Below is a list of key definitions of financial terms used in the annual report of Barloworld Limited (the company) and the group:
The specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements.
Changes in accounting policies are accounted for in accordance with the transitional provisions in International Financial Reporting Standards (IFRS). If no such guidance is given, they are applied retrospectively, unless it is impracticable to do so, in which case they are applied prospectively.
Changes in accounting estimates are recognised in profit or loss.
Prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are corrected prospectively.
The effects of transactions and other events are recognised when they occur rather than when the cash is received or paid.
Actuarial gains and losses
The effect of differences between the previous actuarial assumptions and what has actually occurred, as well as changes in actuarial assumptions.
The amount at which a financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount and the maturity amount, and minus any reduction for impairment or non-collectability.
A resource controlled by the entity as a result of a past event from which future economic benefits are expected to flow.
An entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint arrangement. Significant influence is the power to participate in the financial and operating policy decisions of the associate, but is not control or joint control over those policies.
Available for sale financial assets
Those non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held to maturity investments or financial assets at fair value through profit or loss.
Interest and other costs incurred in connection with the borrowing of funds.
A business is an integrated set of activities and assets conducted and managed for the purpose of providing a return to investors or lower costs or other economic benefits directly and proportionately to participants.
A business combination is the bringing together of separate entities or businesses into one reporting entity.
Average invested capital multiplied by WACC.
The amount at which an asset is recognised after deducting any accumulated depreciation or amortisation and accumulated impairment losses.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.
Cash flow hedge
A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with an asset, or a liability that could affect profit or loss or a highly probable forecast transaction that could affect profit or loss.
The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Cash-settled share-based payment transaction
A share-based payment transaction in which the entity acquires goods or services by incurring a liability to transfer cash or other assets to the supplier of those goods or services for amounts that are based on the price (or value) of the entity’s shares or other equity instruments of the entity.
Change in accounting estimate
An adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors.
Chief operating decision maker (Key management)
Those persons having authority and responsibility for planning, directing and controlling the activities of the entity.
In terms of this definition, the executive committee of Barloworld Limited has been identified as the chief operating decision maker.
An obligation that derives from an established pattern of past practice, published policies or a sufficiently specific current statement, in which the entity has indicated to other parties that it will accept certain responsibilities and as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.
Consolidated financial statements
The financial statements of a group presented as those of a single economic entity.
A possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.
Cost of sales
When inventories are sold, the carrying amount is recognised as part of cost of sales. Any write-down of inventories to net realisable value and all losses of inventories or reversals of previous write-downs or losses are recognised in cost of sales in the period the write-down, loss or reversal occurs.
Costs to sell
The incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income tax expense.
Date of transaction
The date on which the transaction first qualifies for recognition in accordance with International Financial Reporting Standards.
Depreciation (or amortisation)
The systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset, or other amount substituted for cost, less its residual value.
The removal of a previously recognised asset or liability from the statement of financial position.
A financial instrument whose value changes in response to an underlying item, requires no initial or little net investment in relation to other types of contracts that would be expected to have a similar response to changes in market factors and is settled at a future date.
The application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before starting commercial production or use.
Diluted earnings per share
Profit or loss attributable to ordinary equity holders of the parent entity divided by the weighted average number of ordinary shares outstanding during the period, both adjusted for the effects of all dilutive potential ordinary shares.
A reduction in earnings per share or an increase in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions.
A component that has either been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operation, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operation, or a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the income statement and the assets and liabilities associated with these operations are shown as held for sale in the statement of financial position.
EBITDA refers to earnings before interest, taxes, depreciation and amortisation.
The measure of the difference between the accounting profit of a business (net operating profit after tax) and the cost of capital invested in the business (referred to as a “capital charge”)
All forms of consideration (excluding share options granted to employees) given in exchange for services rendered by employees.
Events after the reporting period (Post-balance sheet)
Recognised amounts in the financial statements are adjusted to reflect events arising after the financial position date that provide evidence of conditions that existed at the financial position date. Events after the financial position date that are indicative of conditions that arose after the financial position date are dealt with by way of a note.
Debt and equity instruments are classified as either financial liabilities or as equity based on the substance of the contractual arrangement.
Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs.
A contract or certificate that evidences a residual interest in the total assets after deducting the total liabilities.
A method in which the investment is initially recognised at cost and adjusted thereafter for the post acquisition change in the share of net assets of the investee. Profit or loss includes the share of the profit or loss of the investee.
Equity-settled share-based payment transaction
A share-based payment transaction in which the entity receives goods or services as consideration for equity instruments of the entity (including shares or share options).
