Changes in accounting policies and re-presentation of comparative information

This note explains the items which were reclassified as well as the impact of the adoption of IFRS 9 and IFRS 15 on the group and company annual financial statements.

5.6.1 IMPACT ON THE FINANCIAL STATEMENTS

As part of the implementation of IFRS 9 a detailed analysis was performed on the classification of items in the statement of financial position. It was concluded that certain items needed to be reclassified in the prior year financial statements, as these reclassifications provide more relevant information on the nature of these assets and liabilities and results in more appropriate classifications. The reclassified items are discussed in detail below the table. Although the reclassifications to cash and cash equivalents, lease receivables, trade and other payables as well as interest-bearing borrowings are corrections to the incorrect classification applied previously it was not considered material for group and therefore the prior year financial statements have not been restated but only represented. The prior year company financial statements have been restated for the reclassified items as it was considered material. Refer note 5.7.

Prior year group and company financial statements did not have to be restated as a result of the changes in the accounting policies due to the adoption of IFRS 9 and IFRS 15. As explained in note 5.6.2, IFRS 9 was adopted without restating comparative information. The adjustments arising from the new impairment rules are therefore not reflected in a restated statement of financial position as at 31 December 2017, but are recognised in the opening statement of financial position on 1 January 2018. As explained in note 5.6.3, IFRS 15 was also adopted without restating comparative information.

The following table shows the reclassifications and adjustments recognised for each individual line item as per the statement of financial position. The reclassifications and adjustments are explained in more detail by standard below.

GROUP

	31 December  2017		31 December  2017				1 January  2018
Statement of financial position (extract)	Previously  presented  Rm	Reclassifi-  cations  Rm	Re-presented  Rm		Previously  presented  Rm	Reclassifi-  cations  Rm	Restated  Rm
ASSETS
Non-current assets	47 706	(46)	47 660				47 660
Property, plant and equipment	24 362		24 362				24 362
Biological assets	34		34				34
Intangible assets	17		17				17
Investments in associates	15 810		15 810				15 810
Investments in joint ventures	1 479		1 479				1 479
Financial assets	5 433	(3 082)	2 351		(2 351)
– Financial assets at fair value through other comprehensive income					152		152
– Financial assets at fair value through profit or loss					1 391		1 391
– Loans to associates and joint ventures					128		128
– Other financial assets at amortised cost					678		678
Lease receivables1		72	72				72
Deferred tax	571		571		2		573
Other non-current assets2		2 964	2 964				2 964
Current assets	10 936	(92)	10 844		(11)		10 833
Inventories	1 055		1 055				1 055
Financial assets	48		48		(48)
– Other current financial assets at amortised cost					48		48
– Derivative financial instruments					4		4
Trade and other receivables	3 199	(586)	2 613		(15)		2 598
Lease receivables3		4	4				4
Current tax receivable	28		28				28
Cash and cash equivalents4	6 606	51	6 657				6 657
Other current assets5		439	439				439
Non-current assets held-for-sale	3 910		3 910				3 910
Total assets	62 552	(138)	62 414		(11)		62 403

GROUP

	31 December 2017		31 December 2017				1 January 2018
Statement of financial position (extract)	Previously presented Rm	Reclassifi- cations Rm	Re-presented Rm		Previously presented Rm	Reclassifi- cations Rm	Restated Rm
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital	1 021		1 021				1 021
Other components of equity	8 120		8 120				8 120
Retained earnings	30 962		30 962		(11)	314	31 265
Equity attributable to owners of the parent	40 103		40 103		(11)	314	40 406
Non-controlling interests	(738)		(738)				(738)
Total equity	39 365		39 365		(11)	314	39 668
Non-current liabilities	17 409	33	17 442		(2)	(252)	17 188
Interest-bearing borrowings	6 480		6 480				6 480
Non-current other payables6		89	89				89
Provisions	3 864		3 864				3 864
Post-retirement employee obligations	227		227				227
Financial liabilities	850	(436)	414		(414)
– Financial liabilities at fair value through profit or loss					414		414
Deferred tax	5 988		5 988		(2)	122	6 108
Other non-current liabilities7		380	380			(374)	6
Current liabilities	4 127	(171)	3 956		2	(62)	3 896
Interest-bearing borrowings8	2	66	68				68
Trade and other payables	3 237	(992)	2 245		(4)		2 241
Provisions	95		95				95
Financial liabilities	371	(62)	309		(309)
– Financial liabilities at fair value through profit or loss					309		309
– Derivative financial instruments					6		6
Current tax payable	368		368				368
Overdraft	54		54				54
Other current liabilities9		817	817			(62)	755
Non-current liabilities held-for-sale	1 651		1 651				1 651
Total liabilities	23 187	(138)	23 049			(314)	22 735
Total equity and liabilities	62 552	(138)	62 414		(11)		62 403

