Annexure I: Accounting policies
The principal accounting policies applied in the preparation and presentation of the annual financial statements are set out below:
BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the Company and its subsidiaries, joint ventures and structured entities deemed to be controlled by the Group.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement in the entity and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an entity if and only if the Group has:
| • | power over the investee (ie existing rights that give it the current ability to direct the relevant activities of the investee); |
| • | exposure, or rights, to variable returns from its involvement with the investee; and |
| • | the ability to use its power over the investee to affect its returns. |
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
| • | the contractual arrangement with the other vote-holders of the investee; |
| • | rights arising from other contractual arrangements; and |
| • | the Group’s voting rights and potential voting rights. |
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.
The financial results of the subsidiaries are prepared for the same reporting period using consistent accounting policies.
Investments in subsidiaries in the Company’s financial statements are accounted for at cost less any impairment.
The results of subsidiaries acquired are included in the consolidated financial statements from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date such control ceases.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests represent the equity in a subsidiary not attributable, directly or indirectly, to the parent. These interests are presented separately in the consolidated statement of comprehensive income, and in the consolidated statement of financial position, separately from own shareholders’ equity.
A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses are attributed to any relevant non-controlling interest even if that results in a deficit balance.
If the Group loses control over a subsidiary, it:
| • | derecognises the assets (including goodwill) and liabilities of the subsidiary; |
| • | derecognises the carrying amount of any non-controlling interest; |
| • | derecognises the cumulative translation differences recorded in equity; |
| • | recognises the fair value of the consideration received; |
| • | recognises the fair value of any investment retained; |
| • | recognises any surplus or deficit in profit or loss; and |
| • | reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss, or retained earnings, as appropriate. |
Subsidiaries acquired with the intention of disposal within 12 months are consolidated in line with the principles of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and disclosed as held for sale.
An item or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transactions rather than through continuing use. This condition is regarded as met only when the sale is highly probably and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Assets classified as held for sale are not subsequently depreciated or amortised and are held at the lower of their carrying value or fair value less costs to sell (incremental costs directly attributable to the sale, excluding the finance costs and income tax expense). A discontinued operation is a separate major line of business or geographical area of operation that has been dispose of, or classified as held for sale, as part of a single coordinated plan.
In the consolidated statement of comprehensive income of the reporting period, and of the comparable period, income and expenses from discontinued operations are reported separately from the income and expenses from continuing activities, down to the level of profit after taxes, even when the parent retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in profit or loss and other comprehensive income.
In the statement of financial position, assets and liabilities classified as held for sale are presented separately from other assets and liabilities as current items.
UNDERLYING CONCEPTS
The financial statements are prepared on the going-concern basis, which assumes that the Group will continue in operation for the foreseeable future.
The financial statements are prepared using the accrual basis of accounting whereby the effects of transactions and other events are recognised when they occur, rather than when the cash is received or paid.
Assets and liabilities, and income and expenses are not offset unless specifically permitted by an accounting standard. Financial assets and financial liabilities are only offset when there is a legally enforceable right to offset, and the intention is either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Accounting policies are the specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements.
Changes in accounting policies are accounted for in accordance with the transitional provisions in the standard. If no such guidance is given, they are applied retrospectively.
If after making every reasonable effort to do so, it is impracticable to apply the change retrospectively, it is applied prospectively from the beginning of the earliest period practicable.
Changes in accounting estimates are adjustments to assets or liabilities or the amounts of periodic consumption of assets that result from new information or new developments. Such changes are recognised in profit or loss in the period they occur.
Prior period errors are omissions or misstatements in the financial statements of one or more prior periods. They may arise from a failure to use, or misuse of reliable information that was available at the time or could reasonably be expected to have been obtained. Where prior period errors are material, they are retrospectively restated. If it is impracticable to do so, they are corrected prospectively from the beginning of the earliest period practicable.
FOREIGN CURRENCIES
The consolidated financial statements are presented in South African Rands (Rands), which is the Group’s presentational currency and the Company’s functional currency.
Each foreign entity in the Group determines its own functional currency.
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded at the rates of exchange ruling at the transaction date.
