NOTES TO THE FINANCIAL STATEMENTS

for the years ended 31 March

The Foschini Group Limited and its subsidiaries
        2011 2010
        Rm Rm

31.

FINANCE COST

    
  Finance cost on financial liabilities measured at amortised cost (250,1) (261,5)
       

32.

INCOME TAX EXPENSES

    
  South African current taxation    
    Current year     637,1 488,0
    Prior year under (over) provision     9,3 (6,6)
    Secondary taxation on companies     63,5 59,7
  South African deferred taxation        
    Current year     (61,8) (14,3)
    Prior year (over) under provision     (4,7) 6,4
    Secondary taxation on companies     1,6 (2,4)
  Non-South African current taxation        
    Current year     19,9 18,8
    Prior year over provision     (1,9) –
  Non-South African deferred taxation        
    Current year     (0,6) (0,9)
    Prior year over provision     (0,1) –
    Rate change     – (0,1)
        662,3 548,6
        % %
  Reconciliation of tax rate        
  Effective tax rate     32,3 32,1
  Exempt income     0,2 0,2
  Non-deductible expenditure     (2,2) (0,8)
  Non-South African tax rate     0,9 (0,1)
  Non-recoverable withholding taxes     (0,1) –
  Secondary taxation on companies and withholding tax on dividends (3,1) (3,4)
  South African statutory rate     28,0 28,0
       

33.

EARNINGS PER SHARE

    
         
  33.1 Basic and headline earnings per share
The calculation of basic and headline earnings per share at 31 March 2011 was based on profit for the year attributable to ordinary shareholders of The Foschini Group Limited of R1 301,8 (2010: R1 085,6) million and headline earnings of R1 305,6 (2010: R1 085,6) million divided by the weighted average number of ordinary shares as follows:		    
   
    Profit attributable to equity holders of The Foschini Group Limited 1 301,8 1 085,6
    Adjusted for the after-tax effect of:        
    Goodwill impairment − effective portion     3,2 –
    Goodwill impairment     5,8 –
    Less: non-controlling interest     (2,6) –
    Profit on disposal of property, plant and equipment   (0,2) (0,5)
    Loss on disposal of property, plant and equipment   0,8 05
    Headline earnings     1 305,6 1 085,6
    Weighted average number of ordinary shares in issue   206 459 906 208 243 974
    Earnings per ordinary share (cents)     630,4 521,4
    Headline earnings per ordinary share (cents)   632,3 521,4
         
  33.2 Diluted earnings and diluted headline earnings per share
The calculation of diluted earnings and diluted headline earnings per share at 31 March 2011 was based on profit for the year attributable to ordinary shareholders of The Foschini Group Limited of R1 301,8 (2010: R1 085,6) million and headline earnings of R1 305,6 (2010: R1 085,6) million divided by the fully diluted weighted average number of ordinary shares as follows:		    
       
    Weighted average number of ordinary shares as above 206 459 906 208 243 974
    Number of shares that would have been issued for no consideration 4 094 246 1 264 151
    Weighted average number of ordinary shares used for dilution 210 590 152 209 508 125
    Diluted earnings per ordinary share (cents) 618,1 518,2
    Diluted headline earnings per ordinary share (cents) 619,9 518,2
     

34.

OPERATING LEASE OBLIGATIONS

The group leases most of its trading premises under operating leases.

Leases on trading premises are contracted for periods of between five and ten years, with renewal options for a further five years, wherever possible. The lease agreements for certain stores provide for a minimum annual rental payment and additional payments determined on the basis of turnover. Turnover rentals, where applicable, average approximately 4,5% of turnover. Rental escalations vary, but average at a rate of approximately 8% per annum.

At 31 March, future non-cancellable minimum lease rentals are as follows:		    
     
     
  Less than one year     952,3 837,5
  More than one year and less than five years     2 395,2 2 043,4
  More than five years     277,7 90,5
   

35.

EMPLOYEE BENEFITS
   
  35.1 Share incentive schemes
Executive directors and key management personnel of the group participate in its share incentive schemes.
     