1	Lease receivables of R118 million were reclassified from non-current financial assets to non-current lease receivables so as to improve the presentation of the item according to the nature of the asset. In addition, unearned finance income of R46 million was reclassified from non-current financial liabilities — finance leases to non-current lease receivables as the finance lease was previously presented on a gross basis instead of a net basis.
2	An amount of R2 964 million was reclassified from non-current financial assets to other non-current assets so as to improve the presentation of the items according to the nature of the assets. Included in this amount is R1 268 million for an indemnification asset which arose on the acquisition of ECC, which is within the scope of IFRS 3 Business Combinations, as well as an amount of R1 692 million for an asset which relates to the reimbursement of the environmental rehabilitation provisions and the post-retirement employee obligations, which is within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The remaining R4 million relates to a non-current prepayment.
3	Lease receivables of R14 million were reclassified from trade and other receivables to current lease receivables so as to improve the presentation of the item according to the nature of the asset. In addition, unearned finance income of R10 million was reclassified from non-current financial liabilities — finance leases to current lease receivables as the finance lease was previously presented on a gross basis instead of a net basis and the current portion was incorrectly included as non-current.
4	An amount of R51 million was reclassified from trade and other receivables to cash and cash equivalents as this is the interest accrued on bank balances and bank accounts that were incorrectly classified.
5	An amount of R521 million was reclassified from trade and other receivables to other current assets so as to improve the presentation of the items (such as VAT refundable, prepayments and royalties) according to the nature of the assets. In addition, an amount of R82 million was reclassified from trade and other payables to other current assets so as to correctly eliminate the intercompany insurance prepayment, the elimination entry was previously incorrectly classified as part of other payables.
6	An amount of R89 million was reclassified from current trade and other payables to non-current other payables as the balance should have been presented as non-current due to it being payable after 12 months.
7	An amount of R380 million was reclassified from non-current financial liabilities to other non-current liabilities so as to improve the presentation of the item (such as deferred revenue) according to the nature of the liability.
8	An amount of R66 million was reclassified from trade and other payables to current interest-bearing borrowings as the balance relates to the interest accrued on the loans and bonds.
9	An amount of R62 million was reclassified from current financial liabilities to other current liabilities and an amount of R755 million was reclassified from trade and other payables to other current liabilities so as to improve the presentation of the items (such as deferred revenue, payroll related accruals and VAT payable) according to the nature of the liabilities.

