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PRINCIPAL ACCOUNTING POLICIESHedge AccountingThe following hedge relationship is applied:• Cash flow hedge – a hedge of the exposure to variability in cashflows that is attributable to a particular risk associated with arecognised asset or liability or a highly probable forecast transactionand that could affect profit or loss.• Fair value hedge – a hedge of exposure to changes in fair valueof a recognised asset or liability or an unrecognised firm commitment,or an identified portion of such an asset, liability or firmcommitment, that is attributable to a particular risk and couldaffect profit or loss.There is no initial measurement of the hedging instrument.If the hedge meets the conditions to qualify for hedge accounting,cash flow hedge is subsequently accounted for at fair value with effectiveportion of changes recognised in equity and ineffective portionto the income statement.Fair value hedge of the hedging instrument is subsequently accountedfor at fair value with changes in fair value recognised in the incomestatement.Fair value hedge of the hedged item is subsequently accounted for atfair value in respect of the hedged risk, and any adjustments to thecarrying amount are recognised in the income statement.Hedge accounting is discontinued prospectively if any one of thefollowing occurs;• The hedging instrument expires or is sold, terminated orexercised;• The forecast transaction is no longer expected to occur;• The hedge no longer meets the conditions for hedge accounting;and• The company revokes the designation.18. ENVIRONMENTAL OBLIGATIONSLong-term environmental obligations are based on the Group’senvironmental management plans, in compliance with currentenvironmental and regulatory requirements.Full provision is made based on the net present value of the estimatedcost of restoring the environmental disturbance that has occurred upto the balance sheet date. Increases due to additional environmentaldisturbances are capitalised and amortised over the remaining lifeof the mine.Annual increases in the provision relating to change in the netpresent value of the provision and inflationary increases are shownseparately in the income statement.The estimated costs of rehabilitation are reviewed on a three yearlybasis, and adjusted as appropriate for changes in legislation ortechnology. Cost estimates are not reduced by the potential proceedsfrom the sale of assets, or from planned clean up at closure, in viewof the uncertainty of estimating the potential future proceeds.Contributions are made to a dedicated Rehabilitation Trust Fund tofund the estimated cost of rehabilitation during and at the end of thelife of the mine.19. DIVIDENDSDividends are recorded in the Group’s financial statements in theperiod in which they are approved by the Group’s shareholders.20. CASH AND CASH EQUIVALENTSCash and cash equivalents are defined as cash on hand, deposits heldon call with banks and short term liquid investments with insignificantinterest rate risk and original maturities of three months or less.Cash and cash equivalents are measured at fair value based on therelevant exchange rate at balance sheet date.21. BORROWINGSBorrowings are recognised initially at fair value, net of transactioncosts incurred. Borrowings are subsequently stated at amortisedcost; any difference between the proceeds (net of transactioncosts) and the redemption value is recognised in the incomestatement over the period of the borrowings using the effectiveinterest method.Borrowings are classified as current liabilities unless the Grouphas an unconditional right to defer settlement of the liability for atleast 12 months after the balance sheet date.22. PRESENTATIONWhere necessary, comparative figures have been adjusted to conformto changes in presentation in the current year.23. TRANSITION TO IFRS23.1 Basis of transition to IFRSApplication of IFRS 1The Group’s financial statements for the year ended 31March 2006 will be the first Annual Financial Statementsthat comply with IFRS. As described in Note 1, the Grouphas applied IFRS 1 in preparing these consolidated AnnualFinancial Statements.Foskor’s transition date is 1 July 2004. The Group preparedits opening IFRS balance sheet at that date. The reportingdate of these consolidated Annual Financial Statements is31 March 2006. The Group’s IFRS adoption date is 1 April2005.In preparing these consolidated Annual Financial Statementsin accordance with IFRS 1, the Group has applied themandatory exception and some of the