Online Annual Report 2009

 

 

 

 

 

 

 

 

Insight

Currently the Group complies with IAS 27 Consolidated and Separate Financial Statements when reporting the Group results. For the next financial year, we will adopt the revised IAS 27 Consolidated and Separate Financial Statements to report this information. More detail on the changes anticipated is contained in the technical review.

 

 

 

 

Further reading

More detail on acquisitions within the financial year can be found in note 3
GROUP FINANCIAL STATEMENTS 

Insight

Currently the Group complies with IFRS 3 Business Combinations when reporting on acquisitions or step acquisitions. For the next financial year, we will adopt the revised IFRS 3 Business Combinations to report this information. More detail on the changes anticipated is contained in the technical review.

Further reading

More detail on segmental reporting can be found in note 41.
GROUP FINANCIAL STATEMENTS 

Insight

Currently the Group complies with IAS 14 Segment Reporting when reporting information regarding the Divisions. For the next financial year, we will adopt IFRS 8 Operating Segments to report this information. More detail on the changes anticipated is contained in the technical review.

Further reading

More detail on the associate company can be found in note 16.
GROUP FINANCIAL STATEMENTS 

 

 

 

 

 

 

 

 

Further reading

More detail on goodwill and the Group’s cash-generating units can be found in note 14.
GROUP FINANCIAL STATEMENTS 

Insight

Currently the Group complies with IFRS 3 Business Combinations when reporting on acquisitions or step acquisitions. For the next financial year, we will adopt IFRS 3 Business Combinations revised to report this information. More detail on the changes anticipated is contained in the technical review.

 

 

 

 

Further reading

More detail relating to non-current assets held for sale can be found in note 21.
GROUP FINANCIAL STATEMENTS 

 

 

Further reading

More detail on property, plant and equipment can be found in note 13.
GROUP FINANCIAL STATEMENTS 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Further reading

More detail on intangible assets can be found in note 15.
GROUP FINANCIAL STATEMENTS 

 

 

 

Further reading

More detail on impairment can be found in:
Note 5 – Impairment of assets
Note 13 – Property, plant and equipment
Note 15 – Other intangible assets
GROUP FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

 

 

 

 

Further reading

More detail on revenue can be found in note 4.
GROUP FINANCIAL STATEMENTS 

 

 

 

 

 

 

Further reading

More detail on finance leases can be found in:
Note 9 – Net finance costs
Note 17 – Other financial assets
Note 25 – Non-current liabilities
More detail on operating leases can be found in:
Note 6 – Operating profit
Note 25 – Non-current liabilities
Note 27 – Trade and other payables
Note 33 – Operating lease commitments
GROUP FINANCIAL STATEMENTS

Further reading

More detail on foreign currencies can be found in:
Note 6 – Operating profit
Note 7 – Foreign exchange gains and losses
Note 23 – Other reserves
GROUP FINANCIAL STATEMENTS

Insight

Note 7 – Foreign exchange gains and losses is a new note added this year to assist the reader in understanding the Group’s foreign exchange exposures. We have seen this figure fluctuate considerably and it has become an area of interest to stakeholders and analysts.

 

 

 

 

 

 

 

 

 

 

 

 

Further reading

More detail on retirement benefit costs can be found in note 31.
GROUP FINANCIAL STATEMENTS 

Further reading

More detail on the post-retirement medical aid can be found in note 26.
GROUP FINANCIAL STATEMENTS 

Further reading

More detail on taxation can be found in
Note 10 – Taxation
Note 18 – Deferred taxation
GROUP FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Further reading

More detail on inventories can be found in note 19.
GROUP FINANCIAL STATEMENTS 

Further reading

More detail on financial instruments can be found in note 40.
GROUP FINANCIAL STATEMENTS 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Further reading

More detail on investments can be found in note 16.
GROUP FINANCIAL STATEMENTS 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Further reading

More detail on provisions can be found in note 26 and note 28.
GROUP FINANCIAL STATEMENTS 

 

Further reading

More detail on share-based payments can be found in note 23.
GROUP FINANCIAL STATEMENTS 

 

 

 

Insight

In the following financial year, the Group will adopt IAS 23 Borrowing costs revised, and our policy will change from expensing borrowing costs to capitalising them for all qualifying assets.

 

 

The Improvements to International Reporting Standards was a new standard issued by the International Accounting Standards Board (IASB). This standard is due to be issued annually and is the IASB’s project that provides them with a vehicle for making non-urgent but necessary amendments to IFRS. Some amendments involve consequential amendments to other IFRS. Massmart has adopted the standard issued in August 2008. There were no financial or practical implications on the business. A new standard was issued in May 2009 that becomes effective for Massmart’s 2010 financial year-end.