FOREIGN CURRENCY BALANCES
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the reporting date. Exchange differences are taken to profit or loss, except for differences arising on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to other comprehensive income until the disposal of the net investment, at which time they are recognised in profit or loss. Tax charges and credits attributable to such exchange differences are also accounted for in other comprehensive income.
If non-monetary items measured in a foreign currency are carried at historical cost, the exchange rate used is the rate applicable at the initial transaction date. If they are carried at fair value, the rate used is the rate at the date when the fair value was determined.
The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of the gain or loss on change in fair value of the item (ie translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).
FOREIGN OPERATIONS
At the reporting date, the assets and liabilities of the foreign operations are translated into the presentation currency of the Group (Rands) at the exchange rate ruling at the reporting date. Items of profit or loss are translated at the weighted average exchange rate for the year. Exchange differences are taken directly to a separate component of other comprehensive income. On disposal of a foreign operation, the deferred cumulative amount recognised in other comprehensive income relating to that particular foreign operation is recognised in profit or loss.
Goodwill and fair value adjustments relating to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of that foreign operation, and are translated at the closing rate. The functional currencies of the foreign operations are as follows:
| • | joint venture, Adcock Ingram Limited in India, the Indian Rupee; |
| • | subsidiary, Adcock Ingram Healthcare Private Limited in India (discontinued operation), the Indian Rupee; |
| • | subsidiary, Relicare Tech Services Private Limited in India, the Indian Rupee; |
| • | subsidiary, Datlabs (Private) Limited in Zimbabwe, the United States Dollar; |
| • | subsidiary, Adcock Ingram East Africa Limited in Kenya, the Kenyan Shilling; and |
| • | subsidiary, Ayrton Drug Manufacturing Limited in Ghana (discontinued operation), the Ghanaian Cedi. |
INTEREST IN GROUP COMPANIES
BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree.
For each business combination, the Group measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of the acquiree.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit or loss or other comprehensive income, as appropriate.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be recognised in accordance with IAS 39 either in profit or loss or as a charge to other comprehensive income, as appropriate. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity.
EQUITY-ACCOUNTED INVESTMENTS
The equity-accounted investments are the Group’s investments in joint ventures.
A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement. The Group has the following joint ventures:
| • | Adcock Ingram Holdings Limited has a 49.9% interest in Adcock Ingram Limited, a company incorporated in India, which is involved in the manufacturing of pharmaceutical products; and |
| • | Adcock Ingram Critical Care Proprietary Limited has a 50% indirect interest in National Renal Care Proprietary Limited, a company incorporated in South Africa, which provides renal healthcare services. |
Under the equity method, investments are carried in the statement of financial position at cost, plus post-acquisition changes in the Group’s share of the profit or loss of these investments. Goodwill relating to equity-accounted investments is included in the carrying amount of the investment and is not tested separately for impairment.
Joint ventures are accounted for from the date that joint control is obtained to the date that the Group ceases to have joint control.
The statement of comprehensive income reflects the Group’s share of these investments’ profit or loss. However, losses in excess of the Group’s interest are not recognised. Additional losses are provided for and a liability is recognised, only to the extent that a legal or constructive obligation exists. Where a joint venture recognises an entry directly in other comprehensive income, the Group in turn recognises its share as other comprehensive income in the consolidated statement of comprehensive income. Profits and losses resulting from transactions between the Group and equity-accounted investments are eliminated to the extent of the interest in the underlying investment.
After application of the equity method, each investment is assessed for indicators of impairment. If applicable, the impairment is calculated as the difference between the carrying value and the higher of its value in use or fair value less costs to dispose. Impairment losses are recognised in profit or loss, as part of equity accounted earnings.
In the Company financial statements, joint ventures are initially accounted for at cost when joint control is obtained and subsequently at cost less accumulated impairment losses.
Upon loss of joint control over the joint venture, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
When an equity accounted investment is classified as held for sale in terms of IFRS 5, equity accounting is discontinued, and the investment is held at the lower of its carrying value and fair value less costs to sell.
Where an equity accounted investment’s reporting date differs from the Group’s, the joint venture prepares financial results for the same period as the Group. Where the equity accounted investment’s accounting policies differ from those of the Group, appropriate adjustments are made to conform to the accounting policies of the Group.
