2013 | Annual Report
2
Reckon Limited Annual Report
for the Financial Year Ended 31 December 2013
ABN 14 003 348 730
Contents
4
Our results at a glance
5 Message to shareholders from the Chairman and Group CEO
7
Directors’ Report
14 Remuneration Report
24 Corporate Governance Report
30 Auditor’s Independance Declaration
31
Independent Auditor’s Report
33 Financial Report
33 Directors’ Declaration
34 Consolidated Statement of Profit or Loss
35 Consolidated Statement of Profit or Loss and Other Comprehensive Income
36 Consolidated Statement of Financial Position
37 Consolidated Statement of Changes in Equity
39 Consolidated Statement of Cash Flows
40 Notes to the Financial Statements
88 Additional Information as at 6 March 2014
3
Our Results at a Glance
Operating Revenue
Operating revenue was up 2% to $98.1 million from $96.6 million.
2006
2006
2006
2007
2007
2007
2008
2008
2008
2009
2009
2009
2010
2010
2010
2011
2011
2011
2012
2012
2012
2013
2013
2013
100
100
100
90
90
90
80
80
80
70
70
70
60
60
60
50
50
50
40
40
40
30
30
30
$m
$m
$m
% Growth
% Growth
% Growth
23%
23%
23%
8%
8%
8%
42%
42%
42%
6%
6%
6%
90.2
90.2
90.2
-%
-%
-%
96.6
96.6
96.6
7%
7%
7%
98.1
98.1
98.1
2%
2%
2%
EBITDA
Group EBITDA was up 4% to $35.3 million from $34.0 million.
35
35
35
30
30
30
25
25
25
20
20
20
15
15
15
10
10
10
5
5
5
0
0
0
$m
$m
$m
% Growth
% Growth
% Growth
2006
2006
2006
2007
2007
2007
2008
2008
2008
2009
2009
2009
2010
2010
2010
2011
2011
2011
2012
2012
2012
2013
2013
2013
26%
26%
26%
15%
15%
15%
32%
32%
32%
20%
20%
20%
31.3
31.3
31.3
4%
4%
4%
34.0
34.0
34.0
9%
9%
9%
35.3
35.3
35.3
4%
4%
4%
NPBT
Group NPBT remained unchanged at $23.9 million.
28
28
28
24
24
24
20
20
20
16
16
16
12
12
12
8
8
8
4
4
4
0
0
0
$m
$m
$m
% Growth
% Growth
% Growth
4
2006
2006
2006
2007
2007
2007
2008
2008
2008
2009
2009
2009
2010
2010
2010
2011
2011
2011
2012
2012
2012
2013
2013
2013
21%
21%
21%
14%
14%
14%
18%
18%
18%
26%
26%
26%
22.2
22.2
22.2
-%
-%
-%
23.9
23.9
23.9
8%
8%
8%
23.9
23.9
23.9
-
-
-
Message to shareholders from the
Chairman and Group CEO
Overview
In 2013 Reckon Limited underwent a great deal of change as the company transitioned away from the US software
company, Intuit Inc; moved closer towards achieving its cloud accounting ambitions; and restructured its business
internally.
A lot of careful planning had been put into the structure and management of the business to position us to achieve
our goals in the immediate future and in the years to come.
We have continued to build upon the integration of the development platforms in the business first implemented in
2012. We’ve also installed a driven and talented management team that have the energy and collaborative focus to
drive new ideas forward.
In 2013 the impact of our management changes was quickly evident as the culture of the company shifted to a start-
up mentality, for the development of new cloud solutions. This remains supported by successful and sustainable
products and revenue in our traditional markets.
2013 proved that Reckon is a strong independent brand recognised as a trusted guardian for accounting and
practice management technology. In 2014 and beyond we will capitalise on our strong position in the market and on
our performance pedigree of consistent profits, and convert it into building success across our key technology
platforms: traditional desktop, hosted, and cloud.
Some of the highlights of 2013 include completing the Reckon re-branding; unveiling Reckon One, our new cloud
accounting solution; finalising the development of a new version of Reckon Accounts Hosted; and releasing APS
Private Cloud, a secure hosted version of our renowned Reckon APS practice management suite. All of these
achievements highlight our commitment to cloud development. We have also introduced a scan solution into the
nQueue Billback business and at the same time have started moving customers onto a subscription based pricing
model. In addition we sold our investment in Connect2Field Holdings Pty Ltd at a profit of $1.4 million.
We also remain committed to developing and supporting products across desktop, hosted and cloud platforms
which uniquely positions Reckon to serve a whole range of customer needs.
Other organisational changes will be effective from 2014. The Professional Division has been re-named the
Accountants Group. The Accountants Group is now responsible for the Reckon Docs and Reckon Elite products, as
well as the Reckon APS product range.
The Business Division has been re-named the Business Group. The Business Group is responsible for the new
Reckon One products as well as the Reckon Accounts product range.
The Reckon Virtual Cabinet and Reckon nQueue Billback Divisions will fall under the newly named International
Group.
These changes are the logical outcome of the development of the company as a whole. Products have been aligned
with the group that can derive maximum benefit from product development and sales opportunities.
Against the background of our new start up culture, blended with our traditional businesses, and organisational
re-structuring, the financial performance for the company in 2013 was solid.
The financial reporting for 2013 still reflects the old structure, hence we refer below to: the Business Division, the
Professional Division, the nQueue Billback Division, and the Virtual Cabinet Division.
5
Message to shareholders from the
Chairman and Group CEO (continued)
Key performance metrics
Group
Revenue
EBITDA
NPAT
EPS
2013
2012
% Change
Amount Change
$98.1 million
$96.8 million
$35.3 million
$34.0 million
$18.2 million
$17.8 million
13.9 cents per share
13.4 cents per share
1%
4%
2%
4%
$1.3 million
$1.3 million
$0.4 million
0.5 cents
Dividend
On 11 February 2013, the board declared a final dividend of 4.75 cents per share. The dividend was 90% franked.
The interim dividend announced on 13 August 2013 was 4 cents per share, also franked to 90%.
Divisional Performance
2013 Operating
Revenue
2012 Operating
Revenue
2013 EBITDA
2012 EBITDA
Business division
$57.9 million
$58.3 million
$20.2 million
$21.3 million
Professional division
$24.0 million
$25.1 million
$11.6 million
$12.4 million
nQueue Billback division
$10.7 million
$10.8 million
$4.0 million
$4.6 million
Virtual Cabinet Division
$5.5 million
$2.4 million
$1.7 million
$0.5 million
Conclusion
There was a lot of change, but with the launch of Reckon One, the completion of the rebranding exercise, new modules
in APS and nQueue Billback, ongoing growth in Virtual Cabinet and growth in the Corporate Services business,
coupled with the end of royalty payments to Intuit, we are confident that 2014 promises to be a strong year.
We also look forward to unveiling Reckon Pay, our new mobile smart phone cloud based payment solution that
integrates with Reckon Accounts.
As always we extend our thanks and appreciation to our customers, network of partners and employees for the
contributions to our on-going success.
John Thame
Chairman
Clive Rabie
Group CEO
6
Directors’ Report
The Directors of Reckon Limited submit these financial statements
for the financial year ended 31 December 2013
John Thame AAIBF FCPA
Non-Executive Chairman
John Thame has a lifetime of experience in the retail financial services industry. He was Managing director of
Advance Bank Limited from 1986 until it merged with St George Bank Limited in January 1997 and held a variety of
senior positions in his career with Advance. John was Chairman of St George Bank Limited from 2005 to 2008 and
a member of the St George Bank Limited board until 1 July 2008. He is also Chairman of Abacus Property Trust
Group Limited, where he has been a director since 2002. John was appointed to the board on 19 July 1999.
Ian Ferrier AM FCA
Non-Executive Director
Ian Ferrier is a Fellow of the Institute of Chartered Accountants in Australia. He has extensive experience in company
corporate recovery and turn around practice. He is also a director of a number of private and public companies. Ian
is also Chairman of Australian Vintage Limited having been a Director since 1991 and Chairman of Goodman Group
Limited since 2003 and a director of Energy One Limited. He has significant experience in property and
development, tourism, manufacturing, retail, hospitality and hotels, infrastructure and aviation and service industries.
Ian joined the board on 17 August 2004.
Greg Wilkinson
Founder, Deputy Non-Executive Chairman
Greg Wilkinson has over 30 years experience in the computer software industry. Greg entered the industry in the
early 1980s in London where he managed Caxton Software, which became one of the UK’s leading software
publishers. Greg co-founded Reckon in 1987 and was the Chief Executive Officer until February 2006. He was
appointed to the position of Deputy Chairman in February 2006 and became a member of the board of the listed
entity on 19 July 1999. He was appointed to the Audit & Risk Committee in February 2010 and Remuneration
Committee in December 2011.
7
Clive Rabie
Group Chief Executive Officer
Clive was Chief Operating Officer of Reckon from 2001 until February 2006 and in that time played a pivotal role in its
turn-around. In February 2006 Clive was appointed to the position of Group Chief Executive Officer. He has
extensive management and operational experience in the IT and retail sectors as both an owner and director of
companies.
Myron Zlotnick LLM, GCertAppFin
General Counsel and Company Secretary
Myron Zlotnick has over 20 years experience as a legal practitioner, general and corporate counsel, and as a director
of companies in the information, communications and technology sector. He is a member of ASIC’s Registry and
Licensing Business Advisory Committee.
Marianne Kopeinig LLM, GDipApplCorpGov
Legal Counsel and Assistant Company Secretary
Marianne has over 15 years experience as a private practitioner and corporate counsel for private and ASX listed
companies and broad industry experience in commercial, risk management and compliance functions.
Directors’ Report (continued)
Operations and Activities
In 2013 Reckon Limited conducted business across these areas:
(1) the sales and support of small to larger sized business accounting software and personal wealth management
software under the Reckon Accounts business range and Reckon Accounts personal range brands; the sales
and support of company secretarial services such as company incorporations, SMSF documentation and ASIC
compliance management under the Reckon Docs brand;
(2) the sales and support of accounting practice management and allied software under the APS brand to larger
professional accounting firms, and to smaller professional accounting firms under the Elite brand;
(3) supplying software solutions to legal firms and corporations in the main areas of revenue management, expense
management, print solutions, business process automation, business intelligence, document service automation,
scan and document management under the nQueue Billback brand; and
(4) sales and support of document management and document portal products to a wide variety of clients under
the Virtual Cabinet brand.
Through strategic development and acquisition of businesses and technology, Reckon aspires to broaden its scope
of operations to provide complementary products and services across these business areas. The main products and
services are principally organised into four operating units: the Business division, the Professional division, the
nQueue Billback division and the Virtual Cabinet division.
Reckon has re-organised the business to have three distinct operational groups that are supported by our shared
services teams, effective from 1 January 2014. This re-organisation was implemented as part of an on-going
process to more efficiently utilise resources and maximise sales opportunities.
The Business Division is renamed as the Business Group which is operationally responsible for Reckon Accounts,
Reckon Accounts Hosted, and Reckon One products.
The Professional Division is renamed the Accountants Group which is now operationally responsible for the Reckon
APS range of products, as well as Reckon Elite and Reckon Docs.
The new International Group is operationally responsible for Reckon nQueue Billback and Reckon Virtual Cabinet
businesses.
Underpinning these three new groups are our shared services teams which include IT, development, finance,
marketing and HR.
Business Division 2013
Reckon develops, distributes and supports a range of programs under the Reckon Accounts brand. These programs
are generally used by small to large businesses in Australia and New Zealand. Alongside desktop and hosted
accounting software the range includes a payroll and point of sale solution, as well as personal finance software.
The fastest growing product in the Reckon Accounts suite is Reckon Accounts Hosted, a convenient secure online
accounting software product that very closely mimics the Reckon Accounts business range desktop package.
Reckon Accounts products include: (1) Reckon BankData, a bank feed solution which allows connections with
banks and other financial institutions to download bank transaction information directly into accounting software; and
(2) Reckon GovConnect, an SBR-enabled solution for lodging reports to government agencies such as the ATO.
Reckon’s newest product is Reckon One, a flexible cloud accounting solution for small businesses. The program
was released in February 2014. Reckon One is based on a “designed by you” concept that allows users to tailor the
solution to their needs by choosing modules their business will use. The current modules available are: Core (which
includes payments and receipts, budgets and reporting); Invoices; BankData (automatic bank statement import into
accounts and reconciliation); and Projects (manage revenue and costs, forecasts). The development roadmap
8
includes Time & Billing (timesheets and expenses); GovConnect (BAS lodgement);Inventory and Payroll and an open
API for third party applications.
Users can switch modules on or off as required making Reckon One a very cost-effective solution for small businesses.
The Reckon Elite product suite includes tax return preparation tools, practice management tools and related
solutions mostly used by accountants and tax agents. Reckon Elite is predominantly used in small to medium sized
accounting firms compared to Reckon APS which is used by larger firms.
Reckon Docs corporate services business comprises technology for the registration and compliance management of
companies and other business structures through an easy to use web based ordering system. This business
provides clients with an online company registration service available 24/7; documentation and services for the
establishment of a range of entities, especially trusts for self managed superannuation funds; constitution updates
and domain name registrations; and other documentation for human resources needs.
The Reckon Docs data business provides comprehensive accredited business name and ASIC information
electronically combined with a highly personalised client relationship. A full range of sophisticated information
services to assist customers with the provision of financial, corporate and statutory information is also offered.
Reckon Docs also offers a desktop utility called Reckon Docs Desktop (RDD) that is a simple and convenient
desktop application for company registration, searches, and ASIC compliance management. This product is also
integrated into the Practice Management suite of APS, known as Advance Corporate Registers (ACR).
Professional Division 2013
Reckon develops, distributes and supports the Reckon APS suite of solutions for professional service firms in
Australia, New Zealand and, via a reseller arrangement, in the United Kingdom. For professional accountants these
solutions also include tax and accounts production. Reckon also delivers a wide range of complementary
applications for practice management.
The Reckon APS product suite continues to be considered market leading for its sophistication and depth of offering
to professional accounting firms. This is reflected in the market share that Reckon APS enjoys in Australia and New
Zealand.
Reckon has committed several years of research and development to delivering unique integrated practice software
to work off a single platform, offering all its solutions under the collective “Advance” suite. The Advance suite
comprises several integrated modules for several business critical functions in professional firms: Practice
Management (PM); Business Intelligence and Reporting (PIQ); Document and E-mail Management (DM); Taxation
(Tax); Client Accounting (XPA); Client Relationship Management (CRM); Resource Planning (RP); Superannuation
(DS); Corporate Secretarial (ACR); Workpaper Management (WM); SyncDirect and others.
Reckon has also made all of the above modules available in a hosted version called APS Private Cloud.
In late 2013 the company acquired the technology called Sync Direct. The cloud based system allows accountants
to upload financial transaction data from virtually any source and automatically enter it into their practice
management system for accounts and tax return preparation purposes.
Together Reckon’s Professional and Business divisions co-ordinate development to meet the overall strategic goal of
delivering integrated solutions, on the desktop, in a hosted environment, and in the cloud, to businesses and
accountanting professionals.
nQueue Billback Division 2013
The nQueue Billback division provides software and support services in the revenue management, expense
management, print solutions, document service automation, and document management markets. The division has
recently introduced a new scan module.
9
Directors’ Report (continued)
The division currently operates in Australia, the United Kingdom and the USA, and has reseller arrangements in other
parts of the world.
The division assists law firms and commercial and government clients by enhancing the automation and processing
of any operational and administrative expenses, including print, copy, scan, telephone, online searches, emails, court
fees, car services, credit card charges, courier costs and more. nQueue Billback’s software offerings can be
embedded directly into multi-function devices or reside on tablet computers or terminals to provide clients with the
knowledge required to run their businesses more profitably.
Virtual Cabinet Division 2013
The Virtual Cabinet division enables companies to control all documents in a secure document management system.
Virtual Cabinet document management fully integrates with back office systems and has the ability to link all forms of
electronic files back to client records. Linked with the document portal it also provides a secure and audit trailed
method to send documents to selected recipients, and provides an efficient method for professionals to collaborate
with their clients.
Development
Reckon has co-ordinated product development efforts to meet the growing demand for remote and mobile access
to a range of solutions and applications,including cloud based products. This includes co-ordination across both the
Business and Professional divisions to meet a longer term goal of integrated and collaborative solutions for
accountants, bookkeepers and small to larger sized enterprises.
Overall Reckon is now developing a whole range of desktop, hosted, and cloud products in a single environment
where they integrate to improve collaboration between businesses, accountants, banks, government agencies and
other stakeholders.
Results of Operations
• Revenue was up 1% to $98.1 million from $96.8 million.
• EBITDA was up 4% to $35.3 million from $34 million.
• NPAT was up 2% to $18.2 million from $17.8 million.
• EPS was up 4% to 13.9 cents per share from 13.4 cents per share.
•
A total dividend of 8.75 cents per share for the 2013 year (final dividend of 4.75 cents per share and an interim
dividend of 4 cents per share) up 3% from 8.5 cents per share.
The above results include the profit on sale of our investment in Connect2Field Holdings Pty Ltd.
Business Division
Despite replacing the brand under which these products have traded for more than 20 years, Reckon Accounts
direct unit sales grew by 4%. The revenue growth was hampered by modest price increases in 2013 due to the
rebranding exercise, as well as the ongoing move towards a subscription model.
The retail channel continued to decline, although retail now only represents 3% of Business Division revenue.
Reckon One, has been launched, but does not begin generating revenue until 2014. Substantial costs have been
incurred and expensed in 2013 in pre launch marketing and infrastructure set up costs.
Reckon Docs revenue grew by 5%.
10
The changing nature of the business means that more development costs were capitalised in 2013 than in 2012.
Overheads were higher due to the Reckon One investment noted above, as well as marketing costs on the
rebranding exercise and building our IT Infrastructure to support an online business.
Professional Division
Revenue growth for the APS Australia and New Zealand businesses was 2%. The transition towards a subscription
model has seen the recurring revenue component increase by 11%, offsetting a 21% reduction in upfront revenue.
Albeit that there is a short term impact on revenue, the move towards a subscription model, will put this division in a
much more sustainable position in future.
It is also expected to reduce the purchasing barriers for potential customers, as they will no longer be required to
make a substantial investment upfront to implement APS in future.
The United Kingdom business was sold in 2012, and has generated a royalty stream of $0.5m in 2013.
Virtual Cabinet Division
This division was acquired effective 1 July 2012, and so was only included in the consolidated results for the second
half of 2012. The results in the second half of 2013 compared to comparative period in 2012, has shown revenue
growth of 34% and EBITDA growth of 113%.
nQueue Billback Division
11
The nQueue Billback division finished the year with the strongest 4th quarter in its history, offsetting some of the
impact of a weak first half of 2013.
The development team has focussed on developing a scan solution for the legal market to complement the existing
cost recovery offering; this product is market ready and early indications are promising.
Buyback 2013
Pursuant to the announcement of a share buy-back on 13 August 2013, 2.6 million shares were purchased at an
average price of $2.15 per share during 2013.
Dividends
On 11 February 2014, the board declared a final dividend of 4.75 cents per share (90% franked) payable to
shareholders recorded on the company’s register as at the record date of 21 February 2014. Reckon does not have
a dividend re-investment plan currently in operation. On 13 August 2013, the board declared an interim dividend of 4
cents per share (90% franked) payable to shareholders recorded on the company’s register at record date of 28
August 2013.
Directors’ Report (continued)
Future Developments, Business Strategies and Prospects
for Future Financial Years
Reckon will continue to pursue expanding its product suite across a choice of platforms: desktop, hosted or cloud;
pursue recurring revenue and expand the subscription model across all businesses; selling across divisions;
maintaining and enhancing relationships with its network of partners, including retailers and professional partners;
and striving for operational efficiency.
The group will continue to pursue its cloud strategy focusing on developing integrated products to provide solutions
for small to larger businesses, accountants and lawyers that allow for collaboration, and are connected to financial
institutions and government agencies.
We implemented a number of structural or organisational changes, as mentioned above:
The Business Division has been re-named the Business Group. The Business Group is responsible for the new
Reckon One product, as well as the Reckon Accounts product range. The Professional Division has been re-named
the Accountants Group. The Accountants Group is now responsible for the Reckon Docs and Reckon Elite
products, as well as the Reckon APS product range. The Reckon Virtual Cabinet and Reckon nQueue Billback
businesses will fall under a newly named International Group.
These changes are the logical outcome of the development of the company as a whole. Products have been aligned
with the group that can derive maximum benefit from product development and sales opportunities.
In the Business Group…
At the beginning of 2014 the company released the new cloud accounting product, Reckon One. As stated above,
Reckon One has been launched with a Core module, BankData and Projects. The development roadmap includes
Time & Billing; GovConnect; Inventory; Payroll and an open API for third party applications.
The company is also intending to establish small low cost offices in new territories such as the United Kingdom to
localise and promote Reckon One.
During 2014 a substantially upgraded Reckon Accounts will be released, this included improvements to speed and
reliability.
Reckon Accounts Hosted and Enterprise, in particular, are expected to continue to be the main drivers for growth in
the Reckon Accounts suite.
The company will also benefit from a savings on royalty expenses of about $5 million as a result of the end of the
Intuit Inc relationship.
In the Accountants Group…
It is intended to increase the addressable market by a move towards a subscription business model, by reducing the
upfront investment required of customers to adopt APS products.
There will also be focus on increasing market share and rolling out modules to existing customers.
In parallel with that, product development will continue to focus on maintaining and improving the existing Advance
suite of products. In addition, sales of APS Private Cloud, a Workpaper Management module and Virtual Cabinet are
expected to gain momentum.
This group will also continue to cross sell Reckon Docs products to its customer base.
The addition of the Reckon Elite small practice management solution is also a likely contributor to growth.
12
In the International Group…
Opportunities for growth for Virtual Cabinet are expected to be seen in the United Kingdom, in the accountants and
financial planners markets, in particular. It is also anticipated that the International Group will take advantage of
channels into Australia and New Zealand through the other Groups.
For nQueue Billback, a product update was completed in the second half of 2013. This together with a newly
developed scan solution is expected to contribute to growth. In addition the business has also started moving
towards a subscription business model.
Significant Changes in State of Affairs
Other than as outlined above there were no significant changes in state of affairs.
Matters Subsequent to the End of the Financial Year
On 11 February 2014 Reckon announced an extension to its buy-back of shares which permits the company to buy
back up to 10% of its shares on the open market within a 12 month period. For the 12 months to 31 December
2013, 2.6 million shares were bought back. It is anticipated to keep the buy back in place until 25 February 2015
subject to the normal ASIC requirements.
On 10 February 2014 Reckon’s relationship with Intuit Inc formally ended. Reckon is no longer required to pay a
royalty to Intuit Inc on sales of Reckon Accounts business and personal product ranges. Reckon continues to
localise and develop the source code for these products having been granted a 100 year royalty fee licence to the
then latest version of the source code.
Since year end the group has increased its bank bill facility by $10 million.
13
Other Matters
Other than as disclosed in this Directors’ Report no other matter or circumstance has arisen since 31 December
2013 that has significantly affected, or may significantly affect:
•
the consolidated entity’s operations in future financial years, or
•
the results of those operations in future financial years, or
•
the consolidated entity’s state of affairs in future financial years.
Other than as outlined above, disclosure of information regarding likely developments in the operations of the
consolidated entity in future financial years and the expected results of those operations is likely to result in
unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report.
Directors’ Shareholdings
As at the date of this report, the Directors held shares and options in Reckon as set out in note 28 to the financial
statements.
Directors’ Report (continued)
Remuneration Report - Audited
Key Management
The key management personnel include the directors and those people who have authority and responsibility for
planning, directing and controlling the activities of the consolidated entity. Key management personnel details are set
out on page 18.
Policy for Determining Remuneration
of Key Management Personnel
The policy for determining remuneration of key management personnel, including the directors, the deputy
Chairman, Group CEO, Group CFO, MDs and other company officers is the ultimate responsibility of a remuneration
committee comprising the Chairman of the board and the other independent non-executive directors. The Chairman
of the remuneration committee is Ian Ferrier. There is no formal charter for the remuneration committee. Policy is set
with due consideration for the need to motivate directors and management to pursue the long-term growth and
success of the company as well as to tie remuneration in with performance as contemplated in the ASX Corporate
Governance Principles and Recommendations (“ASX Guidelines”). It is the view of the board that the company
complies with the substance of the aims and aspirations of the ASX Guidelines in the context of the size of the
company, the size of the board, the size of the senior management team and the size of the business.
The Policy for determining remuneration of other management personnel has been delegated to the Group CEO,
Group CFO and MDs by the board to be exercised in accordance with the same broad principles as apply for the
Group CEO, Group CFO, other company officers and MDs.
The board reviews all remuneration in its consideration of the company’s annual budget process. The board, through
the remuneration committee will consider for approval the levels of remuneration set in the annual budget, taking into
account the relevant performance budgeted as well as compared with historical performance, and market conditions.
The policy is to pay the relevant officers and employees remuneration consistent with applicable market comparisons
suited to the unique features of the company, the competitive landscape, the scale of the business, the
responsibilities of the individual directors and employees, internal relativities and performance.
The board is conscious of the need to attract and retain talent. The remuneration policy takes account of striking the
right balance between short term benefits and long term incentives. All remuneration is reviewed annually. Generally
increases, if justified, will not exceed comparable market increases.
Terms of Employment for Key Management Personnel
Executive directors and Group executives are all appointed on standard employment terms that are not fixed term
contracts. These contracts include a notice period of between 1-3 months to be provided by either the executive or
the company. No contract provides for termination payments except where the employee is to receive payment in
lieu of notice.
For 2013, remuneration for key management personnel including the Group CEO, Group CFO, other company
officers, MDs, and other senior executives, comprises a fixed element, a short-term incentive element and a long-
term incentive element.
Fixed Component
The fixed component of remuneration is determined in preparing the annual budget for the year and then subjected
to the approval of the board through the remuneration committee.
14
Short-Term Incentive Payments
The short-term incentive component of remuneration is dependent on satisfaction of performance conditions. Each
annual budget fixes a pool representing the total potential amount in which the relevant employees can share if the
performance conditions are met. There are three weighted elements to the performance conditions, viz: a revenue
target, an earnings before interest, tax, depreciation and amortisation (EBITDA) target, and earnings per share (EPS)
target measured against the budgeted performance of the company.
The board retains a discretion regarding the allocation of the pool between employees as well as regarding
weightings.
Short term incentives are paid in cash as bonuses usually in about February or March of the following year.
The amounts payable include a portion effectively requiring the employee to remain employed for a further one year
period before being paid the remaining short term bonus for performance in that year.
Long-Term Incentive Payments
The long-term incentive component is the last of the mix of the components comprising remuneration packages. It is
aimed at retaining the long term services of the key management personnel to whom it applies and to align their
remuneration with the longer term performance of the company. The substance of the long-term incentive
component for key management was approved by Special General Meeting on 20 December 2005.
In general terms, the long-term incentive component comprises several possible methods of participation: an option
plan, a performance share plan (which includes a long term retention incentive) and a share appreciation plan. The
board has discretion to approve the making of offers to applicable employees to participate in any of these plans.
Options granted and/or performance shares awarded (all in respect of the company’s ordinary shares) and/or share
appreciation rights do not vest before three years after their grant date or at least seven years in the case of the long
term retention incentive. Vesting is also conditional upon the company achieving defined performance criteria. The
performance criteria for all plans except for the long term retention incentive are based upon a total shareholder
return (TSR) target. A TSR is the return to shareholders over a prescribed period, based upon the growth in the
company’s share price plus dividends or returns of capital for that period. The company’s initial TSR target will be the
company achieving a median or higher ranking against the TSR position of individual companies within a
‘comparator group’ of companies (i.e. a group of comparable ASX listed companies pre-selected by the board) over
the same period. The mechanism and detailed criteria to achieve the board’s objectives was designed by an
independent consultant and offers were made under the rules of the company’s original performance share plan
approved by shareholders at the Special General Meeting on 20 December 2005.
Some of the entities comprising the comparator group have been delisted either as part of merger and acquisition
activity or for other reasons. This was factored into the calculation of the company’s performance by the independent
valuers who undertook the exercise on behalf of the company. Where companies were de-listed or suspended, for
example, it was assumed that the company out-performed that company. The comparator group of companies used
in the performance period for assessment included (1) Adacel Technologies Limited, (2) Firstfolio Limited (previously
listed as AFS), (3) Altium Limited, (4) Amcom Telecommunications Limited, (5) ASG Group Limited, (6) CPT Global
Limited, (7) Eftel Limited (no longer listed), (8) Eservglobal Limited, (9) Hansen Technologies Limited, (10) Infomedia
Ltd, (11) Integrated Research Limited, (12) Melbourne IT Limited, (13) Lifestyle Communities Limited (previously listed
as NMB), (14) MYOB Limited (no longer listed), (15) Newsat Limited (suspended from trading), (16) Objective
Corporation Limited, (17) Oakton Limited, (18) Powerlan Limited (now listed as CYo), (19) Queste Communications
Limited, (20) Rea Group Ltd, (21) Sirius Corporation Limited (suspended from trading), (22) Sonnet Corporation
Limited (no longer listed), (23) Asian Pacific Limited (previously listed as TMO, no longer listed), (24) Technology One
Limited, (25) Talent2 International Limited (no longer listed), (26) Chariot Limited (no longer listed), (27) Citect
Corporation Limited (no longer listed).
15
Directors’ Report (continued)
Remuneration Report - Audited (continued)
Only 50 percent of options or performance shares become exercisable or vest if the initial performance criterion is
satisfied. The extent to which the balance of options or performance shares become exercisable or vest will depend
on the extent to which the initial performance criterion is exceeded (i.e. the extent to which the company exceeds a
median ranking against the TSR position of the comparator group of companies).
The share appreciation right plan represents an alternative remuneration component (to offering options or
performance shares) under which the board can invite relevant employees to apply for a right to receive a cash
payment from the company equal to the amount (if any) by which the market price of the company’s shares at the
date of exercise of the right exceeds the market price of the company’s shares at the date of grant of the right. The
right may only be exercised if performance criteria are met. The performance criteria are fixed by the board in the
exercise of its discretion. At present these are the same as the TSR target set for the right to exercise options or for
performance shares to vest.
In 2014, the board will undertake a review of the suitability of the current comparator group as several of the entities
may no longer be appropriate points of comparison. As part of this process the board will also review the suitability
of TSR generally as a relevant and topical measure of performance. If any changes are implemented these will apply
to 2014 and onwards.
On 24 May 2011 the remuneration committee approved and recommended to the board an extension to the long
term incentive plan by adding the long term incentive.
The genesis of the idea to extend the plan and offer additional performance shares was to provide a reward and
an incentive for senior level employees who have a long employment history and good performance record.
It was also intended that these performance shares could be used to provide an incentive for employees with
potential for a longer term contribution to the success of the company to participate in the growth of equity value
of the company.
Part of the company’s success as an organisation is premised on human domain expertise and the consistency and
longevity of service of key management.
The offer of these additional performance shares is designed to encourage and reward employees to commit to
longevity as well as to complement other traditional forms of executive remuneration.
By rewarding those executives who commit to the company over a very long period and thereby providing
management stability as the business grows and matures, the board believes long term shareholder benefits will result.
Other aspects of the remuneration strategy deal with fixed remuneration, short term and long term incentives and are
measured against customary key indicators such as revenue growth, EBITDA, EPS and TSR. This strategy has now
been enhanced to provide a measure of equity rewards for very long and consistent performance by executives
considered key.
The independent consultant did not make any remuneration recommendation in relation to the key management
personnel for the company.
These performance shares are offered to selected employees with the principal vesting condition that participants
must remain employed for the term specified. The shares offered remain at risk of forfeiture until the relevant period
of service has been satisfied. There is no entitlement to dividends during the relevant period of service.
Offers made are staggered in such a way that for 100% of the shares to vest, the employee must remain in
employment for 10 years from the date of the initial offer, with a minimum of 7 years. In the context of the overall
remuneration strategy of the company, the history of the performance of the company, and the relative value of the
shares offered, the remuneration committee is of the view that the addition of this retention incentive to remuneration
offered is appropriate and ‘fair and reasonable’, a view supported by the independent consultant.
It is the remuneration committee’s belief that the addition of these performance shares has added to the balance and
overall mix of remuneration to the applicable employees in a positive way. If the exacting service requirements are not
satisfied then any costs incurred under AASB 2 will be recouped and any forfeited shares will be available for
reallocation or to fund other employee equity entitlements.
16
Balance Between Salary, Short-Term
and Long-Term Incentives
It is the board’s opinion that an adequate balance is struck between the three components comprising the relevant
remuneration. For short term incentives, the performance targets reflect, in part, the key factors that the company
pursues in measuring its performance: volume of sales; earnings generated; and value returned to shareholders in
terms of EPS. The targets also represent a measure of an incentive to encourage commitment to the business and
to its growth. The audited financial results for the year are used to assess whether the performance conditions are
satisfied. Audited results represent an independent accurate method of determining the attainment of the conditions.
For long-term incentives, the additional targets comprising TSR reflect a further assessment of value to shareholders
before the remuneration is earned. As stated above the comparator group will be subject to review as may be TSR
as a suitable measure of performance.
The remuneration committee is satisfied that the remuneration of the relevant employees accords with the performance
indicators of the company as set out in the table below; takes into account the imperative to retain their services to
avoid the business and opportunity costs associated with replacing them; is reflective of the need to be commensurate
with market rates; and takes into account other relevant idiosyncrasies of the company’s performance.
NPAT
EPS
Dividend
Change in share price between
beginning and end of year
January
December
$’000
13,602
17,248
16,693
17,767
18,161
Cents per share
Cents
9.9
12.4
12.1
13.4
13.9
7.0
8.0
8.0
8.5
105
184
234
234
184
234
234
236
8.75
236
217
17
2009
2010
2011
2012
2013
Total shareholder return for the period 2011 to 2013 was 1%. The board was of the opinion, however, that it would
exercise a discretion, under the rules of the plan, to pay a discretionary bonus by releasing performance share plan
shares and share appreciation rights to relevant employees set out in the table on page 19. As set out above the
board is calling into question the relevance and appropriateness of TSR (and a comparator group) as a suitable and
topical yardstick for measuring performance. While any changes to the yardstick implemented will take place from
2014 onwards, there were certain significant factors in the company, especially over the period 2012 – 2013, that in
the board’s opinion justified the payment of a discretionary bonus. These factors include: the company separating
from Intuit Inc, the implementation of brand name changes, assuming the risk of independent development and the
development of cloud products for the first time. Notwithstanding these changes being reflected in a stagnant or
declining share price (possibly a result of uncertainty in the market relating to these changes) management still
managed to: successfully re-brand products and grow revenue, develop Reckon One independently within 2 years
of announcing the split from Intuit Inc, maintain development costs, maintain profitability (in an extremely competitive
market), increase earnings per shares (even taking account of a share buyback), and continue to pay a dividend. All
of which place the company in a position to properly compete in its markets, especially in the cloud accounting
sector and hopefully deliver appropriate returns to shareholders in the long term.
The Company’s Trading Policy prohibits directors, key management personnel and employees from entering into a
transaction with securities which limit the economic risk of any unvested entitlements awarded under any Reckon
equity-based remuneration scheme. Prior to presenting full-year results equity plan participants are required to
confirm that they have not entered into any transactions which would contravene the company’s Trading Policy.
Directors’ Report (continued)
Remuneration Report - Audited (continued)
Fixed
component
Short term incentive
component
Other
compen-
sation
Long term incentive
component
Office
Salary
Bonus1
Other
short
term
benefits
Super-
annuation
Equity settled
share based
payments –
Performance
shares2
Cash settled
share based
payments –
Appreciation
rights3
Total
remuneration
Remun-
eration
2013
Directors5
John
Thame
Chairman,
Non-executive
Director
$110,000
Greg
Wilkinson
Deputy Chairman,
Executive Director
$95,000
$0
$0
$0
$10,038
$0
$8,669
$0
$0
$0
$120,038
$0
$103,669
Clive
Rabie
Ian
Ferrier
Group CEO,
Executive Director
Non-executive
Director
Executives5
Sam
Allert
MD, Accountants
Group
Chris
Hagglund
CFO
Myron
Zlotnick
General Counsel
& Company
Secretary
Peter
Sanders4
MD, Business
Group
Richard
Hellers
President and
CEO, nQueue
Billback Division
$683,500 $266,165
$0
$25,000
$0
$164,329
$1,138,994
$95,000
$0
$0
$8,669
$0
$0
$103,669
$345,600
$86,435 $10,115
$25,000
$32,370
$0
$499,520
$405,550 $123,965
$0
$25,000
$70,608
$0
$625,123
$325,980
$82,163
$0
$25,000
$54,513
$0
$487,656
$220,000
$30,000
$0
$20,075
$1,499
$0
$271,574
$309,917
$51,653
$7,060
$14,875
$7,494
$0
$390,999
TOTAL
$2,590,547 $640,381 $17,175
$162,326
$166,484
$164,329
$3,741,242
1. The potential amounts payable for the short term cash performance bonuses are
determined at the beginning of the year and are earned based upon the
performance criteria for the year. The amounts paid include a portion for 2012
effectively requiring the employee to remain employed for a further one year period
to 31 December 2013 before being paid the remaining short term bonus for
performance in 2012. The short term bonus for Mr Hellers is based on specific
performance targets for the nQueue Billback division.
(25,000 shares), Mr Sanders (5,000 shares) and Mr Hellers (25,000 shares). These
shares vest on 31 December 2019 at zero cents subject to the employees remaining in
employment for the period. The fair value of performance shares which vested or were
forfeited during the 2013 financial year is set out in the table below. No options were
granted to any person during the year as part of their remuneration. No options vested
during the financial year. All options issued in previous years were fully vested in prior
years. No options were exercised during 2013.