IFRS 8 Operating Segments, was issued on 30 November 2006, to replace IAS 14 Segment Reporting. The effective date of this standard is for year-ends beginning on or after 1 January 2009, being Massmart’s 2010 financial year-end. Although early adoption is permitted, the Group has chosen not to do so. The standard requires the Group to adopt the ‘management approach’ to reporting segment information, effectively using its internal management reporting system to collect the data. While this is a change in approach from IAS 14 Segment Reporting, the effect will have no financial impact on the Group. The standard will impact Group disclosure.

In 2006, the IASB agreed to a moratorium under which there would be no new or amended standards effective before 1 January 2009. This was done in order to have a stable platform for a four year period. The effective date for Massmart of this revised suite of standards will be our June 2010 year-end. We have chosen not to early adopt any of these standards. That being said, we are already aware of the impact these standards will have on the business and the changes that lie ahead of us.

Notes to the annual financial statements
for the year ended 28 June 2009

1.  Accounting policies

 

Basis of accounting

The financial statements have been prepared on the historical cost basis except for the revaluation of certain non-current assets and financial instruments to fair value.

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and in a manner required by the Companies Act of South Africa. The principal accounting policies adopted are set out below.

These policies have been consistently applied for the period under review.

Basis of consolidation

The Massmart Group annual financial statements incorporate the annual financial statements of the Company (Massmart Holdings Limited) and the entities it controls. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The operating results of the subsidiaries are consolidated from the date on which effective control is transferred to the Group and up to the effective date of disposal.

Separate disclosure is made of minority interests where the Group’s investment is less than 100%. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority’s interest in the subsidiary’s equity are allocated against the interest of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

All intercompany transactions and balances, income and expenses are eliminated in full on consolidation.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Segmental information

The Group is organised into four divisions for operational and management purposes. Massmart reports its primary business segment information on this basis and on a secondary basis by significant geographical region based on location of assets.

Comparative figures

When an accounting policy is altered, comparative figures are restated if required by the applicable accounting statement and where material. No accounting policies where altered in the last financial year resulting in no restatements.

Interests in associates

An associate is an enterprise over which the Group has significant influence, and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results, assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The carrying amount of such interests is reduced to recognise any decline, other than a temporary decline, in the value of individual investments. The carrying amount reflects the Group’s share of net assets of the associate and includes any goodwill on acquisition, less any impairment in the value of individual investments.

Any excess of the cost of acquisition over the Group’s share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any deficiency of the cost of acquisition below the Group’s share of the fair values of the identifiable net assets of the associate at the date of acquisition (ie discount on acquisition) is credited to profit or loss in the period of acquisition.

Where a Group enterprise transacts with an associate of the Massmart Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except where unrealised losses provide evidence of an impairment of the asset transferred.

Goodwill

Goodwill arising on consolidation of a subsidiary represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary or jointly controlled entity at the date of acquisition. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (ie discount on acquisition) is credited to profit or loss in the period of acquisition.

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

The Group’s policy for goodwill arising on the acquisition of an associate is described under ‘Interests in associates’ above.

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of the assets’ previous carrying amount and fair value less costs to sell.

Property, plant and equipment

Freehold land is shown at cost and is not depreciated. Property, plant and equipment is shown at cost less accumulated depreciation, and reduced by any accumulated impairment losses.

Property cost includes professional fees. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Where expenditure incurred on property, plant and equipment will lead to future economic benefits accruing to the Group, these costs are capitalised. Repairs and maintenance are expensed as and when incurred.

Depreciation is charged so as to write off the cost of assets, other than land, over their estimated useful lives, using the straight-line method, on the following bases:

Buildings 50 years
Fixtures, fittings, plant,
equipment and motor vehicles
4 to 15 years
Computer hardware 3 to 8 years
Leasehold improvements Shorter of lease period or useful life

Useful life and residual value is reviewed annually and the prospective depreciation is adjusted accordingly.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Intangible assets

Trademarks are measured initially at purchased cost. Intangible assets are shown at cost less accumulated amortisation, and reduced by any accumulated impairment losses.

Amortisation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method, on the following basis:

Trademarks 10 years
Computer software 3 to 8 years

Useful life is reviewed annually and the prospective depreciation is adjusted accordingly.

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount for an individual asset, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of an asset (cash-generating unit) is increased to the revised estimate of its recoverable amount. This is done so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Revenue recognition

Revenue of the Group comprises net sales, royalties, franchise fees, interest received, investment income, finance charges, property rentals, management and administration fees, dividends and excludes value-added tax. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales-related taxes.

Sales of goods are recognised when goods are delivered and title has passed.