The year-end of the joint venture, Adcock Ingram Limited (India) is March whilst the year-end of National Renal Care Proprietary Limited is September.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment losses.
Where an item of property, plant and equipment comprises major components with different useful lives, the components are accounted for as separate assets. Expenditure incurred on major inspection and overhaul, or to replace an item is also accounted for separately if the recognition criteria are met. All other repairs and maintenance expenditures are charged to profit or loss during the financial period in which they are incurred.
Each part of an item of property, plant and equipment with a cost that is significant is depreciated separately.
Depreciation is calculated on a straight-line basis, on the difference between the cost and residual value of an asset, over its useful life. Depreciation starts when the asset is available for use. An asset’s residual value, useful life and depreciation method are reviewed at least at each financial year-end.
Any adjustments to residual value, useful life or depreciation method applied are accounted for prospectively.
The following useful lives have been estimated:
| Freehold land | Not depreciated | |
| Freehold buildings | – general purpose | 40 years |
| – special | 20 – 50 years | |
| Leasehold improvements | The lease term or useful life, whichever is the shorter period | |
| Plant, equipment and vehicles | 3 – 15 years | |
| Furniture and fittings | 3 – 15 years | |
| Computer equipment | 3 years |
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in profit or loss in the year the asset is derecognised.
GOODWILL AND INTANGIBLE ASSETS
GOODWILL
Goodwill is initially measured at cost, being the excess of the consideration transferred, the amount of any non-controlling interest and in a business combination achieved in stages, the acquisition date fair value of any previously held equity interest in the acquiree, over the fair value of the Group’s net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. Goodwill relating to subsidiaries is recognised as an asset and is subsequently measured at cost less accumulated impairment losses.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash- generating unit retained.
INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value at the date of acquisition. Subsequently, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged to the statement of comprehensive income in profit or loss in the year in which the expense is incurred.
The useful lives of intangible assets are either finite or indefinite.
Intangible assets with finite lives are amortised over their useful life and assessed for impairment when there is an indication that the asset may be impaired. The amortisation period and the amortisation method are reviewed at each year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
| Trademarks | 15 years or indefinite |
| Customer, supplier and licence-related intangibles | 1 – 15 years |
Amortisation is recognised in the statement of comprehensive income in profit or loss in fixed and administrative expenses. Intangible assets with indefinite useful lives are not amortised but are tested bi-annually for impairment. The useful lives are also reviewed in each period to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment to a finite life is accounted for prospectively.
Certain trademarks have been assessed to have indefinite useful lives, as presently there is no foreseeable limit to the period over which the assets can be expected to generate cash flows for the Group.
An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of comprehensive income in profit or loss when the asset is derecognised.
RESEARCH AND DEVELOPMENT COSTS
Research costs, being costs from the investigation undertaken with the prospect of gaining new knowledge and understanding, are recognised in profit or loss as they are incurred.
Development costs arise on the application of research findings to a plan or design for the production of new or substantially improved materials, products or services, before the start of commercial production.
Development costs are only capitalised when the Group can demonstrate the technical feasibility of completing the project, its intention and ability to complete the project and use or sell the materials, products or services flowing from the project, how the project will generate future economic benefits, the availability of sufficient resources and the ability to measure reliably the expenditure during development. Otherwise development costs are recognised in profit or loss.
During the period of development, the asset is tested annually for impairment. Following the initial recognition of the development costs, the asset is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when development is complete and the asset is available for use. The capitalised development costs are amortised over the useful life of the intangible asset.
IMPAIRMENT OF NON FINANCIAL ASSETS
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If such an indication exists, or when impairment testing is required, as is the case with goodwill and intangible assets with indefinite useful lives, the Group estimates the recoverable amount. An asset’s recoverable amount is the higher of the fair value less costs of disposal and its value in use. The recoverable amount is determined for individual assets, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying value exceeds the recoverable amount, the asset is considered impaired and is written down to the recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of 10 years. Ten years are used in instances where the Group believes that assets have a value in use of 10 or more years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the 10th year.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised.
The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss.
