accounting policy for the year ended 30 September 2009
| 1. | Basis of preparation | |
| The annual financial statements have been compiled on the historical cost basis, except where noted otherwise, in accordance with International Financial Reporting Standards (IFRS). | ||
| Accounting policies have been applied consistently with those of the previous year. | ||
| The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 2. | ||
| Interpretations and amendment to published standards effective in
2009: The following interpretations to existing standards are mandatory for accounting periods beginning on or after 1 October 2008: |
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| IFRIC Interpretation 12 – Service Concession Arrangements IFRIC 12 addresses how service concession operators should apply existing IFRSs to account for the obligations they undertake and rights they receive in service concession arrangements. This interpretation is not relevant to the Group’s operations. |
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| IFRIC Interpretation 13 – Customer Loyalty Programmes IFRIC 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points, free products or vouchers), the arrangement is a multiple element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement in using fair values. This interpretation did not have a significant impact on the Group’s financial statements. |
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| IFRIC Interpretation 14 – The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction IFRIC 14 provides general guidance on how to assess the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected when there is a statutory or contractual minimum funding requirement. This interpretation did not have any impact on the Group’s financial statements. |
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| IFRIC Interpretation 16 – Hedges of a Net Investment in a Foreign Operation IFRIC 16 provides guidance on identifying the foreign currency risks that qualify as a hedged risk in the hedge of a net investment in a foreign operation. It secondly provides guidance on where, within a group, hedging instruments that are hedges of a net investment in a foreign operation can be held to qualify for hedge accounting. Thirdly, it provides guidance on how an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item. This interpretation is not relevant to the Group’s operations. |
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| Amendment to IAS 39 – Financial Instruments: Recognition and Measurement and IFRS 7 – Financial Instruments: Disclosures – Reclassification of Financial Assets The amendments introduce the possibility of reclassifications for certain financial assets previously classified as 'held-for-trading' or 'available-for-sale' to another category under limited circumstances. Various disclosures are required where a reclassification has been made. Derivatives and assets designated as 'at fair value through profit or loss’ under the fair value option are not eligible for this reclassification. The amendment did not have an impact on the Group’s financial statements. |
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| Standards, interpretations and amendments to published standards that are not yet effective and have not been early adopted by the Group: The following are published new standards, amendments and interpretations to existing standards that are mandatory for the Group’s accounting periods beginning on or after 1 October 2009 or later periods, but which the Group has not early adopted voluntarily. (The effective dates stated below refer to periods beginning on or after the stated dates): |
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| Improvements to IFRSs (effective on or after 1 January
2009/on or after 1 July 2009/on or after 1 January 2010) This is a collection of amendments to IFRSs. These amendments are the result of conclusions the International Accounting Standards Board (IASB) reached on proposals made in its annual improvements project for 2008 and 2009.The annual improvements project provides a vehicle for making non-urgent, but necessary amendments to IFRSs. Some amendments involve consequential amendments to other IFRSs. |
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| Amendment to IFRS 2 – Share-based payments (effective from 1 January 2009) An amendment to the current IFRS 2 has been published which will be applicable to the Group for the year ending 30 September 2010. The amendment deals with two matters. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. It is not expected to have a material impact on the Group. |
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| IFRS 3 – Business combinations (effective from 1 July 2009) The revised standard continues to apply the acquisition method to business combinations, with some significant changes. All payments to purchase a business are to be recorded at fair value at acquisition date with contingent payments classified as debt subsequently re-measured through the income statement. There is also a choice on an acquisition-by-acquisition basis to measure non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition related costs should be expensed. The Group will apply IFRS 3 (Revised) prospectively to all business combinations from 1 October 2009. |
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| Amendment to IFRS 7 – Financial instruments: Disclosures (effective from 1 January 2009) The amendments were issued as part of the IASB’s response to the global financial crisis. The amendments increase the disclosure requirements regarding fair value measurement and reinforces existing principles for disclosure regarding liquidity risk. The amendments introduce a three-level hierarchy for fair value measurement disclosure and requires some specific quantitative disclosures for financial instruments in the lowest level in the hierarchy. In addition, the amendments clarify and enhance existing requirements for the disclosure of liquidity risk primarily requiring a separate liquidity risk analysis for derivative and non-derivative financial liabilities. The Group will apply the amendments from 1 October 2009. |
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| IFRS 8 – Operating segments (effective from 1 January 2009) IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131 – Disclosures about Segments of an Enterprise and Related Information. The standard requires a management approach to reporting on financial performance of operating segments, but needs to be reconciled to IFRS amounts reported. The standard is effective for the Group from its 30 September 2010 year-end. The Group is in the process of implementing the standard. |
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| IAS 1 – Presentation of financial statements – Revised