2. The dollar values of the long term incentive and retention component is the fair value
using a model that adapts the Monte Carlo simulation approach: (1) allocated over
each year of the 3 year performance period for 2011 to 2013 and (2) allocated over the
7 year period from 2013 to 2019 for shares offered as a long term retention incentive.
The fair value of the performance shares offered in 2013 for the performance period
2013 to 2015 at grant date was $1.848 per share valued according to the Monte Carlo
simulation approach. The fair value of the shares offered in 2013 for the long term
retention incentive for the period 2013 to 2019 at 1 January 2013 was $1.869 per
share valued according to the Monte Carlo simulation approach. For the performance
period 2013 to 2015 performance shares were offered as follows: Mr Hagglund
(34,410 shares), Mr Zlotnick (22,377 shares) and Mr Allert (14,777 shares). The date of
grant for each of these participants was 1 January 2013. If the performance criteria are
met, then the shares are released at no consideration on 31 December 2015. For the
long term retention incentive period 2013 to 2019 performance shares were offered as
follows: Mr Hagglund (50,000 shares), Mr Zlotnick (50,000 shares) and Mr Allert
3. The dollar value of the share appreciation incentive in the above table is determined
using a model that adapts the Monte Carlo simulation approach allocated over
each year of the 3 year performance period for 2011 to 2013. The fair value of the
rights offered for the performance period 2013 to 2015 was $0.344 valued
according to the Monte Carlo simulation approach. 549,419 rights were issued
under the plan on 1 January 2013 for the performance period 2013 to 2015. The
fair value of appreciation rights which vested or were forfeited during the 2013
financial year is set out in the table below. For the share appreciation plan, the
amount ultimately paid to the employee is calculated based on the difference
between the company share price at vesting and the share price at date of issue
spread over the three year performance period, multiplied by the number of rights
granted.
4. Appointed in 1 January 2013.
5. To the extent that any of the above are directors of any wholly owned subsidiaries
of the company no additional remuneration is paid.
18
Percentage
of total
remuneration
that is
performance
related
Percentage
of available
bonus which
vested in
the year
Percentage
of available
bonus which
was forfeited
during
the year
No of
performance
shares
vested in
20136
Value of
Performance
shares
vested
in 20136
Value of
Performance
shares
forfeited
in 2013
Value of
Appreciation
rights vested
in 20136
Value of
Appreciation
rights
forfeited
in 2013
0%
0%
n/a
n/a
n/a
n/a
38%
87%
13%
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$175,000
n/a
n/a
26%
87%
13%
8,464
$20,092
31%
87%
13%
32,268
$76,598
28%
87%
13%
21,160
$50,230
12%
60%
40%
17%
50%
50%
0
0
0
0
0
0
0
0
0
n/a
n/a
n/a
n/a
n/a
61,892
$146,920
$0
$175,000
n/a
n/a
$0
n/a
n/a
n/a
n/a
n/a
n/a
$0
Remun-
eration
2013
continued
Directors
John
Thame
Greg
Wilkinson
Clive
Rabie
Ian
Ferrier
Executives
Sam
Allert
Chris
Hagglund
Myron
Zlotnick
Peter
Sanders
Richard
Hellers
TOTAL
6. These amounts reflect the discretionary amounts referred to on page 17.
19
Directors’ Report (continued)
Remuneration Report - Audited (continued)
Fixed
component
Short term incentive
component
Other
compen-
sation
Long term incentive
component
Office
Salary
Bonus1
Other
short term
benefits
Super-
annuation
Equity settled
share based
payments –
Performance
shares2
Cash settled
share based
payments –
Appreciation
rights3
Total
remuneration
Remun-
eration
2012
Directors5
John
Thame
Chairman,
Non-executive
Director
Greg
Wilkinson
Deputy Chairman,
Non-executive
Director
Clive
Rabie
Ian
Ferrier
Group CEO,
Executive Director
Non-executive
Director
Executives5
Sam
Allert6
CEO, Professional
Division
Chris
Hagglund
CFO
Myron
Zlotnick
General Counsel
& company
Secretary
Brian
Coventry4
CEO, Professional
Division
Gavin
Dixon7
CEO, Business
Division
Richard
Hellers
President and
CEO, nQueue
Billback division
$105,000
$90,000
$0
$0
$0
$9,450
$0
$8,100
$0
$0
$0
$114,450
$0
$98,100
$614,500 $241,137
$0
$39,500
$0
$105,560 $1,000,697
$90,000
$0
$0
$8,100
$0
$0
$98,100
$313,540
$74,723
$13,243
$26,540
$23,551
$0
$451,597
$371,537 $111,176
$0
$29,037
$73,854
$0
$585,604
$303,090
$74,145
$0
$26,090
$52,968
$0
$456,293
$332,368
$74,723
$0
$29,487
$0
$0
$436,578
$413,860 $116,204
$0
$30,860
$19,739
$0
$580,663
$253,378
$48,263
$12,844
$13,328
$0
$0
$327,813
TOTAL
$2,887,273 $740,371
$26,087
$220,492
$170,112
$105,560 $4,149,895
1. The potential amounts payable for the short term cash performance bonuses are
determined at the beginning of the year and are earned based upon the performance
criteria for the year. The amounts paid include a portion for 2011 effectively requiring
the employee to remain employed for a further one year period to 31 December 2012
before being paid the remaining short term bonus for performance in 2011. The short
term bonus for Mr Hellers is based on specific performance targets for the nQueue
Billback division.
2. The dollar values of the long term incentive and retention component is the fair value
using a model that adapts the Monte Carlo simulation approach: (1) allocated over
each year of the 3 year performance period for 2010 to 2012 and (2) allocated over
the 7 year period from 2012 to 2018 for shares offered as a long term retention
incentive. The fair value of the performance shares offered in 2012 for the
performance period 2012 to 2014 at grant date was $1.785 per share valued
according to the Monte Carlo simulation approach. The fair value of the shares
offered in 2012 for the long term retention incentive for the period 2012 to 2018 at 1
January 2012 was $1.772 per share valued according to the Monte Carlo simulation
approach. For the performance period 2012 to 2014 performance shares were
offered as follows: Mr Hagglund (33,226 shares), Mr Zlotnick (21,787 shares), Mr
Allert (10,894 shares), Mr Coventry, (10,894 shares) and Mr Dixon (37,039 shares).
The date of grant for each of these participants was 1 January 2012. If the
performance criteria are met, then the shares are released at no consideration on 31
December 2014. For the long term retention incentive period 2012 to 2018
performance shares were offered as follows: Mr Hagglund (25,000 shares), Mr
Zlotnick (25,000 shares), Mr Allert (12,500 shares) and Mr Coventry (12,500 shares).
These shares vest on 31 December 2018 at zero cents subject to the employees
remaining in employment for the period. The fair value of performance shares which
vested or were forfeited during the 2012 financial year is set out in the table below. No
options were granted to any person during the year as part of their remuneration. No
options vested during the financial year. All options issued in previous years were fully
vested in prior years. No options were exercised during 2012.
3. The dollar value of the share appreciation incentive in the above table is determined
using a model that adapts the Monte Carlo simulation approach allocated over each
year of the 3 year performance period for 2010 to 2012. The fair value of the rights
offered for the performance period 2012 to 2014 was $0.441 valued according to the
Monte Carlo simulation approach. 396,825 rights were issued under the plan on 1
January 2012 for the performance period 2012 to 2014. The fair value of appreciation
rights which vested or were forfeited during the 2012 financial year is set out in the
table below. For the share appreciation plan, the amount ultimately paid to the
employee is calculated based on the difference between the company share price at
vesting and the share price at date of issue spread over the three year performance
period, multiplied by the number of rights granted.
4. Employment ended on 31 December 2012. No termination benefit paid.
5. To the extent that any of the above are directors of any wholly owned subsidiaries of
the company no additional remuneration is paid.
6. Promoted to the position on 1 October 2012. This represents remuneration for 12
months.
7. Resigned effective from 31 March 2013.
20
Percentage
of total
remuneration
that is
performance
related
Percentage
of available
bonus which
vested in
the year
Percentage
of available
bonus which
was forfeited
during
the year
No of
performance
shares
vested in
2012
Value of
Performance
shares
vested
in 2012
Value of
Performance
shares
forfeited
in 2012
Value of
Appreciation
rights vested
in 2012
Value of
Appreciation
rights
forfeited
in 2012
0%
0%
n/a
n/a
n/a
n/a
35%
88%
12%
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$185,557
n/a
n/a
25%
88%
12%
7,568
$13,086
32%
88%
12%
41,216
$71,266
28%
88%
12%
27,027
$46,732
$0
$0
$0
17%
88%
12%
12,573
$38,482
$72,224
23%
88%
12%
39,514
$68,323
$89,039
15%
60%
40%
n/a
n/a
$0
n/a
n/a
n/a
n/a
n/a
n/a
127,898
$237,889
$161,263
$185,557
n/a
n/a
$0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$0
Remun-
eration
2012
continued
Directors
John
Thame
Greg
Wilkinson
Clive
Rabie
Ian
Ferrier
Executives
Sam
Allert
Chris
Hagglund
Myron
Zlotnick
Brian
Coventry
Gavin
Dixon
Richard
Hellers
TOTAL
21
Directors’ Report continued
Indemnification of Directors and Officers and Auditors
During the financial year, the company paid a premium in respect of a contract insuring the directors of the company
(as named above), the company Secretary and all executive officers of the company, and of any related body
corporate, against a liability incurred as a director, secretary or executive officer 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.
In addition, Rule 12 of the company’s constitution obliges the company to indemnify on a full indemnity basis and to
the full extent permitted by law, every director, officer or former officer for all losses or liabilities incurred by the person
as an officer. This obligation continues after the person has ceased to be a director or an officer of the company or a
related body corporate, but operates only to the extent that the loss or liability is not covered by insurance.
The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or
auditor of the company, or any related body corporate, against a liability incurred as an officer or auditor.
Directors’ Meetings
The following table sets out the number of directors’ meetings held during the financial year and the number of
meetings attended by each director.
Reckon Limited – Attendance Tables
Directors
Meeting
Board
Audit & Risk Committee
Remuneration Committee
JM Thame
I Ferrier
GJ Wilkinson
C Rabie
A
10
10
10
10
B
10
10
9
10
A
2
2
2
n/a
B
2
2
2
n/a
A
2
2
2
n/a
B
2
2
2
n/a
Key:
A - number of meetings eligible to attend
B - number of meetings attended
22
Non-Audit fees
Details of the non-audit services can be found in note 4 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the 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 4 to the financial statements do not
compromise the external auditor’s independence, based on advice received from the Audit & Risk Committee, for
the following reasons:
•
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor, and
none of the services undermine the general principles relating to auditor independence as set out in Code of
Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical
Standards board, including reviewing or auditing the auditor’s own work, acting in a management or decision-
making capacity for the company, acting as advocate for the company or jointly sharing economic risks and
rewards.
On behalf of the directors
Mr J Thame
Chairman
Sydney 13 March 2014
23
Corporate Governance Report
The company is committed to a system of relationships, policies and processes which align with the ASX Corporate
Governance Principles and Recommendations, 2nd Edition (“the ASX Governance Principles”) and the 2010
Amendments. It is a priority of the board to ensure the company’s governance framework and support processes
uphold these principles.
The board is of the opinion that the company’s existing policies and processes effectively achieve the objectives of
the relevant Recommendations. The few departures from the Recommendations in the ASX Governance Principles
are generally justified on the basis that the formal requirements of the Recommendations are not applicable to the
size of the company and the resources available. Where appropriate, the board seeks opportunities to adopt these
Recommendations to suit the circumstances of the company and continue to improve the company’s governance
policies and processes.
The board’s Corporate Governance policies can be viewed by visiting the “Shareholder Centre” from the company’s
website www.reckon.com under “About Us”.
1. Management and Oversight
The company is governed on behalf of the shareholders by its board of Directors who in turn oversee the company’s
management team. The responsibilities and duties of the board are set out in the Constitution. The board is
responsible for ensuring appropriate risk management, accountability and control mechanisms. The board also
provides advice and input into development of the businesses generally, overall corporate strategy, performance
objectives, and appointment of senior executives. The board monitors and reviews the performance of the company,
financial reporting and implementation of strategy. The board approves the annual budget, material capital
expenditure and large acquisitions.
The company has adopted each of the Recommendations relating to Principle 1 of the ASX Governance Principles,
except for the requirement in Recommendation1.1, only to the extent that there is no formal charter. The board is of
the opinion, given the relatively small size of the composition of the board, the relatively flat structure of management,
the size of the management team and open and frequent channels of communication between management and the
board, that there is adequate definition and understanding of the functions and responsibilities of the board and
management. The board maintains sufficiently close oversight of operations and has close input to material decisions
to ensure compliance with principles of good corporate governance. The board recognises that with the growth and
evolution of the company, it is important to review the division of matters and responsibilities reserved to the board.
The board is able to efficiently deal with issues which, in other larger enterprises, may normally be delegated to
committees because of the size of the company and the management team. The Audit & Risk Committee and
Remuneration Committee are the only committees of the board.
The company undertakes an annual performance evaluation of key management personnel, heads of divisions and
head office management (CFO, General Counsel and company Secretary), this generally involves a review and
assessment of the performance of relevant executives and managers against key performance indicators. This
process may also include feedback from peers where relevant and the Division CEOs and the relevant executive or
manager. Where applicable, remedial steps and coaching are implemented. There may be further additional reviews
undertaken through the year if necessary.
24
In addition, a portion of remuneration for key management personnel is tied into the financial performance of the
company as set out in more detail in the Remuneration Report. Performance evaluation for key management
personnel was undertaken in 2013 and it was in accordance with the processes disclosed in this report.
The independent non-executive directors also generally informally monitor and review the ongoing performance of
senior executives.
The Group Human Resources Manager is also responsible for managing and administering an induction process for
newly appointed senior executives. In addition the Group CEO and divisional CEOs are also involved in the briefing of
new senior executives.
2. The Board
At present, the board comprises four members: John Thame, Ian Ferrier, Greg Wilkinson and Clive Rabie. Mr Thame
is Chairman of the board and he, together with Mr Ferrier, are independent non-executive directors. Further
details of the directors, including a summary of their skills, experience and period of office, are set out in the
Directors’ Report.
The company has adopted each of the Recommendations relating to Principle 2 of the ASX Governance Principles,
except for the requirement in Recommendation 2.1 and 2.4 due to the size and circumstances of the board.
However in the opinion of the board, the existing structure and processes are appropriate for the company and still
meet the objectives of the Recommendations and Principle 2. While there is not strictly an independent majority in
the sense described in Recommendation 2.1, as there are only four directors, the non-executive directors ensure
that all issues that come before the board are considered in an impartial manner and from a variety of perspectives
and meet the objectives of Recommendation 2.1. Mr Wilkinson, although still a substantial shareholder, has
occupied a non-executive position for more than three years since he resigned from the management of the
company. The Chairman, who is independent, has a casting vote where necessary. The independent non-executive
directors oversee the nomination of any potential directors.
The criteria for directorship and the election process are set out in the company’s constitution. The size of the board
dictates that there is no efficiency obtained in establishing a formal nomination committee. Accordingly, the company
departs from this requirement in Recommendation 2.4.
The directors periodically review the composition of the board to ensure that members have the desired breadth of
experience, skills and expertise to govern the company effectively. When considering nominees for any future
candidates for the board, the directors will take appropriate steps to ensure that it considers a broad range of
candidates to ensure that the company has the benefit of the appropriate mix of experience, skills and diversity in its
decision making for the best interests of the company as a whole.
Directors are entitled to seek independent professional advice at the company’s expense to assist them in fulfilling
their duties in order to comply with all applicable laws and regulations. There is no formal procedure for the board to
agree when to take independent advice at the expense of the company, but given the size of the board there is no
efficiency to be obtained in formalising this process. The independent non-executive directors exercise their
judgment to call for such advice when they deem appropriate. The Chairman also has frequent contact with internal
legal counsel to assess the need for external advice.
25
Corporate Governance Report (continued)
The board met ten times during 2013. The details of attendance at these meetings are set out in the Directors’ Report.
The independent non-executive directors monitor and review the ongoing performance of the executive directors and
key executives. The independent non-executive directors occasionally meet informally without management being
present to generally discuss the affairs of the company and the overall performance of key executives.
The independent non-executive directors are subject to the company’s constitution and their continuity of tenure is
dependent on re-election by shareholders in accordance with the constitution. Any decision regarding the
appointment of new directors is taken cognisant of the need to appoint someone who, taking into account the mix
of skills, experience and perspective of the other directors, is appropriately qualified and as far as possible familiar
with the company’s market sector.
While there is no formal induction process in place, the Chairman, Deputy Chairman and Group CEO under take a
rigorous process of briefing new board members.
Given the size of the company there is also direct informal communication on a regular basis between the Chairman
and the company Secretary on governance matters.
3. Ethical and Responsible Decision Making
The company’s governance policies and processes incorporate all the Recommendations relating to Principle 3 of
the ASX Governance Principles.
The board’s policy is that the company, the directors and employees in addition to their legal obligations must
maintain high ethical standards in their dealings with the public and other members of the industry.
The company’s Human Resources Policy and Procedures, binding on all employees, also collectively embraces the
substance of the ASX Governance Principles in a Code of Conduct, including expectations regarding behaviour in
the workplace, disciplinary processes, grievance processes, discrimination and harassment, occupational health and
safety, ethical business practices, conflict of interest and corporate opportunity. The company is committed to
training employees and maintaining employees’ relevant technical expertise and understanding of their ethical and
legal obligations, for example by way of trade practices training from time to time for relevant staff.
The company recognises that diversity and inclusiveness is a critical aspect of effective management of its people
and their contributions to the success of the company. This diversity is reflected in the differences in gender, race,
age, culture, education, family or carer status, religion and disability which is found across the company, its
employees, consultants and contractors.
Based on the company’s profile of executive, management and employees in 2011 in Australia, which is used to
benchmark the current status of diversity as to gender, women represented: 36% of the employees in 2013; 1% held
senior executive roles and 3% hold senior manager roles. Other than the 1% increase in the senior manager roles,
there was no significant increase in roles held by women employees. There are no female members of the board.
As reported in 2011, the board set key measurable objectives and KPIs, to promote diversity in the company,
particularly as to gender. The company continues to be committed to those objectives, which are:
a. To achieve greater representation of females in the Reckon Group, particularly in technical and
supervisor / manager roles.
b. To review policies and internal procedures to ensure they provide equitable, fair and flexible work practices,
including consistency with the company’s commitment to diversity, particularly gender diversity, in the organisation.
c. To implement training (in-house or external where relevant) to support a culture of diversity, for example:
appropriate behaviour, harassment etc.
d. Development of a mentoring/succession program for all employees to encourage females to remain in the
business.
26
The company has measured its performance against these objectives in 2013. There has been a marginal increase
of 1% in the representation of women in the technical roles and senior management roles. This is consistent with the
company’s overall recruiting needs for technical roles in 2013. The company will again continue to seek a 5%
increase on the 2011 numbers by December 2014.
