relates to potential loss of clients, working capital management and staff costs which may be triggered by either senior team departures or declining service levels. Accounting and business advisory firms have regular board and management meetings in which the performance of the firm and forecasts are analysed. Any operational issues are also addressed at those meetings. Accounting and business advisory firms Principals are subject to restraint clauses as part of their employment contracts. In addition, all accounting and business advisory firms have succession plans in place. Training and compliance monitoring have been implemented to ensure standards are being met. A further operational risk relates to inappropriate or inadequate client advice. Regarding the acquisition of Count Financial, which completed on 1 October 2019, the Commonwealth Bank of Australia has provided a $300 million indemnity to cover remediation of past conduct as of 30 June 2021 ($200 million from 1 October 2019 to 29 June 2020 and $210 million from 30 June 2020 to 30 July 2020). All firms are required to have quality assurance processes and appropriate professional indemnity insurance either directly or as part of the Group policy. Accounting and business advisory firms who are part of the Count Financial licensee network are covered under Count Financial's professional indemnity insurance arrangements for their financial planning services. In terms of legislative risk, any substantive changes that impact the provision of accounting / tax services or financial planning services, could have a material impact on the Group. For accounting / tax related services, initiatives being considered by the Federal Government to further reduce the requirement for individuals to lodge tax returns may have some impact on the compliance based work for some accounting and business advisory firms. Legislative risk is not currently expected to significantly impact the profitability of accounting and business advisory firms and the Group, but it will continue to be closely monitored by the Board’s Audit and Risk Committee. In addition to the two main risk categories, the following are some of the additional risks assessed by the Board: Î Integration risk: risk relating to the successful integration of newly acquired accounting and business advisory firms; Î Expense management; failure to control expenses such as staff costs would result in earnings for CountPlus not reflecting revenue performance by accounting and business advisory firms; and Î Owner, Driver – Partner model: the timing and implementation of this initiative will be subject to the underlying performance of the participating firms against key performance indicators. 19 COUNTPLUS ANNUAL REPORT 2021Remuneration Report (audited) The remuneration report details the Key Management Personnel remuneration arrangements for CountPlus Limited ('CountPlus' or 'the Company'), in accordance with the requirements of the Corporations Act 2001 (Cth) ('the Act') and its Regulations. Key Management Personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all Directors. The following Key Management Personnel are covered by this report: Non-Executive Directors Title / Committees Ray Kellerman Non-Executive Chairman Member, Remuneration and Nominations Committee Changes during FY21 Relinquished membership of Audit and Risk Committee Alison Ledger Non-Executive Director No change Kate Hill Andrew McGill Chair, Remuneration and Nominations Committee Member, Audit and Risk Committee Non-Executive Director Chair, Audit and Risk Committee Member, Acquisitions Committee Non-Executive Director Chair, Acquisitions Committee Member, Remuneration and Nominations Committee Member, Technology and Innovation Committee Carolyn Colley Non-Executive Director Chair, Technology and Innovation Committee Member, Audit and Risk Committee No change Appointed as member of Technology and Innovation Committee Appointed 6 October 2020 Appointed as Chair of Technology and Innovation Committee Appointed as Member of Audit and Risk Committee Executive Director Matthew Rowe Chief Executive Officer Managing Director Member, Acquisitions Committee Member, Technology and Innovation Committee Appointed as member of Technology and Innovation Committee Other Key Management Personnel Laurent Toussaint Graham McGeagh Narelle Wooden Andrew Kennedy Chief Financial Officer and Company Secretary Chief Operating Officer General Counsel and Company Secretary Chief Advice Officer, Count Financial No change No change No change No change This section of the Directors' report has been audited by the external auditors, Grant Thornton, as required by section 308(3C) of the Act. 20 COUNTPLUS ANNUAL REPORT 2021 Principles used to determine the nature and amount of remuneration The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: Î competitiveness and reasonableness; Î acceptability to shareholders; Î performance linkage / alignment of executive compensation with the creation of shareholder value; and Î transparency. The Remuneration and Nominations Committee ('the Committee') is responsible for determining and reviewing remuneration arrangements for its Directors and Executives. The performance of the Group depends on the quality of its Directors and Executives. The remuneration philosophy is to attract, motivate and retain high performing and high quality personnel. The Committee's purpose is: Î Make recommendations to the Board in relation to the remuneration of Executive and Non-Executive Directors; Î Review and approve CEO and Senior Management remuneration policy for CountPlus; and Î Evaluate potential candidates for executive positions, oversee the development of executive succession plans and evaluate potential candidates for non-executive director positions. Any decision made by the Committee concerning an individual Executive’s remuneration is made without the Executive being present at the meeting. The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it should seek to enhance shareholders' interests by: Î having profit as a core component of plan design; Î focusing on sustained growth in value for shareholders, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and Î attracting and retaining high calibre Executives. Additionally, the reward framework should seek to enhance Executives' interests by: Î Î rewarding capability and experience; reflecting competitive reward for contribution to growth in shareholder wealth; and Î providing a clear structure for earning rewards. In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive Director remuneration is separate. Non-Executive Directors remuneration Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non- Executive Directors' fees and payments are reviewed annually by the Committee. The Committee may, from time to time, receive advice from independent remuneration consultants to ensure Non-Executive Directors' fees and payments are appropriate and in line with the market. The Chairman's fees are determined independently to the fees of other Non-Executive Directors taking into account the fees paid for similar roles in comparable companies. The Chairman is not present at any discussions relating to the determination of his own remuneration. Non-Executive Directors do not receive performance rights or other incentives. ASX listing rules require that the aggregate remuneration for the Non-Executive Directors of the Company be approved by shareholders. The Group most recently obtained approval from its shareholders at its 2019 Annual General Meeting held on 19 November 2019 for a maximum annual aggregate remuneration of $700,000. 21 COUNTPLUS ANNUAL REPORT 2021Executive remuneration The Group aims to reward executives based on their position, responsibility and performance, with a level and mix of remuneration which has both fixed and variable components. The Executive remuneration and reward framework has four components: Î base pay and non-monetary benefits; Î short-term performance incentives; Î long term incentives including share-based payments; and Î other remuneration such as superannuation and long service leave. The combination of these comprises the Executive's total remuneration. Base pay, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Committee based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remuneration. The short-term incentive ('STI') program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators being achieved. The long-term incentives ('LTI') include share-based payments. Performance rights are awarded to executives over a period based on long-term incentive measures. These measures are growth in earnings per share ('EPS') and in return on equity ('ROE') performance hurdles. The Committee reviews the long-term equity-linked performance incentives for executives annually. Group performance and link to remuneration Short term incentives are based on the achievement of a financial and non-financial balanced scorecard. Long term incentives are based on Adjusted EPS Growth and ROE. The table below provides a summary of the Group's earnings performance for the current and prior years: Group Revenue ($'000) Adjusted NPAT attributable to CountPlus shareholders ($'000) Share price ($) Share of associates earnings ($'000) Dividends paid / declared (cents) Adjusted EPS (cents) Adjusted ROE (%) Use of remuneration consultants No remuneration consultants were engaged during the year ended 30 June 2021 (2020: nil). 2021 80,521 5,298 1.00 2,498 2.75 4.75 7.06 2020 82,607 5,950 0.90 2,179 2.50 5.37 9.68 2019 68,646 3,681 0.81 1,553 2.00 3.33 6.50 Voting and comments made at the Company's 2020 Annual General Meeting ('AGM') At the 2020 AGM, 99.7% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2020. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. 22 COUNTPLUS ANNUAL REPORT 2021Service agreements Non-Executive Directors Executive Key Management Personnel Non-Executive Directors do not have fixed-term contracts with the Group. On appointment to the Board, all Non- Executive Directors enter into a service agreement with the Group in the form of a letter of appointment. The letter summarises the Board policies and terms, including compensation. Remuneration and other terms of employment for the Executive Director and other Key Management Personnel are formalised in employment contracts. Each of these agreements provide for the provision of performance related cash bonuses and other benefits (which may include car allowances, car parking and participation in any equity scheme). The major provisions of the agreements relating to remuneration are set out below. Employee Matthew Rowe Laurent Toussaint Graham McGeagh Narelle Wooden Andrew Kennedy Base salary* Term of agreement Notice period 478,306 333,306 313,306 293,306 303,306 Five years** No fixed term No fixed term No fixed term No fixed term Six months Three months Three months Three months Three months * Excluding superannuation based on FY21 salaries. Refer to pages 24 to 25 for a detailed breakdown of the remuneration components. ** Matthew Rowe's agreement commenced on 24 February 2017. On termination the Executive Director and other Key Management Personnel are entitled to the following benefits: Resignation On resignation, unless the Board determines otherwise, all unvested STI or LTI benefits are forfeited. Statutory entitlements Payment of statutory entitlements of long service leave and annual leave applies in all events of separation. Death or total permanent disability On death or total and permanent disability, the Board has discretion to allow all unvested STI and LTI benefits to vest. Termination for serious misconduct The Group may immediately terminate employment at any time in the case of serious misconduct, and the CEO and Other Executive KMP will only be entitled to payment of total base pay up to the date of termination. On termination without notice by the Group in event of serious misconduct: all unvested STI or LTI benefits will be forfeited; and any equity instruments provided to the employee on vesting of STI and LTI awards that are held in trust, will be forfeited. Post-employment restraints The CEO is subject to post-employment restraints of up to 12 months. All Other Executive KMP are subject to post-employment restraints for 6 months. 23 COUNTPLUS ANNUAL REPORT 2021Short term incentive Long term incentive Short term incentives are in place to reward Executive Key Management Personnel for meeting annual performance targets set by the Board at the beginning of the reporting period. The STI is set as a percentage of base salary. All STIs awarded are recommended by the Committee to the Board for approval. As a listed Company, the Directors are mindful of shareholder expectations for the Group's performance when setting and approving these incentives. Executive Key Management Personnel may, at the discretion of the Board, be granted Performance Rights, which are contractual rights to receive shares in the Group if nominated performance milestones are achieved. These Performance Rights are designed to align a proportion of Executive Key Management Personnel's remuneration with shareholder value over the longer term subject to the satisfaction of various performance milestones, as described on page 28 to 29 of this report. Details of remuneration Remuneration of Key Management Personnel of the Group are set out in the following tables. Short term benefits Post-employment benefits Long term benefits Share based expense2 Cash salary and fees Cash bonus3 Non- monetary Superannuation Long service leave Equity- settled $ $ $ $ $ $ Total $ % Variable remuneration % 136,986 82,192 82,192 82,192 57,675 – – – – 478,306 135,106 333,306 65,545 313,306 52,856 293,306 54,862 – – – – – – – – 13,014 7,808 7,808 7,808 5,479 – – – – – – – – 150,000 90,000 90,000 90,000 63,154 0% 0% 0% 0% 0% 21,694 15,423 106,627 757,156 32% 21,694 21,694 21,694 6,348 26,121 453,014 3,129 2,814 23,624 414,609 20,000 392,676 20% 18% 19% 8% 298,425 16,969 4,881 21,694 11,466 11,025 364,460 2,157,886 325,338 4,881 150,387 39,180 187,397 2,865,069 2021 Non-Executive Directors Ray Kellerman Alison Ledger Kate Hill Andrew McGill Carolyn Colley1 Executive Director Matthew Rowe Other Key Management Personnel Laurent Toussaint Graham McGeagh Narelle Wooden Andrew Kennedy Total 1 Carolyn Colley was appointed on 6 October 2020. 2 Represents the value calculated in accordance with AASB 2 Share Based Payment of performance rights granted as part of the long term incentive. 3 The STI award date was 5 August 2021. 24 COUNTPLUS ANNUAL REPORT 2021Short term benefits Post-employment benefits Long term benefits Share based expense2 Cash salary and fees Cash bonus5 Non- monetary Superannuation Long service leave Equity- settled $ $ $ $ $ $ Total $ % Variable remuneration % 136,986 82,192 82,192 82,192 – – – – 459,119 117,000 328,164 53,500 308,164 38,548 291,497 44,000 134,422 36,480 1,904,928 289,528 – – – – – – – – – – 13,014 7,808 7,808 7,808 – – – – – – – – 150,000 90,000 90,000 90,000 0% 0% 0% 0% 21,003 9,006 71,556 677,684 28% 21,003 21,003 21,003 3,049 1,009 14,888 420,604 13,977 382,701 886 10,401 367,787 9,290 3,640 3,675 187,507 129,740 17,590 114,497 2,456,283 16% 14% 15% 21% 2020 Non-Executive Directors Ray Kellerman Alison Ledger Kate Hill Andrew McGill Executive Director Matthew Rowe Other Key Management Personnel Laurent Toussaint Graham McGeagh Narelle Wooden Andrew Kennedy4 Total 4 Andrew Kennedy was appointed a Chief Advice Officer of Count Financial on 13 January 2020. 5 The STI award date was 27 August 2020. The below graph shows the package mix of Key Management Personnel’s remuneration for FY21 and FY20. w e h t t a M e w o R t n e r u a L t n i a s s u o T m a h a r G h g a e G c M e l l e r a N n e d o o W w e r d n A y d e n n e K 25 COUNTPLUS ANNUAL REPORT 2021 The graph below shows the FY21 and FY20 STI awarded as a percentage of maximum opportunity. Matthew Rowe Laurent Toussaint Graham McGeagh Narelle Wooden Andrew Kennedy Shares held by Key Management Personnel The number of shares in CountPlus Limited held during the financial year by each Director and other members of Key Management Personnel of the Group, including their personally related parties, is set out below: Ordinary shares Ray Kellerman Alison Ledger Kate Hill Andrew McGill Carolyn Colley Matthew Rowe Laurent Toussaint Graham McGeagh Andrew Kennedy Total Balance at the start of the year Received as part of remuneration Additions* Disposals / other Balance at the end of the year 907,000 10,000 200,000 10,000 – – – – – – 1,485,000 67,347 20,000 28,330 10,394 – – – 893,000 – – – 6,000 847,653 – – – 2,670,724 67,347 1,746,653 – – – – – – – – – – 1,800,000 10,000 200,000 10,000 6,000 2,400,000 20,000 28,330 10,394 4,484,724 * All additions during the year were from on-market purchases. No other Key Management Personnel have an interest in CountPlus shares. 26 COUNTPLUS ANNUAL REPORT 2021Equity plans Long term incentive plan Historically CountPlus operated three equity plans for employees: a loan funded share plan, an employee loyalty equity plan, and a long term incentive plan. Two plans have been closed and the remaining equity plan is the long term incentive plan. Performance Rights are issued by the Group to Key Management Personnel under its long term incentive plan at the discretion of the Board. The purpose of this incentive plan is to align the remuneration of Executive Key Management Personnel with shareholder value, while retaining key executives. This long term incentive plan offers Performance Rights in CountPlus subject to the satisfaction of the relevant performance milestones, as well as service and other conditions, at the relevant vesting date. All equity grants are made after the AGM each year. Executives must still be employed by CountPlus to be eligible to receive the Performance Rights. See below summary of the long term incentive plan and performance rights in place: Plan Grant date Expiry date 2020 LTI award 18/11/2020 20/12/2024 2019 LTI award 19/11/2019 20/12/2023 2018 LTI award 19/11/2018 20/12/2022 2017 LTI award 23/11/2017 22/11/2020 Total performance shares granted Exercised Forfeited Total balance at end of the year 599,220 567,415 386,706 134,693 1,688,034 – – – – – – (67,347) (67,347) (67,346) (67,346) 599,220 567,415 386,706 – 1,553,341 27 COUNTPLUS ANNUAL REPORT 2021Summary of performance rights issued The table below outlines performance rights granted to each Executive KMP: Participant Matthew Rowe* Laurent Toussaint Graham McGeagh Narelle Wooden Andrew Kennedy Plan 2020 2019 2018 2017 2020 2019 2018 2017 2020 2019 2018 2017 2020 2019 2018 2017 2020 2019 2018 2017 Performance Rights issued Fair value per right $ Total fair value $ 361,150 358,943 140,182 134,693 994,968 64,333 63,939 102,555 – 230,827 60,481 60,110 96,110 – 216,701 56,628 56,282 47,859 – 160,769 56,628 28,141 – – 84,769 1.03835 1.0447 0.5850 0.6088 1.03835 1.0447 0.5850 – 1.03835 1.0447 0.5850 – 1.03835 1.0447 0.5850 – 1.03835 1.0447 – – 375,000 375,000 82,000 82,000 914,000 66,800 66,799 59,990 – 193,589 62,800 62,799 56,220 – 181,819 58,800 58,799 27,995 – 145,594 58,800 29,400 – – 88,200 Total 1,688,034 1,523,202 * Approval for the issue of the Performance Rights to Matthew Rowe was obtained from shareholders under ASX Listing Rule 10.14. Performance milestones and vesting schedule Each Performance Right is issued by the Group and vests into one ordinary share in the Group. Performance Rights carry no dividend or voting rights. For Performance Rights to vest, the relevant Executive must remain employed or engaged by the Group at the relevant vesting date and the relevant performance milestones must be satisfied. The number of performance rights that vest is dependent on the extent to which the performance milestone meets a range of values (as described below) as at the relevant vesting date. The Performance Rights vest on a straight-line basis between the set range of values specified for each performance milestone. 