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Zimplow 2011 annual report

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Zimplow 2011 annual report

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Zimplow 2011 annual report

  1. 1. Z I M P L O W A N N U A L R E P O R T
  2. 2. Mission, Vision and Core ValuesMISSIONTo avail quality, affordable and reliable steel products on time everytime to the mining, farming,construction and manufacturing sectors.VISIONTo be a market leader in the design, sourcing and distribution of at least one of our products in eightcountries south of the Sahara for all our products by 2020.CORE VALUESIntegrityBeing absolutely truthful and accepting responsibility for our actions.QualityBeing professional and quality oriented in everything we do.TeamworkWorking together to achieve a common goal.DependabilityOur customers, employees and suppliers must be able to count on us.FunEmbracing a positive attitude and spontaineity. Zimplow Limited « ii » 2011 Annual Report
  3. 3. Contents 2 Directorship and Administration 3 Notice to Shareholders 4 Chairman’s Review 5 Report of The Directors 6 Corporate Governance 7 Financial Highlights 8 Independent Auditor’s Report 10 Consolidated Statement of Comprehensive Income 11 Consolidated Statement of Financial Position 12 Consolidated Statement of Changes In Equity 13 Consolidated Statement of Cash Flows 14 Notes to the Financial Statements 54 Consolidated Statement of Value Added 55 Shareholders’ Analysis 56 Financial Review 2011 57 Financial Calendar Zimplow Limited «1» 2011 Annual Report
  4. 4. Directorship and Administration DIRECTORS: P Devenish Z Kumwenda* A Kurauone B Mitchell* D Mkonto* E Mlambo T Moyo N Nhira Z L Rusike (Chairman) F Rwakonda* (Appointed 22 August 2011) * Executive GROUP SECRETARY: D Mkonto TRANSFER SECRETARIES: Corpserve (Private) Limited Cnr 1st Street / Union Avenue, Harare AUDIT COMMITTEE: A Kurauone (Chairman) T Moyo N Nhira REMUNERATION COMMITTEE: Z L Rusike (Chairman) P Devenish E Mlambo EXECUTIVE COMMITTEE: Z Kumwenda B Mitchell D Mkonto F Rwakonda REGISTERED OFFICE: 39 Steelworks Road, Heavy Industrial Sites, PO Box 1059, Bulawayo AUDITORS: Ernst & Young Derry House, 6th Avenue / Fife Street, Bulawayo BANKERS: African Banking Corporation Limited Barclays Bank of Zimbabwe Limited Kingdom Bank Limited Merchant Bank of Central Africa Limited National Merchant Bank Limited CURRENCY OF FINANCIAL STATEMENTS: United States Dollars PERIOD OF FINANCIAL STATEMENTS: Year ended 31 December 2011 Zimplow Limited «2» 2011 Annual Report
  5. 5. Notice to ShareholdersSIXTH SECOND ANNUAL GENERAL MEETINGNotice is hereby given that the Sixth second Annual General Meeting of shareholders will be held at the CT Bolts DivisionOffice, Falcon Street and Wanderer Road, Bulawayo on 28 March 2012 at 10:00 hours to transact the following business:AGENDAOrdinary Business 1. To approve the minutes of the Annual General Meeting held on 30 March 2011. 2. To receive and adopt the directors’ report and audited financial statements for the year ended 31 December 2011. 3. To elect directors Mr F. Rwakonda, who retire from office in accordance with the Group’s Articles of Association , and Mr Z Kumwenda and Mrs D Mkonto who retire from office by rotation. All being available, they offer themselves for re-election. 4. To approve the payment of final dividend number 68 of 0.27 United States cents per share proposed on 22 February 2012. 5. To approve the remuneration of directors for the year ended 31 December 2011. 6. To fix the auditors’ remuneration for the year ended 31 December 2011. 7. To appoint auditors for the financial year ending 31 December 2012.BY ORDER OF THE BOARDD MKONTOCompany Secretary39 Steelworks RoadP.O. Box 1059BULAWAYO22 February 2012A member entitled to attend and vote is entitled to appoint one or more proxies to act in the alternative and to attend andvote and speak in his stead. Such proxy need not be a member of the Group. Proxy forms must be lodged at the registeredoffice of the Group not less than forty-eight hours before the time of the meeting. Zimplow Limited «3» 2011 Annual Report
  6. 6. Chairman’s ReviewINTRODUCTION Zimplow net income before tax for the twelve monthsThe much anticipated upturn in the economy for 2011 fiz- ended 31 December 2011 was US$3, 64 million as com-zled out particularly in the second half of the year. Liquid- pared to net income before tax for the 12 months to 31 De-ity challenges which intensified towards the end of 2011 cember 2010 of US$2, 92 million. This represents a 24%and local cost increases, led by electricity tariffs worsened increase. The effective tax rate for the year under reviewthe situation. was 25% compared to 20% in 2010 and this resulted in attributable profit of US$2,73 million for the year ended 31In spite of these and other challenges, the Company man- December 2011 as compared to attributable income afteraged to grow both volumes and profit in the face of serious tax of US$2,34 million for 2010.pressures on margins. I am delighted as your chairman toreport and comment on a pleasing set of results for the 12 Net cash flow from operating activities decreased frommonths ended 31 December 2011. US$2, 2 million in 2010 to US$1, 8 million for the 12 months ended December 31 2011. The decrease wasOPERATIONS mainly due to an advance corporation tax payment ofMealie Brand volumes for the 12 months ended 31 De- US$443 thousand dollars.cember 2011 increased by 27% to 74 thousand imple-ments, as compared with 59 thousand implements for the PROSPECTS12 months ended 31 December 2010. Spare parts vol- The year 2012 is expected to exert more cost pressuresumes decreased by 11% in 2011 when compared to 2010. that will be brought about by huge wage demands. The full impact of electricity tariff increases by the ZimbabweC.T. Bolts mild steel volume sales increased by 15% for Electricity Supply Authority of 51% and increases in allthe 12 months ended 31 December 2011 to 146 tonnes utilities will be fully felt in 2012. Additionally, the rainfallas compared with 127 tonnes for the 12 months ended patterns in the region have been erratic.The Group is still31 December 2010. Mild steel bolts in units increased by