CHARTING A NEW COURSE. Annual Financial Statements 2016

Transcription

1 CHARTING A NEW COURSE Annual Financial Statements 2016

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3 Contents Annual financial statements Directors responsibility statement 2 Secretarial certification 2 Independent auditors report 3 Directors report 4 Directors interest in shares 6 Audit Committee report 7 Group statement of financial position 8 Group statement of comprehensive income 9 Group statement of changes in equity 10 Group statement of cash flows 11 Significant accounting policies 12 Notes to the Group annual financial statements 21 Company annual financial statements 50 Annexure 1 Related parties 58 Annexure 2 Details of land and buildings 59 Analysis of shareholders 60 General information Shareholders diary IBC IBC Astrapak Annual Financial Statements

4 Directors responsibility statement The directors of the Company are responsible for the maintenance of adequate accounting records and the preparation and integrity of the annual financial statements and related information. The annual financial statements have been prepared in accordance with the Companies Act of South Africa, International Financial Reporting Standards of the International Accounting Standards Board, SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and the Interpretations issued by the IFRS Interpretations Committee. The Group s independent auditors, Deloitte & Touche, have audited the annual financial statements and their unmodified report appears on page 3. safeguard, verify and maintain accountability of assets, and to prevent and detect material misstatement and loss. The systems are implemented and monitored by suitably trained personnel with an appropriate segregation of authority and duties. Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review. The consolidated and separate financial statements are prepared on a goingconcern basis. Nothing has come to the attention of the directors to indicate that the Group and Company will not remain going concerns for the foreseeable future. These financial statements were audited in compliance with section 29(1)(e)(i)(aa) of the Companies Act, No 71 of The financial statements set out on pages 8 to 57 were approved by the Board of Directors and are signed on its behalf by: M Diedloff Group Managing Director and Chief Financial Officer The directors are also responsible for the systems of internal control. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the annual financial statements, and to adequately These consolidated and separate financial statements were prepared by Salome Ratlhagane CA(SA) (Group Financial Manager) under the supervision of Manley Diedloff (Group Managing Director and Chief Financial Officer). R Moore Chief Executive Officer Denver 19 April 2016 Secretarial certification In accordance with section 88(2)(e) of the Companies Act, No 71 of 2008, it is hereby certified that, to the best of my knowledge, the Company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of the Act and that such returns are true and correct for the financial period ended 29 February Salome Ratlhagane Company Secretary Denver 19 April Astrapak Annual Financial Statements 2016

5 Independent auditors report TO THE SHAREHOLDERS OF ASTRAPAK LIMITED We have audited the consolidated and separate financial statements of Astrapak Limited as set out on pages 8 to 57 which comprise the statements of financial position as at 29 February 2016, and the statements of comprehensive income, the statements of changes in equity, the statements of cash flows for the year then ended, and the notes which include a summary of significant accounting policies and other explanatory information. Directors responsibility for the consolidated financial statements The Company s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on the consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Astrapak Limited as at 29 February 2016, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. Other reports required by the Companies Act As part of our audit of the consolidated and separate financial statements for the year ended 29 February 2016, we have read the directors report, the Audit Committee s report and secretarial certification for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports, we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports. Report on other legal and regulatory requirements In terms of the Independent Regulatory Board for Auditors ( IRBA ) Rule published in Government Gazette Number dated 4 December 2015, we report that Deloitte & Touche has been the auditor of Astrapak Limited for 21 years. Deloitte & Touche Registered Auditors Per Corinne Ringwood Partner 19 April 2016 National executive: *LL Bam (Chief Executive), *AE Swiegers (Chief Operating Officer), *GM Pinnock (Audit), *N Sing (Risk Advisory), *NB Kader (Tax), TP Pillay (Consulting), S Gwala (BPaaS), *K Black (Clients and Industries), *JK Mazzocco (Talent and Transformation), *MJ Jarvis (Finance), *M Jordan (Strategy), *MJ Comber (Reputation and Risk), *TJ Brown (Chairman of the Board) *Partner and Registered Auditor A full list of partners and directors is available on request. B-BBEE rating: Level 2 contributor in terms of Chartered Accountancy Profession Sector Code Associate of Deloitte Africa, a member of Deloitte Touche Tohmatsu Limited Astrapak Annual Financial Statements

