| 2 Basis of preparation and accounting policies |
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2.1 Basis of preparation
The condensed consolidated annual financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and
in compliance with the Listings Requirements of the JSE Limited, the South African Companies Act, 2008, as amended,
the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and the Financial Reporting Standards Council.
The condensed consolidated annual financial statements are disclosed in South African Rand, which is also the group’s presentation
currency. All financial information presented in Rand has been rounded off to the nearest million.
The condensed consolidated annual financial statements are prepared on the historical cost basis, with the exception of certain financial
instruments initially (and sometimes subsequently) measured at fair value. Details of the group’s significant accounting policies are
consistent with those applied in the previous financial year except for those listed below.
Significant accounting judgements, estimates and assumptions
In preparing these condensed consolidated annual financial statements, the significant judgements made by management in applying
the group’s accounting policies and the key sources of estimation uncertainty were consistent with those applied to the consolidated
financial statements for the year ended 31 March 2016 except for the changes in note 2.2, note 4 and the assumptions used to calculate
the deferred tax asset in Telkom company.
Significant accounting policies
The condensed consolidated annual financial statements have been prepared in accordance with the accounting policies adopted in the
group’s last annual financial statements for the year ended 31 March 2016, except for the adoption of the amendments, new standards
and changes in accounting policies as described in note 2.2.
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The following new standards and amendments to standards have been early adopted.
| Standard(s), Amendment(s) |
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Salient feature of the changes |
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Effective date |
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| IFRS 12 Disclosure of Interests in Other Entities |
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Amendment clarifying the scope of IFRS 12 with respect to
interests in entities classified as held for sale in accordance
with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations. This amendment has been adopted and has no impact
on the group. |
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1 January 2017 |
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| IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses |
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The amendments clarify that an entity needs to consider whether
tax law restricts the sources of taxable profits against which it may
make deductions on the reversal of that deductible temporary
difference. Furthermore, the amendments provide guidance on
how an entity should determine future taxable profits and explains
in which circumstances taxable profit may include the recovery of
some assets for more than their carrying amount.
These amendments have been adopted and do not have an impact
on the group. |
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1 January 2017 |
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The group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
2.2 Correction of prior period errors and change in accounting policy
Correction of prior period errors
The condensed consolidated annual financial statements provide comparative information in respect of the previous period. In addition,
the group presents an additional statement of financial position at the beginning of the preceding period when there is a retrospective
application of an accounting policy and a retrospective restatement. An additional statement of financial position as at
31 March 2015 is presented in these condensed consolidated annual financial statements due to the retrospective correction of a prior
period error.
2.2.1 Telkom Retirement Fund
During the 31 March 2016 reporting period, the group reported the restatement of the balances as a “Reassessment of the Telkom
Retirement Fund (TRF) Defined Benefit Plan”. For classification purposes, it should be noted that the reassessment of the TRF constituted
an error and not a change in accounting policy as previously stated. All relevant IAS 8 disclosures (nature, correction amounts and the
amount of correction at the beginning of the year) regarding the error were appropriately disclosed in the FY2016 Financial Statements.
2.2.2 Fair value hierarchy
During the previous reporting periods, the group reported the fair value hierarchy of the TL20 bonds as level 1 instead of level 2 based on
the fact that it could access the quoted price of the bonds. According to IFRS 13, bonds can only be level 1 if they are quoted on an active
market. The TL20 bonds are quoted on the market, however their transactions are not frequent enough for the market to be regarded as
liquid.
The group has corrected this disclosure by changing the TL20 fair value hierarchy from level 1 to level 2. The group has assessed that
there has been no impact on the fair value of the TL20 bonds in the prior year as the quoted price is an adjusted market price, for
perceived changes in risk as well as the time value of money. The group will continue to assess if the quoted price of the listed
TL20 bonds is considered to be a level 1 or level 2 price and if further adjustment might be required.
2.2.3 Fraud - Trudon
During the current financial year, the group uncovered fraud at one of its subsidiaries, Trudon, resulting in the termination of the services
of the general manager, IT.
