Registration number: 04075033
Amdocs Systems Group Limited
Annual Report and Financial Statements
for the Year Ended 30 September 2019
Amdocs Systems Group Limited
Contents
Company Information
1
Strategic Report
2
Directors' Report
3 to 4
Statement of Directors' Responsibilities
5
Independent Auditor's Report
6 to 8
Statement of Comprehensive Income
9
Statement of Financial Position
10
Statement of Changes in Equity
11
Notes to the Financial Statements
12 to 38
Amdocs Systems Group Limited
Company Information
Directors
Neville Thomas Walker (Irish)
Sarit Galanos (Israeli)
Company secretary
Neville Thomas Walker (Irish)
Registered office
3rd Floor
Chiswick Park Estate
566 Chiswick High Road
London
W4 5YE
Solicitors
Gunnercooke
1 Cornhill
London
W4 5YE
Bankers
JP Morgan Chase Bank N.A.
125 London Wall
London
EC2Y 5AJ
Auditor
Ernst & Young
Chartered Accountants
Ernst & Young Building
Harcourt Centre
Harcourt Street
Dublin 2
Ireland
Page 1
Amdocs Systems Group Limited
Strategic Report for the Year Ended 30 September 2019
The directors present their strategic report for the year ended 30 September 2019.
Fair review of the business
The principal activity of the company is the sale and marketing of software products and related services to the communication industry.
The company's key financial and other performance indicators during the year were as follows:
Turnover decreased from $22,671,238 in 2018 to $20,711,105 in 2019. The company made a profit before tax of $7,080,674 compared to a profit of $6,788,633 in 2018. The company made an operating profit of $6,409,904 compared to an operating profit of $6,532,524 in 2018.
After crediting tax of $249,889 (2018: $1,643,386) a profit of $7,330,563 (2018: profit of $8,432,019) has been transferred to reserves. Shareholder's funds at 30 September 2019 amounted to $54,023,876 (2018: $46,716,291).
Both the level of business and the year end financial position were in line with expectations.
Principal risks and uncertainties
The principal risks and uncertainties facing the company are summarised below:
- the pace with which new communications products and services emerge;
- the nature and pace of technological change within the communications industry;
- the extent to which consolidation within the communications industry will continue;
- the extent to which communications services will continue to converge;
- the increasing need for communications service providers to reduce costs and retain high value customers in a highly competitive environment; and
- general global economic conditions, particularly market conditions in the communications industry and the ongoing COVID-19 Pandemic as referred to in the Directors' Report.
To the fullest possible extent we believe the company has taken sufficient measures to mitigate these risks and uncertainties and turn these into opportunities for future growth.
Approved by the Board on
21 September 2020
21 September 2020
and signed on its behalf by:
.........................................
Neville Thomas Walker (Irish)
Director
Page 2
Amdocs Systems Group Limited
Directors' Report for the Year Ended 30 September 2019
The directors present their report and the financial statements for the year ended 30 September 2019.
Directors of the company
The directors, who held office during the year and to the date of this report, were as follows:
Neville Thomas Walker (Irish)
Sarit Galanos (Israeli) (appointed 31 October 2018)
Janett Kristina Sarfert (German) (resigned 31 October 2018)
On 31 October 2018, Janett Kristina Sarfert (German) also resigned as Company Secretary.
Dividends
No dividend was paid to the parent company during the year (2018: $Nil).
Financial instruments
Foreign currency exchange risk
Profit/loss on ordinary activities and amounts due from fellow subsidiary undertakings are sensitive to movements in exchange rates between US Dollar and Sterling.
Interest rate risk
Our interest expense and income are sensitive to changes in interest rates, as are our cash reserves and our loans due to/from other group undertakings.
Political donations
There were no political donations made during the year (2018: $Nil).
Future developments
It is the intention of the directors to continue the current activities of the company.
Going concern
The response to the impact of COVID-19 is set out in the Events after the reporting date note below.
It is the Company's view, to the best of current knowledge, that COVID-19 will not have a material adverse impact on the company's ability to continue as a going concern. In addition, the Company has received a letter of support from Amdocs Limited which commits to making support available if it is required at a point in time covering the period of twelve months from the date of approval of the financial statements. After making enquiries, the directors have a reasonable expectation that the company will have sufficient resources to continue to trade satisfactorily and hence continue to adopt the going concern basis in preparing these financial statements.
Page 3
Amdocs Systems Group Limited
Directors' Report for the Year Ended 30 September 2019
Events after the reporting date
On 11 March 2020 the World Health Organization declared the coronavirus ("COVID-19") outbreak a “pandemic”.
This outbreak of COVID-19 has resulted in a widespread health crisis that has increased the level of volatility and uncertainty globally and has created significant economic disruption. The financial effect of the current crisis on the global economy and overall business activities cannot be estimated with reasonable certainty at this stage, due to the pace at which the outbreak expands and the high level of uncertainties arising from the inability to reliably predict its magnitude and outcome.