pursuing its growth strategies aimed at improving local and34% in 2011 while high tensile bolts in units substantially regional competitiveness.increased by 87% in 2011 as compared to the same periodin 2010. ACKNOWLEDGEMENTS My appreciation goes to fellow Board members for theTassburg volume sales increased by 47% to 107 tonnes clarity of direction they continue to offer to the business.for the 12 months ended 31 December 2011 as compared The CEO, management and employees deserve credit forto 73 tonnes for the same period in 2010. achieving yet another commendable set of results.On 1 March 2011 the company acquired 49% of a SouthAfrican animal traction distribution company – African Trac-tion and Associated Technologies(AFRITRAC), the resultsof which have been consolidated. The subsidiary contrib-uted US$1.5 million to turnover and $145 thousand dollars Z L Rusiketo income before tax, over a ten month period. Chairman 22 February 2012FINANCIAL REVIEWGroup Revenue for the 12 months ended December 31,2011 increased by 26% to US15.5 million as comparedto US$12, 3 million for the same period in 2010. Thisincrease was due to improved local market as well asadditional revenue from the new acquisition. Domesticrevenue increased by 30% while foreign revenue improvedby 17%. Zimplow Limited «4» 2011 Annual Report
  7. 7. Report of the DirectorsYour directors’ report on the operations of Zimplow Limited for the year ended 31 December 2011 is as follows:PROFIT AND APPROPRIATIONThe profit and relative appropriations are as follows: 31 December 2011 31 December 2010 US$ US$Profit for the year 2 730 282 2 342 001Equity dividend proposed/paid (686 851) (700 000)Retained earnings brought forward 4 171 468 1 829 467Retained earnings carried forward 6 214 899 4 171 468DIVIDENDA final dividend number 68 of 0.27 United States cents (2010-0.21 United States cents) per share was proposed on 22February 2012.SHARE CAPITALThe unissued ordinary shares of 163 722 372 have been placed under the control of the directors, in terms ofExtraordinary General Meetings of Members held on 30 August 1989, 10 November 2004, 16 November2005 and 14 November 2007. PROPERTY, PLANT AND EQUIPMENTCapital expenditure for the year ended 31 December 2011 totalled US$ 510 762. Capitalcommitments for the year to 31 December 2012 amount to US$ 326 560.DIRECTORATEThe names of the directors and secretary are those in office at the time of the printing of thisNotice (22 February 2012).AUDITORSMessrs Ernst & Young remain in office until the conclusion of the Annual General Meeting on 28 March2012, at which members will be asked to fix their remuneration for the year under review and to appoint theauditors for the ensuing year. Messrs Ernst & Young have indicated their willingness to continue in office.For and on behalf of the BoardChairman Chief Executive OfficerZ. Rusike Z. Kumwenda Zimplow Limited «5» 2011 Annual Report
  8. 8. Corporate GovernanceBOARD OF DIRECTORSThe board of directors consists of a non-executive chairman, four executive directors and six non-executive directors. Thechairman of the various committees are all non-executive directors. The board meets regularly to review results, dictatepolicy, formulate overall strategy and approve the budgets. They have introduced structures of corporate governance,certain functions and responsibilities have been delegated to the following committees. Their terms of reference andcomposition are regularly reviewed.AUDIT COMMITTEEThe audit committee liaises with the Group’s external auditors. The external auditors have unrestricted access to theaudit committee. The annual, half yearly statements and financial reporting matters are reviewed by the committee atappropriate intervals.REMUNERATION COMMITTEEThis committee sets the remuneration of the executive directors and approves guidelines for the Group’s pay reviews.EXECUTIVE COMMITTEEThe executive committee sits between board meetings to deliberate and consider detailed operational issues of the Groupwhich includes strategy implementation.DIRECTORS’ RESPONSIBILITY STATEMENTThe directors are responsible for: 1. Selecting appropriate accounting policies and applying them consistently. 2. Making judgements and estimates that are both reasonable and prudent. 3. Stating whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial statements. 4. Preparing the financial statements on a “going concern” basis unless it is inappropriate to presume that the Group will continue in business. 5. Safeguarding the assets of the Group and taking reasonable steps for the prevention and detection of fraud and other irregularities. 6. Keeping proper accounting records. Zimplow Limited «6» 2011 Annual Report
  9. 9. Financial Highlights Year Ended Year Ended 31 December 2011 31 December 2010 US$ US$ Turnover 15 503 306 12 298 300Profit before taxation 3 635 273 2 922 253Profit after taxation 2 730 282 2 342 001Total assets 16 745 397 13 493 652Market capitalisation 26 902 210 21 913 886Ordinary Share Performance (US$ per share) (US$ per share)Basic earnings 0.01 0.01Operating cash flow 0.01 0.01Weighted average number of shares 334 743 344 327 071 924 Zimplow Limited «7» 2011 Annual Report
  10. 10. Independent Auditor’s Report Chartered Accountants (Zimbabwe) Derry House Cnr Fife Street/6th Avenue P.O. Box 437, Bulawayo Tel: +263 9 76111 Fax: +263 9 72359REPORT OF THE INDEPENDENT AUDITORSTo the members ofZIMPLOW LIMITEDREPORT ON THE FINANCIAL STATEMENTSWe have audited the accompanying consolidated financial statements of Zimplow Limited set out on pages 10 to 53,which comprise the consolidated statement of financial position as at 31 December 2011, the consolidated statement ofcomprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows forthe year then ended, the notes to the financial statements which include a summary of significant accounting policies andother explanatory information.DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe Group’s directors are responsible for the preparation and fair presentation of these financial statements in accordancewith International Financial Reporting Standards (IFRS) and in the manner required by the Companies Act (Chapter 24:03)and the relevant statutory instruments (SI 33/99 and SI 62/96) and for such internal control as the directors determineis necessary to enable the preparation of financial statements that are free from material misstatement, whether due tofraud or error.AUDITORS’ RESPONSIBILITYOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conductedour audit in accordance with International Standards on Auditing. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree from material misstatement.BASIS OF OPINIONAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of materialmisstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of the financial statements in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentationof the financial statements. Zimplow Limited «8» 2011 Annual Report
