31 |
Contingent liabilities |
|||||||||||||||||
The company has furnished guarantees to bankers in respect of gross liabilities of R988.8 million recognised on the balance sheets of certain subsidiary companies. The net liability recognised on the group balance sheet in respect of these liabilities is R148.8 million. |
||||||||||||||||||
32 |
Related party transactions |
|||||||||||||||||
Group | ||||||||||||||||||
Transactions between group subsidiaries During the year, in the ordinary course of business, certain companies within the group entered into transactions. These intra-group transactions have been eliminated on consolidation. See the group subsidiaries. Directors and key management A number of directors of the company hold positions in other entities, where they may have significant influence over the financial or operating policies of these entities. Accordingly, the following is considered to be such an entity: Director Entity DM Nurek Investec Bank Limited Transactions between the group and this entity have occurred under terms and conditions that are no more favourable than those entered into with third parties in arms length transactions. These transactions include:
Certain non-executive directors of the group are also non-executive directors of other public companies which transact with the group. Except as disclosed above, the relevant directors do not believe they have control, joint control, or significant influence over the financial or operating policies of those companies. Those entities are not disclosed above. |
||||||||||||||||||
33 |
Events subsequent to balance sheet date |
|||||||||||||||||
No significant events took place between the end of the financial year under review, and the date of signature of these financial statements with the exception of the approval of the final distribution (see the
Directors Report for more details). |
||||||||||||||||||
34 |
Borrowing powers |
|||||||||||||||||
In terms of the articles of association, the borrowing powers of the company are unlimited. |
||||||||||||||||||
35 |
Impact of conversion to International Financial Reporting Standards (IFRS) and other adjustments |
|||||||||||||||||
For the year ended 31 August 2005, the group prepared its financial statements in accordance with South African Statements of Generally Accepted Accounting Practice (SA GAAP). JSE Limited (JSE) Listings Requirements prescribe that a company listed on the JSE prepare its annual financial statements in accordance with IFRS. IFRS refers to the application of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). This requirement applies to all listed companies for financial reporting periods beginning on or after 1 January 2005, and consequently the year ended 31 August 2006 is the groups first annual published financial statements under IFRS. As the group publishes comparative financial information for one year, the date of transition to IFRS is 1 September 2004, the start of the earliest period of comparative information presented. The group has restated information previously published under SA GAAP to the equivalent basis under IFRS. This restatement follows the guidelines set out in IFRS 1 First-time Adoption of International Financial Reporting Standards. |
||||||||||||||||||
Group | ||||||||||||||||||
Tax rate | ||||||||||||||||||
Gross | Tax | change | Net | |||||||||||||||
IFRS conversion adjustments | Notes | R000 | R000 | R000 | R000 | |||||||||||||
Impact on distributable reserve at 1 September 2004 | ||||||||||||||||||
IFRS 1 Trademark re-recognition | 35.1 | 372 000 | (111 600) | | 260 400 | |||||||||||||
IFRS 2 Share-based payments | 35.2 | (9 035) | | | (9 035) | |||||||||||||
IAS 2 Settlement discounts in inventory | 35.3 | (20 600) | 6 180 | | (14 420) | |||||||||||||
IAS 16 Property, plant and equipment | 35.4 | | | | | |||||||||||||
IAS 39 Impairment of trade receivables | 35.5 | 3 598 | (1 079) | | 2 519 | |||||||||||||
Total IFRS conversion adjustments | 345 963 | (106 499) | | 239 464 | ||||||||||||||
Impact on distributable reserve at 31 August 2005 | ||||||||||||||||||
IFRS 1 Trademark re-recognition | 35.1 | 372 000 | (111 600) | 3 720 | 264 120 | |||||||||||||
IFRS 2 Share-based payments | 35.2 | (14 414) | | | (14 414) | |||||||||||||
IAS 2 Settlement discounts in inventory | 35.3 | (23 653) | 7 065 | (206) | (16 794) | |||||||||||||
IAS 16 Property, plant and equipment | 35.4 | | | | | |||||||||||||
IAS 39 Impairment of trade receivables | 35.5 | 2 952 | (892) | 36 | 2 096 | |||||||||||||
Total IFRS conversion adjustments | 336 885 | (105 427) | 3 550 | 235 008 | ||||||||||||||
Impact on profit for the year 2005 | ||||||||||||||||||
IFRS 1 Trademark re-recognition | 35.1 | | | 3 720 | 3 720 | |||||||||||||
IFRS 2 Share-based payments | 35.2 | (5 379) | | | (5 379) | |||||||||||||
IAS 2 Settlement discounts in inventory | 35.3 | (3 053) | 885 | (206) | (2 374) | |||||||||||||
IAS 16 Property, plant and equipment | 35.4 | | | | | |||||||||||||
IAS 39 Impairment of trade receivables | 35.5 | (646) | 187 | 36 | (423) | |||||||||||||
Total IFRS conversion adjustments | (9 078) | 1 072 | 3 550 | (4 456) | ||||||||||||||
Impact on profit for the year 2006 | ||||||||||||||||||
IFRS 1 Trademark re-recognition | 35.1 | | | | | |||||||||||||
IFRS 2 Share-based payments | 35.2 | (5 623) | | | (5 623) | |||||||||||||