Interest income is accrued on a time basis, by reference to the principal outstanding and the interest rate applicable.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Other revenue is recognised on the accrual basis in accordance with the substance of the relevant agreements and measured at fair value of the consideration receivable.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are capitalised at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor, net of finance charges, is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Foreign currencies

The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (ie its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in the functional currency of the Group, and the presentation currency for the consolidated financial statements.

Transactions in currencies other than the Group reporting currency (South African Rands) are initially recorded at the rates of exchange prevailing on the dates of the transactions. In order to hedge its exposure to certain foreign exchange risks, the Group has a policy of covering forward all its foreign exchange liability transactions of a trading nature (see below for details of the Group’s accounting policies in respect of such derivative financial instruments).

At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement and retranslation of monetary items are included in profit and loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit and loss for the period. However, where fair value adjustments of non-monetary items are recognised directly in equity, exchange differences arising on the retranslation of these non-monetary items are also recognised directly in equity.

On consolidation, the assets and liabilities of the Group’s overseas operations (including comparatives) are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

The financial statements (including comparatives) of foreign subsidiaries and associates that report in the currency of a hyperinflationary economy are restated in terms of the measuring unit current at the balance sheet date before they are translated into South African Rands.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Government grants

Government grants for staff training costs are recognised in profit or loss over the periods necessary to match them with the related costs and are deducted in reporting the related expense. Income is not recognised until there is reasonable assurance that the grants will be received.

Retirement benefit costs

Payments to defined contribution plans are charged as an expense as they fall due. There are no defined retirement benefit plans in the Group.

Post-retirement healthcare benefit

Post-retirement healthcare benefits are provided by certain Group companies to qualifying employees and pensioners. The healthcare benefit costs are determined through annual actuarial valuations by independent consulting actuaries using the projected unit credit method. Such gains or losses are recognised over the expected remaining working lives of the participating members. Adjustments are made annually through profit or loss for provisions held for members who have already retired. Actuarial gains and losses are recognised in full in the period in which they occur.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax charge payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred taxation is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. In general, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities, which affects neither the tax profit nor the accounting profit at the time of the transaction.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Secondary Taxation on Companies (STC) is payable on net dividends paid and is recognised as a tax charge in profit or loss in the year it is incurred.

Any tax on capital gains is deferred if the proceeds of the sale of the assets are invested in similar assets. The tax will ultimately become payable on sale of the similar asset.

Inventories

Inventories, which consist of merchandise, are valued at the lower of cost and net realisable value. Cost is calculated on the weighted-average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Financial instruments

Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial assets are classified into the following specified categories:

  • Fair value through profit or loss (FVTPL)
    These are held at fair value and any adjustments to fair value are taken to the income statement. Listed investments are carried at market value by reference to stock exchange quoted selling prices.
  • Loans and receivables
    These are held at amortised cost less any impairment losses recognised to reflect irrecoverable amounts.
  • Held-to-maturity investments
    These are held at amortised cost less any impairment losses recognised to reflect irrecoverable amounts.
  • Available-for-sale investments
    These are held at fair value and any adjustment to fair value is taken to equity.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method
This is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as ‘at fair value through profit or loss’.

Loans and receivables
Trade receivables, loans and other receivables are measured initially at fair value, and are subsequently measured at amortised cost using the effective interest method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit and loss when there is objective evidence that the asset is impaired.

Cash and cash equivalents
Cash and cash equivalents are measured at fair value. For purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held on call with banks and investments in money-market instruments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value, net of bank overdrafts.

Investments
Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs.

At subsequent reporting dates, debt securities that the Group has the express intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

Investments other than held-to-maturity debt securities are classified as either investment held-for-trading or as available-for-sale, and are subsequently measured at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in profit or loss for the period.

Unrealised gains and losses on available-for-sale investments are recognised directly in equity until the disposal or impairment of the relevant investment, at which time the cumulative gain or loss previously recognised in equity is included in the profit or loss for the period. Impairment losses recognised in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognised in profit or loss for debt instruments classified as available-for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.

Listed investments are carried at market value, which is calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date.

Financial liabilities and equity
Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Debt instruments issued, which carry a right to convert to equity that is dependent on the outcome of uncertainties beyond the control of both the Group and the holder, are classified as liabilities except where conversion is certain. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Financial liabilities, other than derivative instruments, are recognised at amortised cost, comprising original debt less principal payments and amortisations.

Financial liabilities include finance lease obligations, interest-bearing bank loans and overdrafts, and trade and other payables. The accounting policy for finance lease obligations is outlined here.

Bank borrowings
Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs (see below).

Trade payables
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method.

Equity instruments
Equity instruments are recorded as the proceeds received, net of direct issue costs.

Derivative financial instruments and hedge accounting
The Group’s activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rates.