COMPANY

	31 December   2017			1 January  2018
Statement of financial position (extract)	Restated1 Rm		IFRS 9  Rm	Restated  Rm
ASSETS
Non-current assets	17 522		2	17 524
Property, plant and equipment	462			462
Intangible assets	12			12
Investments in associates	2 298			2 298
Investments in joint ventures	696			696
Investments in subsidiaries	9 245			9 245
Financial assets	4 642		(4 642)
– Financial assets at fair value through profit or loss			26	26
– Loans to associates and joint ventures			188	188
– Interest-bearing loans to subsidiaries			4 020	4 020
– Other financial assets at amortised cost			408	408
Deferred tax	165		2	167
Other non-current assets	2			2
Current assets	7 056		(31)	7 025
Financial assets	25		(25)
– Interest-bearing loans to subsidiaries			25	25
– Non-interest-bearing loans to subsidiaries			277	277
– Treasury facilities with subsidiaries at amortised cost			641	641
– Other current financial assets at amortised cost
Trade and other receivables	1 458		(949)	509
Cash and cash equivalents	5 555			5 555
Other current assets	18			18
Non-current assets held-for-sale	6 192			6 192
Total assets	30 770		(29)	30 741
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital	11 265			11 265
Other components of equity	(773)			(773)
Retained earnings	3 040		(29)	3 011
Equity attributable to owners of the parent	13 532		(29)	13 503
Non-controlling interests
Total equity	13 532		(29)	13 503
Non-current liabilities	6 819			6 819
Interest-bearing borrowings	3 994			3 994
Provisions	34			34
Financial liabilities	2 791		(2 791)
– Financial liabilities at fair value through profit or loss			2 791	2 791

COMPANY

	31 December  2017			1 January  2018
Statement of financial position (extract)	Restated1  Rm		IFRS 9  Rm	Restated  Rm
Current liabilities	10 419			10 419
Interest-bearing borrowings	57			57
Trade and other payables	9 782		(9 590)	192
Provisions	11			11
Financial liabilities	309		(309)
– Financial liabilities at fair value through profit or loss			309	309
– Non-interest-bearing loans from subsidiaries			8 052	8 052
– Treasury facilities with subsidiaries at amortised cost			1 538	1 538
Current tax payable	20			20
Overdraft	37			37
Other current liabilities	203			203
Total liabilities	17 238			17 238
Total equity and liabilities	30 770		(29)	30 741

¹Refer note 5.7 for details of the items which have been restated for company.

5.6.2 IMPACT OF ADOPTING IFRS

IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) for annual periods beginning on or after 1 January 2018. IFRS 9 brings together all aspects of accounting for financial instruments that relate to the recognition, classification and measurement, derecognition, impairment and hedge accounting.

The adoption of IFRS 9 from 1 January 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in note 16.1. Comparative information has not been restated in accordance with the transitional requirements of IFRS 9 which requires comparative information not to be restated (with an exception where it is possible to restate without the use of hindsight) but for disclosures to be made concerning the reclassifications and measurements as set out below.

The total impact on retained earnings as at 1 January 2018 is as follows:

GROUP

	Note		Rm
Closing balance at 31 December 2017 (IAS 39/IAS 18 Revenue (IAS 18))			30 962
Adjustments from the adoption of IFRS 9			(11)
Increase in impairment allowances for trade receivables	5.6.2.2		(7)
Increase in impairment allowances for financial assets at amortised cost	5.6.2.2		(8)
Increase in deferred tax assets relating to impairment allowances	5.6.2.2		2
Decrease in deferred tax liabilities relating to impairment allowances	5.6.2.2		2
Opening balance at 1 January 2018 (after IFRS 9 before IFRS 15 restatement)			30 951

COMPANY

	Note		Rm
Closing balance at 31 December 2017 (IAS 39/IAS 18) (Restated)			3 040
Adjustments from the adoption of IFRS 9			(29)
Increase in impairment allowances for indebtedness to subsidiaries	5.6.2.2		(1)
Increase in impairment allowances for non-interest-bearing loans to subsidiaries	5.6.2.2		(24)
Increase in impairment allowances for financial assets at amortised cost	5.6.2.2		(6)
Increase in deferred tax assets relating to impairment allowances	5.6.2.2		2
Opening balance at 1 January 2018 (after IFRS 9 before IFRS 15 restatement)			3 011

5.6.2.1 CLASSIFICATION AND MEASUREMENT

IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. However, IFRS 9 eliminates the previous IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale financial assets.

The accounting for the group and company financial liabilities remains largely the same as it was under IAS 39. Similar to the requirements of IAS 39, IFRS 9 requires contingent consideration liabilities to be treated as financial instruments measured at fair value, with changes in fair value recognised in profit or loss.

