NOTICE TO READER

We have compiled the balance sheet of Victoria FreeNet Association as at October 31, 1997 and the statements of revenue and expense and changes in cash for the year then ended, from information provided by management. We have not audited, reviewed or otherwise attempted to verify the accuracy or completeness of such information. Readers are cautioned that these statements may not be appropriate for their purposes.

 

Victoria, British Columbia	MacPherson Brown Flanagan & Fletcher
January 7, 1998	CHARTERED ACCOUNTANTS

STATEMENT OF REVENUE AND EXPENSE

FOR THE YEAR ENDED OCTOBER 31, 1997

STATEMENT OF CHANGES IN CASH

FOR THE YEAR ENDED OCTOBER 31, 1997

						1997	1996
							(Restated)
							(Note 5)
Operating activities
	Excess of expense over revenue for the year					(494)	(4,405)
	Add: Item not affecting cash
		Amortization				8,602	6,830
						8,108	2,425
		Cash provided (consumed) by changes in non-cash working capital items				(12,112)	13,612
						(4,004)	16,037
Investing activity
	Purchase of capital assets					(3,124)	(17,334)
Decrease in cash and term deposits during the year						(7,128)	(1,297)
Cash and term deposits, beginning of year						19,565	20,862
Cash and term deposits, end of year						12,437	19,565

NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997

1. Purpose
   The purpose of the Association is to provide computer-based telecommunication services at no charge to the community, and promote electronic data exchange locally and on an international basis. The Association is registered under the provisions of the Society Act of British Columbia and provides its services on a not-for-profit basis. On November 1, 1997 the Society received a charitable registration number from Revenue Canada. The Association does business under the name Victoria Telecommunity Network.

2. Summary of significant accounting policies

   (a) Capital assets
   Capital assets are recorded at cost, net of any Government funding. Amortization is provided for using the following rates and methods:

   Computer equipment: 30% declining balance

   Software licenses: 5 year straight-line

   One-half of the normal amortization is taken on assets acquired during a particular year.

   (b) Revenue recognition
   Revenue is recorded when earned. The Association follows the deferral method of accounting for restricted contributions, whereby revenue is recognized in the year in which the related expenses are incurred. Government grants related to the acquisition of equipment are applied to reduce the cost of the equipment as described in Note 2(a) above.

   (c) Donated services
   The Association receives the benefit of a significant amount of donated services, the value of which is not recorded in the accounts.

3. Income taxes
   The Association is exempt from income taxes under provisions of the Income Tax Act.

4. Capital assets

   						1997	1996
   				Cost	Accumulated Amortization	Net Carrying Amount	Net Carrying Amount
   			Computer equipment	$77,504	$57,827	$19,677	$24,986
   			Software licenses	850	849	1	170
   				$78,354	$58,676	$19,678	$25,156

5. Change of accounting policy

   The Association changed its method of revenue recognition to the deferral method as described in Note 2(b).

   The change has been accounted for retroactively where the figures for the comparative year have been changed to reflect this change. Specifically, the Government funded contracts revenue, members' equity, and excess of expense over revenue for the 1996 year have been decreased by $11,400 and a deferred revenue item has been increased by $11,400 to reflect this change. There is no deferred revenue for the 1997 fiscal year.