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| (I) |
CONSOLIDATION
AND EQUITY ACCOUNTING |
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Preference
shares and debentures which are compulsorily convertible, are
regarded as part of the permanent equity capital of a company
for the purposes of consolidation and equity accounting. |
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Consolidation
– subsidiary companies |
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All
companies in which the group, directly or indirectly, has an
interest of more than one half of the voting rights or otherwise
has the power to exercise control over the operations, are included
in the consolidated financial statements. |
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The
results of subsidiary companies acquired or disposed of during
the year are included in the consolidated income statement from
or to the date on which effective control was obtained or ceased. |
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Equity
accounting – associated companies |
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Companies
which are not subsidiaries, but in which a long-term interest
is held and over whose financial and operating policies a significant
influence can be exercised, are accounted for according to the
equity method as associated companies. Certain associated companies
have year-ends which differ from that of the Company. In such
circumstances the results of listed and certain unlisted companies
are accounted for from the latest published information and
management accounts as at year-end, respectively. The group's
share of retained income is transferred to non-distributable
reserves. The group's share of other movements in the reserves
of associated companies are accounted for as changes in consolidated
non-distributable reserves. |
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The
results of associated companies acquired or disposed of are
included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal,
as appropriate. |
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Goodwill
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On
the acquisition of an investment, fair values at the date of
acquisition are attributed to the identifiable separable assets
and liabilities acquired. |
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Goodwill
or negative goodwill is the difference between the cost of the
investments and the reasonable value of attributable net assets
of the subsidiary companies and associated companies at the
acquisition dates. Goodwill or negative goodwill is reported
in the balance sheet as non-current assets and amortised using
the straight-line method over its estimated useful life, not
exceeding twenty years. Where the net assets of subsidiary companies
and associated companies at the date of acquisition exceed the
costs of investments acquired, this excess is accounted for
as negative goodwill. |
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| (II) |
PROPERTY,
PLANT AND EQUIPMENT AND DEPRECIATION |
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Leased
assets – assets leased in terms of finance lease agreements
are capitalised at their equivalent cash consideration. Depreciation
is provided on the straight-line basis over the expected useful
lives of the assets. Finance charges are written off over the
term of the lease in accordance with the effective interest
rate method. Leases of assets in terms of which all the risks
and benefits of ownership are effectively retained by the lessor
are classified as operating leases. Payments made under operating
leases are accounted for in income. |
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Leasehold
improvements – are stated at cost and written off over
the periods of the leases. |
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Machinery,
equipment, office equipment and vehicles – are stated
at cost and are depreciated on a straight-line basis over their
expected useful lives. |
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Where
assets are identified as being impaired, that is when the recoverable
amount has declined below its carrying amount, the carrying
amount is reduced to reflect the decline in value. Such amounts
written off are accounted for in income. |
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| (III) |
INTANGIBLE
ASSETS |
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Patents
– the costs of patents which are established and developed
by the group itself are expensed as incurred. The value thereof
is consequently not reflected in the annual financial statements.
The costs of patents which have been purchased are written off
on a straight-line basis over their expected useful lives, being
ten years. |
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Research
and development costs – research and development costs
are written off against income as incurred. |
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| (IV) |
INVESTMENTS |
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Associated
companies – are stated at cost after adjustment for
goodwill. In the consolidated financial statements the share
of post-acquisition reserves and retained income, accounted
for according to the equity method, is included in the carrying
value. |
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Other
investments – are stated at cost, less amounts written
off for declines in value considered not to be of a temporary
nature. Such amounts written off are accounted for as exceptional
items. |
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| (V) |
INVENTORIES
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Inventories
are stated at the lower of cost or net realisable value. The
basis of determining cost is the first-in-first-out method.
Where applicable, provision is made for slow-moving and redundant
inventories. Work in progress and finished goods include direct
costs and an appropriate allocation of manufacturing overheads. |
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| (VI) |
TAXATION |
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Deferred
taxation is provided at current rates using the balance sheet
liability method. Full provision is made for all temporary differences
between the taxation base of an asset or liability and its balance
sheet carrying amount. No deferred tax liability is recognised
in those circumstances where the initial recognition of an asset
or liability has no impact on accounting profit or taxable income.
Assets are not raised in respect of deferred taxation on assessed
losses, unless it is probable that future taxable profits will
be available against which the deferred taxation asset can be
realised in the foreseeable future. |
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Secondary
taxation on companies is provided in respect of dividend payments,
net of dividends received or receivable and is recognised as
a taxation charge for the year. |
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| (VII) |
FOREIGN
CURRENCIES |
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Transactions
in foreign currencies are accounted for at the rates of exchange
ruling on the dates of the transactions. Foreign currency monetary
items at year-end are translated to SA Rand at the rates of
exchange ruling at that date. Exchange differences that arise
as a result thereof, are accounted for in income together with
realised exchange differences on forward exchange contracts.
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Assets,
liabilities and reserves of foreign entities at year-end are
translated to SA Rand at the rates of exchange ruling at that
date. Operating results of foreign subsidiaries and income of
foreign associated companies are translated to SA Rand at the
average of the exchange rates prevailing during the year for
each of the currencies concerned. Differences arising on translation
are accounted for in reserves as exchange rate adjustments. |
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| (VIII) |
FINANCIAL
INSTRUMENTS |
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Financial
instruments include those carried on the balance sheet and off-balance
sheet instruments. |
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Financial
instruments carried on the balance sheet include cash and cash
equivalents, investments, trade and other receivables, trade
and other payables, provisions, leases and borrowings.
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Certain
group companies are also parties to financial instruments that
reduce exposure to fluctuations in foreign currency exchange
rates. These instruments, which mainly comprise forward exchange
contracts, are not recognised in the financial statements on
inception. |
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Fair
values and the recognition methods of the different financial
instruments are disclosed in the notes to the financial statements.
Fair values represent an approximation of possible value, which
may differ from the value that will finally be realised. |
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| (IX) |
PROVISIONS |
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Provisions
are recognised when the group has a present legal or constructive
obligation arising from past events, it is probable that an
outflow of resources embodying economic benefits will be required
to settle the obligation, and a reliable estimate of the amount
of the obligation can be made. |
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Provision
for warranties on products is made for all products still under
warranty at the balance sheet date. This provision is calculated
based on service history. |
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Employee
entitlements to leave are recognised when they accrue to employees
involved. A provision is made for the estimated liability for
leave as a result of services rendered by employees up to balance
sheet date. |
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| (X) |
CASH
AND CASH EQUIVALENTS |
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For
the purpose of the cash flow statement, cash and cash equivalents
comprise cash on hand, deposits held at call with banks, and
investments in money market instruments, net of bank overdrafts.
In the balance sheet, bank overdrafts are included in short-term
interest-bearing borrowings. |
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| (XI) |
REVENUE
RECOGNITION |
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The
sale of goods is recognised when the significant risks and rewards
of ownership of the goods have been transferred. Revenue arising
from services is recognised when the service is rendered. Interest
is recognised on a time proportion basis (taking into account
the principal amount outstanding, the effective rate and the
period), unless collectability is in doubt. Dividends are recognised
when the right to receive payment is established. |
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| (XII) |
TREASURY
SHARES |
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Shares
in the Company held by wholly-owned group companies are classified
as treasury shares and are held at cost. These shares are treated
as a deduction from issued and weighted average number of shares
and the cost price of the shares is deducted from the group's
equity. |
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