Under IFRS 9, on initial recognition, a financial asset is classified as measured at:

• Amortised cost;
• Fair value through other comprehensive income (FVOCI) debt investment;
• FVOCI equity investment; or
• Fair value through profit or loss (FVPL).

The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.

On 1 January 2018 (the date of initial application of IFRS 9), management assessed which business model applied to the financial assets held by the group and company and classified its financial instruments into the appropriate IFRS 9 categories. In addition, management assessed whether contractual cash flows on debt instruments were solely comprised of principal and interest based on the facts and circumstances at the initial recognition of the assets. The main effects resulting from this reclassification are as follows:

GROUP

			IAS 39 categories							IFRS 9 categories
			At fair value through profit or loss									1 January  2018
Financial assets1	Note		Held-for-  trading  Rm	Designated  Rm			Loans and  receivables  at  amortised  cost  Rm	Available-  for-sale  financial  assets at  fair value  Rm		FVPL  Rm	Amortised  cost  Rm	FVOCI  equity  instrument  Rm
Closing balance at 31 December 2017 (IAS 39) (Re-presented)2			4	1 391			10 175	152
Reclassify non-trading equities from available-for-sale to FVOCI	a							(152)				152
Reclassify held-for-trading
FVPL financial assets to FVPL	b		(4)							4
Reclassify designated FVPL financial assets to FVPL	b			(1 391)						1 391
Reclassify loans and receivables financial assets to amortised cost	c						(10 175)				10 175
Reclassify loans and receivables at amortised cost to a financial asset measured at FVPL	d
Opening balance at 1 January 2018 (IFRS 9)										1 395	10 175	152

1	The closing balances as at 31 December 2017 are prior to any adjustments made in terms of IFRS 9 and IFRS 15. The opening balances as at 1 January 2018 differ from the amounts disclosed in note 5.6.1 as this table illustrates the reclassification adjustments only and not the impairment adjustments.
2	Includes financial assets classified as non-current assets held-for-sale.

GROUP

			IAS 39 categories						IFRS 9 categories
			At fair value through profit or loss
Financial liabilities1	Note		Held-for-  trading  Rm	Designated  Rm			Loans and  receivables  at  amortised  cost  Rm		FVPL  Rm	Amortised  cost  Rm
Closing balance at 31 December 2017 (IAS 39)2
(Re-presented)			6	723			8 991
Reclassify held-for-trading FVPL financial liabilities to FVPL	e		(6)						6
Reclassify designated FVPL financial liabilities to FVPL	e			(723)					723
Reclassify financial liabilities to amortised cost	f						(8 991)			8 991
Opening balance at 1 January 2018 (IFRS 9)									729	8 991

1	The closing balances as at 31 December 2017 are prior to any adjustments made in terms of IFRS 9 and IFRS 15.
2	Includes financial liabilities classified as non-current liabilities held-for-sale.

The impact of the changes on the group’s equity is as follows:

			IAS 39			IFRS 9
Other components of equity1	Note		Available-  for-sale  revaluation  reserve  Rm			Financial asset  FVOCI  revaluation  reserve  Rm
Closing balance at 31 December 2017 (IAS 39)			(74)
Reclassify non-trading equities from available-for-sale to FVOCI	a		74			(74)
Opening balance at 1 January 2018 (IFRS 9)						(74)

1	Reserves which were impacted by IFRS 9.

(a) Reclassify non-trading equities from available-for-sale to FVOCI

The group elected to present in OCI changes in the fair value of the Chifeng equity investment, previously classified as availablefor- sale, because the investment is not expected to be sold in the short to medium term. As a result, an asset with a fair value of R152 million was reclassified from available-for-sale financial assets to financial assets at FVOCI and fair value losses of R74 million were reclassified from the available-for-sale revaluation reserve to the financial asset FVOCI revaluation reserve on 1 January 2018.

(b) Reclassify held-for-trading and designated FVPL financial assets to FVPL

These reclassifications have no impact on the measurement categories.

(c) Reclassify loans and receivables financial assets to amortised cost

These reclassifications have no impact on the measurement categories.

