Imperial

The summarised consolidated financial statements have been prepared in accordance with the framework concepts and the recognition and measurement criteria of International Financial Reporting Standards (IFRS) and its Interpretations adopted by the International Accounting Standards Board (IASB) in issue and effective for the Group at 30 June 2016 and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and financial reporting pronouncements as issued by the Financial Reporting Standards Council. The preliminary results are presented in accordance with IAS 34 – Interim Financial Reporting and comply with the Listings Requirements of the Johannesburg Stock Exchange Limited and the Companies Act of South Africa, 2008. These summarised consolidated financial statements are an extract of the full audited consolidated annual financial statements.

These summarised consolidated financial statements and the full audited consolidated annual financial statements have been prepared under the supervision of R Mumford, CA (SA) and were approved by the board of directors on 22 August 2016.

The accounting policies adopted and methods of computation used in the preparation of the summarised consolidated financial statements are in accordance with IFRS and are consistent with those of the audited consolidated annual financial statements for the year ended 30 June 2015, except for the change detailed below.

2.1 Change in accounting policy
Floorplans

During the year the Group reclassified its interest-bearing trade payables, due to vehicle suppliers, from interest-bearing borrowings to trade and other payables. As the interest-bearing amounts are a short-term credit line received from vehicle suppliers to acquire vehicles as inventory it is considered more appropriate to show them as trade payables.

The impact of the change in policy on the comparative amounts was as follows:

2.2 Restatement of the segmental information
The 2015 segmental information for the Vehicle retail, rental and after market parts division has been restated as follows

IFRS 16 Leases introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term longer than 12 months. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Depreciation is recognised on the right-of-use asset and interest on the lease liability. In terms of lessor accounting IFRS 16 substantially carries forward the requirements in IAS 17 Leases and accordingly a lessor continues to account for its leases as operating leases or finance leases. Issued in January 2016 this standard becomes effective for annual reporting periods beginning on or after 1 January 2019.

Other standards that will become applicable to the group in future reporting periods includes IFRS 9 Financial Instruments (effective 1 January 2018) and IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018). The details of these standards is outlined in the 30 June 2016 audited consolidated annual financial statements.

The group is in the process of assessing the impact of these standards on its consolidated financial statements.

Circular 2/2015 Headline Earnings which was issued by the South African Institute of Chartered Accountant (SAICA) in October 2015 replaces Circular 2/2013 Headline Earnings. The revisions contained in the new circular relate primarily to IFRS 9 Financial Instruments and has had no impact on the way the Group computes headline earnings.

10.1 Fair values of financial assets and liabilities carried at amortised cost
The following table sets out instances where the carrying amount of financial liabilities, as recognised on the statement of financial position, differ from their fair values.

The fair values of the remainder of the Group's financial assets and financial liabilities approximate their carrying values.

10.2 Fair value hierarchy
The Group's financial instruments carried at fair value are classified in three categories defined as follows:

Level 1 financial instruments are those that are valued using unadjusted quoted prices in active markets for identical financial instruments.

Level 2 financial instruments are those valued using techniques based primarily on observable market data. Instruments in this category are valued using quoted prices for similar instruments or identical instruments in markets which are not considered to be active; or valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data.

Level 3 financial instruments are those valued using techniques that incorporate information other than observable market data. Instruments in this category have been valued using a valuation technique where at least one input, which could have a significant effect on the instrument’s valuation, is not based on observable market data.

The following table presents the valuation categories used in determining the fair values of financial instruments carried at fair value. For financial assets of discontinued operations refer to page 19.

Transfers between hierarchy levels
The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred. There were no transfers between the fair value hierarchies during the year.

10.3 Movements in level 3 financial instruments measured at fair value
The following table shows a reconciliation of the opening and closing carrying values of level 3 financial liabilities carried at fair value.

Level 3 sensitivity information
The fair values of the level 3 financial liabilities of R1 894 million were estimated by applying an income approach valuation method including a present value discount technique. The fair value measurement is based on significant inputs that are not observable in the market. Key assumptions used in the valuations include the assumed probability of achieving profit targets and the discount rates applied. The assumed profitabilities were based on historical performances but adjusted for expected growth.

The following table shows how the fair value of the level 3 financial liabilities as at 30 June 2016 would change if the significant assumptions were to be replaced by a reasonable possible alternative.

Disposals
The Group disposed of its 65% interest in Neska, a subsidiary of Imperial Logistics International BV.

Acquisitions
For acquisitions during the reporting period please refer to business combinations on page 33.

Acquisition of Palletways Group Limited
The Group acquired a 95% interest in Palletways Group Limited in July 2016 for R3,0 billion (£155,1 million). Palletways provides an express delivery solution for small consignments of palletised freight through more than 400 depots and 14 hubs across Europe. As the initial accounting for the business combination was not complete at the time that the financial statements were authorised for issue no further disclosures are made.

Dividend declaration
Shareholders are advised that a preference and an ordinary dividend has been declared by the board of Imperial on 22 August 2016. For more details please refer to the dividend declaration on page 16.