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BLUE LABEL INTEGRATED ANNUAL REPORT 2014
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
CONTINUED
For the year ended 31 May 2014
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Starter pack assets
A starter pack is a tool which enables the connection of a mobile device to a mobile network operator, also
known as a SIM (subscriber identity module) card.
The starter pack asset represents starter packs which have been distributed but not yet activated. On
activation of the starter pack, the Group has a right to receive cash. Starter packs are stated at cost less
provision for impairment and are determined by means of the weighted average cost basis. Provision for
impairments are made for starter packs distributed but not expected to be activated.
Inventories
Inventories are stated at the lower of cost or estimated net realisable value. Cost comprises direct materials
and, where applicable, overheads that have been incurred in bringing the inventories to their present
location and condition, excluding borrowing costs. The cost of inventory is determined by means of the
weighted average cost basis. Net realisable value is the estimate of the selling price in the ordinary course of
business, less selling expenses. Provisions are made for obsolete, unusable and unsaleable inventory and for
latent damage first revealed when inventory items are taken into use or offered for sale.
Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary
course of business. If collection is expected in the normal operating cycle of the business, they are classified
as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest rate method, less provision for impairment. A provision for impairment of trade receivables
is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of receivables. The amount of the provision is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate. The amount of the provision is recognised in the statement of comprehensive income.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less, and bank overdrafts.
Share capital
Ordinary shares are classified as equity and the shares are fully paid up.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Share issue costs incurred directly in connection with a business
combination are shown as a deduction from equity.
Shares acquired by Blue Label Telecoms for its own employees’ equity compensation benefit scheme, as well
as the shares procured by the subsidiaries in terms of this scheme, are accounted for as treasury shares in the
Group statement of financial position.