Venture capital accounting to equity accounting

As from 30 November 2016, the Group applied the exemption available in IAS 28 – Investments in Associates and Joint Ventures to account for the investment in Oxigen Services India, Oxigen Online and 2DFine Holdings Mauritius as venture capital investments. Therefore, the investment was accounted for in accordance with IAS 39 – Financial Instruments: Recognition and Measurement at fair value with changes in fair value recognised in profit or loss. Any changes in the fair value would have been recognised in the Group income statement.

This accounting treatment was highly judgemental therefore the Group included detailed disclosure on the critical judgement it had applied.

In June 2018, the Group received notification from the JSE proactive monitoring panel stating that they did not agree with the exemption we had applied in IAS 28. This resulted in a protracted engagement with the JSE to determine the appropriate accounting treatment. After lengthy discussions with the JSE, including the JSE consulting with the Financial Reporting Investigation Panel, the JSE concluded that the Group should not have applied venture capital accounting.

The Group has therefore agreed to not apply the exemption available under IAS 28 – Investments in Associates and Joint Ventures to the investment in Oxigen Services India, Oxigen Online and 2DFine Holdings and now account for these associates and joint venture using equity accounting principles.

Revenue – principal versus agent

The Group earns subscription revenue through the provision of content, products and services to customers. During the current year it was determined that certain contracts of this nature that had been accounted for as principal in the prior period should in fact be accounted for as agent. The effect of this error is an equal decrease in revenue and changes in inventories of finished goods. There is no effect on operating profit or net profit after tax.

Put option liability classification

The Airvantage Proprietary Limited put option is carried at fair value through profit and loss. In the prior year this was incorrectly classified as trade and other payables. Whilst the measurement and disclosures complied with IFRS 7 and IAS 39, the classification on the face of the Group statement of financial position was incorrect. This has been rectified in the current year and is now correctly included in the line item “Financial liabilities at fair value through profit and loss”. There is no effect on the Group income statement. The amount reclassified is R98 million.

These errors have been corrected by restating each of the affected financial statement line items in the prior periods as follows: