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. Distells 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 www.distell.co.za.
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 Distells employees and a Corporate Social Investment Trust. The cost of
this transaction to Distells 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 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
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.
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 assets
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 groups 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