In accordance with the requirements of the JSE the group has adopted International Financial Reporting Standards from 1 April 2005. These standards are subject to ongoing review and interpretation by the International Accounting Standards Board.
In complying with IFRS, comparative information has been restated and the following accounting policy changes made:
1. IFRS 1: Transitional Arrangements (1 April 2004)
| 1.1 | Fair Value as Deemed Cost The group elected to apply the fair value of land and buildings as deemed cost. Accordingly, depreciation previously provided has been reversed. Deferred tax has been provided on the revalued amount at the income tax rate. |
| 1.2 | Employee Benefits Unrecognised actuarial gains and losses at the date of transition has been recognised and charged against retained income. |
| 1.3 | Cumulative Translation Differences Foreign currency adjustments arising on the translation of foreign operations (“FCTR”) will continue to be recognised directly in equity. The balance on the FCTR was reset to zero at transition. |
| 1.4 | Designation of Financial Instruments Gilts held by Monarch Insurance Company have been reclassified as available for sale (previously recognised as fair value through profit and loss). |
2. Income Statement Reclassifications
In terms of IAS 1, the following material reclassifications were made in the income statement with comparatives restated accordingly.
- Insurance premiums paid to reinsurers are deducted from insurance premiums written. This was previously included in cost of sales. In addition, reinsurance commissions received have been included in revenue.
- Settlement discounts have been reclassified to cost of sales with an appropriate adjustment to inventory valuation under IAS 2.
In accordance with IFRS 2, share-based payments are recognised as an expense in the income statement over the vesting period with a corresponding credit to equity.
4. IAS 17 – Property Leases
In terms of IAS 17 and SAICA Circular 7/2005 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.
5. IAS 16 – Property, Plant and Equipment
Depreciation will be provided on buildings at deemed cost
(refer 1.1). The residual value will be reassessed at each balance sheet date.
The effect of adopting IFRS is reflected below:
| 12 months ended | ||
| 31 March 2005 | ||
| IFRS Income Statement Impact | Rm | |
| Net profit as previously reported | 408.9 | |
| Employee benefits – IFRS 1 | 2.3 | |
| Designation of financial instruments – IFRS 1 | (5.6) | |
| Share-based payments – IFRS 2 | (10.8) | |
| Occupancy cost – IAS 17 | 0.8 | |
| Depreciation – IAS 16 | (0.1) | |
| Settlement discount in inventory – IAS 2 | (0.3) | |
| As reported under IFRS | 395.2 | |
| 31 March 2005 | 1 April 2004 | |
| IFRS Impact on Shareholders’ Equity | Rm | Rm |
| As previously reported | 2 059.4 | 1 314.2 |
| Fair value deemed as cost – IFRS 1 | 34.7 | 34.7 |
| Employee benefits – IFRS 1 | (25.2) | (27.5) |
| Occupancy cost – IAS 17 | (6.2) | (7.0) |
| Depreciation – IAS 16 | (0.1) | – |
| Settlement discount in inventory – IAS 2 | (3.0) | (2.7) |
| As reported under IFRS | 2 059.6 | 1 311.7 |