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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
Notes
to the Group annual financial statements
continued
For the year ended 31 May 2017
2.
Group composition
continued
2.2 Investments in and loans to venture capital associates and joint venture
An associate and joint venture is accounted for as a venture capital investment where the Group has significant
influence in an associate or joint venture but the Group considers the investment to be a venture capital investment.
This is the case when the Group manages the investment on a fair value basis and has an exit strategy related to
the investment whereby the Group intends to recover the value of its investment through sale.
Critical accounting estimates and assumptions
IAS 28 exemption with respect to Oxigen Services India, Oxigen Online and 2DFine Holdings Mauritius.
The exemption available in IAS 28 –
Investments in Associates and Joint Ventures
has been applied to the
investment in Oxigen Services India, Oxigen Online and 2DFine Holdings Mauritius from 30 November 2016 and the
investment is accounted for in accordance with IAS 39 –
Financial Instruments: Recognition and Measurement
at
fair value with changes in fair value recognised in profit or loss. The differential between the carrying amount of the
investment (previously equity accounted for) and the fair value at this date is reflected as a gain on associate
measured at fair value in the Group income statement. Any additional changes in the fair value between
30 November 2016 and year-end have also been recognised in the Group income statement.
Oxigen Services India was demerged into two separate entities with effect from 1 June 2016. This was done in line
with the Group’s exit strategy to improve the marketability of these entities to potential investors.
Prior to 30 November 2016, the investment in Oxigen Services India was of a strategic nature as it was expected
to emulate the business model of the South African Distribution operations. The original decision to invest in this
business was because it was strategically aligned with other Blue Label distribution businesses in South Africa.
However, its profile has changed from that of the traditional Group business to one of generating growth in the
market value of the investment with a view to unlocking the Group’s share thereof. With the advent of its change
in focus to financial services through wallet subscription, it is no longer strategically aligned with the other business
units of the Group and is unlikely to generate profitability in the short to medium term. However, the market value
of the company is expected to increase exponentially in conjunction with its growth in wallet subscribers. This in
turn creates the potential to unlock the investment in value in the future and the Group is pursuing this new
strategy with respect to its investment in Oxigen Services India. In line with the Group’s exit strategy Oxigen Services
India was demerged into two separate entities with effect from 1 June 2016. This was done to improve the
marketability of these entities to potential investors.
2DFine Holdings Mauritius is an investment holding company that holds an effective interest in Oxigen Services
India and Oxigen Online.
Consequently, management reviews the results and operations of Oxigen Services India, Oxigen Online and
2DFine Holdings Mauritius on a fair value basis as opposed to the profits/losses that it generates. In addition,
management has established an exit strategy that looks to realise this fair value in the foreseeable future.
Accordingly, in accordance with IAS 28 –
Investments in Associates and Joint Ventures
Oxigen Services, India,
Oxigen Online and 2DFine Holdings Mauritius are viewed as venture capital investments which have been
accounted for at fair value through profit and loss from 30 November 2016 at which date equity accounting
ceased, in line with IFRS 13
Fair Value Measurement
.