The following assets have specific characteristics for impairment testing:
GOODWILL
Goodwill is tested for impairment
| • | annually at the reporting date; and |
| • | when circumstances indicate that the carrying value may be impaired. |
Impairment losses relating to goodwill cannot be reversed in future periods.
INTANGIBLE ASSETS
Intangible assets with indefinite useful lives are tested for impairment
| • | biannually as at 31 December and 30 June; and |
| • | when circumstances indicate that the carrying value may be impaired on an individual basis or at the cash-generating unit level. |
FINANCIAL ASSETS
INITIAL RECOGNITION AND MEASUREMENT
Financial assets within the scope of IAS 39 are classified as financial assets through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.
The Group’s classification of financial assets is as follows:
| Description of asset | Classification |
| Amounts owing by Group compan | Loans and receivables |
| Trade and other receivables | Loans and receivables |
| Cash and cash equivalents | Loans and receivables |
| Investments | Available-for-sale |
| Other financial assets | Loans and receivables/Available-for-sale |
All financial assets are recognised initially at fair value plus, in the case of instruments not at fair value through profit or loss, directly attributable transaction costs.
SUBSEQUENT MEASUREMENT
The subsequent measurement of financial assets depends on their classification, as follows:
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance income in the statement of comprehensive income. The losses arising from impairment are recognised in the statement of comprehensive income in fixed and administrative expenses.
Available-for-sale financial assets
Available-for-sale financial assets could include equity investments. Equity investments classified as available-for-sale are those which are neither classified as held for trading nor designated as fair value through profit or loss.
After initial measurement, available-for-sale financial assets are subsequently measured at fair value with unrealised gains and losses recognised as other comprehensive income until the investment is derecognised, at which time the cumulative gain or loss is recognised in fixed and administrative expenses. If determined to be impaired, the cumulative loss is reclassified from the available-for-sale reserve to profit or loss in the statement of comprehensive income.
When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income and there is objective evidence that the asset is impaired by a significant amount or for a prolonged period of time, the cumulative impairment loss that had been recognised in other comprehensive income is reclassified from equity to profit or loss even though the financial asset has not been derecognised.
DERECOGNITION
Financial assets or parts thereof are derecognised when:
| • | the right to receive the cash flows has expired; or |
| • | the Group transfers the right to receive the cash flows, and also transfers either all the risks and rewards, or control over the asset. |
When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability.
The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
IMPAIRMENT OF FINANCIAL ASSETS
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and the loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Loans and receivables
The Group assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the assets in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred).
The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.
The carrying amount of the assets is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss.
Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the statement of comprehensive income. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write off is later recovered, the recovery is credited to finance costs in the statement of comprehensive income.
Available-for-sale financial assets
For available-for-sale financial assets, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.
In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. “Significant” is to be evaluated against the original costs of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less an impairment loss on that investment previously recognised in the statement of comprehensive income – is reclassified from other comprehensive income to profit or loss. Increases in fair value after impairment are recognised directly in other comprehensive income. Impairment losses on available-for-sale equity instruments are not reversed through profit or loss.
FINANCIAL LIABILITIES
INITIAL RECOGNITION AND MEASUREMENT
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, plus directly attributable transaction costs.
The Group has classified financial liabilities, as follows:
| Description of liability | Classification |
| Loans payable and borrowings | Loans and borrowings |
| Trade and other payables | Loans and borrowings |
| Loans from subsidiaries | Loans and borrowings |
| Bank overdraft | Loans and borrowings |
| Amounts owing to Group companies | Loans and borrowings |
SUBSEQUENT MEASUREMENT
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of comprehensive income in profit or loss when the liabilities are derecognised as well as through the effective interest rate method amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of comprehensive income.
DERECOGNITION
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
FAIR VALUE OF FINANCIAL INSTRUMENTS
To measure fair value, the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments measured at fair value by valuation technique:
| • | Level 1 – quoted (unadjusted) prices in active markets; |
| • | Level 2 – other valuation techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and |
| • | Level 3 – valuation techniques which use inputs which have a significant effect on the recorded fair value that are based on unobservable market data. |
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics, risks and the fair value hierarchy.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of cash on hand and at banks, short-term deposits with an original maturity of three months or less and highly liquid investments.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as detailed above, net of outstanding bank overdrafts.
