Exxaro Resources Limited
Annual Financial Statements 2022
In the current year, Exxaro has applied a number of amendments to IFRS accounting standards, as summarised below, issued by the IASB that are mandatorily effective for reporting periods beginning on or after 1 January 2022. The adoption of these amendments did not have any material impact on the disclosure nor on the amounts reported in these financial statements.
| Standard | Key requirements | ||
| Amendments to IFRS 3 Business Combinations - Reference to Conceptual Framework | The amendments update IFRS 3 Business Combinations so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. It also added a requirement that, for obligations within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, an acquirer applies IAS 37 to determine whether at acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of IFRIC 21 Levies, the acquirer applies IFRIC 21 to determine whether the obligating event that give rise to a liability to pay the levy has occurred by the acquisition date. | ||
| Amendments to IAS 16 Property, plant and equipment - Proceeds before intended use | The amendments to IAS 16 prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use, i.e. proceeds while bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Consequently, such sales proceeds and related costs will be recognised in profit or loss. The cost of those items will be measured in accordance with IAS 2 Inventories. | ||
| The amendments also clarify the meaning of "testing whether an asset is functioning properly". IAS 16 now specifies this as assessing whether the technical and physical performance of the asset is such that it is capable of being used in the production or supply of goods or services, for rental to others, or for administrative purposes. | |||
| The financial statements should disclose the amounts of proceeds and cost included in profit or loss that relate to items produced that are not an output of the entity's ordinary activities, and indicate which line item(s) in the statement of comprehensive income include(s) such proceeds and cost. | |||
| Amendments to IAS 37 Onerous Contracts - Cost of fulfilling a contract | The amendments to IAS 37 specify that the cost of fulfilling a contract comprises the costs that relate directly to the contract. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labour or materials) and an allocation of other costs that relate directly to fulfilling that contract (an example would be the allocation of the depreciation charge for an items of property, plant and equipment used in fulfilling the contract). | ||
| Annual improvement to IFRS accounting standards 2018 - 2020 cycle | The annual improvements include amendments to the following applicable standards: | ||
| IFRS 9 Financial Instruments: | |||
| The amendment clarifies that in applying the "10 percent" test to assess whether to derecognise a financial liability, an entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other's behalf. | |||
| IFRS 16 Leases: | |||
| The amendment removes the illustration of the reimbursement of leasehold improvements. |
The amendments to IAS 1 published in January 2020 affect only the presentation of liabilities as current or non-current in the statement of financial position and not the amount or timing of recognition. A key requirement of the 2020 amendments was that entities with liabilities that are subject to covenants to be complied with at a date subsequent to the reporting period do not have the right to defer settlement of the liabilities at the end of the reporting period if they do not comply with the covenants at that date.
Under the 2022 amendments, only covenants of a liability arising from a loan arrangement, which an entity must comply with on or before the reporting date affect the classification of that liability as current or non-current. The amendments are linked to the requirements on disclosure about such liabilities. The IASB concluded that the amended classification requirements will provide useful information when considered together with the requirements to disclose information about non-current liabilities with future covenants in the notes.
The amendments are applied retrospectively with early application permitted.
On adopting the amendment to IAS 1 on 1 January 2023, Exxaro plan to early adopt the subsequent amendment to IAS 1, effective 1 January 2024, regarding the classification of current and non-current liabilities.
The impact of the amendments to IAS 1 can be summarised as follows:
The amendments provide clarification that the entity's right to defer settlement of a liability is subject to the entity complying with future covenants, the entity has a right to defer settlement of the liability even if it does not comply with those covenants at the end of the reporting period.
The amendments clarify that classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability for at least 12 months after the reporting period.
The amendments require additional disclosures by the entity that classifies liabilities arising from loan arrangements as non-current when it has a right to defer settlement of those liabilities that are subject to the entity complying with future covenants within 12 months.
New accounting standards, amendments to accounting standards and interpretations issued which are relevant to the group, but not yet effective on 31 December 2022, have not been early adopted. It is expected that where applicable, these standards and amendments will be adopted on each respective effective date except as noted under 18.2.2. The group continuously evaluates the impact of these standards and amendments. The effect of the implementation of the new, amended or revised standards are not expected to have a material impact, although assessments of the effect of the implementation of these new, amended or revised standards are ongoing..
| Standard | Key requirements | Mandatory application date | ||||
| IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements - Disclosure of accounting policies | The amendments change the requirements in IAS 1 with regard to disclosure of accounting policies. The amendments replace all instances of the term 'significant accounting policies' with 'material accounting policy information'. Accounting policy information is material if, when considered together with other information included in the financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of the financial statements. | 1 January 2023 | ||||
| The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed. Accounting policy information may be material because of the nature of the related transactions, or other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, or other events or conditions is itself material. | ||||||
| The IASB has also developed guidance and examples to explain and demonstrate the application of the 'four-step materiality process' described in IFRS Practice Statement 2. | ||||||
| IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of accounting estimate | The amendment clarifies how companies should distinguish changes in accounting policies from changes in accounting estimates, by replacing the definition of a change in accounting estimates with a new definition of accounting estimates. Under the new definition, accounting estimates are defined as "monetary amounts in financial statements that are subject to measurement uncertainty". The requirements for recognising the effect of changes in accounting estimates prospectively remain unchanged. | 1 January 2023 | ||||
| IAS 12 Income Taxes - Deferred tax related to assets and liabilities arising from a single transaction | The amendment clarifies how a company accounts for income tax including deferred tax, which represents tax payable or recoverable in the future. In specified circumstances, companies are exempt from recognising deferred tax when they recognise assets or liabilities for the first time. The aim of the amendment is to reduce diversity in the reporting of deferred tax on leases and decommissioning obligations, by clarifying when the exemption from recognising deferred tax would apply to the initial recognition of such items. | 1 January 2023 | ||||
| IFRS 17 Insurance contracts | IFRS 17 created one accounting model for all insurance contracts in all jurisdictions that apply IFRS. IFRS 17 requires an entity to measure insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and take into account any uncertainty relating to insurance contracts. The financial statements of an entity will reflect the time value of money in estimated payments required to settle incurred claims. Insurance contracts are required to be measured based only on the obligations created by the contracts. An entity will be required to recognise revenue as an insurance service is delivered, rather than on receipt of premiums. | 1 January 2023 | ||||
| The impact of IFRS 17 affects the Exxaro Insurance Company Limited and not the Exxaro group, as the insurance contracts are between group entities only, which are eliminated for group reporting purposes. |
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