28 No exercise price is payable by an Executive on vesting of a Performance Right. If the minimum set value for each performance milestone is not satisfied on particular vesting date, the relevant Performance Rights lapse. The performance hurdles are growth in EPS and ROE. These were chosen because the Group believes they align with the Group's strategy and shareholder interests and best reflect the key financial performance metrics of the Group and strike an appropriate balance between growth and long-term profitability. COUNTPLUS ANNUAL REPORT 2021When EPS growth of 10% to 12.5% or more is generated, tranche 1 vests on a straight-line basis between 20% and 100%. When ROE of 9% to 15% or more is generated, tranche 2 vests on a straight-line basis between 10% and 100%. Average ROE Hurdle (50%) For the 2018, 2019 and 2020 awards on issue the second performance milestone is based on whether the Group's return on equity meets or exceeds the returns set out below over the consecutive financial years of the award. Vesting schedule Award 2020 2019 2018 2017 Term Four years Four years Four years Three years In FY21, the 2017 LTI award vested and 67,347 ordinary shares were exercised. This represented the EPS tranche which is the only tranche that vested. Diluted EPS Growth Hurdle (50%) For all current awards on issue the first performance milestone is based on whether the Group's earnings per share achieves or exceeds a diluted compound earnings growth rate as set out below over the consecutive financial years of the award. Diluted EPS Growth % of Performance Rights vesting < 10% per annum 0% = or > 10% per annum 20% – 99% = or > 12.5% per annum 100% Average ROE % of Performance Rights vesting < 9% per annum 0% = or > 9% per annum 10% – 99% = or > 15% per annum 100% For the 2017 awards on issue the second performance milestone is based on whether the Group's return on equity meets or exceeds the returns set out below over the consecutive financial years of the award. CAGR ROE % of Performance Rights vesting < 12% per annum 0% = or > 12% per annum 20% – 99% = or > 15% per annum 100% Other transactions with Key Management Personnel Managing Director and CEO Matthew Rowe is a Director and indirect shareholder of My Accounts Pty Ltd ('My Accounts'). In FY21 CountPlus used the services of My Accounts for which it paid $43,600 (excluding GST). Mr Rowe did not participate or bear any kind of influence in decisions relating to transactions with My Accounts. There are no other transactions which involved the Key Management Personnel during the 2021 financial year. This concludes the remuneration report, which has been audited. 29 COUNTPLUS ANNUAL REPORT 2021Indemnity and Insurance of Officers During the financial year, the Group paid a premium in respect of a contract to insure the Directors and Executives of the Group against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 36 to the financial statements. The Board, via the Audit and Risk Committee, has a formal policy on the provision of auditing and related services. Specifically, the external auditor is precluded from the provision of any services that might threaten its independence or conflict with its assurance and compliance role. The policy provides that all non-audit services by the external auditor are pre-approved by the Chair of the Audit and Risk Committee. Semi-annual reports on the provision of auditing and related services are provided to the Board through the Audit and Risk Committee. The Directors are satisfied that the provision of non- audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in note 36 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: Î all non-audit services with pre-approved by the Chair of the Audit and Risk Committee with consideration given to the nature of the services, the suitability of the proposal of the audit firm compared with other tenderers and the quantum of fees involved; Î all non-audit services have been considered specifically to ensure that they do not impact the integrity and objectivity of the auditor; and Î none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing economic risks and rewards. 30 COUNTPLUS ANNUAL REPORT 2021Auditor's independence declaration Corporate Governance statement A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors' report. Rounding of amounts The Group is of a kind referred to in Corporations Instrument 2016 / 191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. The Group's Directors and management are committed to conducting the business of the Group in an ethical manner. The Group has adopted and has substantially complied with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) (Recommendations) to the extent appropriate to the size and nature of the Group's operations. The Group has prepared a statement which sets out the corporate governance practices that were in operation throughout the financial year for the Group, identifies any Recommendations that have not been followed, and provides reasons for not following such Recommendations (Corporate Governance Statement). In accordance with the ASX Listing Rules 4.7.4 and 4.10.3, the Corporate Governance Statement will be available for review on CountPlus’ website (www.countplus.com. au) and will be lodged together with an Appendix 4G with the ASX while this Annual Report is lodged with ASX. The Appendix 4G will identify each Recommendation that needs to be reported against by CountPlus and will provide shareholders with information as to where relevant governance disclosures can be found. The Group's corporate governance policies and charters and policies are all available on CountPlus’ website. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the Directors, Ray Kellerman Chairman 26 August 2021 Sydney 31 COUNTPLUS ANNUAL REPORT 2021Auditor's Independence Declaration Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of CountPlus Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of CountPlus Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants S M Thomas Partner – Audit & Assurance Sydney, 26 August 2021 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. 32 COUNTPLUS ANNUAL REPORT 2021 Contents Financial Statements Corporate Directory Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors' Declaration Independent Auditor’s Report 34 35 36 37 38 39 93 94 33 COUNTPLUS ANNUAL REPORT 2021CHIEF FINANCIAL OFFICER Laurent Toussaint COMPANY SECRETARY Laurent Toussaint Narelle Wooden Company Matters Pty Ltd (William Hundy) Resigned 30 October 2020 Robert Alan Shedden Appointed 10 November 2020 Resigned 16 March 2021 Doug Richardson Appointed 8 June 2021 Level 8 1 Chifley Square Sydney NSW 2000 Telephone +61 2 8218 8778 Computershare Investor Services Pty Ltd Level 3, 60 Carrington Street Sydney NSW 2000 Telephone +61 2 8234 5000 Grant Thornton Audit Pty Ltd Level 17, 383 Kent Street Sydney NSW 2000 Telephone +61 2 8297 2400 Baker McKenzie Level 46, Tower One International Towers Sydney 100 Barangaroo Avenue Barangaroo NSW 2000 Telephone +61 2 9225 0200 Westpac Banking Corporation CountPlus Limited shares are listed on the Australian Securities Exchange (ASX code: CUP) PRINCIPAL REGISTERED OFFICE IN AUSTRALIA SHARE REGISTRY INDEPENDENT AUDITOR SOLICITORS BANKER STOCK EXCHANGE LISTING WEBSITE ADDRESS www.countplus.com.au ABN 11 126 990 832 Corporate Directory DIRECTORS Ray Kellerman Chairman Alison Ledger Independent Non-Executive Director Andrew McGill Independent Non-Executive Director Carolyn Colley Independent Non-Executive Director Appointed 6 October 2020 Kate Hill Independent Non-Executive Director Matthew Rowe Managing Director and Chief Executive Officer 34 COUNTPLUS ANNUAL REPORT 2021 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2021 Revenue from contracts with customers Other income Interest income Gain on bargain purchase Expenses Salaries and employee benefits expense Depreciation expense Premises expenses Acquisition related expenses Amortisation expense Share based payment expense Reversal of impairment / (impairment) of receivables Finance costs Other operating expenses Total expenses Share of net profits of associates accounted for using equity method Profit before income tax expense Income tax expense Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Profit for the year is attributable to: Owners of CountPlus Limited Non-controlling interest Total comprehensive income for the year is attributable to: Owners of CountPlus Limited Non-controlling interest Basic earnings per share Diluted earnings per share Note 5 6 7 19 11 8 20 9 31 44 44 2021 $’000 80,521 3,530 53 – (53,362) (4,133) (1,748) (334) (1,377) (187) 422 (1,059) (15,261) (77,039) 2,498 9,563 (2,479) 7,084 (23) 7,061 4,938 2,146 7,084 4,915 2,146 7,061 Cents 4.43 4.39 2020 $’000 82,607 2,141 163 10,952 (52,748) (3,964) (1,621) (427) (1,402) (115) (528) (1,108) (16,664) (78,577) 2,179 19,465 (2,017) 17,448 (10) 17,438 15,861 1,587 17,448 15,851 1,587 17,438 Cents 14.30 14.24 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 35 COUNTPLUS ANNUAL REPORT 2021Consolidated Statement of Financial Position As at 30 June 2021 Assets Current assets Cash and cash equivalents Trade and other receivables Contract assets Loans and advances Indemnity asset Assets of disposal groups classified as held for sale Total current assets Non-current assets Trade and other receivables Contract assets Investments in associates Property, plant and equipment Right-of-use assets Intangible assets Deferred taxation Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Interest bearing loans and borrowings Lease liabilities Current tax liabilities Provisions Remediation provision Other liabilities Total current liabilities Non-current liabilities Trade and other payables Contract liabilities Interest bearing loans and borrowings Lease liabilities Deferred taxation Provisions Other liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Capital and reserves attributable to the owners of CountPlus Limited Non-controlling interest Total equity Note 2021 $’000 2020 $’000 10 11 12 13 15 16 11 12 20 17 18 19 14 21 22 23 24 14 26 27 25 21 22 23 24 14 26 25 28 29 30 31 26,239 19,514 12,926 236 259,810 318,725 2,726 321,451 490 21,839 18,236 4,006 13,103 36,514 1,024 95,212 25,842 19,711 14,730 424 195,000 255,707 – 255,707 245 25,673 17,629 4,078 13,950 36,741 – 98,316 416,663 354,023 14,201 10,332 2,610 3,439 1,403 6,797 259,827 1,116 299,725 – 20,668 1,718 10,994 – 966 770 35,116 334,841 81,822 123,153 (47,767) (4,217) 71,169 10,653 81,822 13,633 12,925 3,359 3,321 1,278 6,002 195,030 925 236,473 40 24,158 1,372 12,041 215 1,010 602 39,438 275,911 78,112 123,065 (47,913) (6,435) 68,717 9,395 78,112 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 36 COUNTPLUS ANNUAL REPORT 2021 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2021 Issued Capital $’000 Treasury Shares* $’000 Share Based Payment Reserve $’000 Acquisition Reserve $’000 Foreign Currency Translation Reserve $'000 Accumulated Losses $’000 Non-controlling interests (NCI) $’000 Total Equity $’000 Total $’000 Balance at 1 July 2020 126,566 (3,501) 645 (48,548) Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners Transactions with non-controlling interests (NCI) Share based payments for long term incentives (LTI) Transfer of treasury shares Reallocation of employee share reserve Dividends paid (note 32)** – – – – – – – – – – – – – 88 – – – – – – 187 (41) 23 – – – – – – – – – (10) – (23) (23) – – – – – (6,435) 68,717 4,938 4,938 9,395 78,112 2,146 7,084 – (23) – (23) 4,938 4,915 2,146 7,061 116 116 874 990 – 187 (47) – – 23 – – – 187 – 23 (2,789) (2,789) (1,762) (4,551) Balance at 30 June 2021 126,566 (3,413) 814 (48,548) (33) (4,217) 71,169 10,653 81,822 Issued Capital $’000 Treasury Shares* $’000 Share Based Payment Reserve $’000 Acquisition Reserve $’000 Foreign Currency Translation Reserve $'000 Accumulated Losses $’000 Non-controlling interests (NCI) $’000 Total Equity $’000 Total $’000 Balance at 1 July 2019 126,566 (4,983) 1,486 (48,548) Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners Transactions with non-controlling interests (NCI) Share based payments for long term incentives (LTI) Transfer of treasury shares Reallocation of employee share reserve Dividends paid (note 32)** – – – – – – – – – – – – – 1,482 – – – – – – 115 (376) (580) – – – – – – – – – – – (20,487) 54,034 15,861 15,861 6,232 60,266 1,587 17,448 (10) – (10) – (10) (10) 15,861 15,851 1,587 17,438 – – – – – 117 – – 580 117 115 1,106 – 2,365 2,482 – – – 115 1,106 – (2,506) (2,506) (789) (3,295) Balance at 30 June 2020 126,566 (3,501) 645 (48,548) (10) (6,435) 68,717 9,395 78,112 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. * The Company has formed a trust to administer a Loan Funded Share Plan. Shares held by the trust are disclosed as Treasury Shares and deducted from contributed equity. ** This amount includes the dividends applied to the Loan Funded Share Plan. 37 COUNTPLUS ANNUAL REPORT 2021Consolidated Statement of Cash Flows For the Year Ended 30 June 2021 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Government grants received Interest received Interest and other finance costs paid Income taxes paid Net cash from operating activities Cash flows from investing activities Payment for acquisition of associates Payment for completion adjustment of acquisition of subsidiary Cash acquired from acquisition of subsidiary, net of cash paid Purchase of shares under Owner, Driver – Partner model Proceeds from payment adjustment – associates Purchase of business assets Purchase of equipment and other non-current assets Proceeds from sales under the Owner, Driver – Partner model Proceeds received in advance for sales under Owner, Driver – Partner model Proceeds from sale of property, plant and equipment and business units Proceeds from sale of business assets Dividends / distributions received from associates Payment for deferred consideration on acquisition of controlled entities and associates Net cash (used in) / from investing activities Cash flows from financing activities Proceeds from borrowings Proceeds from Loan Funded Share Plan Repayment of lease liability Dividends paid Repayment of borrowings Payment of dividends by controlled subsidiaries to non-controlling interests Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year Note 43 20 17 25 32 10 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 2021 $’000 146,365 (134,268) 2,389 14,486 37 (1,062) (3,865) 9,596 – – – (220) 69 (2,798) (1,442) 979 – – 449 1,821 (464) (1,606) 963 – (3,005) (2,789) (1,000) (1,762) (7,593) 397 25,842 26,239 2020 $’000 151,237 (137,759) 1,549 15,027 143 (1,108) (1,625) 12,437 (2,988) (24,286) 32,699 (128) – (819) (1,785) 357 452 13 – 1,596 (206) 4,905 3,741 1,104 (2,923) (2,506) (385) (789) (1,758) 15,584 10,258 25,842 38 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 1 General information CountPlus Limited (‘the Company’) is a listed public company limited by shares, incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities Exchange ('ASX'). The consolidated financial report for the year ended 30 June 2021 (‘the financial report’) comprises the parent and its controlled entities (‘the Group’). CountPlus Limited is the ultimate parent entity in the Group. The Group's core business is to collaborate with leading accounting and advice firms for the long term success of the clients, people and shareholders by the way of shared values, mutual success and sense of community. The financial statements were authorised for issue, in accordance with a resolution of Directors, on 26 August 2021. 2 Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group / Consolidated entity consisting of CountPlus Limited and its subsidiaries. Basis of preparation These consolidated general-purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. CountPlus Limited is a for-profit entity for the purpose of preparing the financial statements. Both the functional and presentation currency of CountPlus Limited and its subsidiaries is Australian dollars (A$) and the financial report is presented in Australian dollars (A$). In accordance with ASIC Corporations (Rounding in Financial / Directors' Reports) Instrument 2016 / 191, amounts in the financial report are rounded off to the nearest thousand dollars unless otherwise indicated. Compliance with IFRS These consolidated financial statements of the Group also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). Critical accounting estimates and judgements The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Historical cost convention The Consolidated financial statements have been prepared on an accrual basis and are based on historical costs modified by the revaluation of certain financial assets and financial liabilities for which the fair value basis of accounting has been applied. Changes to presentation Wherever necessary, CountPlus Limited has regrouped and reclassified certain balances in the financial statements in order to provide more relevant information to our stakeholders. The comparative information has been reclassified accordingly. These reclassifications do not have any impact on the profit for the current year or prior year. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 46. Going concern The consolidated financial statements have been prepared on a going concern basis, which contemplates the continuity of normal operations and the realisation of assets and discharges of liabilities in the ordinary course of business. 39 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 New or amended Accounting Standards and Interpretations adopted The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July 2020: Î AASB 2018–7 Amendments to Australian Accounting Standards – Definition of Material [AASB 101 and AASB 108] Î AASB 2018–6 Amendments to Australian Accounting Standards – Definition of a Business [AASB 3] Î AASB 2019–3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform [AASB 9, AASB 139 and AASB 7] Î AASB 2019–5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet issued in Australia [AASB 1054] Î Conceptual Framework for Financial Reporting and AASB 2019–1 Amendments to Australian Accounting Standards – References to the Conceptual Framework. Î AASB 2020–3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments [AASB 1, AASB 3, AASB 9, AASB 116, AASB 137 and AASB 141] Î AASB 2020–4 Amendments to Australian Accounting Standards – COVID-19 Related Rent Concessions [AASB 16] Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. Accounting standards and interpretations issued but not yet effective Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021 reporting period and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Î AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 [AASB 9, AASB 139 and AASB 7] Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of CountPlus Limited and its subsidiaries as at 30 June 2021 and the results of CountPlus Limited and its subsidiaries for the year then ended. CountPlus Limited and its subsidiaries together are referred to in these financial statements as (‘the Group’). Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position and Statement of Changes in Equity of the Group. Investments in subsidiaries are accounted for at cost in the financial statements of CountPlus Limited less any impairment charges. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. 40 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Associates Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The Group's share of its associates' post acquisition profits or losses is recognised in profit or loss and its share of post-acquisition other comprehensive income, is recognised in other comprehensive income. The cumulative post acquisition movements are adjusted against the carrying amount of the investment. Dividends from associates are recognised as reduction in the carrying amount of the investment. When the Group's share of losses in an associate equal or exceeds its interest in the associate, including any other unsecured long term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Employee share trust The Group has formed a trust to administer the Group's Loan Funded Share Plan. This trust is consolidated as the substance of the relationship is that the trust is controlled by the Group. Shares held by the trust are disclosed as Treasury Shares and are deducted from contributed equity. Foreign currency translation The financial statements are presented in Australian dollars, which is CountPlus Limited's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Financial Instruments Recognition, initial measurement and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument, and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss, which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and subsequent measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: Î Î amortised cost; or fair value through profit or loss (FVPL). All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Classifications are determined by both: Î Î the entities business model for managing the financial asset; and the contractual cash flow characteristics of the financial assets. 41 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVPL): Î Î they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Financial assets at fair value through profit or loss (FVPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVPL. Impairment of financial assets AASB 9’s impairment requirements use more forward looking information to recognise expected credit losses – the ‘expected credit losses model’. