The group is reporting for the first time in accordance with International Financial Reporting Standards (IFRS) for the year ended 31 August 2006 and accordingly, comparative figures have been restated. The unaudited results for the year ended 31 August 2006 have been prepared in accordance with the group’s accounting policies, which comply with IFRS. These standards are subject to ongoing review and possible amendment by interpretive guidance from the International Financial Reporting Interpretations Committee. The results may therefore be subject to change at future reporting dates. A full set of the group’s accounting policies are available on request from the company’s registered office. The disclosures required in terms of IFRS 1 – First time adoption of IFRS concerning the transition from South African Statements of Generally Accepted Accounting Practice and the requisite changes in accounting policies are set out below and as part of the Statement of Changes in Equity above.
The group has applied IFRS 2 – Share-based payments to all options granted after 7 November 2002 which had not vested at 31 August 2004. The fair value of these options were determined at the grant date using the Binomial option pricing model. The fair value of the options that are expected to vest have been amortised over the vesting period. The cumulative value amortised at 31 August 2006 amounts to R20.0 million.
The provisions of IFRS1 have required the group to re-recognise trademarks to the value of R372 million which were written off against share premium in 1996. These trademarks are treated as intangibles with indefinite useful lives in accordance with IAS38 – Intangible assets. Accordingly these trademarks are not amortised, but are subject to an annual impairment test.
The group has revised its assessment of the residual values and remaining useful lives of its assets in accordance with IAS16 – Property, plant and equipment. The historic impact was not considered material and has accordingly been adjusted for prospectively. The change relates to land and buildings and motor vehicles.
Rebates, settlement discounts and distribution costs have been included as part of the cost of merchandise which has had the effect of reducing the value of inventories. In addition, the group has historically used the Retail Inventory Method to estimate the first-in-first-out (FIFO) cost of inventory. The assumptions and methodology applied by the group in using the Retail Inventory Method were reviewed and refined during the year in the context of more reliable information becoming available, to more accurately reflect the FIFO cost of inventory.
Irrecoverable debtors’ balances represent amounts that should have been impaired in previous years.
Leave pay and bonus accruals related to known over and underprovisions in the years indicated.
Onerous leases relate to onerous contract costs which had previously not been accrued for.
In addition to the reallocation of rebates and settlement discounts from other income to gross profit and the reallocation of distribution costs from operating expenses to gross profit as described above, the group has also reallocated distribution and logistic fee income in its pharmaceutical distribution business from gross profit to other income.