  11. 11. Independent Auditor’s Report continuedWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.AUDIT OPINIONIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position ofZimplow Limited as at 31 December 2011, and its financial performance and its cash flows for the year then ended inaccordance with International Financial Reporting Standards.Report on other legal and regulatory requirementsIn our opinion, the financial statements have, in all material respects, been properly prepared in compliance with thedisclosure requirements of the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and SI62/96).Registered Public AuditorsBulawayo28 February 2012 Zimplow Limited «9» 2011 Annual Report
  12. 12. Consolidated Statement of Comprehensive Incomefor the year ended 31 December 2011 Notes Year Ended Year Ended 31 Dec 2011 31 Dec 2010 US$ US$TURNOVER 15 503 306 12 298 300Domestic 11 235 468 8 635 365Export 4 267 838 3 662 935Cost of sales (8 737 971) (6 801 772)Gross profit 6 765 335 5 496 528Net operating expenses (3 300 806) (2 720 466)Operating profit 3 3 464 529 2 776 062Finance income 249 237 161 049Finance costs (78 493) (14 858)Profit before taxation 3 635 273 2 922 253Income tax expense 6.1 (904 991) (580 252)Profit for the year 2 730 282 2 342 001Other comprehensive income :Fair value (loss)/gain on availablefor sale financial assets (29 752) 124Exchange differences on translating foreign operations (135 147) - Income tax relating to components of othercomprehensive income. 6.1 4 546 (19) Other comprehensive (loss)/income for the year, net of tax (160 353) 105Total comprehensive income for the year 2 569 929 2 342 106 Profit attributable to: Owners of the parent 2 677 328 2 342 001 Non-controlling interests 52 954 - 2 730 282 2 342 001 Total comprehensive income attributable to: Owners of the parent 2 583 057 2 342 106 Non-controlling interests (13 128) - 2 569 929 2 342 106 Earnings per share ($) Basic 22 0.01 0.01 Diluted 22 0.01 0.01 Zimplow Limited « 10 » 2011 Annual Report
  13. 13. Consolidated Statement of Financial Positionas at 31 December 2011 Notes 31 Dec 2011 31 Dec 2010 31 Dec 2009 US$ US$ US$EQUITY AND LIABILITIESIssued share capital and reserves 5.1 7 621 223 7 068 881 7 066 581Share based payment reserve 18.1 (65 400) - -Available for sale reserve 76 496 101 702 101 597 Foreign currency translation reserve 18.2 (69 065) - -Retained earnings 6 161 945 4 171 468 1 829 467Equity attributable to owners of the parent 13 725 199 11 342 051 8 997 645 Non-controlling interests 19 512 633 - - Total equity 14 237 832 11 342 051 8 997 645 Non Current LiabilitiesDeferred tax liability 6.3 621 484 599 833 618 860Current LiabilitiesTrade and other payables 12.1 1 171 111 804 488 980 708Provisions 12.2 378 982 378 421 140 627Current tax liabilities 335 988 368 859 232 912 1 886 081 1 551 768 1 354 247TOTAL EQUITY AND LIABILITIES 16 745 397 13 493 652 10 970 752ASSETSNon Current AssetsProperty, plant and equipment 7 2 863 605 2 667 362 2 668 756Available for sale financial assets 8 147 976 177 728 177 604 Goodwill 9 41 625 - - 3 053 206 2 845 090 2 846 360Current AssetsInventories 10 7 057 950 5 372 463 5 829 151Trade and other receivables 11 2 686 329 2 242 511 1 163 878Other current assets - - 91 412Cash and bank balances 13 3 947 912 3 033 588 1 039 951 13 692 191 10 648 562 8 124 392TOTAL ASSETS 16 745 397 13 493 652 10 970 752Chairman Chief Executive OfficerZ L Rusike Z. Kumwenda22 February 2012 Zimplow Limited « 11 » 2011 Annual Report
  14. 14. Consolidated Statement of Changes in Equity for the year ended 31 December 2011 Share Capital Share Available for Foreign Currency Retained Share Based Attributable Non Total Capital Reserve Premium sale reserve Translation earnings Payment to owners of Controlling Reserve Reserve the Parent Interest US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ Balance at 1 January 2009 – 7 066 581 – - – - - 7 066 581 – 7 066 581 Payment of dividend – – – – – (392 486) - (392 486) – (392 486) Profit for the year – – – – 2 221 953 - 2 221 953 – 2 221 953 Other comprehensive income for the year – – – 101 597 – - - 101 597 – 101 597 Balance at 31 December 2009 – 7 066 581 – 101 597 – 1 829 467 - 8 997 645 – 8 997 645 Re-denomination of share capital 32 707 (32 707) – - – - – - – -Zimplow Limited Adjustment* – 2 300 – – – - - 2 300 – 2 300 Payment of dividend – – – – – - - - – - Profit for the year – – – – 2 342 001 - 2 342 001 – 2 342 001« 12 » Other comprehensive income for the year – – – 105 – - - 105 – 105 Balance at 31 December 2010 32 707 7 036 174 – 101 702 – 4 171 468 - 11 342 051 – 11 342 051 Profit for the year – – – – – 2 677 328 - 2 677 328 52 954 2 730 282 Payment of dividend – – – – – (686 851) - (686 851) – (686 851) Share based payment transaction(note 17.1) – – – – – – (65 400) (65 400) – (65 400) Issue of Ordinary Shares on2011 Annual Report acquistion of Afritrac(note 20) 9 – 552 333 – – – - 552 342 – 552 342 Non Controlling Interest arising from acqusition of Afritrac(note 20.4) – – – – – – – - 525 761 525 761 Other comprehensive income; Effects of foreign currency translation – – – (69 065) – - (69 065) (66 082) (135 147) Fair value loss on AFS financial asset – – – (25 206) – - - (25 206) – (25 206) Balance at 31 December 2011 32 716 7 036 174 552 333 76 496 (69 065) 6 161 945 (65 400) 13 725 199 512 633 14 237 832 * Being deemed cost adjustment to Tassburg assets that were identified on the consolidation of the fixed asset register.