In compliance with Workplace Gender Equality Act 2012 (“WGEA”), the company lodged its first report under the
new Act relating to Reckon employees in Australia for the period 1 April 2012 to 31 March 2013. For consistency,
the criteria used to determine the workplace profile of Reckon employees for the WGEA report has also been applied
for this report in relation to Principle 3 of the ASX Governance Principles. The WGEA report is published on the
company’s intranet and can also be viewed on its website www.reckon.com
The company’s Diversity & Inclusion Policy Statement as approved by the board on 15 December 2011 is published
in the company’s website.
4. Integrity in Financial Reporting
The board assumes the responsibility to ensure the integrity of the company’s financial reporting and has established
the Audit & Risk Committee to focus on the issues relating to the integrity of the financial reporting of the company
and oversight and review of the company’s risk management. The terms of reference for the Audit & Risk
Committee, to review and monitor all financial, risk management and compliance policies, were formalised in a
Charter in 2003 to meet the requirements of the ASX Governance Principles. The Audit & Risk Committee consists
of John Thame and Ian Ferrier, independent, non-executive directors, as well as the non-executive director Greg
Wilkinson. The board is of the opinion that the composition of the Audit & Risk Committee ensure independent
review of the company’s financial reporting over and above formal audit processes. Details of their Experience and
qualifications are set out in the Directors’ Report.
The Audit & Risk Committee also meets informally to discuss matters including risk management and reporting. With
the appointment of Greg Wilkinson to the Audit & Risk Committee in February 2010, the board is of the opinion that
the structure of the Committee, together with its considerable technical expertise in the market sector of the
company and financial literacy, enables it to discharge its functions effectively and meet the objectives of Principle 4
and as such, that the company has fully adopted Recommendation 4.2.
Deloitte Touche Tohmatsu, the company’s auditors, report directly to the Audit & Risk Committee on the
appropriateness of the company’s internal accounting policies and practices. The board reviews the adequacy of
existing external audit arrangements each year, with particular emphasis on the scope and quality of the audit. The
Audit & Risk Committee provides written advice to the board on the standard of independence of the auditors in
light of any non-audit services during 2013 and which is reported in the Directors’ Report.
At each Audit & Risk Committee meeting, the independent non-executive directors meet separately with the auditors
without management being present to review any concerns that the auditors may have regarding the financial
management of the company.
The Audit & Risk Committee met twice during 2013. The Audit & Risk Committee reports back to the board after
each Audit & Risk Committee meeting. The details of attendance at these meetings are set out in the Directors’
Report. The board is aware of its obligations to ensure the appropriate selection and rotation of external auditors and
the external audit engagement partners and closely monitors and reviews the engagement of the company’s external
auditors.
27
Corporate Governance Report (continued)
5. Timely and Balanced Disclosure
The company has adopted each of the Recommendations relating to Principle 5 of the ASX Governance Principles.
The board remains conscious of the company’s disclosure obligations under the Corporations Act, the ASX listing
rules and the ASIC guidance principles. These obligations are reflected in the Continuous Disclosure Policy. All
required disclosures are also made in accordance with the Continuous Disclosure policy which is accessible to the
public at the company website. A review of operations and commentary on the financial results is provided in the
Directors’ Report and the Financial Report.
6. Rights of Shareholders
The board is conscious of the requirements of Principle 6 of the ASX Governance Principles and takes into account
the rights and needs of shareholders to receive balanced and understandable information about the company and
acts in accordance with this Principle. The company communicates with shareholders through its ASX disclosures to
the market.
The company also communicates with shareholders through the posting of statutory notices to shareholders and at
the general and special meetings of the company. The company keeps recent announcements and general
company information on its website with a dedicated investor relations section which is accessible to the public. The
website contains a link to the ASX website for older announcements. Given the size and circumstances of the
company, there is no formally documented communications strategy, and in this respect the company has not
adopted Recommendation 6.1.
The company’s auditor attends the Annual General Meeting and is available to answer shareholder questions about
the conduct of the audit and the preparation and content of the Auditor’s Report at the meeting.
7. Recognise and Manage Risk
As stated above in paragraph 1, the board is responsible for ensuring appropriate risk management, accountability,
and control mechanisms. It constantly monitors the operational and financial aspects and material risks of the
company’s activities and, through the Audit & Risk Committee, considers the recommendations and advice of the
auditors and other external advisers on the operational and financial risks that face the company. The Group CEO
and Group CFO monitor and review the financial performance of the company and monitor any potential risk virtually
on a daily basis. The board has received assurance from the CEO and the CFO that the s295A Declaration provided
in the Financial Report is founded on a sound system of risk management and internal control and that the system is
operating effectively in all material respects in relation to financial reporting risks. The board is of the opinion that
there is substantial compliance with the ASX Governance Principle 7 although Recommendations 7.1 and 7.2 have
not yet been fully adopted.
As described above, the size of the company and the management team enables the board to have effective
oversight of the overall risk management of the company. In the board’s opinion, especially with the existence of an
Audit & Risk Committee, there is no efficiency for the company to establish a separate risk management committee.
The board is provided with a declaration from the Group CEO and the Group CFO under section 295A of the
Corporations Act, that due consideration is given to budgets, cashflows, realisation of current assets, continuity of
terms of trade, and consideration of contingencies in the day to day operations of the company and in the monthly
management financial reporting and statutory reporting of the company.
28
At present the nature of operations and scope of the business is reasonably well established and understood by
management and the board. The decision making and reporting processes in the company incorporate an
assessment of the relevant material risks, for example in the planning, budget, HR, product development, R&D, legal
and compliance activities and, where relevant, any material risk issues are reported to and considered by the board.
The planning and budget process involves both the executive and senior management, which means all of these
employees have a more than adequate understanding of the issues, activities and opportunities across the company.
In turn this enables them to manage operational, planning, strategic and risk issues in the company. In addition, the
company regularly conducts reviews of the material risks in the context of the annual insurance renewals and, in
relation to acquisitions through due diligence. Relevant risk factors are included in the various management and
financial reports to the board and are then considered by the board.
Due to the effectiveness of the existing processes and the size of the business, business risk management systems,
policies and procedures have not been comprehensively formalised. With a view to fully adopting Recommendations
7.1 and 7.2, the company’s risk management systems, policies and processes are under consideration to be
formalised and documented, if necessary.
8. Remunerate Fairly and Responsibly
The company remunerates directors and key executives in accordance with the aspirations set out in ASX
Governance Principle 8. Accordingly, the board has adopted a remuneration policy designed to attract and maintain
talented and motivated directors and senior employees so as to encourage enhanced performance of the company.
There is a clear relationship between performance and remuneration and a desire to strike the correct balance
between the various components making up remuneration. The Remuneration Committee consists of the
independent, non-executive directors, John Thame and Ian Ferrier and non-executive director Greg Wilkinson.
Details of their experience and qualification are set out in the Directors’ Report. The Remuneration Committee
ensures independent review of financial reporting over and above formal audit processes. The Remuneration
Committee supervises the development and implementation of the company’s remuneration policy including the
operation of option plans, and reviews the performance of the executive directors and senior executives. There is no
formal charter for the Remuneration Committee, but it does fix policy and reward in accordance with ASX
Governance Principle 8. The full detail of the policy and remuneration is contained in the Remuneration Report. The
Remuneration Committee met twice during 2013. The details of attendance at these meetings are set out in the
Directors’ Report.
29
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Board of Directors
Reckon Limited
Level 12
65 Berry Street
North Sydney NSW 2060
13 March 2014
Dear Board Members
RECKON LIMITED
In accordance with section 307C of the Corporations Act 2001, I am pleased to
provide the following declaration of independence to the directors of Reckon Limited.
As lead audit partner for the audit of the financial statements of Reckon Limited for
the financial year ended 31 December 2013, I declare that to the best of my
knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Alfie Nehama
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
30
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Members of Reckon Limited
Report on the Financial Report
We have audited the accompanying financial report of Reckon Limited, which comprises the
consolidated statement of financial position as at 31 December 2013, the consolidated
statement of profit or loss, the consolidated statement of profit or loss and other comprehensive
income, the consolidated statement of cash flows and the consolidated statement of changes in
equity for the year ended on that date, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration of the consolidated
entity comprising the company and the entities it controlled at the year’s end or from time to time
during the financial year as set out on pages 33 to 87.
Directors’ Responsibility for the Financial Report
31
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 note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the consolidated financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control, relevant to
the company’s preparation of the financial report that gives a true and fair view, in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
Auditor’s Report
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001. We confirm that the independence declaration required by the
Corporations Act 2001, which has been given to the directors of Reckon Limited, would be in
the same terms if given to the directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of Reckon Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at
31 December 2013 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001; and
(b) the consolidated financial statements also comply with International Financial Reporting
Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 21 of the directors’ report
for the year ended 31 December 2013. 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.
Opinion
In our opinion, the Remuneration Report of Reckon Limited for the year ended 31 December
2013, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Alfie Nehama
Partner
Chartered Accountants
Sydney, 13 March 2014
32
Directors’ Declaration
The directors of the company declare that:
1.
the financial statements and notes as set out on pages 34 to 87, are in accordance with the Corporations
Act 2001, and:
•
•
•
comply with Accounting Standards; and
comply with International Financial Reporting Standards, as stated in note 1 to the financial
statements; and
give a true and fair view of the financial position as at 31 December 2013 and of the performance for
the year ended on that date of the consolidated group;
2.
the Chief Executive Officer and the Chief Finance Officer have each declared that:
•
•
•
the financial records of the company for the financial year have been properly maintained in
accordance with s 286 of the Corporations Act 2001;
the financial statements and notes for the financial year comply with the Accounting Standards, and
the financial statements and notes for the financial year give a true and fair view;
3.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors pursuant to Section 295(5) of the
Corporations Act 2001.
33
On behalf of the directors
Mr J Thame
Chairman
Sydney, 13 March 2014
Consolidated Statement of Profit or Loss
for the year ended 31 December 2013
Continuing operations
Revenue
Product and selling costs
Royalties
Employee benefits expenses
Share-based payments expenses
Marketing expenses
Premises and establishment expenses
Depreciation and amortisation of other non-current assets
Telecommunications
Legal and professional expenses
Finance costs
Other expenses
Note
Consolidated
2013
$’000
2012
$’000
2
98,125
96,765
(17,992)
(17,109)
(5,202)
(5,322)
(29,037)
(28,520)
2
(405)
(304)
(2,695)
(2,175)
(2,365)
(2,146)
(10,729)
(9,824)
(839)
(694)
(705)
(907)
(798)
(311)
(4,549)
(4,745)
Profit on sale of investment in joint venture entity
9
1,414
–
Business acquisition costs
Net costs associated with premises relocation:
Estimated sub-lease rent shortfall
Profit before income tax
Income tax expense
Profit for the year
Profit attributable to:
Owners of the parent
Non-controlling interest
Earnings per share
Basic Earnings per Share
Diluted Earnings per Share
–
(173)
(438)
(492)
23,889
23,939
3
(5,728)
(6,172)
18,161
17,767
23
17,812
17,342
349
425
18,161
17,767
Cents
Cents
13.9
13.8
13.4
13.3
24
24
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
34
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
for the year ended 31 December 2013
Profit for the year
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss:
Fair value adjustment of equity instruments
Exchange difference on translation of foreign operations
Total other comprehensive income, net of income tax
Note
Consolidated
2013
$’000
2012
$’000
18,161
17,767
22
22
-
3,883
3,883
247
186
433
Total comprehensive income for the year
22,044
18,200
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
21,695
17,775
349
425
22,044
18,200
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
35
Consolidated Statement
of Financial Position
as at 31 December 2013
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total Current Assets
Non-Current Assets
Receivables
Financial assets
Investment in joint venture entity
Property, plant and equipment
Deferred tax assets
Intangible assets
Other assets
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Borrowings
Current tax payables
Provisions
Deferred revenue
Total Current Liabilities
Non-Current Liabilities
Borrowings
Other financial liabilities
Deferred tax liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings
Total Equity
Note
Consolidated
2013
$’000
2012
$’000
29
6
5
7
6
8
9
10
11
12
7
13
14
16
14
15
18
16
21
22
23
2,573
10,998
1,746
2,291
1,926
8,795
1,244
2,695
17,608
14,660
1,194
1,391
56
-
3,279
127
56
660
3,415
141
77,848
68,032
599
83,103
100,711
-
73,695
88,355
4,731
58
1,131
3,471
9,285
4,922
10,994
1,119
3,341
8,674
18,676
29,050
17,433
11,658
4,107
722
33,920
52,596
48,115
136
10,608
2,949
1,194
14,887
43,937
44,418
16,818
16,878
(17,641)
(14,839)
48,938
48,115
42,379
44,418
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
36
Consolidated Statement
of Changes in Equity
for the year ended 31 December 2013
Share
buyback
reserve
$’000
Foreign
currency
translation
reserve
$’000
Share-
based
payments
reserve
$’000
Issued
capital
$’000
Acquisition
of non-
controlling
interest
reserve
$’000
Attributable
to owners
of the
parent
$’000
Non-
controlling
interest
$’000
Retained
earnings
$’000
Total
$’000
16,878
(8,978)
(1,383)
503
42,379
(4,981)
44,418
–
44,418
–
–
17,812
–
17,812
349
18,161
–
–
–
–
–
–
260
(320)
–
–
–
–
–
–
(5,528)
–
–
–
–
–
3,883
3,883
–
–
–
17,812
–
–
–
–
–
–
–
241
–
–
(260)
–
–
–
–
–
(11,253)
–
–
–
–
–
–
–
–
–
–
–
3,883
–
3,883
21,695
349
22,044
241
(5,528)
(11,253)
–
(320)
–
–
–
–
–
241
(5,528)
(11,253)
–
(320)
349
349
(349)
–
37
16,818
(14,506)
2,500
484
48,938
(6,119)
48,115
(1,487)
(1,487)
–
–
(1,487)
48,115
Consolidated
Balance at
1 January 2013
Profit for the year
Other comprehensive
income:
Exchange differences
on translation of foreign
operations
Total comprehensive
income
Share based payments
expense
Share buyback
(note 21)
Dividends paid (note 30)
Treasury shares
vested/lapsed
Treasury shares
acquired
Transfer to acquisition
of non-controlling
interest reserve
Remeasurement of
Linden House option
liability (note 15)
Balance at
31 December 2013
Consolidated Statement
of Changes in Equity (continued)
for the year ended 31 December 2013
Share
buyback
reserve
$’000
Foreign
currency
translation
reserve
$’000
Share-
based
payments
reserve
$’000
Asset
revaluation
reserve
$’000
Issued
capital
$’000
Retained
earnings
$’000
Acquisition
of non-
controlling
interest
reserve
$’000
Attributable
to owners
of the
parent
$’000
Non-
controlling
interest
$’000
Total
$’000
(1,569)
556
(1,067)
36,621
Consolidated
Balance at
1 January 2012
Profit for the year
Other comprehensive
income:
Fair value adjustment
of financial assets
Exchange differences
on translation of
foreign operations
Total comprehensive
income
Share based
payments expense
Share buyback
(note 21)
Dividends paid
(note 30)
Treasury shares
vested/lapsed
Treasury shares
acquired
Transfer to retained
earnings
Transfer to
acquisition of
non-controlling
interest reserve
Payment for
non-controlling
interest in nQueue
Billback subsidiaries
(note 26(d))
Remeasurement of
Linden House option
liability (note 15)
Transfer of prior
year buyback
Balance at
31 December 2012
15,752
–
–
–
–
–
–
–
301
(541)
–
–
–
–
–
–
–
–
–
–
(7,612)
–
–
–
–
–
–
-–
1,366
(1,366)
–
–
186
186
–
–
–
–
–
–
–
–
–
–
–
–
–
-
248
–
–
(301)
–
–
–
–
–
–
–
17,342
247
–
–
247
17,342
–
–
–
–
–
–
–
(10,764)
–
–
820
(820)
–
–
–
–
–
–
–
–
–
–
–
50,293
203
50,496
17,342
425
17,767
247
186
–
–
247
186
17,775
425
18,200
248
(7,612)
–
–
248
(7,612)
(10,764)
(549)
(11,313)
–
(541)
–
–
–
–
–
(541)
–
–
–
–
–
–
–
–
79
79
(79)
–
(4,496)
(4,496)
–
(4,496)
–
–
(564)
(564)
–
–
42,379
(4,981)
44,418
–
–
–
(564)
–
44,418
16,878
(8,978)
(1,383)
503
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
38
Consolidated Statement of Cash Flows
for the year ended 31 December 2013
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest paid
Income taxes paid
Note
Consolidated
Inflows/(Outflows)
2013
$’000
2012
$’000
105,886
104,956
(74,145)
(74,288)
-
32
100
59
(705)
(311)
(4,543)
(6,488)
Net cash inflow from operating activities
29(b)
26,525
24,028
Cash Flows From Investing Activities
Payment for purchase of business, net of cash acquired
Payment for non-controlling interest (net)
Payment for investment in joint venture entity
Proceeds from sale of investment in joint venture entity
Payments for purchase of intellectual property
Payment for capitalised development costs
Payment for property, plant and equipment
Proceeds from sale of investment
Net cash outflow from investing activities
Cash Flows From Financing Activities
Proceeds from/(repayment of) borrowings
Payment for other financial liabilities
Payment for share buyback
Payment for treasury shares
Dividends paid to owners of the parent
Non-controlling interest dividends paid
Net cash outflow from financing activities
Net Increase/(Decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
39
29(c)
29(d)
9
9
22
21
30
(1,750)
(8,511)
-
-
(4,496)
(660)
1,736
(311)
-
-
(13,126)
(9,616)
(1,520)
(1,371)
-
6,448
(14,971)
(18,206)
6,836
10,484
(438)
(124)
(5,528)
(7,612)
(320)
(541)
(11,253)
(10,764)
-
(549)
(10,703)
(9,106)
851
(3,284)
1,432
4,703
271
13
Cash and cash equivalents at the end of the financial year
29(a)
2,554
1,432
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Notes to the Financial Statements
for the year ended 31 December 2013
1 Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of the financial report are set out below. Unless
otherwise stated, the accounting policies adopted are consistent with those of the previous year. The financial
report includes the consolidated entity consisting of Reckon Limited and its subsidiaries. For the purposes of
preparing the consolidated financial statements, the company is a for-profit entity.
Basis of preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards
and Interpretations and the Corporations Act 2001, and complies with the other requirements of the law.
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards
(AIFRS). Compliance with AIFRS ensures that the consolidated financial statements and notes of Reckon
Limited, comply with International Financial Reporting Standards (IFRSs).
The financial statements were authorised for issue by the directors on 13 March 2014.
The financial report has been prepared in accordance with the historical cost convention, except for the
revaluation of certain non-current assets and financial instruments. Historical cost is generally based on the fair
values of the consideration given in exchange for assets. All amounts are presented in Australian dollars unless
otherwise noted. The parent entity has applied the relief available to it under ASIC Class Order 98/100, and
accordingly, amounts in the financial report have been rounded off to the nearest thousand dollars, except
where otherwise indicated.
