Notes: 1. These consolidated summarised preliminary financial statements are prepared in accordance with AC127: Interim Financial Reporting. The accounting policies and methods of computation for the financial statements for the year ended 30 June 2005 are consistent with those applied in the prior year except as described in note 2 below and are in accordance with South African Statements of Generally Accepted Accounting Practice and the Companies Act in South Africa. 2. Restatements, changes in accounting policy and comparatives. 2.1 AC140: Business Combinations The Group adopted AC140: Business Combinations during the current year. The adoption of this statement resulted in a change in the accounting policy for goodwill. For all business combinations on or after 31 March 2004 goodwill is measured as the excess of the “cost of the acquisition” over the “interest in the fair value of the assets, liabilities and contingent liabilities acquired and recognised”. Until 30 June 2004, goodwill was: – amortised on a straight line basis over its useful life with a maximum of ten years. In accordance with the provisions of AC140: – the Group ceased amortisation of goodwill from 1 July 2004; – accumulated amortisation as at 30 June 2004 has been eliminated with a corresponding decrease in the cost of goodwill; and – from 1 July 2004 onwards, goodwill is tested annually for impairment, as well as when there are indications of impairment. Adoption of this accounting policy resulted in goodwill amortisation amounting to R5 million being ceased, and in a goodwill impairment charge of R5 million. The impact of the restatement on earnings and headline earnings per share is set out below. The acquisition accounting for Clough Limited is still on a provisional basis. 2.2 AC105: Leases In prior years, operating lease payments were recognised in the income statement in the year incurred. Interpretative guidance by the South African Institute of Chartered Accountants, Circular 7/2005 issued in August 2005, requires minimum lease payments that are subject to fixed escalations to be spread over the life of the lease instead of as incurred. R millions The adjustments resulting from the restatement can be summarised as follows: Increase of 2003 accumulated profit opening balance – Recognition of deferred operating lease income accrual 108 Recognition of deferred operating lease cost accrual (119) Decrease of 2004 net profit (11) Increase of 2005 net profit 13 The impact of the restatement on earnings and headline earnings per share is set out below. 2.3 Depreciation of headlease investment property In prior years, the land element of the capitalised headlease investment property was incorrectly depreciated together with the building element. During the current year, this has been corrected by a reversal of R6 million in accumulated depreciation. R millions The adjustments resulting from the restatement can be summarised as follows: Increase in 2003 accumulated profit opening balance 3 Increase in 2004 net profit 3 Increase in 2005 net profit 3 The impact of the restatement on earnings and headline earnings per share is set out below. 2.4 Impact on earnings and headline earnings per share Increase (decrease) in basic and diluted earnings per share (EPS) 2005 2004 Cents Cents Non-amortisation of goodwill 2 – Impairment of goodwill (2) – Recognition of operating lease payments and income on a straight-line basis* 4 (3) Adjustments to the depreciation of headlease investment property* 1 1 Total impact 5 (2) These adjustments had no impact on basic and diluted headline earnings per share (HEPS). * Relates to the headlease and other discontinued property activities 2.5 Comparatives The comparative information presented has been restated for the following: – reclassification of investment property from property, plant and equipment to investment property; – reclassification of an impairment provision from other accruals to other investments; – restatement of operating lease costs and income on a straight-line basis; and – restatement of the depreciation on headlease investment property. 3. Total financial institution guarantees given to third parties on behalf of group companies amounted to R1 788 million (2004: R1 352 million). The directors do not believe any exposure to loss is likely. 4. These summarised financial statements and the annual financial statements from which they have been extracted have been audited by the company's auditors, Deloitte & Touche. Their unqualified audit opinions are available for inspection at the company's registered office.