(d) Reclassify loans and receivables at amortised cost to a financial asset measured at FVPL

An other receivable with a gross amount of R70 million was reclassified to a financial asset at FVPL as a result of the contractual cash flows not meeting the solely payments of principal and interest (SPPI) criteria. The corresponding impairment allowance of R70 million was also reclassified. The fair value of the financial asset was determined to be nil.

(e) Reclassify held-for-trading and designated FVPL financial liabilities to FVPL

These reclassifications have no impact on the measurement categories.

(f) Reclassify financial liabilities to amortised cost

These reclassifications have no impact on the measurement categories.

COMPANY

			IAS 39 categories				IFRS 9 categories
Financial assets1	Note		Designated at fair value through profit or loss Rm	Loans and receivables at amortised cost Rm			FVPL Rm	Amortised cost Rm
Closing balance at 31 December 2017
(IAS 39) (Restated)			26	11 654
Reclassify designated FVPL financial assets to FVPL	a		(26)				26
Reclassify loans and receivables financial assets to amortised cost	b			(11 654)				11 654
Reclassify loans and receivables at amortised cost to a financial asset measured at FVPL	c
Opening balance at 1 January 2018 (IFRS 9)							26	11 654

1	The closing balances as at 31 December 2017 are prior to any adjustments made in terms of IFRS 9 and IFRS 15. The opening balances as at 1 January 2018 differ from the amounts disclosed in note 5.6.1 as this table illustrates the reclassification adjustments only and not the impairment adjustments.

The impact of the changes on the group’s equity is as follows:

			IAS 39 categories				IFRS 9 categories
Financial assets1	Note		Designated at fair value through profit or loss Rm	Loans and receivables at amortised cost Rm			FVPL Rm	Amortised cost Rm
Closing balance at 31 December 2017 (IAS 39) (Restated)			3 100	13 870
Reclassify designated FVPL financial liabilities to FVPL	d		(3 100)				3 100
Reclassify financial liabilities to amortised cost	e			(13 870)				13 870
Opening balance at 1 January 2018 (IFRS 9)							3 100	13 870

1	The closing balances as at 31 December 2017 are prior to any adjustments made in terms of IFRS 9 and IFRS 15.

(a) Reclassify designated FVPL financial assets to FVPL

These reclassifications have no impact on the measurement categories.

(b) Reclassify loans and receivables financial assets to amortised cost

These reclassifications have no impact on the measurement categories.

(c) Reclassify loans and receivables at amortised cost to a financial asset measured at FVPL

An other receivable with a gross amount of R70 million was reclassified to a financial asset at FVPL as a result of the contractual cash flows not meeting the SPPI criteria. The corresponding impairment allowance of R70 million was also reclassified. The fair value of the financial asset was determined to be nil.

(d) Reclassify designated FVPL financial liabilities to FVPL

These reclassifications have no impact on the measurement categories.

(e) Reclassify financial liabilities to amortised cost

These reclassifications have no impact on the measurement categories.

5.6.2.2 IMPAIRMENT OF FINANCIAL ASSETS

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses (impairments) are recognised earlier than under IAS 39.

Under IFRS 9, expected credit loss allowances are measured on either of the following basis:

• 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and
• lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

The group has four types of financial assets that are subject to IFRS 9’s new ECL model, namely:

• Trade receivables for the sale of goods and rendering of services;
• Other receivables;
• Loans to joint ventures and associates; and
• Financial assets carried at amortised cost.

The company has several types of financial assets that are subject to IFRS 9’s new ECL model, namely:

• Trade receivables from the rendering of services;
• Other receivables;
• Loans to joint ventures and associates;
• Financial assets carried at amortised cost;
• Interest-bearing loans to subsidiaries;
• Non-interest-bearing loans to subsidiaries; and
• Treasury facilities with subsidiaries at amortised cost.

The group and company were required to revise its impairment methodology under IFRS 9 for each of these classes of assets. The impact of the change in impairment methodology on the group and company retained earnings and equity is disclosed in the first tables of note 5.6.2.

While loans to joint ventures and associates as well as cash and cash equivalents are subject to the impairment requirements of IFRS 9, the identified impairment losses were immaterial.

