NOTES TO THE ANNUAL FINANCIAL STATEMENTS  
for the year ended 31 December 2005

41.

RESTATEMENTS

41.1 

Restatement – business combinations
On 1 July 2004, various businesses were acquired for a consideration of R375,9 million as stated in the 2004 annual report. Subsequent to the 2004 year end, the directors became aware that certain assets and liabilities were incorrectly stated pertaining to the businesses of Dano Textile Industries (Pty) Ltd, Wayne Rubber Division (a division of Feltex Holdings (Pty) Ltd) and Hosaf Fibres (Pty) Ltd .
Accordingly, the 2004 results have been restated to take the following misstatements into account: The effect of the restatement is summarised as follows:
          31 December 2004   1 January 2004  
          Rm   Rm  
  Increase in accumulated loss     17,0   –  
  Taxation     4,1   –  
  Net increase in accumulated loss     21,1   –  
  The effects on the balance sheet were as follows:            
  Decrease in property, plant and equipment     (6,8)   –  
  Decrease in inventory     (6,0)   –  
  Decrease in accounts receivable     (4,1)   –  
  Increase in provisions     (4,8)   –  
  Increase in deferred tax asset     0,4   –  
        (21,1)   –  
  The income statement effect of restatement is summarised            
     as follows:            
  Decrease in negative goodwill on acquisitions     (18,9)   –  
  Decrease in cost of sales     1,9   –  
  Increase in deferred taxation expense     (4,1)   –  
        (21,1)   –  
  Reduction in earnings per share as a result of restatement (cents)     (7,2)   –  

41.2

Restatement – operating lease liabilities restatement
The group previously accounted for operating leases by recognising the lease expense in the year in which the financial obligation arose. In terms of the revised interpretation of the accounting standard (IAS 17 – Leases) by the South African Institute of Chartered Accountants (SAICA), operating leases with fixed escalation clauses are now recognised as an expense on a straight line basis over the lease term.
The adoption of this interpretation resulted in the recognition of a non current interest free liability of R6,6 million at 1 January 2004, representing the difference between lease payments made to date and the straight line charges recognised in the income statement.
 
          Year ended      
          31 Dec 2004   1 January 2004  
          Rm   Rm  
  Increase in accumulated loss     6,8   6,6  
  Taxation     (1,9)   (1,9)  
  Net increase in accumulated loss     4,9   4,7  
  The effect on the balance sheet was as follows:            
  Increase in interest-free borrowings     6,8   –  
  The income statement effect of restatement is            
     summarised as follows:            
  Increase in other operating expenses     (0,2)   –  

41.3 

Restatement – provisions against subsidiaries 
COMPANY
During the previous year total provisions against subsidiaries was calculated at R973,8 million. During 2005, the company revised its method of calculating the provisions against its investments in and loans to subsidiaries. 
Previously the provisions were calculated by comparing the investments and loans to subsidiaries to the net asset value of the holding company only. This method has been revised to compare the investments and loans to subsidiaries to the net asset value of the underlying groups and not just the net asset value of the holding company.
The change in method has no effect on the group results. The 2004 company income statement and balance sheet have accordingly been restated and are shown below.
          Year ended      
          31 Dec 2004   1 January 2004  
          Rm   Rm  
  The effect of the restatement is summarised as follows:            
  Increase in opening retained earnings     588,1   –  
  Taxation     –   –  
  Net     588,1   –  
  The effects on the balance sheet were as follows:            
  Increase in investment in subsidiaries     588,1   –