The company is actively monitoring the pandemic and managing its business to respond to the impact of COVID-19.
Disclosure of information to the auditor
Each director has taken steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the company's auditor is aware of that information. The directors confirm that there is no relevant information that they know of and of which they know the auditor is unaware.
Reappointment of auditor
In accordance with section 485 of the Companies Act 2006, a resolution for the re-appointment of Ernst & Young as auditor of the company is to be proposed at the forthcoming Annual General Meeting.
Approved by the Board on 21 September 2020 and signed on its behalf by:
.........................................
Neville Thomas Walker (Irish)
Director
Page 4
Amdocs Systems Group Limited
Statement of Directors' Responsibilities
The directors acknowledge their responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 'Reduced Disclosure Framework' ('FRS 101'). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
•
select suitable accounting policies and apply them consistently;
•
make judgements and accounting estimates that are reasonable and prudent;
•
state whether FRS 101 has been followed, subject to any material departures disclosed and explained in the financial statements; and
•
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Approved by the Board on 21 September 2020 and signed on its behalf by:
.........................................
Neville Thomas Walker (Irish)
Director
Page 5
Amdocs Systems Group Limited
Independent Auditor's Report to the Members of Amdocs Systems Group Limited
Opinion
We have audited the financial statements of Amdocs Systems Group Limited (the 'company') for the year ended 30 September 2019, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, and the related notes to including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 101 'Reduced Disclosure Framework' (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
•
give a true and fair view of the state of the company's affairs as at 30 September 2019 and of its profit for the year then ended;
•
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
•
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report below. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
•
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Page 6
Amdocs Systems Group Limited
Independent Auditor's Report to the Members of Amdocs Systems Group Limited
Other information
The other information comprises the information included in the annual report set out on pages __ to __, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
•
the Strategic Report and Directors' Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept; or
•
the financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors' remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors' Responsibilities set out on page 5, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Page 7
Amdocs Systems Group Limited
Independent Auditor's Report to the Members of Amdocs Systems Group Limited
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
......................................
Dermot Quinn (Senior Statutory Auditor)
For and on behalf of Ernst & Young, Statutory Auditor
Ernst & Young Building
Harcourt Centre
Harcourt Street
Dublin 2
Ireland
28 September 2020
Page 8
Amdocs Systems Group Limited
Statement of Comprehensive Income for the Year Ended 30 September 2019
2019
2018
Note
$
$
Turnover
3
20,711,105
22,671,238
Cost of sales
(10,235,008)
(16,065,588)
Gross profit
10,476,097
6,605,650
Administrative expenses
(4,066,193)
(73,126)
Operating profit
4
6,409,904
6,532,524
Other interest receivable and similar income
5
1,074,433
344,236
Interest payable and similar charges
6
(403,663)
(194,098)
Other gains and losses
7
-
(106,813)
Dividend income
13
-
212,784
670,770
256,109
Profit on ordinary activities before tax
7,080,674
6,788,633
Tax on profit on ordinary activities
10
249,889
1,643,386
Profit for the financial year and total comprehensive income
7,330,563
8,432,019
The above results were derived from continuing operations.
The notes on pages 12 to 38 form an integral part of these financial statements.
Page 9
Amdocs Systems Group Limited
(Registration number: 04075033)
Statement of Financial Position as at 30 September 2019
30 September
30 September
2019
2018
Note
$
$
Fixed assets
Tangible assets
11
445,461
574,001
Intangible assets
12
5,240
8,049
Investments
13
14,146,094
14,146,094
14,596,795
14,728,144
Current assets
Trade and other debtors
14
44,089,341
38,049,334
Cash at bank and in hand
3,148
3,465
Deferred tax assets
10
4,533,743
4,000,383
48,626,232
42,053,182
Creditors: Amounts falling due within one year
18
(9,197,027)
(9,659,122)
Net current assets
39,429,205
32,394,060
Total assets less current liabilities
54,026,000
47,122,204
Creditors: Amounts falling due after more than one year
19
-
(210,235)
Provisions for liabilities
20
(2,124)
(195,678)
Net assets
54,023,876
46,716,291
Capital and reserves
Called up share capital
15
7,924
7,924
Share premium reserve
42,405,482
42,405,482
Profit and loss account
11,610,470
4,302,885
Shareholder's funds
54,023,876
46,716,291
Approved by the Board on
21 September 2020
21 September 2020
and signed on its behalf by:
.........................................
Neville Thomas Walker (Irish)
Director
The notes on pages 12 to 38 form an integral part of these financial statements.