6 Directors report Nature of business Astrapak Limited and its subsidiaries ( Astrapak or the Company or the Group ) are manufactures and distributors of an extensive range of plastic packaging products. The Group has manufacturing facilities in all main centres of South Africa and has annualised revenues of R1,348 million. The operations are grouped into various business segments and service mainly the food, beverage, personal care, pharmaceutical, agricultural, industrial and retail markets. Trading results 2016 R R 000 Revenue 1 348, ,6 Profit from operations before exceptional items 44,3 61,5 Profit/(loss) for the year 21,2 (122,3) Loss attributable to ordinary shareholders (3,3) (138,5) Attributable to preference shareholders of the parent 12,7 10,9 Loss per ordinary share (cents) (2,7) (114,4) Headline loss per ordinary share (cents) (14,1) (71,5) Authorised and issued share capital Details of the authorised share capital are given in note 11 to the financial statements. No changes occurred during the year. Preference shares The non-redeemable, non-participating, cumulative preference shareholders will receive, if declared, dividends which are payable by 31 March and 30 September each year. Dividends are calculated based on 88,89% of the average daily prime rate which prevailed in respect of the relevant period for which the dividend is calculated. Subsidiaries The list of all parties related to the Company during the year ended 29 February 2016 is disclosed in Annexure 1 to the financial statements. A number of special resolutions were passed by subsidiary companies. None of these resolutions are of significance to the shareholders in assessing the state of affairs of the Group. Directors The names of directors of Astrapak are listed on page IBC of these annual financial statements. Directors remuneration The aggregate remuneration and benefits paid to the executive and nonexecutive directors of the Group for the year ended 29 February 2016 are set out in note 36 of these financial statements. Astrapak Limited Share Option Scheme Further details on the Astrapak Limited Share Option Scheme ( the scheme ) and the number of options issued to executive directors in terms of such scheme are set out in note 36 of these annual financial statements. Property, plant and equipment During the year, the Group acquired property, plant and equipment to the value of R132,4 million (2015: R158,0 million). Plant and machinery were not impaired in the current year and prior year impairments were R38,6 million. Directors service contracts All executive directors and prescribed officers have service level agreements in place. Distribution to ordinary shareholders Astrapak has not declared an ordinary dividend in respect of the financial year ended 29 February 2016 (2015: Rnil). Litigation statement In terms of the JSE Listings Requirements, the directors, whose names appear on page IBC of these financial statements, have confirmed that they are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or have had in the recent past, being at least the previous 12 months, a material effect on the Group s financial position. 4 Astrapak Annual Financial Statements 2016

7 Going concern The directors report that, after having considered a wide range of factors, they have reasonable expectation that the Group and Company have adequate resources and facilities available to continue in operation for the foreseeable future. For this reason, the Group continues to adopt the going-concern basis in preparing its financial statements. Discontinued operations During the 29 February 2016 financial year, the following entities were disposed of: Cinqpet. East Rand Plastics. Knilam Packaging. As at 29 February 2016, entities included in discontinued operations and assets classified as held-for-sale are as follows: Flexible Barrier Film Converters Proprietary Limited (held-for-sale). Coralline Investment Proprietary Limited (held-for-sale). Flexible divisions which are divisions of Astrapak Manufacturing Holdings Proprietary Limited Peninsula Packaging (held-for-sale). Rigids divisions which are divisions of Astrapak Manufacturing Holdings Proprietary Limited Cinqplast Denver (discontinued). Plastop Bronkhorstspruit (discontinued). Events after the reporting period No material fact or circumstance has come to light between 29 February 2016 and date of signature of these financial statements that would require adjustment to or disclosure in these financial statements. Astrapak Annual Financial Statements