Non-operating and capital items
Non-operating and capital items cover those amounts, which are not considered to be of an operating/trading nature, and generally include re-measurements due to:
- Impairments of goodwill and non-current assets
- Gains and losses on the measurement to fair value less costs to sell (or on the disposal) of assets or disposal groups constituting discontinued operations
- Gains and losses on the measurement to fair value less costs to sell of non-current assets or disposal groups classified as held for sale
- Gains and losses on the disposal of fixed property
- Recycling through profit or loss of foreign currency translation reserves upon disposal of entities whose functional currencies are different to the group’s presentation currency
- Recycling through profit or loss of fair value gains and losses previously recognised in other comprehensive income upon the disposal of available for sale financial assets and realisation of hedges of a net investment in a foreign operation
- The group’s proportionate share of non-operating and capital items (determined on the same basis) of associates and joint arrangements.
Re-measurements to fair value of other financial instruments (including amounts recycled through profit or loss under cash flow hedges that were previously recognised in other comprehensive income) are not included in non-operating and capital items.
The decreases in economic benefits in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Fair value hedge
A hedge of exposure to changes in fair value of a recognised asset, liability or firm commitment.
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred.
Financial asset or liability at fair value through profit or loss
A financial asset or financial liability that is classified as held for trading or is designated as such on initial recognition other than investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured.
A financial asset is an asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity, or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.
A contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A financial liability is a liability that is a contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity.
The risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract.
A binding agreement for the exchange of a specified quantity of resources at a specified price on a specified future date or dates.
An uncommitted but anticipated future transaction.
Going concern basis
The assumption that the entity will continue in operation for the foreseeable future.
Gross investment in lease
The aggregate of the minimum lease payments receivable by the lessor under a finance lease and any unguaranteed residual value accruing to the lessor.
An asset, liability, firm commitment, highly probable forecast transaction or net investment in a foreign operation that exposes the entity to risk of changes in fair value or future cash flows and is designated as being hedged.
A designated derivative or non-derivative financial asset or non-derivative financial liability whose fair value or cash flows are expected to offset changes in the fair value or cash flows of a designated hedged item.
The degree to which changes in the fair value or cash flows of the hedged item that is attributable to a hedged risk are offset by changes in the fair value or cash flows of the hedging instrument.
Held for trading financial asset or financial liability
One that is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or as part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking or a derivative (except for a derivative that is a designated and effective hedging instrument).
If individually or collectively it would not influence the economic decisions of the users of the financial statements.
The amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.
Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.
Increase in economic benefits in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
An insurer’s net contractual rights under an insurance contract.
An insurer’s net contractual obligations under an insurance contract.
Risk, other than financial risk, transferred from the holder of a contract to the issuer.
An uncertain future event that is covered by an insurance contract and creates insurance risk.
The party that has an obligation under an insurance contract to compensate a policyholder if an insured event occurs.
The measure of the sum of the total interest of all shareholders (including non-controlling interests), long-term loans, bank overdrafts and short-term loans less cash.
An arrangement in which two or more parties have joint control.
The contractually agreed sharing of control which exists only when decisions about relevant activities require unanimous consent of the parties sharing control.
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities relating to the arrangement.
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
An obligation that derives from a contract, legislation or other operation of law.
A present obligation of the entity arising from a past event, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
Loans and receivables
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
A condition upon which the exercise price, vesting or exercisability of an equity instrument depends on and is related to the market price of the entity’s equity instruments, such as attaining a specified share price or a specified amount of intrinsic value of a share option, or achieving a specified target that is based on the market price of the entity’s equity instruments relative to an index of market prices of equity instruments of other entities.
Minimum lease payments
Payments over the lease term that the lessee is or can be required to make, excluding contingent rent, costs for services and taxes to be paid by and reimbursed to the lessor including in the case of a lessee, any amounts guaranteed by the lessee or by a party related to the lessee or in the case of a lessor, any residual value guaranteed to the lessor by the lessee, a party related to the lessee or a third party unrelated to the lessor that is financially capable of discharging the obligations under the guarantee.
Net operating assets plus goodwill, cash and cash equivalents.
Gross debt (long and short term) less net cash.
Net investment in the lease
The gross investment in the lease discounted at the interest rate implicit in the lease.
Net operating assets
Segment assets less segment liabilities.
The equity in a subsidiary not attributable, directly or indirectly, to a parent.
A lease other than a finance lease.
The executive committee has determined the operating segments based on the information it uses to allocate resources and assess segmental performance. Segments are analysed by operating activities and geographical regions. The activities of the group’s operating segments are described below:
The Equipment segment provides customers with integrated solutions that include Caterpillar earthmoving equipment, engines and other complementary brands.
The Automotive segment provides customers with integrated motor vehicle usage solutions through the operation of car rental, motor retail and fleet services.
The Logistics segment provides customers with traditional logistics services and supply chain management solutions.
The Handling segment provides customers with innovative solutions for material handling needs including lift trucks, warehouse handling equipment and distribution of agricultural equipment.
The Corporate segment comprises all the other group activities including the operations of the corporate office in Johannesburg and treasury in the United Kingdom.
Segment accounting policies are consistent with those adopted for the preparation of the group financial statements.
The executive committee evaluates the segment performance based on the operating results plus any other items that are directly attributable to segments including fair value adjustments on financial instruments. Interest costs are excluded due to the centralised nature of the group’s treasury operations. All intra-segment transactions are eliminated on consolidation.