The Group uses foreign exchange forward contracts to hedge its exposure to foreign currency fluctuations relating to certain firm trading commitments. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on the use of financial derivatives consistent with the Group’s risk management strategy. The Group does not trade in derivative financial instruments for speculative purposes.

Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates.

The effective portion of the changes in fair value of derivative financial instruments that are designated and qualify as cash flow hedges are recognised directly in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. If the hedged firm commitment or forecast transaction results in the recognition of an asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. Amounts deferred in equity are recognised in profit or loss in the same period in which the hedged firm commitment affects profit or loss.

Changes in the fair value of derivative financial instruments that do not qualify as cash flow hedges are recognised in profit or loss as they arise.

The hedge is de-designated as a cash flow hedge at the shipped-on-board date, and discontinued when the hedging instrument is sold, expired, terminated, exercised, or no longer qualifies for hedge accounting. At the time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction is recognised in profit or loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to profit or loss for the period.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that the Group will be required to settle that obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Share-based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.

Fair value is measured by use of a Binomial model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

Borrowing costs

Borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.  Technical review

 

International Financial Reporting Standards (IFRS)

Massmart adopted International Financial Reporting Standards (IFRS), with effect from 1 July 2005. The Group is exposed to the following suite of standards. Amendments have been made to the standards, which has resulted in revised issue and version dates. All amendments have been complied with in line with the transitional provisions of that standard and there has been no impact on the business, financial or practical of any amendments which have become effective in the past financial year.

  Standard Standard’s name Issued/version
  IFRSs Improvements to International Financial Reporting Standards Issued August 2008
  IFRS 1 First-time Adoption of IFRS Updated to January 2008
  IFRS 2 Share-based Payment Updated to January 2008
  IFRS 3 Business Combinations Updated to January 2008
  IFRS 4 Insurance Contracts Updated to January 2008
  IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Updated to January 2008
  IFRS 6 Exploration for and Evaluation of Mineral Resources Updated to January 2008
  IFRS 7 Financial Instruments: Disclosures Updated to January 2008
  IAS 1 Presentation of Financial Statements IAS 1 revised in 2003 as amended in 2005
  IAS 2 Inventories Updated to January 2008
  IAS 7 Cash Flow Statements Updated to January 2008
  IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors Updated to January 2008
  IAS 10 Events after the Balance Sheet Date Updated to January 2008
  IAS 11 Construction Contracts Updated to January 2008
  IAS 12 Income Taxes Updated to January 2008
  IAS 14 Segment Reporting Issued February 2008
  IAS 16 Property, Plant and Equipment Updated to January 2008
  IAS 17 Leases Updated to January 2008
  IAS 18 Revenue Updated to January 2008
  IAS 19 Employee Benefits Updated to January 2008
  IAS 20 Accounting for Government Grants and Disclosure of Government Assistance Updated to January 2008
  IAS 21 The Effects of Changes in Foreign Exchange Rates Updated to January 2008
  IAS 23 Borrowing Costs Updated to January 2008
  IAS 24 Related Party Disclosures Updated to January 2008
  IAS 26 Accounting and Reporting by Retirement Benefit Plans Updated to January 2008
  IAS 27 Consolidated and Separate Financial Statements Issued February 2008
  IAS 28 Investments in Associates Updated to January 2008
  IAS 29 Financial Reporting in Hyperinflationary Economies Updated to January 2008
  IAS 31 Interests in Joint Ventures Updated to January 2008
  IAS 32 Financial Instruments: Disclosure and Presentation Updated to January 2008
  IAS 33 Earnings per Share Updated to January 2008
  IAS 34 Interim Financial Reporting Updated to January 2008
  IAS 36 Impairment of Assets Updated to January 2008
  IAS 37 Provisions, Contingent Liabilities and Contingent Assets Updated to January 2008
  IAS 38 Intangible Assets Updated to January 2008
  IAS 39 Financial Instruments: Recognition and Measurement Updated to January 2008
  IAS 40 Investment Property Updated to January 2008
  IAS 41 Agriculture Updated to January 2008
  AC 500 Preface to South African Statements and Interpretations of Statements of Generally Accepted Accounting Practice Issued January 2005
  AC 501 Accounting for ‘Secondary Tax on Companies (STC)’ Issued January 2005
  AC 502 Substantively Enacted Tax Rates And Tax Laws Issued February 2006
  AC 503 Accounting For Black Economic Empowerment (BEE) Transactions Issued April 2006
       
  This table provides a brief analysis of the differences between the old and new standards that will be changing in our 2010 financial year and the relating impact on the business.
  Standard Standard’s name Material differences between the new and old standard.
  IFRS 3 Business Combinations
  • Transaction costs will have to be expensed. Currently we capitalise these costs.
  • Share options given to a seller will have to be included in the purchase consideration. These costs are currently excluded from the purchase consideration.
  • Any contingent consideration will have to be valued at acquisition date. Where there is a subsequent change, the difference will have to be recognised in the income statement. Currently we adjust goodwill.
  • There is now the option to provide goodwill for minorities, but we have elected not to do this.
  • In step acquisitions, previous non-controlling equity interests held are deemed to be disposed at fair value, which is then included in the purchase price to determine goodwill. Currently the existing investment is not deemed to be disposed of and only the additional acquisition is accounted for in determining goodwill.