Adoption of new and revised Accounting Standards
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards board (the AASB) that are relevant to their operations and effective for the current year.
New and revised Standards and amendments thereof and Interpretations effective for the current year that are
relevant to the Group include:
• AASB 2011-9 ‘Amendments to Australian Accounting Standards - Presentation of Items of Other
Comprehensive Income’
• AASB 10 ‘Consolidated Financial Statements’ and AASB 2011-7 ‘Amendments to Australian Accounting
Standards arising from the consolidation and Joint Arrangements standards’
• AASB 11 ‘Joint Arrangements’ and AASB 2011-7 ‘Amendments to Australian Accounting Standards arising
from the consolidation and Joint Arrangements standards’
• AASB 12 ‘Disclosure of Interests in Other Entities’ and AASB 2011-7 ‘Amendments to Australian Accounting
Standards arising from the consolidation and Joint Arrangements standards’
• AASB 127 ‘Separate Financial Statements’ (2011) and AASB 2011-7 ‘Amendments to Australian Accounting
Standards arising from the consolidation and Joint Arrangements standards’
• AASB 128 ‘Investments in Associates and Joint Ventures’ (2011) and AASB 2011-7 ‘Amendments to
Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’
• AASB 13 ‘Fair Value Measurement’ and AASB 2011-8 ‘Amendments to Australian Accounting Standards
arising from AASB 13’
• AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10 ‘Amendments to Australian Accounting Standards
arising from AASB 119 (2011)’
40
1 Summary of Significant Accounting Policies continued
• AASB 2012-2 ‘Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets
and Financial Liabilities’
• AASB 2012-5 ‘Amendments to Australian Accounting Standards arising from Annual Improvements 2009–
2011 Cycle’
• AASB 2012-10 ‘Amendments to Australian Accounting Standards – Transition Guidance and Other
Amendments’
Impact of Amendments to AASB 101 ‘Presentation of Financial Statements’:
The amendment (part of AASB 2011-9) ‘Amendments to Australian Accounting Standards - Presentation of
Items of Other Comprehensive Income’ introduce new terminology for the statement of comprehensive income
and income statement. Under the amendments to AASB 101, the statement of comprehensive income is
renamed as a statement of profit or loss and other comprehensive income and the income statement is
renamed as a statement of profit or loss. The amendments to AASB 101 retain the option to present profit or
loss and other comprehensive income in either a single statement or in two separate but consecutive
statements. However, the amendments to AASB 101 require items of other comprehensive income to be
grouped into two categories in the other comprehensive income section:
(a)
items that will not be reclassified subsequently to profit or loss, and
(b)
items that may be reclassified subsequently to profit or loss when specific conditions are met.
41
Income tax on items of other comprehensive income is required to be allocated on the same basis – the
amendments do not change the option to present items of other comprehensive income either before tax or net
of tax. The amendments have been applied retrospectively, and hence the presentation of items of other
comprehensive income has been modified to reflect the changes.
Other than the above mentioned presentation changes, the application of the amendments to AASB 101 does
not result in any impact on profit or loss, other comprehensive income and total comprehensive income.
Impact of the application of AASB 10
AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with
consolidated financial statements and Interpretation 112 ‘Consolidation – Special Purpose Entities’. AASB 10
changes the definition of control such that an investor controls an investee when a) it has power over an
investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee, and c) has the
ability to use its power to affect its returns.
All three of these criteria must be met for an investor to have control over an investee. Previously, control was
defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. Additional guidance has been included in AASB 10 to explain when an investor has control over an
investee. Some guidance included in AASB 10 that deals with whether or not an investor that owns less than 50
per cent of the voting rights in an investee has control over the investee is relevant to the Group.
The directors of the company made an assessment as the date of the initial application of AASB 10 as to
whether or not the Group has control of Linden House Software Limited in accordance with the new definition of
control and the related guidance set out in AASB 10. The directors concluded that, consistent with the
accounting treatment in the comparative year, it has had control over Linden House Software Limited since
acquisition on the basis of the existence of a substantive call option (refer note 1(w)).
Notes to the Financial Statements
(continued)
1 Summary of Significant Accounting Policies continued
Impact of the application of AASB 11
AASB 11 replaces AASB 131 ‘Interests in Joint Ventures’ and the guidance contained in a related interpretation,
Interpretation 113 ‘Jointly Controlled Entities – Non-Monetary Contributions by Venturers’, has been
incorporated in AASB 128 (as revised in 2011). AASB 11 deals with how a joint arrangement of which two or
more parties have joint control should be classified and accounted for.
Under AASB 11, there are only two types of joint arrangements – joint operations and joint ventures. The
classification of joint arrangements under AASB 11 is determined based on the rights and obligations of parties
to the joint arrangements by considering the structure, the legal form of the arrangements, the contractual terms
agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. A joint operation
is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have
rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint
arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the
net assets of the arrangement.
Previously, AASB 131 ‘Interests in Joint Ventures’ contemplated three types of joint arrangements – jointly
controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint
arrangements under AASB 131 was primarily determined based on the legal form of the arrangement (e.g. a
joint arrangement that was established through a separate entity was accounted for as a jointly controlled entity).
The initial and subsequent accounting of joint ventures and joint operations is different. Investments in joint
ventures are accounted for using the equity method (proportionate consolidation is no longer allowed).
Investments in joint operations are accounted for such that each joint operator recognises its assets (including
its share of any assets jointly held), its liabilities (including its share of any liabilities incurred jointly), its revenue
(including its share of revenue from the sale of the output by the joint operation) and its expenses (including its
share of any expense incurred jointly). Each joint operation accounts for the assets and, liabilities, as well as
revenue and expenses, relating to its interest in the joint operation in accordance with the applicable Standards.
The directors of the company reviewed and assessed the classification of the Group’s investments in joint
arrangements in accordance with the requirements of AASB 11. The directors concluded that the application of
the amendments has no material impact on the disclosures or on the amounts recognised in the consolidated
financial statements.
Impact of the application of AASB 12
AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint
arrangements, associates and/or unconsolidated structured entities. In general, the application of AASB 12 has
resulted in more extensive disclosures in the consolidated financial statements. However this did not result in
any changes to the financial statements.
Impact of the application of AASB 13
The Group has applied AASB 13 for the first time in the current year. AASB 13 establishes a single source of
guidance for fair value measurements and disclosures about fair value measurements. The scope of AASB 13 is
broad; the fair value measurement requirements of AASB 13 apply to both financial instrument items and
non-financial instrument items for which other AASBs require or permit fair value measurements and disclosures
about fair value measurements, except for share-based payment transactions that are within the scope of AASB
2 ‘Share-based Payment’, leasing transactions that are within the scope of AASB 117 ‘Leases’, and
measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the
purposes of measuring inventories or value in use for impairment assessment purposes).
42
1 Summary of Significant Accounting Policies continued
AASB 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction in the principal (or most advantageous) market at the measurement date under current
market conditions. Fair value under AASB 13 is an exit price regardless of whether that price is directly
observable or estimated using another valuation technique. Also, AASB 13 includes extensive disclosure
requirements.
AASB 13 requires prospective application from 1 January 2013. In addition, specific transitional provisions were
given to entities such that they need not apply the disclosure requirements set out in the Standard in
comparative information provided for periods before the initial application of the Standard. In accordance with
these transitional provisions, the Group has not made any new disclosures required by AASB 13 for the 2012
comparative period. The application of AASB 13 has not had any material impact on the amounts recognised in
the consolidated financial statements.
Impact of the application of AASB 119
In the current year, the Group has applied AASB 119 (as revised in 2011) ‘Employee Benefits’ and the related
consequential amendments for the first time.
AASB 119 (as revised in 2011) changes the accounting for defined benefit plans and termination benefits. The
most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The
amendments require the recognition of changes in defined benefit obligations and in the fair value of plan assets
when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of AASB
119 and accelerate the recognition of past service costs. All actuarial gains and losses are recognised
immediately through other comprehensive income in order for the net pension asset or liability recognised in the
consolidated statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the
interest cost and expected return on plan assets used in the previous version of AASB 119 are replaced with a
‘net interest’ amount under AASB 19 (as revised in 2011), which is calculated by applying the discount rate to
the net defined benefit liability or asset.
The amendments also changed the definition of short term employee benefits from ‘due to be settled within 12
months’ to a revised definition as those employee benefits that are ‘expected to be settled wholly within 12
months’. The new requirements may lead to annual leave being measured on a discounted basis. The directors
have assessed that the new requirements do not have a material effect on the consolidated financial statements.
The amendments have been applied retrospectively. As the Group does not have any defined benefit plans, the
application of the amendments has had no material impact on the disclosures or on the amounts recognised in
the consolidated financial statements.
Impact of the application of AASB 2012-2 ‘Amendments to Australian Accounting
Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities’
The Group has applied the amendments to AASB 7 “Disclosures – Offsetting Financial Assets and Financial
Liabilities’ for the first time in the current year. The amendments to AASB 7 require entities to disclose
information about rights of offset and related arrangements (such as collateral posting requirements) for financial
instruments under an enforceable master netting agreement or similar arrangement.
The amendments have been applied retrospectively. As the Group does not have any offsetting arrangements in
place, the application of the amendments has had no material impact on the disclosures or on the amounts
recognised in the consolidated financial statements.
43
Notes to the Financial Statements
(continued)
1 Summary of Significant Accounting Policies continued
Early adoption of Accounting Standards
In the prior year the directors elected under s.334(5) of the Corporations Act 2001 to apply Accounting Standard
AASB 9 ‘Financial Instruments’ for the 2012 financial year, even though the Standard is not required to be
applied until annual reporting periods beginning on or after 1 January 2015. Investments in equity instruments
are irrevocably classified as equity instruments revalued through other comprehensive income. They continue to
be valued at fair value with changes to value being recognised in asset revaluation reserve. Realised gains/
losses are not recycled to net profits as was previously required under AASB 139.
Significant Accounting Policies
(a) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the company and entities
(including special purpose entities) controlled by the company (its subsidiaries). Control is achieved when the
company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Income and expense of subsidiaries acquired or disposed of during the year are included in the consolidated
statement of comprehensive income from the effective date of acquisition and up to the effective date of
disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the
company and to the non-controlling interests even if this results in the non-controlling interests having a
deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control are
accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling
interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed to owners of the company.
(b) Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in
a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair
values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the
acquiree and the equity instruments issued by the Group in exchange for control of the acquiree.
Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable
assets acquired and the liabilities assumed are recognised at their fair value, except that:
• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are
recognised and measured in accordance with AASB 112 ‘Income Taxes’; and
• liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with AASB 2 ‘Share-based Payment’ at the
44
1 Summary of Significant Accounting Policies continued
acquisition date.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the
acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the
acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate
share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at
the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net
assets. The choice of measurement basis is made on a transaction-by-transaction basis.
Where the consideration transferred by the Group in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured at its
acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as
measurement period adjustments are adjusted retrospectively, with corresponding adjustments against
goodwill. Measurement period adjustments are adjustments that arise from additional information obtained
during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and
circumstances that existed at the acquisition date.
Where a business combination involves the issuance of a put option granted to the vendor in respect of an
equity interest not owned by the parent, the present value of the put exercise price is recognised as a
financial liability in the consolidated accounts of the parent entity. The recognition of this liability effectively
treats the option as if it has been exercised, constituting a transaction between owners as owners which is
recorded in equity. Any subsequent re-measurement is considered to be part of the equity transaction and
is recorded in equity via an “acquisition of non-controlling interest reserve.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the measurement period (see above), or
additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed as of the acquisition date that, if known, would have affected the amounts
recognised as of that date.
(c) Investments in Joint Ventures
An associate is an entity over which the Group has significant influence. 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.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control.
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated
financial statements using the equity method of accounting, except when the investment, or a portion
thereof, is classified as held for sale, in which case it is accounted for in accordance with AASB 5. Under the
equity method, an investment in an associate or a joint venture is initially recognised in the consolidated
statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or
45
Notes to the Financial Statements
(continued)
1 Summary of Significant Accounting Policies continued
loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of
an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes
any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint
venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only
to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of
the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the date on
which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate
or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the
identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the
carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable
assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit
or loss in the period in which the investment is acquired.
The requirements of AASB 139 are applied to determine whether it is necessary to recognise any impairment
loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire
carrying amount of the investment (including goodwill) is tested for impairment in accordance with AASB 136
Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair
value less costs to sell) with its carrying amount, Any impairment loss recognised forms part of the carrying
amount of the investment. Any reversal of that impairment loss is recognised in accordance with AASB 136
to the extent that the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date when the investment ceases to be an
associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an
interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures
the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in
accordance with AASB 9. The difference between the carrying amount of the associate or joint venture at the
date the equity method was discontinued, and the fair value of any retained interest and any proceeds from
disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on
disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised
in other comprehensive income in relation to that associate or joint venture on the same basis as would be
required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a
gain or loss previously recognised in other comprehensive income by that associate or joint venture would be
reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or
loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.
When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to
use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had
previously been recognised in other comprehensive income relating to that reduction in ownership interest if
that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.
When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting
from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial
statements only to the extent of interests in the associate or joint venture that are not related to the Group.
(d) Depreciation and Amortisation
Depreciation is provided on plant and equipment. Depreciation is calculated on a straight-line basis.
Leasehold improvements are amortised over the period of the lease or the estimated useful life, whichever is
the shorter, using the straight-line method. The following estimated useful lives are used in the calculation of
depreciation and amortisation:
46
1 Summary of Significant Accounting Policies continued
Plant and equipment
Leasehold improvements
3 - 5 years
3 - 7 years
(e) Trade Payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the
end of the financial year and which are unpaid. These amounts are unsecured and are usually paid within 30
days of the month of recognition.
(f) Contributed Equity
Transaction Costs on the Issue of Equity Instruments
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of
the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are
incurred directly in connection with the issue of those equity instruments and which would not have been
incurred had those instruments not been issued.
(g) Foreign Currency Translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (“the functional currency”). The consolidated
financial statements are presented in Australian dollars, which is Reckon Limited’s functional and
presentation currency.
47
Transactions and balances
All foreign currency transactions during the financial year have been brought to account in the functional
currency using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at
reporting date are translated at the exchange rate existing at that date. Exchange differences are brought to
account in the profit or loss in the period in which they arise.
Group companies
The results and financial position of all the Group entities (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency are
translated into the presentation currency of the consolidated entity as follows:
•
•
Assets and liabilities are translated at the closing rate at the date of the statement of financial
position;
Income and expenses are translated at average rates (unless this is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
•
All resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of monetary items forming part of the net
investment in foreign entities, and of borrowings and other currency instruments designated as hedges of
such investments, are taken directly to reserves. When a foreign operation is sold, a proportionate share of
such exchange differences are recognised in profit or loss as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity at the closing rate.
Notes to the Financial Statements
(continued)
1 Summary of Significant Accounting Policies continued
(h) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
•
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as
part of the cost of acquisition of an asset or as part of an item of expense; or
•
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables.
(i) Intangible assets
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition
of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units
(or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-
generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the
carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or
loss in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in
subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Intellectual Property
Intangible assets acquired in a business combination and recognised separately from goodwill are initially
recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost
less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
that are acquired separately.
Customer contracts are amortised on a straight line basis over their useful life to the Group of ten years.
Brand names are not amortised but are subject to annual impairment testing. The Group has committed to
continually use, invest in and promote acquired brands, therefore brands have been assessed to have an
indefinite life.
Research and development costs
Research expenditure is recognised as an expense when incurred.
An internally-generated intangible asset arising from development is recognised if, and only if, all of the
following have been demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
•
•
•
48
1 Summary of Significant Accounting Policies continued
•
•
•
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and
to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its
development
Development costs in respect of enhancements on existing suites of software applications are capitalised
and written off over a 3 to 4 year period. Development costs on technically and commercially feasible new
products are capitalised and written off on a straight line basis over a period of 3 to 4 years commencing at
the time of commercial release of the new product.
Development costs include cost of materials, direct labour and appropriate overheads.
At each balance date, a review of the carrying value of the capitalised development costs being carried
forward is undertaken to ensure the carrying value is recoverable from future revenue generated by the sale
of that software.
(j) Income Tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income
based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences between the tax bases of assets and liabilities, and their
carrying amounts in the financial statements, and to unused tax losses.
49
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply
when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or
substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is
made for certain temporary differences arising from the initial recognition of an asset or liability. No deferred
tax asset or liability is recognised in relation to those temporary differences if they arose in a transaction,
other than a business combination, that at the time of the transaction did not affect either accounting profit
or taxable profit or loss.
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. All
deferred tax liabilities are recognised.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised
directly in equity.
The company and its wholly-owned Australian resident entities have formed a tax-consolidated group and are
therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Reckon
Limited. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences
of the members of the tax-consolidated group are recognised in the separate financial statements of the
members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to
the carrying amounts in the separate financial statements of each entity and the tax values applying under tax
consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and
relevant tax credits of the members of the tax-consolidated group are recognised by the company (as head
entity in the tax-consolidated group). Due to the existence of a tax funding arrangement between the entities
in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each
member of the group in relation to the tax contribution amounts paid or payable between the parent entity and
the other members of the tax-consolidated group in accordance with the arrangement.
Notes to the Financial Statements
(continued)
1 Summary of Significant Accounting Policies continued
The tax sharing agreement entered into between members of the tax-consolidated group provides for the
determination of the allocation of income tax liabilities between the entities should the head entity default on
its tax payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax
sharing agreement is that each member’s liability for tax payable by the tax consolidated group is limited to
the amount payable to the head entity under the tax funding arrangement.
(k) Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are assigned to inventory on hand
on a weighted average cost basis.
(l) Leased Assets
A distinction is made between finance leases which effectively transfer from the lessor to the lessee
substantially all the risks and benefits incident to ownership of leased assets, and operating leases under
which the lessor effectively retains substantially all the risks and benefits.
Operating lease payments are recognised on a straight line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased
assets are consumed. Contingent rentals arising under operating leases are recognised as an expense in the
period in which they are incurred. Lease incentives are initially recognised as a liability and are amortised
over the term of the lease on a straight line basis.
(m) Employee Benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave,
long service leave, when it is probable that settlement will be required and they are capable of being
measured reliably.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using
the remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the
estimated future cash outflows to be made by the Group in respect of services provided by employees up to
reporting date.
The Group recognises a liability and an expense for the long-term incentive plan for selected executives
based on a formula that takes into consideration the ranking of total shareholder return measured against a
comparator group of companies.
Contributions are made by the Group to defined contribution employee superannuation funds and are
charged as expenses when incurred.
(n) Receivables
Trade receivables and other receivables are recorded at amortised cost, less impairment.
(o) Impairment of assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating
units for which a reasonable and consistent allocation basis can be identified.
50
1 Summary of Significant Accounting Policies continued
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit)
is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a revaluation increase.