Property held by the owner or by the lessee under a finance lease for use in the production or supply of goods or services or for administrative purposes.
Past service cost
The increase or decrease in the present value of the defined benefit obligation for employee service in prior periods resulting from the introduction of, or changes to, post-employment benefits or other long-term employee benefits.
A party that has a right to compensation under an insurance contract if an insured event occurs.
Employee benefits (other than termination benefits) that are payable after the completion of employment.
Post-employment benefit plans
Formal or informal arrangements under which an entity provides post-employment benefits to employees. Defined contribution benefit plans are where there are no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Defined benefit plans are post-employment benefit plans other than defined contribution plans.
The currency in which the financial statements are presented.
A current estimate of the present discounted value of the future net cash flows in the normal course of business.
Prior period error
An omission from or misstatement in the financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that was available when financial statements for those periods were authorised for issue and could reasonably be expected to have been obtained and taken into account in the preparation of those financial statements.
Projected unit credit method
An actuarial valuation method that sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.
Applying a new accounting policy to transactions, other events and conditions occurring after the date the policy changed or recognising the effect of the change in an accounting estimate in the current and future periods.
Recognition of assets and liabilities
Assets are only recognised if they meet the definition of an asset, it is probable that future economic benefits associated with the asset will flow to the group and the amount at which the settlement would take place or fair value can be measured reliably.
Liabilities are only recognised if they meet the definition of a liability, it is probable that future economic benefits associated with the liability will flow from the group and the cost or fair value can be measured reliably.
Financial instruments are recognised when the entity becomes a party to the contractual provisions of the instrument. Financial assets and liabilities as a result of firm commitments are only recognised when one of the parties has performed under the contract.
Regular way purchases and sales are recognised using trade date accounting.
The higher of an asset’s or cash-generating unit’s fair value less cost to sell and its value in use.
Regular way purchase or sale
A purchase or sale of a financial asset under a contract, the terms of which require delivery of the asset within the timeframe established by regulation or convention in the marketplace concerned.
The original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding.
The estimated amount which an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its useful life.
A programme that is planned and controlled by management, and materially changes either the scope of a business undertaken by an entity or the manner in which that business is conducted.
Applying a new accounting policy to transactions, other events and conditions, as if that policy had always been applied.
Correcting the recognition, measurement and disclosure of amounts as if a prior period error had never occurred.
Return on invested capital (ROIC)
The return on investment capital is a profitability ratio. It measures the percentage return that a company makes over its invested capital by calculating net operating profit after tax over total equity, plus long and short-term loans, bank overdrafts and cash on hand.
Revenue represents the gross inflow of economic benefits during the period arising in the course of the ordinary activities when those inflows result in increases in equity, other than increases relating to contributions from equity participants.
Total assets less goodwill, cash on hand, deferred and current taxation assets.
Non-interest-bearing current and non-current liabilities, excluding deferred and current taxation liabilities.
Segment result represents operating profit plus any other items that are directly attributable to segments including fair value adjustments on financial instruments. Interest costs are excluded due to the centralised nature of the group’s treasury operations.
Share-based payment transactions
A cash-settled share-based payment transaction is the acquisition of goods or services by incurring a liability to transfer cash or other assets to the supplier of those goods or services for amounts that are based on the price (or value) of the entity’s shares or other equity instruments.
An equity-settled share-based payment transaction is a transaction where goods or services are received and settled in equity instruments of the entity (including shares or share options).
The tax base of an asset is the amount that is deductible for tax purposes if the economic benefits from the asset are taxable or is the carrying amount of the asset if the economic benefits are not taxable.
The tax base of a liability is the carrying amount of the liability less the amount deductible in respect of that liability in future periods.
The tax base of revenue received in advance is the carrying amount less any amount of the revenue that will not be taxed in future periods.
The differences between the carrying amount of an asset or liability and its tax base.
Incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, ie those that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument.
An entity’s own equity instruments, held by the entity or other members of the consolidated group.
Unearned finance income
The difference between the gross investment in the lease and the net investment in the lease.
The period over which an asset is expected to be available for use or the number of production or similar units expected to be obtained from the asset.
Value in use
The present value of the future cash flows expected to be derived from an asset or cash-generating unit.
To become an entitlement. Under a share-based payment arrangement, a counterparty’s rights to receive cash, other assets or equity instruments of the entity vests when the counterparty’s entitlement is no longer conditional on the satisfaction of any vesting conditions.
The conditions that determine whether the entity receives the services that entitle the counterparty to receive cash, other assets or equity instruments of the entity, under a share-based payment arrangement. Vesting conditions are either service conditions or performance conditions. Service conditions require the counterparty to complete a specified period of service. Performance conditions require the counterparty to complete a specified period of service and specified performance targets to be met (such as a specified increase in the entity’s profit over a specified period of time). A performance condition might include a market condition.
The period during which all the specified vesting conditions of a share-based payment arrangement are to be satisfied.