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NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
For the year ended 31 May 2016
BLUE LABEL INTEGRATED ANNUAL REPORT 2016
132
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.
2016
R’000
2015
R’000
Finished goods
Prepaid airtime
1 473 828
1 400 084
Handsets
158 815
8 683
Other*
26 217
24 337
1 658 860
1 433 104
*Other inventory mainly consists of starter packs and consumables.
Inventories with a cost of R24.4 billion (2015: R20.4 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 (2015: 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.
Un-
redeemed
electricity
provision
R’000
Onerous
contracts
R’000
Retail
platform
clawback
provision
R’000
Total
R’000
Opening balance
18 874
2 617
— 21 491
Additions
769 354
— 9 411
778 765
Used during the year
(767 199)
— (4 997)
(772 196)
Reversed
— (2 617)
(515)
(3 132)
Closing carrying amount
21 029
— 3 899
24 928
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.