  15. 15. Consolidated Statement of Cashflowsfor the year ended 31 December 2011 Notes Year Ended Year Ended 31 Dec 2011 31 Dec 2010 US$ US$CASH FLOWS FROM OPERATING ACTIVITIESOperating profit before dividends, interest,taxation and exchange gains/losses 3 464 529 2 776 062Adjustment for non cash items:Depreciation and amortisation of non current assets 302 328 271 230Income recognised in respect of share option scheme (65 400) - Profit on disposal of property, plant and equipment (15 917) (40 594)Operating income before working capital changes 3 685 540 3 006 698(Increase)/decrease in inventories (1 026 982) 456 689Increase in trade and other receivables (171 043) (1 094 022)Increase in trade and other payables 101 632 168 372Cash generated by operating activities 2 589 147 2 537 737Finance income received 249 237 161 049Finance costs paid (78 493) (14 858)Taxation paid (910 078) (463 349)Net cash flows from operating activities 1 849 813 2 220 579CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment (510 762) (282 984)Proceeds on disposal of property,plant and equipment 38 207 56 042Net cash inflow on acquisition of subsidiary 20.6 355 919 -Net cash invested (116 636) (226 942)CASH FLOWS FROM FINANCING ACTIVITIESDividend paid to owners of the company (686 851) -Increase in cash and cash equivalents 1 046 326 1 993 637Cash and cash equivalents at 1 January 2011 3 033 588 1 039 951 Effects of exchange rates on the balance of cash held in foreign operations (132 002) -Cash and cash equivalents at 31 December 2011 3 947 912 3 033 588Operating cashflow per share (US$) 0.01 0.01 Zimplow Limited « 13 » 2011 Annual Report
  16. 16. Notes to the Financial Statementsfor the year ended 31 December 20111. Corporate informationThe financial statements for the reporting period ended 31 December 2011 were authorised for issue in accordancewith a resolution of the Group’s Directors on 22 February 2011.Zimplow Limited, the Group’s parent entity, is a Zimbabwe based concern. The Group operates three divisions and oneSubsidiary as follows: • Mealie Brand: engaged in the manufacture and distribution of animal – drawn agricultural implements, hoes and metal fasteners. Products include ploughs, cultivators, harrows, ridgers, ground nut shellers and planters. The Mealie Brand factory is situated in Bulawayo; • CT Bolts: engaged in the manufacture and distribution of metal fasteners for the mining, construction and agricultural industries. Products include industrial screws, mild steel bolts, sockets and anchoring products, nails, nuts, washers, lags, chrome bolt covers and fittings. The CT Bolts factory is situated in Bulawayo with an operating branch located in Harare; • Tassburg: engaged in the manufacture and distribution of wood screws, veranda bolts and high tensile bolts for the household furniture, construction and mining industries. The Tassburg factory is situated in Harare. • African Traction and Associated technologies “Afritrac:” engaged in the distribution of animal – drawn agricultural implements and tools is situated in South Afica.2. Basis of preparationThe financial statements have been prepared on the historical cost basis except for property, plant, equipment andfinancial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below.Historical cost is generally based on the fair value of the consideration given in exchange for assets.The Group has achieved explicit and unreserved compliance with IFRS after early adoption of the revised IFRS 1 “First-time Adoption of International Financial Reporting Standards” issued on 20 December 2010. The Group failed to expressa statement of explicit and unreserved compliance with IFRS for the financial year ended 31 December 2009 due to theeffects of severe hyperinflation as defined in IFRS 1 (Revised).On 20 December 2010, the IASB amended IFRS 1 in order to: - provide relief for first-time adoptors of IFRS from having to reconstruct transactions that occurred before their date of transition to IFRS; and - provide guidance for entities emerging from severe hyperinflation to either resume presenting IFRS financial statements or topresent IFRS financial statements for the first time.IFRS 1 (Revised) is applicable for periods beginning on or after 1 July 2011, early adoption is permitted. The Group haselected to early adopt the amendments to IFRS 1. The effect of the application of the amendments to IFRS 1 is to renderthe opening statement of financial position, prepared on 1 January 2009 (date of transition to IFRS) IFRS compliant.The opening statement of financial position was reported in the prior year as not being compliant with IFRS due to theinability to comply with International Accounting Standard IAS 21 The Effects of Changes in Foreign Exchange Rates andIAS 29; Financial Reporting in hyperinflationary Economies.The Group’s previous functional currency, the Zimbabwe dollar (ZW$), was subjected to severe hyperinflation before thedate of transition to IFRS because it had both of the following characteristics: (a) a reliable general price index was not available to all entities with transactions and balances in the ZW$; and (b) exchangeability between the ZW$ and a relatively stable foreign currency did not exist. Zimplow Limited « 14 » 2011 Annual Report
  17. 17. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)The Group changed its functional currency from Zimbabwe dollars on 1 January 2009.The Group has adopted 1 January2009 as the effective date of currency normalisation and the date of transition to reporting in terms of InternationalFinancial Reporting Standards.The Group elected to measure certain items of trade and other receivables, inventories and trade and other payables at fairvalue and to use the fair value as the deemed cost of those assets and liabilities in the opening IFRS statement of financialposition. The determination of balances for the opening statement of financial position is summarised below :Financial assets and liabilities - Fair value as agreed by the shareholders, i.e. willing buyer willing seller.Accounts receivable - Settlement amounts agreed with debtors in United States dollars.Property, plant and equipment - Property was valued at gross replacement value and reassessed in line with subsequentmarket trends and necessary adjustments were made. Plant and equipment was reconstructed based on archivedinformation from suppliers’ invoices denominated in United States dollars.Payables - Settlement amounts agreed with creditors in United States dollars.Bank balances - All ZW$ bank accounts were written off to nil. Opening balances represented actual United States dollars.The financial statements comprise three statements of financial position, two statements of comprehensive income,changes in equityand cash flows as a result of the application of the Amendments to IFRS 1.In preparing its openingIFRS statement of financial position, the Group has not adjusted amounts previously determined in accordance with the“Guidance on Change in Functional Currency - 2009”, which was drafted jointly by the Public Accountants and AuditorsBoard (PAAB), Zimbabwe Accounting Practices Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE). This guidance wasadopted as the local standard for reporting by most listed entities and other incorporated entities in Zimbabwe reportingsubsequent to severe hyperinflation. As amounts have not changed from those presented in previously issued financialstatements, reconciliations have not been presented, because the amendments to IFRS 1 effectively endorsed the approachadopted in the guidance paper issued by the PAAB, ZAPB and the ZSE, which dealt with conversion of local currencybalances to stable foreign currency after a period of severe hyperinflation.The principal accounting policies are set below:2.1 Adoption of standards and interpretations New and revised IFRSs applied with no material effect on the financial statementsThe following new and revised IFRSs have also been adopted in these financial statements.Theapplication of these new and revised IFRSs has not had any material impact on the amounts reportedfor the current and prior years but may affect the accounting for future transactions or arrangements.Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Additional Exemptions forFirsttime Adopters (as part of improvements to IFRS issued in 2009): The amendments provide two exemptions whenadopting IFRS forthe first time relating to oil and gas assets, and the determination as to whether the arrangementcontains a lease. Not applicable.Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010) The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by itemin the statement of changes in equity or in the notes to the financial statements. In the current year, for each componentof equity, the Group has chosen to present such an analysis in the statement of changes in Equity. Zimplow Limited « 15 » 2011 Annual Report