IAS 2 Settlement discounts in inventory | 35.3 | 3 167 | (918) | | 2 249 | |||||||||||||
IAS 16 Property, plant and equipment | 35.4 | 4 834 | (400) | | 4 434 | |||||||||||||
IAS 39 Impairment of trade receivables | 35.5 | ( 507) | 147 | | (360) | |||||||||||||
Total IFRS conversion adjustments | 1 871 | (1 171) | | 700 | ||||||||||||||
A deferred tax asset was raised when the trademarks referred to in note 35.1 were written off against share premium in 1996. This deferred tax asset was credited to a non-distributable reserve. As a result of the trademarks being re-recognised in accordance with IFRS 1, the deferred tax asset has been reversed and the non-distributable reserve transferred to distributable reserves. |
||||||||||||||||||
Group | ||||||||||||||||||
Tax rate | ||||||||||||||||||
Gross | Tax | change | Net | |||||||||||||||
Other adjustments | Notes | R000 | R000 | R000 | R000 | |||||||||||||
Impact on distributable reserve at 1 September 2004 | ||||||||||||||||||
Inventory adjustments | 35.6 | (141 406) | 42 419 | | (98 987) | |||||||||||||
Leave-pay provision | 35.7 | (5 896) | 1 769 | | (4 127) | |||||||||||||
Bonus provision | 35.8 | (12 684) | 3 805 | | (8 879) | |||||||||||||
Sundry debtors impairments | 35.9 | (25 080) | | | (25 080) | |||||||||||||
Onerous leases | 35.10 | (15 282) | 4 585 | | (10 697) | |||||||||||||
Property, plant and equipment impairments | 35.11 | (5 603) | 1 681 | | (3 922) | |||||||||||||
Total other adjustments | (205 951) | 54 259 | | (151 692) | ||||||||||||||
Impact on distributable reserve at 31 August 2005 | ||||||||||||||||||
Inventory adjustments | 35.6 | (158 137) | 47 270 | (1 414) | (112 281) | |||||||||||||
Leave-pay provision | 35.7 | ( 4 055) | 1 235 | (59) | (2 879) | |||||||||||||
Bonus provision | 35.8 | (14 678) | 4 383 | (127) | (10 422) | |||||||||||||
Sundry debtors impairments | 35.9 | (25 080) | | | (25 080) | |||||||||||||
Onerous leases | 35.10 | (19 303) | 5 751 | (153) | (13 705) | |||||||||||||
Property, plant and equipment impairments | 35.11 | (11 746) | 3 463 | (56) | (8 339) | |||||||||||||
Total other adjustments | (232 999) | 62 102 | (1 809) | (172 706) | ||||||||||||||
Impact on profit for the year 2005 | ||||||||||||||||||
Inventory adjustments | 35.6 | (16 731) | 4 851 | ( 1 414) | (13 294) | |||||||||||||
Leave-pay provision | 35.7 | 1 841 | (534) | (59) | 1 248 | |||||||||||||
Bonus provision | 35.8 | (1 994) | 578 | (127) | (1 543) | |||||||||||||
Sundry debtors impairments | 35.9 | | | | | |||||||||||||
Onerous leases | 35.10 | (4 021) | 1 166 | (153) | (3 008) | |||||||||||||
Property, plant and equipment impairments | 35.11 | (6 143) | 1 782 | (56) | (4 417) | |||||||||||||
Total other adjustments | (27 048) | 7 843 | (1 809) | (21 014) | ||||||||||||||
Impact on profit for the year 2006 | ||||||||||||||||||
Inventory adjustments | 35.6 | 6 506 | (1 887) | | 4 619 | |||||||||||||
Leave-pay provision | 35.7 | (6 652) | 1 929 | | (4 723) | |||||||||||||
Bonus provision | 35.8 | (3 017) | 875 | | (2 142) | |||||||||||||
Sundry debtors impairments | 35.9 | | | | | |||||||||||||
Onerous leases | 35.10 | 4 563 | (1 323) | | 3 240 | |||||||||||||
Property, plant and equipment impairments | 35.11 | 546 | (158) | | 388 | |||||||||||||
Total other adjustments | 1 946 | (564) | | 1 382 |
IFRS conversion adjustments | ||
35.1 |
Trademark re-recognition The group wrote off trademarks relating to the Clicks and Discom businesses of R372 million against Share Premium in 1996. IFRS 1 requires the group to re-recognise all assets and liabilities at the date of transition to IFRS that were acquired or assumed in a past business combination. The trademarks have accordingly been re-recognised out of distributable reserves. The trademarks are treated as intangible assets with indefinite useful lives in accordance with IAS 38 Intangible assets. The trademarks are consequently not amortised but are subject to an annual impairment test. (See note 10). The deferred tax asset raised on the write-off of the trademarks was charged to equity by way of a non-distributable reserve. As a result of the trademark being re-recognised, the deferred tax asset has reversed and the related non-distributable reserve has been transferred to the distributable reserve. |
|
35.2 | Share-based payments In terms of IFRS 2, all share-based payment transactions must be recognised in the financial statements using a fair value measurement basis and charged when the goods or services are consumed. It requires the fair value of all equity instruments granted to be based on market prices, if available, and to take into account the terms and conditions on which those instruments were granted. This standard applies to all options granted after 7 November 2002 which had not vested by 1 January 2005. The fair value of these options was determined at the grant date using the Binomial option pricing model. In addition to options that have already vested and have not been forfeited, the fair value of the options that are expected to vest has been amortised over the vesting period. (See note 18). |
|