DERIVATIVE INSTRUMENTS
Derivatives are financial instruments whose value changes in response to an underlying factor, require no initial or little net investment and are settled at a future date. Derivatives, other than those arising on designated hedges, are measured at fair value with changes in fair value being recognised in profit or loss.
HEDGE ACCOUNTING
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
CASH FLOW HEDGES
| • | a recognised asset or liability; or |
| • | a highly probable forecast transaction; or |
| • | the foreign currency risk in an unrecognised firm commitment. |
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in other comprehensive income, while any ineffective portion is recognised in profit or loss.
Amounts taken to other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged income or financial asset or liability is recognised or when the forecast sale or purchase occurs. Where the hedged item is the cost of a non-financial asset or liability, the amount deferred in other comprehensive income is transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in other comprehensive income are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken to profit or loss.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:
| Raw materials | Purchase cost on a first-in, first-out basis |
| Finished goods and work in progress | Cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity. |
Consumables are written down with regard to their age, condition and utility.
Costs of inventories include the transfer from other comprehensive income of gains and losses on qualifying cash flow hedges in respect of the purchases of inventories.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated completion and selling costs.
PROVISIONS
Provisions are recognised when the Group 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.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income through profit or loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
LEASES
At inception date an arrangement is assessed to determine whether it is, or contains, a lease. An arrangement is accounted for as a lease where it is dependent on the use of a specific asset and it conveys the right to use that asset.
Leases are classified as finance leases where substantially all the risks and rewards associated with ownership of an asset are transferred from the lessor to the Group as lessee. Finance lease assets and liabilities are recognised at the lower of the fair value of the leased property or the present value of the minimum lease payments. Finance lease payments are allocated, using the effective interest rate method, between the lease finance cost, which is included in finance costs, and the capital repayment, which reduces the liability to the lessor.
Capitalised lease assets are depreciated in line with the Group’s stated depreciation policy. If there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of its estimated useful life and lease term.
Operating leases are those leases which do not fall within the scope of the above definition.
Operating lease rentals are charged against trading profit on a straight-line basis over the lease term.
REVENUE
Revenue comprises turnover, dividend income and finance income. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received/ receivable excluding value-added tax, normal discounts, rebates, settlement discounts, promotional allowances, and internal revenue which is eliminated on consolidation.
The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements.
Turnover from the sale of goods (including notional interest on those sales) is recognised when the significant risks and rewards of ownership have passed to the buyer.
Dividend income is recognised when the Group’s right to receive payment is established.
Finance income is accrued on a time basis recognising the effective rate applicable on the underlying assets.
BORROWING COSTS
All borrowing costs are expensed in the period they occur, as none of the borrowing costs were directly attributable to the acquisition, construction or production of an asset which qualify for capitalisation. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
TAXES
CURRENT INCOME TAX
Current income tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible.
Current tax relating to items recognised outside profit or loss is recognised in other comprehensive income and not in profit or loss. Current tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The Group’s liability or receivable for current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date in the countries where the Group operates.
DEFERRED TAX
Deferred tax is provided using the liability method on all temporary differences at the reporting date. Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base.
Deferred tax liabilities are recognised for taxable temporary differences, except:
| • | where the liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and |
| • | in respect of taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled, and it is probable that the temporary differences will not reverse in the foreseeable future. |
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, where it is probable that the asset will be utilised in the foreseeable future, except:
| • | where the asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and |
| • | in respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures, only to the extent that it is probable that the differences will reverse in the foreseeable future, and taxable profit will be available against which these differences can be utilised. |
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Unrecognised deferred tax assets are re-assessed at each reporting date and recognised to the extent it has become probable that future taxable profit will allow the asset to be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on tax rates and laws that have been enacted or substantively enacted by the reporting date.
Deferred tax is charged to profit or loss, except to the extent that it relates to a transaction that is recognised outside profit or loss or a business combination that results from an acquisition. In this case, the deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset and they relate to income taxes levied by the same taxation authority.
DIVIDENDS TAX
A Dividends Tax of 15% on dividend distributions is withheld from shareholders and paid to the South African Revenue Service, where applicable.