Page 10
Amdocs Systems Group Limited
Statement of Changes in Equity for the Year Ended 30 September 2019
Share premium reserve
Profit and loss account
Share capital
Other reserves
Total
$
$
$
$
$
At 1 October 2018
7,924
42,405,482
-
4,302,885
46,716,291
Profit for the year
-
-
-
7,330,563
7,330,563
Total comprehensive income
-
-
-
7,330,563
7,330,563
Share based payment transactions
-
-
132,562
-
132,562
Transfer to profit and loss reserve
-
-
(132,562)
132,562
-
Recharge from ultimate parent
-
-
-
(155,540)
(155,540)
At 30 September 2019
7,924
42,405,482
-
11,610,470
54,023,876
Share premium reserve
Profit and loss account
Share capital
Other reserves
Total
$
$
$
$
$
At 1 October 2017
7,924
42,405,482
-
(3,938,374)
38,475,032
Profit for the year
-
-
-
8,432,019
8,432,019
Total comprehensive income
-
-
-
8,432,019
8,432,019
Share based payment transactions
-
-
123,982
-
123,982
Transfer to profit and loss reserve
-
-
(123,982)
123,982
-
Recharge from ultimate parent
-
-
-
(314,742)
(314,742)
At 30 September 2018
7,924
42,405,482
-
4,302,885
46,716,291
The notes on pages 12 to 38 form an integral part of these financial statements.
Page 11
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework', issued by the Financial Reporting Council and the Companies Act 2006.
The financial statements have been prepared under the historical cost convention, except that as disclosed in the accounting policies, certain items are shown at fair value, and on the going concern basis.
The financial statements are denominated in US dollar ("$") which is the functional currency of the company.
Summary of disclosure exemptions
The company has taken advantage of the following disclosure exemptions under FRS 101:
(a) the requirements of IFRS 7 Financial Instruments: Disclosures;
(b) the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
(c) the requirements of paragraphs 10(d), 10(f), 39A-D, 40A-D and 134-136 of IAS 1 Presentation of Financial Statements;
(d) the requirements of IAS 7 Statement of Cash Flows;
(e) the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
(f) the requirements of paragraph 17 of IAS 24 Related Party Disclosures;
(g) the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member;
(h) the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of paragraph 73(e) of IAS 16 Property, Plant and Equipment and paragraph 118(e) of IAS 38 Intangible Assets;
(i) the second sentence of paragraph 110 and paragraphs 113(a), 114, 115, 118, 119(a) to (c), 120 to 126 and 129 of IFRS 15 Revenue from Contracts with Customers;
(j) the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets; and
(k) the requirements of paragraphs 45(b) and 46-52 of IFRS 2 Share based Payment: because the share based payments concerns the instruments of another group entity.
Page 12
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Going concern
The response to the impact of COVID-19 is set out in the Events after the reporting date note below.
It is the Company's view, to the best of current knowledge, that COVID-19 will not have a material adverse impact on the company's ability to continue as a going concern. In addition, the Company has received a letter of support from Amdocs Limited which commits to making support available if it is required at a point in time covering the period of twelve months from the date of approval of the financial statements. After making enquiries, the directors have a reasonable expectation that the company will have sufficient resources to continue to trade satisfactorily and hence continue to adopt the going concern basis in preparing these financial statements.
Changes in accounting policy
New standards, interpretations and amendments effective
The following have been applied for the first time from 1 October 2018 and have had an effect on the financial statements:
IFRS 15 Revenue from Contracts with Customers
In the current year, the company has applied IFRS 15 which is effective for annual periods beginning on or after 1 January 2018. The company has elected to apply the modified retrospective approach, recognising any effect of initially applying the standard as an adjustment to the opening balances of the 2018 balance sheet.
Therefore, the comparative information for the period ending 30 September 2018 was not restated and continues to be presented in accordance with IAS 11. As a result of the decision, the company has changed its accounting policies and updated its internal controls and processes relating to revenue recognition. The most noteworthy impact to the company relates to:
- the changes in recognising revenue from contract modifications and variations;
- the establishment of a consistent revenue recognition method for contracts with similar characteristics; and
- the definition of distinct performance obligations within certain ‘framework agreement' contracts.
Management performed a review of the existing accounting policies and all contracts with customers at the transition date. From this review it was determined that no measurement changes are required. Disclosures in relation to revenue from contracts with customers have been updated to meet the requirements of the new standard (see Note 2.)
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments classification and measurement; impairment and hedge accounting. The company applied IFRS 9 prospectively, with an initial application date of 1 January 2018. The company has not restated the comparative information, which continues to be reported under IAS 39.
The adoption of IFRS 9 did not result in any recognition or measurement adjustment.
None of the other standards, interpretations and amendments effective for the first time from 1 October 2018 have had a material effect on the financial statements.
Page 13
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Group financial statements
Section 400 of the Companies Act 2006 exempts an intermediate parent entity whose own parent entity is established under the law of an EEA state from the need to prepare consolidated financial statements. The company has availed itself of this exemption and consequently has prepared these financial statements on a stand alone basis.
Investment in subsidiary companies
Subsidiaries are all entities that the company controls. Investments in subsidiary companies are initially recognised at cost, being the fair value of the consideration given. After initial recognition investments are stated at cost less provision for impairment in accordance with IAS 36 "Impairment of assets". If the carrying amount exceeds the recoverable amount then the carrying value of the investment is written down to its recoverable amount.