   

Options

The scheme rules of the 1997 scheme provide that delivery and payment for the shares take place in three equal tranches on the second, fourth and sixth anniversary of the date on which the options were exercised.
   
   

Share appreciation rights

The scheme rules of the 2007 scheme provide that, upon fulfilment of certain performance conditions, the share appreciation rights (SARs) may upon request, be converted from the third anniversary of the grant date. Participants are entitled to receive shares in equal value to the growth in the share price on a defined number of shares between the date of grant and the date of conversion. The entitlement to these shares is subject to group performance criteria, linked to inflation. All rights expire after six years.

The fair value of options and SARs granted and exercised after 7 November 2002 was determined using a binomial option-pricing model. The assumptions used in determining the fair value are as follows:  
          2011 2010
    Share appreciation rights granted during the financial year ending 31 March    
    Grant price     R64,47 R58,37
    Expected volatility     35,9% 35,5%
    Expected dividend yield     6,0% 5,8%
    Risk-free interest rate     8,0% 7,9%
   

The group recognised total expenses of R55,9 (2010: R34,3) million related to these equity-settled share-based payment transactions during the year.

Details of the share options and SARs outstanding at the end of the year are set out below.
          Number of share options
    Foschini 1997 Share Option Scheme    
    Options exercised, subject to future delivery, at 1 April 4 357 794 6 154 503
    Put exercised by option holders     – (94 999)
    Options forfeited during the year     (89 003) (71 673)
    Options delivered during the year     (2 694 041) (1 630 037)
    Options exercised, subject to future delivery, at 31 March 1 574 750 4 357 794
          Number of SARs
    Foschini 2007 Share Incentive Scheme    
    SARs granted, subject to fulfilment of conditions, at 1 April 9 565 000 9 503 000
    SARs granted during the year, subject to fulfilment of conditions 2 266 500 172 000
    SARs delivered during the year     (1 500) –
    SARs forfeited during the year     (118 000) (110 000)
    SARs granted, subject to fulfilment of conditions, at 31 March 11 712 000 9 565 000
     
    SARs delivered during the year equates to 792 ordinary shares.

Options in terms of the 1997 scheme will be delivered during the following financial years: 
    Year   Average
price		 Number
of share
options		  
    2012   48,60 188 334  
    2013   60,19 1 278 080  
    2014   56,60 108 336  
          1 574 750  
         
    Upon request, SARs in terms of the 2007 scheme may be converted from the following financial years:    
    Year   Average price Number of
SARS		  
    2012   41,57 9 283 500  
    2013   58,37 172 000  
    2014   64,47 2 256 500  
          11 712 000  
         
    These schemes are administered by The Foschini Share Incentive Trust which holds shares in The Foschini Group Limited as follows:    
          2011 2010
    Shares held at the beginning of the year     7 455 692 9 092 806
    Shares delivered during the year     (2 694 833) (1 637 114)
    Shares purchased during the year     6 379 641 –
    Shares held at the end of the year     11 140 500 7 455 692
             
  35.2 Staff housing loans
Refer to note 5.		        
             
  35.3 Retirement funds
   

The Foschini Group funds
     
    The Foschini Group Retirement Fund: Defined contribution plan

The Foschini Group Retirement Fund, which is governed by the provisions of the Pension Funds Act No. 24 of 1956, is a defined contribution plan. It provides comprehensive retirement and associated benefits for members and their dependants.

All permanent employees of wholly-owned subsidiaries of The Foschini Group Limited, excluding those that are members of the Namflex or Sibaya Funds, are members of the retirement fund.

An actuarial valuation of the fund was performed as at 31 December 2009, in which the valuator reported that the fund was in a sound financial position.

The actuarial valuation as at 31 December 2012 is due to be performed during the 2013 financial year.
     
    Investment Solutions Provident Fund: Defined contribution plan

All executives and key management personnel are required to be members of this fund.

The employer contributes 1,5% of employee’s earnings to this fund.
   
     
    Namflex Pension Fund: Defined contribution plan

All permanent employees in Namibia under normal retirement age are required to be members of the Namflex Pension Fund.

