2007 / 2008 Annual Report - Eastern Cape Development Corporation

EASTERN CAPE DEVELOPMENT CORPORATION 2007/081.8 Share capital and equityOrdinary share capital, preference share capital or any financial instrument issued by the group is classified as equitywhen:• Payment of cash, in the form of a dividend or redemption, is at the discretion of the group;• The instrument does not provide for the exchange of financial instruments under conditions that are potentiallyunfavourable to the group;• Settlement in the group’s own equity instruments is for a fixed number of equity instruments at a fixed price; and• The instrument represents a residual interest in the assets of the group after deducting all of its liabilities.The group’s ordinary and preference share capital is classified as equity.Consideration paid or received for equity instruments is recognized directly in equity. Equity instruments are initiallymeasured at the proceeds received less incremental directly attributable issue costs. No gain is recognised in profit orloss on the purchase, sale, issue or cancellation of the group’s equity instruments.When the group issues a compound instrument, i.e. an instrument that contains both a liability and equity component,the equity component is initially measured at the residual amount after deducting from the fair value of the compoundinstrument the amount separately determined for the liability component. Transaction costs that relate to the issue of acompound financial instrument are allocated to the liability and equity components of the instrument in proportion tothe allocation of proceeds.Distributions to holders of equity instruments are recognised as dividends within equity in the period in which they arepayable. Dividends for the year that are declared after the balance sheet date are disclosed in the notes.1.9 Government grants and deferred incomeGovernment includes government agencies and similar bodies whether local, national or international. Governmentassistance is action by government designed to provide an economic benefit specific to an entity or range of entitiesqualifying under certain criteria. A government grant is assistance by government in the form of transfers of resources.When the conditions attaching to government grants have been met and the grants have been received, they arerecognised in profit or loss on a systematic basis over the periods necessary to match them with the related costs. Whenthey are for expenses or losses already incurred, they are recognised in profit or loss immediately. The unrecognisedportion of project spend at the balance sheet date is presented as deferred income. No value is recognised for othergovernment asistance.Government grants are recognised when there is reasonable assurance that:• the Group will comply with the conditions attaching to them; and• the grants will be received.Government grants are recorded as deferred income when they become receivable and are then recognised as incomeon a systematic basis over the periods necessary to match the grants with the related costs, which they are intended tocompensate.Government grants related to assets, including non-monetary grants at fair value, are presented in the balance sheet bysetting up the grant as deferred income.1.10 Project grantsThe grants received and associated expenditure are not included in the income statement of the Group but transferreddirectly to individual project fund accounts, which are reflected as a current liability. Interest received on the fundsis accounted for in the fund account unless the Group is entitled thereto according to the agreement. The funds areapplied to either specific expenditure as directed by the funder or in terms of the agreement with the funder.79