Revenue recognition
The company recognises revenue under the five-step methodology required under IFRS 15, which requires the company to identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations identified, and recognise revenue when (or as) each performance obligation is satisfied.
The company's primary revenue categories, related performance obligations, and associated recognition patterns are as follows:
(i.) Revenue recognition for projects
The company usually sells its software licenses as part of an overall solution offered to a customer including significant customisation, modification, implementation and integration. Those services are deemed essential to the software. As a result, revenue related to these projects is recognised over time, usually based on a percentage that incurred labor effort to date bears to total projected labor effort. Incurred effort represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Revenue from customisation, implementation, modification and integration services is also recognised over the course of the projects. When total cost estimates for these types of arrangements exceed revenues in a fixed-price arrangement, the estimated losses are recognised immediately based upon the cost applicable to the delivering unit. Significant judgment is required when estimating total labor effort and progress to completion on these arrangements, as well as whether a loss is expected to be incurred on the project.
As a significant portion of the company's revenue is satisfied over time as work progresses, the annual operating results may be affected by the size and timing of the initiation of customer projects as well as the company's progress in completing such projects.
(ii.) Revenue recognition for subsequent license fee
Subsequent license fee revenue is recognised when the customer has access to the license and the right to use and benefit from the license. In cases when the conditions require delivery, then delivery must have occurred for purposes of revenue recognition. Subsequent license fee is based on a customer's subscriber level, transaction volume or other measurements when greater than the level specified in the contract for the initial license fee.
Page 14
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Revenue recognition (continued)
(iii.) Revenue recognition for term-based license and perpetual license
Revenue related to software solutions that do not require significant customisation, implementation and modification are recognised upon delivery.
(iv.) Revenue recognition for maintenance
Maintenance revenue is recognised ratably over the term of the maintenance agreement.
(v.) Revenue recognition for ongoing services
Revenue from ongoing support services is recognised over time as services are performed, using one method of measuring performance such as time elapsed, output produced, volume of data processed or subscriber count that provides the most faithful depiction of the transfer of services.
(vi.) Revenue recognition for managed services arrangement
Managed services arrangements include management of data center operations and IT infrastructure, application management and ongoing support, management of end-to-end business processes, and managed transformation that includes both a transformation project as well as taking over managed services responsibility. The revenue from managed services arrangement is recognised for each individual performance obligation according to its relevant revenue category, including but not limited to, revenue from the management of a customer's operations, revenue from projects and revenue from ongoing support services. Revenue from the management of a customer's operations pursuant to managed services arrangements, is recognised over time as services are performed, using one method of measuring performance such as time elapsed, output produced, volume of data processed or subscriber count that provides the most faithful depiction of the transfer of services, pursuant to the specific contract terms of the managed services arrangement. Typically, managed services arrangements are long term in duration and are not subject to significant seasonality.
(vii.) Revenue Recognition for third-party hardware and software
Third-party hardware sales are recognised upon delivery or installation, and revenue from third-party software sales is recognised upon delivery. Maintenance revenue is recognised ratably over the term of the maintenance agreement. Revenue from third-party hardware and software sales is recorded at gross amount for transactions in which the company controls the third-party hardware and software prior to fulfilling the performance obligation. In specific circumstances where the company does not meet the above criteria, revenue is recognised on a net basis. In certain arrangements, the company may earn revenue from other third-party services which is recorded at a gross amount as it controls the services before transferring them to the customer.
Page 15
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Revenue recognition (continued)
(viii.) Arrangements with multiple performance obligations
Many of the company's agreements include multiple performance obligations. The company allocates the transaction price for each contract to each performance obligation identified in the contract based on the relative stand alone selling price (SSP). The company determines SSP for the purposes of allocating the transaction price to each performance obligation by considering several external and internal factors including, but not limited to, transactions where the specific performance obligation sold separately, historical actual pricing practices and geographies in which the company offers its services in accordance with IFRS 15. The determination of SSP requires the exercise of judgement. If a specific performance obligation is sold for a broad range of amounts (that is, the selling price is highly variable) or if the company has not yet established a price for that good or service, and the good or service has not previously been sold on a stand alone basis (that is, the selling price is uncertain), the company applies the residual approach whereby all other performance obligations within a contract are first allocated a portion of the transaction price based upon their respective SSPs with any residual amount of transaction price allocated to the remaining specific performance obligation.
Billing terms and conditions generally vary by contract category. Amounts are typically billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones. In cases where timing of revenue recognition significantly differs from the timing of invoicing, the company is considering whether a significant financing component exists. The company elected to use the practical expedient in assessing the financing component in contracts where the time between cash collection and performance is less than one year.
Contract assets and contract liabilities
In case the services rendered by the company as of the reporting date exceed the payments made by the customer as of that date and the company does not have the unconditional right to charge the client for the services rendered, a contract asset is recognised. The company assesses a contract asset for impairment in accordance with IFRS 9 using the simplified approach permitted by IFRS 9 which requires expected lifetime losses to be recognised from initial recognition of the contract asset. An impairment of a contract asset is measured, presented and disclosed on the same basis as a financial asset that is within the scope of IFRS 9.