(p) Revenue Recognition
Sale of Goods and Disposal of Assets
Revenue from the sale of goods and disposal of other assets is recognised when the consolidated entity has
passed control of the goods or other assets to the buyer, the fee is fixed or determinable and collectability is
probable.
Software licence fee revenue is recognised at the point of “go live” (i.e. when all users can use the system
on a fully functional basis).
Rendering of Services
Revenue from a contract to provide services is recognised by reference to the stage of completion of the
contract or on a time and materials basis depending upon the nature of the contract.
Support and maintenance revenue is recognised on a straight-line basis over the period of the contract.
In multiple element arrangements where goods and services are sold as a bundled product, the fair value of
the services component is recognised as revenue over the period during which the service is performed.
Interest and Other Revenue
Interest revenue is recognised on a time proportional basis taking into account the effective interest rates
applicable to the financial assets. Other revenue is recognised when the right to receive the revenue has
been established.
(q) Deferred Revenue
Revenue earned from maintenance and support services provided on sales of certain products by the
consolidated entity are deferred and then recognised in profit or loss over the contract period as the services
are performed, normally 12 months. Refer note 1(p) for further detail.
51
Notes to the Financial Statements
(continued)
1 Summary of Significant Accounting Policies continued
(r) Earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members of the
company by the weighted average number of ordinary shares outstanding during the financial year, adjusted
for bonus elements in ordinary shares issued during the year.
Diluted earnings per share adjusts the figures in the determination of basic earnings per share by taking into
account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of dilutive potential ordinary shares.
(s) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and bank
overdrafts.
(t) Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Financial assets are classified into the following specified categories: financial assets at amortised cost
(including loans and receivables), financial assets ‘at fair value through profit or loss’ (FVTPL), and financial
assets at ‘fair value through other comprehensive income’. The classification depends on the nature and
purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases
or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases
or sales are purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is
designated as at FVTPL. A financial asset is classified as held for trading if:
•
•
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or
•
it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial
recognition if such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement
recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or
interest earned on the financial asset and is included in the ‘other gains and losses’ line item in the statement
of comprehensive income/income statement.
Investments in equity instruments, which were previously classified as available for sale financial assets, are
from 1 January 2012 irrevocably classified as equity instruments revalued through other comprehensive
52
1 Summary of Significant Accounting Policies continued
income. Quoted shares held by the Group that are traded in an active market are classified as fair value
through other comprehensive income and are stated at fair value. Gains and losses arising from changes in
fair value are recognised in other comprehensive income and accumulated in the asset revaluation reserve.
They continue to be valued at fair value with changes to value being recognised in the asset revaluation
reserve (previously available for sale asset revaluation reserve). Realised gains/losses are not recycled to net
profits as was previously required under AASB 139.
A financial asset is measured at amortised cost if both the business model test and cash flow characteristics
test conditions are met i.e. the asset is held with in a business model whose objective is to hold assets in
order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Loans and receivables are measured at amortised cost using the effective interest method, less any
impairment. Interest income is recognised by applying the effective interest rate, except for short-term
receivables when the recognition of interest would be immaterial. The effective interest method is a method
of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including
all fees on points paid or received that form an integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected life of the debt instrument, or (where appropriate) a
shorter period, to the net carrying amount on initial recognition.
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is
designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising
on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates
any interest paid on the financial liability and is included in the in the statement of comprehensive income/
income statement.
Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair
value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using
the effective interest method, with interest expense recognised on an effective yield basis. The effective
interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability, or (where appropriate) a shorter
period, to the net carrying amount on initial recognition.
(u) Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events,
for which it is probable that an outflow of economic benefits will result and that the outflow can be reliably
measured.
(v) Fair Value estimation
The fair value of financial instruments and share based payments that are not traded in an active market is
determined using appropriate valuation techniques. The Group uses a variety of methods and assumptions
that are based on existing market conditions. The fair value of financial instruments traded on active markets
(quoted shares), are based on balance date bid prices.
The directors consider that the nominal value less estimated credit adjustments of trade receivables and
payables approximate their fair values.
53
Notes to the Financial Statements
(continued)
1 Summary of Significant Accounting Policies continued
(w) Significant accounting judgments, estimates and assumptions
Significant accounting judgments
In applying the Group’s accounting policies, management has made the following judgments which have the
most significant effect on the financial statements:
Capitalisation of development costs – the Group has adopted a policy of capitalising development costs only
for products for which an assessment is made that the product is technically feasible and will generate
definite economic benefits for the Group going forward. The capitalised costs are subsequently amortised
over the expected useful life of the product.
Revenue recognition - in multiple element arrangements where goods and services are sold as a bundled
product, the fair value of the services component is recognised as revenue over the period during which the
service is performed.
Consolidation of Linden House - Linden House has been consolidated on the basis of the existence of a
substantive call option, which is exercisable at acquisition date, and which enables Reckon Limited to
acquire the remaining interest in the company.
Significant accounting estimates and assumptions
The carrying amount of certain assets and liabilities are often determined based on estimates and
assumptions of future events. The key estimates and assumptions that have a significant risk of causing
material adjustment to the carrying amounts of certain assets and liabilities are:
Impairment of goodwill – the Group determines whether goodwill is impaired on an annual basis. This
requires an estimation of the recoverable amount of the cash-generating unit to which the goodwill is
allocated. The assumptions used in this estimation, and the effect if these assumptions change, are
disclosed in note 12.
Share based payments – the Group measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date on which they are granted. The fair value has
been determined using a model that adopts Monte Carlo simulation approach, and the assumptions related
to this can be found in note 20.
Product life and amortisation – the Group amortises capitalized development costs based on a straight line
basis over a period of 3-4 years commencing at the time of commercial release of the new product. This is
the assessed useful life.
Surplus lease space – The Group provides for surplus lease space based on an estimate of the income
expected to be generated taking into consideration market conditions relating to rental yields and vacancy
periods. Further details are set out in note 16.
Other financial liabilities – The Group has recognised as a liability the fair value of an option instrument arising
in connection with a business acquisition. Fair value determination is based on assumptions relating to future
profitability of the acquired business and market discount rates. The chosen valuation techniques and
assumptions used are believed to be appropriate in determining the fair value of financial instruments.
Further details are set out in note 15.
54
1 Summary of Significant Accounting Policies continued
(x) New accounting standards not yet effective
At the date of authorisation of the financial report, a number of Standards and Interpretations were in issue
but not yet effective.
Initial application of the following Standards will not affect any of the amounts recognised in the financial
report, but may change the disclosures presently made in relation to the financial report.
Standard/Interpretation
AASB 2011-4 ‘Amendments to Australian Accounting Standards to
Remove Individual Key Management Personnel Disclosure
Requirements’
AASB 2012-3 ‘Amendments to Australian Accounting Standards –
Disclosures – Offsetting Financial Assets and Financial Liabilities’
AASB 2013-3 ‘Amendments to AASB 136 - Recoverable Amount
Disclosures for Non-Financial Assets’
AASB 2013-4 ‘Amendments to Australian Accounting Standards
– Novation of Derivatives and Continuation of Hedge Accounting’
AASB 2013-5 ‘Amendments to Australian Accounting Standards –
‘Investment Entities’
Effective for
annual reporting
periods beginning
on or after
Expected to be
initially applied
in the financial
year ending
1 July 2013
31 December 2014
1 January 2014
31 December 2014
1 January 2014
31 December 2014
1 January 2014
31 December 2014
1 January 2014
31 December 2014
AASB 2013-7 ‘Amendments to AASB 1038 arising from AASB 10 in
relation to consolidation and interests of policyholders’
1 January 2014
31 December 2014
AASB 2013-8 ‘Amendments to Australian Accounting Standards –
Australian Implementation Guidance for Not-for-Profit Entities – Control
and Structured Entities [AASB 10, AASB 12 & AASB 1049]
1 January 2014
31 December 2014
Interpretation 21 ‘Levies’
1 January 2014
31 December 2014
55
Notes to the Financial Statements
(continued)
2 Profit for the year
Profit before income tax includes the following items of revenue and expense:
Revenue
Sales revenue
Sale of goods and rendering of services
Other Revenue
Dividend income
Interest revenue – Bank deposits
Expenses
Cost of Sales
Bad debt expense:
Other Entities
Finance costs expensed:
Bank loans and overdraft
Net transfers to/(from) provisions:
Sales returns and rebates
Employee benefits
Allowance for doubtful debts
Depreciation of non-current assets:
Property, plant and equipment
Amortisation of non-current assets:
Leasehold improvements
Intellectual property
Development costs
Foreign exchange losses/(gains)
Employee benefits expense:
Post employment benefits – defined contribution plans
Termination benefits
Share based payments:
Equity-settled share-based payments
Cash-settled share-based payments
Research and development costs written off
Operating lease rental expenses:
Minimum lease payments
56
Consolidated
2013
$’000
2012
$’000
98,093
96,606
–
32
32
100
59
159
98,125
96,765
23,194
22,431
80
48
705
311
41
94
167
(121)
(917)
23
1,119
996
481
752
8,377
(672)
2,424
223
241
164
405
–
527
1,018
7,282
69
2,283
25
248
56
304
987
2,077
1,906
3 Income Tax
(a) Income tax expense recognised in profit and loss
Current tax
Deferred tax
Under /(over) provided in prior years
(b) The prima facie income tax expense on pre-tax accounting profit reconciles to
the income tax expense/(income tax revenue) in the financial statements as follows:
Profit before income tax
Income tax expense calculated at 30% of profit
Tax Effect of:
Consolidated
2013
$’000
2012
$’000
4,813
1,172
(257)
5,470
930
(228)
5,728
6,172
23,889
23,939
7,167
7,182
Effect of higher tax rates on overseas income
(23)
25
Tax effect of non-deductible/non-taxable items:
Non-controlling interest component
Research and development claims
Utilisation of capital losses on profit on sale of investment in joint venture entity
Sundry items
Under/(over) provision in prior years
Income tax expense attributable to profit
The tax rate used for the 2013 and 2012 reconciliations above is the corporate tax rate of
30% payable by Australian corporate entities on taxable profits under Australian tax law.
(c) Future income tax benefits not brought to account as an asset: not probable of recovery
Tax losses:
Revenue
Capital
–
(600)
(424)
(135)
(81)
(595)
–
(131)
5,985
6,400
(257)
(228)
5,728
6,172
–
2,098
2,098
–
2,507
2,507
57
Notes to the Financial Statements
(continued)
4 Remuneration of Auditors
(a) Deloitte Touche Tohmatsu
During the year, the auditors of the parent entity earned the following remuneration:
Auditing and reviewing of financial reports
Tax compliance and consulting services
(b) Other Auditors
Auditing and reviewing of financial reports
Tax compliance services
5 Inventories
Finished goods:
Consolidated
2013
$
2012
$
218,268
211,624
78,958
75,126
297,226
286,750
51,092
53,126
38,702
25,136
89,794
78,262
387,020
365,012
Consolidated
2013
$’000
2012
$’000
At lower of cost and net realisable value
1,746
1,244
58
6 Trade and Other Receivables
Current:
Trade receivables (i)
Allowance for doubtful debts
Other receivables
Non current:
Trade receivables
Other receivables
(i) The ageing of past due receivables at year end is detailed as follows:
Past due 0-30 days
Past due 31-60 days
Past due 61+ days
Total
The movement in the allowance for doubtful accounts in respect of trade receivables is
detailed below:
Balance at beginning of the year
Amounts written off during the year
Increase/(reduction) in allowance recognised in the profit and loss
Balance at end of year
Consolidated
2013
$’000
2012
$’000
10,373
8,270
(517)
9,856
1,142
(430)
7,840
955
10,998
8,795
1,114
1,301
80
90
1,194
1,391
1,388
1,652
983
1,556
3,927
962
798
3,412
430
(80)
167
517
455
(48)
23
430
59
Notes to the Financial Statements
(continued)
7 Other Assets
Current:
Prepayments
Other
Non current:
Prepayments
Consolidated
2013
$’000
2012
$’000
1,197
1,094
2,291
1,104
1,591
2,695
599
–
8 Other Financial Assets
Security deposits
56
56
9 Investment in Joint Venture Entity
Investment in Connect2Field Holdings Pty Ltd
–
660
The investment in Connect2Field Holdings Pty Ltd was sold during the year for
$2.1million, resulting in a profit on sale of $1.4million. $0.3million of the
proceeds are held in escrow and will be released in October 2014. A current tax
expense of $0.4million arose on the gain realised in the current year, resulting in
a utilisation of $0.4million of unrecognised capital tax losses.
60
10 Property, Plant And Equipment
Leasehold Improvements
At cost
Less: Accumulated amortisation
Total leasehold improvements
Plant and equipment
At cost
Less: Accumulated depreciation
Total plant and equipment
Consolidated
2013
$’000
2012
$’000
3,539
3,388
(3,104)
(2,692)
435
696
7,973
6,816
(5,129)
(4,097)
2,844
3,279
2,719
3,415
61
Total
$’000
3,415
1,520
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant
and equipment at the beginning and end of the financial year are set
out below.
Leasehold
Improvements
$’000
Plant and
Equipment
$’000
Consolidated
Carrying amount at 1 January 2013
Additions
Depreciation/amortisation expense
Balance at 31 December 2013
Consolidated
Carrying amount at 1 January 2012
Additions
Acquisitions through business combinations (note 29)
Depreciation/amortisation expense
Balance at 31 December 2012
696
220
(481)
435
1,223
–
–
(527)
696
2,719
1,300
(1,175)
(1,656)
2,844
3,279
2,178
1,371
208
3,401
1,371
208
(1,038)
(1,565)
2,719
3,415
Notes to the Financial Statements
(continued)
11 Deferred Tax Assets
The balance comprises temporary differences attributable to:
Doubtful debts
Employee benefits
Other provisions
Details of unrecognised deferred tax assets can be found in note 3(c)
Reconciliation:
Opening balance at 1 January
Credited/(charged) to profit or loss
Balance at 31 December
12 Intangibles
Intellectual property – at cost (i)
Accumulated amortisation
Development costs – at cost
Accumulated amortisation
Goodwill – at cost
Consolidated
2013
$’000
2012
$’000
9
70
48
7
55
79
127
141
141
(14)
127
86
55
141
17,045
14,984
(10,757)
(10,005)
6,288
4,979
62,456
49,119
(39,706)
(31,174)
22,750
17,945
48,810
45,108
77,848
68,032
(i) The intellectual property carrying amount comprises of customer contracts of $3,748
thousand (2012: $4,417 thousand), brand names of $562 thousand (2012: $562 thousand)
and other intellectual property of $1,978 thousand (2012: nil).
62
12 Intangibles continued
Impairment test for goodwill
Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to the
business entities acquired, as follows:
Professional Division Australia
Professional Division New Zealand
nQueue Billback
Elite
Reckon Docs
Virtual Cabinet
Consolidated
2013
$’000
2012
$’000
10,361
10,361
1,742
2,330
2,536
1,742
1,965
2,536
11,125
11,125
20,716
17,379
48,810
45,108
The recoverable amount of a CGU is determined based on value-in-use calculations. Management has based the value in use
calculations on the most recently completed board approved budget for the forthcoming one year (2014) period. Subsequent
cash flows are projected using constant long term average growth rates of 3% per annum for all CGU’s apart from Virtual
Cabinet. Constant growth rates of 6% have been used for Virtual Cabinet to reflect the early stage of the evolution of this CGU,
which is expected to experience high growth over the next few years. An average post-tax discount rate of 11.0% (2012:
12.2%) (pre-tax rate: 15%) reflecting assessed risks associated with CGU’s has been applied to determine the present value of
future cash flow projections for all CGU’s apart from Virtual Cabinet, for which a discount rate of 11.5% has been applied. No
impairment write-offs have been recognized during the year (2012: nil). With the exception of Virtual Cabinet, should the
projected growth rates reduce to 0%, no material impairment would arise. In the case of Virtual Cabinet, for an impairment to
arise the following would need to occur: the 2014 budget not be met, and the projected growth rates reduced to below 5%.
63
Consolidated movements in intangibles
At 1 January 2013
Additions
Acquisitions through business combinations (note 29)
Effect of foreign currency exchange differences
Amortisation charge
At 31 December 2013
At 1 January 2012
Additions
Goodwill
$’000
Intellectual
Property
$’000
Develop-
ment
Costs
$’000
Total
$’000
45,108
4,979
17,945
68,032
–
–
3,702
311
13,182
13,493
1,750
–
–
–
1,750
3,702
–
(752)
(8,377)
(9,129)
48,810
6,288
22,750
77,848
27,775
3,609
14,582
45,966
–
–
9,658
9,658
Acquisitions through business combinations (note 29)
17,204
2,388
987
20,579
Effect of foreign currency exchange differences
129
–
–
129
Amortisation charge
At 31 December 2012
–
(1,018)
(7,282)
(8,300)
45,108
4,979
17,945
68,032
Notes to the Financial Statements
(continued)
13 Trade and Other Payables
Current:
Trade payables and sundry accruals (i)
(i) The credit period for the majority of goods purchased is 30 days. No interest is charged.
The Group has policies in place to ensure payables are paid within the credit periods.
14 Borrowings
Current:
Bank borrowings (i)
Hire purchase liabilities
Non-current
Bank borrowings (i)
Hire purchase liabilities
Consolidated
2013
$’000
2012
$’000
4,731
4,922
19
39
58
10,994
-
10,994
17,350
83
17,433
-
136
136
(i) The consolidated entity has bank facilities totalling $23.95 million as at 31 December 2013.
The facility comprises a variable rate bank overdraft facility, and a multi option facility (which
includes a bill facility and bank guarantee/transactional facility). The facility has been
renegotiated to commence on 31 December 2013, and covers a 3 year term expiring on 31
December 2016 in respect of the bill facility and expiring on 31 December 2014 for the
remaining facilities. The facility is secured over the Australian net assets of the Group ($44.8
million at 31 December 2013).
2013
The available, used and unused components of the facility at year end is as follows:
Available
Used
Unused
Bank
overdraft
$’000
Bill facility
$’000
Bank
guarantee
facility
$’000
1,000
20,000
19
981
17,350
2,650
2,950
1,834
1,116
The remaining contractual maturity for the facility (including both interest and
principal) is as follows:
0-12 months
2-5 years
19
–
Weighted average interest rate
6.7%
4.6%
64
–
1,834
17,350
–
–
15 Other financial liabilities
Linden House option liability (i)
(i) This balance represents the present value of future payments arising in connection with the
acquisition of the non-controlling interest in Linden House Software Limited (refer note 29(c)),
including future profit entitlements over the next 18 months and the redemption price of put
option instruments issued in respect of their remaining equity interest in the company. A
discount rate of 12.4% has been applied to future cash flow estimates to derive the
outstanding liability. Recognising the present value of the redemption price effectively treats the
option as if it has been exercised, which is an equity transaction. Any re-measurement of this
liability is therefore treated as an equity transaction processed through an “acquisition of
non-controlling interest reserve”. Within the context of AASB 7, this is classified as a level 3 fair
value measurement, being derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs). The gross amount
of $13.8 million (2012: $13.2million) is payable between one and three years after balance date.
