Notes to the financial statements | Note 4.2

4.2 Inventories
 

 
 

Significant accounting judgements, estimates and assumptions

Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Judgement is involved in determining whether inventories need to be written off to net realisable value. Factors considered include the age of the stock, inventory turnover, exchange rates, new device models released and the ability to bundle devices with other value-added services, such as voice, data and SMSes.

Inventory write-downs related to slow-moving stock are determined by considering the following:

Slow-moving stock

For network build stock, the identification of obsolete and excess warehouse stock for build stock entails the running of quarterly reports by management detailing obsolete and excess stock:

  • Obsolete stock: all material items per material group with no movement for the last 12 months.
  • Excess stock: all material items per material group with more than 12 months' stock on hand, with five years' stock cover consideration.

New items not yet used and items planned for projects are excluded. The balance is then taken through the write-off process.

The identification of obsolete and excess stock for maintenance spares entails the running of quarterly reports by management detailing obsolete and excess spares:

  • Obsolete stock: all material items per material group with no movement for the last 24 months.
  • Excess stock: all material items per material group with more than 24 months' stock on hand.

New items not yet used and items planned for projects are excluded. The balance is then taken through the write-off process.
 

Summary of significant accounting policies

Stock valuation and work-in-progress

Inventory is measured at the lower of cost and net realisable value.

The purchase cost of inventories comprises the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), transport, handling and other costs directly attributable to the acquisition of the finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of inventory.

Initial cost of inventories, where relevant, includes the transfer of gains and losses on qualifying fair value hedges recognised as firm commitments, in respect of foreign currency denominated purchases.

Merchandise, installation material, maintenance material and network equipment inventories are stated at the lower of cost, determined on a weighted average basis and estimated net realisable value. Inventory is assessed for write-down to the net realisable value at each reporting date. The reversal of any write-downs is also considered where increases in the net realisable value have been identified.
 
   Group  Company 
   31 March 
2023 
Rm  		31 March 
2022 
Rm 		 31 March 
2023 
Rm  		31 March 
2022 
Rm 
Inventories  1 091  1 084  31  883 
Gross inventories  1 320  1 244  321  940 
Write-down of inventories to net realisable value  (229) (160) (4) (107)
Inventories consist of the following categories:  1 320  1 244  321  940 
Installation material, maintenance material and network equipment  468  541  1  540 
Merchandise  852  703  320  400 
Write-down of inventories to net realisable value  229  160  4  107 
Opening balance  160  154  107  112 
Charged to selling, general and administrative expenses  70  15  22  15 
Write-down provision transferred to Openserve (Pty) Ltd  -   -   (119) -  
Inventories written off  (1) (9) (6) (20)
  During the current financial year, R123 million (31 March 2022: R33 million) for Group and Rnil (31 March 2022: R33 million) for Company was transferred from inventories to property, plant and equipment. The transfers only take place from CWIP.