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and fair value through other comprehensive income (FVOCI), trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between: Î Î financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’); and financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’). ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assesses impairment of trade receivables on a collective basis as they possess credit risk characteristics based on the days past due. Classification and measurement of financial liabilities The Group's financial liabilities include borrowings, trade and other payables, contract liabilities and other liabilities. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Company designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for financial liabilities designated at FVPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss. All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. 42 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Non-current assets or disposal groups classified as held for sale Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of- use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave, long service leave and accumulating sick leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Non-accumulating sick leave is expensed to profit or loss when incurred. 43 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Dividends Dividends are recognised when declared during the financial year. Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Rounding of amounts The Group is of a kind referred to in Corporations Instrument 2016 /191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Comparatives The significant accounting policies adopted in the preparation of the financial statements have been consistently applied to the current year and the comparative period, unless otherwise stated. Where necessary, comparative information has been reclassified to be consistent with current period disclosures. 3 Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Impairment At each reporting date, the Group reviews the recoverable amount of its tangible and intangible assets to determine whether there is any indication that these assets may be impaired. If such an indication exists, the recoverable amount of the asset, assessed as the higher of its fair value less costs to sell and its value in use, is compared to its current carrying amount. Any excess of the asset’s carrying value over its recoverable amount is expensed in the statement of profit or loss and other comprehensive income. The Group determines whether goodwill is impaired at least on an annual basis. This requires estimation of the recoverable amount of the CGU by determining the value in use of each individual CGU. The following key assumptions are used in determining the value in use calculation for each CGU: Î Revenue growth; Î Employment expense ratio; Î EBITA margin; Î Discount rates; and Î Long term growth rate (terminal rate). Acquired client relationships are tested for impairment whenever there is an indication that the intangible asset may be impaired. This assessment is made at least on an annual basis. The net carrying value is compared with the expected future benefits from the relationships for each cash generating unit. If the carrying value of the relationships is higher than the expected future benefits an impairment loss is recorded for the difference. 44 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Allowance for expected credit losses of receivables Where receivables are outstanding beyond the normal trading terms, the recovery likelihood of these receivables is assessed and reviewed by management. Outstanding debts that are deemed to be uncollectable are written off when identified. Historical experience and information of the Group's client base are considered when determining the allowance for expected credit losses. The allowance for expected credit loss of receivables includes assumptions about risk of default and expected loss rates; management judgment is applied in determining these rates. Allowance for expected credit losses of contract assets The recoverability of contract assets are assessed and reviewed by management on a regular basis. Any amounts in excess of net recoverable value are written off when identified. Historical experience and information of the Group’s client base are considered when determining the allowance for expected credit losses. Remediation provision The key accounting judgments and estimates used in calculating the remediation provision include the value of ongoing service fees charged, the number of years in which issues have occurred, the refund rate, the interest calculation methodology and the value below which fee refunds will be made without investigation. The key assumptions reflected in the remediation provision are subject to a high degree of uncertainty. The key assumptions will become clearer over time as the remediation program obtains greater insight into the actual quantum of the issues identified. The value of ongoing service fees charged has been estimated using Count Financial’s books and records and the books and records of third party product providers where relevant; the population of impacted customers is subject to some uncertainty and is yet to be finalised. The refund rate has been estimated by reference to testing conducted on a small sample of client cases. The refund rate is subject to change as actual refund rate data (incurred by Count Financial) becomes available. The interest calculation methodology that has been applied is based on a rate equivalent to the RBA cash rate plus 6% compounded monthly. This methodology is subject to change. Some customers may be remediated without investigation where the combined value of the refund and the interest is below a certain amount, however this is dependent on the availability of underlying customer records. This is subject to change. Contingent consideration Some acquisitions involve the payment of contingent consideration to vendors. This consideration is determined based on a multiple of actual earnings over a fixed period and is dependent on revenue or client retention. Consideration payable to the vendors in relation to acquisitions is recognised at fair value based on expected financial performance over the applicable future financial years. The component of contingent consideration not expected to be settled within 12 months after the end of the reporting period is measured as the present value of expected future payments to be made in respect of this contingent consideration, using a risk adjusted discount rate. Lease make good provision A provision has been made for the present value of anticipated costs for future restoration of leased premises. The provision includes future cost estimates associated with closure of the premises. The calculation of this provision requires assumptions such as application of closure dates and cost estimates. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will be recognised in profit or loss. Deferred taxes The Consolidated entity is subject to taxes in Australia. The application of tax law to the specific circumstances and transactions of the Consolidated entity requires the exercise of judgement by management. The tax treatments adopted by management in preparing the financial statements may be impacted by changes in legislation and interpretations or be subject to challenge by tax authorities. Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. In addition, CountPlus has recognised a deferred tax asset on tax capital losses. CountPlus plans to continue with the successful Owner, Driver – Partner model which is expected to result in transactions with core firms over the next two to three years. A consequence of these transactions is likely to create taxable capital gains. The envisaged structure of most of the transactions, being share sale transactions, are subject to predefined financial hurdles being met by firms. Both the structure of the transactions and the potential increase in value in the firms are likely to give rise to taxable capital gains which the Group has concluded will result in the deferred tax assets being utilised in the foreseeable future. 45 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 AASB 16 Leases Lease term Where lease arrangements contain options to extend the term or terminate the contract, the Group assesses whether it is ‘reasonably certain’ that the option to extend or terminate the contract will be made. Consideration is given to the prevalence of other contractual arrangements and or the economic circumstances relevant to the lease contract, that may indicate the likelihood of the option being exercised. Lease liabilities and right-of-use assets are measured using the reasonably certain contract term. Lease discount rates The discount rate applicable to a lease arrangement is determined at the inception of the contract or when certain modifications are made to the contract. The discount rate applied is the rate implicit in the arrangement, or if unknown, the Group’s incremental borrowing rate. The incremental borrowing rate is determined with reference to the Group’s borrowing portfolio at the inception of the arrangement or the time of the modification and the amount and nature of the lease arrangement. If the arrangement relates to a specialised asset, incremental project financing assumptions are considered. Contract asset – ongoing insurance trail commissions receivable The key assumptions underlying the ongoing insurance trail commission asset include the remaining life of the product and the likely run off of products over time. It has been assumed that the insurance policies have a remaining life of five years and that 20% of policies are cancelled at the end of each year. These assumptions are subject to change depending on the actual experience of the insurance arrangements over time. Contract liability – ongoing insurance trail commission payable The key assumptions underlying the ongoing insurance trail commission liability are the remaining life of the insurance products, the likely run off of products over time and the adviser payout ratio. It has been estimated that the insurance policies have a remaining life of five years and that 20% of policies are cancelled at the end of each year. These assumptions are subject to change depending on the actual experience of the insurance arrangements over time. In respect of the adviser payout ratio, it has been estimated that 93.5% (2020: 93%) of ongoing insurance trail commission is paid to aligned advisers. This is subject to change if Count Financial’s adviser pricing changes or if the average payout ratio changes across the portfolio; this may occur given the tiered pricing model applicable to aligned advisers. 4 Operating segments Identification of reportable operating segments The consolidated entity is organised into four operating segments. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. Î Accounting which comprises the provision of accounting, audit and assurance, taxation, and business and corporate advisory services. Î Financial planning which comprises of financial planning services offered by member firms. Î Financial services which comprises of financial planning services provided by Australian Financial Services licence (AFSL) holders. Î Other which mainly comprises of information technology related revenue, legal related revenue, conference and insurance related revenue. The CODM reviews contribution margin (revenue less salaries and superannuation) to assess the performance of the operating segments. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. No segment assets and liabilities are disclosed because there is no measure of segment assets and liabilities regularly reported to the CODM. The information reported to the CODM is on a monthly basis. 46 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Operating segment information 2021 Revenue ($'000) Segment contribution ($'000) Segment contribution margin % 2020 Revenue ($'000) Segment contribution ($'000) Segment contribution margin % Accounting Financial planning Financial services 52,681 24,967 47% 11,379 4,871 43% 8,725 3,654 42% Accounting Financial planning Financial services 51,975 24,012 46% 11,779 5,742 49% 12,515 7,739 62% Reconciliation of segment contribution margin to profit from operations before income tax. Total contribution margin Other income and interest income Share of net profit of associates Gain on bargain purchase Amortisation and depreciation expense Finance costs Premises expenses Other costs Profit from operations before income tax Other 7,736 2,513 32% Other 6,338 55 1% 2021 $’000 36,005 3,583 2,498 – (5,510) (1,059) (1,748) (24,206) 9,563 Total 80,521 36,005 45% Total 82,607 37,548 45% 2020 $’000 37,548 2,304 2,179 10,952 (5,366) (1,108) (1,621) (25,423) 19,465 The segment revenue described above represents revenue generated from external customers. Other costs include $13,086,000 (2020: $12,674,000) of salaries and employee benefit expense that are not included in contribution margin. 5 Revenue from contracts with customers Accounting services revenue Financial planning revenue Financial services revenue Other operating revenue Revenue from contracts with customers Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Timing of revenue recognition Transferred at a point in time Transferred over time 2021 $’000 52,681 11,379 8,725 7,736 80,521 2021 $’000 20,104 60,417 80,521 2020 $’000 51,975 11,779 12,515 6,338 82,607 2020 $’000 30,632 51,975 82,607 47 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Accounting services revenue Accounting services revenue includes fees generated by CountPlus firms from services provided to clients. Financial planning revenue Financial planning revenue includes commissions and fees generated by CountPlus firms from financial advice services provided to clients. Financial services revenue Financial services revenue includes revenue generated from services performed by authorised representatives of Count Financial and Total Financial Solutions Australia Limited (TFS) (both Australian Financial Services Licence holders) and product margin rebates that are paid by product providers to TFS and Count Financial. Count Financial and TFS are considered to be acting as agent under the requirements of AASB 15 Revenue from Contracts with Customers. Fees, commissions and related costs are deducted from the gross number to obtain the reported net revenue figure as disclosed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Significant accounting policy Revenue recognition To determine whether to recognise revenue, the Group follows a five-step process: 1 2 Identifying the contract with a customer; Identifying the performance obligations; 3 Determining the transaction price; 4 Allocating the transaction price to the performance obligations; and 5 Recognising revenue when / as performance obligation(s) are satisfied. The Group often enters into transactions involving a range of the Group's products and services, for accounting and financial planning services. In all cases, the total fee charged for an engagement is allocated amongst the various performance obligations based on their relative stand-alone fees. The fee charged for an engagement excludes any amounts collected on behalf of third parties. Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised services to its customers. Performance obligations for accounting and financial planning revenue The Group’s contracts comprise performance obligations around completing client deliverables in line with engagement letter terms (based on the agreed billing method, standard of work and timeline). Under AASB 15, the Group must evaluate the separability of the promised services based on whether they are ‘distinct’. A promised service is ‘distinct’ if both: Î Î the customer benefits from the item either on its own or together with other readily available resources; and it is ‘separately identifiable’ (i.e. the Group does not provide a significant service integrating, modifying or customising it). Accounting services revenue Accounting services revenue is recognised over a period of time. Accounting revenue from the provision of accounting services is recognised on an accrual basis in the period in which the service is provided, based on time spent and performance obligations satisfied. Any amounts unbilled at the end of the reporting period are presented in the Statement of Financial Position as contract assets. Recognition is in accordance with the terms of the client services agreement or engagement letter, adjusted for any time that may not be recoverable with reference to the professional hours incurred. Client engagement letter gives an enforceable right to payment for performance completed to date, including a reasonable margin if the contract is terminated by the customer for reasons other than CountPlus' failure to perform as promised. Financial planning revenue Financial planning revenue is recognised at a point in time. Financial planning revenue from the provision of financial planning services, loan commission and leasing commission is recognised at a point in time in the period in which the service is provided. Financial services revenue Financial services revenue is measured at the fair value of the consideration received or receivable. Financial services revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group, and specific criteria have been met for each of the Group’s activities as described below. (i) Fee income – ongoing service fees Service fees are received from end customers for ongoing advice services which are available to a client over a 12 month period. The performance obligation is to provide advice services to the customer throughout the period, as well as the continuous administration and maintenance of the end customers’ portfolios. Income is recognised on an annual basis in accordance with rates specified in agreements with advisers and end customers. These fees are recognised and charged over the length of the service. 48 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 (ii) Rebate income Rebate income is an incentive bonus received from various product providers based on the achievement of new business written targets outlined in an agreement. The frequency of settlement varies by counterparty. Income is recognised in accordance with these agreements. These fees are recognised and charged when the related service is completed which is typically at the time of the transaction. (iii) Commission income Commission income is received for the referral services which triggered a successful referral of a customer into a product where the customer has renewed the product for a second / subsequent year. The net present value of future trail commissions is recognised at the start of a contract when the performance obligation has been met, typically when a customer is introduced to a new product. For investment referral services, the Group is unable to forecast the trail commission revenue in line with the highly probable test in AASB 15. Therefore trail commission revenue on investment referral balances are recognised when received or paid. (iv) Adviser fees Adviser fees are received from financial advisers for financial advice licensee services which are provided on an ongoing basis. The performance obligation is to provide advisers with an authority to trade, to provide training services and financial advice support. Income is recognised over time in accordance with rates specified in agreements with advisers. Interest revenue is recognised when there is control of the right to receive the interest payment. Dividends received from associates are accounted for in accordance with the equity method of accounting. Other revenue is recognised when the right to receive payment is established. All revenue is stated net of the amount of goods and services tax (GST). 6 Other income Gain on deferred consideration Gain on disposal of intangible assets Gain on lease variation Other income Government grants Other income Government grants 2021 $’000 355 396 110 280 2,389 3,530 2020 $’000 88 – 152 352 1,549 2,141 The Company received Jobkeeper payments from the Australian Government in support of businesses significantly affected by COVID-19. Significant accounting policy Government grants Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Grants that compensate the Group for expenses incurred are recognised in other income in the Consolidated Statement of Profit or Loss and other Comprehensive Income on a systematic basis in which the expenses are recognised. 