114 / 248
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
CONTINUED
For the year ended 31 May 2015
112
BLUE LABEL INTEGRATED ANNUAL REPORT 2015
1.
SIGNIFICANT ACCOUNTING POLICIES continued
Starter pack assets
A starter pack is a tool which enables the connection of a mobile device to a mobile network operator,
also known as a subscriber identity module (SIM) card.
The starter pack asset represents starter packs which have been distributed but not yet activated. On
activation of the starter pack, the Group has a right to receive cash. Starter packs are stated at cost
less provision for impairment and are determined by means of the weighted average cost basis.
Provision for impairments are made for starter packs distributed but not expected to be activated.
Inventories
Inventories are stated at the lower of cost or estimated net realisable value. Cost comprises direct
materials and, where applicable, overheads that have been incurred in bringing the inventories to their
present location and condition, excluding borrowing costs. The cost of inventory is determined by
means of the weighted average cost basis. Net realisable value is the estimate of the selling price in
the ordinary course of business, less selling expenses. Provisions are made for obsolete, unusable and
unsaleable inventory and for latent damage first revealed when inventory items are taken into use or
offered for sale.
Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the
ordinary course of business. If collection is expected in the normal operating cycle of the business,
they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest rate method, less provision for impairment. A provision for impairment of
trade receivables is established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of receivables. The amount of the provision is
the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. The amount of the provision is recognised in
the statement of comprehensive income.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term
highly liquid investments with original maturities of three months or less.
Share capital
Ordinary shares are classified as equity and the shares are fully paid up.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Share issue costs incurred directly in connection with a
business combination are shown as a deduction from equity.
Shares acquired by Blue Label Telecoms for its own employees’ equity compensation benefit scheme,
as well as the shares procured by the subsidiaries in terms of this scheme, are accounted for as
treasury shares in the Group statement of financial position.