If the payments made by a customer exceed the services rendered under the relevant contract, a contract liability is recognised. The company recognises any unconditional rights to consideration separately from contract assets as a trade receivable because only the passage of time is required before the payment is due.
Contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan
with the company, and a failure to make contractual payments for a period of greater than 180 days past due.
Page 16
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Revenue recognition (continued)
Cost to obtain or fulfil contracts with customers
The company recognises the incremental costs incurred by the company to obtain contracts with customers and the costs incurred in fulfilling contracts with customers that are directly associated with the contract as an asset if those costs are expected to be recoverable, and record them in ''Other assets'' in the statement of financial position. Incremental costs of obtaining contracts are those costs that the company incurs to obtain a contract with a customer that would not have been incurred if the contract had not been obtained. The asset is amortised on a straight-line basis over the term of the specific contract it relates to, consistent with the pattern of recognition of the associated revenue and recognised in ''cost of sales'' in the statement of comprehensive income. Additionally the asset is assessed for impairment and any impairment loss is recognised in ''cost of sales'' in the statement of comprehensive income. The company recognises the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Foreign currency transactions and balances
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the rates prevailing on the reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the initial transaction dates.
Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.
Tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the company operates and generates taxable income.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements and on unused tax losses or tax credits in the company. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
The carrying amount of deferred tax assets are reviewed at each reporting date and a valuation allowance is set up against deferred tax assets so that the net carrying amount equals the highest amount that is more likely than not to be recovered based on current or future taxable profit.
Where a group undertaking transferred losses to the company, the amount paid in excess of the benefit received is recognised in administrative expenses in the statement of comprehensive income.
Page 17
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Tangible assets
Tangible assets are stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
The cost of tangible assets include directly attributable incremental costs incurred in their acquisition and installation.
The asset's residual values, useful lives methods are reviewed, and adjusted if appropriate, at each financial year end.
Expenditure for repairs and maintenance of tangible assets is charged to the statement of comprehensive income. Expenditure for significant improvements and renovations is capitalised if it is considered that it adds value to the tangible assets.
An item of tangible assets is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of comprehensive income in the year the item is derecognised.
Depreciation
Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives, as follows:
Asset class
Depreciation method and rate
Computer equipment
3.5 - 7 years
Office equipment
5 - 10 years
Shorter of the estimated useful life and the term of the lease
Leasehold improvements
Intangible assets
Intangible assets represent acquired computer software.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
Amortisation
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least once during the reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.
Amortisation method and rate
Asset class
4 years
Acquired computer software
Page 18
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Provisions
Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain the expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.
Leases
Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.
Impairment of non-financial assets
The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the company makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in statement of comprehensive income. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Page 19
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.
The difference between fair value of the amount received for share capital and the nominal value of the share capital issued is transferred to the share premium account.
Dividends
Dividend distribution to the company's shareholders is recognised as a liability in the company's financial statements in the period in which the dividends are approved by the company's shareholders.
Defined contribution pension obligation
A defined contribution plan is a pension plan under which fixed contributions are paid into a separate entity and has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
For defined contribution plans contributions are paid publicly or privately administered pension insurance plans on a mandatory or contractual basis. The contributions are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as an asset.
Page 20
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Share based payments
Employees of the company receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award.
Fair value is determined by using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares (market conditions) of the company's ultimate parent undertaking, Amdocs Limited.
The cost of equity-settled transactions are recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employee becomes fully entitled to the award ("vesting date"). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The charge or credit for a period, reflected in the statement of comprehensive income, represents the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the statement of comprehensive income for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the statement of comprehensive income.
Page 21
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(i) Financial assets
Initial recognition and measurement
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
- the assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
If either of the above two criteria is not met, the financial assets are classified and measured at fair value through the profit or loss (FVTPL).
If a financial asset meets the amortised cost criteria, the company may choose to designate the financial asset at FVTPL. Such an election is irrevocable and applicable only if the FVTPL classification significantly reduces a measurement or recognition inconsistency.
A financial asset is measured at FVTOCI only if it meets both of the following conditions and is not designated as at FVPTL:
- the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
- the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity investments that is not held for trading, the company may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis.
If an equity investment is designated as FVTOCI, all gains and losses, except for dividend income, are recognised in other comprehensive income and are not subsequently included in the statement of income.
Financial assets not otherwise classified above are classified and measured as FVTPL.
Page 22
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Financial instruments (continued)
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
• Financial assets at fair value through profit or loss
The company has not designated any financial assets at fair value through OCI nor profit or loss.
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the company. The company measures financial assets at amortised cost if both of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial 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.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The company's financial assets at amortised cost includes trade and other debtors.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the company's statement of financial position) when:
• The rights to receive cash flows from the asset have expired, or
• The company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through' arrangement; and either (a) the company has transferred substantially all the risks and rewards of the asset, or (b) the company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the company continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.