7 Salaries and employee benefits expense Wages, salaries and on-costs Post-employment benefits expenses Other employee benefit expenses 2021 $’000 44,437 3,862 5,063 53,362 2020 $’000 43,402 3,771 5,575 52,748 49 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 8 Other operating expenses Audit fees Legal fees Accounting and other professional fees Sales and marketing expenses Administration expenses Insurance expense Technology expense Net loss / (gain) on disposal of property, plant and equipment Count Financial transition expenses Other 9 Income tax expense Income tax expense Current tax Deferred tax – origination and reversal of temporary differences Over provision Aggregate income tax expense Deferred tax included in income tax expense comprises: Decrease in deferred tax assets Increase in deferred tax liabilities Deferred tax – origination and reversal of temporary differences Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible / (taxable) in calculating taxable income: Non-deductible depreciation and amortisation Gain on deferred consideration Gain on bargain purchase Taxable capital gain on exit of tax consolidated group Benefit on trail commission Share of equity accounted investments Taxable capital gain on sale of subsidiary Non-deductible expenses Non-taxable income Taxable capital gain on sale of shares Initial recognition of deferred tax asset on capital losses Profit on disposal of parcel of fees Taxable capital gain on disposal of fees Sundry items Over provision in prior years Income tax expense 50 2021 $’000 437 381 760 1,108 2,260 3,396 6,156 26 – 737 2020 $’000 431 519 1,016 790 2,318 3,392 6,196 (5) 1,214 793 15,261 16,664 2021 $’000 3,530 (1,061) 10 2,479 (18,251) 17,190 (1,061) 9,563 2,869 17 (110) – 7 (8) (709) 178 199 (37) 93 – (119) 80 9 2,469 10 2,479 2020 $’000 2,567 (603) 53 2,017 (4,179) 3,576 (603) 19,465 5,840 8 (27) (3,286) – (22) (632) – 207 (76) 10 (2) (20) – (36) 1,964 53 2,017 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 AASB Interpretation 23 Uncertainty over Income Tax Treatments (Interpretation 23) Interpretation 23 clarifies the application of the recognition and measurement criteria in AASB 12 Income taxes where there is uncertainty over income tax treatments. It requires an assessment of each uncertain tax position to determine whether it is probable that a taxation authority will accept the position. Where it is not considered probable, the effect of the uncertainty will be reflected in determining the relevant taxable profit or loss, tax bases, unused tax credits or tax rates. The amount will be determined as either the single most likely amount or the sum of the probability weighted amounts in a range of possible outcomes, whichever better predicts the resolution of the uncertainty. Significant accounting policy Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered, or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: Î when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or Î when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Tax consolidation legislation The parent and its 100% owned Australian subsidiaries formed an income tax consolidation group with effect from 5 November 2010. Subsidiaries joined the tax consolidation group from the date they became wholly owned. They would exit the tax consolidation group once they are less than 100% owned. The parent and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer. Members of the CountPlus tax consolidation group entered into a tax sharing and funding agreement. Under the terms of this agreement, each member in the tax consolidation group agreed to make a tax equivalent payment to the parent based on their current tax liability or current tax asset. Deferred taxes are recorded by members of the tax consolidation group in accordance with the principles of AASB 112 Income Taxes. 10 Cash and cash equivalents Current assets Cash at bank Reconciliation to cash and cash equivalents at the end of the financial year The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the statement of cash flows as follows: 2021 $’000 2020 $’000 26,239 25,842 Balance as per statement of cash flows 26,239 25,842 Risk exposure The Group's exposure to interest rate risk is discussed in note 34. The maximum exposure to credit risk at the end of each reporting period is the carrying amount of cash and cash equivalents mentioned above. Significant accounting policy Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Consolidated Statement of Financial Position. 51 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 11 Trade and other receivables Current assets Trade receivables Less: Allowance for expected credit losses Other receivables Prepayments Rebates and adviser revenue receivable 2021 $’000 8,992 (247) 8,745 789 3,065 6,915 10,769 19,514 2020 $’000 9,633 (558) 9,075 1,790 1,518 7,328 10,636 19,711 Non-current assets Other receivables 490 245 Ageing analysis of trade receivables As at 30 June, the ageing analysis of receivables is as follows and represents both current and overdue but not impaired receivables: Current 0 to 3 months 3 to 6 months Over 6 months 2021 $’000 6,248 1,114 996 634 8,992 2020 $’000 6,140 1,399 887 1,207 9,633 Trade receivables are non-interest bearing and are generally on 30-day terms. Allowance for expected losses is recognised when there is objective evidence that a trade receivable is impaired and is based on the Group policies. These amounts have been included on the face of the Statement of Profit or Loss and Other Comprehensive Income. Allowance for expected credit losses As at 30 June, the ageing of the allowance for expected credit losses is as follows: Current 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue Movements in the allowance for expected credit losses are as follows: Opening balance Changes in allowance for expected credit losses Receivables written off / (recovered) during the year as uncollectable Closing balance 52 2021 $’000 15 2 85 145 247 2021 $’000 (558) 422 (111) (247) 2020 $’000 3 3 151 401 558 2020 $’000 (570) (528) 540 (558) COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 The creation and release of the allowance for expected credit losses has been included on the face of the Statement of Profit or Loss and Other Comprehensive Income. Amounts charged to the allowance account are generally written off when there is no expectation of recovery. The maximum exposure to credit risk at reporting date is the carrying amount of each class of receivables mentioned above. Refer to note 34 for more information on the risk management policy of the Group. Significant accounting policy Trade receivables Trade receivables are initially recognised at their fair value and subsequently measured at amortised cost using the effective interest method, less allowance for expected losses. Recoverability of trade receivables is reviewed on an ongoing basis. Trade receivable balances which are known to be uncollectable are written off by reducing the carrying amount directly. An allowance for expected losses on trade receivables is raised by applying a rate based on historic collection rates for overdue balances, which are reassessed each year, and adjusted specific debtors where management is aware of specific conditions which affect the likely recovery of outstanding balances. The loss allowance is the amount equal to the expected lifetime credit losses. The allowance for expected losses of receivables is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate if the impact of discounting is considered material. Significant accounting judgements, estimates and assumptions Allowance for expected losses of receivables The allowance for expected losses of receivables assessment requires a degree of estimation and judgement. Where receivables are outstanding beyond the normal trading terms, the recovery likelihood of these receivables is assessed and reviewed by management. Outstanding debts that are deemed to be uncollectable are written off when identified. Historical experience and information of the Group's client base are considered when determining the allowance for expected credit losses. 12 Contract assets Current assets Contract assets Allowance for expected credit losses of contract assets Ongoing insurance trail commission receivable Loss allowance on trail commission receivable Non-current assets Ongoing insurance trail commission receivable Loss allowance on trail commission receivable 2021 $’000 3,625 (209) 9,630 (120) 12,926 22,096 (257) 21,839 2020 $’000 3,983 (387) 11,273 (139) 14,730 25,976 (303) 25,673 Contract assets Contract assets represents costs incurred and profit recognised on client assignments and services that are in progress and have not yet been invoiced at reporting date. Contract assets are valued at net realisable value after providing for any expected credit losses. Contract assets are recognised in the Statement of Financial Position and the movement recognised in the Statement of Profit or Loss and Other Comprehensive Income. Ongoing insurance trail commission receivable Contract assets have been raised to reflect the recognition of ongoing insurance trail commissions receivable across various commission arrangements. This reflects the upfront recognition of ongoing insurance commission income when a performance obligation has been met, e.g. a new customer is introduced to a product. The amount of ongoing insurance trail commission revenue and the associated expenses paid to aligned advisers is dependent on assumptions about the term of the underlying insurance policies generating the commission. The Group has recognised the net present value of expected future risk insurance trail commission income. Included in the recognition of the income are assumptions around the remaining life of the product and the likely run off of products over time. Ongoing insurance trail commission income, present valued, is only recognised to the extent that it is highly probable and on the basis that it is not expected to reverse in future periods. 53 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Ageing of contract assets As at 30 June, the ageing of the contract assets is as follows: Current 1 to 3 months 3 to 6 months Over 6 months Movement and ageing of allowance for expected credit losses At 30 June, the movement in provision for allowance of expected credit losses is as follows: At 1 July Allowance for expected credit losses recognised in the year At 30 June, the ageing of the allowance for expected credit losses is as follows: Current 0 to 3 months 3 to 6 months Over 6 months 2021 $’000 1,379 901 595 750 3,625 2021 $’000 (387) 178 (209) 2021 $’000 – 19 38 152 209 2020 $’000 1,742 1,040 676 525 3,983 2020 $’000 (171) (216) (387) 2020 $’000 – 35 70 282 387 The maximum exposure to credit risk at reporting date is the carrying amount of each class of asset mentioned above. Refer to note 34 for more information on the risk management policy of the Group. Movement in ongoing insurance trail commission receivable $’000 – 24,590 20,728 (8,069) 37,249 6,537 (12,060) 31,726 Balance at 1 July 2019 Ongoing insurance trail commission receivable acquired Amount recognised in revenue from contracts with customers Receipt of ongoing insurance trail commission Balance at 30 June 2020 Amount recognised in revenue from contracts with customers Receipt of ongoing insurance trail commission Balance at 30 June 2021 54 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Significant accounting judgements, estimates and assumptions Allowance for expected credit losses The recoverability of contract assets is assessed and reviewed by management on a regular basis. The allowance for expected credit losses of contract assets assessment requires a degree of estimation and judgement. The level of expected credit losses is assessed by considering the ageing of contract assets, historical billing and collection rates and specific knowledge of the individual customer’s financial position. Ongoing insurance trail commissions The key assumptions underlying the ongoing insurance trail commission asset include the remaining life of the product and the likely run off of products over time. It has been assumed that the insurance policies have a remaining life of 5 years and that 20% of policies are cancelled at the end of each year. These assumptions are subject to change depending on the actual experience of the insurance arrangements over time. 13 Loans and advances Current assets Loans and advances 2021 $’000 2020 $’000 236 424 Included in above loans and advances is an amount receivable from Count Member Firm Pty Ltd of $197,000 (2020: $395,000). 14 Tax assets and liabilities Current tax assets and liabilities Current tax payable Deferred tax assets The balance comprises temporary differences attributable to: Bonus provision Employee liabilities (annual leave and long service leave) Allowance for expected credit losses – trade receivables Professional fees Make good Accruals Contract liability – accrued trail commission expense Tax losses Right-of-use asset Depreciation Remediation provision Other Total deferred tax assets Set-off of deferred tax liabilities pursuant to set-off provisions Net deferred tax assets 2021 $’000 (1,403) 2021 $’000 45 2,158 100 12 51 389 8,902 888 608 124 77,958 151 91,386 (90,362) 1,024 2020 $’000 (1,278) 2020 $’000 – 1,954 199 10 51 377 10,392 697 525 130 58,516 86 72,937 (72,937) – 55 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Movements in deferred tax assets At 1 July 2019 Charged to income tax expense Charged directly to equity Deferred tax balance on acquisition of subsidiary Deferred tax balance on remediation provision Decrease in tax losses At 30 June 2020 At 1 July 2020 Charged to income tax expense Deferred tax balance on acquisition of subsidiary Increase in tax losses Under provision in prior year As at 30 June 2021 Deferred tax liabilities The balance comprises temporary differences attributable to: Work in progress Prepaid expenses Fair valued intangible assets Accrued income Contract asset – accrued trail commission income Indemnity asset Other Total deferred tax liabilities Set-off of deferred tax assets pursuant to set-off provisions Net deferred tax liabilities Movements in deferred tax liabilities At 1 July 2019 Net deferred tax balance on acquisition of subsidiaries* Deferred tax balance on indemnity asset Charged to the income tax expense At 30 June 2020 At 1 July 2020 Net deferred tax balance on acquisition of subsidiaries* Charged to the income tax expense Other adjustments At 30 June 2021 * Includes business assets acquired by member firms. 56 $’000 3,013 4,178 438 6,861 58,500 (53) 72,937 72,937 18,251 14 191 (7) 91,386 2021 $’000 2020 $’000 1,025 8 1,970 2 9,405 77,941 11 90,362 (90,362) – Other $’000 1,079 7,377 58,500 3,955 70,911 70,911 – 17,482 (1) 88,392 1,042 19 2,241 171 11,175 58,500 4 73,152 (72,937) 215 Total $’000 2,463 8,613 58,500 3,576 73,152 73,152 21 17,190 (1) 90,362 Fair valued intangible assets $'000 1,384 1,236 – (379) 2,241 2,241 21 (292) – 1,970 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Significant accounting judgements, estimates and assumptions Deferred taxes The Group is subject to taxes in Australia. The application of tax law to the specific circumstances and transactions of the Consolidated entity requires the exercise of judgement by management. The tax treatments adopted by management in preparing the financial statements may be impacted by changes in legislation and interpretations or be subject to challenge by tax authorities. Recognition of deferred tax assets on capital losses CountPlus has recognised a deferred tax asset on tax capital losses. CountPlus plans to continue with the successful Owner, Driver – Partner model which is expected to result in transactions with core firms over the next two to three years. A consequence of these transactions is likely to create taxable capital gains. The envisaged structure of most of the transactions, being share sale transactions, are subject to pre- defined financial hurdles being met by firms. Both the structure of the transactions and the potential increase in value in the firms are likely to give rise to taxable capital gains which the Group has concluded will result in the deferred tax assets being utilised in the foreseeable future. 15 Indemnity asset Current assets Indemnity asset Indemnity asset 2021 $’000 2020 $’000 259,810 195,000 Included in the Statement of Financial Position of Count Financial is a provision for remediation amounting to $259,810,000. A corresponding indemnity asset has been recognised which represents an amount receivable pursuant to an indemnity deed granted by the Commonwealth Bank of Australia. The provision is for ongoing service fees charged to clients where no service was provided and for other advice issues. The provision relates to the period prior to the purchase of Count Financial by CountPlus. The indemnity provided by Commonwealth Bank of Australia (CBA) relates directly to the remediation provision. The indemnity granted by CBA upon acquisition was $200,000,000. The indemnity increased to $210,000,000 at 30 June 2020 and subsequently increased to $300,000,000 at 30 July 2020. The indemnity at 30 June 2021 was $300,000,000. The indemnity is subject to renegotiation if some of the underlying assumptions behind the provision are reassessed. Refer to note 27 for further information on the provision for remediation. Recoveries of remediation amounts are expected to be assessable for tax purposes. Note that remediation payments are expected to be deductible for tax purposes. 16 Assets of disposal groups classified as held for sale In June 2021 the CountPlus Board of Directors approved the proposed sale of the Bentleys audit and corporate finance businesses. Consequently all assets related to the sale were classified as a disposal group. Measurement of the disposal group's assets did not result in any gain or loss. The sale does not result in a discontinued operation as CountPlus services audit clients across other subsidiaries. The remaining Bentleys business and related operations remain with CountPlus. The carrying amount of assets and liabilities in the disposal group are disclosed in the table below: Goodwill Acquired client relationship Deferred tax liability Property, plant and equipment Total $’000 1,826 937 (42) 5 2,726 57 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 17 Property, plant and equipment Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at 1 July 2019 Additions Disposals Transfers in / (out) Depreciation expense Balance at 30 June 2020 Additions Additions through business combinations Disposals Transfers in / (out) Depreciation expense Balance at 30 June 2021 At 30 June 2020 Cost Accumulated depreciation Net book value At 30 June 2021 Cost Accumulated depreciation Net book value Office equipment $’000 Furniture, fixtures and fittings $’000 Leasehold improvements $’000 Other property, plant and equipment $’000 Motor vehicles $’000 1,363 490 (20) (200) (485) 1,148 455 52 (12) (15) (433) 1,195 842 150 (25) (4) (195) 768 106 48 (21) (20) (195) 686 1,140 1,023 (4) 202 (295) 2,066 406 – – – (407) 2,065 309 2 – (230) (30) 51 1 – (4) 10 (33) 25 43 21 (9) – (10) 45 – – – – (10) 35 Office equipment $’000 Furniture, fixtures and fittings $’000 Leasehold improvements $’000 Other property, plant and equipment $’000 Motor vehicle $’000 4,002 (2,854) 1,148 3,962 (2,767) 1,195 2,915 (2,147) 768 2,871 (2,185) 686 3,014 (948) 2,066 3,420 (1,355) 2,065 942 (891) 51 387 (362) 25 69 (24) 45 69 (34) 35 Total $’000 3,697 1,686 (58) (232) (1,015) 4,078 968 100 (37) (25) (1,078) 4,006 Total $’000 10,942 (6,864) 4,078 10,709 (6,703) 4,006 58 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Significant accounting policy Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term, as follows: Furniture, fixtures and fittings Leasehold improvements Î Office equipment Î Î Î Make good Î Motor vehicle 4% – 20% 8% – 37% over the estimated life of the asset or shorter of the lease term over the estimated life of the lease 20% – 25% The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in profit or loss. 18 Right-of-use assets The Group as a lessee For any new contracts entered into on or after 1 July 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key criteria, which include: Î Î Î the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group; the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and the Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use. Measurement and recognition of leases as a lessee At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the Statement of Financial Position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit or loss if the right-of-use asset is already reduced to zero. The Group has elected to account for short term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. 