8 Directors interest in shares as at 29 February 2016 Director Beneficial direct Nonbeneficial indirect Unit holding % Interest in shares as at 28 February ,30 RI Moore ,20 PC Botha* ,93 M Diedloff ,17 Net purchases from 1 March 2015 to 29 February ,41 RI Moore ,19 PC Botha* M Diedloff ,22 Interest in shares as at 29 February ,71 RI Moore ,39 PC Botha* ,93 M Diedloff ,39 * The shares held by PC Botha are held in his capacity as principal, trustee or director of a number of entities including Lereko Metier Capital Growth Fund. 6 Astrapak Annual Financial Statements 2016

9 Audit Committee report The Audit Committee has discharged all its responsibilities and carried out all the functions assigned to it in terms of section 94(7) of the Companies Act, No 71 of 2008 ( the Act ). The Audit Committee has adopted formal terms of reference, as delegated to it by the Board of Directors ( the Board ), as its Audit Committee Charter. The Audit Committee herewith confirms that it has discharged the functions in terms of its charter and ascribed to it in terms of the Act in the following manner: reviewed the interim and year-end financial results as published and recommended the adoption thereof to the Board; reviewed external audit reports on the annual financial statements; reviewed the Board-approved internal audit and risk charters; reviewed and approved the internal audit plan; assessed the independence of the internal audit function; reviewed and approved the adopted approach to risk management and the risk registers produced via the risk assessment process; reviewed all internal audit and risk management reports; reviewed the internal audit and risk management plans and where required made recommendations to the Board on remedial actions to be taken; evaluated the effectiveness of risk management, control and various governance processes; verified the independence of the external auditors; nominated Deloitte & Touche as auditor and noted the appointment of Mrs Corinne Ringwood as the designated auditor; reviewed and approved audit fees and engagement terms of the external auditor; considered and determined the nature and extent of non-audit services; considered and satisfied itself that the Chief Financial Officer has appropriate expertise and experience and that the composition, experience and skills set of the finance function met the Group s requirements; considered and reviewed the appropriateness of IT risks and controls; reviewed and monitored the appropriateness of the Group s combined assurance model and ensuring that significant risks facing the business were adequately addressed; and received and dealt appropriately with any complaints, from within or outside the Company, relating to the accounting practices and internal audit of the Company, to the content or auditing of its financial statements, or any related matter. In the course of its reviews, the Audit Committee took appropriate steps to ensure that the financial statements were prepared in accordance with International Financial Reporting Standards and in the manner required by the Act. It further considered and made recommendations on internal financial controls, dealt with any concerns or queries of matters financial, audit or risk-related and reviewed and considered all legal matters that could significantly impact on the organisation and the financial results reported or to be reported. The Audit Committee determined that, during the financial year under review, it had discharged its legal, regulatory and all other responsibilities, as might be defined in its charter and terms of reference. The Board concurs with this assessment. TV Mokgatlha Chairman: Audit Committee 19 April 2016 Astrapak Annual Financial Statements

10 Group statement of financial position as at 29 February 2016 R 000 Notes ASSETS Non-current assets Property, plant and equipment Goodwill Deferred taxation assets Investments and loans Current assets Inventories Accounts receivable Taxation receivable Investments and loans Cash and cash equivalents Assets classified as held-for-sale Total assets EQUITY AND LIABILITIES Equity attributable to ordinary shareholders of the parent Ordinary share capital Ordinary share premium Treasury shares 12 ( ) ( ) Retained income Revaluation reserve Share-based payment reserve Equity attributable to preference shareholders and non-controlling interest Preference share capital Preference share premium Non-controlling interest Non-current liabilities Long-term interest-bearing debt Deferred taxation liabilities Current liabilities Accounts payable Provisions Short-term interest-bearing debt Taxation payable Shareholders for preference dividends Bank overdraft Liabilities classified as held-for-sale Total equity and liabilities Astrapak Annual Financial Statements 2016

