|
BASIS OF ACCOUNTING
The financial statements as set out on pages 106 to 117 have been prepared on the historical cost basis except for certain financial instruments that are fairly valued by marking-to-market. Significant details of the Company’s accounting policies are set out below which are consistent with those applied in the previous year, except for the adoption of IFRS 2 Share-Based Payments and IAS 21 The Effects of Changes in Foreign Exchange on 1 March 2005. In accordance with the transition provisions, IFRS 2 has been applied to all grants after 7 November 2002 and that were unvested as of 1 March 2005.
Comparative figures in respect of 2005 have been restated to reflect these adjustments, which are the only two that have a material impact on the Company’s results.
The financial statements comply with the International Financial Reporting Standards (“IFRS”) of the International Accounting Standards Board, the JSE’s listing requirements and the Companies Act of South Africa.
FINANCIAL INSTRUMENTS
Measurement
Financial instruments are initially measured at cost, which includes transaction cost and approximates fair value. Subsequent to initial recognition these instruments are measured as set out below.
Trade receivables
Trade receivables are recognised initially at cost, which approximates fair value. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all the amounts due according to the original terms of the receivables.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
Borrowings
Borrowings are initially recorded at fair value, net of direct issue costs. Finance charges, including premiums payable on settlement or
redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.
PROVISIONS
Provisions are recognised when the Company has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Non-current provisions are adjusted to reflect the time value of money.
TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable income for the year. Taxable income differs from net income as reported in the income statement as it includes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax uses tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable income. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilised. The carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities are recognised for temporary taxable differences arising on investments in subsidiaries.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
REVENUE RECOGNITION
Interest income is accrued on a time basis, by reference to the principal amount outstanding and at the interest rate applicable.
Management fees are charged to related parties in terms of stipulated agreements and this revenue is recorded as and when it accrues.
PENSION SCHEME ARRANGEMENTS
The Company makes contributions to a defined contribution retirement plan, on behalf of employees. These contributions are charged against income as incurred.
The Company has no liability to these defined contribution retirement plans other than the payment of its share of the contribution in terms of the agreement with the funds and employees concerned.
SHARE-BASED PAYMENTS
The Company has applied the requirements of IFRS 2 Share-Based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 March 2005.
The Company issues equity-settled share-based incentives to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
Fair value is measured by use of a binomial model for the equity-settled share-based payments. The expected life used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural
considerations.
The Statement of Changes in Equity has been restated to incorporate the requirements of IFRS 2 Share-Based Payments.
FOREIGN CURRENCY TRANSACTIONS
The Company has also adopted the revised standard during the year under review, IAS 21 The Effects of Changes in Foreign Exchange Rates.
Initial recording:
A foreign currency transaction is recorded initially in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. For practical reasons, a rate that approximates the actual rate at the date of the transaction is often used (eg an average monthly rate). Functional currency is the currency of the primary economic environment in which the entity operates.
At each balance sheet date:
- Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
- Foreign currency monetary items are translated using the closing rate.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at initial recognition are recognised in profit or loss.
This has resulted in the restatement of the Statement of Changes in Equity to reflect the change whereby the foreign exchange on equityrelated monetary items previously reported in equity are now released to retained income and carried in profit and loss.
|
Print
