Notes to the group annual financial statements | Note 1
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1. Summary of significant accounting policies

The annual financial statements are presented in accordance with, and comply with, International Financial Reporting Standards (IFRS) and the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued and effective at the time of preparing these annual financial statements.The annual financial statements are prepared according to the historic cost convention.

The preparation of the annual financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the group’s accounting policies.These estimates and assumptions affect the reported amounts of assets, liabilities and contingent liabilities at the balance sheet date as well as the reported income and expenses for the year. Although estimates are based on management’s best knowledge and judgement of current facts as at the balance sheet date, the actual outcome may significantly differ from these estimates.

Refer to note 2, as well as the individual notes for details of estimates, assumptions and judgements used.

1.1 Investment in associates

Investments in associated companies are accounted for under the equity method. Associated companies are those companies in which the group generally has between 20% and 50% of the voting rights, or over which the group exercises significant influence, but which it does not control.The group’s investment in associates includes goodwill and other intangible assets identified on acquisition, net of any accumulated amortisation and impairment loss.

Equity accounting involves recognising in the income statement the group’s share of the associate’s post-acquisition results net of taxation and minority interests in the associate.The group’s share of post-acquisition movements in other reserves is accounted for in the other reserves of the group.The group’s interest in the associate is carried on the balance sheet at cost, adjusted for the group’s share of the change in post-acquisition net assets, and inclusive of goodwill and other identifiable intangible assets recognised on acquisitions.Where the group’s share of losses in the associate equals or exceeds the carrying amount of its investment, the carrying amount of the investment, as well as any loans to the associate, is reduced to nil and no further losses are recognised, unless the group has incurred obligations to the associate or the group has guaranteed or committed to satisfy obligations of the associate.

Unrealised gains and losses on transactions between the group and its associates are eliminated to the extent of the group’s interest in the associates, unless the loss provides evidence of an impairment of the asset transferred.

Accounting policies of associates have been changed where necessary to ensure consistency of the policies adopted by the group.

An impairment loss is recognised in the income statement when the carrying amount of an asset exceeds its recoverable amount.An asset’s recoverable amount is the higher of the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable willing parties, or its value in use.Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.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. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

1.2 Financial assets

The classification of financial assets depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Fair value through other comprehensive income financial assets are non-derivatives that are either designated in this category or not classified in any other category. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. During the year and at 31 March 2014, the group and company had no fair value through other comprehensive income financial assets.

1.3 Other receivables

Other receivables are originally carried at fair value and subsequently measured at amortised cost using the effective interest method, less provision made for impairment of these receivables.

1.4 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. Cash and cash equivalents comprise cash on hand and deposits held on call with banks.

1.5 Current and deferred income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken in tax returns with respect to situations where the applicable tax regulations are subject to interpretation and establishes provisions, where appropriate, on the basis of amounts expected to be paid to tax authorities.

The normal South African company tax rate used at the balance sheet date is 28% (2013: 28%).

Deferred income tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the annual financial statements.

1.6 Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments are classified either as financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.

Compound instruments

The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis until extinguished upon conversion or at the instrument’s maturity date.The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not substantially remeasured.

1.7 Revenue recognition

Dividend income is recognised when the right to receive payment is established.

1.8 Borrowing costs

Borrowing costs are recognised in profit or loss in the period in which they are incurred.

1.9 Interest income

Interest is accrued on a time-proportion basis, recognising the effective yield on the underlying assets.

1.10 Dividend distributions

Dividend distributions to the company’s shareholders are recognised as a liability in the company’s financial statements in the period in which the dividends are approved by the company’s shareholders.

1.11 New standards and interpretations

Amendment to IFRS 1
First time adoption on government loans” – 1 January 2013

Amendments to IFRS 7
Financial Instruments Disclosures: Asset and Liability offsetting” – 1 January 2013

IAS 19
Employee Benefits” – 1 January 2013

Financial Instruments (2009)” – 1 January 2015

Financial Instruments (2010)” – 1 January 2015

Amendments to IFRS 9
Financial Instruments (2011)” – 1 January 2015

Consolidated Financial Statements” – 1 January 2013

Joint Arrangements” – 1 January 2013

Disclosure of Interest in Other Entities” – 1 January 2013

Fair Value Measurement” – 1 January 2013

Amendment to IAS 1
Presentation of Financial Statements” on presentation of items of OCI – 1 July 2012

Amendment to IAS 19
Defined Benefit Plan” – 1 July 2014

IAS 27 (revised 2011)
Separate Financial Statements” – 1 January 2013

IAS 28 (revised 2011)
Associates and Joint Ventures” – 1 January 2013

Amendments to IAS 32
Financial Instruments: Presentation” – 1 January 2014

Amendment to the transition requirements in IFRS 10
Consolidated financial statements”, IFRS 11 “Joint Arrangements”, and IFRS 12 “Disclosure of interests in other entities” – 1 January 2013

IASB issues narrow-scope amendments to IAS 36
Impairment of assets” – 1 January 2014

Amendments to IFRS 10
Consolidated Financial Statements”, IFRS 12 and IAS 27 for investment entities – 1 January 2014

IFRS 14 – 1 January 2016

Amendment to IAS 19 regarding defined benefit plan – 1 July 2014