Notes to the Group annual financial statements | Note 3.6

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Refer to accounting policies on borrowings and trade and other payables for financial liabilities (which exclude employee-related liabilities and VAT), and share capital for equity instruments issued by the Group.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within the normal operating cycle of the business, i.e. 12 months. If not, they are presented as non-current liabilities.

In the prior year, deferred revenue was included in Trade and other payables, however in the current year it has been disclosed separately on the face of the balance sheet, the above has therefore been restated. Refer to note 3.6.4.

Borrowings are recognised initially at fair value, net of transaction costs incurred, when the relevant contracts are entered into. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method.

Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expired.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after year-end.

The table below details the facilities drawn upon at 31 May 2022. For terms of these facilities, refer to note 3.2.

The Group did not default on any loans or breach any terms of the underlying agreements during the period.

Changes in liabilities arising from financing activities

Financial guarantee contracts are recognised at fair value on the date that the Group becomes a party to an irrevocable commitment. Financial guarantee contracts are subsequently stated at the higher of the amount determined by the expected credit loss (ECL) model and the amount initially recognised. Any difference between the redemption value guarantee obligation and the amount paid is recognised in the income statement.

In the prior year the Group did not raise a liability for its guarantee to the consortium of financial institutions in respect of Cell C's funding of R182 million due to the fact that it held sufficient collateral, which the Group expected to realise should the guarantee be called upon and the residual financial risk not be material.

Deferred revenue represents a prepayment by its customers for goods or services that have yet to be delivered. Deferred revenue is recognised as earned revenue on the income statement as the good or service is delivered to the customer. The amounts recognised will generally be utilised within the next reporting period and therefore disclosed as current.

Deferred revenue mainly consists of unredeemed Ringas vouchers. Ringas vouchers are universal, single use, prepaid airtime vouchers that allow you to top-up your number with any of the four major South African mobile networks. The revenue is only recognised when the voucher is redeemed. The payment of these vouchers by the customer is made upfront. Ringas is a relatively new product that launched in September 2020.