EMPLOYEE BENEFITS
Short-term employee benefits
The cost of all short-term employee benefits is recognised
during the period in which the employee renders the related
service. The provisions for employee entitlements to
wages, salaries, performance bonuses and annual leave
represent the amounts which the group has a present obligation
to pay as a result of the employee’s services provided
to the balance sheet date. The provisions have been calculated
at undiscounted amounts based on current wage and salary
levels.
Retirement benefits
Payments to defined contribution retirement benefit
plans are charged as an expense as they fall due. Payments
made to state-managed retirement benefit schemes are
dealt with as defined contribution plans where the group’s
obligations under the schemes are equivalent to those
arising in a defined contribution retirement benefit
plan.
Defined benefit obligations
For defined benefit retirement plans, the cost of providing
benefits is determined using the projected-unit credit
method, with actuarial valuations being carried out annually.
Actuarial gains and losses which exceed 10 per cent
of the greater of the present value of the group’s pension
obligations and the fair value of plan assets are amortised
over the expected average remaining working lives of
the participating employees.
Past service cost is recognised immediately to the extent
that the benefits are already vested, and otherwise is
amortised on a straight-line basis over the average period
until the amended benefits become vested.
The amount recognised in the balance sheet represents
the present value of the defined benefit obligation as
adjusted for unrecognised actuarial gains and losses
and unrecognised past service cost and reduced by the
fair value of plan assets. Any asset resulting from this
calculation is limited to unrecognised actuarial losses
and past service cost, plus the present value of available
refunds and reductions in future contributions to the
plan.
SHARE-BASED PAYMENTS
The group issues equity-settled share-based payments
to certain employees. Equity-settled share-based payments
are measured at fair value at the grant date. The fair
value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis
over the vesting period, based on the group’s estimate
of shares that will eventually vest.
Fair value is measured by use of the binomial pricing
model. The expected lives used in the model have been
adjusted, based on management’s best estimate, for the
effects of non-transferability, exercise restrictions
and behavioural considerations.
BEE transactions
BEE transactions involving the disposal or issue of
equity interests in subsidiaries are recognised when
the accounting recognition criteria have been met.
Although economic and legal ownership of such instruments
have transferred to the BEE partner, the accounting derecognition
of such equity interest sold by the parent company or
recognition of equity instruments issued in the underlying
subsidiary is postponed until the significant risks and
rewards of ownership of the equity have passed to the
BEE partner.
SEGMENT REPORTING
A segment is a distinguishable component of the group
that is engaged either in providing products or services
(business segment), or in providing products or services
within a particular economic environment (geographic
segment), which is subject to risks and rewards that
are different from those of other segments. The group’s
primary business segmentation is based on the group’s
internal reporting format to management.
CRITICAL JUDGEMENTS AND ESTIMATIONS
In preparing the financial statements in conformity
with IFRS, the board of directors has made the following
significant judgements, estimates and assumptions:
Contracts in progress
Various assumptions are applied in arriving at the profit
or loss recognised on contracts in progress. Refer to
the revenue accounting policy for more detail.
Provisions
Various assumptions are applied in arriving at the carrying
value of provisions that are recognised in terms of the
requirements of IAS 37 Provisions, Contingent Liabilities
and Contingent Assets. This includes the provision
for warranty claims and contract completion. The carrying
amounts of the provisions are disclosed in note 25.
Impairments
Property, plant and equipment as well as intangible
assets are considered for impairment when conditions
indicate that impairment may be necessary and is considered
at least annually. The discounted cash flow method is
used, taking into account future expected cash flows,
market conditions and the expected useful lives of the
assets.
Assumptions were made in assessing any possible impairment
of goodwill. Details of these assumptions and risk factors
are set out in note 12.
Useful lives and residual values
The useful lives and residual values of property, plant
and equipment and intangible assets are reviewed at each
balance sheet date. These useful lives are estimated
by management based on historic analysis and other available
information. The residual values are based on the assessment
of useful lives and other available information.
Deferred taxation assets
Judgement is applied by management to determine whether
a deferred taxation asset should be recognised in the
event of a tax loss, based on whether there will be future
taxable income against which to utilise the tax loss.
Retirement benefit obligation
Various assumptions have been applied by the actuaries
in the calculation of the retirement benefit obligation.
The assumptions are disclosed in note 29 to the annual
financial statements.
Deferred tax on fair value of available-for-sale financial
asset
In management’s opinion the group’s available-for-sale
financial asset will be realised through a sale. As a
result, the capital gains tax rate has been used to determine
the deferred tax liability resulting from the fair valuation
of the asset. |