59 COUNTPLUS ANNUAL REPORT 2021 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Non-current assets Premises – right-of-use Less: Accumulated depreciation Office equipment – right-of-use Less: Accumulated depreciation Others – right-of-use Less: Accumulated depreciation Balance at 30 June Reconciliations 2021 $’000 24,345 (11,516) 12,829 709 (441) 268 15 (9) 6 2020 $’000 22,194 (8,607) 13,587 687 (338) 349 41 (27) 14 13,103 13,950 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Right-of-use assets $’000 – 11,152 5,749 (2) (2,949) 13,950 13,950 2,208 (3,055) 13,103 Total $’000 – 11,152 5,749 (2) (2,949) 13,950 13,950 2,208 (3,055) 13,103 At 1 July 2019 Adoption of AASB16 Additions Disposals Depreciation expense At 30 June 2020 At 1 July 2020 Additions Depreciation expense At 30 June 2021 60 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 19 Intangible assets Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Acquired client relationship / Adviser networks $’000 Goodwill $’000 IT software $’000 Brand $’000 Other intangible assets $’000 27,800 637 – – – 28,437 – 728 (1,826) – – 27,339 4,895 631 2,041 (5) (1,275) 6,287 – 2,854 (937) (120) (1,164) 6,920 130 99 – – (43) 186 457 12 – (27) (110) 518 – – 1,493 – (45) 1,448 – – – – (60) 1,388 348 74 – – (39) 383 9 – – – (43) 349 Total $’000 33,173 1,441 3,534 (5) (1,402) 36,741 466 3,594 (2,763) (147) (1,377) 36,514 Acquired client relationship / Adviser networks $’000 Goodwill $’000 IT software $’000 Brand $’000 Other intangible assets $’000 Total $’000 38,427 (9,990) 28,437 37,329 (9,990) 27,339 28,634 (22,347) 6,287 29,833 (22,913) 6,920 733 (547) 186 1,163 (645) 518 1,493 (45) 1,448 1,493 (105) 1,388 503 (120) 383 69,790 (33,049) 36,741 512 (163) 70,330 (33,816) 349 36,514 Balance at 1 July 2019 Additions Additions through business combinations Disposals Amortisation expense Balance at 30 June 2020 Additions Additions through business combinations Classified as held for sale Disposals Amortisation expense Balance at 30 June 2021 At 30 June 2020 Cost Accumulated amortisation and impairment Net book value At 30 June 2021 Cost Accumulated amortisation and impairment Net book value Impairment tests for goodwill Goodwill acquired through business combinations has been allocated to and is tested at the level of the respective cash generating units (CGUs), for impairment testing. For the purpose of impairment testing, fourteen of the seventeen member firms listed in note 41, are considered as separate CGUs, operating largely independently from other businesses in the Group. All subsidiaries are separately identified in note 41. The Group utilises a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period to assess the recoverable amount of the CGUs. The member firm budget for FY22 is used as the basis for the five year period; and year two to five is extrapolated at a 3% growth rate over the remainder of the five year budget period. A pre-tax discount rate has been applied to cash flow projections and cash flows beyond the five-year period have been extrapolated using a growth rate of 2.5%. This method is used to assess impairment for the individually significant CGUs. The same methodology of impairment testing is performed across all CGUs. 61 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 For the purpose of annual impairment testing, goodwill is allocated to the following cash-generating units: Significant cash generating units CountPlus One Pty Ltd The MBA Partnership Pty Ltd* Kidmans Partners Pty Ltd Unite Advisory Pty Ltd Bentleys (WA) Pty Ltd** Crosby Dalwood Pty Ltd Moggs Accounting + Advisory Pty Ltd (formerly Mogg Osborne Pty Ltd) Remaining cash-generating units 2021 $’000 4,759 5,639 4,245 3,502 – 1,782 2,229 5,183 2020 $’000 4,759 4,172 4,245 3,502 1,826 1,782 1,629 6,522 27,339 28,437 * On 9 November 2020, The MBA Partnership acquired fellow subsidiary Specialised Business Solutions Pty Ltd from CountPlus Limited. Goodwill attributable to Specialised Business Solutions has been allocated to The MBA Partnership Pty Ltd for the purpose of impairment testing. ** Goodwill previously allocated to Bentleys has been transferred to the disposal group recognised in the Consolidated Statement of Financial Position. Refer to note 16 for further information. Key assumptions used for value in use calculations The calculation of value in use for the CGUs was most sensitive to the following assumptions: Î Revenue growth; Î Employment expense ratios; Î EBITA margin; and Î Discount rates. Revenue growth is based on the budget for the next financial year as well as management assessment over the forecast period. Budget revenue for 2022 is based on management expectations and the average annual revenue growth thereafter is assumed to be maintained at 3% p.a. over the remaining forecast period for all CGUs. Employment expense ratios are based on the budget for the next financial year and management assessment over the forecast period. Employment expense ratio shows the employment cost as a percentage of net revenue. This is assumed to be maintained between 59% and 68% over the forecast period. Discount rates represent the current market assessment of the risks specific to the Group, considering the time value of money and specific risk of the underlying assets that have not been incorporated into the cash flow estimates. The discount rate is calculated using the weighted average cost of capital (WACC) and reflects management’s estimation of the time value of money and specific risk estimated for the Group. The WACC considers both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. It incorporates a beta factor to reflect the specific risk associated with the industries in which the Group operates. The cost of debt is based on the interest-bearing borrowings the Group is obliged to service. It is assumed for the purpose of the analysis that the long term growth rate (terminal rate) will equate to the long term average growth rate of the national economy. Management estimate this to be 2.5% p.a. which is in line with the long term expected Australian inflation rate. The sensitivity analysis concluded that changing this rate to reflect possible lower growth projections would not materially impact the valuations of the individual CGUs. 62 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Impairment of goodwill At 30 June 2021 management performed impairment testing (including the impact of COVID-19) for each cash generating unit (CGU) of CountPlus. Management calculated the recoverable amount of the CGUs in accordance with AASB 136 Impairment of Assets at 30 June 2021 using a pre-tax discount rate of 18.57% (13.00% post tax) (30 June 2020: 18.57% (13.00% post tax)) . No impairment losses were identified at 30 June 2021. For the below CGUs where an indication of impairment existed, management calculated the recoverable amount of these CGUs in accordance with AASB 136 Impairment of Assets. Key assumptions for this value in use calculation at 30 June 2021 were: Î Revenue growth of 3%; Î Employment expense ratio 59% – 68%; and Î The long term growth rate (terminal rate) was estimated to be 2.5% p.a. The recoverable amount of the above CGUs was determined based on value-in-use calculations, consistent with the methods used in prior years. Sensitivity to changes in assumptions A cash-generating unit ('CGU') is the smallest group of assets that independently generates cash flow and whose cash flow is largely independent of the cash flows generated by other assets. The concept is used by the International Financial Reporting Standards in the determination of asset impairment. Sensitivity has been tested for the following four CGUs based on management assessment that the assumptions in the value in use calculation for these CGUs were most sensitive to change. For CountPlus One Pty Ltd: The recoverable amount as determined by the value in use calculation exceeds the carrying value by $1,088,000 or 20%. Reasonably possible changes in assumptions may result in impairment as set out below: Î Other things being equal, if the company’s yearly revenue is 5% less than expected over the forecast period, an impairment of $869,000 would result. Î Other things being equal, if the pre-tax discount rate is increased from 18.57% to 20.00%, the recoverable amount would exceed the carrying amount by $550,000. Î Î If the company’s employment cost margin (its single largest expense item) increases from 62% to 66% over the forecast period, an impairment of $498,000 would result. If the long term average growth rate decreases from 2.5% to 1% p.a., the recoverable amount would exceed the carrying amount by $543,000. For Crosby Dalwood Pty Ltd: The recoverable amount as determined by the value in use calculation exceeds the carrying value by $1,293,000 or 75%. Reasonably possible changes in assumptions will not result in impairment except the following: Î Other things being equal, if the company’s yearly revenue is 5% less than expected over the forecast period, the recoverable amount would exceed the carrying amount by $238,000. Î Other things being equal, if the pre-tax discount rate is increased from 18.57% to 20.00%, the recoverable amount would exceed the carrying amount by $1,040,000. Î Î If the company’s employment cost margin (its single largest expense item) increases from 64% to 68% over the forecast period, an impairment loss of $782,000 would result. If the long term average growth rate decreases from 2.5% to 1% p.a., the recoverable amount would exceed the carrying amount by $1,035,000. 63 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 For Addvantage Financial Freedom Pty Ltd: The recoverable amount as determined by the value in use calculation exceeds the carrying value by $1,227,000 or 64%. Reasonably possible changes in assumptions will not result in impairment except the following: Î Other things being equal, if the company’s yearly revenue is 5% less than expected over the forecast period, the recoverable amount would exceed the carrying amount by $107,000. Î Other things being equal, if the pre-tax discount rate is increased from 18.57% to 20.00%, the recoverable amount would exceed the carrying value by $1,011,000. Î Î If the company’s employment cost margin (its single largest expense item) increases from 65% to 69% over the forecast period, the recoverable amount would exceed the carrying value by $338,000. If the long term average growth rate decreases from 2.5% to 1% p.a., the recoverable amount would exceed the carrying value by $1,007,000. For Unite Advisory Pty Ltd: The recoverable amount as determined by the value in use calculation exceeds the carrying value by $1,847,000 or 46%. Reasonably possible changes in assumptions may result in impairment as set out below: Î Other things being equal, if the company’s yearly revenue is 5% less than expected over the forecast period, the recoverable amount would exceed the carrying value by $306,000. Î Other things being equal, if the pre-tax discount rate is increased from 18.57% to 20.00%, the recoverable amount would exceed the carrying value by $1,358,000. Î Î If the company’s employment cost margin (its single largest expense item) increases from 62% to 66% over the forecast period, the recoverable amount would exceed the carrying value by $599,000. If the long term average growth rate decreases from 2.5% to 1% p.a., the recoverable amount would exceed the carrying value by $1,347,000. For all CGUs: Across all CGUs over the forecast period, other things being equal, if revenue is 10% lower than expectations, an impairment of $14,515,000 would result. Management believes that no other reasonable change in the key assumptions would cause the carrying value to materially exceed its recoverable amount. Amortisation period of intangible assets other than Goodwill The amortisation period for the intangible assets are as follows: Acquired client relationships 10 years Adviser networks Brands Software 15 years 25 years 1 – 5 years The factors that are considered in determining the useful life of an intangible asset are: Î Î Î Î the expected usage of the asset by the entity and whether the asset could be managed efficiently by another management team; typical product life cycles for the asset and public information on estimates of useful lives of similar assets that are used in a similar way; technical, technological, commercial or other types of obsolescence; the stability of the industry in which the asset operates and changes in the market demand for the products or services output from the asset; Î expected actions by competitors or potential competitors; Î Î the level of maintenance expenditure required to obtain the expected future economic benefits from the asset and the entity’s ability and intention to reach such a level; the period of control over the asset and legal or similar limits on the use of the asset, such as the expiry dates of related leases; and Î whether the useful life of the asset is dependent on the useful life of other assets of the entity. 64 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Significant accounting judgements, estimates and assumptions Impairment of intangible assets At each reporting date, the Group reviews the recoverable amount of its intangible assets to determine whether there is any indication that these assets may be impaired. If such an indication exists, the recoverable amount of the asset, assessed as the higher of its fair value less costs to sell and its value in use, is compared to its current carrying amount. Any excess of the asset’s carrying value over its recoverable amount is expensed in the Statement of Profit or Loss and Other Comprehensive Income. The Group determines whether goodwill is impaired at least on an annual basis. This requires estimation of the recoverable amount of the CGU by determining the value in use of each individual CGU. Acquired client relationships are tested for impairment whenever there is an indication that the intangible asset may be impaired. This assessment is made at least on an annual basis. The net carrying value is compared with the expected future benefits from the relationships for each cash generating unit. If the carrying value of the relationships is higher than the expected future benefits an impairment loss is recorded for the difference. At each reporting date if an impairment indicator exists, the Group makes a formal estimate of the asset's recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined in aggregate for the cash generating unit to which the asset belongs. 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. Non-financial assets, other than goodwill that suffer an impairment, are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. Goodwill Goodwill acquired in a business combination is initially measured at cost of the business combination being the excess of the consideration transferred over the fair value of the entity’s identified assets acquired and liabilities assumed. If this consideration transferred is lower than the fair value of the net identified assets of the subsidiary acquired, the difference is recognised in the Statement of Profit or Loss and Other Comprehensive Income. Goodwill on consolidation is initially recorded at the amount by which the purchase price for a business combination exceeds the fair value attributed to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired at date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment, is allocated to cash generating units and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. IT software Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and / or cost reduction, are capitalised to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees' time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years. IT software is tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income for the amount by which the asset’s carrying amount exceeds its recoverable amount. 65 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Acquired client relationships and Adviser networks Acquired client relationships are intangible assets identified in the acquisition of businesses and represent that part of the purchase consideration that is attributable to and represented by the clients and customers with long term relationships with the business being acquired. These assets are capitalised at fair values at the date of acquisition. Acquired client relationships are amortised over their useful life and tested for impairment at least annually and whenever there is an indication that the carrying value of the intangible asset may be impaired. The useful life of these assets are 10 years and they are amortised and expensed using the straight-line method. This is in accordance with the expected pattern of future benefits based on the net cash flows expected from those relationships. The amortisation period and the amortisation method are reviewed at least annually as at 30 June to ensure the amortisation expense reflects the performance of the intangible asset. Adviser networks are the intangible assets identified in the acquisition of Count Financial and represent that part of the purchase consideration that is attributable to and represented by the advisers with long term relationships with that business. These assets were capitalised at fair value at the date of the acquisition, amortised over their useful life and tested for impairment at least annually and whenever there is an indication that the carrying value of the intangible asset may be impaired. The useful life of these assets is 10 to 15 years and are amortised and expensed using the straight-line method. This is in accordance with the expected pattern of future benefits based on the net cash flows expected from those networks. The amortisation period and the amortisation method are reviewed at least annually as at 30 June to ensure that the amortisation expense reflects the performance of the intangible asset. Brands Brands are recognised at fair value at acquisition. Following initial recognition, they are carried at cost less any accumulated amortisation and accumulated impairment losses. They are amortised over 25 years on straight-line basis and assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. This is in accordance with the expected pattern of future benefits based on the net cash flows expected from those assets. The amortisation period and the amortisation method are reviewed at least annually as at 30 June to ensure the amortisation expense reflects the performance of the intangible asset. Other intangible assets Other intangible assets acquired are recognised at cost at acquisition. Following initial recognition, they are carried at cost less any accumulated amortisation and accumulated impairment losses. These assets are amortised over the useful economic life and assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income for the amount by which the asset’s carrying amount exceeds its recoverable amount. This is in accordance with the expected pattern of future benefits based on the net cash flows expected from those assets. The amortisation period and the amortisation method are reviewed at least annually as at 30 June to ensure the amortisation expense reflects the performance of the intangible asset. 20 Investments in associates Investments in associates are accounted for using the equity method of accounting. Information relating to associates are set out below: Name One Hood Sweeney Pty Ltd Hunter Financial Planning Pty Ltd OBM Financial Services Pty Ltd Rundles CountPlus Pty Ltd Rundles Financial Planning Pty Ltd DMG Financial Holdings Pty Ltd Principal place of business / Country of incorporation Australia Australia Australia Australia Australia Australia Ownership interest 2021 % 32.36% 40.00% 40.00% 40.00% 20.00% 30.00% 2020 % 32.36% 40.00% 40.00% 40.00% 20.00% 30.00% The percentage of ownership interest held is equivalent to the percentage of voting rights for all associates. All associates have the same year end as the parent entity (30 June). There are no significant restrictions on the ability of associates to transfer funds in the form of cash dividends or to repay loans or advances to the consolidated entity. 