(effective from 1 January 2009) The changes made to IAS 1 require information in financial statements to be aggregated on thenbsp;basis of shared characteristics and to introduce a statement of comprehensive income. This will enable readers to analyse changes in a company’s equity resulting from transactions with owners in their capacity as owners separately from 'non-owner' changes. The revisions include changes in the titles of some of the financial statements to reflect their function more clearly. The new titles are not mandatory for use in financial statements. Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the start of the comparative period in addition to the current period and comparative period. The Group will comply with the disclosure amendments introduced by this standard. |
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| IAS 23 - Borrowing Costs – Revised (effective from 1 January 2009) The amendment to IAS 23 - Borrowing Costs, requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of the asset. The option of immediately expensing those borrowing costs will be removed. The Group will apply IAS 23 prospectively as from 1 October 2009. |
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| IAS 27 – Consolidated and separate financial statements – Revised (effective from 1 July 2009) IAS 27 requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control. They will no longer result in goodwill or gains and losses. The standard also specifies the accounting treatment when control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in profit or loss. The Group will apply the changes prospectively from 1 October 2009. |
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| Amendment to IAS 32 – Financial Instruments: Presentation and IAS 1 – Presentation of financial statements – Puttable Financial Instruments
and Obligations Arising on Liquidation (effective from 1 January 2009) The amendments require entities to classify the following types of financial instruments as equity, provided they have particular features and meet specific conditions: a) puttable financial instruments (for example, some shares issued by co-operative entities); b) instruments, or components of instruments, that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation (for example, some partnership interests and some shares issued by limited life entities). Additional disclosures are required regarding the instruments affected by the amendments. The Group will apply the IAS 32 and IAS 1 amendments from 1 October 2009. It is not expected to have a material impact on the Group. |
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| Amendments to IAS 39 – Financial Instruments: Recognition and Measurement: Exposures Qualifying for Hedge Accounting (effective 1 July 2009) The amendment makes two significant changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. The Group will adopt these amendments in its financial year ending 30 September 2010. |
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| IFRIC Interpretation 17 – Distribution of Non-cash Assets to Owners(effective 1 July 2009) IFRIC 17 applies to the accounting for distributions of non-cash assets (commonly referred to as dividends in specie) to the owners of the entity. The interpretation clarifies that: a dividend payable should be recognised when the dividend is appropriately authorised and is no longer at the discretion of the entity; an entity should measure the dividend payable at the fair value of the net assets to be distributed; and an entity should recognise the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss. The Group will adopt this interpretation in its financial year ending 30 September 2010. |
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| The initial application of the above Standards or Interpretations in future financial periods are not expected to have a significant impact on the Group’s reported results. | ||
| The following standards, interpretations and amendments will not affect the Group’s reported results or financial position: | ||
| IFRS 1 – First-Time Adoption of International Financial Reporting Standards and IAS 27 – Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 January 2009) The amendment allows first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removed the definition of the cost method from IAS 27 and replaced it with a requirement to present dividends as income in the separate financial statements of the investor. |
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| IFRIC Interpretation 15 – Agreements for the Construction of Real Estate (effective 1 January 2009) IFRIC 15 addresses diversity in accounting for real estate sales. IFRIC 15 clarifies how to determine whether an agreement is within the scope of IAS 11 – Construction contracts or IAS 18 – Revenue and when revenue from construction should be recognised. The guidance replaces example 9 in the appendix to IAS 18. |
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| IFRIC Interpretation 18 – Transfers of Assets from Customers (effective 1 July 2009) The standard, which will be applicable to the Group for the year ending 30 September 2010, clarifies the accounting treatment of agreements in which an entity receives an item of property, plant and equipment from a customer that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services. |
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| AC 504 – IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction in the South African Pension Fund Environment (effective from 1 April 2009) The interpretation provides guidance on the application of IFRIC 14 (AC 447) in South Africa in relation to defined benefit pension obligations (governed by the Pension Funds Act, 1956) within the scope ofIAS 19 (AC 116). |
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| AC 503 – Accounting for Black Economic Empowerment Transactions – Revised
(effective from 1 January 2009) The Accounting Practices Committee has revisited AC 503 in light of the amendments to IFRS 2. As a result of these amendments, paragraphs 18 to 25 and the related Illustrative Examples and Basis for Conclusions of AC 503 have been revised to take into account the amended definition of vesting conditions and the accounting treatment of non-vesting conditions. |
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| Amendments to IFRIC 9 – Reassessment of Embedded Derivatives and IAS 39 – Financial Instruments: Recognition and Measurement (effective from 1 July 2009) The amendments clarify that if an asset is reclassified under the amendment to IAS 39 and IFRS 7 it must be assessed for embedded derivatives at the date of reclassification. In addition, a contract that includes an embedded derivative that cannot be separately measured, is prohibited from being reclassified out of the ‘at fair value through profit or loss’ category. |
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| Amendments to IFRS 2 – Group cash-settled share-based payment transactions (effective from 1 January 2010) The amendment clarifies the accounting for group cash-settled share-based payment transactions. The entity receiving the goods or services shall measure the share-based payment transaction as equity-settled only when the awards granted are its own equity instruments, or the entity has no obligation to settle the share-based payment transaction. The entity settling a share-based payment transaction when another entity in the Group receives the goods or services recognises the transaction as equity-settled only if it is settled in its own equity instruments. In all other cases, the transaction is accounted for as cash-settled. |
