(formely M-Cell Limited) - Business Report 2003 - MTN Group

issue during the period and is based on the earnings attributable to ordinary shareholders, after excluding
those items as required by Accounting Issues Task Force opinion AC306.
2.12 Provisions
A provision is recognised when there is a legal or constructive obligation as a result of a past event for
which it is probable that a transfer of economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
The Group recognises a provision for onerous contracts when the expected benefits to be derived from a
contract are less than the unavoidable costs of meeting the obligations under the contract.
2.13 Deferred taxation
Deferred taxation is provided, using the liability method, for all temporary differences arising between the
tax bases of assets and liabilities and their carrying values for financial reporting purposes. Current enacted
tax rates are used to determine deferred taxation.
Under this method the Group is required to make provision for deferred taxation in relation to an
acquisition, on the difference between the fair values of the net assets acquired and their tax base.
Provision for taxes, mainly withholding taxes, which could arise on the remittance of accumulated profits,
principally relating to subsidiaries, is only made where a decision has been made to remit such earnings.
The principal temporary differences arise from depreciation on property, plant and equipment, working
capital allowances and tax losses carried forward. Deferred taxation assets relating to the carry forward of
unused tax losses, deductible temporary differences and tax credits are recognised to the extent that it is
probable that future taxable profit will be available against which the unused tax losses, deductible
temporary differences and tax credits can be utilised.
No deferred tax is recognised if the temporary difference arises from goodwill or from the initial recognition
of an asset which has no impact on accounting profit or taxable income.
2.14 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes all costs
directly attributable to bringing the asset to working condition for its intended use. Land is not depreciated,
and the depreciation of all other property, plant and equipment is calculated to write off the cost to its
residual values on the straight-line basis over their expected useful lives as follows:
Buildings 3,34% – 6,67%
Information systems, furniture and office equipment 10% – 25%
Network infrastructure 10% – 33%
Aircraft and vehicles 20% – 25%
Leasehold improvements
Shorter of the term of the lease or five years
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets or, where shorter, the expected term of the relevant lease.
Subsequent expenditure relating to an item of property, plant and equipment is capitalised when it is
probable that future economic benefits from the use of the asset will be increased.
Repairs and maintenance are charged to the income statement during the financial period in which they
are incurred.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between
the sale proceeds and the carrying amount of the asset.
2.15 Impairment of assets
The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether
there is any indication of impairment. If there is any indication that an asset may be impaired, its recoverable
amount is estimated. The recoverable amount is the higher of its net selling price and value in use.
In assessing value in use, the expected future cash flows from the asset 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. An impairment loss is recognised whenever the carrying amount of an asset
exceeds its recoverable amount.
2.16 Other intangible assets
Intangible assets that are considered to have an enduring benefit are stated at cost less accumulated
amortisation and accumulated impairment losses (if applicable). Intangible assets are amortised to the
MTN BUSINESS REPORT 2003
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