66 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Summary of associates held during the year One Hood Sweeney Pty Ltd One Hood Sweeney is a South Australian professional services firm located across Adelaide, Whyalla and Kadina. It provides accounting, business advisory, financial planning, finance and technology services to its clients. Hunter Financial Planning Pty Ltd Hunter Financial is a financial planning specialist based in Newcastle. Hunter Financial offers a consultative approach to wealth management particularly in the area of wealth creation budgeting, insurance, estate planning and self-managed super funds (SMSF). OBM Financial Services Pty Ltd OBM Financial Services Pty Ltd is a professional services firm based in Ivanhoe, Victoria. It provides accounting and financial planning services to its clients. OBM is a Count Financial member firm. Rundles CountPlus Pty Ltd Rundles CountPlus is a professional services firm based in Melbourne, Victoria. It provides accounting and business advisory services to its clients. Rundles Financial Planning Pty Ltd Rundles Financial Planning is a professional services firm based in Melbourne, Victoria. It provides financial planning services to its clients. DMG Financial Holdings Pty Ltd DMG Financial Holdings is a professional services firm located in Sale and Yarram, Victoria. It provides accounting and business advisory services to its clients. Material associates 2021 Summarised Consolidated Statement of Financial Position Current assets Non-current assets Current liabilities Non-current liabilities Net assets / equity Summarised Consolidated Statement of Profit or Loss and Other Comprehensive Income Revenue Profit for the year Total comprehensive income Group share of profit for the year 2020 Summarised Consolidated Statement of Financial Position Current assets Non-current assets Current liabilities Non-current liabilities Net assets / equity Summarised Consolidated Statement of Profit or Loss and Other Comprehensive Income Revenue Profit for the year Total comprehensive income Group share of profit for the year One Hood Sweeney $'000 Hunter Financial Planning $’000 OBM Financial Services $’000 Rundles CountPlus $’000 DMG Financial Holdings $’000 5,310 8,702 (5,366) (1,933) 6,713 21,789 3,683 3,683 1,192 641 8,133 (538) (840) 7,396 3,065 637 637 255 1,093 1,494 (796) (586) 1,205 4,507 831 831 332 1,766 4,791 (2,704) – 3,853 4,804 780 780 312 1,095 5,800 (779) (2,042) 4,074 7,432 1,176 1,176 353 One Hood Sweeney $'000 Hunter Financial Planning $’000 OBM Financial Services $’000 Rundles CountPlus $’000 DMG Financial Holdings $’000 5,685 6,703 (4,668) (1,970) 5,750 21,308 2,936 2,936 950 1,131 7,365 (842) (187) 7,467 2,959 899 899 360 948 3,604 (733) (591) 3,228 3,950 470 470 188 1,560 3,999 (2,884) – 2,675 4,485 839 839 336 1,615 4,715 (875) (1,212) 4,243 4,877 961 961 289 67 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Carrying amount of investments in associates Reconciliation of carrying amount of investments in associates to summarised financial information for associates accounted for using the equity method: 2021 $’000 7,277 1,192 (744) 7,725 2,742 255 (283) 2,714 1,532 (69) 332 (40) 1,755 2,228 312 (300) 2,240 347 54 (64) 337 3,503 – 353 (391) 3,465 2021 $’000 18,236 2,498 2020 $’000 6,896 950 (569) 7,277 2,809 360 (427) 2,742 1,344 – 188 – 1,532 2,140 336 (248) 2,228 418 56 (127) 347 – 3,439 289 (225) 3,503 2020 $’000 17,629 2,179 One Hood Sweeney Pty Ltd Opening balance Share in profit Dividends Carrying amount based on share in net assets of associate Hunter Financial Planning Pty Ltd Opening balance Share in profit Dividends Carrying amount based on share in net assets of associate OBM Financial Services Pty Ltd Opening balance Completion adjustment of acquisition of associate Share in profit Dividends Carrying amount based on share in net assets of associate Rundles CountPlus Pty Ltd Opening balance Share of profit Dividends Carrying amount based on share in net assets of associate Rundles Financial Planning Pty Ltd Opening balance Share of profit Dividends Carrying amount based on share in net assets of associate DMG Financial Holdings Pty Ltd Opening balance Acquisition of associate Share of profit Dividends Carrying amount based on share in net assets of associate Total carrying value of investments in associates as at 30 June Total share of net profit of associates accounted for using the equity method Contingent liabilities and capital commitments The associates had no contingent liabilities or capital commitments as at 30 June 2021 or 30 June 2020. 68 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 21 Trade and other payables Current liabilities Trade payables Other payables Adviser payments GST payable Sundry payables and accrued expenses Non-current liabilities Other payables Refer to note 34 for further information on financial instruments risk. 22 Contract liabilities Current liabilities Unearned revenue Ongoing insurance trail commission Non-current liabilities Ongoing insurance trail commission 2021 $’000 1,291 67 8,111 1,420 3,312 14,201 2020 $’000 1,181 11 6,925 1,546 3,970 13,633 – 40 2021 $’000 1,328 9,004 10,332 2020 $’000 2,441 10,484 12,925 20,668 24,158 Contract liabilities have been raised to reflect the recognition of ongoing insurance commissions payable across various commission arrangements. This reflects the recognition of certain future trail commission expenses when a performance obligation has been met, e.g. a new customer is introduced to a product. The expense and contract liability is calculated based upon the estimated payout to aligned advisers. Movement in unearned revenue Balance at 1 July 2019 Payments received in advance Additions through business combinations Transfer to revenue – included in the opening balance Transfer to revenue – other balances Balance at 30 June 2020 Payments received in advance Transfer to revenue – included in the opening balance Transfer to revenue – other balances Balance at 30 June 2021 $’000 916 4,268 20 (745) (2,018) 2,441 2,041 (2,333) (821) 1,328 69 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Movement in ongoing insurance trail commission liability Balance at 1 July 2019 Ongoing insurance commission liability acquired Amount recognised in revenue from contracts with customers Payment of ongoing insurance trail commission Balance at 30 June 2020 Amount recognised in revenue from contracts with customers Payment of ongoing insurance trail commission Balance at 30 June 2021 $’000 – 22,869 19,088 (7,315) 34,642 6,543 (11,513) 29,672 Significant accounting judgements, estimates and assumptions Ongoing insurance trail commission The key assumptions underlying the ongoing insurance trail commission liability are the remaining life of the insurance products, the likely run off of products over time and the adviser payout ratio. It has been estimated that the insurance policies have a remaining life of five years and that 20% of policies are cancelled at the end of each year. These assumptions are subject to change depending on the actual experience of the insurance arrangements over time. In respect of the adviser payout ratio, it has been estimated that 93.5% (2020: 93%) of ongoing insurance trail commission is paid to aligned advisers. This is subject to change if Count Financial's adviser pricing changes or if the average payout ratio changes across the portfolio; this may occur given the tiered pricing model applicable to aligned advisers. 23 Interest bearing loans and borrowings Current liabilities Bank loans – funding facility and other loans Acquisition facility Hire purchase Non-current liabilities Bank loans – funding facility and other loans Refer to note 34 for further information on financial instruments risk. Total facilities Bank overdraft Bilateral funding facility Used at the reporting date Bank overdraft Bilateral funding facility Unused at the reporting date Bank overdraft Bilateral funding facility 70 2021 $’000 717 1,891 2 2,610 1,718 2021 $’000 5,000 23,430 28,430 1,141 4,326 5,467 3,859 19,079 22,938 2020 $’000 461 2,891 7 3,359 1,372 2020 $’000 5,000 23,332 28,332 1,024 4,722 5,746 3,976 18,610 22,586 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 The interest-bearing loans and borrowings balance are $4,328,000 (Non-current: $1,718,000 Current: $2,610,000) (2020: Non-current: $1,372,000 Current: $3,359,000) borrowings from Westpac Bank. There are currently four lines of credit with Westpac Bank. CountPlus Limited has an overdraft facility with Westpac Bank, the limit is $5,000,000 (2020: $5,000,000). From this facility, bank guarantees on properties are offset against this balance. CountPlus Limited has a revolving line of credit with Westpac Bank, the limit is currently $20,000,000 (2020: $20,000,000) and is charged with a variable rate. This five-year facility with Westpac started on 1 December 2017. The rate is determined with reference to the Bank Bill Swap Bid Rate (BBSY). Reference Rates are published in the Australian Financial Review plus a margin. A guarantee and charge as security for the facility is provided by CountPlus Limited. Kidmans Partners Pty Ltd has a bank loan with Westpac Bank, the limit is $1,960,000 repayable over five years. In addition, there is a line fee on this facility. A guarantee and charge as security for the facility is provided by Kidmans Partners Pty Ltd. The MBA Partnership Pty Ltd has a bank loan with Westpac Bank, the limit is $1,470,000 repayable over one year. In addition, there is a line fee on this facility. A guarantee and charge as security for the facility is provided by The MBA Partnership Pty Ltd. Defaults and breaches During the current and prior year, there were no defaults or breaches on any of the loans. Significant accounting policy Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings, using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent whereby there is no evidence that it is probable that some or all the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Changes in liabilities arising from financing activities Long term borrowings Short term borrowings Hire purchase short term liabilities Total liabilities from financing activities 2020 $’000 1,372 3,352 7 4,731 Non-cash changes Reclassification to short term $’000 Cash flow $’000 Other changes $’000 1,063 (1,461) (5) (403) (717) 717 – – – – – – 2021 $’000 1,718 2,608 2 4,328 24 Lease liabilities Lease liabilities are presented in the Statement of Financial Position as follows: Current liabilities Lease liabilities Non-current liabilities Lease liabilities 2021 $’000 2020 $’000 3,439 3,321 10,994 12,041 71 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 The Group has leases for office buildings and some office equipment. With the exception of short term leases and leases of low-value underlying assets, each lease is reflected on the Statement of Financial Position as a right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see note 17). Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. For leases over office buildings the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. At 30 June 2021, 39 right-of-use assets were leased. The average lease term for premises is nine years, office equipment is five years and others is four years. The average lease term includes option periods which management are reasonably certain will be exercised. At 30 June 2021, the average remaining lease term for premises was four years, office equipment was five years and others was four years. The lease liabilities are secured by the related underlying assets. Lease payments not recognised as a liability The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred. At 30 June 2021 the Group was not committed to short term leases. Variable lease payments expensed on the basis that they are not recognised as a lease liability include rentals based on revenue from the use of the underlying asset and excess use charges on office equipment. Variable payment terms are used for a variety of reasons, including minimising costs for IT equipment with infrequent use. Variable lease payments are expensed in the period they are incurred. Total cash outflow for leases for the year ended 30 June 2021 was $3,702,000 (2020: $3,640,000). Amounts relating to leases recognised for the reporting period The following amounts are recognised in Statement of Profit or Loss and Other Comprehensive Income: Depreciation charge for the right-of-use assets by class of asset Premises Office equipment Others Total depreciation charge Interest expense on lease liabilities (included in operating cost) Total expense related to leases The following amounts are recognised in the Statement of Cash Flows: Cash outflow for leases (AASB 16) – financing activity Principal Cash outflow for leases (AASB 16) – operating activity Interest Total cash outflows 72 2021 $’000 2,919 128 8 3,055 697 3,752 2021 $’000 3,005 3,005 697 3,702 2020 $’000 2,791 144 14 2,949 716 3,665 2020 $’000 2,924 2,924 716 3,640 COUNTPLUS ANNUAL REPORT 2021 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 25 Other liabilities Current liabilities Deferred cash consideration for acquisition of business combination, business assets and investment in associates Other current liabilities Non-current liabilities Deferred cash consideration for acquisition of business combination, business assets and investment in associates Lease make good liabilities Movements in deferred consideration Current At 1 July 2020 Arising during the year Payments made during the year Fair value gain on deferred consideration Transfer from non-current deferred consideration Total current Non-current At 1 July 2020 Arising during the year Transfer to current deferred consideration Total non-current Total 2021 $’000 1,063 53 1,116 203 567 770 2020 $’000 877 48 925 108 494 602 $’000 877 910 (464) (368) 108 1,063 108 203 (108) 203 1,266 Significant accounting judgements, estimates and assumptions Deferred consideration Some acquisitions involve the payment of deferred consideration to vendors. This consideration is determined based on a multiple of actual earnings over a fixed period and is dependent on revenue or client retention. Consideration payable to the vendors in relation to acquisitions is recognised at fair value based on expected financial performance over the applicable future financial years. The component of deferred consideration not expected to be settled within 12 months after the end of the reporting period is measured as the present value of expected future payments to be made in respect of this deferred consideration, using a risk adjusted discount rate. 73 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 26 Provisions Current liabilities Employee benefits – annual leave Employee benefits – long service leave Employee benefits – sick leave Bonus provision Other Non-current provisions Employee benefits – long service leave 2021 $’000 3,323 2,895 38 518 23 6,797 966 2020 $’000 2,788 2,715 – 495 4 6,002 1,010 Significant accounting judgements, estimates and assumptions Provisions Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events. It is probable that a future sacrifice of economic benefits will be required, and a reliable estimate can be made of the amount of the obligation. Employee benefits Further disclosures relating to Key Management Personnel are set out in the remuneration report which starts on page 20 of the Directors’ Report. Short term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months after the end of the period in which the employees render the related service, are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. All short term employee benefit obligations are presented as payables and as provisions. Long term obligations The liability for long service leave not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service, is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience, adjustments and changes in actuarial assumptions are recognised in the Statement of Profit or Loss and Other Comprehensive Income. The obligations are presented as current liabilities in the Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. 27 Remediation provision Current liabilities Remediation provision – ongoing service fees – Count Financial Remediation provision – other advice issues – Count Financial Remediation provision – Total Financial Solutions Australia 74 2021 $’000 258,082 1,728 17 259,827 2020 $’000 195,000 – 30 195,030 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Remediation provision – Count Financial The Count Financial remediation provision represents the estimated cost of remediation of current and former clients in respect of advice issues, including ongoing service fees charged where no service was provided. The advice issues occurred prior to the acquisition of Count Financial by CountPlus on 1 October 2019. Refer to note 15 for disclosure on the corresponding indemnity asset. The provision includes the following elements: Ongoing service fees – cost of remediation of clients Ongoing service fees – interest on amounts payable to clients Other advice issues 2021 $’000 129,040 129,042 1,728 259,810 2020 $’000 109,200 85,800 – 195,000 Ongoing service fees The following key assumptions have been reflected in the remediation provision: Î Value of ongoing service fees charged Î Number of years in which issues occurred Î Refund rate Î Î Value below which refunds will be made without investigation Interest calculation methodology $451,575,000 11 years 24% RBA cash rate plus 6% compounded monthly $2,000 (excluding interest) A change in each of the key assumptions above may impact the value of the remediation provision. We set out below an estimate of the impact of a change in three of the key assumption on the value of the provision. Note that the impact of the movements in the assumptions (as set out below) are independent of each other. Key assumption Value of ongoing service fees charged Number of years in which issues occurred Refund rate Movement +$10,000,000 -$10,000,000 +1 year -1 year +1% -1% Impact on provision $'000 5,716 (5,716) 38,729 (34,261) 8,043 (8,043) Remediation settlements will not be known until individual cases have been reviewed and compensation offers accepted. Differences in amounts paid to the amount of provision recorded at 30 June 2021 will be recorded as profit or loss in future periods. Remediation payments are expected to be deductible for tax purposes. If a remediation settlement is tax deductible, CountPlus will receive the net amount from the CBA. Similarly, if the reimbursement is deemed to be assessable, the CBA will remit the grossed up amount to CountPlus. Other advice issues ‘Other advice issues’ presented above relate to additional items covered under the CBA indemnity deed including remediation due to specifically identified clients, deceased estates, clients of specific financial advisers and in respect of litigation matters. While these items formed part of the indemnity provided by CBA to Count Financial at 30 June 2020, they were unable to be estimated at that date. Since 1 July 2020, resolution of these items has been prioritised, and at 30 June 2021, future expected payments are able to be estimated. 75 COUNTPLUS ANNUAL REPORT 2021 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Movement in remediation provision – Count Financial Provision at 1 July 2019 Additional provisions Amounts utilised during the year Provision at 30 June 2020 Additional provisions Amounts utilised during the year Provision at 30 June 2021 $’000 – 195,000 – 195,000 69,772 (4,962) 259,810 Significant accounting judgements, estimates and assumptions Remediation provision The key accounting judgements and estimates used in calculating the remediation provision include the value of ongoing service fees charged, the number of years in which issues have occurred, the refund rate, the interest calculation methodology, the length of time taken to make the refund and the value below which fee refunds will be made without investigation. The key assumptions reflected in the remediation provision are subject to a high degree of uncertainty. The key assumptions will become clearer over time as the remediation program obtains greater insight into the actual quantum of the issues identified. The value of ongoing service fees charged has been estimated using Count Financial’s books and records and the books and records of third-party product providers where relevant; the population of impacted customers is subject to some uncertainty and is yet to be finalised. The refund rate has been estimated by reference to testing conducted on a small sample of client cases. The refund rate is subject to change as actual refund rate data (incurred by Count Financial) becomes available. The interest calculation methodology that has been applied is based on a rate equivalent to the RBA cash rate plus 6% compounded monthly. This methodology is subject to change. Some customers may be remediated without investigation where the combined value of the refund and the interest is below a certain amount, however this is dependent on the availability of underlying customer records. This is subject to change. 