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Notes
to the Group annual financial statements
continued
For the year ended 31 May 2017
BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
10. Accounting framework
10.1 Basis of preparation
The principal accounting policies applied in the preparation of the Group and Company annual financial statements
are in the related notes and are consistent with those adopted in the prior year, unless otherwise specified.
The Group and Company annual financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the JSE Listings
Requirements and the Companies Act, No 71 of 2008.
The term IFRS includes International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and
interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or the former
Standing Interpretations Committee (SIC). The standards referred to are set by the International Accounting Standards
Board (IASB).
The Group and Company annual financial statements are prepared under the historical cost convention, adjusted for
financial instruments measured at fair value through profit and loss. Amounts are rounded to the nearest thousand
with the exception of earnings per share, ordinary share capital and equity compensation benefit. The preparation of
financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to
be reasonable under the circumstances. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRS that have a significant effect on the financial statements
and estimates with a significant risk of material adjustment in the next year are discussed in the notes to which they
relate.
10.2 Going concern
The Group and Company’s forecasts and projections, taking account of reasonably possible changes in trading
performance, show that the Group and Company should be able to operate within its current funding levels into the
foreseeable future.
After making enquiries, the directors have a reasonable expectation that the Group and Company have adequate
resources to continue in operational existence for the foreseeable future. The Group and Company therefore continue
to adopt the going concern basis in preparing the financial statements.
10.3 Standards, amendments and interpretations not yet effective
The Group has evaluated the effect of all new standards, amendments and interpretations that have been issued but
which are not yet effective. Based on the evaluation, management does not expect these standards, amendments
and interpretations to have a significant impact on the Group’s results and disclosures. The expected implications of
applicable standards, amendments and interpretations are dealt with below.
IFRS 9 –
Financial Instruments
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and
financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that
relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed
measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair
value through other comprehensive income and fair value through profit and loss. The basis of classification depends
on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in
equity instruments are required to be measured at fair value through profit and loss with the irrevocable option at
inception to present changes in fair value in other comprehensive income. There is now a new expected credit losses
model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes
to classification and measurement except for the recognition of changes in own credit risk in other comprehensive
income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge
effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the
hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use
for risk management purposes.