These changes will all have a financial impact on future acquisitions. There is no retrospective application, so no adjustment is required to the current income statement and balance sheet.

  IFRS 8 Operating Segments
  • Segment identification and information is determined and presented ‘through the eyes of management’. This is not how we determine our segments or segment information currently. However, the end result is very similar.
  • Segment information will have to reconcile to IFRS. This has always reconciled.

These changes will have no financial impact on the business.

  IAS 1 Presentation of Financial Statements This standard presents much change – all of it disclosure related.
  • It introduces the concept of ‘total comprehensive income’ – which briefly is the change in equity other than changes resulting from transactions with owners in their capacity as owners.

  • The income statement has been renamed ‘statement of comprehensive income’.
  • ‘Statement of comprehensive income’ can be one statement, or an income statement and a separate statement of items recognised in other comprehensive income. We have not yet decided which format we will elect.
  • The balance sheet has been renamed ‘statement of financial position’.
  • The cash flow statement has been renamed ‘statement of cash flows’.

These changes will have no financial impact on the business.

  IAS 23 Borrowing Costs
  • All borrowing costs will have to be capitalised where they are qualifying assets. Currently our accounting policy is to expense these costs.

This change will have a financial impact on future qualifying assets where borrowing costs are incurred. There is no retrospective application, so no adjustment is required to the current income statement and balance sheet.

  IAS 27 Consolidated and Separate Financial Statements
  • There will be no restriction on allocating losses of a subsidiary to the minorities. Currently we do not do this.

This change will have a financial impact on future minority allocations in loss-making subsidiaries. There is no retrospective application, so no adjustment is required to the current income statement and balance sheet.

       
 

Interpretations of Statements of Generally Accepted Accounting Practice

The International Financial Reporting Interpretations Committee (IFRIC) is a committee of the International Accounting Standards Board (IASB) that assists the IASB in establishing and improving standards of financial accounting and reporting for the benefit of users, preparers and auditors of financial statements. The role of the IFRIC is to provide timely guidance on newly identified financial reporting issues not specifically addressed in International Financial Reporting Standards (IFRS) or issues where unsatisfactory or conflicting interpretations have developed, or seem likely to develop. It thus promotes the rigorous and uniform application of IFRS.

The following IFRIC’s were issued since the start of the financial year or earlier but became effective for the current financial year. There is no impact on the Group, but the IFRIC’s have been included for completeness.

  IFRIC Name Effective date
  IFRIC 12 Service Concession Arrangements Annual periods beginning on or after 1 January 2008
  IFRIC 13 Customer Loyalty Programmes Annual periods beginning on or after 1 July 2008
  IFRIC 14 The Limit On A Defined Benefit Asset, Minimum Funding Requirements And Their Interaction Annual periods beginning on or after 1 January 2008
  IFRIC 15 Agreements for the Construction of Real Estate Annual periods beginning on or after 1 January 2009
  IFRIC 16 Hedges of Net Investment in a Foreign Operation Annual periods beginning on or after 1 October 2008
  IFRIC 17 Distributions of Non-cash Assets to Owners Annual periods beginning on or after 1 July 2009
  IFRIC 18 Transfer of Assets from Customers Transfers from customers on or after 1 July 2009
       
 

An IFRIC becomes inoperative and is withdrawn when an IFRS or other authoritative document issued by the IASB, that overrides or confirms a previously issued IFRIC, becomes effective.

Circulars

A circular is issued by the JSE or the South African Institute of Chartered Accountants (SAICA) where guidance or clarification is required on an identified financial reporting issue on a South African platform (as apposed to an IFRIC, discussed above, that operates on an international platform). This guidance may be required to establish and improve standards of financial accounting and reporting for the benefit of users, preparers and auditors of financial statements and therefore promote the rigorous and uniform application of the standards.

The following circulars were issued since the start of the period under review. Most of these have had no impact on the Group, but have been included for completeness. The impact of each circular has been indicated in the right hand column.

