Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. Unless otherwise stated, these policies have been consistently applied to all the years presented. The financial statements are presented in South African Rands (“R”), rounded to the nearest thousand.

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS); its interpretations adopted by the International Accounting Standards Board, and the Companies Act of 1973 and the PFMA as amended. These financial statements have been prepared on the historical-cost basis, except for certain financial instruments, such as trading liabilities and derivative financial instruments, which are stated at fair value and incorporate the principal accounting policies set out below.

The preparation of financial statements that conform to IFRS, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge at the time, actual amounts may ultimately be different from these estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 10.

These accounting policies are consistent with the previous period.

• it is probable that future economic benefits associated with the item will flow to the Company; and
  
• the cost of the item can be measured reliably.

The residual value and the useful life of each asset are reviewed at each financial period-end.

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset.

• it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
  
• the cost of the asset can be measured reliably.

Costs associated with the acquisition of computer software licences, which are not directly related to the research and development activities of PBMR, are capitalised. These computer software licences have a finite useful life and are amortised on a straight-line basis over the periods of the expected benefit.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

Amortisation is provided to write down the intangible assets, on a straight-line basis, to their residual values as follows:

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when:

• it is technically feasible to complete the asset so that it will be available for use or sale;
  
• there is an intention to complete and use or sell it;
  
• there is an ability to use or sell it;
  
• it will generate probable future economic benefits;
  
• there are available technical, financial and other resources to complete the development and to use or sell the asset;
  
• the expenditure attributable to the asset during its development can be measured reliably; and
  
• no development expenditure was recognised as intangible assets during the reporting period.

Exposure to credit, interest rate and currency risks arises in the normal course of the Company’s business. Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates.

The Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company becomes party to the contractual provisions of the instrument.

The Company uses derivative financial instruments to hedge its exposure to foreign exchange. It is Company policy to hedge all foreign firm and ascertained commitments exceeding R50 000. A firm and ascertained commitment exists once the successful supplier and PBMR have signed a contract and the amount, cash flow/s and payment date/s are determinable. The Company does not hold or issue derivative financial instruments for trading purposes. Derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, they are stated at fair value. Changes in the fair value of derivative financial instruments are recognised in surplus or deficit as they arise. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

• the Company has a present obligation as a result of a past event;
  
• it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
  
• a reliable estimate can be made of the obligation.

A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At each balance sheet date:

• foreign currency monetary items are translated using the closing rate;
  
• non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and
  
• non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.