10. Non-financial instruments
10.3

Standards, amendments and interpretations not yet effective

At the date of authorisation of these annual financial statements, the following relevant standards, amendments, and interpretations to existing standards were in issue but not yet effective. These will apply to the Group’s accounting periods beginning on 1 June 2019 or later periods, and have not been elected to be early adopted by the Group.

The salient features of those standards, amendments, and interpretations have been described below.

Standard Description of change Management actions and assessed impact Effective date –
accounting periods
beginning on or
after
IFRS 16 – Leases

This IFRS sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (“lessee”) and the supplier (“lessor”);

  • IFRS 16 replaces the previous leases standard, IAS 17 – Leases, and related Interpretations;
  • IFRS 16 has one model for lessees which will result in almost all leases being included on the statement of financial position. The lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. No significant changes have been included for lessors.

The Group has assessed the estimated impact that the initial application of IFRS 16 will have on its Group income statement, Group statement of financial position and Group statement of cash flows once adopted on 1 June 2019.

In preparation for the adoption of IFRS 16 the following actions have been undertaken:

  • Management has provided formal training programmes relating to IFRS 16 to all employees involved in the supervision of the finance function.
  • As part of the training programme, a workshop session was held to identify business units where IFRS 16 may have an impact.
  • Assessment questionnaires were completed for each business unit to identify leasing arrangements of significance to the Group.

The results of the work undertaken thus far have indicated that the Group is not a lessee of significance across the majority of its operations. Key leasing arrangements identified thus far include:

Leases of office and warehousing space

The Group leases office and warehousing space to accommodate the Groups employees and operations. These leases are generally of a longer term (three to five years) with the most significant of which being the lease for the Group’s head office and main hub of operations in Sandton. Dependent on the Group’s business plan, or to address the need when it arises, the Group does also lease properties for shorter or longer timeframes. Based on the leases identified thus far, the Group currently has approximately 25 existing commitments with external parties to the Group in relation to these leasing arrangements, with an indicative average remaining term of 25 months. The indicative remaining lease commitment for future minimum lease payments for these leases is approximately R143 million.

Leases of retail stores

The Group, primarily through its WiConnect business, operates retail stores in shopping malls and retail centres all of which are leased from their respective landlords. Based on the leases identified thus far, the Group currently has approximately 69 existing commitments with external parties to the Group in relation to these leasing arrangements, with an indicative average remaining term of 24 months. The indicative remaining lease commitment for future minimum lease payments for these leases is approximately R26 million.

Leases of equipment (office and other equipment)

The Group primarily purchases equipment utilised by its operations on an outright purchase basis. However, where outright purchase is not financially optimal, operational needs are satisfied with leased equipment. Based on the leases identified thus far, the Group currently has approximately five existing commitments with external parties to the Group in relation to these leasing arrangements, with an indicative average remaining term of 12 months. The indicative remaining lease commitment for future minimum lease payments for these leases is approximately R1 million.

The Group does not engage in significant leasing activities as a lessor (where the Group is a lessor, these activities are not believed to be core to the operations of the Group).

  • The Group is continuing to assess the impact of the accounting changes that will arise under IFRS 16 and cannot yet reasonably quantify the impact;
  • The Group plans to apply IFRS 16 initially on 1 June 2019, using the modified retrospective approach applying the practical expedients of IFRS 16. Therefore, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 June 2019, with no restatement of comparative information; and
  • The Group will elect to recognise the right-of-use assets at an amount equal to the lease liability at 1 June 2019.
 1 January 2019

The following standards/amendments/interpretations are not anticipated to have a material impact on the Group, and are effective for annual periods beginning on 1 June 2019:

Standard(s)
Amendment(s)
Interpretation(s)		 Description of change Effective date –
accounting periods
beginning on or
after
Annual improvements
2015 – 2017 cycle		 The annual improvements project is a collection of amendments to various IFRS standards and is the result of conclusions reached by the IASB on proposals made at its annual improvement project; and the interpretation will not have a material impact on the Group. 1 January 2019
New interpretation
– IFRIC 23 –
Uncertainty over Income Tax Treatments
  • This interpretation clarifies the accounting for income tax treatments that have yet to be accepted by tax authorities;
  • IFRIC 23 specifically clarifies how to incorporate this uncertainty into the measurement of tax as reported in the consolidated financial statements;
  • IFRIC 23 does not introduce any new disclosures but reinforces the need to comply with existing disclosure requirements about judgements made, assumptions and other estimates used and the potential impact of uncertainties that are not reflected; and
  • The interpretation will not have a material impact on the Group.
 1 January 2019
Amendments to IFRS
3 – Business Combinations

These amendments make it easier for companies to decide whether activities and assets they acquire are a business or merely a group of assets. The amendments:

  • Confirm that a business must include inputs and a process, and clarified that:
    (i) the process must be substantive; and
    (ii) the inputs and process must together significantly contribute to creating outputs;
  • Narrow the definitions of a business by focusing the definition of outputs on goods and services provided to customers and other income from ordinary activities, rather than on providing dividends or other economic benefits directly to investors or lowering costs; and
  • Add a test that makes it easier to conclude that a company has acquired a group of assets, rather than a business, if the value of the assets acquired is substantially all concentrated in a single asset or group of similar assets.

The amendments will not have a material impact on the Group.

 1 January 2019
Amendments to IAS 1
– Presentation of Financial Statements
and IAS 8 – Accounting
Policies, Changes in
Accounting Estimates
and Errors

The IASB refined its definition of material to make it easier to understand. It is now aligned across IFRS Standards and the Conceptual Framework.

The revised definition of material is:

  • Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity;
  • The Board has also removed the definition of material omissions or misstatements from IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors; and
  • The amendments will not have a material impact on the Group.
 1 January 2019