(a) Trade receivables

The group applies the IFRS 9 simplified approach to measure ECLs, which uses a lifetime expected credit loss allowance, for all trade receivables. To measure the ECLs, trade receivables have been grouped based on shared credit risk characteristics (corporate entities, small medium enterprises and public sector entities) and the days past due to assess significant increase in credit risk.

The impairment allowances as at 1 January 2018 for trade receivables are as follows:

GROUP

	Current Rm	More than 30 days past due Rm	More than 60 days past due Rm	More than 90 days past due Rm	Total Rm
Gross carrying amount	2 458	69	5	35	2 567
Impairment allowance	6	22	5	35	68

The impairment allowances for trade receivables as at 31 December 2017 reconcile to the opening expected credit loss allowances for trade receivables on 1 January 2018 is as follows:

Impairment allowances	Group Rm
Closing balance at 31 December 2017 (IAS 39)	61
Amounts restated through opening retained earnings	7
Opening balance at 1 January 2018 (IFRS 9)	68

The group’s expected credit loss allowances increased by a further R13 million to R81 million for trade receivables during the year ended 31 December 2018. The increase would have been R1 million lower under the incurred loss model of IAS 39.

Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, among others, the failure of a debtor to engage in a repayment plan with the group or company, and a failure to make contractual payments for a period of greater than 120 days past due.

(b) Other receivables and other financial assets at amortised cost

The group and company other receivables and other financial assets at amortised cost are considered to have low credit risk, and the expected credit loss allowance recognised during the period was therefore limited to 12 months’ expected losses. These instruments are considered to be of low credit risk when they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term.

Applying the expected credit risk model for the group resulted in the recognition of an expected credit loss allowance of R8 million on 1 January 2018 (the previous impairment allowance was R70 million which was reclassified on 1 January 2018). The expected credit loss allowances increased by a further R51 million to R59 million for other receivables and other financial assets at amortised cost during the year ended 31 December 2018. The significant increase in the expected credit loss allowances for other receivables is due to one of the parties defaulting on payments and there being a high probability that the outstanding amounts will not be settled.

Applying the expected credit risk model for the company resulted in the recognition of an expected credit loss allowance of R6 million on 1 January 2018 (the previous impairment allowance was R70 million which was reclassified on 1 January 2018). The expected credit loss allowances decreased by R2 million to R4 million for other receivables and other financial assets at amortised cost during the year ended 31 December 2018.

Impairment allowances	Group  Rm	Company  Rm
Closing balance at 31 December 2017 (IAS 39)	70	70
Amount reclassified on a financial asset classified as FVPL	(70)	(70)
Amounts restated through opening retained earnings	8	6
Opening balance at 1 January 2018 (IFRS 9)	8	6

(c) Indebtedness by subsidiaries

The company’s indebtedness by subsidiaries is assessed per counterparty’s credit risk. There are those which are considered to be of low credit risk as there is a low risk of default and the counterparty has strong capacity to meet its contractual cash flow obligations in the near term. Then there are those which have been fully provided for as the counterparty is considered to have a high credit risk as they have defaulted on payments and they do not have the capacity to meet their contractual obligations.

The expected credit loss allowance recognised during the period was limited to 12 months expected losses for those counterparties which were considered to have low credit risk. Applying the expected credit risk model resulted in the recognition of an expected credit loss allowance of an additional R25 million on 1 January 2018. The expected credit loss allowances increased by a further R1 million to R60 million for indebtedness by subsidiaries during the year ended 31 December 2018.

Impairment allowances	Company Rm
Closing balance at 31 December 2017 (IAS 39)	34
Amounts restated through opening retained earnings	25
Opening balance at 1 January 2018 (IFRS 9)	59

5.6.2.3 ACCOUNTING POLICIES APPLIED FROM 1 JANUARY 2018

Refer note 16.1 for the accounting policies applied from 1 January 2018.

Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below.