This fund is a money purchase arrangement whereby the members pay 7,5% of their pensionable salary as contributions towards retirement benefits.
     
    Sibaya Provident Fund: Defined contribution plan
All permanent employees in Swaziland under normal retirement age are required to be members of the Sibaya Provident Fund, whereby members pay 7,5% of their pensionable salary as contributions to this fund.
   
   

RCS Group funds

     
    Alexander Forbes Retirement Annuity: Defined contribution plan
All permanent employees of RCS Botswana (Proprietary) Limited under normal retirement age are required to be members of the Alexander Forbes Retirement Annuity. This fund is a money purchase arrangement whereby the members pay 7,5% of their pensionable salary as contributions towards retirement benefits.
     
    Liberty Life Pension Fund and SACCAWU Provident Fund
Existing employees of the Massdiscounters credit business which was acquired during the 2009 financial year, remained as members of either the SACCAWU Provident Fund or the Liberty Life Pension Fund.
   
     
    Liberty Life Provident Fund: Defined contribution plan
Employees of RCS Investment Holdings (Proprietary) Limited, a partially-owned subsidiary, are not members of The Foschini Group Retirement Fund, but receive comparable benefits from the Liberty Life Provident Fund. In addition, existing employees of the Massdiscounters credit business which was acquired during the 2009 financial year remained as members of either the SACCAWU Provident Fund or the Liberty Life Pension Fund.
     
    Sanlam Retirement Annuity: Defined contribution plan
All permanent employees of RCS Investment Holdings Namibia (Proprietary) Limited under normal retirement age are required to be members of the Sanlam Retirement Annuity. This fund is a money purchase arrangement whereby the members pay 7,5% of their pensionable salary as contributions towards retirement benefits.
   
     
    The employers and the members make equivalent contributions in respect of retirement benefits. In addition, the employers cover death and disability benefits, reinsurance, and administration and management costs.
      Number of members Employer contributions
          2011 2010
      2011 2010 Rm Rm
    Summary per fund:        
   

TFG Funds

        
    The Foschini Group Retirement Fund 10 793 9 971 109,5 96,2
    Investment Solutions Provident Fund 162 147 1,7 1,4
    Namflex Pension Fund 249 213 1,6 1,2
    Sibaya Provident Fund 9 8 –* –*
   

RCS Group Funds

        
    Alexander Forbes Retirement Annuity 6 – –* –
    Liberty Life Pension Fund 13 51 01 0,4
    Liberty Life Provident Fund 590 469 8,7 9,4
    SACCAWU Provident Fund 14 36 0,1 0,3
    Sanlam Retirement Annuity 2 – –* –
      11 838 10 895 121,7 108,9
    * Zero as a result of rounding to millions
     
 

35.4

Medical aid
   

The Foschini Group funds
     
    The Foschini Group Medical Aid Scheme: Defined benefit plan
The company and its wholly-owned subsidiaries operate a defined benefit medical aid scheme for the benefit of their permanent South African employees. Membership of the scheme is voluntary, except for senior employees.

Total membership currently stands at 2 773 (2010: 2 712) principal members.

These costs are charged against income as incurred and amounted to R29,2 (2010: R26,9) million, with employees contributing a further R29,2 (2010: R26,9) million to the fund.

In respect of the year ended 31 December 2010, the scheme earned contributions of R63,7 million and reflected a net surplus of R1,5 million after the deduction of all expenses. The fund had net assets totalling R37,0 million.

The budgeted projected surplus in respect of the year ending 31 December 2011 is R0,8 million.
   
    Bankmed Medical Aid Scheme: Defined benefit plan
Permanent employees in Namibia are voluntary members of the Bankmed Medical Aid Scheme.

These costs are charged against income as incurred and amounted to R0,7 (2010: R0,7) million, with employees contributing a further R0,7 (2010: R0,7) million to the fund. There are currently 56 (2010: 64) members of this fund.
   