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| Use of adjusted measures The measure explained below (items of a capital nature) is presented as management believes it to be relevant to the understanding of the Group’s financial performance. These measures are used for internal performance analysis and provide additional useful information on underlying trends to equity holders. These measures are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other entities. It is not intended to be a substitute for, or superior to, measures as required by IFRS. |
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| Items of a capital nature Income or expenditure of a capital nature on the face of the income statement, being all income statement items of a capital nature are excluded in the calculation of headline earnings per share. The principal items that will be included under this measurement are: gains and losses on disposal and scrapping of property, plant and equipment, intangible assets and assets held-for-sale; impairments or reversal of impairments; any non-trading items such as gains and losses on disposal of available-for-sale financial assets, operations and subsidiaries. |
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| 2. | Basis of consolidation | |
| Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The consolidated annual financial statements include those of the Company and all its subsidiaries. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries. |
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| The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the net assets acquired in the subsidiary is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. | ||
| Subsidiaries are excluded from consolidation when control is intended to be temporary because the subsidiary is acquired and held exclusively with the view to its subsequent disposal in the next 12 months. | ||
| Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated and considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. | ||
| The investments in subsidiaries are recorded at cost in the Company’s separate financial statements. | ||
| Treasury shares The cost of treasury shares is presented as a deduction from equity. Shares under option already allocated to staff and unallocated shares are considered as treasury shares and are consolidated as such as part of the Group’s results. |
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| Transactions with minority interests The Group applies a policy of treating transactions with minority interests as transactions with equity owners of the Group. For purchases from minority interests, the difference between any consideration paid and the relevant interest acquired in the carrying value of net assets of the subsidiary is deducted from equity. Differences between the proceeds received and the relevant share of minority interests, for disposals to minority interests, are also recorded in equity. |
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| Joint ventures The Group’s interest in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group financial statements. The Group recognises the portion of gains and losses on the sale of assets by the Group to the joint venture to the extent that it is attributable to other venturers. The Group does not recognise the share of profits or losses from the joint venture that result from the Group’s purchase of assets from the joint venture until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. |
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| Associates Associates are all entities over which the Group has significant influence, but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. |
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| The Group's share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. | ||
| Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. | ||
| 3. | Property, plant and equipment | |
| Land and buildings comprise mainly of factories, depots, warehouses, offices and silos. All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. | ||
| Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which it is incurred. | ||
| Land is not depreciated. Depreciation on property, factory buildings, machinery, vehicles, furniture and equipment is calculated on a straight-line basis at rates deemed appropriate to write off the cost of the assets to their residual values over their expected useful lives. | ||
| The expected useful lives are as follows: | ||
| * Buildings | 10 – 25 years | |
| * Poultry houses | 25 years | |
| * Plant, machinery and equipment | 3 – 30 years | |
| * Vehicles | 3 – 20 years | |
| The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. | ||
| Gains and losses on disposals of fixed assets are determined by comparing proceeds with the carrying amounts. These are included in the income statement. | ||
| 4. | Intangible assets | |
| Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired entity at the date of the acquisition. Goodwill arising from business combinations is included in ‘intangible assets’ whereas goodwill on acquisition of associates is included in ‘investments in associates’ and is tested for impairment as part of the overall balance. |
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| The excess of the purchase price over the carrying amount of minority interest, when the Group increases its interest in an existing subsidiary, is recognised in equity. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. | ||
| Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. | ||
| Trademarks and intellectual property Trademarks and intellectual property are shown at historical cost. Subsequently these intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Intellectual property has finite useful lives. The useful lives of trademarks are either finite or indefinite. |
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| Intellectual property and trademarks with finite useful lives are amortised over their useful lives and assessed for impairment when there is an indication that the assets may be impaired. Amortisation is calculated using the straight-line method over these intangible assets’ estimated useful lives of between 5 to 25 years. | ||
| 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. Trademarks with indefinite useful lives are not amortised, but tested annually for impairment, either on an individual basis or as part of a cash-generating unit. The useful lives of these intangible assets are reviewed at the end of each period to determine whether events and circumstances continue to support an indefinite useful life assessment for those trademarks. | ||
| Computer software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of between 2 to 5 years. |
