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

finance charges.

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 Group’s policy to provide retirement benefits for its

extinguished – 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

PROVISIONS

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

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Aspen Annual Report 2006