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262 <strong>Telkom</strong> Annual Report 2009 Notes to the annual financial statements (continued) for the three years ended March 31, 2009 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Summary of significant accounting policies (continued) Financial instruments (continued) Subsequent measurement Subsequent to initial recognition, the Company classifies financial assets as ’at fair value through profit or loss’, ’held-tomaturity investments’, ’loans and receivables’, or ’available-forsale'. Financial liabilities are classified ’at fair value through profit or loss’ or ’other financial liabilities’. The measurement of each is set out below and presented in a table in note 12. The fair value of financial assets and liabilities that are actively traded in financial markets is determined by reference to quoted market prices at the close of business on the balance sheet date. Where there is no active market, fair value is determined using valuation techniques such as discounted cash flow analysis. Financial assets at fair value through profit or loss The Company classifies financial assets that are held for trading in the category ’financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the future. Derivatives not designated as hedges are also classified as held for trading. On remeasurement to fair value the gains or losses on held for trading financial assets are recognised in net finance charges and fair value movements for the year. Gains and losses arising from changes in the fair value of the ’financial assets at fair value through profit or loss’ category are presented in the income statement within ’finance charges and fair value movements’ in the period which they arise. Held-to-maturity financial assets The Company classifies non-derivative financial assets with fixed or determinable payments and fixed maturity dates as held-tomaturity when the Company has the positive intention and ability to hold to maturity. These assets are subsequently measured at amortised cost. Amortised cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method. This calculation includes all fees paid or received between parties to the contract. For investments carried at amortised cost, gains and losses are recognised in net profit or loss when the investments are sold or impaired. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Trade receivables are subsequently measured at the original invoice amount where the effect of discounting is not material. Available-for-sale financial assets Available-for-sale financial assets are those non-derivative assets that are designated as available-for-sale, or are not classified in any of the three preceding categories. Equity instruments are all treated as available-for-sale financial instruments. After initial recognition, available-for-sale financial assets are measured at fair value, with gains and losses being recognised as a separate component of equity, net of taxation. Dividend income is recognised in the income statement as part of other income when the Company’s right to receive payment is established. Changes in the fair value of monetary items denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in carrying amount of the item. The translation differences on monetary items are recognised in profit or loss, while translation differences on non-monetary securities are recognised in equity. Changes in the fair value of monetary and non-monetary items classified as available-for-sale are recognised directly in equity. When an investment is derecognised or determined to be impaired, the cumulative gain or loss previously recorded in equity is recognised in profit or loss. Financial liabilities at fair value through profit or loss Financial liabilities are classified as ‘at fair value through profit or loss’ (’FVTPL’) where the financial liability is held for trading. A financial liability is classified as held for trading: • if it is acquired for the purpose of settling in the near term; or • if it is a derivative that is not designated and effective as a hedging instrument. Financial liabilities at a FVTPL are stated at fair value, with any resultant gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Other financial liabilities Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method, with interest expense recognised in finance charges and fair value movements, on an effective interest rate basis. The effective interest rate is the rate that accurately discounts estimated future cash payments through the expected life of the financial liability or, where appropriate, a shorter period.