  Circular Name Date issued Impact on the Group
  Circular 8/2007 Headline Earnings July 2007 This circular had an impact on the Group. See below for a detailed explanation.
  Circular 9/2007 Statement of Generally Accepted Accounting Practice for Small and Medium-sized Entities (SMEs) September 2007 This circular has no impact on the Group.
  Circular 1/2008 Guideline on Fees for Audits done on Behalf of the Auditor-General March 2008 This circular has no impact on the Group.
  Circular 1/2009 Guideline on Fees for Audits done on Behalf of the Auditor-General March 2009 This circular has no impact on the Group.
  Circular 2/2009 Statement of Generally Accepted Accounting Practice (GAAP): International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) September 2009 This circular has no impact on the Group.
  Circular 3/2009 Headline Earnings September 2009 This circular has no impact on the Group.
         
 

Where a circular impacts the Group, the results of the Group have been adjusted retrospectively as if the Group had always accounted for the circular correctly.

Circular 8/2007 Headline Earnings was issued in July 2007 by SAICA at the request of the JSE and became effective for the Group in the 2008 financial year-end. This circular is far more ‘rules based’ than its predecessor, Circular 02/2007 Headline Earnings. The impact the circular had on the Group has been to prescribe the starting point for the calculation of headline earnings. The Group previously used earnings attributable to the equity holders of the parent as its starting point, this has now been adjusted to earnings as defined by IAS 33, Earnings per Share as required by the new circular. The difference between the old and new starting point is the Massmart Thuthukani dividend, which in the past was adjusted for in headline earnings per share, but not headline earnings. More detail on this adjustment can be found in note 12.

Summary

The Group’s accounting policies are governed by IFRS and the AC 500 series as issued by the Accounting Practices Board and listed above. Guidance has been obtained from IFRIC’s and circulars effective on 5 October 2009, also listed above. Due to the nature and volume of Exposure Drafts (EDs), no review has been provided here.

The Group maintains the view that the standards set the minimum requirement for financial reporting. The financial statements in this annual report have been prepared with the aim of exposing the reader to a very detailed view of the numbers, using a simplified approach, in the hope of facilitating a deeper and informed understanding of the business.

3.  Acquisition of subsidiaries

 

Subsidiaries acquired

Purchasing
division
Principal
activity
Date of
acquisition
Control
acquired
(%)
  2009        
  Top Spot Masscash Retail Cash and Carry 25 August 2008 100
  Cambridge Food Masscash Retail Cash and Carry 1 December 2008 51
  Saverite – Romatswa Masscash Retail Cash and Carry 12 May 2009 100
  Saverite – Ghanzi Masscash Retail Cash and Carry 19 May 2009 100
  Buildrite – Queenstown Massbuild Home improvement/hardware 8 June 2009 100
  Buildrite – East London Massbuild Home improvement/hardware 17 June 2009 100
  Buildrite – King Williams Town Massbuild Home improvement/hardware 22 June 2009 100
           
 

Analysis of assets and liabilities acquired

   
 
  • The net asset value of the businesses acquired during the year was R34.8 million on the date of acquisition.
           
          2009
 

Net cash outflow on acquisition

  Rm
  Total purchase price   (241.1)
  Less: Cash and cash equivalents of subsidiary   1.0
  Cash impact of acquisition, net of cash and cash equivalents acquired   (240.1)
  Less: Seller's loan settlement in one business 41.6
  Net cash outflow for the Group (198.5)
 
  • The net cash outflow as reflected above can be found in note 39.7.
 
           
 

Goodwill arising on acquisition

 
 
  • Goodwill arose in the business combinations because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of the expected synergies, revenue growth and future market development. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured.
  • Goodwill was recognised on the following acquisitions:
    • Top Spot
    • Cambridge Food
    • Buildrite
  • Goodwill raised on these acquisitions of R205.3 million is recognised in note 14.
   

4.  Revenue

      2009 2008
      Rm Rm
  Sales   43,128.7 39,783.6
  Change in fair value of financial assets carried at fair value through profit or loss   36.8 54.0
  Instalment sale finance charges   2.3 51.3
  Dividends from unlisted investments   64.2 81.2
  Less: Interest paid on a related liability   (50.7) (75.5)
  Royalties and franchise fees   29.5 27.7
  Management and administration fees   0.4 0.4
  Property rentals   2.6 2.2
  Commissions and fees   17.0 17.0
  Other   1.0 2.9
      43,231.8 39,944.8
         

5.  Impairment of assets

      2009 2008
    Notes Rm Rm
  Intangible assets 15 1.6 4.7
      1.6 4.7
 
  • The impairment of assets in the current year relates to certain computer software in Masscash.
  • The impairment of assets in the prior year related to computer software and trademarks in Masscash and Corporate. An IT upgrade in Shield rendered the previous system obsolete and the trademarks in Corporate were assessed as holding no future economic benefit.
   