  18. 18. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)IAS 24 Related Party Disclosures (as revised in 2009) IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changedthe definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosurerequirements for government-related entities.The Company and its subsidiaries are not government-related entities. The application of the revised definition of relatedparty set out in IAS 24 (as revised in 2009) in the current year has resulted in the identification of related parties thatwere not identified as related parties under the previous Standard. Specifically, associates of the ultimate holding companyof the Company are treated as related parties of the Group under the revised Standard whilst such entities were nottreated as related parties of the Group under the previous Standard. The related party disclosures set out in note 14 tothe consolidated financial statements have been changed to reflect the application of the revised Standard. Changes havebeen applied retrospectively. Amendments to IFRS 3 Business CombinationsAs part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to clarify that the measurement choice regardingnon-controlling interests at the date of acquisition is only available in respect of non-controlling interests that arepresent ownership interests and that entitle their holders to a proportionate share of the entity’s net assets in the eventof liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless anothermeasurement basis is required by other Standards. In addition, IFRS 3 was amended to provide more guidance regardingthe accounting for share-based payment awards held by the acquiree’s employees. Specifically, the amendments specifythat share-based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS2 Share-based Payment at the acquisition date (‘market-based measure’). Amendments to IAS 32 Classification of Rights IssuesThe amendments address the classification of certain rights issues denominated in a foreign currency as either equityinstruments or as financial liabilities. Under the amendments, rights, options or warrants issued by an entity for theholders to acquire a fixed number of the entity’s equity instruments for a fixed amount of any currency are classified asequity instruments in the financial statements of the entity provided that the offer is made pro rata to all of its existingowners of the same class of its non-derivative equity instruments. Before the amendments to IAS 32, rights, options orwarrants to acquire a fixed number of an entity’s equity instruments for a fixed amount in foreign currency were classifiedas derivatives. The amendments require retrospective application.The application of the amendments has had no effect on the amounts reported in the current and prior years because theGroup has not issued instruments of this nature. Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement IFRIC 14 addresses when refunds or reductions in future contributions should be regarded as available in accordancewith paragraph 58 of IAS 19; how minimum funding requirements might affect the availability of reductions in futurecontributions; and when minimum funding requirements might give rise to a liability. The amendments now allowrecognition of an asset in the form of prepaid minimum funding contributions. The application of the amendments hasnot had no effect on the amounts reported in the current and prior years because the Group has not entered into anytransactions of this nature. Zimplow Limited « 16 » 2011 Annual Report
  19. 19. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments The Interpretation provides guidance on the accounting for the extinguishment of a financial liability by the issue of equityinstruments. Specifically, under IFRIC 19, equity instruments issued under such arrangement will be measured at their fairvalue, and any difference between the carrying amount of the financial liability extinguished and the consideration paidwill be recognised in profit or loss.The application of IFRIC 19 has had no effect on the amounts reported in the current and prior years because the Grouphas not entered into any transactions of this nature.Improvements to IFRSs issued in 2010Except for the amendments to IFRS 3 and IAS 1 described earlier, the application of Improvements to IFRSs issued in 2010has not had any material effect on amounts reported in the consolidated financial statements.New and revised IFRSs in issue but not yet effectiveThe Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:Amendments to IFRS 7 Disclosures – Transfers of Financial Assets (1)IFRS 9 Financial Instruments (2)IFRS 10 Consolidated Financial Statements (2)IFRS 11 Joint Arrangements (2)IFRS 12 Disclosure of Interests in Other Entities (2)IFRS 13 Fair Value Measurement (2)Amendments to IAS 1 Presentation of Items of Other Comprehensive Income (3)Amendments to IAS 12 Deferred Tax – Recovery of Underlying Assets (4)IAS 19 (as revised in 2011) Employee Benefits (2)IAS 27 (as revised in 2011) Separate Financial Statements (2)IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures (2) (1) Effective for annual periods beginning on or after 1 July 2011. (2) Effective for annual periods beginning on or after 1 January 2013. (3) Effective for annual periods beginning on or after 1 July 2012. (4) Effective for annual periods beginning on or after 1 January 2012.The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financialassets. These amendments are intended to provide greater transparency around risk exposures when a financial assetis transferred but the transferor retains some level of continuing exposure in the asset. The amendments also requiredisclosures where transfers of financial assets are not evenly distributed throughout the period. The amendments to IFRS7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments areintended to provide greater transparency around risk exposures when a financial asset is transferred but the transferorretains some level of continuing exposure in the asset. The amendments also require disclosures where transfers offinancial assets are not evenly distributed throughout the period.The directors do not anticipate that these amendments to IFRS 7 will have a significant effect on the Group’s disclosuresregarding transfers of trade receivables. However, if the Group enters into other types of transfers of financial assets in thefuture, disclosures regarding those transfers may be affected. Zimplow Limited « 17 » 2011 Annual Report
  20. 20. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets.IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilitiesand for derecognition.Key requirements of IFRS 9 are described as follows: • IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. • The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.IFRS 9 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.The directors anticipate that IFRS 9 will be adopted in the Group’s consolidated financial statements for the annual periodbeginning 1 January 2013 and that the application of IFRS 9 may have significant impact on amounts reported in respectof the Group’s financial assets and financial liabilities. . However, it is not practicable to provide a reasonable estimate ofthat effect until a detailed review has been completed.In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued,including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011).Key requirements of these five Standards are described below.IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financialstatements. SIC-12 Consolidation – Special Purpose Entities has been withdrawn upon the issuance of IFRS 10. Under IFRS10, there is only one basis for consolidation, that is control. In addition, IFRS 10 includes a new definition of control thatcontains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement withthe investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensiveguidance has been added in IFRS 10 to deal with complex scenarios.IFRS 11 replaces IAS 31 Interests in Joint Ventures. IFRS 11 deals with how a joint arrangement of which two or moreparties have joint control should be classified. SIC-13 Jointly Controlled Entities – Non-monetary Contributions byVenturers has been withdrawn upon the issuance of IFRS 11. Under IFRS 11, joint arrangements are classified as jointoperations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast,under IAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointlycontrolled operations. Zimplow Limited « 18 » 2011 Annual Report
  21. 21. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereasjointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportionateaccounting.IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements,associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensivethan those in the current standards.These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permittedprovided that all of these five standards are applied early at the same time.The directors anticipate that these five standards will be adopted in the Group’s consolidated financial statements for theannual period beginning 1 January 2013. The application of these five standards may have significant impact on amountsreported in the consolidated financial statements.However, the directors have not yet performed a detailed analysis of theimpact of the application of these Standards and hence have not yet quantified the extent of the impact.IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair valuemeasurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosuresabout fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fairvalue measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are moreextensive than those required in the current standards. For example, quantitative and qualitative disclosures based onthe three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments:Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope.IFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.The directors anticipate that IFRS 13 will be adopted in the Group’s consolidated financial statements for the annualperiod beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported in thefinancial statements and result in more extensive disclosures in the financial statements.The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a singlestatement or in two separate but consecutive statements. However, the amendments to IAS 1 require additionaldisclosures to be made in the other comprehensive income section such that items of other comprehensive income aregrouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will bereclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensiveincome is required to be allocated on the same basis.The amendments to IAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of itemsof other comprehensive income will be modified accordingly when the amendments are applied in the future accountingperiods.The amendments to IAS 12 provide an exception to the general principles in IAS 12 that the measurement of deferred taxassets and deferred tax liabilities should reflect the tax consequences that would follow from the manner in which theentity expects to recover the carrying amount of an asset. Specifically, under the amendments, investment properties thatare measured using the fair value model in accordance with IAS 40 Investment Property are presumed to be recoveredthrough sale for the purposes of measuring deferred taxes, unless the presumption is rebutted in certain circumstances. Zimplow Limited « 19 » 2011 Annual Report