• The group and company have taken an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Therefore, comparative periods have not been restated. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings and reserves as at 1 January 2018. Accordingly, the information presented for 2017 does not reflect the requirements of IFRS 9 but rather those of IAS 39.
• The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application:
  — The determination of the business model within which a financial asset is held
  — The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVPL
  — The designation of certain investments in equity instruments not held for trading as at FVOCI
• If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the group and company have assumed that the credit risk on the asset had not increased significantly since its initial recognition.

5.6.3 IMPACT OF ADOPTING IFRS 15

The revenue accounting policy has changed with effect from 1 January 2018 as a result of adopting IFRS 15.

IFRS 15 supersedes IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations for annual periods beginning on or after 1 January 2018. IFRS 15 applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. This standard establishes a comprehensive framework for determining whether, how much and when revenue is recognised, providing additional guidance in many areas not covered in detail under the previous revenue standards and interpretations. The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying the framework to the contracts with customers. This standard also specifies the accounting treatment for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. IFRS 15 further includes extensive new disclosure requirements.

Refer note 7.1.1.1 for the revised revenue accounting policy and note 7.1.2 for the disaggregated revenue disclosure required by IFRS 15.

In accordance with the transition provisions, IFRS 15 was adopted by applying the cumulative effect method. In terms of this method:

1. the new rules were applied retrospectively, only to contracts with customers that were not completed by 1 January 2018 (the date of initial application); and
2. the opening balance of retained earnings as at 1 January 2018 was adjusted with the cumulative effect of the retrospective application (per (a) above).

Accordingly the comparative information presented for 2017 has not been restated, but presented as previously reported applying the previous revenue standards and interpretations.

The cumulative effect of the retrospective application on the group’s retained earnings as at 1 January 2018 is as follows:

GROUP

	Note		Rm
Opening balance at 1 January 2018 (after IFRS 9 before IFRS 15 restatement) (Refer note 5.6.2)			30 951
Adjustment from the adoption of IFRS 15			314
Decrease in deferred revenue liability due to earlier recognition of revenue from a pricing adjustment	5.6.3.2(a)		436
Increase in deferred tax liability relating to earlier recognition of revenue from a pricing adjustment	5.6.3.2(a)		(122)
Opening balance at 1 January 2018 (after IFRS 9 and IFRS 15 restatements)			31 265

For the company, the adoption of IFRS 15 did not require an adjustment to opening retained earnings as at 1 January 2018.

5.6.3.1 FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2018 HAD IAS 18 BEEN APPLIED

The following tables present a comparison of the group financial results as reported under IFRS 15 to what the financial results would have been in terms of IAS 18.

Impact on the statement of comprehensive income

			Group
For the year ended 31 December 2018	Note		As reported  Rm	Adjustments1 Rm	IAS 182 Rm
Revenue	5.6.3.2		25 491	(162)	25 329
Operating expenses	5.6.3.2		(19 788)	224	(19 564)
Net operating profit			5 703	62	5 765
Finance income			283		283
Finance costs			(605)		(605)
Income from financial assets			6		6
Share of income of equity-accounted investments			3 259		3 259
Profit before tax			8 646	62	8 708
Income tax expense			(1 653)	(17)	(1 670)
Profit for the year from continuing operations			6 993	45	7 038
Profit for the year from discontinued operations			69		69
Profit for the year			7 062	45	7 107
Other comprehensive income, net of tax			246		246
Total comprehensive income for the year			7 308	45	7 353
Profit attributable to:
Owners of the parent			7 030	45	7 075
Non-controlling interests			32		32
Profit for the year			7 062	45	7 107
Total comprehensive income attributable to:
Owners of the parent			7 276	45	7 321
Non-controlling interests			32		32
Total comprehensive income for the year			7 308	45	7 353

For the year ended 31 December 2018	cents	cents	cents
Attributable earnings per share
Aggregate
– Basic	2 801	18	2 819
– Diluted	2 156	14	2 170

1	Adjustments comprise:
	—	a contract modification consideration that would be recognised as revenue over seven years under the previous revenue standards and interpretations (R62 million and tax of R17 million).
	—	a reclassification of stock yard management service fee that would be recognised as a cost recovery in operating expenses under the previous revenue standards and interpretations (R224 million). Refer 5.6.3.2 for details of the assessment.
2	Amounts without the adoption of IFRS 15.

