Accounting policy and comparative figures INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) With effect from 1 July 2005, Distell is required to prepare its consolidated financial statements in accordance with IFRS. Consequently, the first published IFRS results are the interim results for the six months ended 31 December 2005. Distell’s first complete set of financial statements under IFRS will be for the year ending 30 June 2006. As comparative information is also reported, the date for the transition to IFRS is effectively 1 July 2004. IFRS 1 “First-time adoption of IFRS” has been applied and the results for the comparative periods have been restated accordingly. The detailed IFRS Transition report will be included in the interim report mailed to shareholders and featured on the website at These interim results have been prepared in accordance with IAS 34 “Interim Financial Reporting” and IFRS expected to be applicable on 30 June 2006. In October 2005 the group entered into a broad-based Black Economic Empowerment transaction with a consortium that includes investment group, Wiphold; all Distell’s employees and a Corporate Social Investment Trust. The cost of this transaction to Distell’s shareholders, calculated by using an option pricing model, equates to R122,3 million. Based on IFRIC 8 “Scope of IFRS 2” issued in January 2006, IFRS 2 “Share-based payments” will apply to the non-employee portion of the BEE transaction. Earlier application of this Interpretation is being adopted, resulting in an non-recurring expense of R67,3 million and a corresponding increase in equity. No further measurement or adjustments are required as it is presumed that the BEE credentials are received upfront. The R55,0 million relating to the employee portion of the BEE transaction is being expensed over a vesting period of 8 years in terms of IFRS 2 at R6,9 million per year, commencing from the current financial year. COMPARATIVE FIGURES Comparative figures for the year ended 30 June 2005 and the six months to 31 December 2004 have been restated to reflect the changes relating to the adoption of IFRS. Adjustments which reflect the major differences between South African Statements of Generally Accepted Accounting Practice (“SA GAAP”) and IFRS are noted below. The adjustments are shown net of taxation where applicable. Share-based payments In accordance with the requirements of IFRS 2, the fair value of outstanding employee share options granted since 7 November 2002 to participants under the Distell Group Share Trust, has been recognised as an expense in the income statement over the vesting period, with a corresponding credit to equity. Property, plant and equipment Past interpretation of SA GAAP did not provide for the re-assessment of an asset’s useful life and residual value annually. The revised statement version of IAS 16 requires useful lives and residual values of assets to be reviewed at least at each financial year-end. This resulted in an increase in distributable reserves with a corresponding increase in Property, plant and equipment. Foreign currency transactions In accordance with IAS 21 “The Effects of Changes in Foreign Exchange Rates”, no distinction is made between integral foreign operations and foreign entities and all assets and liabilities of foreign operations must be translated from their respective functional currencies into the group’s presentation currency using the year-end exchange rates, and their income and expenses using the average exchange rates. Gains or losses resulting from translation of functional currencies to the presentation currency must be reflected as a separate component of shareholders’ equity. Proportionate consolidation of Afdis Holdings (Private) Ltd (50%) Afdis Holdings (Private) Limited (“Afdis Holdings”), a company registered in Zimbabwe, was not previously consolidated under SA GAAP due to the severe currency and long-term restrictions which significantly impaired its ability to transfer funds to its shareholders. In terms of IFRS, this exemption is prohibited and as a result this entity is now required to be proportionately consolidated in accordance with IAS 31 “Interest in Joint Ventures”.