annual financial statements

transition to international financial reporting standards – ANNEXURE A

The Lewis Group adopted International Financial Reporting Standards (“IFRS”) in the current financial year. The date of transition to IFRS is 1 April 2004. The opening balance sheet as at 1 April 2004 and the comparative information for the 2005 financial year has been restated to comply with IFRS. Lewis has utilised certain transitional arrangements in IFRS 1 (“First-time adoption of International Financial Reporting Standards”). The following exemptions under IFRS 1 and adoption of IFRS standards applicable to the group have been made in order to restate the comparative information:
1.	Exemptions under IFRS 1:
	A.	Fair value as deemed cost Lewis elected to apply the fair value of land and buildings as deemed cost. Accordingly, depreciation previously provided has been reversed. Deferred taxation has been provided on the revalued amount at the income tax rate.
	B.	Retirement benefits Unrecognised actuarial gains and losses at the date of transition has been recognised and charged against retained income.
	C.	Cumulative translation differences Foreign currency adjustments arising on the translation of foreign operations will continue to be recognised directly in equity. The balance on the Foreign Currency Translation Reserve at the date of transition was reset to zero.
	D.	Designation of financial instruments Gilts held by Monarch Insurance Company have been designated as available-for-sale (previously recognised as fair value through profit and loss).
2.	Adoption of IFRS standards
	A.	IFRS 2 : Share-based payments Share-based payments are recognised as an expense in the income statement over the vesting period with a corresponding credit to equity (refer note 18.2).
	B.	IAS 17: Property leases Operating leases with fixed escalations have been recognised as an expense on a straight-line basis over the lease term and not on the basis of the cash outflows as in previous years (refer note 1.6) in accordance with SAICA Circular 7/2005.
	C.	IAS16: Property, plant and equipment Depreciation will be provided on buildings at deemed cost (refer 1A above). The residual value will be re-assessed at each balance sheet date (refer note 1.5).
	D.	IAS2: Inventory valuation Due to the reclassification of settlement discounts to cost of sales (refer 3 below), an appropriate adjustment to the inventory valuation was required.
3.	Reclassifications in the income statement The following reclassifications were made:
	1.	Insurance premiums paid to re-insurers are now deducted from insurance premiums written. This was previously included in cost of sales. In addition, reinsurance commissions received have been included in revenue.
	2.	Settlement discounts have been reclassified to cost of sales.
	3.	Additional expense categories included in other operating costs have been separately disclosed, namely administration and IT, marketing and transport and travel.
4.	Cash flow statement There is no change in the cash flows for 2005.
5.	Basis of transition to IFRS The following exemptions within IFRS 1 were not applied:
	exemption from restatement of comparatives for IAS 32 and IAS 39; insurance contracts; compound financial instruments; assets and liabilities of subsidiaries, associates and joint ventures; decommissioning liabilities included in the cost of property, plant and equipment; and leasing arrangements. In terms of IFRS1, the retrospective application of the following items were not allowed: derecognition of financial assets and liabilities; hedge accounting; estimates; and assets held for sale.

Restatement of Income Statement for the year ending 31 March 2005

	Reported			Adjustments to comply with IFRS*							Reported
	under										under
	SA GAAP	1A	1B	1C	1D	2A	2B	2C	2D	3	IFRS
Revenue	2 511.5									(0.3)	2 511.2
Cost of merchandise sales	(1 050.9)								(0.5)	166.4	(885.0)
Operating costs	(870.9)										(1 043.5)
Employment costs	(409.4)		3.4								(406.0)
Share-based payments	–					(10.8)					(10.8)
Administration and IT	–									(134.5)	(134.5)
Bad debts and impairment provision	(101.6)										(101.6)
Marketing	–									(79.6)	(79.6)
Occupancy costs	(89.2)						1.3				(87.9)
Transport and travel	–									(85.6)	(85.6)
Depreciation	(37.3)							0.4			(36.9)
Other operating costs	(233.4)							(0.8)		133.6	(100.6)

Operating profit	589.7										582.7
Investment income	45.9				(8.3)						37.6
Profit before finance costs	635.6										620.3
Net finance costs	(42.7)										(42.7)
Profit before taxation	592.9										577.6
Taxation	(184.0)		(1.1)		2.7		(0.5)	0.3	0.2		(182.4)
Net profit attributable to ordinary
shareholders	408.9										395.2
* Adjustments 1A – 3 refer to the IFRS exemptions and adoptions detailed above.

