ANNUAL FINANCIAL STATEMENTS 2019 OVERVIEW
Welcome to our 2019 Annual Financial Statements
This report contains the consolidated financial statements and the separate annual financial statements of Impala Platinum Holdings Limited for the year ended 30 June 2019.
These annual financial statements were prepared according to International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the South African Companies Act, Act 71 of 2008, the Listings Requirements of the JSE Limited and the recommendations of King IVTM*.
NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The principal accounting policies used by the Group are consistent with those of the previous year, except for changes from new or revised IFRSs.
IFRS 16 LEASES
The new standard provides a comprehensive model to identify lease arrangements and the treatment thereof in the financial statements of both lessees and lessors. Implats has identified operating leases to the value of approximately R20 million which will have to be brought onto the balance sheet in terms of the new standard and additional disclosure will be required. The standard is effective for year-ends beginning on or after 1 January 2019. The standard will be applied using the simplified approach with the cumulative effect of initially applying the standard recognised at date of initial application (1 July 2019). The practical expedient to treat leases for which the lease term ends within 12 months of the date of initial application in the same way as short-term leases will be applied.
IFRIC 23 UNCERTAINTY OVER INCOME TAX TREATMENT
This new interpretation standard sets out how to determine the accounting tax position when there is uncertainty over income tax treatments. The impact of the interpretation will be assessed and applied to uncertain tax positions in future. The interpretation is effective for year-ends beginning on or after 1 January 2019.
Revenue from Contracts with Customers, refer note 19.
Financial Instruments, refer “Financial Instruments – Adopting IFRS 9” on page 44.
STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, requirements of the South African Companies Act, Act 71 of 2008, and the Listings Requirements of the JSE Limited.
BASIS OF PREPARATION
The consolidated financial statements have been prepared under the historical cost convention except for the following:
- Certain financial assets and financial liabilities are measured at fair value
- Derivative financial instruments are measured at fair value
- Liabilities for cash-settled share-based payment arrangements are measured using a binomial option model.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
The consolidated financial statements are prepared on the going-concern basis. It also requires management and the board to exercise their judgement in the process of applying the Group’s accounting policies. The preparation of financial statements in conformity with IFRS also requires the use of certain critical accounting estimates and assumptions. The estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and other factors that are considered relevant, including current and expected economic conditions, expectations of future events that are believed to be reasonable under the circumstances.
These estimates will seldom equal the actual results exactly. Revisions to accounting estimates are recognised in the period in which the estimates are reviewed and in future periods. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in the notes where necessary and indicated with EJ.
Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured in its functional currency, ie the currency of the primary economic environment in which the entity operates. For South African operations, the functional currency is South African rand and for Zimbabwean operations (Zimplats and Mimosa), it is US dollar. The consolidated financial statements are presented in South African rand, which is the presentation currency of the Group.
Functional currency of Zimplats operations
In 2019 the Zimbabwean government officially introduced the Real Time Gross Settlement (RTGS$) and subsequent to that, in June 2019 the multi-currency system was discontinued.
Considering the primary economic environment in which Zimplats operates, as well as considering factors such as which currency influences sales prices, the currency in whose competitive forces and regulations primarily determine sales prices, the currency which influences cost, the currency funding financing activities and the currency in which receipts from operating activities are retained, management concluded that Zimplats’ functional currency is still the US$. Before floating the RTGS$ in the open market in February 2019, Zimplats managed to realise an exchange rate of 1:1 between the US$ and RTGS$, and therefore this rate was applied to transactions during that period between October 2018 and February 2019. Reporting transactions between March and June 2019 were converted at the interbank market rate, as indicated on page 16.
The production and operating expenditure recognised in profit or loss by Zimplats amounts to US$ 448 million. This includes transactions concluded in the US$ and transactions concluded in RTGS$. The RTGS$ transactions were translated into US$ using the rates indicated above.
In the absence of an official exchange rate, if the RTGS$ transactions were translated into US$ using the Old Mutual Implied Rate, the production and operating expenditure would have been reduced by between US$85 million and US$105 million and a corresponding exchange translation loss of equal value would have been recognised. (A range was provided due to the complexity involved in the calculation of the exchange translation loss.) As Implats presents its profit or loss statement by function these adjustments would not impact the amounts disclosed on the face of the profit or loss statement. The exposure to RTGS$ on statement of financial position at year-end has been disclosed in note 31.2.2.
Transactions and balances
Foreign currency transactions are accounted for at the rates of exchange ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated at year-end exchange rates. Gains or losses arising on settlement of such transactions and from the translation of foreign currency monetary assets and liabilities are recognised in profit or loss.
Total comprehensive income of the foreign subsidiary and joint venture is translated into South African rand at the actual exchange rate on transaction date. The average exchange rate is, where appropriate, used as an approximation of the actual rate at transaction date. Assets, including goodwill, and liabilities are translated at rates ruling at the reporting date. The exchange differences arising on translation of assets and liabilities of the foreign subsidiary and joint venture are recognised in other comprehensive income and accumulated in the foreign currency translation reserve. On proportionate disposal of the foreign entity, all of the translation differences are reclassified to profit or loss when control is lost over the entity, or the proportionate share of accumulated exchange differences are reattributed to non-controlling interest if control is not lost.