CORE Internet Council of
Registrars
Report of the Auditors
to the Plenary Meeting
Financial Statements
31 December 1999
CORE Internet Council of Registrars, Geneva
We have audited the accompanying balance sheet
of CORE Internet Council of Registrars ("CORE") as of 31 December
1999 and the related statements of income and cash flows for the year then
ended. These financial statements are
the responsibility of CORE's management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with
International Standards on Auditing.
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit
includes examining, on a test basis, evidence supporting amounts and
disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements give a
true and fair view of the financial position of CORE as at
31 December 1999, and of the results of its operations and its cash
flows for the year then ended, in accordance with International Accounting
Standards.
KPMG Fides Peat
Henry
B Ferguson David R
Curry
Geneva,
Financial Statements (balance sheet, statement
of income and expenses, statement of cash flows and notes to the financial
statements)
Balance Sheet as at 31 December 1999 1998
Notes USD USD
Current assets
Accounts receivable 3 144,341 89,500
Other receivables 2,039 -
Prepaid registration fees to NSI 6 1,649,442 -
Cash
and cash equivalents 1,352,000 261,275
Total assets 3,147,822 350,775
LIABILITIES AND ACCUMULATED DEFICIT
Current liabilities
Accounts payable 202,009 173,607
ISOC 4 119,934 119,934
Accrued prepayments by members 5 1,677,549 812,000
Deferred registration income 6 2,191,657 -
4,191,149 1,105,541
Accumulated deficit
Retained deficit (754,766) -
Excess of expenditure over income for the year (288,561) (754,766)
(1,043,327) (754,766)
Total
liabilities and accumulated deficit 3,147,822 350,775
See
accompanying Notes to the Financial Statements.
Statement of Income and Expenses
for the Year ended 31 December 1999 1998
(12
months) (15 months)
Notes USD USD
Result of
registrations
Registration income 194,189 -
NSI - Registration fees (133,652) -
Gross result of registrations 60,537 -
OTHER INCOME
Initial membership fees 70,000 901,000
Interest received 13,141 4,074
Miscellaneous income - 3,756
Total other income 83,141 908,830
Total income 143,678 908,830
Statement of Income and Expenses
for the Year ended 31 December 1999 1998
(12
months) (15 months)
Notes USD USD
EXPENSES
Registration expenses
ICANN domain fees 39,174 -
NSI license fees 10,000 -
49,174 -
Administrative expenses
SRS development - CSL GmbH 117,410 -
Secretariat 72,000 151,287
Accounting 5,622 32,481
Legal fees 50,313 68,429
Administrative fees 16,060 2,905
Acceptance review fees ‑ 90,000
SRS fees – Emergent 6,000 474,480
IAHC / POC / ISOC 6,473 260,820
Public relations 9,877 266,782
Lobbying 17,500 199,007
Other contracts ‑ 30,622
Travel expenses 38,240 30,553
Meetings ‑ 29,988
Telephone 26,470 19,763
Postage 1,692 1,669
Internet 1,824 2,487
Bank charges 3,358 2,323
ICANN 8,550 -
Other administrative expenses 1,676 -
Total administrative expenses 383,065 1,663,596
Total expenses 432,239 1,663,596
Excess of expenses over income for
the period (288,561) (754,766)
See
accompanying Notes to the Financial Statements.
Statement of Cash Flows
for the Year ended 31 December 1999 1998
(12
months) (15 months)
USD USD
Cash flow from operating activities
Cash receipts from registrations 2,385,846 -
Cash
paid to NSI (1,770,665) -
Other
registration payments (49,174) -
566,007 -
Cash
received from prepaid registrations 256,149 -
Cash
received in membership fees 70,000 901,000
Cash
received for monthly contributions 554,559 722,500
Cash
received from other income - 3,756
Cash
paid to suppliers (367,092) (1,370,055)
Net
cash received from operating activities 1,079,623 257,201
Cash flow from investing activities
Interest
received 11,102 4,074
Increase
in cash and cash equivalents 1,090,725 261,275
Cash
and cash equivalents at start of year 261,275 -
Cash and cash equivalents at end of year 1,352,000 261,275
Notes to the Financial Statements
Year ended 31 December 1999
1 Organisation and activity
CORE is a not-for-profit Swiss association
created in October 1997 based on the Generic Top-Level Domains Memorandum of
Understanding (TLD-MoU) signed on 1 May 1997, under the auspices of the
International Telecommunication Union.
The association has been chartered based on Article 67 of the Swiss Code
of Obligations. In order to become
members of CORE, applicants had to submit the Application to Qualify to sign
the CORE-MoU and pay the application fee, a process administered by the
Internet Society prior to CORE's existence.
The purpose of the Association is the
coordination of registrations in generic top-level domains. Originally, it was expected to act as a
registry for newly created Internet Top-Level domains by the first quarter of
1998. Preparations were undertaken
accordingly and involved investments in an automated shared registration system
(SRS). The launch of a separate US
government process concerning the launch of the new top-level domains created a
requirement for CORE to initiate lobbying and public relations activities in
the US in order to preserve the interests of CORE's members. During the entire first period (October 1997
to December 1998) of its existence, CORE was not in a position to facilitate
domain registrations for its members.