VALUE-ADDED TAX (VAT)
Revenues, expenses and assets are recognised net of the amount of VAT, except:
| • | where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and |
| • | receivables and payables are stated with the amount of VAT included. |
The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.
EMPLOYEE BENEFITS
SHORT-TERM EMPLOYEE BENEFITS
All short-term benefits, including leave pay, are fully provided in the period in which the related service is rendered by the employees.
A liability is recognised when an employee has rendered services for benefits to be paid in the future, and an expense when the entity utilises the economic benefit arising from the service provided by the employee.
DEFINED CONTRIBUTION PLANS
In respect of defined contribution plans, the contribution paid by the Group is recognised as an expense. If the employee has rendered the service, but the contribution has not yet been paid, the amount payable is recognised as a liability.
DEFINED BENEFIT PLANS
The present value of the defined benefit obligation, the related current service costs and, where applicable, past service costs, are calculated using the projected unit credit method, incorporating actuarial assumptions and a discount rate based on quality government bonds.
Re-measurements, comprising of actuarial gains and losses and the return on plan assets (excluding net interest), are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Current service costs are recognised in the statement of comprehensive income in profit or loss in those expense categories consistent with the function of the employee cost.
Past service costs are expensed on a straight-line basis over the average period until the benefits become vested. If the benefits vest immediately following the introduction of, or changes to, a defined benefit plan, the past service cost is recognised immediately.
POST-RETIREMENT MEDICAL OBLIGATIONS
The Group provides post-retirement healthcare benefits to certain of its retirees and one employee still in service. The expected costs of these benefits are accrued over the period of employment, using the projected unit credit method. Valuations are based on assumptions which include employee turnover, mortality rates, a discount rate based on current bond yields of appropriate terms and healthcare inflation costs. Valuations of these obligations are carried out by independent qualified actuaries.
Actuarial gains or losses are recognised in the same manner as those of the defined benefit obligation.
SHARE-BASED PAYMENTS
Certain employees of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (“equity-settled transactions”) or share appreciation rights (“cash-settled transactions”).
EQUITY-SETTLED TRANSACTIONS
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined by an external appraiser using a modified version of the Black-Scholes model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The charge in the statement of comprehensive income in profit or loss for a period represents the movement in the cumulative expense between the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. If at the date of modification, the total fair value of the share-based payment is increased, or is otherwise beneficial to the employee, the difference is recognised as an additional expense.
Where an equity-settled award is cancelled (other than forfeiture), it is treated as if it had vested on the date of cancellation (acceleration of vesting), and any unrecognised expense recognised immediately. Any payment made to the employee on the cancellation or settlement of the grant shall be accounted for as the repurchase of an equity interest, i.e. as a deduction from equity, except to the extent that the payment exceeds the fair value of the equity instruments granted, measured at the repurchase date. Any such excess shall be recognised as an expense. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted and designated as a replacement for the cancelled award, the cancelled and new awards are treated as if they were a modification of the original award, as described above. The dilutive effect of outstanding equity-settled options is reflected as additional share dilution in the computation of diluted earnings and diluted headline earnings per share.
CASH-SETTLED TRANSACTIONS
The cost of cash-settled transactions is measured initially at fair value at the grant date using a modified version of the Black-Scholes model, taking into account the terms and conditions upon which the instruments were granted. This fair value is expensed over the period until vesting with recognition of a corresponding liability. The liability is remeasured to its fair value at each reporting date up to and including the settlement date with changes in fair value recognised in profit or loss.
ACCOUNTING FOR BEE TRANSACTIONS
Where equity instruments are issued to a Black Economic Empowerment (BEE) party at less than fair value, the instruments are accounted for as share-based payments in terms of the stated accounting policy.
Any difference between the fair value of the equity instrument issued and the consideration received is accounted for as an expense in the statement of comprehensive income through profit or loss.
A restriction on the BEE party to transfer the equity instrument subsequent to its vesting is not treated as a vesting condition, but is factored into the fair value determination of the instrument.
BEE transactions are accounted for as equity-settled share-based payments and are treated the same as equity-settled transactions.
