Annual Report for the year ended 30 June 2009
   
 
   
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Accounting policies  
     
 

GENERAL INFORMATION

Aspen Pharmacare Holdings Ltd is the holding company of the Group and is domiciled and incorporated in the Republic of South Africa.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. Except as otherwise disclosed, these policies are consistent in all material respects with those applied in previous years.

Financial reporting terms

These definitions of financial reporting terms are provided to ensure clarity of meaning as certain terms may not always have the same meaning or interpretation in all countries.

Group structures

Associate: An entity in which the Group has significant influence, but not control or joint control, over financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.

Company: A legal business entity registered in terms of the applicable legislation of that country.

Entity: Aspen Pharmacare Holdings Ltd or a subsidiary, joint venture, associate or special purpose entity within the Group. Foreign operation: An entity whose activities are based or conducted in a country or currency other than that of the reporting entity (Aspen Pharmacare Holdings Ltd).

Group: The Group comprises Aspen Pharmacare Holdings Ltd, its subsidiaries and its interest in joint ventures, associates and special purpose entities.

Joint venture: An economic activity over which the Group exercises joint control established under a contractual arrangement.

Operation: A component of a Group

  • that represents a separate major line of business or geographical area of operation; and
  • is distinguished separately for financial and operating purposes.

Subsidiary: Any entity over which the Group has the power to exercise control. This is usually accompanied by a shareholding of more than one half of the voting rights.

Special purpose entity (“SPE”): An entity established to accomplish a narrow and well defined objective. At this stage limited to the share trusts. An SPE is consolidated when the substance of the relationship between the entity and the SPE indicates that the SPE is controlled by that entity.

General accounting terms

Acquisition date: The date on which control in subsidiaries, special purpose entities, joint ventures and significant influence in associates commences.

Assets under construction: A non-current asset which includes expenditure capitalised for work-in-progress in respect of activities to develop, expand or enhance items of property, plant and equipment and intangible assets.

Cash-generating unit: The smallest identifiable group of assets which can generate cash inflows independently from other assets or groups of assets.

Control: The ability, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities. When assessing the ability to control an entity, the existence and effect of potential voting rights that are presently exercisable or convertible are taken into account.

Discontinued operation: An operation that, pursuant to a single plan, has been disposed of or abandoned or is classified as an operation held-for-sale.

Disposal date: The date on which control of subsidiaries and special purpose entities, joint control in joint ventures and significant influence in associates ceases.

Financial results: Comprise the financial position (assets, liabilities and equity), results of operations (income and expenses) and cash flows of an entity and of the Group.

Functional currency: The currency of the primary economic environment in which the entity operates.

Non-current: A period longer than 12 months from reporting date.

Other comprehensive income: Comprises items of income and expense (including reclassification adjustments) that are not recognised in the income statement and includes the effect of translation of foreign operations, cash flow hedges and changes in revaluation reserves.

Presentation currency: The currency in which financial results of an entity are presented.

Qualifying asset: An asset that necessarily takes a substantial period of time (normally in excess of 12 months) to get ready for its intended use or sale.

Recoverable amount: The amount that reflects the greater of the asset’s fair value less costs to sell and value-in-use that can be attributed to an asset as a result of its ongoing use by the entity. In determining the value-in-use, expected future cash flows are discounted to their present values using the discount rate.

Revenue: Comprises turnover with dividends received and interest received included in investment income.

Share-based payment transaction: A transaction in which the entity receives goods or services as consideration for equity instruments of the entity (including share options and appreciation rights), or acquires goods or services by incurring liabilities to the supplier of those goods or services for amounts that are based on the price of the entity’s shares or other equity instruments of the entity.

Significant influence: The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decisions of an entity so as to obtain economic benefit from its activities.

Turnover: Comprises revenue generated by operating activities and includes sales of products, services rendered, licence fees and royalties net of indirect taxes, rebates and trade discounts.

Financial instrument terms

Cash and cash equivalents: Comprise cash-on-hand, demand deposits and other short-term highly liquid investments readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. These investments typically have a maturity period of three months or less at the date of purchase.

Cash flow hedge: A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction, and could affect profit or loss.

Derivative instrument: A financial instrument

  • whose value changes in response to changes in a specified interest rate, commodity price, foreign exchange rate or similar variable (the ‘underlying’) provided that in the case of a non-financial variable that variable is not specific to a party to the contract;
  • that requires minimal initial net investment; and
  • whose terms require or permit settlement at a future date.

Equity instrument: Any contract (including investments) that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Financial asset: Cash and cash equivalents, a contractual right to receive cash, an equity instrument of another entity or a right to exchange a financial instrument under favourable conditions. A contract that may be settled in the entity’s own equity instruments other than by an exchange of a fixed amount of cash for a fixed number of the entity’s own equity instruments.

Financial liability: A contractual obligation to deliver cash or an obligation to exchange a financial instrument under unfavourable conditions or a contract that may be settled in the entity’s own equity instruments other than by an exchange of a fixed amount of cash for a fixed number of the entities own equity instruments. This includes debt.

Financial guarantee contract: A contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of the debt instrument.

Loans and receivables: A non-derivative financial asset with fixed or determinable repayments that are not quoted in an active market, other than those that the entity intends to sell in the near term which shall be classified as held for trading.

Monetary item: A unit of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.

Transaction date: The date an entity commits itself to purchase or sell a financial instrument.

 
     
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