11 Group statement of comprehensive income R 000 Notes Revenue Cost of sales ( ) ( ) Gross profit Other income Distribution and selling costs ( ) (99 392) Administrative and other operating expenses ( ) ( ) Profit from operations before exceptional items Exceptional items 16 (12) (36 632) Profit from operations Investment income Finance costs 18 (34 976) (34 396) Profit before taxation Taxation expense 19 (14 887) (14 891) Profit/(loss) for the year from continuing operations (11 036) Profit/(loss) for the year from discontinued operations ( ) Profit/(loss) for the year ( ) Profit/(loss) attributable to: Ordinary shareholders of the parent (3 308) ( ) Continuing operations (17 816) (27 224) Discontinued operations ( ) Preference shareholders of the parent Non-controlling interest Profit/(loss) for the year ( ) Other comprehensive loss (net of tax) (594) (4 813) Items that will not be reclassified to profit and loss Revaluation of land and buildings Realisation of reserve relating to the disposal of property (11 330) (4 813) Tax effect on revaluation and realisation 136 Total comprehensive income/(loss) for the year ( ) Total comprehensive income/(loss) for the year attributable to: Ordinary shareholders of the parent (3 902) ( ) Continuing operations (17 816) (27 224) Discontinued operations ( ) Movement in other comprehensive loss (594) (4 813) Preference shareholders of the parent Non-controlling interest Total comprehensive income/(loss) for the year ( ) Loss per ordinary share (cents) 20 (2,7) (114,4) Diluted loss per ordinary share (cents) 20 (2,7) (114,0) Astrapak Annual Financial Statements

12 Group statement of changes in equity R 000 Ordinary share capital and premium Treasury shares Retained income Revaluation reserve Sharebased payment reserve Put options on noncontrolling interest Equity attributable to ordinary shareholders of the parent Preference share capital and premium Noncontrolling interest Total Balance as at 1 March ( ) (904) Loss for the year ( ) ( ) ( ) Preference dividends paid (10 890) (10 890) (10 890) Shareholder loan Realisation of reserve on disposal of property (4 813) (4 813) (4 813) Reversal of revaluation reserve on disposal of property (7 627) Adjustment to fair value of put options Share-based payment expense for the year (4 340) (4 340) (4 340) Balance as at 28 February ( ) Profit for the year Ordinary dividends paid (7 500) (7 500) Preference dividends declared (12 718) (12 718) (12 718) Shareholder loan (8 805) (8 805) Revaluation of property Reversal of revaluation reserve on disposal of property (11 330) Deferred taxation relating to the realisation of reserve on disposal of property Share-based payment expense for the year (832) (832) (832) Balance as at 29 February ( ) Astrapak Annual Financial Statements 2016

13 Group statement of cash flows R 000 Notes Cash flows from operating activities Cash generated from operations Investment income Finance costs 25 (41 763) (47 380) Dividends paid (11 483) (10 654) Taxation paid 29 (30 404) (17 463) Net cash inflow from operating activities Cash flows from investing activities Additions to plant and equipment 26 ( ) ( ) (Increase)/decrease in non-controlling interest (16 305) Proceeds on sale of business Proceeds on the disposal of property, plant and equipment Decrease in vendor loan Net cash inflow/(outflow) from investing activities (471) Cash flows from financing activities Decrease in long-term liabilities (7 945) (27 824) Decrease in short-term interest-bearing debt (70 527) (463) Net cash outflow from financing activities (78 472) (28 287) Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Astrapak Annual Financial Statements