Page 23
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Financial instruments (continued)
Impairment of financial assets
The company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in three stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For credit-impaired financial instruments, the company recognises the lifetime ECL.
For trade receivables and contract assets, the company applies a simplified approach in calculating ECLs. Therefore, the company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
The company considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the company may also consider a financial asset to be in default when internal or external information indicates that the company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
(ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The company's financial liabilities may include trade and other payables and loans and borrowings including bank overdrafts.
Page 24
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
1
Accounting policies (continued)
Financial instruments (continued)
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
The company has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings
This is the category most relevant to the company. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
(iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Statement of Financial Position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
2
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements required management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the period. However the nature of estimation means the actual outcomes could differ from those estimates. The following are the company's key sources of estimation uncertainty:
Page 25
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
2
Critical accounting judgements and key sources of estimation uncertainty (continued)
Impairment of non-financial assets
The company assesses at each reporting date whether an asset may be impaired. If any such indication exists the company estimates the recoverable amount of the asset. Where there are indicators of impairment of individual assets, the company performs impairment tests based on fair value less cost to sell or a value in use calculation, The fair value less costs to sell calculation is based on available data from binding sales transactions in an arms' length
transaction on similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model.
Page 26
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
3
Turnover
Revenue was wholly derived from the company's principal activity. It comprises the value of goods and services sold, excluding VAT. The company has recognised the following amounts in relation to revenue in the Statement of Comprehensive Income. Revenue is derived from 39 customers, locally mainly in Europe. Revenue from customer was as follows:
2019
2018
$
$
Contracts with customers
20,711,105
22,671,238
Current assets and liabilities
30 September
30 September
2019
2018
$
$
Contract assets
255,368
640,056
Contract liabilities
(1,065,005)
(1,751,423)
Net contract liabilities
(809,637)
(1,111,367)
Revenue recognised during the year ended 30 September 2019, which was included in 'Contract liabilities' as of 1 October 2018 was $1,475,498. Amounts billed during the year ended 30 September 2019, which was included in 'Contract assets' as of 1 October 2018 was $268,174.
Billing terms and conditions generally vary by contract category. Amounts are typically billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones. In cases where timing of revenue recognition significantly differs from the timing of invoicing, the company considers whether a significant financing component exists. The company elected to use the practical expedient in assessing the financing component in contracts where the time between cash collection and performance is less than one year.
4
Operating profit
Arrived at after charging/(crediting)
2019
2018
$
$
Depreciation expense
180,117
107,468
Amortisation expense
3,016
2,540
Foreign exchange losses/(gains)
197,602
(345,618)
Operating lease expense - property
172,894
430,694
Operating lease expense - other
8,487
7,135
Loss on disposal of property, plant and equipment
-
45
Audit remuneration
56,193
76,229
Page 27
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
5
Other interest receivable and similar income
2019
2018
$
$
Interest income on bank deposits
10
-
Other finance income
1,463
-
Interest on loans to group undertakings
1,072,960
344,236
1,074,433
344,236
6
Interest payable and similar charges
2019
2018
$
$
Bank charges
575
1,901
Interest on loans from group undertakings
403,088
192,197
403,663
194,098
7
Other gains and losses
The analysis of the company's other gains and losses for the year is as follows:
2019
2018
$
$
Gain (loss) from disposals of investments
(106,813)
Refer to Note 13 'Investments' for further information.
Page 28
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
8
Staff costs
The aggregate payroll costs (including directors' remuneration) were as follows:
2019
2018
$
$
Wages and salaries
10,218,232
12,193,714
Social security costs
1,300,535
1,495,891
Pension costs, defined contribution scheme
578,941
642,034
12,097,708
14,331,639
Included in wages and salaries is a total expense of share-based payments of $132,562 (2018: $123,982) all of which arises from transactions accounted for as equity settled share-based payment transactions.
The average number of persons employed by the company (including directors) during the year, analysed by category was as follows:
2019
2018
No.
No.
Production
88
101
Administration and support
3
3
Sales, marketing and distribution
18
19
109
123
9
Directors' remuneration
The directors did not receive any remuneration or benefit for qualifying services in either the current year or the prior year.
Page 29
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
10
Income tax
Tax charged/(credited) in the statement of comprehensive income
2019
2018
$
$
Current taxation
Corporation tax
116,796
-
Corporation tax adjustment to prior period
166,675
63,074
Deferred taxation
Arising from origination and reversal of temporary differences
1,120,510
1,092,542
Arising from previously unrecognised tax loss
(1,653,870)
(2,799,002)
Deferred tax
(533,360)
(1,706,460)
Tax credit in the statement of comprehensive income
(249,889)
(1,643,386)
The tax on profit for the year is the same as the standard rate of corporation tax in the UK of 19% (2018 - the same as the standard rate of corporation tax in the UK of 19%).
