For the year ended 31 march 2013
The condensed consolidated provisional annual financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and in compliance with the Listings Requirements of the Johannesburg Stock Exchange Limited (JSE) and the South African Companies Act, 2008.
The condensed consolidated provisional annual financial statements are presented in South African Rand, which is the Group's functional currency. All financial information presented in Rand has been rounded to the nearest million.
The condensed consolidated provisional annual financial statements are prepared on the historical cost basis, with the exception of certain financial instruments initially (and sometimes subsequently) measured at fair value. Details of the Group's significant accounting policies are set out below, and are consistent with those applied in the previous financial year except for the following:
In preparing these condensed consolidated provisional annual financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those applied to the consolidated financial statements for the year ended 31 March 2012.
Except as described below the accounting policies applied by the Group in the condensed consolidated provisional annual financial statements are consistent with those applied in the prior year.
IFRS 10 replaces the part of IAS 27 Consolidated and Separate Financial Statements that deals with consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. Management assessed whether or not the Group has control over its investees (previously consolidated or not) in accordance with the new definition of control and the related guidance set out in IFRS 10. The standard had no impact on the Group as entities controlled and consolidated by Telkom have not changed as a result of adopting IFRS 10. There are no additional entities that require consolidation as a result of the adoption of IFRS 10.
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers. IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. There are two types of joint arrangements under IFRS 11: joint operations and joint ventures. These two types of joint arrangements are distinguished by parties' rights and obligations under the arrangements. The previous accounting policy under IAS 31 was to equity account for joint ventures. Management reviewed and assessed the legal form of the contractual arrangements in relation to the Group's investments in joint arrangements. The application of IFRS 11 has changed the classification of the Group's investment in the Number Portability Company, which was classified as a jointly controlled entity under the previous standard and was accounted for using the equity method. Under IFRS 11 the Number Portability Company is classified as an associate and will continue to be accounted for using the equity method.
IFRS 12 specifies the minimum disclosures that are applicable to entities that have interests in subsidiaries, joint arrangements, associates or unconsolidated structured entities. The objective of IFRS 12 is that entities should disclose information that helps users of financial statements evaluate the nature of and risks associated with its interests in other entities and the effects of those interests on their financial statements. The adoption of the new standard has resulted in comprehensive disclosures relating to Subsidiaries, Joint arrangements, Associates and unconsolidated structured entities in the consolidated annual financial statements.
The amendments provide additional transition relief for entities adopting IFRS 10, 11 and 12 by limiting the requirement to provide adjusted comparative information to only the preceding comparative period. Amendments to IFRS 11 and 12 eliminate the requirement to provide comparative information for periods prior to the immediately preceding comparative period.The amendment also makes provision for interests in investees that were disposed of during a previous reporting period, such that consolidation would not occur with either IAS 27 / SIC-12 or IFRS 10 at the date of initial application. As such arrangements disposed of by Telkom prior to 1 April 2012 were not reassessed. IFRS 12 was also amended to no longer require the disclosure of comparative information for unconsolidated structured entities. The transitional guidance had no impact on the Group.
IFRS 13 provides a new definition of fair value and a single source of guidance for all fair value measurements used in IFRS financial statements. The proposed disclosures increase transparency about fair value measurements, including the valuation techniques and inputs used to measure fair value. The standard will have a potential fair value impact on non-recurring, non-financial assets and liabilities that are measured at fair value less cost to sell (i.e. IFRS 5 and IAS 36) and fair value disclosure impact for IFRS 13. The Group is already complying with enhanced disclosures. A large amount of disclosures are required for instruments categorised under level 3 of the hierarchy. Currently, there are no recurring fair value measurements falling under level 3 but new items falling under this category will trigger additional disclosure requirements in the future. IFRS 13 also requires various disclosures on items not measured at fair value, but for which fair value needs to be disclosed. These additional disclosures are provided in note 11. The standard had no material impact on the Group.
The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single continuous statement or in two separate but consecutive statements. The amendments require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that might be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis. Entities also have the option of changing the title of the 'Statement of comprehensive income' to 'Statement of profit or loss and other comprehensive income'. Telkom opted to change the name accordingly. The amendments resulted in a change in presentation but had no impact on the recognition or measurement of items in the financial statements. The relevant disclosures are provided in the Statement of profit or loss and other comprehensive income.
The annual improvements project amendment also clarifies the difference between voluntary additional comparative information and the minimum required comparative information. The requirements for comparative information have been clarified in two areas. Firstly, when an entity voluntarily presents comparative information in excess of the minimum requirements, the additional comparative information disclosed need not represent a full set of financial statements, but must include notes. Secondly, when there is a change in accounting policy, retrospective restatement or reclassification, an entity must present a third statement of financial position at the beginning of the preceding period, but need not present notes for the opening statement (of financial position). The Group will apply the amendments when appropriate.
The revised IAS 27 supersedes the previous IAS 27 (2008). The standard requires an entity that prepares separate financial statements, to account for the investments in subsidiaries, joint ventures and associates either at cost or in accordance with IAS 39 / IFRS 9. The adoption of the standard will not have an impact on the Group as the Group already accounts for all investments either at cost or in accordance with IAS 39.