Notes to the annual financial statements (continued) for the three years ended March 31, 2009 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Summary of significant accounting policies (continued) Financial instruments (continued) Financial guarantee contracts Financial guarantee contracts are subsequently measured at the higher of the amount determined in accordance with IAS37 Provisions, Contingent Liabilities and Contingent Assets or the amount initially recognised less, when appropriate, cumulative amortisation, recognised in accordance with IAS18 Revenue. Cash and cash equivalents Cash and cash equivalents are measured at amortised cost. This comprises cash on hand, deposits held on call and term deposits with an initial maturity of less than three months when entered into. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents defined above, net of credit facilities utilised. Capital and money market transactions New bonds and commercial paper bills issued are subsequently measured at amortised cost using the effective interest rate method. Bonds issued where the Company is a buyer and seller of last resort are carried at fair value. The Company does not actively trade in bonds. Derecognition A financial instrument or a portion of a financial instrument will be derecognised and a gain or loss recognised when the Company’s contractual rights expire, financial assets are transferred or financial liabilities are extinguished. On derecognition of a financial asset or liability, the difference between the consideration and the carrying amount on the settlement date is included in finance charges and fair value movements for the year. For available-for-sale assets, the fair value adjustment relating to prior revaluations of assets is transferred from equity and recognised in finance charges and fair value movements for the year. Bonds and commercial paper bills are derecognised when the obligation specified in the contract is discharged. The difference between the carrying value of the bond and the amount paid to extinguish the obligation is included in finance charges and fair value movements for the year. Impairment of financial assets At each balance sheet date an assessment is made of whether there are any indicators of impairment of a financial asset or a group of financial assets based on observable data about one or more loss events that occurred after the initial recognition of <strong>Telkom</strong> Annual Report 2009 263 the asset or the group of assets. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. For loans and receivables carried at amortised cost, if there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured at the difference between the asset’s carrying amount and the present value of estimated future cashflows. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If any such evidence exists for available-for-sale assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. The recoverable amount of financial assets carried at amortised cost is calculated as the present value of expected future cash flows discounted at the original effective interest rate of the asset. If, in a subsequent period, the amount of the impairment loss for financial assets decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed except for those financial assets classified as availablefor-sale and carried at cost that are not reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Reversals in respect of equity instruments classified as availablefor-sale are not recognised in profit and loss. Reversals of impairment losses on debt instruments classified as available-forsale are reversed through the income statement, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised through the income statement. Embedded derivatives The Company assesses whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when it first becomes party to the contract. The Company reassesses the contract when there is a change in the terms of the contract which significantly modifies the cash flows that would otherwise be required under the contract.
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We are... one of Africa’s largest
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Telkom shareholding as at March 31,
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Grow profitable revenue through wir
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600 500 400 300 200 100 0 07 08 09
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The telecommunications industry Con
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egulation that stipulated standard
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a - Euros a - Euros a - Euros 0.25
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ated management team with experienc
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The regulatory environment The regu
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On target for 2010 Telkom Annual Re
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Online impairments, the fixed-line
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• Remodelling - reaching for new
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in this annual report has been upda
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Capital expenditure for the Group i
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More than100 years of combined tele
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Management team Telkom Annual Repor
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Telkom Annual Report 2009 33 Age at
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uild a partnership with communities
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Customers: Through our Customer Cen
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• Interfacing with the media Whil
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Partnering with Human Resources Gro
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The members’ resignations and app
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Share dealings In line with JSE Lis
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NYSE rules Telkom practice Telkom A
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the codes of conduct and ethics tha
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Telkom Annual Report 2009 51 Enterp
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provider, we practice a risk manage
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egulate the business of dealers in
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addressing a number of significant
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There was a major Over the past dec
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payment policy that facilitates the
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Headcount movement Compensation and
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• Accelerated development of wome
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14,500 union members participated i
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were admitted to the university in
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ole in exposing students to the rea
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Sick leave indices • We saved R2
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These will be augmented by another
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Some of the key deliverables are:
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Fittingly, the initiative was launc
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Sponsorships Sponsorships continue
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Item Comment and reference Governan
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espond to competitive challenges Pe
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Operational review History and deve
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service. All costs including instal
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Traffic was adversely affected in b
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Telkom’s focus on bringing new in
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esponse of the CDMA operators to ou
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MWEB Africa On April 21, 2009, we a
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VPN model that allows other service
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services and also to support Telkom
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Telkom’s fixed-line voice busines
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Results of operations The Telkom Gr
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EBITDA can be reconciled to operati
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Telkom Annual Report 2009 109 Finan
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Fixed-line operating revenue increa
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The following table sets forth info
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Interconnection revenue Year ended
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Telkom Annual Report 2009 117 Fixed
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Fixed-line payments to other networ
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Service fees increased in the year
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Vodacom’s operating revenue from
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our fixed-line business, which were
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Vodacom’s selling, general and ad
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The increase in other operating rev
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commercial paper bills, as well as
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The following table sets forth our
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challeng Consolidated financial sta
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138 Telkom Annual Report 2009
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140 Telkom Annual Report 2009 Direc
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142 Telkom Annual Report 2009 Conso
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144 Telkom Annual Report 2009 Conso
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146 Telkom Annual Report 2009 Notes
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338 Telkom Annual Report 2009 Share
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344 Telkom Annual Report 2009 Notic
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346 VOTING AND PROXIES Ordinary sha
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Notes Telkom Annual Report 2009 1.
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