CORE Internet Council of
Registrars
Report of the Auditors
to the Plenary Meeting
Financial Statements
30 June 2000
CORE Internet Council of Registrars, Geneva
We have audited the accompanying balance sheet
of CORE Internet Council of Registrars ("CORE") as of
30 June 2000 and the related statements of income and cash flows for
the six-month period 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
30 June 2000, and of the results of its operations and its cash flows
for the period 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, statement of cash flows and expenses and notes to the financial
statements)
Balance Sheet at 30 June 31
December
2000 1999
Notes USD USD
Current assets
Accounts receivable 3 115,374 144,341
Other receivables 3,565 2,039
Prepaid registration fees to NSI 5,541,970 1,649,442
Cash and cash equivalents 2,896,452 1,352,000
Total assets 8,557,361 3,147,822
Current liabilities
Accounts payable and accruals 580,776 202,009
ISOC 4 119,934 119,934
Accrued prepayments by members 5 2,179,760 1,677,549
Deferred registration income 6 6,753,056 2,191,657
9,633,526 4,191,149
Accumulated deficit
Retained deficit (1,043,327) (754,766)
Excess of expenditure over income for the year (32,838) (288,561)
(1,076,165) (1,043,327)
Total
liabilities and accumulated deficit 8,557,361 3,147,822
See
accompanying Notes to the Financial Statements.
Statement of Income and Expenses
for the Period to 30
June 31 December
2000 1999
(6
months) (12 months)
Notes USD USD
Result of
registrations
Registration income 1,703,862 194,189
NSI - Registration fees (1,359,306) (133,652)
Gross result of registrations 344,556 60,537
OTHER INCOME
Initial membership fees 30,000 70,000
Interest received 36,235 13,141
Total other income 66,235 83,141
Total income 410,791 143,678
Statement of Income and Expenses
for the Period to 30
June 31 December
2000 1999
(6
months) (12 months)
Notes USD USD
Registrations expenses
ICANN domain fees 49,930 39,174
NSI license fees - 10,000
49,930 49,174
Administrative expenses
SRS
development - CSL GmbH 126,025 117,410
SRS development - ETSI 39,724 ‑
Secretariat 74,701 72,000
Accounting - 5,622
Legal fees 113,538 50,313
Administrative fees 6,000 16,060
SRS fees – Emergent 2,868 6,000
IAHC / POC / ISOC 390 6,473
Public relations 250 9,877
Lobbying - 17,500
Travel expenses 18,758 38,240
Meetings 1,190 ‑
Telephone 6,672 26,470
Postage 849 1,692
Internet 900 1,824
Bank charges 1,834 3,358
ICANN - 8,550
Other administrative expenses - 1,676
Total administrative expenses 393,699 383,065
Total expenses 443,629 432,239
Excess of expenses over income for
the period (32,838) (288,561)
See
accompanying Notes to the Financial Statements.
Statement of Cash Flows
for the Period ended 30
June 31 December
2000 1999
(6
months) (12 months)
Notes USD USD
Cash flow from operating activities
Cash receipts from registrations 6,265,261 2,385,846
Cash paid to NSI (5,057,234) (1,770,665)
Other registration payments (49,930) (49,174)
1,158,097 566,007
Cash received from prepaid
registrations 344,011 256,149
Cash received in membership fees 30,000 70,000
Cash received in monthly
contributions 187,167 554,559
Cash paid to suppliers (209,532) (367,092)
Net cash received from operating
activities 1,509,743 1,079,623
Cash flow from investing activities
Interest received 34,709 11,102
Increase in cash and cash
equivalents 1,544,452 1,090,725
Cash and cash equivalents at start of period 1,352,000 261,275
Cash and cash equivalents at end of period 2,896,452 1,352,000
Enclosure 4.1
Notes to the Financial Statements
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.
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
Period ended 30 June 2000
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 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, which can
be separately identified and quantified is recognised as an intangible asset
and amortised over a period of three years.
Other development costs are recognised in the statement of income and
expenditure as an expense is incurred.
f)
Income tax
Notes to the Financial Statements
Period ended 30 June 2000
3 Accounts receivable
2000 1999
USD USD
Member
contributions outstanding 447,274 470,941
Provision
for uncollected contributions (331,900) (326,600)
115,374 144,341
Accounts receivable are member contributions
outstanding from members. The member contributions are recognized by
accrual. 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
Period ended 30 June 2000
5
Accrued
prepayments
Monthly contributions
2000 1999
USD USD
Deferred member
contributions 1,579,600 1,421,400
Registration
payments 600,160 256,149
2,179,760 1,677,549
Deferred member contributions
Contributions Provision Net
USD USD USD
Balance as at 1 January 2000 1,748,000 (326,600) 1,421,400
Member contributions during the
period 163,500 ‑ 163,500
Increase in provision for
uncollected
contributions ‑ (5,300) (5,300)
Balance as at 30 June 2000 1,911,500 (331,900) 1,579,600
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 account 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
period is held to pay for similar registrations in the future.
Notes to the Financial Statements
Period ended 30 June 2000
6 Deferred registration income
CORE receives a fee for each
registration. The registration is for
either a one-year or 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
30 June 2000 was as follows :
Registration NSI Net
Income Fees
USD USD USD
Balance at 1 January 2000 2,191,657 (1,649,442) 542,215
Cash received or (paid / accrued) during the period 6,265,261 (5,251,834) 1,013,427
Recognised as (income) or expense in the period (1,703,862) 1,359,306 (344,556)
Deferred income /
(prepaid expense) at 30 June
2000 6,753,056 (5,541,970) 1,211,086
7 Contingencies
8 Related parties