The main purpose of revising the standard was to include consequential amendments of issuing a new standard, IFRS 11 Joint Arrangements, which replaced IAS 31 Interests in Joint Ventures. The standard outlines how to apply, with certain limited exceptions, the equity method to investments in associates and joint ventures. The standard also defines an associate by reference to the concept of 'significant influence', which requires power to participate in financial and operating policy decisions of the investee, but not joint control or control of those policies. As a consequence of the amendment the Group changed the classification of the Number Portability Company from a joint venture to an associate. All joint ventures and associates were previously accounted for according to the equity method and this did not change.
Two amendments were made to Circular 3/2009 Headline Earnings and consequently a replacement circular, Circular 3/2012 Headline Earnings was issued. The first amendment made to the rule table ensures that the tax effects of items excluded from headline earnings are also excluded from the calculation of headline earnings. The second amendment relates to the compensation received from third parties for items of property, plant and equipment that were impaired, lost or given up. The amendment ensures that the treatment of this compensation is excluded from the calculation of headline earnings in order to achieve consistency with the manner in which the loss was treated for headline earnings. The first amendment is already applied by the Group. The second amendment had no impact on the Group.
Standard(s), Amendment(s), Interpretation(s) |
Salient feature of the changes |
Effective date |
|---|---|---|
| IFRS 1 Severe Hyperinflation | Amendments regarding severe hyperinflation provide guidance for entities emerging from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial statements for the first time | 1 July 2011 |
| IFRS 1 Removal of Fixed Dates for First Time Adopters | The amendments regarding the removal of fixed dates provide relief to first-time adopters of IFRSs from reconstructing transactions that occurred before their date of transition to IFRSs | 1 July 2011 |
| IFRS 7 Financial Instruments Disclosures | Amendments enhancing disclosures about transfers of financial assets | 1 July 2011 |
| IFRS 10 Consolidated Financial Statements;IFRS 12 Disclosure of Interests in Other Entities;IAS 27 Separate Financial Statements | Amendments providing investment entities an exemption from the consolidation of particular subsidiaries. The subsidiaries exempt from consolidation are measured at fair value through profit or loss in accordance with IFRS 9/IAS39 | 1 January 2014 |
| IAS 12 Income Taxes | Rebuttable presumption introduced that an investment property will be recovered in its entirety through sale. The amendment also introduces the requirement that deferred tax on non-depreciable assets measured using the revaluation model in IAS 16 should always be measured on a sale basis. | 1 January 2012 |
| IAS 27 Separate Financial Statements | Amendment requires an investment entity to account for its investment in a relevant subsidiary in the same way in its consolidated and separate financial statements or to provide separate financial statements if all subsidiaries are unconsolidated. | 1 January 2014 |
Standards and interpretations in issue not yet adopted and not yet effective
The following new standards, amendments to standards and interpretations in issue have not yet been adopted and are not yet effective. All standards are effective for annual periods beginning on or after the effective date
Pronouncement |
Title |
Effective date |
|---|---|---|
| IFRS 1 First-time Adoption of IFRS | Amendments permits the repeated application of IFRS 1, borrowing costs on certain qualifying assets | 1 January 2013 |
| IFRS 1 First-time Adoption of IFRS | Amendment addresses how a first-time adoptee would account for a government loan with a below market rate of interest | 1 January 2013 |
| IFRS 7 Financial Instruments Disclosures | Amendments enhancing disclosures about offsetting of financial assets and financial liabilities | 1 January 2013 |
| IFRS 7 Financial Instruments Disclosures | Amendments requiring disclosures about the initial application of IFRS 9 | 1 January 2015 |
| IFRS 9 Financial Instruments | Classification and measurement of financial assets and financial liabilities and derecognition requirements | 1 January 2015 |
| IAS 16 Property, Plant and Equipment | Classification of service equipment | 1 January 2013 |
| IAS 19 Employee Benefits* | Amended Standard resulting from the Post-Employment Benefits, Short-Term Employee Benefits and Termination Benefits projects | 1 January 2013 |
| IAS 32 Financial Instruments: Presentation | Amendments to clarify tax effect of distribution to holders of equity instruments | 1 January 2013 |
| IAS 32 Financial Instruments: Presentation | Amendments to application guidance on the offsetting of financial assets and financial liabilities and the related net credit exposure | 1 January 2014 |
| IAS 34 Interim Financial Reporting | Amendments to clarify interim reporting segment information for total assets in order to enhance consistency with the requirements of IFRS 8 | 1 January 2013 |
| IAS 36 Impairment of Assets | Amendment to disclosures of the recoverable amount of impaired non-financial assets as a consequence of issuing IFRS 13 Fair Value Measurement. | 1 January 2014 |
| IFRIC 20 Stripping costs in the production phase of a surface mine | Stripping costs in the production phase of a surface mine | 1 January 2013 |
*The adoption will affect Telkom significantly in the 2014 financial year.