An internal investigation into the fraud was launched, which identified invoicing and accounting irregularities which led to the incorrect
recognition and subsequent measurement of intangible assets over a period of several years. The investigation also identified the past
practice of irregularly capitalising operating expenditure as intangible assets. The nature of the errors identified included:
- Intangible assets capitalised for which there was no evidence of a valid asset or expense as a result of the above fraud
- Expenses capitalised to intangible assets which on re-evaluation of the nature of expense, based on the invoice detail, was deemed to
not meet the recognition criteria of IAS 38 at date of capitalisation
- Identification of intangible assets which were no longer in use and which had been decommissioned in earlier periods but not
de-recognised at time of decommissioning
- Income tax implications in relation to expenses and wear and tear allowances deducted in prior periods relating to invoices associated
with financial irregularities which based on senior counsel opinion should not have been deducted for tax purposes.
These issues identified constituted material prior period errors and have been corrected by restating each of the affected line items for the prior period as shown in the table 2.3 and 2.4 below.
2.2.4 Change in accounting policies
Cost of sales
The group has previously included all the expenses that can be directly linked to revenue received for services provided and goods sold
to customers in the definition of cost of sales.
Following the sale of the Enterprise business to BCX in November 2016, the group elected to change its accounting policy for cost of
sales to only include expenses directly tied to revenue from the sale of goods. This decision to change the accounting policy in the view
of management will provide more reliable and relevant information to ensure consistent presentation across the group following the sale
of Enterprise to BCX.
The new group accounting policy now applies that cost of sales determined as:
- Cost of goods sold relating to the sale of goods net of supplier rebates and discounts including:
• Commission costs paid to external parties for the sale of goods sold
• Logistics and delivery expenses relating to the goods sold
All other costs are disclosed by nature with the following being the key categories:
- Employee expenses
- Selling, general and administrative expenses
- Service fees
- Operating leases
- Depreciation and amortisation
This change in policy has resulted in the re-classification of these line items in the comparative statement of profit or loss and other comprehensive income. Refer to note 2.3.
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Group |
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| 2.3 Adjustments to the condensed consolidated provisional statement of
profit or loss and other comprehensive
income for the year ended
31 March 2016 |
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As previously
reported
Rm |
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Telkom
restatement *
Rm |
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BCX
restatement*
Rm |
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Trudon IAS 8
disclosure**
Rm |
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|
Restated
Rm |
|
| Operating revenue |
|
37 325 |
|
|
– |
|
|
– |
|
|
– |
|
|
37 325 |
|
| Payments to other operators |
|
2 793 |
|
|
– |
|
|
– |
|
|
– |
|
|
2 793 |
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| Cost of sales |
|
6 969 |
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|
100 |
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|
(2 047) |
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|
(11) |
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|
5 011 |
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| Net operating revenue |
|
27 563 |
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|
(100) |
|
|
2 047 |
|
|
11 |
|
|
29 521 |
|
| Other income |
|
1 281 |
|
|
– |
|
|
– |
|
|
– |
|
|
1 281 |
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| Operating expenses |