14 Significant accounting policies 1. General information Astrapak Limited and its subsidiaries is a company incorporated under the Companies Act of South Africa. The address of the registered office is given on page IBC. The principal business of the Group is described in the directors report. These financial statements are presented in South African Rand because that is the currency of the primary economic environment in which the Group operates. Statement of compliance The annual financial statements have been prepared in accordance with the Companies Act of South Africa, International Financial Reporting Standards and SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and Financial Pronouncements issued by the Financial Reporting Standards Board. The financial statements have been prepared in a manner that is consistent with the prior year. The historical cost basis has been applied to the preparation of the financial statements except for the revaluation of certain properties and financial instruments to fair value as explained in the accounting policies below. 1.1 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Astrapak Limited Group ( the Company ) and entities controlled by the Company (its subsidiaries) as at 28 February each year. Control is achieved where the Company has the power to govern the financial and operating polices of an investee entity so as to obtain benefits from its activities. On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. The acquisition of subsidiaries is accounted for using the purchase method. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (that is discount on acquisition) is credited to profit or loss in the period of acquisition. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owner of the Company and to the non-controlling interests even if this results in the noncontrolling interest having a deficit balance. If the subsidiary uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Transactions with non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. Any increase or decrease in ownership interest in subsidiaries without a change in control is recognised as equity transactions in the consolidated financial statements. Accordingly, any premium or discount on subsequent purchases of equity instruments from or sales of equity instruments to non-controlling interests are recognised directly in equity of the parent shareholder. Put options on non-controlling interests Changes in fair value of put options on non-controlling interests are reflected through equity. 1.2 Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group s interest in the fair value of the identifiable assets and liabilities of a subsidiary, or jointly controlled entity, at the date of acquisition. Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. Whenever negative goodwill arises, the identification and measurement of the acquired identifiable assets, liabilities and contingent liabilities are reassessed. If negative goodwill still remains, it is recognised in profit or loss immediately. 12 Astrapak Annual Financial Statements 2016

15 Goodwill is not amortised. For the purposes of impairment testing, goodwill is allocated to each of the Group s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income/income statement. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. The same principle is applicable for partial disposals where there is a change in ownership, in other words, a portion of the goodwill is expensed as part of the cost of disposal. For partial disposals and acquisitions with no change in ownership, goodwill is recognised as a transaction with equity holders. 1.3 Non-controlling interests The Group presents non-controlling interests in its consolidated statement of financial position within equity, separately from the equity of the owners of the parent and attributes the profit or loss and each component of other comprehensive income to the owners of the parent and to the non-controlling interests. The proportion allocated to the parent and non-controlling interests is determined on the basis of present ownership interests. 1.4 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of trade discounts, rebates and other sales-related taxes. Sales of goods are recognised when goods are delivered and title has passed. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. 1.5 Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. Finance leases are capitalised. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group s general policy on borrowing costs. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. 1.6 Foreign currencies Transactions in currencies other than South African Rand are recorded at the rates of exchange prevailing on the dates of the transactions. At each year-end date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing on the year-end date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on translation are included in net profit or loss for the period, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity. To hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts and options. Astrapak Annual Financial Statements

16 Significant accounting policies continued 1.7 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 1.8 Government grants Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Government grants are recognised as income over the periods necessary to match them with the costs they are intended to compensate on a systematic basis. 1.9 Exceptional items Exceptional items are material items which derive from events or transactions that fall outside the ordinary trading activities of the Group and which individually or, if of a similar type, in aggregate, need to be disclosed by virtue of their size or incidence, if the financial statements are to give a true and fair view Retirement benefit costs Under defined contribution plans, the Group s legal or constructive obligation is limited to the amount that it agrees to contribute to the fund. Consequently, the actuarial risk that benefits will be less than expected and the investment risk that assets invested will be insufficient to meet expected benefits is borne by the employee. Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due Impairment of assets, excluding goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or the cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 14 Astrapak Annual Financial Statements 2016