    Ingwe Health Plan: Defined benefit plan
An external medical aid scheme, Ingwe Health Plan, is also available to group employees and is subsidised by the group in the same way as the schemes mentioned above. The plans offered cater for lower income earners and 55 (2010: 67) employees are currently members. Costs charged to income total R1,0 (2010: R1,4) million.
   
     
    RCS Group funds
     
    Discovery Health: Defined benefit plan
All permanent staff of RCS Investment Holdings (Proprietary) Limited, a partially-owned subsidiary are required to become members of their choice of the medical plans offered by Discovery Health.

These costs are charged against income as incurred and amounted to R6,1 (2010: R3,6) million. Total membership currently stands at 1 346 (2010: 509) principal members.
   
    BOMaid: Defined benefit plan
All permanent staff of RCS Botswana (Proprietary) Limited are required to become members of their choice of the medical plans offered by BOMaid. Total membership currently stands at three (2010: nil) principal members. These costs are charged against income as incurred and amounted to R27 030 (2010: Rnil).
   
    Nexus Medical Aid: Defined benefit plan
All permanent staff of RCS Investment Holdings Namibia (Proprietary) Limited are required to become members of their choice of the medical plans offered by Nexus Medical Aid. Total membership currently stands at one (2010: nil) principal member. These costs are charged against income as incurred and amounted to R30 474 (2010: Rnil).
   
     
  35.5 Post-retirement medical aid
Qualifying retired employees are entitled to medical aid benefits, which have been fully provided for (refer to note 20).

The cost of providing post-retirement medical aid has been determined in accordance with IAS 19 and the charge against income for the year was Rnil (2010: Rnil) million.

The principal assumptions at the last valuation date, being 31 March 2011 were as follows:
 
    Net discount rate 1,5%    
    Withdrawal rates 0% − 20%    
    Normal retirement age 60 − 65 years    
             
  35.6 Other
Group employees and pensioners are entitled to a discount on purchases made at stores within the group.
   
   

36.

DIRECTORS’ REMUNERATION
 
  Remuner-
ation 		Remuner-
ation 		Pension
 fund		 Travel
 allowance		 Other
benefits*		 Per-
formance
bonus**		 2011
Total		 2010
Total
  R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Non-executive                
D M Nurek 1 050,0 – – – – – 1 050,0  
F Abrahams 347,6 – – – – – 347,6  
S E Abrahams 341,0 – – – – – 341,0  
W V Cuba 235,0 – – – – – 235,0  
M Lewis 206,0 – – – – – 206,0  
E Oblowitz## 122,8 – – – – – 122,8  
D M Polak 227,0 – – – – – 227,0  
N V Simamane 255,0 – – – – – 255,0  
K N Dhlomo 255,0 – – – – – 255,0  
Total 3 039,4 – – – – – 3 039,4  
Executive                
A D Murray – 3 889,7 466,8 305,0 123,4 6 281,8 11 066,7  
R Stein – 2 260,2 271,2 233,9 79,2 2 901,7 5 746,2  
P S Meiring – 1 914,7 229,8 233,9 76,2 2 430,8 4 885,4  
Total – 8 064,6 967,8 772,8 278,8 11 614,3 21 698,3  
Total remuneration 2011 3 039,4 8 064,6 967,8 772,8 278,8 11 614,3 24 737,7  
Non-executive                
D M Nurek 800,0 – – – – –   800,0
F Abrahams 250,0 – – – – –   250,0
S E Abrahams 300,0 – – – – –   300,0
W V Cuba 220,0 – – – – –   220,0
M Lewis 175,0 – – – – –   175,0
E Oblowitz## – – – – – –   –
D M Polak 257,5 – – – – –   257,5
N V Simamane 192,2 – – – – –   192,2
K N Dhlomo 192,2 – – – – –   192,2
Total 2 386,9 – – – – –   2 386,9
Executive                
A D Murray – 3 543,0 425,2 297,6 119,8 1 500,0   5 885,6
R Stein – 2 075,0 249,0 228,1 74,7 600,0   3 226,8
P S Meiring – 1 801,0 216,1 228,1 76,2 800,0   3 121,4
Total – 7 419,0 890,3 753,8 270,7 2 900,0   12 233,8
Total remuneration 2010 2 386,9 7 419,0 890,3 753,8 270,7 2 900,0   14 620,7
   