6.  Operating profit

  Credits to operating profit include:      
  Foreign exchange profit   268.4 220.2
  Profit on disposal of tangible and intangible assets   2.9 1.5
  Profit on disposal of assets classified as held for sale   7.0
  Charges to operating profit include:      
  Depreciation and amortisation (owned assets):   324.4 281.9
    Buildings   5.2 4.7
    Fixtures, fittings, plant and equipment   183.7 151.2
    Computer hardware   49.6 43.5
    Leasehold improvements   28.8 25.0
    Motor vehicles   11.9 9.1
    Computer software   44.9 48.0
    Trademarks   0.3 0.4
  Depreciation and amortisation (leased assets):   18.7 15.9
    Buildings   1.9 2.0
    Fixtures, fittings, plant and equipment   2.1 1.3
    Computer equipment   2.0 -
    Motor vehicles   12.7 12.6
  Foreign exchange loss   346.8 157.7
  Share-based payment expense   133.5 109.1
    Massmart Holdings Limited Employee Share Trust   66.6 42.0
    Massmart Thuthukani Empowerment Trust   54.7 62.3
    Massmart Black Scarce Skills Trust   12.2 4.8
  Operating lease charges:   858.5 751.3
    Land and buildings   821.0 705.0
    Plant and equipment   19.2 26.6
    Computer equipment   7.5 9.5
    Motor vehicles   10.8 10.2
  Loss on disposal of tangible and intangible assets   4.6 5.3
  Fees payable:      
    Administrative and outsourcing services   63.2 196.7
    Consulting   32.4 19.9
  Auditors' remuneration:   20.0 15.6
    Current year fee   15.3 13.5
    Prior year underprovision   1.8 0.1
    Tax advice and reviews   0.8 0.9
    Consulting and business reviews   1.0 0.4
    Contract assignments   0.6 0.7
    Other   0.5
           
 

7.  Foreign exchange gains and losses

  Foreign exchange (loss)/gain arising from loans to African operations* (116.9) 58.7
  Foreign exchange gain/(loss) arising from ineffective hedges 4.2 (10.7)
  Foreign exchange gain arising from an investment in offshore trading structure 14.9 27.3
  Foreign exchange gain/(loss) arising from the translation of foreign creditors 19.4 (12.8)
    (78.4) 62.5
 
       
  The Group was exposed to the following currencies for the period under review and their year-end exchange rates were:
    Spot rate Spot rate Spot rate
  Country Currency June 2007 June 2008 June 2009
  United States Us Dollar 7.2050 7.9639 7.9425
  United Kingdom Pound Sterling 14.4085 15.8915 13.1286
  European Union Euro 9.6646 12.4719 11.1480
  Botswana Pula 1.1725 1.2245 1.1675
  Malawi Malawian Kwacha 0.0524 0.0577 0.0572
  Mauritius Rupee 0.2300 0.2995 0.2562
  Mozambique New Metical 0.2807 0.3341 0.2995
  Namibia Namibian Dollar 1.0276 1.0183 1.0103
  Nigeria Naira 0.0575 0.0687 0.0541
  Tanzania Tanzanian Shilling 0.0058 0.0068 0.0062
  Uganda Uganda Shilling 0.0044 0.0051 0.0038
  Zambia Zambian Kwacha 0.0020 0.0025 0.0015
  Ghana New Cedi 7.4312 5.3690
 
   
 

Foreign exchange gain/(loss) arising from loans to African operations

  In Massdiscounters, a loan is initially provided to African operations as start up capital and then maintained as a working capital loan. This loan attracts foreign exchange gains/losses when it is translated into the functional currency of that entity at year-end. Where the operation holds other monetary balances not in its functional currency, that balance will also attract foreign exchange gains/losses when translated at year-end. These balances are not material and have been ignored in the explanation below.
   
  The graph below indicates the appreciation (rise in line) or depreciation (fall in line) of each currency relative to the Rand in the past year.
   
  African currencies spot rate relative to the Rand (based to June 2008)
   
 

Click to enlarge

African currencies spot rate relative to the Rand (based to June 2008)

   
 

Where there is a depreciation of the African currency (alternatively, a strengthening in the Rand) the resulting impact is a foreign exchange loss on the loan. From the graph, it is evident that all African currencies depreciated against the Rand in the current year compared to June 2008 which explains the translation exchange loss. In the prior year most African currencies strengthened against the Rand which is evidenced by the large translation exchange gain.

The African operations trade in their local currency, which for reporting purposes is also their functional currency. The foreign exchange gain/loss that arises when translating the foreign operation into Rands (the Group's presentation currency) is accounted for in the FCTR on the balance sheet. Further details on these translations can be found in note 23.

