Notes to the Annual Financial Statements

Adoption of International Financial Reporting Standards

The Group has adopted International Financial Reporting Standards for the first time. IFRS 1: First-time Adoption of International Financial Reporting Standards has been applied. Comparative figures have been restated. The effects of the adoption of IFRS on equity have been reconciled below:

Reconciliation of Equity At 1 January 2004
								Total
								attribu-
								table	Minority
				Non-				to equity	interest	Cell
				distribu-	Trans-	Contin-		holders	in	share-
		Share	Share	table	lation	gency	Retained	of the	subsi-	holders
Group	Note	capital	premium	reserve	reserve	reserve	earnings	Company	diaries	interest	Total
		R000	R000	R000	R000	R000	R000	R000	R000	R000	R000
Balance at 1 January
2004 as previously
stated		3,045	1,605	291,744	(6,016)	251,800	655,694	1,197,872	2,958	51,822	1,252,652
Adoption of
International Financial
Reporting Standards
(IFRS)
– Change    in basis of
accounting    for cells
per IFRS 4	2.1	–	–	–	–	(6,769)	11,760	4,991	–	(51,822)	(46,831)
– Change in
depreciation    for policy
property    and
equipment	2.2	–	–	–	–	–	(7,801)	(7,801)	–	–	(7,801)
Restatement
in respect of IAS 17:
Leases	2.3	–	–	–	–	–	(3,595)	(3,595)	–	–	(3,595)
Balance at 1 January 2004 as restated		3,045	1,605	291,744	(6,016)	245,031	656,058	1,191,467	2,958	–	1,194,425

				Non-
		Share	Share	distributable	Contingency	Retained
Company	Note	capital	premium	reseve	reserve	earnings	Total
		R000	R000	R000	R000	R000	R000
Balance at 1 January 2004 as previously stated		3,045	1,605	420,756	227,794	529,102	1,182,302
Adoption of International Financial Reporting Standards (IFRS)
– Change in depreciation policy for    property and equipment	2.2	–	–	–	–	(7,801)	(7,801)
Restatement in respect of IAS 17: Leases	2.3	–	–	–	–	(3,595)	(3,595)
Change in accounting policy for investment in subsidiaries	2.4	–	–	(125,309)	–	–	(125,309)
Balance at 1 January 2004 as restated		3,045	1,605	295,447	227,794	517,706	1,045,597

The adoption of IFRS 4: Insurance Contracts led to a change in the basis of presentation and accounting for cells. The results of insurance contracts underwritten in cells where the risks and rewards accrue to cell owners are no longer included in the Group’s net income. Comparative figures have been restated to reflect this change. The effect of the change is as follows:

		Gross	Tax	Net
		R000	R000	R000
Group
Income statement
2004: (Decrease)/increase in net income due to results
from cells no longer being included in net income		(15,311)	3,395	(11,916)
		Statutory	Cell	Assets
	Retained	contingency	shareholders’	and other
	earnings	reserve	interest	liabilities
	R000	R000	R000	R000
Balance sheet
(Decrease)/increase at:
31 December 2003	11,760	(6,769)	51,822	(56,813)
31 December 2004	(156)	(7,833)	47,779	(39,790)

The Group has changed its depreciation policy for property and equipment to compy with the provisions of IAS 16: Property, Plant and Equipment. Property and equipment are now depreciated to their residual value and not to zero. In addition, the useful lives and residual values of property and equipment are re-assessed at each balance sheet date. Comparative figures have been restated to reflect this change. The effect of the change is as follows:

	Gross	Tax	Net
	R000	R000	R000
Group and Company
Income statement
2004: Net decrease in depreciation charge for the year	2,355	–	2,355
2004: Net decrease in profit on disposal of property and equipment	(2,750)	–	(2,750)
			Accumulated
			depreciation on
	Retained	Deferred	property and
	earnings	taxation	equipment
	R000	R000	R000
Balance sheet
(Decrease)/increase at:
31 December 2003	(7,801)	–	7,801
31 December 2004	(8,196)	–	8,196
2.3 Restatement in respect of IAS 17: Leases
On 2 August 2005 SAICA issued circular 7/2005 clarifying the interpretation of IAS 17: Leases. The Group has conformed with this interpretation of the accounting for operating leases and now accounts for the expense on a straight-line basis over the period of the lease. Comparative figures have been restated to reflect this change. The effect of the change is as follows:
	Gross	Tax	Net
	R000	R000	R000
Group and Company
Income statement
2004: (Decrease) in net income	(2,210)	–	(2,210)
	Retained	Deferred	Operating lease
	earnings	taxation	liability
	R000	R000	R000
Balance sheet
(Decrease)/increase at:
31 December 2003	(3,595)	–	3,595
31 December 2004	(5,805)	–	5,805
2.4 Change in accounting policy
The Company has changed its policy of accounting for investment in subsidiaries. Investment in subsidiaries was previously shown at net asset value, but is now shown at cost. Comparative figures have been restated. The effect of the change in accounting policy is as follows:
	Gross	Tax	Net
	R000	R000	R000
Company
(Decrease) in non-distributable reserves at 31 December 2003	(125,309)	–	(125,309)
2004: (Decrease) in transfer to non-distributable reserves	(16,409)	–	(16,409)
(Decrease) in non-distributable reserves at 31 December 2004	(141,718)	–	(141,718)
There was no effect on the Group’s non-distributable reserves due to the above change as investment in subsidiaries had been eliminated upon consolidation.

 

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