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Distell Group Limited - Transition To International Financial Reporting
Standards ("Ifrs")
DISTELL GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1988/005808/06
Share code: DST
ISIN Code: ZAE000028668
("Distell")
Transition to International Financial Reporting Standards ("IFRS")
Introduction
For the year ended 30 June 2005 Distell prepared its financial statements under
South African Statements of Generally Accepted Accounting Practice ("SA GAAP"),
effective at that date. In accordance with the JSE Limited ("JSE") Listings
Requirements, all listed companies are required to adopt International Financial
Reporting Standards ("IFRS") for years commencing on or after 1 January 2005.
Distell is therefore required to prepare its consolidated financial statements
in accordance with IFRS for the year ending 30 June 2006. As the Group publishes
comparative information for one year in its financial statements, the date for
transition to IFRS is 1 July 2004, which represents the start of the earliest
period of comparative information presented. Distell will also publish its
interim results for the six months ended 31 December 2005 under IFRS.
First-time Adoption of International Financial Reporting Standards ("IFRS 1")
sets out the guidelines for entities to follow in its first set of IFRS
financial statements. Distell has used these guidelines to restate its financial
information previously published under SA GAAP to the equivalent basis under
IFRS. It is important to note that this financial information has been prepared
in accordance with IFRS statements that are expected to be effective as at 30
June 2006. These are subject to ongoing review and possible amendment by
interpretation guidance from the International Accounting Standards Board
("IASB") and may therefore change.
Application of IFRS 1
The date of transition to IFRS for the Group is 1 July 2004 and therefore as
required by IFRS 1, the Group"s opening balance sheet at 1 July 2004 has been
restated to reflect retrospectively all existing IFRS standards and IFRIC
interpretations.
IFRS 1 contains a number of optional exemptions and mandatory exceptions to this
full retrospective application of IFRS and management has considered these
options and has applied the following:
Business combinations
The Group has elected not to apply IFRS 3 Business Combinations retrospectively
to business combinations that occurred prior to 1 July 2004. As a result, the
carrying amount of any goodwill is the amortised amount on 30 June 2004 and
previously amortised goodwill and goodwill eliminated against reserves are not
re-instated.
Property, plant and equipment
A first time adopter may elect to use the fair value of property, plant and
equipment at transition date as the deemed cost. The group is not making use of
this transitional exemption and elects to measure individual items of property,
plant and equipment at depreciated cost determined in accordance with IFRS.
Cumulative translation differences
The cumulative translation differences in respect of the Group"s foreign
operations have been deemed to be zero on the date of transition.
Share-based payments
The Group is electing not to apply the provisions of IFRS 2 - Share-based
payments to equity-settled instruments granted on or before 7 November 2002, or
to equity instruments granted after 7 November 2002 but which had vested prior
to 1 January 2005.
Financial instruments
The Group is electing the exemption not to restate its comparatives for IAS 32
(Financial Instruments - Disclosure and Presentation) and IAS 39 (Financial
instruments - Recognition and Measurement). The Group has applied existing GAAP
applicable as at 30 June 2005 to financial instruments in its 2005 figures that
will be disclosed as comparatives for the 2006 IFRS results.
Designation of financial assets and financial liabilities in terms of IAS 39
In terms of the transitional arrangements the Group is electing the option to
reclassify certain financial assets. The reclassifications are not material.
There are no changes to estimates made under previous SA GAAP for transition to
IFRS. Where estimates have previously been made under SA GAAP, consistent
estimates have been made at the same date.
Adjustments
The bases of the major adjustments are noted below.
Share-based payments
The Group grants share options to participants under the Distell Group Share
Trust. In accordance with the requirements of IFRS 2, the Group has recognised
an expense in the income statement, with a corresponding credit to equity,
representing the fair value of outstanding employee share options. The fair
value of the option at grant date is recognised in the income statement over the
relevant option vesting periods, adjusted to reflect actual and expected levels
of vesting.
Property, plant and equipment
Past interpretation of SA GAAP did not take into account the re-assessment of an
asset"s useful life and residual value on a regular basis.
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.
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 expensed using the
average exchange rates. Gains or losses resulting from translation of functional
currencies to the presentation currency must be included as a separate component
of shareholders" equity.
Reclassifications
Previously the Group disclosed computer software as part of property, plant and
equipment. This balance has now been re-classified to intangible assets in
accordance with IAS 38 ("Intangible Assets").
The net effect of the restatement of financial results, as reported under SA
GAAP, for the year to 30 June 2005 to comply with IFRS will result in about a 1%
increase in the attributable and headline earnings for that year.
The information contained in this announcement has not been audited by the
Group"s auditors, PricewaterhouseCoopers Inc. The Group will prepare its interim
results for the six months to 31 December 2005 under IFRS and the full impact of
IFRS adjustments on the financial results, as previously reported under SA GAAP,
will be disclosed in the Group"s interim report that will be published on 21
February 2006.
22 November 2005
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 22/11/2005 01:15:22 PM Produced by the JSE SENS Department
