associated equity component, and is carried on an amortised
Restructuring provisions comprise lease termination penalties
cost basis until extinguished on redemption or conversion.
and employee termination payments. Provisions are not
The carrying amount of the equity instrument represented
recognised for future operating losses.
by the option to convert the instrument into ordinary shares is determined by deducting the initial carrying amount of
Where a number of similar obligations exist, the likelihood that
the financial liability from the fair value of the compound
an outflow of economic resources will be required is determined
instrument as a whole.
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to
Dividends on mandatorily redeemable preference shares are
any one item included in the class may be small.
recognised in the income statement under finance costs. Provisions are measured at the present value of the expected BORROWINGS AND BORROWING COSTS
cash outflow required to settle the present obligation at the
Borrowings are recognised initially at fair value, net of transaction
balance sheet date, determined using a pre-tax discount rate
costs incurred. Borrowings are subsequently stated at amortised
that reflects current market assessments of the time value of
cost using the effective yield method; any difference between
money and the risks specific to the obligation. The increase in
the proceeds (net of transaction costs) and the redemption
the provision due to the passage of time is recognised under
value is recognised in the income statement over the period of
the borrowings. EMPLOYEE BENEFITS The entity removes a financial liability (or a part of a financial
Pension and provident fund obligations
liability) from its balance sheet when, and only when, it is
It is the Groupâ€™s policy to provide retirement benefits for its
extinguished â€“ that is, when the obligation specified in the
employees. Contributions to retirement benefit plans are
contract is discharged, cancelled, or expires.
charged against income in the year they become payable.
The entity presents separately current and non-current liabilities
A defined benefit plan is a pension plan that determines
on the face of the balance sheet. A liability is classified as current
an amount of pension benefit to be provided, usually
unless the Group has an unconditional right to defer settlement of
as a function of one or more factors such as age, years
the liability for at least 12 months after the balance sheet date.
of service or compensation. The Group does not have any employees belonging to this type of fund. A defined
Borrowing costs directly attributable to major projects that
contribution plan is a provident fund under which the Group
necessarily take a substantial period of time to get ready for the
pays fixed contributions into a separate entity (a fund) and
intended use are capitalised over the period during which the
will have no legal or constructive obligation to pay further
asset is acquired or constructed until the asset is ready for its
contributions if the fund does not hold sufficient assets to pay
intended use or sale.
all employees relating to employee service in the current and prior periods. For defined contribution plans, the Group pays
All other borrowing costs are dealt with in the income statement
contributions to publicly or privately held pension insurance
in the period in which they are incurred.
plans on a mandatory, contractual or voluntary basis. Once the contributions have been paid, the Group has no further
payment obligations. The payments made to provident funds
Provisions are recognised when the Group has a present legal
are expensed as incurred and are included in staff costs.
or constructive obligation as a result of past events, for which
Refer to notes 22 and 27.
it is more likely than not that an outflow of resources will be required to settle the obligation and a reliable estimate has been
Post-retirement medical aid obligations
made of the amount of the obligation. Where the Group expects
In terms of Group policy post-retirement medical aid benefits
a provision to be reimbursed, for example under an insurance
are not provided for employees who joined after 28 February
contract, the reimbursement is recognised as a separate asset
2000. However, due to previous employment benefits offered,
but only when the reimbursement is virtually certain.
the Group has honoured its contractual commitment in respect
Aspen Annual Report 2006