2. NEW STANDARDS AND INTERPRETATIONS
 
2.1 Adoption of new standards, amendments to standards and interpretations
 

The Group has adopted IFRS 16, COVID-19-related rent concessions – Amendments to IFRS 16 and IFRIC 23 – Uncertainty over Income Tax Treatments ('IFRIC 23'), as issued by the IASB, with effect from 1 August 2019.

IFRS 16

The Group has adopted IFRS 16 retrospectively from 1 August 2019 but has not restated comparatives for the 2019 reporting period, as permitted under the standard's transitional provisions. The impact arising from the new leasing rules are therefore recognised in the opening statement of financial position on 1 August 2019. The new accounting policies are disclosed in note 1.5.

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 – Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 August 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 August 2019 was 9.3%.

Right-of-use assets were measured at the amount of the lease liability on adoption.

For leases previously classified as finance leases, the Group recognised the carrying amount of the lease asset and lease liability as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

  • applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
  • relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review – there were no onerous contracts as at 1 August 2019;
  • accounting for operating leases with a remaining lease term of less than 12 months as at 1 August 2019 as short-term leases;
  • excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
  • using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Group has also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 – Determining whether an Arrangement contains a Lease.

Operating lease commitments disclosed as at 31 July 2019 amounted to R414 million. On adoption of IFRS 16, these existing operating lease commitments, excluding short-term and low-value commitments, have now been recognised as right-of-use assets and obligations to make lease payments in the statement of financial position. This has resulted in an increase in current and non-current liabilities, and a corresponding increase in non-current assets of R367 million as at 1 August 2019. The total adjustment to retained earnings as at 1 August 2019, due to previously recognised operating lease straight-lining reserves at 31 July 2019, was R30 million.

COVID-19-related rent concessions – Amendments to IFRS 16

As a result of the COVID-19 pandemic rent concessions were granted to the Group in the form of payment holidays and deferral of lease of payments for a period of time, followed by increased rent payments in future periods. The Group has not made use of the optional exemption from assessing whether a rent concession related to COVID-19 is a lease modification and accordingly, the modification guidance within IFRS 16 was applied to such rent concessions.

IFRIC 23

IFRIC 23 and the IFRIC agenda decision in relation to the presentation of liabilities or assets related to uncertain tax treatments in September 2019 respectively clarifies the application of the recognition and measurement requirements in IAS 12 – Income Taxes and the presentation requirements in IAS 1 – Presentation of Financial Statements when there is uncertainty over income tax treatments.

No additional current or deferred tax liabilities were recognised as a result of IFRIC 23, nor were there any reclassification of previously recognised amounts.
2.1 Standards issued but not yet effective
  Certain new accounting standards and interpretations have been published that are not effective for 31 July 2020 reporting periods. These standards are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.
2.3 Standards and interpretations early adopted
  The Group has chosen not to early adopt any new standards or interpretations.