Restatement of Balance Sheet as at 31 March 2005

	Reported		Adjustments to comply with IFRS*							Reported
	under									under
	SA GAAP	1A	1B	1C	1D	2A	2B	2C	2D	IFRS

Assets
Non-current assets
Property, plant and equipment	112.2	47.4						(0.1)		159.5
Investments – insurance business**	171.6									171.6
Deferred taxation	46.8	(12.7)	10.6				2.7		1.3	48.7
	330.6									379.8
Current assets
Investments – insurance business**	334.2									334.2
Inventories	160.1								(4.3)	155.8
Trade and other receivables	1 750.6									1 750.6
Cash on hand and deposits	55.3									55.3
	2 300.2									2 295.9
Total assets	2 630.8									2 675.7
Equity and liabilities
Capital and reserves
Share capital and premium	676.9									676.9
Other reserves	54.7	(27.7)		2.2	12.3	10.8				52.3
Retained earnings	1 327.8	62.4	(25.2)	(2.2)	(12.3)	(10.8)	(6.2)	(0.1)	(3.0)	1 330.4
	2 059.4									2 059.6
Non-current liabilities
Interest-bearing borrowings	1.7									1.7
Deferred taxation	12.0									12.0
Retirement benefits	36.6		35.8							72.4
	50.3									86.1
Current liabilities
Trade and other payables	216.3						8.9			225.2
Taxation	125.6									125.6
Current-portion of interest-bearing borrowings	7.2									7.2
Overdrafts and short-term interest-bearing
borrowings	172.0									172.0
	521.1									530.0
Total equity and liabilities	2 630.8									2 675.7
* Adjustments 1A – 2D refer to the IFRS exemptions and adoptions detailed above. ** Gilts reclassified as non-current asset in terms of IFRS.

Restatement of Balance Sheet as at 1 April 2004

	Reported		Adjustments to comply with IFRS*							Reported
	under									under
	SA GAAP	1A	1B	1C	1D	2A	2B	2C	2D	IFRS
Assets
Non-current assets
Property, plant and equipment	115.4	47.6								163.0
Investments – insurance business**	354.2									354.2

	469.6									517.2

Current assets
Investments – insurance business**	88.7									88.7
Inventories	155.3								(3.8)	151.5
Trade and other receivables	1 751.7									1 751.7
Cash on hand and deposits	358.8									358.8
	2 354.5									2 350.7
Total assets	2 824.1									2 867.9
Equity and liabilities
Capital and reserves
Share capital and premium	300.9									300.9
Other reserves	32.1	(28.5)		2.2	6.6					12.4
Retained earnings	981.2	63.2	(27.5)	(2.2)	(6.6)	(7.0)			(2.7)	998.4
	1 314.2									1 311.7
Non-current liabilities
Interest-bearing borrowings	683.8									683.8
Deferred taxation	28.1	12.9	(11.7)			(3.0)			(1.1)	25.2
Retirement benefits	36.0		39.2							75.2
	747.9									784.2
Current liabilities
Trade and other payables	207.4					10.0				217.4
Taxation	82.4									82.4
Current-portion of interest-bearing
borrowings	472.2									472.2
	762.0									772.0
Total equity and liabilities	2 824.1									2 867.9
* Adjustments 1A – 2D refer to the IFRS exemptions and adoptions detailed above. ** Gilts reclassified as non-current asset in terms of IFRS.