16 Provisions
Current:
Sales returns, volume rebates
Employee benefits
Surplus premises
Commissions and sundry provisions
Non-current:
Employee benefits
Surplus premises
Consolidated
2013
$’000
2012
$’000
11,658
10,608
102
61
2,505
2,425
498
366
516
339
3,471
3,341
639
83
722
625
569
1,194
65
Notes to the Financial Statements
(continued)
16 Provisions continued
Movement in provisions
Movements in each class of provision during the financial year, excluding employee benefits,
are set out below:
2013 Consolidated
Carrying amount at the start of the year
Amounts paid
Additional provisions recognised/(utilised)
Carrying amount at the end of the year
Sales
returns,
volume
rebates
$’000
Commiss-
ions and
sundry
$’000
61
–
41
339
–
27
Total
$’000
1,485
(942)
506
102
366
1,049
Surplus
premises
$’000
1,085
(942)
438
581
The provision for surplus premises represents the present value of the future lease payments on the Pyrmont premises
that the Group is presently obligated to make under the operating lease contract, less revenue expected to be earned on
the lease, including estimated future sub-lease revenue, where applicable. The estimate may vary as a result of changes in
the utilisation of the leased premises and sub-lease arrangements where applicable. The lease expires in February 2015.
17 Working capital deficiency
The consolidated statement of financial position indicates an excess of current liabilities over current assets of
$1,068 thousand (December 2012: $14,390 thousand). This arises due to the cash management structure adopted
by management, whereby surplus funds are used to repay debt and make investments. Net cash inflows from
operations for the year were $26,525 thousand (2012: $24,028 thousand). Unused bank overdraft and bill facilities
at balance date total $3,631 thousand. Also, included in current liabilities is deferred revenue of $9,285 thousand
(December 2012: $8,674 thousand), settlement of which will involve substantially lower cash flows.
66
18 Deferred Tax Liabilities
The temporary differences are attributable to:
Doubtful debts
Employee benefits
Sales returns and volume rebates
Deferred revenue
Difference between book and tax value of non-current assets
Other provisions
Details of unrecognised deferred tax assets can be found in note 3(c)
Reconciliation:
Opening balance at 1 January
Acquisition of business (note 29)
Charged (credited) to profit or loss
Balance at 31 December
Consolidated
2013
$’000
2012
$’000
(96)
(102)
(1,284)
(1,109)
(32)
(605)
(18)
(598)
6,729
5,802
(605)
(1,026)
4,107
2,949
2,949
1,089
-
1,158
4,107
875
985
2,949
67
Notes to the Financial Statements
(continued)
19 Parent Entity Disclosures
Consolidated
2013
$’000
2012
$’000
3,001
2,756
85,828
76,551
88,829
79,307
24,278
18,384
15,387
14,138
39,665
32,522
16,818
16,878
(14,506)
(8,978)
–
484
(1,624)
–
503
(485)
47,992
38,867
49,164
46,785
20,288
15,752
–
247
20,288
15,999
–
–
Financial position
Assets
Current assets
Non-current assets
Liabilities
Current liabilities
Non-current liabilities
Equity
Share capital
Share buyback reserve
Available-for-sale revaluation reserve
Share based payments reserve
Acquisition of non-controlling interest reserve
Retained earnings
Financial performance
Profit for the year
Other comprehensive income
Total comprehensive income
Capital commitments for the acquisition of property, plant and equipment
Not longer than 1 year
Other
Reckon Limited assets have been used as security for the bank facilities set out in note 14.
The parent entity has no contingent liabilities.
68
20 Employee Benefits
The aggregate employee benefit liability recognised and included in the financial statements is
as follows:
Accrued annual leave:
Current (note 16)
Long term incentive:
Current (note 16)
Non-current (note 16)
Provision for long service leave:
Current (note 16)
Non-current (note 16)
Consolidated
2013
$’000
2012
$’000
1,296
1,272
185
80
1,024
559
196
91
957
534
3,144
3,050
69
Long-term incentive plan
The long-term incentive plan was approved at the Special General Meeting on 20 December 2005, and comprises
three possible methods of participation: an option plan, a performance share plan and a share appreciation plan. The
board has discretion to make offers to applicable employees to participate in any of these plans. Options granted
and/or performance shares awarded (all in respect of the company’s ordinary shares) and/or share appreciation
rights do not vest before three years after their grant date and are conditional on the participant remaining employed
at vesting date, subject to board discretion. Vesting is also conditional upon the company achieving defined
performance criteria. The performance criteria are based upon a total shareholder return (TSR) target. A TSR is the
return to shareholders over a prescribed period, being the growth in the company’s share price plus dividends or
returns of capital for that period. The company’s initial TSR target will be the company achieving a median or higher
ranking against the TSR position of individual companies within a ‘comparator Group’ of companies (i.e. a group of
comparable ASX listed companies pre-selected by the board) over the same period. The initial comparator group
was determined by independent advisers and was set out in the Chairman’s speech at the Special General Meeting
on 20 December 2005. The board reviews the suitability of the comparator group on an ongoing basis. Only 50% of
options or performance shares become exercisable or vest if the initial performance criterion is satisfied. The extent
to which the balance of options or performance shares become exercisable or vest will depend on the extent to
which the initial performance criterion is exceeded (i.e. the extent to which the company exceeds a median ranking
against the TSR position of the comparator group of companies).
From 2011 performance shares were also awarded with longer term vesting periods. The principal vesting condition
is that participants must remain employed for the term, in this case, to achieve 100% vesting employees must
remain in employment for 10 years from the date of initial offer.
The share appreciation rights plan represents an alternative remuneration element (to offering options or performance
shares) under which the board can invite relevant employees to apply for a right to receive a cash payment from the
company equal to the amount (if any) by which the market price of the company’s shares at the date of exercise of
the right exceeds the market price of the company’s shares at the date of grant of the right. The right may only be
exercised if performance criteria are met. The performance criteria are fixed by the board in the exercise of its
Notes to the Financial Statements
(continued)
20 Employee Benefits continued
discretion. At present these are the same as the TSR target set for the right to exercise options or for performance
shares to vest.
No options were issued during the year (2012: Nil).
549,419 (2012: 396,825) appreciation rights and 387,990 (2012: 277,940) performance shares, were issued during
the year. The fair value of these rights was 34.4 cents (2012: 44 cents) and the shares were $1.864 (2012: $1.785),
using a model that adopts the Monte Carlo simulation approach. The assumptions used in this model are: grant date
share price of $2.36; expected volatility of 21.5%; dividend yield of 3.4%; and a risk free rate of 2.9%. The expense
recognised in 2013 for appreciation rights/performance shares was $404,966 (2012: $304,092).
Set out below are summaries of performance shares and appreciation rights granted under the long-term incentive plan:
Performance Shares
Vesting
Shares
Shares lapsed
Grant Date
Date
Granted
during the year
Shares vested
during the year
Shares available at
the end of the year
2013
2012
2013
2012
2013
2012
Jan’10
Dec’12
214,190
–
7,568
–
155,271
Jan’11
Dec’13
156,704
23,981
23,981
101,689
7,053
Jan’12
Dec’14
150,440
1,453
54,033
2,904
Jan’13
Dec’15
91,740
4,222
–
Jan’11
Dec’17
112,500
10,000
16,250
Jan’12
Dec’18
127,500
10,000
16,250
Jan’13
Dec’19
296,250
20,000
–
–
–
–
–
–
–
–
–
–
–
–
–
125,670
92,050
96,407
87,518
–
86,250
96,250
101,250
111,250
276,250
–
206,925 additional shares have been acquired for future grants.
Appreciation Rights
Expiry
Grant Date
Date
Rights
Granted
Rights lapsed
during the year
Rights vested
during the year
Rights available at
the end of the year
2013
2012
2013
2012
2013
2012
Jan’10
Dec’12
357,873
Jan’11
Dec’13
282,258
Jan’12
Dec’14
396,825
Jan’13
Dec’15
549,419
–
–
–
–
–
–
–
–
–
357,873
282,258
–
–
–
–
–
–
–
–
282,258
396,825
396,825
549,419
–
Reckon Limited Employee Option Plans
The company has previously had two ownership-based remuneration schemes:
Executive share option plan
The executive share option plan has been terminated.
Executive share option plan No. 2
The Reckon Limited Executive Share Option Plan No. 2 was established on 19 July 2000. Under the provisions of
the plan, the directors may grant options over unissued shares in the company to executives and directors of the
70
20 Employee Benefits continued
company (or their associates) or subsidiaries of the company selected by the directors from time to time, subject to
the ASX Listing Rules and the Corporations Act 2001.
Options are granted for a five-year period and 50% of each new tranche becomes exercisable after each of the first
two anniversaries of the grant date. The entitlements are vested as soon as they are exercisable (i.e. they are not
conditional on future employment). Each option entitles the holder to one ordinary share.
Amounts receivable on exercise of any options are recognised as share capital. No options were exercised during
the year (2012: nil).
Short-term incentive plan
The short-term incentive component of remuneration is dependent on satisfaction of performance conditions. Each
annual budget fixes a pool representing the total potential amount in which the relevant employees can share if the
performance conditions are met. There are three weighted elements to the performance conditions, viz. a revenue
target, an EBITDA target, and an earnings per share target measured against the budgeted performance of the
group. The amounts payable include a portion effectively requiring the employee to remain employed for a further
one year before being paid.
71
Notes to the Financial Statements
(continued)
21 Issued Capital
2013
2012
No.
$’000
No.
$’000
Fully Paid Ordinary Share Capital
Balance at beginning of financial year
129,488,015
18,842 132,839,672
17,476
Transfer from share-based payments reserve for options
exercised during the year
Share buyback
Prior year share buyback transferred to reserves
(2,574,949)
–
–
–
(3,351,657)
–
–
1,366
Balance at end of financial year
126,913,066
18,842 129,488,015
18,842
Less Treasury shares
Balance at beginning of financial year
812,077
1,964
744,858
1,724
Shares purchased in current period
134,279
320
235,127
541
Shares lapsed
Lapsed shares utilised
Shares vested
–
8,480
–
–
(5,584)
–
(104,593)
(260)
(162,324)
Balance at end of financial year
850,243
2,024
812,077
–
–
(301)
1,964
Balance at end of financial year net of treasury shares
126,062,823
16,818 128,675,938
16,878
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Changes to the then Corporations Law abolished the authorised capital and par value concepts in relation to share
capital from 1 July 1998. Therefore the company does not have a limited amount of authorised capital and issued
shares do not have a par value.
During the year 2,574,949 (2012: 3,351,657) shares were bought back at an average price of $2.15 (2012: $2.27).
The shares bought back in the current year were cancelled immediately.
No options were exercised during the year.
72
22 Reserves
Foreign currency translation reserve
Balance at beginning of financial year
Translation of foreign operations
Balance at end of financial year
Asset revaluation reserve
Balance at beginning of financial year
Transfer to retained earnings
Fair value adjustment of financial assets
Balance at end of financial year
Share buyback reserve
Consolidated
2013
$’000
2012
$’000
(1,383)
(1,569)
3,883
186
2,500
(1,383)
–
–
–
–
(1,067)
820
247
–
–
73
Balance at beginning of financial year
(8,978)
Share buyback
Prior year share buyback
Balance at end of financial year
Acquisition of non-controlling interest reserve
Balance at beginning of financial year
Transfer from non-controlling interest
Increase in interest in nQueue Billback subsidiaries (note 29(d))
Fair value adjustment of Linden House option liability (note 15)
Balance at end of financial year
Share-based payments reserve
Balance at beginning of financial year
Share based payment expense
Treasury shares vested/lapsed
Balance at end of financial year
(5,528)
(7,612)
–
(1,366)
(14,506)
(8,978)
(4,981)
349
–
79
–
(4,496)
(1,487)
(564)
(6,119)
(4,981)
503
241
(260)
484
556
248
(301)
503
(17,641)
(14,839)
Notes to the Financial Statements
(continued)
22 Reserves continued
Nature and purpose of reserves
(a) Foreign currency translation reserve
Exchange differences arising on translation of the financial reports of foreign subsidiaries are taken to the foreign
currency translation reserve, as described in note 1(g).
(b) Asset revaluation reserve
Fair value adjustments of financial assets are taken to the asset revaluation reserve.
(c) Share buyback reserve
The value of shares bought back are allocated to this reserve.
(d) Share-based payments reserve
The share-based payments reserve is for the fair value of options granted and recognised to date but not yet
exercised, and treasury shares purchased and recognised to date which have not yet vested.
(e) Acquisition of non-controlling interest reserve
The acquisition of non-controlling interest reserve represents an equity account to record transactions between
equity holders.
23 Retained Earnings
Balance at beginning of financial year
Net profit
Transfer from the asset revaluation reserve
Dividends (note 30)
Balance at end of financial year
Consolidated
2013
$’000
2012
$’000
42,379
36,621
17,812
17,342
–
(820)
(11,253)
(10,764)
48,938
42,379
74
24 Earnings Per Share
Basic earnings per share
Diluted earnings per share
Consolidated
2013
cents
13.9
13.8
2012
cents
13.4
13.3
Weighted average number of ordinary shares used in the calculation of basic earnings
per share
127,924,992 129,533,443
Weighted average number of ordinary shares and potential ordinary shares (in relation
to employee performance shares) used in the calculation of diluted earnings per share
128,775,235 130,345,520
Earnings used in the calculation of basic and diluted earnings per share is $17,812 thousand (2012: $17,342 thousand)
25 Contingent Liabilities
There are no material contingent liabilities as at 31 December 2013 (2012: Nil).
26 Commitments For Expenditure
(a) Capital Expenditure Commitments
The consolidated entity has capital expenditure commitments of $nil as at 31 December 2013 (2012: $nil).
75
(b) Lease Commitments
Operating Leases
Within 1 year
Later than 1 year and not longer than 5 years
Later than 5 years
Consolidated
2013
$’000
2012
$’000
2,784
5,964
–
2,697
7,274
342
8,748
10,313
Operating leases relate to office and warehouse premises with lease terms of between 1 to 7 years. All operating
lease contracts contain market review clauses in the event that the consolidated entity exercises its option to renew.
The consolidated entity does not have an option to purchase the leased asset at the expiry of the lease period.
Notes to the Financial Statements
(continued)
27 Subsidiaries
Name of Entity
Country of Incorporation
Ownership Interest
2013
%
2012
%
Parent Entity
Reckon Limited
Subsidiaries
Reckon.com.au Pty Limited
Reckon Australia Pty Limited
Reckon Investment Centre Limited
Reckon Online Holdings Pty Limited
Reckon Limited Performance Share Plan Trust
Reckon New Zealand Pty Limited
Advanced Professional Solutions Pty Limited
Advanced Professional Solutions Limited
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Reckon Accountable Technology Limited
United Kingdom
Reckon Docs Pty Limited
Quickdocs.com.au Pty Limited
Reckon Billback Pty Limited
nQueue Billback Limited
Billback LLC
nQueue Billback LLC
Australia
Australia
Australia
United Kingdom
United States of America
United States of America
Linden House Software Limited
United Kingdom
Reckon Accounts Pte Limited
Reckon Sync Technology Pty Ltd *
Singapore
Australia
* Previously Business Driven Systems (Australia) Pty Ltd
All shares held are ordinary shares.
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
–
76
28 Related Party Disclosures
(a) Key Management Personnel Remuneration
Short term benefits
Post-employment benefits
Share based payments
Consolidated
2013
$
2012
$
3,248,103
3,653,731
162,326
220,492
330,813
275,672
3,741,242
4,149,895
The names of and positions held by the key management are set out in note 28(d). Further details of the
remuneration of key management are disclosed in the Directors’ Report.
(b) Other Transactions with Key Management Personnel
There were no transactions with directors and other key management personnel apart from those disclosed in this
note and in note 29(e).
(c) Other Related Party Transactions
Intuit Ventures Inc
77
Intuit Ventures Inc, a significant shareholder (11.7%) in Reckon Limited provides the rights for Reckon to market and
distribute Intuit software throughout Australia and New Zealand. In return for this, Intuit receives a royalty payment
based on sales made throughout the territory. These royalties amounted to $5,202,276 (2012: $5,322,372) which is
expensed in the month that the associated product was sold. The balance due at 31 December 2013 is $217,537
(2012: $196,835).
On 10 February 2014, Reckon’s licencing agreement with Intuit Inc was formally terminated. Announced on 22
March 2012, this was as a consequence of the gradual divergence of the respective online ambitions of Reckon
Limited and Intuit Inc.
Notes to the Financial Statements
(continued)
28 Related Party Disclosures continued
(d) Directors’ and Key Management Equity Holdings
Options and Shareholding 2013
20131
Office
Greg
Wilkinson
Deputy Chairman,
Non-Executive
Director
Clive
Rabie2
John
Thame
Myron
Zlotnick
Ian
Ferrier2
Chris
Hagglund
Pete
Sanders3
Sam
Allert
Richard
Hellers
CEO,
Group Executive
Director
Chairman,
Non-Executive
Director
General Counsel
& Co Secretary
Non-Executive
Director
Chief Financial
Officer
MD Business
Group
MD Accountants
Group
President & CEO
nQueue Billback
Division
Share
holding at
start of 2013
Share
holding at
end of 2013
Performance
shares at
start of 2013
Performance
shares vested
in 2013
Performance
shares issued
in 2013
Performance
shares held at
end of 2013
7,450,000
7,450,000
10,508,000
10,508,000
19,000
19,000
0
0
0
0
0
0
0
0
0
0
0
0
123,001
133,761
125,385
21,160
72,377
176,602
0
0
0
0
0
0
296,289
370,471
157,408
74,182
84,410
167,636
0
0
0
0
5,000
5,000
7,568
16,032
46,474
8,464
39,777
75,671
0
0
0
0
25,000
25,000
1 No options were issued in 2013.
2 Since 1 January 2014 Mr Rabie has purchased 250,000 shares and Mr Ferrier has purchased 100,000 shares.
Apart from this, at the date of the Directors Report the above shareholdings remain unchanged.