  22. 22. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)The amendments to IAS 12 are effective for annual periods beginning on or after 1 January 2012. The directors anticipatethat the application of the amendments to IAS 12 in future accounting periods may result in adjustments to the amountsof deferred tax liabilities recognised in prior years regarding the Group’s investment properties of which the carryingamounts are presumed to be recovered through sale. However, the directors have not yet performed a detailed analysis ofthe impact of the application of the amendments and hence have not yet quantified the extent of the impact.The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significantchange relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require therecognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminatethe ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs.The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive incomein order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect thefull value of the plan deficit or surplus.The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospectiveapplication with certain exceptions. The directors anticipate that the amendments to IAS 19 will be adopted in the Group’sconsolidated financial statements for the annual period beginning 1 January 2013 and that the application of IAS 19 willnot affect the amounts reported in the current and prior years because the Group has not entered into any transactions ofthis nature.2.2 Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial ReportingStandards.Transition to International Financial Reporting Standards (IFRS)The Group is resuming presentation of IFRS Financial Statements after early adoption of revised IFRS 1 First time Adoptionof International Financial Reporting Standards isssued on 20 December 2010. The Group failed to present IFRS FinancialStatements for the year ended 31 December 2009 due to effects of sever hyper inflation as defined in IFRS 1. The openingStatement of Financial Position was reported in the prior year as not being compliant with International AccountingStandards (IAS ) 21, The effects of changes in Foreign Exchange Rates and IAS 29 Financial Reporting in Hyper Inflationeryeconomies. The Group’s previous functional currency, the Zimbabwean Dollar (ZW$) was subjected to severe hyperinflation before the date of transition to IFRS because it had both of the following characteristics: (a) a reliable general price index was not available to all entities with transactions and balances in the Zimbabwe Dollar and (b) exchangeability between the ZW$ and relative stable foreign currency did not exist. The Group changed its functional and presentation currency from the ZW$ to the United States Dollar (US$) with effect from 1 January 2009.Deemed Cost ExemptionThe Group elected to measure certain items of property, plant and equipment, trade and other receivables, inventories andtrade and other payables at fair values as the deemed cost of those assets and liabilites in the opening IFRS statement offinancial position.Comparative financial informationThe financial statements comprise of three satements of financial position, two statements of comprehensive income,changes in equity and cashflows as a result of the retrospective application of the Amended IFRS 1. The comparativestatement of the comprehensive income, changes in equity and cashflows are for 12 months. Zimplow Limited « 20 » 2011 Annual Report
  23. 23. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)Reconciliation of previosuly prepared financial statements to IFRS compliant financial statementsIn preparing its opening IFRS statement of financial position, the Group has not adjusted theamounts previously determined in accordance with the Guidance on Change in FunctionalCurrency 2009. Since the amounts have not changed, reconciliations have not been presented. 2.3 Significant accounting judgements, estimates and assumptionsThe preparation of the Group’s financial statements requires the Group’s Directors and Management to make judgements,estimates and formulate assumptions that may affect the reported amounts of revenues, expenses, assets, liabilities andthe disclosure of contingent liabilities/ assets at the reporting period end date. Estimates and judgements are continuallyevaluated, and are based on historical experience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. However, uncertainty about these assumptions and estimates couldresult in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in thefuture.JudgementsIn the process of applying the Group’s accounting policies, management has made the following judgements, apart fromthose involving estimates, which have the most significant effect on the amounts recognised in the financial statements.The Group’s Directors are of the opinion that the Statement of Financial Position represents a true and fair position of theGroup. • Useful lives and residual values of property, plant and equipment The Group assesses the useful lives and residual values of property, plant and equipment each period, taking into account past experience and macro-economic changes. • Fair values The Group makes estimates and judgements in the valuation of property, plant and equipment, and the valuation of financial assets (such as trade receivables). Judgement is required in determining fair values of assets. The Group may also rely on independent opinions of experts in related specialist fields. • Impairment of Goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate inorder to calculate present value. The carrying amount of goodwill as at 31 December 2011 was US$41 625. No impairment was recognised during the year.2.4 Summary of significant accounting policiesSegment reportingOperating segments provide products or services that are subject to risks and rewards that are different from those ofother operating segments. Operating segments are considered reportable segments when their operating results andfinancial position are: • Regularly reviewed by the Group’s chief operating decision makers as part of the decision making process regarding resources to be allocated towards each segment’s operations; and • Duly assessed against internally determined key performance indicators.The Group’s reportable segments, for which internal financial management information is available and consistentlyreviewed, are distinctly determined across the different product types manufactured and their customer markets served.Detailed information on the reportable segments identified and presented is disclosed in note 4. Zimplow Limited « 21 » 2011 Annual Report
  24. 24. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)Basis of Consolidations and business combinationsSubsidiaries are all entities over which the Group has the power to govern the financial and operating policies so as toobtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable orconvertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidatedfrom the effective date on which control is transferred to the Group. They are de-consolidated from the effective date thatcontrol ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries and businessunits by the Group. The cost of an acquisition is measured at the aggregate of the fair values, at the date of exchange,of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange for control of theacquiree or business unit. Acquisition – related costs are recognised, as incurred, in the Statement of ComprehensiveIncome, as part of profit or loss for the period.Inter-Group transactions, balances and unrealised gains on transactions between Group entities are eliminated. Unrealisedlosses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policiesof subsidiaries and business units are changed where necessary to ensure consistency with the policies adopted by the Group.Non – controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’sequity therein. The interest of non–controlling shareholders may be initially measured either at fair value or at the non –controlling interest’s proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is madeon an acquisition – by – acquisition basis. Subsequent to acquisition, non–controlling interests consist of the amountattributed to such interests at initial recognition and the non–controlling interest’s share of changes in equity since thedate of the combination. Total comprehensive income is attributed to non controlling interest even if this results in thenon controlling interest having a deficit balance.Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equitytransactions. Any difference between the amount by which the non – controlling interests are adjusted and the fair valueof the consideration paid or received is recognised directly in equity and attributed to owners of the Group.Where applicable, the cost of acquisition includes any asset or liability resulting from a contingent considerationarrangement, measured at its acquisition date fair value. Subsequent changes in such fair values are adjusted against thecost of acquisition where they qualify as measurement period adjustments (refer below). All other subsequent changes inthe fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevantIFRS. Changes in the fair value of contingent consideration classified as equity are not recognised.The acquiree’s identifiable assets , liabilities and contigent liabilities that meet the conditions for recognition under IFRS 3(2008) are recognised at the fair value at the acquisition date , except that; • Non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5: “Non-current Assets Held for Sale and Discontinued Operations”, which are recognised and measured at fair value less costs to sell; • Liabilities or equity instruments related to the replacement by the Group of an acquiree’s share based payment awards, which are measured in accordance with IFRS 2: “Share Based Payment” • Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements, which are recognised and measured in accordance with IAS 12: “Income Taxes” and IAS 19: “Employee Benefits” respectively.If the initial accounting for a business combination is incomplete by the end of the reporting period in which thecombination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Thoseprovisional amounts are adjusted during the set measurement period, or additional assets or liabilities are recognised, toreflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known,would have affected the amounts recognised as of that date. Zimplow Limited « 22 » 2011 Annual Report