  In accordance with the requirements of IFRS 2, the fair value of share options and share appreciation rights (SAR) granted to employees is expensed in profit or loss over the term of the option/SAR. An amount of R6,5 (2010: R3,9) million, R2,8 (2010: R1,7) million, R1,0 (2010: R0,9) million and R2,4 (2010: R1,5) million was recognised in respect of options granted to Messrs A D Murray, R Stein, D M Polak and P S Meiring respectively. These amounts are not included in the amounts reflected above.
   

37.

RELATED PARTY TRANSACTIONS
  Shareholders
An analysis of the principal shareholders of the company is provided in appendix 3.

For details of directors’ interests refer to note 13.5.
 
   
  Subsidiaries
During the year, in the ordinary course of business, certain companies within the group entered into arm’s length transactions. These intra-group transactions have been eliminated on consolidation.
 
   
  Other related parties
   
  The Foschini Group Retirement Fund
The Foschini Group Retirement Fund is administered by Foschini Retail Group (Proprietary) Limited, a subsidiary of The Foschini Group Limited.
 
          2011 2010
          Rm Rm
  Administration fee earned from The Foschini Group Retirement Fund 1,9 1,8
   
  An executive director of The Foschini Group Limited (Mr R Stein) is also a trustee of The Foschini Group Retirement Fund.
   
  Directors
   
  Remuneration
  Details relating to executive and non-executive directors’ remuneration are disclosed in note 36.
   
  Interest of directors in contracts
No directors have any interests in contracts that are in contravention of section 234 of the Companies Act No. 61 of 1973.

Executive directors are bound by service contracts.
 
   
  Loans to directors
No loans have been made to directors.
 
   
 

Employees

Details relating to the share incentive schemes are disclosed in note 35.1.
 
   
 

Key management personnel

Key management personnel are those having authority and responsibility for planning, directing and controlling activities, directly or indirectly, including any director of that entity. Executive directors and associates of all subsidiary companies and The Foschini Group Limited have been classified as key management personnel.

No key management personnel had a material interest in any contract of significance with any group company during the year under review.
 
          2011 2010
          Rm Rm
  Remuneration paid to key management personnel is as follows:    
  Short-term employee benefits    
    Remuneration     80,5 77,5
    Performance bonus     67,8 1,1
    Travel allowance     11,1 9,7
  Post-employment benefits        
    Pension fund     10,6 8,8
  Other long-term benefits        
    Other benefits     1,2 3,8
  Share-based payments        
    Fair value of share options granted*     50,6 27,4
  Total remuneration     221,8 128,3
           
  Refer to note 36 for further disclosure regarding remuneration paid to executive directors of the company.

Remuneration paid to the top three highest earners, excluding executive directors, is as follows:
 		    
  Short-term employee benefits    
    Remuneration     5,3 4,8
    Performance bonus     6,9 0,1
    Travel allowance     0,5 0,5
  Post-employment benefits        
    Pension fund     0,7 0,6
  Other long-term benefits        
    Other benefits     0,1 0,1
  Share-based payments        
    Fair value of share options granted*     6,2 3,7
  Total remuneration     19,7 9,8
 
* The fair value of options granted is the annual expense determined in accordance with IFRS 2 Share-based Payments
   
             

38.