|
20 083 |
|
|
(100) |
|
|
1 968 |
|
|
75 |
|
|
22 026 |
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| Employee expenses |
|
10 901 |
|
|
– |
|
|
1 264 |
|
|
– |
|
|
12 165 |
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| Selling, general and administrative expenses |
|
4 978 |
|
|
– |
|
|
743 |
|
|
75 |
|
|
5 796 |
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| Service fees |
|
3 106 |
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|
(100) |
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|
(41) |
|
|
– |
|
|
2 965 |
|
| Operating leases |
|
1 098 |
|
|
– |
|
|
2 |
|
|
– |
|
|
1 100 |
|
| EBITDA |
|
8 761 |
|
|
– |
|
|
79 |
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|
(64) |
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|
8 776 |
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| Depreciation of property, plant and equipment |
|
4 370 |
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|
– |
|
|
79 |
|
|
(1) |
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|
4 448 |
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| Amortisation of intangible assets |
|
902 |
|
|
– |
|
|
– |
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|
(22) |
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|
880 |
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| Write-offs, impairment and losses of property, plant and equipment and intangible assets |
|
170 |
|
|
– |
|
|
– |
|
|
– |
|
|
170 |
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| Operating profit |
|
3 319 |
|
|
– |
|
|
– |
|
|
(41) |
|
|
3 278 |
|
| Investment income |
|
203 |
|
|
– |
|
|
– |
|
|
– |
|
|
203 |
|
| Finance charges and fair value movements |
|
622 |
|
|
– |
|
|
– |
|
|
– |
|
|
622 |
|
| Interest |
|
521 |
|
|
– |
|
|
– |
|
|
– |
|
|
521 |
|
| Foreign exchange and fair value movements |
|
101 |
|
|
– |
|
|
– |
|
|
– |
|
|
101 |
|
| Profit before taxation |
|
2 900 |
|
|
– |
|
|
– |
|
|
(41) |
|
|
2 859 |
|
| Taxation expense |
|
524 |
|
|
– |
|
|
– |
|
|
14 |
|
|
538 |
|
| Profit for the year |
|
2 376 |
|
|
– |
|
|
– |
|
|
(55) |
|
|
2 321 |
|
| Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Items that will be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Exchange losses on translating foreign operations |
|
(9) |
|
|
– |
|
|
– |
|
|
– |
|
|
(9) |
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| Items that will not be reclassified to profit or loss |
|
|
|
|
|
|
|
|
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|
|
|
|
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| Defined benefit plan actuarial losses |
|
191 |
|
|
– |
|
|
– |
|
|
– |
|
|
191 |
|
| Defined benefit plan asset ceiling limitation |
|
86 |
|
|
– |
|
|
– |
|
|
– |
|
|
86 |
|
| Other comprehensive income for the year, net of taxation |
|
268 |
|
|
– |
|
|
– |
|
|
– |
|
|
268 |
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| Total comprehensive income for the year |
|
2 644 |
|
|
– |
|
|
– |
|
|
(55) |
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|
2 589 |
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| Total operations |
|
|
|
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|
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|
|
|
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| Basic earnings per share (cents) |
|
439.4 |
|
|
|
|
|
|
|
|
|
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|
432.4 |
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| Diluted earnings per share (cents) |
|
432.8 |
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|
|
|
|
|
|
|
|
|
|
425.8 |
|
2.4 Adjustments to the condensed
consolidated provisional
statement of
financial position |
|
Group - March 2016 |
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Group - March 2015 |
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As
previously
reported
Rm |
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|
Trudon IAS 8
disclosure*
Rm |
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|
Restated
March 2016
Rm |
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|
As
previously
reported