  25. 25. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)The aforementioned measurement period is the period from the date of acquisition to the date the Group receivescomplete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximumof one year.GoodwillGoodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisitiondate). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non – controllinginterest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over thefair value of the identifiable net assets recognised. Following initial recognition, goodwill is measured at cost less anyaccumulated impairment losses. Goodwill is not amortised, but is reviewed for impairment annually or more frequentlyif events or changes in circumstances indicate that the carrying value may be impaired. Impairment losses relating togoodwill cannot be reversed in future periods.For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocatedto each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination,irrespective of whether other assets or liabilities of the entity are assigned to those units. Each unit to which the goodwillis so allocated: • Represents the lowest level within the entity at which the goodwill is monitored for internal management purposes; and • Is not larger than a reportable segment determined in accordance with IFRS 8: “Operating Segments”.Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss isrecognised. Where goodwill forms part of the cash-generating unit and part of the operation within that unit is disposedof, the goodwill associated with the operation disposed of is included in the carrying amount of the operation whendetermining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based onthe relative values of the operation disposed of and the portion of the cash-generating unit retained.Bargain purchase gainIf, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable net assets exceeds the sumof the consideration transferred, the amount of any non – controlling interest in the acquiree and the fair value of theacquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately, in profit or loss as abargain purchase gainShare-based payment arrangementsEquity-settled share-based payments to employees and others providing similar services are measured at the fair valueof the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 17.The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-linebasis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with acorresponding increase in equity (equity-settled employee benefits reserve). At the end of each reporting period, theGroup revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the originalestimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with acorresponding adjustment to the equity-settled employee benefits reserve.The policy described above is applied to all equity-settled share-based payment transactions that were granted on andafter 31 July 2011. Zimplow Limited « 23 » 2011 Annual Report
  26. 26. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of thegoods or services received, except where that fair value cannot be estimated reliably, in which case they are measured atthe fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterpartyrenders the service.For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at thefair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, thefair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.Share-based payment arrangements of the acquiree in a business combinationWhen the share-based payment awards held by the employees of an acquiree (acquiree awards) are replaced by theGroup’s share-based payment awards (replacement awards), both the acquiree awards and the replacement awards aremeasured in accordance with IFRS 2 Share-based Payment(“market-based measure”) at the acquisition date. The portionof the replacement awards that is included in measuring the consideration transferred in a business combination equalsthe market-based measure of the acquiree awards multiplied by the ratio of the portion of the vesting period completed tothe greater of the total vesting period or the original vesting period of the acquiree award. The excess of the market-basedmeasure of the replacement awards over the market-based measure of the acquiree awards included in measuring theconsideration transferred is recognised as remuneration cost for post-combination service.However, when the acquiree awards expire as a consequence of a business combination and the Group replaces thoseawards when it does not have an obligation to do so, the replacement awards are measured at their market-based measurein accordance with IFRS 2. All of the market-based measure of the replacement awards is recognised as remuneration costfor post-combination service.At the acquisition date, when the outstanding equity-settled share-based payment transactions held by the employees ofan acquiree are not exchanged by the Group for its share-based payment transactions, the acquiree share-based paymenttransactions are measured at their market-based measure at the acquisition date. If the share-based payment transactionshave vested by the acquisition date, they are included as part of the non-controlling interest in the acquiree. However, ifthe share-based payment transactions have not vested by the acquisition date, the market-based measure of the unvestedshare-based payment transactions is allocated to the non-controlling interest in the acquiree based on the ratio of theportion of the vesting period completed to the greater of the total vesting period or the original vesting period of theshare-based payment transaction. The balance is recognised as remuneration cost for post-combination service.Foreign currency translationsThe Group’s consolidated financial statements are presented in United States dollars, which is also the parent company’sfunctional currency. Each entity in the Group determines its own functional currency and items included in the financialstatements of each entity are measured using that functional currency.i) Transactions and balancesTransactions in foreign currencies are initially recorded by the Group entities at their respective functionalcurrency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated inforeign currencies are retranslated at the functional currency spot rate of exchange at the reporting date. Zimplow Limited « 24 » 2011 Annual Report
  27. 27. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)All differences arising on settlement or translation of monetary items are taken to the income statement withthe exception of monetary items that are designated as part of the hedge of the Group’s net investment of aforeign operation. These are recognised in other comprehensive income until the net investment is disposed, atwhich time, the cumulative amount is reclassified to the income statement. Tax charges and credits attributableto exchange differences on those monetary items are also recorded in other comprehensive income.Non-monetary items that are measured in terms of historical cost in a foreign currency are translated usingthe exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value ina foreign currency are translated using the exchange rates at the date when the fair value is determined. Thegain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or losson change in fair value of the item (i.e., translation differences on items whose fair value gain or loss isrecognised in other comprehensive income or profit or loss is also recognised in other comprehensive income orprofit or loss, respectively).For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operationsare translated into the parent company’s functional currency using exchange rates prevailing at the end of each reportingperiod. Income and expense items are translated at the average exchange rates for the period, unless exchange ratesfluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used.Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed tonon-controlling interests as appropriate).On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposalinvolving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control overa jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over anassociate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of thatoperation attributable to the owners of the Company are reclassified to profit or loss.Non-current assets held for saleNon current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principallythrough a sale transaction rather than through continuing use. This condition is regarded as met only when a sale is highlyprobable and the asset (or disposal group) is available for immediate sale in its present condition. Management must becommitted to the sale which should be expected to qualify for recognition as a completed sale within one year from thedate of classification.Non current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carryingamount and fair value less cost to sell and are no longer depreciated. Zimplow Limited « 25 » 2011 Annual Report