28 Contributed equity Ordinary shares – fully paid Treasury shares – Issued capital held by loan funded share plan Ordinary shares 2021 Shares 114,222,559 (2,612,310) 2020 Shares 114,222,559 (2,679,657) 2021 $’000 126,566 (3,413) 2020 $’000 126,566 (3,501) 111,610,249 111,542,902 123,153 123,065 Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Group in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Group does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Employee share scheme The Group has a long term incentive, under which performance rights are awarded to Key Management Personnel. Share buy-back There is no current on-market share buy-back. 76 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Capital risk management When managing capital, the Board's objective is to ensure the Group continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management monitors the capital structure to ensure that the Group is positioned to take advantage of favourable costs of capital or higher expected returns on assets. The Group currently has a facility of $20,000,000, with the Westpac Bank, which has been drawn down by $1,891,000 as at 30 June 2021. The Group has an overdraft facility of $5,000,000 which was drawn down by lease guarantees of $1,024,000 at 30 June 2021. In addition, there are two bank loans in member firms totalling $3,430,000 which have been drawn down by $2,435,000. Future acquisitions and investments will be funded from existing and future cash flows as well as funds received under the Group’s Owner, Driver – Partner model. In the long term, the Group expects to maintain a dividend payout ratio of between 60% and 90% of maintainable net profit after tax and minority interests, subject to market conditions and Group performance. The Group is not subject to any externally imposed capital requirements. Significant accounting policy Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. 29 Reserves Acquisition reserve Share-based payments reserve Foreign currency reserve Movements in reserves 2021 $’000 (48,548) 814 (33) (47,767) Movements in each class of reserve during the current and previous financial year are set out below: Balance at 1 July 2019 Foreign currency translation Transfer to accumulated losses Transfer of loan funded share plan Share based payments for long term incentive plan Balance at 30 June 2020 Foreign currency translation Transfer to accumulated losses Transfer of loan funded share plan Share based payments for long term incentive plan Balance at 30 June 2021 Share based payment reserve $’000 Acquisition reserve $’000 Foreign Currency Reserve $’000 1,486 – (580) (376) 115 645 – 23 (41) 187 814 (48,548) – – – – (48,548) – – – – (48,548) – (10) – – – (10) (23) – – – (33) 2020 $’000 (48,548) 645 (10) (47,913) Total $’000 (47,062) (10) (580) (376) 115 (47,913) (23) 23 (41) 187 (47,767) 77 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Nature and purpose of reserves Share based payment reserve In addition, the reserve is used to recognise the value of equity benefits provided to the Chief Executive Officer and other Key Management Personnel as part of their remuneration for the long term incentive plan. For further details see the remuneration report on pages 20 to 29. Acquisition reserve The acquisition reserve arises on the acquisition of the non-controlling interests of subsidiaries. On 1 July 2010, the Group’s interests in 15 associates were consolidated with the non-controlling interest being measured as the present ownership’s proportionate share of identifiable net assets. The acquisition of these non-controlling interests as part of the public listing was not a business combination but was an equity transaction between owners. Accordingly, in 2011, the difference between the consideration paid and fair value of the identifiable net assets of the non-controlling interests has been accounted for in the acquisition reserve. 30 Accumulated losses Accumulated losses at the beginning of the financial year Adjustment for change in accounting policy – AASB 16 Leases Accumulated losses at the beginning of the financial year – restated Profit after income tax expense for the year Dividends paid (note 32) Transfers in Accumulated losses at the end of the financial year 31 Non-controlling interest Reconciliation of non-controlling interest in controlled entities Opening balance Acquisitions Purchase of shares from non-controlling interest holder Disposal of shares to non-controlling interest holder Share of net profit for the period Dividends paid by subsidiaries to non-controlling interests Closing Balance 2021 $’000 (6,435) – (6,435) 4,938 (2,789) 69 (4,217) 2021 $’000 9,395 487 (358) 745 2,146 (1,762) 10,653 2020 $’000 (19,412) (1,075) (20,487) 15,861 (2,506) 697 (6,435) 2020 $’000 6,232 2,308 (183) 240 1,587 (789) 9,395 78 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 The MBA Partnership Pty Ltd The proportion of ownership interests (and voting rights) held by non-controlling interest Opening non-controlling interest at 1 July Additions Disposals The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Specialised Business Solutions Pty Ltd The proportion of ownership interests (and voting rights) held by non-controlling interest Opening non-controlling interest at 1 July The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Kidmans Partners Pty Ltd The proportion of ownership interests (and voting rights) held by non-controlling interest Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June AdviceCo. Pty Ltd The proportion of ownership interests (and voting rights) held by non-controlling interest Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Mogg Osborne Pty Ltd The proportion of ownership interests (and voting rights) held by non-controlling interest Opening non-controlling interest at 1 July The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Count Financial Ltd The proportion of ownership interests (and voting rights) held by non-controlling interest Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Bentleys Advisory (WA) Pty Ltd The proportion of ownership interests (and voting rights) held by non-controlling interest Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest Twomeys Pty Ltd The proportion of ownership interests (and voting rights) held by non-controlling interest Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest Total non-controlling interest at 30 June 2021 $’000 31.89% 2,144 487 (358) 734 (515) 2,492 38.72% 807 44 (170) 681 35.85% 1,278 10 196 (192) 1,292 40.00% 1,450 154 404 (296) 1,712 35.00% 1,188 319 (224) 1,283 15.00% 2,528 – 110 (215) 2,423 5.00% – 164 3 (6) 161 40.00% – 417 336 (144) 609 10,653 2020 $’000 37.97% 2,098 – (183) 611 (382) 2,144 38.72% 763 44 – 807 35.62% 1,066 139 226 (153) 1,278 35.00% 1,265 101 226 (142) 1,450 35.00% 1,040 260 (112) 1,188 15.00% – 2,308 220 – 2,528 – – – – – – – – – – – – 9,395 79 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 The following information is provided for non-controlling interests that are material to the consolidated entity. Figures are as per the subsidiaries' financial statements: 2021 $’000 15,112 6,687 11,710 1,469 307,492 293,138 14,785 1,091 11,661 5,173 7,273 548 6,092 1,415 4,585 1,062 7,210 2,791 5,044 909 10,231 6,033 7,805 197 4,016 1,742 5,170 873 2020 $’000 12,499 5,116 10,397 1,187 256,848 242,150 14,865 1,787 9,906 3,446 7,498 714 5,709 1,297 4,184 677 6,425 2,379 4,386 745 9,072 5,065 7,274 153 3,695 1,947 4,614 645 The MBA Partnership Pty Ltd Assets Liabilities Revenue Net Profit Count Financial Ltd Assets Liabilities Revenue Net Profit Kidmans Partners Pty Ltd Assets Liabilities Revenue Net Profit AdviceCo. Pty Ltd Assets Liabilities Revenue Net Profit Mogg Osborne Pty Ltd Assets Liabilities Revenue Net Profit Bentleys (WA) Pty Ltd Assets Liabilities Revenue Net Profit Twomeys Pty Ltd Assets Liabilities Revenue Net Profit 80 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 32 Dividends Dividends Dividends paid during the financial year were as follows: Dividends paid during the year Interim dividend fully franked based on tax paid @ 30%, ordinary dividend paid for the year ended Full year dividend fully franked based on tax paid @ 30%, ordinary dividend paid for the year ended Dividends proposed and recognised as liability Final dividend fully franked based on tax paid @ 30%, ordinary dividend for the year ended 2021 $’000 – 1,395 1,394 – – 2020 $’000 – 1,111 1,395 – – Total dividends paid or provided for during the year 2,789 2,506 Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% 2021 $’000 7,893 2020 $’000 7,006 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: Î Î Î franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date franking debits that will arise from the payment of dividends recognised as a liability at the reporting date franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date 33 Financial assets and liabilities Note 2 provides a description of each category of financial assets and financial liabilities and the related accounting policies. The carrying amounts of financial assets and financial liabilities in each category are as follows: 30 June 2021 Financial assets Cash and cash equivalents Trade and other receivables Loans and advances Total financial assets 30 June 2021 Financial liabilities Trade and other payables Interest bearing loans and borrowings Lease liabilities Other liabilities Total financial liabilities Note Amortised cost $’000 10 11 13 Note 21 23 24 25 26,239 8,745 236 35,220 Other liabilities (amortised cost) $’000 1,291 4,328 14,433 1,886 21,938 Total $’000 26,239 8,745 236 35,220 Total $’000 1,291 4,328 14,433 1,886 21,938 81 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 30 June 2020 Financial assets Cash and cash equivalents Trade and other receivables Loans and advances Total financial assets 30 June 2020 Financial liabilities Trade and other payables Interest bearing loans and borrowings Lease liabilities Other liabilities Total financial liabilities Note Amortised cost $’000 10 11 13 Note 21 23 24 25 25,842 9,075 424 35,341 Other liabilities (amortised cost) $’000 1,181 4,731 15,362 1,033 22,307 Total $’000 25,842 9,075 424 35,341 Total $’000 1,181 4,731 15,362 1,033 22,307 The carrying amount of the following financial assets and liabilities is considered a reasonable approximation of fair value: Î Î Î trade and other receivables; cash and cash equivalents; loans and advances; 34 Financial instruments risk Financial risk management objectives trade and other payables; Î Î other liabilities; and Î interest bearing borrowings. The Group's principal financial assets and liabilities, which arise directly from its operations, comprise of cash and cash equivalents, trade and other receivables, interest bearing loans, borrowing, trade and other payables. The Group's activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and ageing analysis for credit risk. Risk management is carried out by senior finance executives ('Finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies and evaluates financial risks within the Group's operating units. Finance reports to the Board on a monthly basis. Market risk Price risk The Group is not exposed to any significant price risk. Interest rate risk The Group's main interest rate risk arises from long term borrowings. Borrowings obtained at variable rates expose the Group to interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. At 30 June 2021, the Group had total bank loans outstanding of $4,326,000 (2020: $4,722,000). The Group also had an overdraft facility of $5,000,000 which had been drawn down by lease guarantees of $1,141,000. The effect on profit as a result of changes in interest rate with all other variables remaining constant would be as follows: Change in profit +1% (100 basis points) -1% (100 basis points) 82 2021 $’000 (168) 168 2020 $’000 (191) 191 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Credit risk The Group is exposed to credit risk from its operating activities (primarily cash and cash equivalents and trade and other receivables). The Group trades only with creditworthy third parties, and as such collateral is not requested nor is it the Group's policy to securitise its trade and other receivables. There are no significant concentrations of credit risk within the Group and financial instruments are spread amongst several counterparties to spread the risk of default of counterparties. The Group's exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments, as indicated in the consolidated statement of financial position. The maximum credit risk exposure does not consider the value of any collateral or other security held, in the event other entities / parties fail to perform their obligations under the financial instruments in question. In addition, receivable balances are monitored on an ongoing basis. The Group observes its provision policy. Liquidity risk Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. As at 30 June 2021, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: 30 June 2021 Trade and other payables Interest bearing loans and borrowings Lease liabilities Other liabilities Current within 6 months $’000 6 to 12 months $’000 Non-current 1 to 5 years $’000 later than 5 years $’000 1,291 382 1,861 771 4,305 – 380 1,642 115 2,137 – 3,853 10,082 764 14,699 – 47 2,928 235 3,210 This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting period as follows: 30 June 2020 Trade and other payables Interest bearing loans and borrowings Lease liabilities Other liabilities Financing arrangements Unused borrowing facilities at the reporting date: Bank overdraft Bilateral funding facility Current within 6 months $’000 6 to 12 months $’000 Non-current 1 to 5 years $’000 later than 5 years $’000 1,181 321 1,798 680 3,980 – 314 1,591 244 2,149 – 4,205 10,383 371 14,959 2021 $’000 3,859 19,079 22,938 – 326 4,139 232 4,697 2020 $’000 3,976 18,610 22,586 The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time. For further details on bank loan facilities see note 23. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. 83 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 35 Fair value measurement The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables, loans, advances and other receivables and interest-bearing borrowings approximate their fair value. The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Fair value hierarchy The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Unobservable inputs for the asset or liability. Level 1 Level 2 Level 3 2021 Financial liabilities Contingent cash consideration Total liabilities 2020 Financial liabilities Contingent cash consideration Total liabilities Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 – – – – (1,266) (1,266) (1,266) (1,266) Level 1 $'000 Level 2 $'000 Level 3 $'000 – – – – (985) (985) Total $'000 (985) (985) $’000 (985) 355 (1,100) 464 (1,266) Balance at beginning of year Gain on deferred consideration in profit or loss Additions to deferred cash & equity consideration for acquisitions of assets, subsidiaries & associates during the year Cash paid for settlement of deferred cash consideration Balance at end of year The fair value of the financial assets and liabilities represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values. Fair value of other investments held at fair value through profit and loss is determined based on observable market transactions. Observable market transactions considered are those transactions which occurred on 30 June 2021, excluding new issue of shares. The fair value is calculated by multiplying the total number of shares outstanding by the market price. Fair value of contingent cash consideration is derived from management expectations of the performance of the acquired businesses and assets. Fair value of deferred equity consideration is derived from management expectations of the performance of the acquired businesses and assets. There were no transfers between levels during the financial year. The maximum potential payment for deferred consideration is $1,266,000 (2020: $985,000). Management believes no reasonable change in any other key assumptions would have a material impact on the fair value of the other investments and deferred consideration. 84 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 36 Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor of the Group: 2021 $ 2020 $ 371,000 431,000 – 5,000 5,000 376,000 6,535 251,222 257,757 688,757 Audit services – Grant Thornton Audit or review of the financial statements Other services – Grant Thornton Taxation services including tax due diligence Other advisory services* Total other services – Grant Thornton Total remuneration of Grant Thornton * Other advisory services comprises of transaction advisory and IT systems integration. 37 Contingent assets The Group has no contingent assets as at 30 June 2021 (2020: nil). 38 Contingent liabilities Class action lawsuit Class action proceedings have been filed in the Federal Count of Australia against Count Financial Limited, a subsidiary of the Company. The proceedings seek financial compensation and relate to: Î Î commissions paid to Count Financial Limited and its authorised representatives (financial advisers) in respect of financial products (including insurance); and certain obligations of Count Financial Limited and its financial advisers including to act in the best interests of clients. The class action relates to the period from 21 August 2014 to 21 August 2020. CountPlus Limited acquired Count Financial Limited from the Commonwealth Bank of Australia (CBA) on 1 October 2019. CBA has provided an indemnity to CountPlus Limited in relation to certain conduct that occurred prior to and after the acquisition of Count Financial Limited by CountPlus Limited for an amount of $300M. A reliable estimate of the expected future inflows and / or outflows related to the class action cannot be formed at this stage. Claim against Total Financial Solutions Australia A claim has been raised by a former client of Total Financial Solutions Australia Limited (TFSA) and McQueen Financial Group Pty Ltd (McQueen) (a former Corporate Authorised Representative of TFSA and current Corporate Authorised Representative of Count Financial Ltd) in relation to the denial of a Total and Permanent Disability (TPD) benefit in relation to their Westpac life insurance policy. A reliable estimate of the expected future inflows and / or outflows related to the claim cannot be formed at this stage. A claim for indemnity has been made against the professional indemnity insurance taken out by Count Financial Limited. The deductible on this claim is $250,000. TFSA and McQueens have filed a defence to the claim. Claim against The MBA Partnership This matter relates to a claim against The MBA Partnership Pty Ltd (MBA) in the Queensland District Court by Eastland 5 Pty Ltd. The plaintiff claims that MBA acted for them in relation to certain matters and has suffered loss. The amount claimed against MBA is $517,033 plus costs and interest. The insurer has been notified of the claim and external lawyers engaged to defend the matter. A reliable estimate of the expected future inflows and / or outflows related to this matter cannot be formed at this stage. The Group has no other contingent liabilities as at 30 June 2021 (30 June 2020: nil). 85 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 39 Commitments Capital commitments The Group has total capital commitments of $1,024,000 (2020: $1,024,000), to various landlords in form of bank guarantees. No material losses are anticipated in respect of these guarantees. Hire purchase commitments The Group leases various office equipment, motor vehicles and leasehold improvements under hire purchase arrangements. The future commitments under these categories are listed in the table below. Commitments 2021 $’000 2020 $’000 2 – 2 – 2 6 2 8 – 8 Hire purchase commitments Committed at the reporting date and recognised as liabilities, payable: Within one year One to five years Total commitment Less: Future finance charges Hire purchase commitments 40 Related party transactions Parent entity CountPlus Limited is the parent entity. Subsidiaries Transactions between the Company and its subsidiaries during the year consisted of: Î Î Î Î the loans advanced by the parent to subsidiaries; the loan repayments by the subsidiaries to the parent; the payment of dividends to the parent by subsidiaries; and recharges from the parent to the subsidiaries. At the year end, all loan balances, payment of dividends and recharges between the parent and these subsidiaries were eliminated on consolidation. Subsidiaries Interests in subsidiaries are set out in note 41. Associates Interests in associates are set out in note 20. 