The differences are reconciled below:
2019
2018
$
$
Profit before tax
7,080,674
6,788,633
Corporation tax at standard rate
1,345,328
1,289,840
Increase in current tax from adjustment for prior periods
166,675
63,074
Decrease from effect of different UK tax rates on some earnings
(131,823)
(128,534)
Increase/(decrease) from effect of expenses not deductible in determining taxable profit/(tax loss)
25,477
(22,074)
Decrease from effect of exercise employee share options
(1,676)
(46,690)
Deferred tax credit from unrecognised temporary difference from a prior period
(1,653,870)
(2,799,002)
Total tax credit
(249,889)
(1,643,386)
Page 30
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
10
Income tax (continued)
Future tax changes
The directors are not aware of any factors that will materially affect the rate of corporation tax in the foreseeable future.
The UK corporation tax rate reduced from 20% to 19% effective for the years commencing 1 April 2017, 2018 and 2019. This rate had been enacted on 18 November 2015 when the Finance (No. 2) Bill 2015 received Royal Assent. The UK corporation rate further reduces to 17% in respect of years commencing after 1 April 2020. This rate had been enacted on 15 September 2016 when the Finance Bill 2016 received Royal Assent. At Budget 2020, the government announced that the Corporation Tax main rate for the years starting 1 April 2020 and 2021 would remain at 19%. As at the date to which these financial statements are prepared, the 19% has not been enacted and as such this rate has not been applied in preparing these financial statements.
Deferred tax
Deferred tax movement during the year:
At
At 1 October 2018
Recognised in income
30 September 2019
$
$
$
Accelerated tax depreciation
990,588
209,555
1,200,143
Tax losses carry-forwards
2,788,027
326,208
3,114,235
Share-based payment
221,768
(2,403)
219,365
Net tax assets/(liabilities)
4,000,383
533,360
4,533,743
Deferred tax movement during the prior year:
At
At 1 October 2017
Recognised in income
30 September 2018
$
$
$
Accelerated tax depreciation
953,725
36,863
990,588
Tax losses carry-forwards
1,127,776
1,660,251
2,788,027
Share-based payment
212,422
9,346
221,768
Net tax assets/(liabilities)
2,293,923
1,706,460
4,000,383
There are $4,810,204 of unused tax losses (2018 - $6,359,665) for which no deferred tax asset is recognised in the statement of financial position.
Page 31
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
11
Tangible assets
Computer equipment
Leasehold improvements
Office equipment
Total
$
$
$
$
Cost or valuation
At 1 October 2018
5,065,855
558,953
1,238,069
6,862,877
Additions
37,437
14,140
51,577
Disposals
(35,749)
(35,749)
At 30 September 2019
5,067,543
558,953
1,252,209
6,878,705
Depreciation
At 1 October 2018
4,765,474
499,457
1,023,945
6,288,876
Charge for the year
94,766
8,746
76,605
180,117
Eliminated on disposal
(35,749)
(35,749)
At 30 September 2019
4,824,491
508,203
1,100,550
6,433,244
Carrying amount
At 30 September 2019
243,052
50,750
151,659
445,461
At 30 September 2018
300,381
59,496
214,124
574,001
12
Intangible assets
Acquired computer software
Total
$
$
Cost or valuation
At 1 October 2018
268,843
268,843
Additions
207
207
At 30 September 2019
269,050
269,050
Amortisation
At 1 October 2018
260,794
260,794
Amortisation charge
3,016
3,016
At 30 September 2019
263,810
263,810
Carrying amount
At 30 September 2019
5,240
5,240
Page 32
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
12
Intangible assets (continued)
Acquired computer software
Total
$
$
At 30 September 2018
8,049
8,049
13
Investments
2019
2018
Subsidiaries
$
$
Cost or valuation
At 1 October
51,470,478
51,577,291
Additions
-
-
Disposals
-
(106,813)
At 30 September
51,470,478
51,470,478
Provision
At 1 October
37,324,384
37,324,384
Provision charge
-
-
At 30 September
37,324,384
37,324,384
Net book value
14,146,094
At 30 September
14,146,094
Details of the principal investments held by the company at 30 September 2019 of which the company holds, directly or indirectly, at least 20% of the nominal value of any class of share capital are as follows:
Proportion of ownership interest and voting rights held
Country of incorporation and principal place of business
Holdings type
Name of subsidiary
(stock/shares)
Amdocs Systems Europe Limited
UK
Ordinary
100%
Amdocs Systems Limited
UK
Ordinary
100%
Cramer Systems International Limited
UK
Ordinary
100%
Cramer Limited
UK
Ordinary
100%
Amdocs Systems AB
Sweden
Ordinary
100%++
Page 33
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
13
Investments (continued)
++ held by a subsidiary undertaking
The subsidiary undertakings are engaged in providing business support systems and related services to the communication industry.
On 12 March 2018, the company disposed of its investment in Jacobs Rimmell LLC as the company was liquidated on the same date. Amdocs Systems Group Limited had a loss on disposal of $106,813 and received a dividend of $212,784.
