14. ACCOUNTING STANDARDS AND INTERPRETATIONS NOT EFFECTIVE AT JUNE 30 2019
 

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended June 30 2019. These include the following standards and interpretations and amendments to standards that are applicable to the business of the group, and have not been applied in preparing these financial statements:

Standard/
interpretation
  Description   Reporting period
beginning on or
after
IFRS 16 Leases  

With effect from July 1 2019 the group will adopt IFRS 16: Leases (IFRS 16). IFRS 16 replaces IAS 17 Leases which requires that all operating leases, other than short-term and low-value leases, to be recorded on the statement of financial position in a similar manner to finance leases under IAS 17. As a result approximately 1 835 operating leases of the group’s lease portfolio will now be brought onto the statement of financial position.

  January 1 2019
   

The group has elected to adopt IFRS 16 using a modified retrospective approach. Under a modified retrospective approach, the group applies IFRS 16 from the beginning of July 1 2019 and does not restate its prior-period financial information. The lease liability will be measured present value of the remaining lease payments discounted at the incremental borrowing rate at July 1 2019. The right-of-use lease will be measured as if IFRS 16 had always been applied (but using the incremental borrowing rate at July 1 2019).

   
    The group’s initial assessment of IFRS 16 is that it will have an impact on the following significant areas (but not limited to):
  • Recognition of a right-of-use lease asset of approximately R4,2 billion and amortisation for the 2020 financial year between R640 million and R660 million.
  • An overall increase in the Group’s net debt (lease liability of approximately R5,1 billion), debt/equity ratio and total assets due to inclusion of the lease right-of-use asset (R4,2 billion) on the statement of financial position.
  • Higher trading profit due to an element of the operating lease charge being disclosed as a finance charge.
  • Higher finance charges (2020: estimated lease finance charge between R310 million and R330 million) and lower trading interest cover levels due to the finance element of the current lease charge being moved to the finance charges line on the statement of profit or loss.
  • Lease payments for the 2020 financial year expected to be between R940 million and R980 million, in terms of IFRS 16 (ignoring lease smoothing adjustments), the “operating” lease charge is not recognised as an operating expense as it is replaced by the amortisation of the right-of-use asset and interest of the lease liability.
  • Derecognition of the straight-lining lease liabilities of R84 million as an opening retained earnings adjustment on transition.
   

The group does not currently believe the adoption of the following pronouncements will have a material impact on its results, financial position or cash flows:

  • IFRIC Interpretation 22 – Foreign currency transactions and advance consideration
  • IFRIC Interpretation 23 – Uncertainty over income tax treatments
  • Amendments to IFRS 3 – Definition of a business
  • Amendments to IFRS 3 – Accounting for acquisitions of interests in joint operations
  • Amendments to IFRS 9 – Prepayment features with negative compensation
  • Amendments to IFRS 10 and IAS 28 – Sale of contribution of assets between an investor and its associate or joint venture
  • Amendments to IFRS 11 – Accounting for acquisitions of Interests in joint arrangements
  • Amendments to IAS 1 and IAS 8 – Definition of material
  • Amendments to IAS 12 – Income tax consequences of payments on financial instruments classified as equity
  • Amendments to IAS 19 – Plan amendment, curtailment or settlement
  • Amendments to IAS 23 – Borrowing costs eligible for capitalisation
  • Amendments to IAS 28 – Investments in associates and joint ventures – clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice.
  • Amendments to IAS 28 – Long-term interests in associates and joint ventures