86 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Key Management Personnel Short term employee benefits Post-employment benefits Long term benefits Share-based payments Transactions with related parties The following transactions occurred with related parties: 2021 $ 2,488,105 150,387 39,180 187,397 2,865,069 2020 $ 2,194,456 129,740 17,590 114,497 2,456,283 Sale of goods and services: Net fees and commissions received from Count Financial Net fees and commissions received from Colonial First State Group (a related party by shareholding) Premises expenses: Catalyst Finance Pty Ltd The Southport Unit Trust Rosebead Pty Ltd Mark & Bronwyn Kenmir Superannuation Fund Bronwyn Kenmir 2021 $’000 – 195 210 283 63 29 44 Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans to related parties The following balances are outstanding at the reporting date in relation to loans with related parties: Current receivables: Loan to Count Member Firm Pty Ltd Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. 2021 $’000 197 2020 $’000 2,400 667 254 319 62 29 44 2020 $’000 395 87 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 41 Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Ownership interest Principal place of business / Country of Incorporation Name 1. The MBA Partnership Pty Ltd* Î Digital O2 Pty Ltd Î MBA FS (Rawsons) Pty Ltd Î The MBA Partnership (NSW) Pty Ltd Î The MBA Partnership BNE Pty Ltd Î Specialised Business Solutions Pty Ltd Î Collective Outsourcing Pty Ltd Î Collective Outsourcing Incorporated 2. Bentleys (WA) Pty Ltd* Î Bentleys Advisory (WA) Pty Ltd Î Bentleys Corporate Finance (WA) Pty Ltd Î Australian Superannuation & Compliance Pty Ltd 3. Addvantage Financial Freedom Pty Ltd* Î Addvantage Accountants Pty Ltd Î Cooma Accounting and Financial Services Pty Ltd Î Beames & Associates Pty Ltd 4. Moggs Accounting + Advisory Pty Ltd (formerly Mogg Osborne Pty Ltd)* 5. Crosby Dalwood Pty Ltd* 6. Cooper Reeves Pty Ltd* 7. CountPlus One Pty Ltd* 8. Evolution Advisers Pty Ltd* 9. AdviceCo. Pty Ltd* 10. Kidmans Partners Holdings Pty Ltd* Î Kidmans Partners Pty Ltd Î Kidmans Partners Mortage Pty Ltd Î Kidmans Partners Services Pty Ltd Î Kidmans Partners Wealth Pty Ltd 11. Unite Advisory Pty Ltd* 12. CountPlus FS Holdings Pty Ltd (TFS Group)* Î Total Financial Solutions Australia Ltd Î TFS Operations Pty Limited Î TFS Advice Pty Limited 13. Twomeys Pty Ltd* Î Twomeys Accounting & Advisory Pty Ltd 14. Count Financial Limited* 15. Kidmans PEC Pty Ltd 16. BLUE789 Pty Ltd 17. ADVICE389 Pty Ltd Australia Australia Australia Australia Australia Australia Australia Philippines Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 2021 % 68.11% 100.00% 100.00% 51.00% 100.00% 61.28% 100.00% 100.00% 95.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 65.00% 100.00% 100.00% 100.00% 100.00% 60.00% 64.15% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 60.00% 100.00% 85.00% 100.00% 100.00% 100.00% 2020 % 62.03% 100.00% 70.00% 51.00% – 61.28% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 65.00% 100.00% 100.00% 100.00% 100.00% 65.00% 64.38% – – – – 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% – 85.00% 100.00% 100.00% 100.00% * These subsidiaries are separate cash generating units. These entities are consolidated into the respective cash generating units (CGUs) identified above. The class of shares acquired for all the subsidiaries are ordinary shares. 88 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Significant restrictions relating to subsidiaries There are no statutory, contractual or regulatory restrictions on any of the subsidiary’s ability to access or transfer or use its assets and settle the liabilities of the consolidated entity. There are no guarantees given or other requirements that may restrict dividends and other capital distributions being paid, or loans and advances being made or repaid to (or from) other entities within the consolidated entity. Consolidated structured entities The Group does not have any consolidated structured entities other than the ones which are consolidated in these financial statements and listed as subsidiaries above. 42 Events after the reporting period On 14 July 2021, CountPlus Limited member firm, NSW based Unite Advisory Pty Ltd (Unite) finalised terms to acquire 100% of the business of Bentley Brett & Vincent Pty Ltd. Simultaneously with this transaction, Unite will proceed with an equity buy-back program by Key Management Personnel, under the CountPlus OD-PTM model. On 30 July 2021, CountPlus Limited finalised terms to sell the Audit and Corporate business units of member firm Bentleys (WA) Pty Ltd to Hall Chadwick (WA) Pty Ltd. On 26 August 2021, the Directors resolved to declare a full year final dividend for FY21 of 1.50 cents (fully franked) to be paid on 13 October 2021 (Record date 24 September 2021). No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect: a) the consolidated entity’s operations in future financial years; b) the results of those operations in future financial years; or c) the consolidated entity’s state of affairs in future financial years. 43 Reconciliation of profit after income tax to net cash from operating activities Profit after income tax expense for the year Adjustments for: Depreciation and amortisation Share-based payments Impairment / (reversal) of impairment of receivables Gain on bargain purchase Gain on deferred consideration Gain on lease variation Gain on disposal of non-current assets Insurance trail commission accounting adjustment Loss on disposal of non-current assets Share of associate net profit Employee entitlements Make good provision discount unwind Accrued interest income Change in operating assets and liabilities: Increase in trade and other receivables (Decrease) / increase in contract liabilities Increase in trade and other payables (Increase) / decrease in income tax refund due Decrease in deferred tax liabilities Decrease in employee benefits Net cash from operating activities 2021 $’000 7,084 5,510 187 (422) – (355) (108) (396) 552 26 (2,498) 1,229 (3) (16) 790 (1,113) 1,023 (125) (1,261) (508) 9,596 2020 $’000 17,448 5,366 115 528 (10,952) (88) (152) – – – (2,179) 1,564 – (20) (1,373) 151 2,103 942 (550) (466) 12,437 89 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 44 Earnings per share Profit after income tax Non-controlling interest Profit after income tax attributable to the owners of CountPlus Limited Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Long term incentive performance rights 2021 $’000 7,084 (2,146) 4,938 2020 $’000 17,448 (1,587) 15,861 2021 Number 2020 Number 111,583,310 110,887,268 776,671 502,922 Weighted average number of ordinary shares used in calculating diluted earnings per share 112,359,981 111,390,190 Basic earnings per share Diluted earnings per share Significant accounting policy Basic earnings per share is calculated by dividing: 2021 Cents 4.43 4.39 2020 Cents 14.30 14.24 Î the profit attributable to owners of the Group, excluding any costs of servicing equity other than ordinary shares; and Î by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to consider: Î Î the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. 90 COUNTPLUS ANNUAL REPORT 2021Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 45 Share plans Loan funded share plan Long term incentive awards are delivered to employees in the form of a loan funded share plan (LFSP). Under the plan, employees who have contributed to Group performance may be granted an allocation of loan-funded shares which are held on their behalf by an employee share trust. A summary of the Group shares issued up to the year ended 30 June 2021 are as follows: Description Grant date Expiry date Exercise price Start of the year Granted during the year Exercised during the year Expired Forfeited Balance at end of the year Vested and exercisable at end of the year LFSP 2015 March 2015 March 2018(a) $1.12 385,139 – – – 385,139 – – (a) Due to an extension granted in respect of the LFSP 2015 shares, the plan remained active at 30 June 2020. The plan was formally terminated during the FY21 period. During the 2020 financial year, the acquisition of Count Financial resulted in an increase in the CountPlus share price, the 2015 LFSP vesting conditions were retested and it was determined that 1,134,150 shares were eligible to vest to the participants. These awards were exercised during the course of the 2020 financial year. As at 30 June 2020, there were 385,139 awards outstanding in relation to the 2015 Loan Funded Share Plan. These vesting conditions were tested and it was determined that none of these awards are expected to vest. The 2015 Loan Funded Share Plan has been cancelled during the course of the 2021 financial year. Employee loyalty equity plan During the 2021 and 2020 financial years no shares were issued under the employee loyalty equity share plan. Long term incentive plan The long term incentive plans are set out on pages 27 to 29 of this report. 46 Parent entity information The individual financial statements for the parent entity show the following aggregate amounts: Statement of Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Contributed equity Share based payment reserve Accumulated losses 2021 $’000 6,142 55,025 61,167 (1,701) (491) (2,192) 58,975 126,552 855 (68,432) 58,975 2020 $’000 6,246 55,740 61,986 (2,355) (542) (2,897) 59,089 126,552 642 (68,105) 59,089 91 COUNTPLUS ANNUAL REPORT 2021 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2021 Statement of Profit or Loss and Other Comprehensive Income Profit for the year 2021 $’000 2,521 2020 $’000 3,463 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2021 and 30 June 2020. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2021 and 30 June 2020. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 and 30 June 2020. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following: Î Î Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Investments in associates are accounted for at cost, less any impairment, in the parent entity. Î Dividends received from subsidiaries are recognised as other income by the parent entity. Parent entity financial information The financial information for the parent entity, CountPlus Limited, disclosed above have been prepared on the same basis as the consolidated financial statements, except as set out below. Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at the lower of cost and recoverable value in the financial statements of CountPlus Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments. Tax consolidation legislation CountPlus Limited (‘the Corporate Entity’) and its 100% owned Australian subsidiaries formed an income tax consolidation group with effect from 5 November 2010. Subsidiaries joined the tax consolidation group from the date they became wholly owned. The Corporate Entity and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer. Members of the CountPlus tax consolidation group entered into a tax sharing and funding agreement. Under the terms of this agreement, each member in the tax consolidation group agreed to make a tax equivalent payment to the Corporate Entity based on their current tax liability or current tax asset. Deferred taxes are recorded by members of the tax consolidation group in accordance with the principles of AASB 112 Income Taxes. Financial guarantees The Group currently has banking facilities with Westpac Bank. These comprise a $5,000,000 revolving line of credit facility and a $20,000,000 Bank Bill Business Loan. $1,891,000 was drawn during the year and a bank guarantee of $1,024,000 has been provided for property leases. Share based payments The grant by the Group of options over its equity instruments to the employees of a subsidiary in the Group is treated as a capital contribution to the relevant subsidiary. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiaries, with a corresponding credit to equity. 92 COUNTPLUS ANNUAL REPORT 2021Directors' Declaration 1. In the opinion of the Directors of CountPlus Limited: a. The consolidated financial statements and notes of CountPlus Limited are in accordance with the Corporations Act 2001, including i. Giving a true and fair view of its financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and ii. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. b. There are reasonable grounds to believe that CountPlus Limited will be able to pay its debts as and when they become due and payable. 2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2021. 3. Note 2 confirms that the consolidated financial statements also comply with International Financial Reporting Standards. Signed in accordance with a resolution of the Board of Directors. Ray Kellerman Chairman 26 August 2021 Sydney 93 COUNTPLUS ANNUAL REPORT 2021 Independent Auditor’s Report To the members of CountPlus Limited Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of CountPlus Limited Report on the audit of the financial report Opinion We have audited the financial report of CountPlus Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year ended on that date; and b complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. 94 COUNTPLUS ANNUAL REPORT 2021Independent Auditor’s Report To the members of CountPlus Limited Key audit matter How our audit addressed the key audit matter Remediation provision (Note 27) As at 30 June 2021, the Group recorded a remediation provision of $259,810,000 and a corresponding remediation receivable. The provision represents the estimated cost of remediation of current and former clients in respect of advice issues, including ongoing services charged where no service was performed by Count Financial. The advice issues occurred prior to the acquisition of Count Financial by the Group. The receivable represents an indemnity deed granted by the Commonwealth Bank of Australia. Per AASB 137 Provisions, Contingent Liabilities and Contingent Assets, a provision should be recognised if an entity has a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made. The provision is based upon estimates in relation to the value of the ongoing service fees charged, the number of years in which issues have occurred, the refund rate, the interest calculation on those fees and the value below which fee refunds are made without investigation. This is a key audit matter as the assumptions used in the determination of remediation costs involves complexity and significant management judgement and estimation. Recoverable amount of intangible assets (Note 19) As at 30 June 2021, the Group’s intangible assets of $36,514,000 consist of goodwill, acquired client relationships/advisor networks, brands, IT software and other intangible assets. No impairment expense has been recognised during the year. AASB 136 Impairment of Assets requires that, for the purposes of impairment testing, goodwill acquired in a business combination be allocated to each of the Group’s cash-generating units (CGUs). Each CGU to which goodwill has been allocated must be tested for impairment annually. Management has assessed that the group has 13 CGUs, and has allocated the goodwill and other intangible assets to these CGUs. Management has tested the CGUs for impairment by comparing their carrying amounts with their recoverable amounts. The recoverable amounts were determined using value-in-use models. Our procedures included, amongst others: • obtaining the Group’s calculation of the provision and updating our understanding of the methodology used to calculate the provision; • evaluating the reasonableness of the key assumptions used to estimate the provision; • assessing the validity of the receivable by reviewing the terms and conditions of the indemnity deed and subsequent amendments; • recalculating the provision using management’s assumptions; and • evaluating the adequacy of the accounting policy and disclosures made in the Group’s financial statements in respect of the remediation provision and receivable. Our procedures included, amongst others: • enquiring with management to obtain and document an understanding of their processes and controls related to the assessment of impairment, including identification of CGUs and the calculation of the recoverable amount for each CGU; • evaluating the value-in-use models against the requirements of AASB 136, including consultation with our valuations experts; • obtaining management’s value-in-use calculations to: - - - testing the mathematical accuracy; evaluating management’s ability to perform accurate estimates by comparing historical forecasting to actual results; and testing forecast cash inflows and outflows to be derived by the CGUs’ assets; 95 COUNTPLUS ANNUAL REPORT 2021 Independent Auditor’s Report To the members of CountPlus Limited Key audit matter How our audit addressed the key audit matter Recoverable amount of intangible assets (Note 19) cont. This is a key audit matter due to the judgements and estimates required in determining the appropriate CGUs and calculating the recoverable amount. • reviewing discount rates applied to forecast future cash flows; • performing sensitivity analysis on the significant inputs and assumptions made by management in preparing the calculation; and • assessing the adequacy of financial report disclosures. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.pdf. This description forms part of our auditor’s report. 96 COUNTPLUS ANNUAL REPORT 2021 Independent Auditor’s Report To the members of CountPlus Limited Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 20 to 29 of the Directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of CountPlus Limited, for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants S M Thomas Partner – Audit & Assurance Sydney, 26 August 2021 97 COUNTPLUS ANNUAL REPORT 2021 ASX Additional Information The shareholder information set out below was applicable as at 31 July 2021. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Colonial Holding Company Ltd National Nominees Limited J P Morgan Nominees Australia Pty Limited HSBC Custody Nominees (Australia) Limited Mirrabooka Investments Limited Citicorp Nominees Pty Limited Mr Barry Martin Lambert Pacific Custodians Pty Limited (Employee Share Tst A/C) Santos L Helper Pty Ltd (SBS Van Paassen A/C) Rowe Heaney Super Fund Pty Ltd (Rowe Heaney Super Fund A/C) UBS Nominees Pty Ltd RK Sydney Pty Ltd (RK Family A/C) Avanteos Investments Limited (7749080 Jonathan A/C) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Mr Joseph Zanca & Mrs Szerenke Zanca (Zanacorp Super Fund A/C) 15 Harvey Investment Company Pty Ltd (Seastar Investment A/C) 16 Mr Michael Allan Beddoes (Beddoes Practice A/C) 17 18 Mr Barry Martin Lambert 19 20 Mr Raymond John Kellerman & Mrs Ruth Kellerman (The Kellerman S/F A/C) Alex J Rowe Pty Ltd (Rowe Heaney Family A/C) Zanacorp Financial Group Pty Ltd Substantial holders At the date of this report, the substantial shareholder is: Colonial Holding Company 98 Listed Ordinary Shares – Fully Paid Number of Holders Number of Shares 419 638 291 467 85 1,900 115 239,938 1,692,120 2,333,113 14,208,193 95,749,195 114,222,559 – Listed Ordinary Shares – Fully Paid Number of Shares Percentage 40,945,747 5,460,791 5,043,335 4,521,988 3,450,242 3,438,363 3,300,000 2,612,310 2,100,000 1,700,000 1,389,730 1,200,000 1,162,528 1,000,000 835,561 800,000 800,000 764,729 700,000 600,000 81,825,324 35.85 4.78 4.42 3.96 3.02 3.01 2.89 2.29 1.84 1.49 1.22 1.05 1.02 0.88 0.73 0.70 0.70 0.67 0.61 0.53 71.66 Listed Ordinary Shares – Fully Paid Number of Shares Percentage 40,945,747 35.85 COUNTPLUS ANNUAL REPORT 2021Investors' Information Share Trading Shareholders’ Enquiries CountPlus Limited’s fully paid ordinary shares are listed on the Australian Securities Exchange (ASX) and are traded under the code CUP. Investors seeking information regarding their shareholding or wishing to change their address, should contact our share registry: Computershare Investor Services Pty Ltd Voting rights At a General Meeting, every member present in person or by proxy or attorney, or in the case of a corporation by a representative duly authorised under the seal of that corporation, has one vote on a show of hands and in the event of a poll, one vote for each fully paid ordinary share held by the member. Options carry no voting rights. Address Telephone Fax Level 3, 60 Carrington Street Sydney NSW 2000 1300 850 505 +61 2 8234 5000 +61 2 8235 8150 Any other enquiries relating to CountPlus Limited can be directed to CountPlus at: Postal Address Telephone Email ABN GPO Box 1453 Sydney NSW 2001 +61 2 8218 8778 info@countplus.com.au 11 126 990 832 99 COUNTPLUS ANNUAL REPORT 2021 100 COUNTPLUS ANNUAL REPORT 2021COUNTPLUS ANNUAL REPORT 2021C o u n t P l u s A n n u a l R e p o r t 2 0 2 1 Annual Report 2021

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