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Statutory annual financial statements
|The statutory annual financial statements have been
prepared according to the historical cost convention using the appropriation method of
accounting, and incorporate the fundamental assumptions of going-concern, consistency and
1. Appropriation method
The method adopted for the combination of the scheme companies on the formation of the AngloGold company is the uniting of interest method for accounting for mergers in terms of International Accounting Standard No. 22 ? Business Combinations. The surplus arising on merger accounting between the nominal share capital and share premium issued by the company and the nominal value of the share capital and share premium of the scheme companies acquired has been reflected as a merger adjustment and set-off against shareholders' equity.
Where an investment in a subsidiary or a joint venture is acquired or disposed of during the financial year, its results are included from, or to the date control became, or ceased to be effective. Where an investment in a subsidiary or a joint venture is made during the financial year, any excess of the purchase price compared with the fair value of the attributable net assets is recognised as goodwill and amortised as an expense over the lesser of its useful life or 20 years.
All inter-group transactions and balances are eliminated on consolidation. Unearned profits that arise between group entities are eliminated.
The income statement includes the group's proportionate share of the results of operations, the attributable share of taxation thereon, and outside shareholders' interest in net income of associates. The equity accounted retained earnings of associates, which are not available for distribution by way of a dividend to the company's shareholders, less any provisions, are transferred to a non-distributable reserve.
Results of associates are equity accounted from their most recent audited annual financial statements or unaudited interim statements. Any losses of associates are brought to account until the investment in and loans to such associates are written down to a nominal amount. Thereafter losses are accounted for only insofar as the group is committed to providing financial support to such associates.
The carrying values of the investments in associates represent the cost of each investment, including unamortised goodwill, the share of post acquisition retained earnings and any other movements in reserves. The carrying value is compared with the associate's market value or directors' valuation. Where, in the opinion of the directors, the value of an associate has been permanently impaired below its carrying value, or the market value has fallen below the carrying value over a sustained period, a provision is made for such impairment in value.
4. Mining assets
Mining assets are recorded at cost of acquisition less sales, recoupments and amounts written off. Cost includes pre-production expenditure incurred during the development of the mine. Cost also includes interest capitalised during the construction period where such cost is financed by borrowings.
Inventories are valued at the lower of cost and net realisable value after appropriate provisions for redundant and slow moving items. Cost is determined on the following bases.
Gold on hand, uranium oxide and sulphuric acid are valued on an average production cost method.
Consumable stores are valued at the lower of average cost or net realisable value.
6. Environmental expenditure
7. Post-retirement benefits
Defined contribution plans
Defined benefit plans
Post-retirement medical aid costs
8. Revenue recognition
The sale of mining
products is recognised when the significant risks
Dividends are recognised when the right to receive payment is established.
Interest is recognised
on a time proportion basis, taking account of the
9. Hedging transactions
Gains and losses on gold hedging instruments that effectively establish prices for future production, are recognised in income at the earlier of any cash flow or delivery of the related hedged production.
Hedged positions below current cost of production are recognised in the period in which the loss arises.
Foreign currency derivative financial instruments are translated at contract rates. Gains and losses on these contracts are recognised in income as a component of the related gold transaction.
10. Foreign currency
The balance sheets and income statements of foreign subsidiaries are translated on the following bases:
Assets and liabilities (both monetary and non-monetary) are translated at the closing rate. Income statement items are translated at a weighted average rate of exchange for the period. Exchange differences are taken directly to a foreign currency translation reserve which is included with non-distributable reserves.
Monetary items of these operations are translated using the closing rate of exchange. Non-monetary items are translated at the rate of exchange at the historical transaction date. Income statement items are translated at a weighted average rate of exchange for the period. All exchange differences are taken to the income statement for the period.
11. Translation into US dollars
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