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ABL ABLP
ABL
ABIL - Effects Of Transition To International Financial Reporting Standards
African Bank Investments Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
Ordinary share code: ABL ISIN: ZAE000030060
Preference share code: ABLP ISIN: ZAE000065215
("ABIL")
EFFECTS OF TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
African Bank Investments Limited ("ABIL") will make the transition to
International Financial Reporting Standards (IFRS) for the financial year ending
30 September 2006. In order to facilitate a more meaningful understanding and
comparison of the current year"s results (including interim results), the group
has set out in this document the choices it has made with regard to the adoption
of IFRS and the impact of the changes in the income statements for 2005 as well
as previously reported balance sheet and statements of changes in equity.
In order to achieve a smooth and consistent adoption of IFRS by companies, IFRS
1 sets out the requirements for transition to IFRS. The general principle of
IFRS 1 requires full retrospective application of the IFRS applicable at 30
September 2006, to the opening balance sheet at 1 October 2004, unless various
elections under IFRS 1 are selected. Certain elections allow the applicable IFRS
to be applied retrospectively, i.e. restated back to 1 October 2004, or
prospectively, i.e. implemented from the start of the current year (1 October
2005) with an adjustment to opening reserves.
The group has worked through all the changes from SA GAAP to IFRS, and overall,
the impact of the changes on ABIL is not material. There are broadly three
areas of IFRS that impact the income statement and balance sheet of the group.
IFRS 2, Share-based payments. The group has adopted IFRS 2 for options,
converted options and new long-term incentive plans (LTIP"s), retrospectively.
This results in a charge for the granting of options, matched to the service
life and the creation of a liability for the converted options and new LTIP"s.
IAS 18, Revenue recognition. Administration fees charged on the origination of
loans are required to be deferred and amortised over the life of the loan. This
statement was applied prospectively, and accordingly the deferred revenue
reserve was increased by R81 million on 1 October 2005 with a debit to opening
reserves.
IAS 39, Impairment provisions. The discount rate used for assessing the present
value of expected cashflows has to be increased to the original effective rate
with no adjustment for credit spreads. This statement was applied
prospectively, and this resulted in an R82 million increase in impairment
provisions as at 1 October 2005.
With regard to the BEE programme, which entailed the issue of ABIL shares in
September 2005, at par value, ABIL has elected not to account for this
transaction under IFRS 2 as the implementation date of a new interpretation,
IFRIC 8 - Scope of IFRS 2, which scopes such transactions into IFRS 2, is only
effective for financial periods beginning on or after 1 May 2006.
Overall the impact of the changes was a decrease in the net attributable income
for the 6 months to 31 March 2005 of R12 million and an increase in the net
attributable income for the 12 months to 30 September 2005 of R2 million. In
addition the impact of the retrospective adjustments decreased net asset value
(NAV) by R89 million on 30 September 2005 from R2,211 million to R2 122 million
and the prospective adjustments resulted in a further decrease in NAV on 1
October 2005 of R115 million to R2 007 million.
The net impact of the IFRS changes is primarily a more conservative accounting
treatment for the recognition of income and setting of impairment provisions, as
well as reflecting the economic cost of equity incentive schemes in the income
statement, in the period to which they relate.
None of the changes impact on the underlying cashflows, nor do they change the
economic drivers of the business. In addition these changes will not have a
material effect on the targeted capital of the group, nor its stated dividend
policy.
For a full discussion of the IFRS changes and copies of the restated financial
statements, please refer to our website at www.africanbank.co.za.
Midrand
20 April 2006
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 20/04/2006 02:33:23 PM Produced by the JSE SENS Department