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Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Development costs that are directly attributable to the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets when the following criteria are met:
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| Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditure that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Computer software development costs recognised as assets are amortised over their estimated useful lives of between 1 to 5 years. | ||
| 5. | Impairment of non-financial assets | |
| Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. | ||
| The recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets, other than goodwill, that have suffered impairment, are reviewed for possible reversal of the impairment at each reporting date. | ||
| 6. | Financial assets | |
| 6.1 | Classification | |
The Group classifies its financial assets in the following categories:
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| The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. | ||
| Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held-for-trading unless they are designated as hedges. The Group's financial instruments at fair value through profit or loss comprise of "derivative financial instruments". |
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| Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group's loans and receivables comprise of "trade and other receivables", "loans to joint ventures" and "cash and cash equivalents" in the balance sheet. |
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| Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. |
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| 6.2 | Recognition and measurement | |
| Regular purchases and sales of financial assets are recognised on trade date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. | ||
| Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest rate method. | ||
| Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in the income statement in the period in which they arise. | ||
| Gains or losses arising from changes in the fair value of available-for-sale financial assets are presented in the statement of changes in equity in the period in which they arise. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as 'items of a capital nature'. Dividend income from available-for-sale equity instruments is recognised in the income statement as part of investment income when the Group’s right to receive payments is established. | ||
| The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs. | ||
| 6.3 | Impairment | |
| The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, is removed from equity and recognised in the income statement. Impairment losses on equity instruments recognised in the income statement are not reversed through the income statement. Impairment testing on trade receivables is described in note 9 of the Accounting policy. | ||
| 7. | Biological assets | |
| Biological assets are measured on initial recognition and at the end of each reporting period at fair value less cost to sell. Changes in the measurement of fair value less cost to sell are included in profit or loss for the period in which it arises. All costs incurred in maintaining the assets are included in profit or loss for the period in which it arises. | ||
| Fair values of livestock held for breeding, lay-hens, broilers and hatching eggs are determined with reference to market prices of livestock of similar age, breed and genetic material. | ||
| Fair value of vineyards is calculated as the future expected net cash flows from the asset, discounted at a current market-determined rate, over the remaining useful life of the vineyards. | ||
| 8. | Inventories | |
Inventory is valued at the lower of cost or net realisable value. Cost in each category is determined as follows:
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| The cost of finished goods comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Costs of inventories include the transfer from equity of any gains or losses on qualifying cash flow hedges relating to purchases of raw materials. | ||
| 9. | Trade receivables | |
| Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. | ||
| The amount of the provision for impairment of trade receivables is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement within ‘other operating expenses’. The carrying amount of the asset is reduced through the use of an allowance account. When trade receivables are uncollectible, it is written off as ‘other operating expenses’ in the income statement. Subsequent recoveries of amounts previously written off, are credited against ’other operating expenses’ in the income statement. | ||
| 10. | Cash and cash equivalents | |
| Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of six months or less and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. | ||
| 11. | Share capital | |
| Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of income tax, from the proceeds. | ||
| Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Group's equity holders until the shares are cancelled, re-issued or disposed of. Where such shares are subsequently sold or re-issued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Group’s equity holders. | ||
| 12. | Borrowings | |
| Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. | ||
| 13. | Provisions | |
| Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. | ||
| Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. | ||
| Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as an interest expense. | ||
| 14. | Trade payables |
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| Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method. | ||
| 15. | Current and deferred income tax |
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| The income tax expense for the period comprises current and deferred income tax. Income tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case, the income tax is also recognised in equity. | ||
| The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group’s subsidiaries, joint ventures and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. | ||
| Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. | ||
| Deferred income tax assets relating to unused tax losses are recognised to the extent that it is probable that future taxable profits will be available against which the unused losses can be utilised. | ||
| Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the Group controls the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. | ||
| 16. | Secondary taxation on companies | |
| South African resident companies are subject to a dual corporate tax system. One part of the tax being levied on taxable income and the other, secondary tax on companies (STC), on distributed income. A company incurs a STC charge on the declaration or deemed declaration of dividends, as defined in the Income Tax Act, to its shareholders. STC is not a withholding tax on shareholders, but a tax on companies. | ||