Impact on the statement of financial position

			Group
At 31 December 2018	Note		As reported  Rm	Adjustments1 Rm	IAS 182 Rm
ASSETS
Non-current assets			52 226		52 226
Current assets			7 641		7 641
Non-current assets held-for-sale			5 183		5 183
Total assets			65 050		65 050
EQUITY AND LIABILITIES
Capital and other components of equity
Share capital			1 021		1 021
Other components of equity			8 028		8 028
Retained earnings	5.6.3.2(a)		32 797	(269)	32 528
Equity attributable to owners of the parent	5.6.3.2(a)		41 846	(269)	41 577
Non-controlling interests			(701)		(701)
Total equity	5.6.3.2(a)		41 145	(269)	40 876
Non-current liabilities	5.6.3.2(a)		15 745	207	15 952
Interest-bearing borrowings			3 843		3 843
Other payables			152		152
Provisions			3 952		3 952
Post-retirement employee obligations			193		193
Financial liabilities			713		713
Deferred tax	5.6.3.2(a)		6 874	(105)	6 769
Other non-current liabilities	5.6.3.2(a)		18	312	330
Current liabilities	5.6.3.2(a)		6 823	62	6 885
Interest-bearing borrowings			573		573
Trade and other payables			2 960		2 960
Provisions			70		70
Financial liabilities			757		757
Current tax payable			209		209
Overdraft			1 531		1 531
Other current liabilities	5.6.3.2(a)		723	62	785
Non-current liabilities held-for-sale			1 337		1 337
Total liabilities	5.6.3.2(a)		23 905	269	24 174
Total equity and liabilities			65 050		65 050

1	Relates to the reversal of the IFRS 15 initial application adjustment amounting to R314 million, net of tax, (refer table in note 5.6.3) and the impact for the year ended 31 December 2018 arising from the contract modification consideration assessment of R45 million, net of tax, (refer note 5.6.3.2 (a)).
2	Financial results without the adoption of IFRS 15.

5.6.3.2 IMPACT ASSESSMENT OF CUSTOMER CONTRACT TERMS AND CONDITIONS

The standard terms and conditions of contracts with customers result in the same revenue recognition under IFRS 15, as compared to IAS 18, except for the following specific contractual arrangements that had an impact on initial application of the group:

(a) Contract modification consideration

A contract with a customer for the sale of goods had two distinct phases of delivery of the underlying goods. The contract was modified to include additional consideration over a period of seven years (referred to as the contract modification consideration). Under IAS 18, the contract modification consideration was determined as a standalone revenue arrangement and would have been recognised as revenue over the seven-year period. Under IFRS 15, the contract modification consideration is assessed as a pricing adjustment that relates only to the goods delivered under the first phase of the contract, which was concluded at the end of the 2017 financial year, and is therefore required to be allocated to the goods delivered under this phase. Accordingly, the revenue recognition of the contract modification consideration is recognised earlier under IFRS 15 than IAS 18. This adjustment has been made on the cumulative effect basis, with the adoption of IFRS 15, to opening retained earnings as at 1 January 2018.

(b) Stock yard management services

On certain contracts, the group was compensated in the form of a cost recovery for the rendering of stock yard management services.

Under IAS 18, up to 31 December 2017, these cost recoveries were accounted for in operating expenses as a cost recovery, as it was not seen as the main operation or revenue stream of the group. Under IFRS 15, however, the rendering of these services is seen as a separate performance obligation and forms part of the revenue of the group. Accordingly the income from the rendering of stock yard management services is presented as revenue separately from the corresponding cost. There is no impact on the profit or loss of the group as the accounting is similar to a reclassification.

5.6.3.3 ACCOUNTING POLICIES APPLIED FROM 1 JANUARY 2018

Refer 17.1.1.1 for the accounting policies applied from 1 January 2018.