14
Trade and other debtors
30 September
30 September
2019
2018
$
$
Trade debtors
850,227
1,464,199
Amounts owed by group undertakings
42,072,295
34,592,917
Accrued income
255,368
640,056
Prepayments
222,272
-
Other debtors
143,780
120,759
Income tax asset
545,399
1,231,403
44,089,341
38,049,334
Amounts owed by group undertakings are unsecured, bear interest at commercial rates and are repayable in full within one year of granting.
Page 34
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
15
Share capital
Allotted, called up and fully paid shares
30 September
30 September
2019
2018
No.
$
No.
$
A ordinary shares of £0.00010 each
2,357,000
441
2,357,000
441
B ordinary shares of £0.00010 each
1,500,000
280
1,500,000
280
C ordinary shares of £0.00010 each
2,000,000
374
2,000,000
374
D ordinary shares of £0.00010 each
2,000,000
374
2,000,000
374
H ordinary shares of £0.00010 each
4,875,823
911
4,875,823
911
Y ordinary shares of £0.00002 each
3,556,312
133
3,556,312
133
B participating preference shares of £0.00010 each
3,664,375
684
3,664,375
684
A participating preference shares of £0.00100 each
2,531,300
4,727
2,531,300
4,727
22,484,810
7,924
22,484,810
7,924
Page 35
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
16
Other reserves
The reserve records the contributions in respect of the share based payments made to the employees of the company.
17
Obligations under leases and hire purchase contracts
Operating leases
Commitments under non-cancellable operating leases are as follows:
30 September
30 September
2019
2018
$
$
Land and buildings
Within one year
436,881
436,881
In two to five years
-
438,077
436,881
874,958
The amount of non-cancellable operating lease payments recognised as an expense during the year was $Nil (2018 - $Nil)
18
Creditors due within one year
30 September
30 September
2019
2018
$
$
Trade payables
55,142
173,765
Accrued expenses
1,077,968
1,633,404
Amounts owed to group undertakings
6,329,087
5,650,086
Social security and other taxes
622,343
450,444
Other creditors
47,482
-
Deferred income
1,065,005
1,751,423
9,197,027
9,659,122
Amounts owed to group undertakings are unsecured, bear interest at commercial rates and are repayable in full within one year of granting.
Page 36
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
19
Creditors due after more than one year
30 September
30 September
2019
2018
$
$
Non-current accrued expenses
210,235
20
Other provisions
National insurance on stock options
Total
$
$
At 1 October 2018
195,678
195,678
Decrease in existing provisions
(193,554)
(193,554)
At 30 September 2019
2,124
2,124
21
Pension and other schemes
Defined contribution pension scheme
The company operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the company to the scheme and amounted to $578,941 (2018 - $642,034).
Contributions totalling $Nil (2018 - $Nil) were payable to the scheme at the end of the year and are included in creditors (Note 18).
22
Share-based payments
Amdocs Systems Group Limited, as a member of the Amdocs group of companies, has adopted the Amdocs Stock Option and Incentive Plan (the "Plan"), which provides for the grant of restricted stock awards and stock options to employees, officers, directors and consultants. The purpose of the Plan is to enable the company to attract and retain qualified personnel and to motivate such persons by providing them with equity participation in the company. Awards granted under the Plan generally vest over a period of four years and stock options have a term of ten years.
Amdocs Systems Group Limited, has availed of the exemptions under FRS 101.6-8 from the requirements of paragraphs 45(b) and 46-52 of IFRS 2 share based payments as the equivalent disclosures are included in the consolidated financial statements of the group in which the entity is consolidated.
Page 37
Amdocs Systems Group Limited
Notes to the Financial Statements for the Year Ended 30 September 2019
23
Related party transactions
In common with other companies which are members of a group of companies, the financial statements reflect the effect of such membership. The company has availed of the exemption provided in Financial Reporting Standard 101, Reduced Disclosure Framework, for wholly owned subsidiary undertakings within the group, from the requirement to give details of transactions with entities that are part of the group.
true
24
Parent and ultimate parent undertaking
The company's immediate parent is Amdocs Astrum Limited.
The ultimate parent is Amdocs Limited. The financial statements for Amdocs Limited are available from the company's website: www.amdocs.com.
25
Events after the reporting date
On 11 March 2020 the World Health Organization declared the coronavirus ("COVID-19") outbreak a “pandemic”.
This outbreak of COVID-19 has resulted in a widespread health crisis that has increased the level of volatility and uncertainty globally and has created significant economic disruption. The financial effect of the current crisis on the global economy and overall business activities cannot be estimated with reasonable certainty at this stage, due to the pace at which the outbreak expands and the high level of uncertainties arising from the inability to reliably predict its magnitude and outcome.
The company is actively monitoring the pandemic and managing its business to respond to the impact of COVID-19.
26
Board approval
These financial statements were authorised for issue by the Board on 21 September 2020.
Page 38
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