CASH FLOW

        
         
  38.1 Operating profit before working capital changes    
    Profit before tax     2 051,1 1 711,1
    Adjusted for:        
      Interest income − sundry     (16,8) (11,6)
      Finance cost     250,1 261,5
      Dividend income     (12,1) (13,8)
      Non-cash items     358,0 290,3
    Operating profit before working capital changes 2 630,3 2 237,5
         
 

38.2

Working capital changes

        
    (Increase) decrease in inventory     (310,9) 31,1
    Increase in trade and other receivables     (930,1) (613,8)
    Increase in trade and other payables     416,9 41,3
    Increase in working capital     (824,1) (541,4)
         
 

38.3

Reconciliation of taxation paid

        
    Amount unpaid at the beginning of the year     (128,0) (70,6)
    Current year provision     (727,9) (559,9)
    Current tax effect of other items in equity     7,8 15,2
    Amount unpaid at the end of the year     79,1 128,0
          (769,0) (487,3)
         
 

38.4

Reconciliation of dividends paid

        
    Dividends declared during the year     (637,5) (599,1)
    Dividends paid by subsidiary to non-controlling interest (28,4) (9,1)
          (665,9) (608,2)
             

39.

CHANGE IN ACCOUNTING POLICY

The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the AC 500 Standards as issued by the Accounting Practices Board or it successor, and the interpretations adopted by the International Accounting Standards Board (IASB) on a basis consistent with the prior year except for the adoption of the following revised standard.
 
   
 

IAS 27 Consolidated and Separate Financial Statements

During the year, the group adopted the amended IAS 27 Consolidated and Separate Financial Statements.

The principal effect of the change required by IAS 27 was that total comprehensive income of subsidiaries are now attributed to non-controlling interest even if this results in a total deficit balance.

The adoption of IAS 27 has had no significant effect on these results.
 
   

40

ACCOUNTING STANDARDS AND INTERPRETATIONS TO BE ADOPTED IN FUTURE YEARS

There are standards and interpretations in issue that are not yet effective. These include the following standards and interpretations that are applicable to the group and may have an impact on future financial statements:
 
   
  IFRS 7 Financial Instruments: Disclosures
The amendments to IFRS 7 will be applicable to the group for the first time for its financial reporting period ending 31 March 2013.

In terms of the amendments additional disclosure will be provided regarding transfers of financial assets that are:
  • not derecognised in their entirety; and
  • derecognised in their entirety, but for which the group retains continuing involvement.

It is not anticipated that this standard would have an impact on the group’s financial statement disclosures.
 
   
  IFRS 9 Financial Instruments
IFRS 9 will be applicable to the group for the first time for its financial reporting period ending 31 March 2014. The standard will be applied retrospectively, subject to transitional provisions.

IFRS 9 addresses the initial measurement and classification of financial assets and will replace the relevant sections
of IAS 39.

Under IFRS 9 there are two options in respect of classification of financial assets, namely, financial assets measured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value. Embedded derivatives are no longer separated from hybrid contracts that have a financial asset host.

The impact on the financial statements for the group has not yet been estimated.
 
   
  IFRS 9 Additions to Financial Instruments
The additions to IFRS 9 will be applicable to the group for the first time for its financial reporting period ending
31 March 2014. The standard will be applied retrospectively, subject to transitional provisions.

Under IFRS 9 (2010), the classification and measurement requirements of financial liabilities are the same as per IAS 39, barring the following two aspects:

  • Fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss, attributable to the changes in the credit risk of the liability will be presented in other comprehensive income (OCI). The remaining change is recognised in profit or loss. However, if the requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently reassessed.

  • Under IFRS 9 (2010) derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.

IFRS 9 (2010) incorporates the guidance in IAS 39 dealing with fair value measurement, derivatives embedded in host contracts that are not financial assets and the requirements of IFRIC 9 Reassessment of Embedded Derivatives.

The impact on the financial statements for the group has not yet been estimated.
 
   
  IAS 24 (AC 126) (revised)
IAS 24 (AC 126) (revised) will be applicable to the group for the first time for its financial reporting period ending 31 March 2012. The standard will be applied retrospectively.

IAS 24 (AC 126) (revised) addresses the disclosure requirements in respect of related parties, with the main changes relating to the definition of a related party and disclosure requirements by government-related entities.

Under IAS 24 (AC 126) (revised) the definition of a related party has been amended with the result that a number of new related party relationships have been identified.

It is not anticipated that this standard would have an impact on the group’s financial statement disclosures.
 