TREASURY SHARES
Shares in Adcock Ingram Holdings Limited held by the Group, including shares held by structured entities deemed to be controlled by the Group, are classified within total equity as treasury shares. Treasury shares are treated as a deduction from the issued and weighted average number of shares for earnings per share and headline earnings per share purposes and the cost price of the shares is reflected as a reduction in capital and reserves in the statement of financial position. Dividends received on treasury shares are eliminated on consolidation. No gain or loss is recognised in the statement of comprehensive income through profit or loss on the purchase, sale, issue or cancellation of treasury shares. The consideration paid or received with regard to treasury shares is recognised in equity.
CONTINGENT ASSETS AND CONTINGENT LIABILITIES
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Contingent assets are not recognised as assets.
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the Group. Alternatively it may be a present obligation that arises from past events but is not recognised because an outflow of economic benefits to settle the obligation is not probable, or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are not recognised as liabilities unless they are acquired as part of a business combination.
Recognised amounts in the financial statements are adjusted to reflect significant events arising after the date of the statement of financial position, but before the financial statements are authorised for issue, provided there is evidence of the conditions existing at the reporting date. Events after the reporting date that are indicative of conditions that arose after this date are dealt with by way of a note.
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
In the process of applying the Group’s accounting policies, management has made certain judgements, estimates and assumptions, apart from those involving estimations, which have a significant effect on the amounts recognised in the financial statements.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
STRUCTURED ENTITIES
OWNER-DRIVER COMPANIES
Various owner-driver companies exist in the Group. These entities were incorporated to support the distribution network of the Group and are consolidated into the Group in accordance with IFRS 10.
Based on the contractual terms, the activities of these entities are being conducted on behalf of the Group according to its specific business needs so that the Group obtains benefits from these entities’ operations. In addition, it was assessed that the Group controls each of these entities as there is insufficient assets within these entities to allow each entity to finance its own activities without the support of the Group.
AD-IZINYOSI (RF) PROPRIETARY LIMITED AND ADBEE (RF) LIMITED
During the year, the Group facilitated the restructuring of their existing BEE vehicle, which was performed in line with the circular dated 28 May 2015. This has led to the formation of Ad-Izinyosi (RF) Proprietary Limited and AdBEE (RF) Limited, a company with instruments listed on the JSE.
Adcock Ingram considered the relevant activities of both entities, the Company’s involvement in facilitating the restructuring, the Company’s protective rights in respect of the companies acting in accordance with their Memorandum of Incorporation; and the Company’s lack of future financial exposure to the overall scheme. The conclusions was that in the Company’s judgement the Group does not have power over the relevant activities of these two entities, nor benefit from the variable returns that would emanate from such entities. These entities are therefore not consolidated into the Group.
MPHO EA BOPHELO TRUST
The Mpho ea Bophelo Trust is an entity incorporated for the purpose of representing Adcock Ingram employees in the Group’s BEE transaction and is consolidated in accordance with IFRS 10. The activities of this entity are conducted in accordance with the Group’s specific business needs in that the Group obtains benefits from this operation. The Group retains the majority of the residual or ownership risks and rewards related to this entity or its assets and it was therefore considered that the Group controls this entity.
CONSOLIDATION OF ENTITIES IN WHICH THE GROUP HOLDS LESS THAN MAJORITY OF VOTING RIGHTS
The Group considers that it controls Menarini SA Proprietary Limited and Novartis Ophthalmics Proprietary Limited even though it owns less than 50% of the voting rights as it controls the daily management and decision making of these entities.
CARRYING VALUE OF GOODWILL, PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS
Indefinite life intangible assets are tested for impairment bi-annually, while property, plant and equipment, goodwill and finite life intangible assets are tested at least annually or when there is an indicator of impairment. The calculation of the recoverable amount requires the use of estimates and assumptions concerning the future cash flows which are inherently uncertain and could change over time. In addition, changes in economic factors such as discount rates could also impact this calculation.
RESIDUAL VALUES AND USEFUL LIVES OF PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS
Residual values and useful lives of property, plant and equipment, and intangible assets are assessed on an annual basis. Estimates and judgements in this regard are based on historical experience and expectations of the manner in which assets are to be used, together with expected proceeds likely to be realised when assets are disposed of at the end of their useful lives. Such expectations could change over time and therefore impact both depreciation and amortisation charges and carrying values of property, plant and equipment, and intangible assets in the future.