Foreign exchange gain/(loss) arising from ineffective hedges

The Group uses foreign exchange forward contracts to hedge its exposure to foreign currency fluctuations relating to certain firm trading commitments. IAS 39 Financial Instruments: Recognition and Measurementnt defines the accounting treatment for cash flow hedges, which is also contained in our accounting policies.

Extract from the Massmart accounting policies in note 1:

“The effective portion of the changes in fair value of derivative financial instruments that are designated and qualify as cash flow hedges are recognised directly in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. If the hedged firm commitment or forecast transaction results in the recognition of an asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. Amounts deferred in equity are recognised in profit or loss in the same period in which the hedged firm commitment affects profit or loss.”

This foreign exchange gain arises from the ineffective hedges being recognised in profit or loss. The determination of an ineffective hedge is where the contract price moves outside of the range of 80% to 125% in relation to the underlying spot rate.

Foreign exchange gain/(loss) arising from an investment in offshore trading structure

The Group’s offshore trading structure is a US Dollar denominated investment. The graph below shows that the Rand closed relatively flat on the US Dollar in the current year, but there was a foreign exchange gain arising from this investment. This is because during the year the Group realised a portion of their investment when the Rand was relatively weak against the Dollar with the result being a foreign exchange gain for the Group.

US Dollar spot rate relative to the Rand

 

Click to enlarge

US Dollar spot rate relative to the Rand

 

Foreign exchange gain/(loss) arising from the translation of foreign creditors

Foreign creditors resulting from foreign stock purchases are translated into functional currency at year-end and the exchange difference is accounted for in profit or loss. As the bulk of foreign creditors are recorded in US Dollars, this exchange difference can be explained by the movement in the Rand against the US Dollar.

However, as payments are made to creditors throughout the year that attract different rates of exchange, the entire exchange gain/loss cannot be linked to the closing Rand/US Dollar movement.

   

8.  Hyperinflation

 

In the 2007 financial year, the decision was made to prospectively deconsolidate the results of the Zimbabwean Makro operations.

In terms of IAS 27 Consolidated and Separate Financial Statementsts, control is defined as ‘the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities’. It is evident from the current social, political and economic developments within Zimbabwe that control does not exist. This has been evidenced through the forcing of retailers to sell goods at predetermined prices and the inability of the Massmart Group to repatriate monies. It is Massmart's view that, throughout the 2009 financial year, it did not have control over the Zimbabwean operations and as such the results remain deconsolidated. This will be assessed on a yearly basis.

On deconsolidation in 2007, the investment in Makro Zimbabwe was reflected as an ‘available-for-sale’ financial asset. The fair value of this asset was determined to be zero and the adjustment taken to equity as a reserve. For the period under review the fair value was again assessed as zero and as a result there has been no fair value movement. Details can be found in note 16.

9.  Net finance costs

    2009 2008
    Rm Rm
  Finance costs    
  Interest on bank overdrafts and loans 100.3 97.7
  Interest on obligations under finance leases 12.5 12.9
    112.8 110.6
  Finance income    
  Income from investments, receivables and bank accounts 64.2 46.5
    64.2 46.5
 
  • Details on the loans and finance leases can be found in note 25.
       

10. Taxation

    2009 2008
    Rm Rm
  Current year    
  South African normal taxation    
    Current taxation 470.0 506.0
    Deferred taxation 26.6 33.8
  Foreign taxation    
    Current taxation 50.7 37.4
    Deferred taxation (10.5) 5.9
  Secondary taxation on companies (relating to dividends paid) 80.8 65.9
  Taxation effect of participation in export partnerships 0.2 0.4
  Total 617.8 649.4
  Prior year under/(over) provision:    
  South African normal taxation    
    Current taxation 11.1 5.7
    Deferred taxation (6.5) 1.4
    Release from equity reserve to income 0.5
  Foreign taxation    
    Current taxation (1.5) 2.7
    Deferred taxation (impairment of deferred taxation assets) (0.5) 3.2
    2.6 13.5
    620.4 662.9
 
  • Two companies in the Group participate in Trencor export partnerships. As the companies are liable for the tax effect of the participation, the amount is classified as a taxation charge. Details on the export partnership can be found in note 16.
      % %
  The rate of taxation is reconciled as follows:    
    Standard corporate taxation rate 28.0 28.0
    Exempt income (1.9) (1.1)
    DisallowabForeign incomele expenditure 3.0 2.3
      0.1 0.1
    Prior year underprovision (including impairment) 0.1.1 0.7
    Secondary taxation on companies 3.8 3.4
  Other (0.5) (0.6)
  Effective rate 32.6 32.8