  28. 28. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)Income and revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Revenue excludes value added tax andother sales related duties, and is reduced for estimated customer returns, rebates, discounts and other similar allowances.Sale of GoodsRevenue from the sale of goods is recognised when all the following conditions are satisfied:The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;The Group retains neither continuing managerial involvement to the degree usually associated with ownership noreffective control over the goods sold; • The amount of revenue can be measured reliably; • It is probable that the economic benefits associated with the transaction will flow to the entity; and • The costs incurred or to be incurred in respect of the transaction can be measured reliably.Dividend and Interest revenueDividend revenue from investments is recognised when the shareholder’s right to receive payment has been established(provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can bemeasured reliably).Interest revenue is accrued on a time proportionate basis, by reference to the principal outstanding and at the effectiveinterest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset’s net carrying amount.Other incomeOther income is recognised in the period that it is due and receivable.Property, plant and equipmentProperty, plant and equipment are measured at fair value less accumulated depreciation and impairment losses, if any,recognised after the date of a revaluation. Valuations, performed by the Group’s Directors or independent external valuers,are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from itscarrying amount.When items of property, plant and equipment are revalued, any accumulated depreciation at the date of a revaluationis restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount afterrevaluation equals its revalued amount.Any revaluation surplus (increase in the carrying amount of an asset as a result of a revaluation) is recognised in othercomprehensive income in the Statement of Comprehensive Income and accumulated in equity (revaluation reserve) inthe Statement of Changes in Equity. The increase is recognised in profit or loss to the extent that it reverses a revaluationdecrease of the same asset previously recognised in profit or loss.If an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss.The decrease, however, is recognised in other comprehensive income to the extent of any credit balance existing in therevaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amountaccumulated in equity as a revaluation reserve.An annual transfer, within the Statement of Changes in Equity, from the asset revaluation reserve to retained earnings,is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciationbased on the original cost. Zimplow Limited « 26 » 2011 Annual Report
  29. 29. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)Subsequent costs are included in an asset’s carrying amount or recognised as a separate asset, as appropriate, only whenit is probable that future economic benefits associated with the item will flow to the Group and the cost of the item canbe measured reliably. All other repairs and maintenance are recognised in profit or loss in the Statement of ComprehensiveIncome during the financial period in which they are incurred.Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.Depreciation is calculated on a straight line basis over the following asset class useful life spans in order to allocate theircost or revalued amounts to their residual values: • Buildings: 50 years; • Plant and machinery: 5 to 50 years; • Motor vehicles: 5 years; • Office furniture and computer equipment: 4 to 10 years.An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expectedfrom its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference betweenthe net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset isderecognised.The useful lives and residual values of assets are reviewed and adjusted, if appropriate, at each reporting period end date,with the effect of any changes in estimate accounted for on a prospective basis. Where the residual value of an assetincreases to an amount equal to or greater than the asset’s carrying amount, depreciation will cease to be charged on theasset until its residual value subsequently decreases to an amount below its carrying amount.Impairment of non financial assetsThe Group assesses at each reporting period end date whether there is an indication that an asset may be impaired. If anysuch indication exists, or when annual impairment testing for an asset is required, the Group’s management makes anestimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generatingunit’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does notgenerate cash inflows that are largely independent of those from other assets or group of assets. Where the carryingamount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverableamount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risks specific to the asset.Impairment losses of continuing operations are recognised in profit or loss in the Statement of Comprehensive Income inthose expense categories consistent with the function of the impaired asset.An assessment is made at each reporting period end date as to whether there is any indication that previously recognisedimpairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount isestimated.A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine theasset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of theasset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would havebeen determined, net of depreciation, had no impairment loss been recognised for the asset in prior periods. Such reversalis recognised in profit or loss unless the asset is carried at its revalued amount, in which case the reversal is treated asa revaluation increase and recognised in other comprehensive income. After such a reversal, the depreciation charge isadjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis,over its remaining useful life. Zimplow Limited « 27 » 2011 Annual Report
  30. 30. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement atinception date. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risksand rewards of ownership to the lessee. All other leases are classified as operating leases.The Group’s lease transactions in place throughout the current reporting period only extend as far as the Group’s capacityas a lessee under operating lease arrangements.Group as a lesseeOperating lease payments are recognised as an expense on a straight-line basis over the lease term, except whereanother systematic basis is more representative of the time pattern in which economic benefits from the leased asset areconsumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they areincurred.Contingent rentals:Contingent rentals are lease payments, or portions thereof, that are not fixed in amount but are based on the futureamount of a factor that is susceptible to change other than with the passage of time. Contigent rents are recognised as anexpense in the period in which they are incurred. The CT Bolts premises where the Group operates from were leased undersuch terms for part of the current reporting period. Details regarding lease transactions are as disclosed in note 15.In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except whereanother systematic basis is more representative of the time pattern in which economic benefits from the leased asset areconsumed.Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take asubstantial period of time to get ready for their intended use or sale are capitalised as part of the cost of the respectiveassets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other coststhat an entity incurs in connection with the borrowing of funds.Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifyingassets is deducted from the borrowing costs eligible for capitalisation.Intangible assetsIntangible assets acquired separatelyIntangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisationand accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives.The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect ofany changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that areacquired separately are carried at cost less accumulated impairment losses.Internally-generated intangible assets - research and development expenditure Zimplow Limited « 28 » 2011 Annual Report
  31. 31. Notes to the Financial Statementsfor the year ended 31 December 2011 (continued)Expenditure on research activities is recognised as an expense in the period in which it is incurred.An internally-generated intangible asset arising from development (or from the development phase of an internal project)is recognised if, and only if, all of the following have been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development.The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from thedate when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangibleasset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisationand accumulated impairment losses, on the same basis as intangible assets that are acquired separately.Intangible assets acquired in a business combinationIntangible assets that are acquired in a business combination are recognised separately from goodwill and are initiallyrecognised at their fair value at the acquisition date (which is regarded as their cost).Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost lessaccumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquiredseparately.Derecognition of intangible assetsAn intangible asset is derecognised on disposal, or when no future economic benefits are expected from its use or disposal.Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposalproceeds and the carrying amount of the asset, arerecognised in profit or loss when the asset is derecognised.InventoriesInventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its presentlocation and condition, are accounted for as follows:Raw materials - purchase costs on weighted average costFinished goods and work in progress - costs of direct materials, labour and a proportion of manufacturing overheads basedon normal operating capacity but excluding borrowing costs.Net realisable value is the estimated selling price in the ordinary course of the business, less estimated costs ofcompletion and the estimated costs necessary to make the sale.Cash and cash equivalentsCash and cash equivalents comprise cash at banks, cash on hand and short term highly liquid deposits with an originalmaturity of three months or less.For presentation purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalentsas defined above, net of outstanding bank overdrafts. Zimplow Limited « 29 » 2011 Annual Report

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