17 1.12 Taxation The taxation expense represents the sum of the taxation currently payable and deferred taxation. The taxation currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group s liability for current taxation is calculated using taxation rates that have been enacted or substantively enacted by the statement of financial position date. Deferred taxation is the taxation expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding taxation bases used in the computation of taxable profit, and is accounted for using the statement of financial position liability method. Deferred taxation liabilities are generally recognised for all taxable temporary differences and deferred taxation assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxation profit nor the accounting profit. Deferred taxation liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred taxation assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred taxation is calculated at the taxation rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred taxation is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred taxation is also dealt with in equity. Deferred taxation assets and liabilities are offset when there is a legal enforceable right to offset current taxation assets against liabilities and when the deferred taxation relates to the same fiscal authority. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised Property, plant and equipment Plant and equipment is accounted for at cost less accumulated depreciation and any accumulated impairment. All direct costs, including finance costs relating to major capital projects, are capitalised up to the date of commissioning. Property is accounted for using the revaluation model. Under the revaluation model, property is carried at the revalued amount, being its fair value at the date of the revaluation less subsequent depreciation and impairment. Increases are value credited to other comprehensive income and accumulated in equity and reversal of a revaluation decrease previously recognised as an expense should be recognised as income. Decreases arising from the revaluation are recognised as an expense to the extent that it exceeds the amount previously credited to the revaluation surplus. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Depreciation is charged so as to write off the cost of assets, other than freehold land, over their estimated economic useful lives, using the straight-line method. Depreciation is not provided for on freehold land. Residual values and estimated useful lives are assessed on an annual basis and, if expectations differ from previous estimates, adjusted prospectively as a change in accounting estimate. Astrapak Annual Financial Statements

18 Significant accounting policies continued 1.14 Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in first-out method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution Financial instruments Financial assets and financial liabilities are recognised on the Group s statement of financial position when the Group has become a party to contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs are directly attributable to the acquisition or issue of financial assets and liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss or recognised immediately in profit or loss. Financial assets are fair value through profit or loss ( FVTPL ) Financial assets are classified at FVTPL when the asset is either held-for-trading or does not satisfy the criteria for hedge accounting or is designated at FVTPL. A financial asset is designated at FVTPL on initial recognition if this designation provides more useful information because: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial asset is part of a group of financial assets, financial liabilities or both, that is managed and its performance evaluated on a fair value basis in accordance with a documented risk/investment management strategy, and the information regarding this grouping is reported internally to key management on this basis; or it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as at FVTPL. Financial assets measured at FVTPL are recognised at fair value. Any subsequent gains or losses are recognised in profit or loss. Trade receivables and payables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable trade receivables are recognised in profit or loss when there is objective evidence that the asset is impaired. Appropriate allowances for estimated irrecoverable trade receivables are recognised in profit or loss when there is objective evidence that the asset is impaired. Cash and cash equivalents comprise the net of cash on hand and overdrafts, demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis to the statement of comprehensive income using the effective interest rate method and are added to the carrying amount of the instrument to the extent they are not settled in the period in which they arise. Equity instruments are recorded at the proceeds received, net of direct issue costs. The Group uses derivative financial instruments, primarily foreign currency forward contracts, to hedge its risks associated with foreign currency. The Group does not use derivative financial instruments for speculative purposes. The fair value of these derivatives is recorded and remeasured at each reporting date. Changes in fair value of derivative financial instruments that are designated and effective as hedges of future cash flows relating to firm commitments and forecast transactions are recognised directly in equity. If the hedged firm commitment or forecast transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gain or loss on the derivative that had previously been recognised in equity is included in the initial measurement of the asset or liability. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the period. Changes in fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the statement of comprehensive income as they arise. 16 Astrapak Annual Financial Statements 2016

19 1.16 Provisions and contingencies Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Onerous contracts Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. Contingent liabilities A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group, or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability. If the likelihood of an outflow of resources is remote, the possible obligation is neither a provision nor a contingent liability and no disclosure is made. Contingent assets A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Such contingent assets are only recognised in the financial statements where the realisation of income is virtually certain. If the inflow of economic benefits is only probable, the contingent asset is disclosed as a claim in favour of the Group but not recognised in the statement of financial position. Provisions for royalties, distribution commissions and credit notes Provisions for royalties, distribution commissions and credit notes are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and when it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation Share-based payments The Group has applied the requirements of IFRS 2 Share-based Payments. An expense is recognised where the Group receives goods or services in exchange for shares or rights over shares (equity-settled transactions). Employees, including directors, of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external value using the binomial model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Group (market conditions). The expected life used in the model has been adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, on a straight-line basis over the period in which the non-market performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date). Astrapak Annual Financial Statements