| The STC consequence of dividends is recognised as a taxation charge in the income statement in the same period that the related dividend is accrued as a liability. The STC liability is reduced by dividends received during the dividend cycle. Where dividends declared exceed the dividends received during a cycle, STC is payable on the net amount at the current STC rate. Where dividends received exceed dividends declared within a cycle, there is no liability to pay STC. The potential tax benefit related to excess dividends received, is carried forward to the next dividend cycle as a STC credit. Deferred tax assets are recognised on unutilised STC credits to the extent that it is probable that dividends will be declared against which the unutilised STC credits will be utilised. | ||
| 17. | Revenue recognition | |
| Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown, net of value-added tax, estimated returns, rebates and discounts and after elimination of sales within the Group. | ||
| The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. | ||
| Revenue is recognised as follows: | ||
| Sale of goods Sale of goods are recognised when a Group entity has delivered products to the customer, the customer has accepted the products and the collectability of the related receivables is reasonably assured. No element of financing is deemed present as sales are made within credit terms which are consistent with market practice. |
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| Sale of services Sale of services are recognised in the accounting period in which the services are rendered, by reference to the completion of services provided as a proportion of the total services to be provided. |
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| 18. | Recognition of interest income | |
| Interest income is recognised on a time-proportion basis using the effective interest rate method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flows discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest on impaired loans is recognised using the original effective interest rate. | ||
| 19. | Recognition of dividend income | |
| Dividend income is recognised when the right to receive payment is established. | ||
| 20. | Research and development expenditure | |
| Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technical feasibility and its costs can be measured reliably. Other development expenditure that do not meet these criteria are recognised as an expense as incurred. | ||
| Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised, from the point at which the asset is ready for use, on a straight-line basis over its useful life, not exceeding 5 years. | ||
| 21. | Foreign currency transactions | |
| Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which that entity operates (‘the functional currency’). The consolidated financial statements are presented in South African Rand, which is the Group’s functional and presentation currency. |
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| Transactions and balances Transactions in foreign currency are translated into the functional currency using the exchange rates prevailing at the transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates, are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. |
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| Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the security. Translation differences are recognised in profit or loss, and other changes in the carrying amount are recognised in equity. | ||
| Translation differences on non-monetary financial assets and liabilities, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity. | ||
| Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency of South African Rand are translated into South African Rand as follows:
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| Exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to equity on consolidation. When a foreign operation is partially disposed of or sold, such exchange differences are recognised in the income statement as part of the gain or loss on disposal. | ||
| Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. | ||
| 22. | Accounting for leases: Group company is the lessee | |
| Finance leases Leases of property, plant and equipment, where the Group assumes substantially all the benefits and risks of ownership, are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and the finance charges to achieve a constant rate on the capital balance outstanding. The corresponding rental obligations, net of finance charges, are included in non-current borrowings. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. |
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| Property, plant and equipment acquired under finance lease contracts, are depreciated over the shorter of the lease term or the useful life of the assets. | ||
| Operating leases Leases of assets under which a significant portion of the risks and benefits of ownership are effectively retained by the lessor, are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. |
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| When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty, is recognised as an expense in the period in which termination takes place. | ||
| 23. | Accounting for leases: Group company is the lessor | |
| Operating leases Operating lease assets are included in property, plant and equipment in the balance sheet. These assets are depreciated over their expected useful lives on a basis consistent with similar property, plant and equipment. Rental income is recognised on a straight-line basis over the period of the lease. |
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| 24. | Employee benefits | |
| Retirement scheme arrangements The policy of the Group is to provide retirement benefits for all its employees in the form of a defined contribution plan. A defined contribution plan is a retirement scheme under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the retirement benefits relating to employee service in the current and prior periods. |
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| For defined contribution plans, the Group pays contributions to publicly or privately administered retirement schemes on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. | ||
| Post-retirement medical benefits The Group provides post-retirement medical benefits to some employees, some employed prior to 31 December 1994 and others prior to 31 March 1997, by way of a percentual contribution to their monthly costs. Such benefits are not available to employees employed after these dates. Provision is made for the total accrued past service cost. |
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| Independent actuaries annually determine the accumulated post-retirement medical aid obligation and the annual cost of these benefits. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, are recognised in the income statement over the expected remaining working life of the related existing employees, if such gains and losses exceed the closing balance of the prior year provision by more than 10%. Actuarial gains and losses relating to former employees are recognised immediately in profit or loss. | ||