3 Mr Sanders commenced as MD Business Group effective from 1 January 2013.
78
28 Related Party Disclosures continued
Options and Shareholding 2012
Share
holding at
start of 2012
Share
holding at
end of 2012
Performance
shares at
start of 2012
Performance
shares vested
in 2012
Performance
shares issued
in 2012
Performance
shares held at
end of 2012
20121
Office
Greg
Wilkinson
Deputy Chairman,
Non-Executive
Director
7,450,000
7,450,000
CEO,
Executive Director
10,508,000
10,508,000
0
0
0
0
0
0
Clive
Rabie
Brian
Coventry3
John
Thame
Myron
Zlotnick
Ian
Ferrier
CEO,
Professional
Division
Chairman,
Non-Executive
Director
General Counsel
& Co Secretary
Non-Executive
Director
Chris
Hagglund
Chief Financial
Officer
Gavin
Dixon5
Sam
Allert4
CEO Business
Division
CEO, Professional
Division
Richard
Hellers
President & CEO
nQueue Billback
Division
50,000
12,573
30,648
12,573
23,394
19,000
19,000
0
0
0
95,974
123,001
105,625
27,027
46,787
125,385
0
0
0
0
0
0
255,073
296,289
140,398
41,216
58,226
157,408
79
290,284
264,724
81,917
39,514
37,039
0
11,429
7,568
30,648
7,568
23,394
46,474
0
0
0
0
0
0
0
0
0
0
1 No options were issued in 2012.
2 Shareholdings at the date of the previous years Directors’ Report remain unchanged.
3 Mr Coventry’s employment terminated on 31 December 2012 (41,469 performance shares lapsed).
4 Mr Allert commenced as CEO Professional Division effective from 1 October 2012 (previously MD APS Australia).
5 Mr Dixon’s employment terminated on 31 March 2013 (79,442 performance shares lapsed).
Notes to the Financial Statements
(continued)
29 Notes to the Statement of Cash Flows
(a) Reconciliation of Cash
For the purposes of the statement of cash flows, cash includes cash on hand and in banks
and investments in money market instruments, net of outstanding bank overdrafts. Cash at
the end of the financial year as shown in the statement of cash flows is reconciled to the
related items in the statement of financial position as follows:
Cash (i)
Bank overdraft
(i) Cash balance is predominantly in the form of short-term money market deposits, which
can be accessed at call.
(b) Reconciliation of Profit After Income Tax To Net Cash
Flows From Operating Activities
Profit after income tax
Depreciation and amortisation of non-current assets
Profit on sale of investment in joint venture entity
Non-cash employee benefits expense – share based payment
Increase/(decrease) in current tax liability/asset
Increase/(decrease) in deferred tax balances
Unrealised foreign currency translation amount
(Increase)/decrease in assets net of acquisitions:
Current receivables
Current inventories
Other current assets
Non-current receivables
Non-current other
Increase/(decrease) in liabilities net of acquisitions:
Current trade payables
Other current liabilities
Other non-current liabilities
Net cash inflow from operating activities
80
Consolidated
2013
$’000
2012
$’000
2,573
1,926
(19)
(494)
2,554
1,432
18,161
17,767
10,729
9,823
(1,414)
241
13
1,172
(90)
(1,865)
(502)
404
197
(599)
–
248
(1,246)
930
44
(400)
(63)
(932)
(614)
–
(191)
153
741
(1,229)
(472)
(453)
26,525
24,028
29 Notes to the Statement of Cash Flows continued
(c) Business acquired
Business Driven Systems
Effective from 1 October 2013, 100% of the ordinary shares of Business Driven Systems
(Australia) Pty Ltd was acquired for $1,750 thousand. The purchase price represented the IP
for a product known as SyncDirect, which allows the transfer of data from a multitude of
accounting systems (including cloud products) to enable accountants to seamlessly access
client data via their practice management solution.
Linden House
Cash consideration
Less net cash acquired
Fair value of option liability
Fair value of assets acquired:
Receivables
Intellectual property – customer contracts
Intellectual property – development of solution
Intellectual property – brand
Fixed assets
Payables
Hire purchase liabilities
Deferred tax liabilities
Deferred revenue
Goodwill
Consolidated
2013
$’000
2012
$’000
–
9,168
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(657)
8,511
10,262
18,773
1,665
1,826
987
562
208
(492)
(151)
(875)
(2,161)
1,569
17,204
18,773
81
On 3 July 2012 Reckon Limited acquired an initial 50% interest in Linden House Software Limited together with options to
take its total holding to 100%.
Notes to the Financial Statements
(continued)
29 Notes to the Statement of Cash Flows continued
(d) nQueue Billback Division minority interest acquired
Effective from 31 July 2012 Reckon Limited acquired the 26% remaining interest in the nQueue Billback Division in the USA
and the remaining 25% interest in nQueue Billback UK that it did not previously hold for cash consideration of $4,496
thousand.
(e) APS UK Division sold
Effective from 31 December 2012 the APS UK business has been sold to the previous managing director, Brian Coventry.
Reckon will receive an ongoing revenue stream from royalties on sales under a licensing agreement.
30 Dividends – ordinary shares
Final dividend for the year ended 31 December 2012 of 4.75 cents (2011: 4.5 cents) per
share franked to 90% paid on 1 March 2013
Interim dividend for the year ended 31 December 2013 of 4 cents per share franked to 90%
(2012: 3.75 cents) paid on 11 September 2013
Franking credits available for subsequent financial years based on a tax rate of 30%
(2012: 30%)
Refer to note 33 for details of dividends declared post year end.
Consolidated
2013
$’000
2012
$’000
6,111
5,945
5,142
4,819
11,253
10,764
699
1,697
31 Financial Instruments
(a) Significant Accounting Policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 1 to the financial statements.
(b) Financial Risk Management Objectives
The Board of Directors has overall responsibility for the establishment and oversight of the company and Group’s financial
management framework.
The Board of Directors oversees how Management monitors compliance with risk management policies and procedures
and reviews the adequacy of the risk management framework in relation to the risks. The main risk arising from the
company and Group’s financial instruments are currency risk, credit risk, equity price risk, liquidity risk and cash flow
interest rate risk.
(c) Interest Rate Risk
The Group is exposed to interest rate risk on the cash held in bank deposits and on bank borrowings. Cash deposits of
$2,573 thousand were held by the consolidated entity at the reporting date, attracting an average interest rate of 0.6%
(2012: 0.8%). Interest bearing borrowings by the consolidated entity at the reporting date were $17,369 thousand
(2012:$10,994 thousand). These variable rate borrowings during the year attracted an average interest rate of 6.7%
82
31 Financial Instruments continued
(2012: 7.50%) on overdraft facilities and 4.6% on bank bill facilities (2012: 5.1%). If interest rates had been 50 basis points
higher or lower (being the relevant volatility considered relevant by management) and all other variables were held constant,
the Group’s net profit would increase/decrease by $88 thousand (2012: $45 thousand).
The Board of Directors monitors these exposures and does not presently hedge against these risks.
The maturity profile for the consolidated entity’s cash and over draft ($2,554 thousand) that is exposed to interest rate risk is
less than one year, and interest bearing borrowings ($17,350 thousand) that are exposed to interest rate risk is 2 to 5 years.
(d) Credit Risk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has adopted the policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from
defaults.
The consolidated entity does not have any significant credit risk exposure to any single counterparty or any group of
counterparties having similar characteristics.
The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the
consolidated entity’s maximum exposure to credit risk without taking account of the value of any collateral or other security
obtained.
The average credit period on sale of goods is 45 days. Interest is generally not charged. The Group recognises an
allowance for doubtful debts comprising a specific component for expected irrecoverable amounts, and a general provision
calculated as a % of outstanding balances based upon the historical experience.
83
(e) Foreign Currency Risk
The consolidated entity and company undertakes certain transactions denominated in foreign currencies that are different
to the functional currencies of the entities undertaking the transactions, hence exposures to exchange rate fluctuations
arise. The Board of Directors monitors these exposures and does not presently hedge against this risk.
The carrying amount of the consolidated entity’s foreign currency denominated monetary assets and liabilities at the
reporting date that are denominated in a currency that is different to the functional currency of respective entities
undertaking the transactions is as follows:
Euro
Consolidated
Liabilities
Assets
2013
$’000
–
2012
$’000
–
2013
$’000
136
2012
$’000
60
At 31 December 2013, if the Euro weakened against the UK Pound by 10% (being the relevant volatility considered relevant
by Management), with all other variables held constant the net profit of the consolidated entity would increase by
$14 thousand (2012: $6 thousand). At 31 December 2013, if the New Zealand Dollar, US Dollar and UK Sterling weakened
against the Australian Dollar by 10% (being the relevant volatility considered relevant by Management), with all other
variables held constant the net profit of the consolidated entity would increase by $564 thousand (2012: $271 thousand).
This latter sensitivity relates to inter-group loan balances denominated in Australian Dollars, which are eliminated on
consolidation.
In Management’s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk as the
year-end exposure does not necessarily reflect the exposure during the course of the year. The consolidated entity includes
certain subsidiaries whose functional currencies are different to the consolidated entity presentation currency. The main
operating entities outside of Australia are based in New Zealand, United States of America and the United Kingdom. These
entities transact primarily in their functional currency and, aside from inter-group loan balances, do not have significant
Notes to the Financial Statements
(continued)
31 Financial Instruments continued
foreign currency exposures due to outstanding foreign currency denominated items. As stated in the consolidated entity’s
accounting policies per note 1, on consolidation the assets and liabilities of these entities are translated into Australian
Dollars at exchange rates prevailing at year end. The income and expenses of these entities is translated at the average
exchange rates for the year. Exchange differences arising are classified as equity and are transferred to a foreign exchange
translation reserve. The consolidated entity’s future reported profits could therefore be impacted by changes in rates of
exchange between the Australian Dollar and the New Zealand Dollar, and the Australian Dollar and the US Dollar and the
Australian Dollar and the UK Sterling.
(f) Liquidity
The Group manages liquidity risk by maintaining adequate cash reserves and banking facilities by continuously monitoring
forecast and actual cash flows.
(g) Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern. The capital
structure of the Group consists of cash, other financial assets, debt and equity attributable to equity holders of the parent.
The board reviews the capital structure on a regular basis. Based upon this review, the Group balances its overall capital
structure through borrowings, the payment of dividends, issues of shares, share buy-backs and returns of capital. This
strategy remains unchanged since the prior year.
(h) Fair Value
The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid
markets, is determined with reference to quoted market prices. The fair value of other financial assets and liabilities is
determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices
from observable market transactions. The carrying amount of financial assets and financial liabilities recorded in the financial
report approximates their respective fair values, determined in accordance with the accounting policies disclosed in note 1
to the financial statements.
32 Segment Information
Operating segments are identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its
performance.
(a) Business segment information
The consolidated entity is organised into four operating divisions:
Business Division
Professional Division
nQueue Billback Division
Virtual Cabinet Division
These divisions are the basis upon which the consolidated entity reports its financial information to the chief operating
decision maker, being the Board of Directors.
The principal activities of these divisions are as follows:
•
•
•
•
Business Division - development, distribution and support of personal financial and accounting software, as well as
related products and services to professional partners. Products sold in this division include Reckon Accounts,
QuickBooks, Quicken, Reckon Docs and Reckon Elite.
Professional Division - development, distribution and support of practice management, tax, client accounting and
related software under the APS brand.
nQueue Billback Division – distribution and support of cost recovery, cost management and related software.
Virtual Cabinet Division - development, distribution and support of document management and client portal products.
84
32 Segment Information continued
Segment revenues and results
Operating revenue
Business Division
Professional Division
nQueue Billback Division
Virtual Cabinet Division
Other revenue
Total revenue
2013
$’000
2012
$’000
57,912
58,280
23,964
25,095
10,655
10,855
5,562
2,376
98,093
96,606
32
159
98,125
96,765
2013
$’000
EBITDA
2013
$’000
D&A
2013
$’000
NPBT
2012
$’000
EBITDA
2012
$’000
D&A
2012
$’000
NPBT
Business Division
20,256
(2,662)
17,594
21,337
(2,478)
18,859
85
Professional Division
11,552
(5,345)
nQueue Billback Division
4,032
(1,906)
Virtual Cabinet Division
1,668
(816)
6,207
2,126
852
12,361
(5,347)
4,596
(1,698)
499
(301)
7,014
2,898
198
37,508
(10,729)
26,779
38,793
(9,824)
28,969
Central administration costs
Premises relocation costs
Acquisition costs
Profit on sale of investment in
joint venture entity
Other revenue
Finance costs
Profit before income tax
Income tax expense
Profit for the year
(3,193)
(438)
-
1,414
32
(705)
23,889
(5,728)
18,161
(4,213)
(492)
(173)
-
159
(311)
23,939
(6,172)
17,767
Notes to the Financial Statements
(continued)
32 Segment Information continued
The revenue reported above represents revenue generated from external customers.
Segment profit represents the profit earned by each segment without allocation of central administration costs, finance
costs and income tax expense, all of which are allocated to Corporate head office. This is the measure reported to the
chief operating decision maker for the purposes of resource allocation and assessing performance.
No single country outside of Australia contributed more than 10% of Group revenue for either 2013 or 2012. No single
customer contributed 10% or more of Group revenue for either 2013 or 2012.
EBITDA above means earnings before interest, depreciation and amortisation, D&A means depreciation and amortisation,
and NPBT means net profit before tax.
Segment assets and liabilities
Assets
Liabilities
2013
$’000
2012
$’000
2013
$’000
2012
$’000
Business Division
34,357
25,511
27,953
20,724
Professional Division
28,250
27,554
4,378
nQueue Billback Division
17,338
15,291
11,152
4,908
7,019
Additions to
non-current assets
2013
$’000
6,846
6,649
2,130
2012
$’000
3,713
5,015
1,566
Virtual Cabinet Division
27,403
23,341
15,750
14,628
1,138
21,522
Total of all segments
107,348
91,967
59,233
47,279
16,763
31,816
Eliminations
Consolidated
(6,637)
(3,342)
(6,637)
(3,342)
-
-
100,711
88,355
52,596
43,937
16,763
31,816
(b) Geographical information
Australia
Other countries (i)
(i) No single country outside of Australia is considered
to generate revenues which are material to the Group.
Revenues from
external customers
Non-current assets
2013
$’000
2012
$’000
2013
$’000
2012
$’000
76,931
77,223
44,805
38,826
21,162
19,383
38,298
34,869
98,093
96,606
83,103
73,695
86
32 Segment Information continued
(c) Segment revenues
Business and wealth management products and services
Accounting industry products and services
Legal industry products and services
33 Subsequent Events
Subsequent to the end of the financial year:
Share buy back
External sales
2013
$’000
2012
$’000
51,739
52,152
35,699
33,599
10,655
10,855
98,093
96,606
On 11 February 2014 the Board of Directors recommended to continue the on-market share buyback of not more than
10% of the shares in the company.
Dividend
The board has declared a dividend of 4.75 cents per share to shareholders on 11 February 2014. The dividend will be 90%
franked. The record date for the dividend is 21 February 2014. The aggregate amount of the proposed dividend expected
to be paid on 6 March 2014 out of retained profits at 31 December 2013, but not recognised as a liability at the end of the
year is $5,988 thousand. The impact on the franking account balance of unrecognised dividends is $2,310 thousand.
Bank facilities
Since year end the Group has increased its bank bill facility by $10 million. The maturity profile has not changed.
Intuit Inc
On 10 February 2014 Reckon’s relationship with Intuit Inc formally ended. Reckon is no longer required to pay a royalty to
Intuit Inc on sales of Reckon Accounts business and personal product ranges. Reckon continues to localise and develop
the source code for these products having been granted a 100 year royalty fee licence to the then latest version of the
source code.
87
34 Company information
Reckon Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office
and principal place of business is:
Level 12, 65 Berry Street
North Sydney
Sydney NSW 2060
A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of
operations and activities in the Directors’ Report, which is not part of this financial report.
The financial report was authorised for issue by the directors on 13 March 2014.
Additional Information as at 6 March 2014
(unaudited)
Twenty Largest Holders of Quoted Equity Securities
Ordinary Shareholder
RBC Investor Services Australia Pty Limited
Intuit Ventures Inc
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
G J Wilkinson
Aust Executor Trustees SA Ltd
Mr C Rabie & Mrs K R Rabie
DJZ Investments Pty Limited
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Ltd
Mr S J Rickwood
Mr C A Rabie
Rawform Pty Ltd
Mr P R Hayman
RBC Investor Services Australia Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
QIC Limited
Reckon Australia Pty Ltd
Number
Percentage
15,757,667
14,828,304
12,875,821
12,865,571
6,147,800
5,040,418
4,735,611
4,690,000
3,062,585
2,546,488
2,528,848
2,181,004
1,601,062
1,332,389
1,302,200
1,053,636
975,324
932,090
866,557
857,764
12.42
11.68
10.15
10.14
4.84
3.97
3.73
3.70
2.41
2.01
1.99
1.72
1.26
1.05
1.03
0.83
0.77
0.73
0.68
0.68
96,181,139
75.79
Number of Holders of Equity Securities
Ordinary Share Capital
126,913,066 fully paid ordinary shares are held by 4,139 individual shareholders as at 6 March 2014.
All issues ordinary shares carry one vote per share.
Shareholdings less than marketable parcels
The number of shareholdings held in less than marketable parcels is 115.
88
Distribution of Holders of Equity Securities
As at 6 March 2014
Number of Ordinary Shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Substantial Shareholders
As at 6 March 2014
(a) From Twenty Largest holders of Quoted Equity Securities
RBC Investor Services Australia Pty Limited
Intuit Ventures Inc
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Mr C Rabie
Mr G Wilkinson
(b) As disclosed to ASX
Perpetual Limited & Subsidiaries
Acorn Capital Limited
Number of
Shareholders
949
2,019
588
535
48
4,139
Ordinary
Shares
(Number)
Ordinary
Shares
(Percentage)
89
15,757,667
14,828,304
12,875,821
12,865,571
10,758,000
7,450,000
12.42
11.68
10.15
10.14
8.48
5.87
Ordinary
Shares
(Number)
Ordinary
Shares
(Percentage)
18,228,593
8,513,194
14.08
6.71
Additional Information as at 6 March 2014
(unaudited)
Principal Registered Office
Level 12, 65 Berry Street
North Sydney NSW 2060
Tel: (02) 9577 5000
www.reckon.com
Auditors
Deloitte Touche Tohmatsu
225 George Street
Sydney NSW 2000
Principal Administration Office
Level 12, 65 Berry Street
North Sydney NSW 2060
Tel: (02) 9577 5000
Stock Exchange Listings
Reckon Limited’s ordinary shares are listed on the Australian Securities Exchange Limited under the symbol ‘RKN’.
Company Secretary
Mr Myron Zlotnick
Annual General Meeting
The Annual General Meeting for Reckon Limited will be held on Wednesday 21 May 2014 at 10:00am at level 12, 65 Berry
Street, North Sydney, NSW. If you are unable to attend, you are invited to complete the Proxy Form included with your
Notice of Meeting. The completed Proxy Form must be received no later than 48 hours before the Annual General Meeting.
90
Important Information – Corporate Notices
Securityholders will be aware that legislative changes have had the effect of giving them options as to how they receive
statutory corporate notices and reports. In the interest of cost saving and the environment (every little bit helps), we
encourage you to opt in to receive all notices and reports electronically.
Please go to: www.computershare.com.au and follow the prompts to register your request to opt in to receive ALL
NOTICES AND REPORTS IN ELECTRONIC FORMAT.
To register to be notified by email when the Annual Report and other Announcements are available online:
• Visit the share registry at www.computershare.com
• Click on ‘”Investor Centre”
• Follow the prompts to update your “Communications Options”
• After you have updated your email address and selected the publications you wish to
receive, a confirmation email will be sent to you
Should you have any further enquiries, contact the Registry on 1300 855 080 or +61 3 9415 4000 (if outside Australia).
Alternatively, email your full name and address of the securityholder to shareholders@reckon.com to receive the Annual
Report, corporate and statutory notices electronically.
91