   
  Improvements to International Financial Reporting Standards (IFRS) 2010
The following standards have been amended by the Annual Improvements to IFRS 2010 project and will be applicable to the group for its financial reporting period ending 31 March 2012.

It is not anticipated that these amendments would have a significant impact on the group's financial statements.
 
   
  IFRS 3 Business Combinations − Transitional requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS
IFRS 3 is amended to state that contingent consideration arising in a business combination that had been accounted for in accordance with IFRS 3 (2004) that has not been settled or otherwise resolved at the adoption date of IFRS 3 (2008) continues to be accounted for in accordance with IFRS 3 (2004).

For such contingent consideration, the cost of the business combination is adjusted if and when payment of the contingent consideration is probable and the amount can be measured reliably. That means that IAS 39 Financial Instruments: Recognition and Measurement does not apply to contingent consideration within the scope of the amendment, i.e. liability-classified contingent consideration is not measured at fair value through profit or loss.

The amendment is required to be applied prospectively from the date that an entity first applied IFRS 3 (2008).
 
   
 

IFRS 3 − Measurement of non-controlling interests
IFRS 3 is amended to limit the accounting policy choice to measure non-controlling interests (NCI) upon initial recognition either at fair value or at the NCI’s proportionate share of the acquiree’s identifiable net assets to instruments that give rise to a present ownership interest and currently entitle the holder to a share of net assets in the event of liquidation.

The accounting policy choice does not apply to other instruments, such as written options classified as equity instruments or options granted under share-based payment arrangements. Such interests generally will be measured at fair value or otherwise in accordance with other relevant IFRS, e.g. share-based payments that give rise to NCI will be measured in accordance with IFRS 2 Share-based Payment.

The amendment is required to be applied prospectively from the date that an entity first applied IFRS 3 (2008).
   
  IFRS 7 Financial Instruments: Disclosures (amendments to disclosures)
IFRS 7 is amended to add an explicit statement that the qualitative disclosure should be made in the context of the quantitative disclosures to better enable users to evaluate an entity’s exposure to risks arising from financial instruments.

The existing disclosure requirements of IFRS 7 are amended as follows:
  • Clarifiy that disclosure of the amount that best represents an entity’s maximum exposure to credit risk is required only if the carrying amount of a financial asset does not reflect such exposure already.
  • Additional requirement to disclose the financial effect of collateral held as security and other credit enhancements in respect of a financial instrument. This disclosure is in addition to the existing requirement to describe the existence and nature of such collateral.
  • Clarifiy that disclosure in respect of collateral taken possession of by the entity is required only in respect of such collateral held at the end of the reporting period.

The following requirements have been removed from IFRS 7:
  • disclosure of the carrying amount of financial assets that would have been past due or impaired if their terms had not been renegotiated; and
  • disclosure of the description and fair value of collateral held as security and other credit enhancements in respect of financial assets that are past due but not impaired and in respect of financial assets that are individually determined to be impaired.

In addition, the clause stating that quantitative disclosures are not required when a risk is not material has been removed from IFRS 7.
 
   
  IAS 1 Presentation of Financial Statements
This amendment relates to the presentation of the statement of changes in equity. Currently, IAS 1 required for each component of equity a reconciliation from opening to closing balances to be presented in the statement of changes in equity. That reconciliation is required to show separately changes arising from items recognised in profit or loss in other comprehensive income and from transactions with owners acting in their capacity as owners.

IAS 1 is amended to clarify that disaggregation of changes in each component of equity arising from transactions recognised in other comprehensive income also is required to be presented, but is permitted to be presented either in the statement of changes in equity or in the notes.
 
   
 

IAS 34 − Significant Events and Transactions

IAS 34 is amended by adding a number of examples to the list of events or transactions that require disclosure under IAS 34, being examples of:
  • recognition of a loss from the impairment of financial assets;
  • significant changes in an entity’s business or economic circumstances that have an impact on the fair value of items in the statement of financial position, regardless of whether such items are accounted for at fair value;
  • significant transfers of financial instruments between levels of the fair value hierarchy; and
  • changes in assets’ classification as a result of changes in their purpose or use.