| Share-based compensation The Group operates equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options or share appreciation rights is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or share appreciation rights granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options or share appreciation rights that are expected to become exercisable. At each balance sheet date, the Group revises its estimates of the number of options or share appreciation rights that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity. |
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| The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium when the options or share appreciation rights are exercised. | ||
| Broad-based employee share scheme The Group introduced a broad-based employee share scheme for all employees, other than management qualifying for the share-based compensation plan. The share scheme is accounted for as a cash-settled share-based payment. In terms of the scheme employees received class A ordinary shares with full voting rights and limited dividend rights until such time as a notional debt has been repaid. Once the notional debt has been repaid, class A ordinary shares will have all the rights similar to ordinary shares. |
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| The cost of cash-settled transactions is measured initially at fair value at the grant date using the Actuarial Binomial Pricing Option Model, taking into account the terms and conditions upon which the instruments were granted. Refer to note 22.2 for further detail. The fair value of the employee services received in exchange for the issue of class A ordinary shares is recognised as an expense over the period until vesting with recognition of a corresponding liability. The liability is remeasured at each balance sheet date up to and including the settlement date with changes in fair value recognised in the income statement. | ||
| Other long-term employee benefits The Group provides for long-service awards that accrue to employees. Independent actuaries calculate the liability recognised in the balance sheet in respect of long-service awards annually. Actuarial gains and losses arising from experience adjustments, and changes in actuarial assumptions, are recognised immediately in the income statement. |
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| Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. |
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| Benefits falling due more than 12 months after balance sheet date are discounted to present value. | ||
| Bonus plans The Group recognises a liability and an expense for bonuses based on a formula that takes into consideration the profit attributable to the Group’s shareholders after certain adjustments. The Group recognises a provision when contractually obliged or where there is a past practice that has created a constructive obligation. |
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| 25. | Derivative financial instruments and hedging activities | |
Derivative financial instruments are mainly used to manage operational exposure to interest rate, foreign
exchange and commodity price risks. Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured at their fair value. The method of recognising the
resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged. The Group designates certain derivatives as either:
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| The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. | ||
| The fair values of various derivative instruments used for hedging purposes are disclosed in note 18. Refer to note 49 for more detail on movements in the hedging reserve. The fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as current assets or liabilities. | ||
| Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Group only applies fair value hedge accounting to hedge changes in the fair value of fixed price commodity purchase commitments, due to changes in the forward price in the market of the related commodity. |
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| Cash flow hedges The effective portion of changes in the fair value of derivatives, that are designated and qualify as cash flow hedges, are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. |
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| Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss. However, when the forecast transaction that is hedged, results in the recognition of a non-financial asset or liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. The deferred amounts are ultimately recognised in cost of goods sold in the case of inventory or in depreciation in the case of property, plant and equipment. The gain or loss relating to the effective portion of interest rate swaps and interest rate collar agreements hedging variable rate borrowings is recognised in the income statement within ‘finance costs’. The gain or loss relating to the ineffective portion is recognised in the income statement within ‘other income’ or ‘other operating expenses’. | ||
| When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised in the income statement when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is transferred immediately to the income statement. | ||
| Embedded derivatives Embedded derivatives are derivative instruments that are embedded in another contract or host contract. The Group separates an embedded derivative from its host contract and accounts for it separately, when its economic characteristics are not clearly and closely related to those of the host contract. These separated embedded derivatives are classified as trading assets or liabilities and marked to market through the income statement, provided that the combined contract is not measured at fair value with changes through the income statement. |
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| Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement within ‘other income’ or ‘other operating expenses’. |
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| 26. | Government grants | |
| Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all the attached conditions. | ||
| Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate. | ||
| Government grants relating to the purchase of property, plant and equipment are included in current liabilities as deferred government grants and are credited to the income statement on a straight-line basis over the expected lives of the related assets. | ||
| 27. | Dividend distribution | |
| Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company’s shareholders. |
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| 28. | Segment reporting | |
| A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. |
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| 29. | Borrowing costs | |
| Borrowing costs are expensed in the income statement during the period in which it is incurred. |
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