optional exemptionsfrom full retrospective application of IFRS.Early adoption of IFRIC 4IFRIC 4, determining whether an Arrangement contains aLease, is effective for annual periods commencing on or after01 January 2006, and has been early adopted by the Group.The early application of this Interpretation by the Groupresulted in the recognition of a finance lease asset and liabilityrelating to the pipeline currently in use at Foskor RichardsBay. More detail on the financial impact of this finance leaseis included in Note 16 to the financial statements.23.1.2 Exemption from full retrospective application – elected bythe GroupBusiness combinations exemptionThe Group has applied the business combination exemptionin IFRS 1. It has not restated combinations that took placeprior to the transition date (1 July 2004) and therefore thecarrying amount of goodwill of the opening IFRS balancesheet is the carrying amount of goodwill under previous SAGAAP, after adjustments necessary to reflect any impairmentlosses in respect of goodwill at the date of transition.Fair value deemed cost exemptionThe Group has elected to use the exemption available in IFRS1, First Time Adoption of International Financial ReportingStandards, to measure items of Property, Plant and Equipmentat the date of transition (01 July 2004) to IFRS, deeming thedepreciated cost of an asset to be its fair value. The applicationof this exception is detailed in Note 23.2.228
23.2 RECONCILIATIONS BETWEEN IFRS AND SA GAAPThe following reconciliations provide quantification of the effect of the transition to IFRS. The first reconciliation providesan overview of the impact on equity of the transition at 1 July 2004, 31 March 2005 and 31 March 2006. The followingfive reconciliations provide details of the impact of the transition on:– equity at 31 March 2005 (Note 23.2.2 )– net income 31 March 2005 (Note 23.2.3)– equity at 31 March 2006 (Note 23.2.4)– net income 31 March 2006 (Note 23.2.5)– cash flow 31 March 2006 (Note 23.2.6)23.2.1 Summary of equityR’000 31-Mar-05 Note 31-Mar-06 NoteTotal equity under SA GAAP 864,435 23.2.2 922,024 23.2.4Restatement of accumulated depreciationdepreciation to reflect PPE’s useful livesrather than their tax lives. 44,314 23.2.2 102,617 23.2.4Recognition of finance lease againstPPE using guidance set out in IFRIC 4. – 23.2.2 940 23.2.4Total equity under IFRS 908,749 1,025,58123.2.2 Reconciliation of equityas at 31 March 2005Effect oftransitionR’000 Note SA GAAP to IFRS IFRSASSETSProperty, plant and equipment 23.2.2.1 1,614,225 84,322 1,698,547Ore stockpiling 65,619 – 65,619Intangible assets 29,919 – 29,919Investment in joint venture 25 – 25Available for sale investments 40,933 – 40,933Non–current receivables 1,066 – 1,066Non–current assets 1,751,787 84,322 1,836,109Inventory 470,404 – 470,404Ore stockpile short-term 12,134 – 12,134Prepaid taxation 3,880 – 3,880Receivables and prepayments 444,270 – 444,270Bank and cash balances 335,244 – 335,244Current assets 1,265,932 – 1,265,932Total assets 3,017,719 84,322 3,102,041EQUITY AND LIABILITIESShare capital 7,784 – 7,784Retained earnings 23.2.2.3 874,874 44,314 919,188Fair value reserve (18,223) – (18,223)Shareholders’ equity 864,435 44,314 908,749Shareholders’ loan 1,450,000 – 1,450,000Total shareholders’ interest 2,314,435 44,314 2,358,749Non–interest–bearing borrowings 12,800 – 12,800Finance lease liability 23.2.2.2 – 36,989 36,989Environmental rehabilitation liability 152,442 – 152,442Post–employment liability 136,375 – 136,375Deferred tax liabilities – – –Non–current liabilities 301,617 36,989 338,606Trade and other payables 365,471 – 365,471Provisions 16,538 – 16,538Finance lease liability 23.2.2.2 – 3,019 3,019Current tax liability 19,658 – 19,658Current liabilities 401,667 3,019 404,686Total equity and liabilities 3,017,719 84,322 3,102,04129
Page 2 and 3: MISSION• We accept our responsibi
Page 4 and 5: DIRECTORS AND MANAGEMENTList of Dir
Page 6 and 7: CHAIRMAN’S REVIEWOur focus is ong
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Page 18 and 19: AUDITORS’ REPORTIndependent audit
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Page 22 and 23: BALANCE SHEETas at 31 March 2006COM
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Page 26 and 27: PRINCIPAL ACCOUNTING POLICIESThe pr
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Page 56 and 57: FIVE YEAR REVIEWFoskor GroupAnnuali
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Page 60: ADMINISTRATIONSECRETARY AND REGISTE

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