FAIR VALUE OF BEE SHARE ALLOCATIONS
In calculating the amount to be expensed as a share-based payment, the Group is required to calculate the fair value of the equity instruments granted to the BEE participants in terms of the staff empowerment transactions.
SHARE-BASED PAYMENTS
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield and making assumptions about them.
Cash-settled share options granted to employees for services rendered or to be rendered are raised as a liability and recognised in profit or loss over the vesting period. The liability is remeasured to its fair value annually until settled and any changes in value are recognised in profit or loss. Fair value is measured using a Black-Scholes option pricing model.
DEFERRED TAX ASSETS
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits.
PENSION AND OTHER POST-EMPLOYMENT BENEFITS
The cost of defined benefit pension plans and post-employment medical benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.
PROVISIONS
The establishment and review of provisions requires significant judgement by management as to whether or not a reliable estimate can be made of the amount of the obligation. Best estimates, being the amount that the Group would rationally pay to settle the obligation, are recognised as provisions at the reporting date.
STANDARDS AND INTERPRETATIONS ISSUED THAT ARE NOT YET EFFECTIVE
The following standards and interpretations have not been applied by the Group as the standards and interpretations are not yet effective.
The Group intends to adopt these standards when they become effective.
IFRS 9: FINANCIAL INSTRUMENTS – RECOGNITION AND MEASUREMENT
IFRS 9 as issued by the IASB in July 2014, replaces IAS 39 and all previous versions of IFRS 9. IFRS 9 brings together the following three aspects
of the accounting for financial instruments:
| • | classification and measurement; |
| • | impairment; and |
| • | hedge accounting. |
IFRS 9 will be effective for the Group from 1 July 2018 and early application is permitted. The Group has not yet quantified the effect of this standard.
IFRS 11: JOINT ARRANGEMENTS – ACCOUNTING FOR ACQUISITION OF INTERESTS IN JOINT OPERATIONS
The amendments require an entity acquiring an interest in a joint operation to determine whether an asset or business is acquired. In the case of acquiring a business, all of the principles in IFRS 3 Business Combinations should be applied. The amendments to IFRS 11 will be effective for the Group from 1 July 2016.
IFRS 15: REVENUE FROM CONTRACTS WITH CUSTOMERS
IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising from contracts with customers. It also provides a model for the recognition and measurement of disposal of certain non-financial assets. The core principle is that revenue must reflect the consideration the Group is entitled to in exchange for transferring goods and services to its customers.
The standard requires retrospective application. There are also more disclosure requirements than the current IAS 18 standard with the aim to enable users of financial statements to understand the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. IFRS 15 will be effective for the group from 1 July 2018 and the impact if any, has not yet been determined.
IFRS 16 LEASES
IFRS 16 requires lessees to account for all leases in a similar way to finance leases under IAS 17. At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to separately recognise the interest expense on the lease liability and depreciation expense on the right of use of the asset. These amendments will be effective from 1 July 2019 and key financial metrics would be impacted, but not to a material extent, for the Group.
IAS 1 PRESENTATION OF FINANCIAL STATEMENTS – DISCLOSURE INITIATIVE AMENDMENTS
The amendments clarify:
| • | the materiality requirements in IAS 1; |
| • | that specific line items in the financial statements may be disaggregated; |
| • | that entities have flexibility as to the order in which they present the notes to financial statements; and |
| • | that the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss. These amendments will be effective from 1 July 2016 and are not expected to have a significant impact on the Group’s disclosure. |
IAS 7 STATEMENT OF CASH FLOWS – DISCLOSURE INITIATIVE AMENDMENTS
The amendments to IAS 7 are part of the IASB’s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. These amendments will be effective from 1 July 2017 and are not expected to have a significant impact on the Group’s disclosure.
IAS 12 INCOME TAXES – RECOGNITION OF DEFERRED TAX ASSETS FOR UNREALISED LOSSES AMENDMENTS
The amendments clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value. These amendments will be effective from 1 July 2017 and are not expected to have a significant impact on the Group’s disclosure.