CORE has been funded over the period with the original
membership application fees (collected prior to CORE's existence by the
Internet Society) and member contributions credited for future registrations.
The latter were based on a compulsory assessment decided by the
membership. Also, during the year, CORE
commenced processing .com, .org and .net registrations for its members.
The accounting year is from January to December, with
the exception of the first year running from October 1997 through December
1998.
2 Significant accounting
policies
a)
Statement of compliance
The financial statements have been prepared in
accordance with the accounting standards issued by the International Accounting
Standards Committee ("IASC"), interpretations issued by the Standing
Interpretations Committee of the IASC and the requirements of Swiss law.
Notes to the Financial Statements
Year ended 31 December 1999
b)
Basis of preparation
The financial statements are presented in
United States dollars ("USD"), rounded to the nearest dollar.
The financial statements are prepared on the
historical cost basis.
The
following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the financial statements :
c)
Revenue recognition
Initial
membership fees are recognised upon receipt.
Members’
contributions are firstly recognised on the accrual basis and are then deferred
until such time that members use their contributions to register domain names
with CORE.
d)
Foreign currencies
Transactions
in foreign currencies are recorded using the rate of exchange approximating
that at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
translated using the rate of exchange ruling at the balance sheet date and
gains or losses on translation are included in the profit and loss account.
e)
Intangible assets
Expenditure on developing software is
recognised in the statement of income and expenditure as an expense is
incurred.
f)
Income taxes
Notes to the Financial Statements
Year ended 31 December 1999
3 Accounts receivable
1999 1998
USD USD
Member
contributions outstanding 470,941 297,500
Provision
for uncollected contributions (326,600) (208,000)
144,341 89,500
Accounts receivable are member contributions
outstanding from members. A reserve was
constituted for the majority of member contributions that had accrued but had
not been collected by year-end. As from April 31, 1999 members who had remained
delinquent in terms of member contributions saw their membership terminated by
decision of the 1999 Annual Plenary Meeting in Nice. From a contractual
standpoint, the termination of membership does not extinguish CORE's claim for
the period. A member whose membership was terminated can reapply for
membership, in which case any dues actually paid or outstanding as of the date
of termination are taken in to account. A number of members paid dues after the
year-end. The reserve for uncollected member contributions is in line with the
amount outstanding from members whose membership was terminated.
4 ISOC
Prior to the existence of CORE, during summer 1997,
the Internet Society (which had been the driving force behind the TLD-MoU)
performed the fiduciary duty of collecting the checks for future members'
application fees. By virtue of its charter documents, CORE is bound to
reimburse justified expenses of the Internet Ad Hoc Committee (IAHC) and its
successor organization, the Policy Oversight Committee (POC). ISOC paid the
recognized costs immediately before transferring the remainder to CORE.
However, in the course of 1998 ISOC accounted for additional expenses relating
to the IAHC and thereafter registered expenses related to telephone conferences
and limited travel related to the POC. In early 1998, when it appeared that the
expected launch of new gTLDs would be delayed in a significant manner, CORE and
ISOC agreed that CORE would pay the outstanding amount as soon as CORE was in a
position to register domain names in new gTLDs managed by CORE.
Notes to the Financial Statements
Year ended 31 December 1999
5 Accrued prepayments
1999 1998
USD USD
Deferred
member contributions 1,421,400 812,000
Registration
payments 256,149 -
1,677,149 812,000
Deferred member contributions
Contributions Provision Net
USD USD USD
Balance as at 1 January 1999 1,020,000 (208,000) 812,000
Member contributions during the year 728,000 ‑ 728,000
Increase in provision for
uncollected
contributions ‑ (118,600) (118,600)
Balance as at 31 December 1999 1,748,000 (326,600) 1,421,400
As member contributions have the status of a member
prepayment for future registrations in new gTLDs to be managed by CORE, they
are recognised as deferred income. In the event that CORE starts to register
domains as a registry in a new gTLD, CORE is to allow members to register
domains for the amount equivalent to their accumulated contributions.
The provision for uncollected contributions which was
made against accounts receivables (see note 3) is also made against the
deferred income.
Registration payments
Members prepay for .org, .com and .net
registrations. Any prepayment remaining
at the end of the year is held to pay for similar registrations in the future.
Notes to the Financial Statements
Year ended 31 December 1999
6 Deferred registration income and prepaid
NSI fees
CORE receives a fee for each
registration. The registration is for a
two-year period. Only the income from
the date of registration to the balance sheet date (on a pro rata basis) is
recognised in the statement of income and expenses. The remaining income is deferred in the balance sheet and is
recognised in the period to which the registration relates.
The same principle is
applied to the amount of registration fees which CORE pays to NSI.
Therefore the position as at
31 December 1999 was as follows :
Registration NSI Net
Income Fees
USD USD USD
Cash received or (paid / accrued) during the year 2,385,846 (1,783,094) 602,752
Recognised as (income) or expense in the year (194,189) 132,652 (60,537)
Deferred income /
(prepaid expense) at 31
December 1999 2,191,657 (1,649,442) 542,215
7 Contingencies
8 Related parties