ACCOUNTING Policies –
for the year ended June 2006 continued
FOREIGN CURRENCY TRANSLATION
Goodwill and fair value adjustments on the acquisition of a
Functional and presentation currency
foreign operation are treated as assets and liabilities of the
Items included in the financial statements of each entity in the
foreign operation and are translated at the closing rate.
Group are measured using the currency of the primary economic environment in which the entity operates (the functional
ACCOUNTING FOR BEE TRANSACTIONS
currency). The consolidated financial statements are presented
Financial instruments issued by the Group as a part of BEE
in South African Rand, which is the functional and presentation
transactions are, on initial recognition, classified as a liability or
currency of the parent.
as equity in accordance with the substance of the contractual arrangements. BEE transactions are accounted for under
Transactions and balances
IFRS 2, IAS 32 and 39. The effect of this is that the difference
Foreign currency transactions are translated into the functional
between the issue price of the ordinary and preference shares
currency using the exchange rates prevailing at the dates of
issued and the market value at the date of the transaction is
the transactions. Monetary assets and liabilities denominated in
charged to profit or loss.
foreign currencies are converted to functional currency at rates of exchange ruling at year-end. Foreign exchange gains and losses
The policy used to account for equity financial instruments
resulting from the settlement of such transactions and from
issued is disclosed on page 80 (share capital and share
the translation of monetary assets and liabilities denominated
premium). The policy used to account for compound financial
in foreign currencies are recognised in the income statement,
instruments is disclosed on page 80 (convertible, cumulative,
except when deferred in equity as qualifying cash flow hedges.
variable rate preference shares).
Translation differences on non-monetary financial assets and
PROPERTY, PLANT AND EQUIPMENT
liabilities such as equities held at fair value through profit and
Property, plant and equipment is stated at historical cost less
loss are reported as part of the fair value gain or loss. Translation
accumulated depreciation and accumulated impairment losses.
differences on non-monetary financial assets such as equities
Historical cost includes expenditure that is directly attributable
classified as available-for-sale equities are included in the
to the acquisition of the items. Cost includes transfers from
revaluation reserve in equity.
equity of any gains/losses on qualifying cash flow hedges of currency purchase costs.
Group companies The results and financial position of all Group operations (none
Subsequent costs are included in the asset’s carrying amount, or
of which has the currency of a hyperinflationary economy)
recognised as a separate asset, only when it is probable that the
that have a functional currency different from the presentation
future economic benefits associated with the item will flow to the
currency are translated into the Group’s presentation currency
Group and the cost of the item can be measured reliably. All other
on the following basis:
repairs and maintenance are charged to the income statement
• Income statements and cash flows of foreign operations
in the period in which they are incurred. Major renovations are
are translated into the Group’s presentation currency at the
depreciated over the remaining useful life of the related asset.
average exchange rate for the year, unless this average is not a reasonable approximation of the cumulative effect of
Depreciation is calculated to write-off the cost of assets to their
the rates prevailing on the transaction dates, in which case
residual values on the straight-line basis over the estimated
income and expenses are translated at the rates at the dates
remaining useful lives of the assets. The assets’ residual values
of the transactions.
and useful lives are reviewed, and adjusted if appropriate, at
• Assets and liabilities are translated at the closing rate at the balance sheet date.
each balance sheet date. The assumptions regarding estimated remaining useful lives for the 2006 financial year were as follows:
• Exchange differences arising from the translation of the net
Buildings
9 – 61 years
investment in foreign operations, as well as borrowings and
Plant, equipment and major spare parts
1 – 30 years
other currency instruments designated as hedges of such
Computer equipment
1 – 10 years
investments, are recognised as a separate component of
Office equipment and furniture
1 – 16 years
equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as a part
Land and buildings comprise mainly factories and office
of the gain or loss on sale.
buildings. Land is not depreciated. Leasehold improvements
74
Aspen Annual Report 2006