35.3 | Settlement discounts in inventory IAS 2 Inventories requires trade discounts, rebates and other similar items to be deducted from the cost of purchase of an item of inventory. In prior years, cash discounts received from suppliers were included in other income. Cash discounts are now shown as a reduction of cost of merchandise sold for the year, with a consequential reduction in the inventory valuation at the reporting date, consistent with current interpretation. |
|
35.4 | Property, plant and equipment IAS 16 Property, plant and equipment requires an annual assessment of the remaining useful lives and residual values of all assets and for depreciation to be adjusted accordingly. The group has reviewed the remaining useful lives and residual values of all assets and has recalculated depreciation. The cumulative impact of this change at the date of transition to IFRS was not material and comparatives have consequently not been restated. The cumulative difference at the date of transition has been accounted for prospectively. The asset classes impacted were buildings and motor vehicles. |
|
35.5 | Impairment of trade receivables IAS 39 Financial Instruments: Recognition and measurement prohibits general doubtful debt provisions and requires an impairment in the case where objective evidence of impairment exists. The impairment is calculated based on an incurred loss model rather than an expected loss model. The group has recalculated the value of trade receivables impaired in accordance with this standard. |
|
Other adjustments | ||
35.6 | Inventory adjustments Rebates and distribution costs were previously recognised as other income and expenses respectively in the period incurred. The group has now recognised rebates and distribution centre costs as part of the cost of merchandise which has had the effect of reducing the value of inventories. The group now complies with IAS 2 in respect of these component costs of inventory. In addition, the group has historically used the Retail Inventory Method to estimate the first-in-first-out (FIFO) cost of inventory. The assumptions and methodology applied by the group in using the Retail Inventory Method were reviewed and refined during the year in the context of more reliable information becoming available, to more accurately reflect the FIFO cost of inventory. This has been adjusted retrospectively and comparatives have been restated. |
|
35.7 | Leave-pay provision The group has corrected a historic underprovision in the provision for leave-pay. The group now complies with IAS 19 Employee benefits in this regard. The adjustment has been made retrospectively and comparatives have been restated. |
|
35.8 | Bonus provision The group has corrected a historic underprovision in the provision for bonuses which are employee obligations at the balance sheet date. The group now complies with IAS 19 Employee benefits in this regard. The adjustment has been made retrospectively and comparatives have been restated. |
|
35.9 | Sundry debtors impairments Various receivables existed at the end of the previous financial year which should have been impaired in earlier financial years. These have been impaired in the relevant year and comparatives have been restated as necessary. |
|
35.10 | Onerous leases The group has corrected a historic underprovision in relation to onerous lease contracts. The group now complies with IAS 37 Provisions and contingencies in respect of onerous leases. The provision has been determined based on the present value of future cash flows relating to contracts where the present value of the cash flows exceeds the benefits from the related contracts. The adjustment has been made retrospectively and comparatives have been restated. |
|
35.11 | Property, plant and equipment impairments As part of the exercise of converting to IFRS, the group has critically assessed the recoverable values of all its assets and has identified assets that are no longer in use. These assets relate primarily to closed stores and obsolete information technology assets and have accordingly been written off. The adjustment has been made retrospectively and comparatives have been restated. |
|
Reclassifications |
||
36 |
Standards issued but not yet effective |
|
The directors have considered all Standards and Interpretations that have been issued but which are not yet effective and found those set out below to be applicable. IFRIC 4 This interpretation is effective for the group for the year ending 31 August 2008. This interpretation requires that where an entity enters into an arrangement that depends on the use of a specific asset and that arrangement conveys the right to control this specific asset, then this arrangement should be treated as an asset under IAS 17 Leases. Arrangements that are in substance leases should be assessed against the criteria included in IAS 17 to determine whether the arrangement should be accounted for as a finance or operating lease. This interpretation is not likely to have a material impact on the financial results presented in the current or future periods. IFRS 7 The disclosures provided in respect of financial instruments in the financial statements for the year ending 31 August 2008, as well as comparative information, will be compliant with IFRS 7. IFRS 7 requires additional disclosure compared to that required in terms of existing IFRS in respect of, amongst others, capital objectives and policies. The adoption of IFRS 7 will not have any impact on the accounting policies adopted for financial instruments. |