150 / 220
/
148
BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
Notes
to the Group annual financial statements
continued
For the year ended 31 May 2017
4.
Non-financial instruments
continued
4.4 Inventories
Inventories comprise prepaid airtime (including physical prepaid airtime), handsets and other related products.
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.
2017
R’000
2016
R’000
Finished goods
Prepaid airtime
2 067 904
1 473 828
Handsets
84 676
158 815
Other*
27 541
26 217
2 180 121
1 658 860
* Other inventory mainly consists of starter packs and consumables.
Inventories with a cost of R24.1 billion (2016: R24.4 billion) were sold during the year and have been charged to the
income statement.
A general notarial bond is held by Investec Bank Limited over airtime up to R1.5 billion (2016: R1.5 billion).
4.5 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events,
it is more likely than not that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount of the obligation can be made. Provisions are not recognised for
future operating expenses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.
The increase in the provision due to the passage of time is recognised as an interest expense.
Unredeemed
electricity
provision
R’000
Retail
platform
clawback
provision
R’000
Total
R’000
Opening balance
21 029
3 899
24 928
Additions
765 901
5 271
771 172
Used during the year
(755 562)
(5 160)
(760 722)
Reversed
— (307)
(307)
Closing carrying amount
31 368
3 703
35 071
Unredeemed electricity provision
The unredeemed electricity provision raised represents the value of electricity vouchers sold and unredeemed as at
year-end, payable by the Group to the municipalities on redemption by the end customer.
Redemption is dependent on activation by customers. This is expected to occur within the first quarter of the following
financial year.
Retail platform clawback provision
The retail platform clawback provision represents the estimated value payable as a clawback on deficient debtors for
amounts already received on goods sold through a third-party platform provider.
The provision will be utilised within nine months of the following financial year per the contractual terms of the
clawback arrangement.