Rm |
|
|
Trudon IAS 8
disclosure*
Rm |
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|
Restated
March 2015
Rm |
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| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Non-current assets |
|
33 875 |
|
|
(186) |
|
|
33 689 |
|
|
30 855 |
|
|
(160) |
|
|
30 695 |
|
| Property, plant and equipment |
|
25 357 |
|
|
(7) |
|
|
25 350 |
|
|
24 479 |
|
|
(8) |
|
|
24 471 |
|
| Intangible assets |
|
4 584 |
|
|
(179) |
|
|
4 405 |
|
|
2 982 |
|
|
(152) |
|
|
2 830 |
|
| Other investments |
|
2 318 |
|
|
– |
|
|
2 318 |
|
|
2 231 |
|
|
– |
|
|
2 231 |
|
| Employee benefits |
|
846 |
|
|
– |
|
|
846 |
|
|
452 |
|
|
– |
|
|
452 |
|
| Other financial assets |
|
55 |
|
|
– |
|
|
55 |
|
|
28 |
|
|
– |
|
|
28 |
|
| Finance lease receivables |
|
281 |
|
|
– |
|
|
281 |
|
|
413 |
|
|
– |
|
|
413 |
|
| Deferred taxation |
|
434 |
|
|
– |
|
|
434 |
|
|
270 |
|
|
– |
|
|
270 |
|
| Current assets |
|
12 912 |
|
|
(48) |
|
|
12 864 |
|
|
11 127 |
|
|
(27) |
|
|
11 100 |
|
| Inventories |
|
971 |
|
|
– |
|
|
971 |
|
|
638 |
|
|
– |
|
|
638 |
|
| Income tax receivable |
|
57 |
|
|
(14) |
|
|
43 |
|
|
11 |
|
|
(8) |
|
|
3 |
|
| Current portion of finance lease receivables |
|
207 |
|
|
– |
|
|
207 |
|
|
200 |
|
|
– |
|
|
200 |
|
| Trade and other receivables |
|
7 375 |
|
|
(34) |
|
|
7 341 |
|
|
5 388 |
|
|
(19) |
|
|
5 369 |
|
| Current portion of other financial assets |
|
1 754 |
|
|
– |
|
|
1 754 |
|
|
1 247 |
|
|
– |
|
|
1 247 |
|
| Cash and cash equivalents |
|
2 548 |
|
|
– |
|
|
2 548 |
|
|
3 643 |
|
|
– |
|
|
3 643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
46 787 |
|
|
(234) |
|
|
46 553 |
|
|
41 982 |
|
|
(187) |
|
|
41 795 |
|
| Equity and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity attributable to owners of the parent |
|
26 134 |
|
|
(159) |
|
|
25 975 |
|
|
24 864 |
|
|
(123) |
|
|
24 741 |
|
| Share capital |
|
5 208 |
|
|
– |
|
|
5 208 |
|
|
5 208 |
|
|
– |
|
|
5 208 |
|
| Share-based compensation reserve |
|
241 |
|
|
– |
|
|
241 |
|
|
126 |
|
|
– |
|
|
126 |
|
| Non-distributable reserves |
|
1 507 |
|
|
– |
|
|
1 507 |
|
|
1 507 |
|
|
– |
|
|
1 507 |
|
| Retained earnings |
|
19 178 |
|
|
(159) |
|
|
19 019 |
|
|
18 023 |
|
|
(123) |
|
|
17 900 |
|
| Non-controlling interest |
|
473 |
|
|
(83) |
|
|
390 |
|
|
363 |
|
|
(64) |
|
|
299 |
|
| Total equity |
|
26 607 |
|
|
(242) |
|
|
26 365 |
|
|
25 227 |
|
|
(187) |
|
|
25 040 |
|
| Non-current liabilities |
|
7 104 |
|
|
– |
|
|
7 104 |
|
|
5 272 |
|
|
– |
|
|
5 272 |
|
| Interest-bearing debt |
|
4 566 |
|
|
– |
|
|
4 566 |
|
|
3 244 |
|
|
– |
|
|
3 244 |
|
| Employee related provisions |
|
1 665 |
|
|
– |
|
|
1 665 |
|
|
1 264 |
|
|
– |
|
|
1 264 |
|
| Non-employee related provisions |
|
66 |
|
|
– |
|
|
66 |
|
|
61 |
|
|
– |
|
|
61 |
|
| Deferred revenue |
|
656 |
|
|
– |
|
|
656 |
|
|
687 |
|
|
– |
|
|
687 |
|
| Deferred taxation |
|
151 |
|
|
– |
|
|
151 |
|
|
16 |
|
|
– |
|
|
16 |
|
| Current liabilities |
|
13 076 |
|
|
8 |
|
|
13 084 |
|
|
11 483 |
|
|
– |
|
|
11 483 |
|
| Trade and other payables |
|
7 134 |
|
|
– |
|
|
7 134 |
|
|
5 635 |
|
|
– |
|
|
5 635 |
|
| Shareholders for dividend |
|
22 |
|
|
– |
|
|
22 |
|
|
19 |
|
|
– |
|
|
19 |
|
| Current portion of interest-bearing debt |
|
703 |
|
|
– |
|
|
703 |
|
|
1 612 |
|
|
– |
|
|
1 612 |
|
| Current portion of employee related provisions |
|
2 231 |
|
|
– |
|
|
2 231 |
|
|
1 882 |
|
|
– |
|
|
1 882 |
|
| Current portion of non-employee related provisions |
|
142 |
|
|
– |
|
|
142 |
|
|
303 |
|
|
– |
|
|
303 |
|
| Current portion of deferred revenue |
|
1 708 |
|
|
– |
|
|
1 708 |
|
|
1 502 |
|
|
– |
|
|
1 502 |
|
| Income tax payable |
|
675 |
|
|
8 |
|
|
683 |
|
|
344 |
|
|
– |
|
|
344 |
|
| Current portion of other financial liabilities |
|
455 |
|
|
– |
|
|
455 |
|
|
185 |
|
|
– |
|
|
185 |
|
| Credit facilities utilised |
|
6 |
|
|
– |
|
|
6 |
|
|
1 |
|
|
– |
|
|
1 |
|
| Total liabilities |
|
20 180 |
|
|
8 |
|
|
20 188 |
|
|
16 755 |
|
|
– |
|
|
16 755 |
|
| Total equity and liabilities |
|
46 787 |
|
|
(234) |
|
|
46 553 |
|
|
41 982 |
|
|
(187) |
|
|
41 795 |
|
** Refer to note 2.2.3.