Estructura mecánica

• The description of ancillary services in IAS 40 differentiates between

investment property and owner-occupied property (i.e., property,

plant and equipment). The amendment clarifies that IFRS 3, not the

BOTSWANA TELECOMMUNICATIONS CORPORATION LIMITED

ACCOUNTING POLICIES (continued)

• The amendment becomes effective for the annual periods beginning on or after 1 July 2014 and will therefore be applied in the Company’s first annual report after becoming effective.

SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

Estimates and Judgments

The preparation of financial statements in conformity with

International Financial Reporting Standards requires the use of certain

critical accounting estimates and judgments concerning the future. Estimates and judgments are continually evaluated and are based on historical factors coupled with expectations about future events

that are considered reasonable. In the process of applying the group’s accounting policies, management has made the following estimates

and judgments that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities as they involve assessments or decisions that are particularly complex or subjective within the next year.

Revenue recognition and presentation

Revenue arrangements including more than one deliverable:

This relates to fixed lines and mobile installations. In revenue

arrangements including more than one deliverable, the deliverables are assigned to one or more separate units of accounting and the arrangement consideration is allocated to each of the units of accounting based on the cash cap method.The cash cap method is applied to multiple-element post-paid mobile arrangements.Under the cash cap method, revenue is allocated to the different elements of the agreement, but the value allocated to the handset is limited to the amount of cash received for it, which may be zero, because the remainder of the revenue in the transaction is contingent upon the BTCL providing the monthly services.

Determining the value allocated to each deliverable can require

complex estimates due to the nature of goods and services provided.

The entity generally determines the fair value of individual elements based on prices at which the deliverable is usually sold on a standalone basis, after considering volume discounts where appropriate.

Presentation: Gross versus Net

Determining whether the entity is acting as a principal or an agent

requires judgement and consideration of all relevant facts and

Development grants

Grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Initial capitalisation of costs is based on management’s

judgment that the attached conditions will be complied with. Revenue

is recognised over the useful lives of the assets purchased using the grant. The current portion of development grant is estimated by

amortizing existing government grants received at reporting date

and assuming that there will be no grants received and no additional

capital expenditure in the financial year 2014/2015. Further details are

given in Note 17.

Revaluation of land and buildings

Land and buildings are carried at a revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Management considers that valuations are performed frequently enough (after every three years) to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. The independent valuer has made the following assumptions during the revaluation process and at arriving at the property values:

That the property are free from any structural fault, rot, infestation or defects of any other nature, including inherent weaknesses due to the use in construction of deleterious materials.

That the properties are not contaminated and that the sites have stable ground conditions.

Further details are given in Note 7.

Lease classification

The company as the lessor has entered into property rental lease arrangements. The Corporation has determined, based on an evaluation of the terms and conditions of the arrangements, that

it retains all the significant risks and rewards of ownership of

these properties and so accounts for the contracts as operating

leases.  These property lease arrangements relate to: Office space

being rented in various locations around Botswana.Further details are given in Note 11 and 23. The company has transferred some of the immovable property to Botswana Fibre Networks (BOFINET) ( see Note 7) as per government directive. BTCL entered in to a possession BOTSWANA TELECOMMUNICATIONS CORPORATION LIMITED

ACCOUNTING POLICIES (continued)

Deferred lease

The current portion of deferred lease is based on the assumption that

there will be no additions to operating lease contracts in the financial year 2014. Further details are given in Note 11.

Related parties

Government, parastatals and key management personnel are considered as being related to the company.The government is still a related party despite privatisation as the shares are currently held

100% by the Government of Botswana .Significant management judgment is required to determine as to who qualifies for being

a related party, based on the type of the relationship especially on entities also controlled by the Government. Further details are given

in Note 24.  

Allowances for slow moving inventory

Based on prior management practice, inventory that has not moved for a 12-month period is considered to have no normal sale value. Obsolete and discontinued products are considered to have no normal sale value. The provision is raised based on the full cost or net realisable value of the product.

Depreciation Charges and Residual Values

For depreciation purposes, a significant component is defined as equal to or greater than 20% of the total cost of the asset and each significant

component with different useful lives are depreciated separately. The useful life of an asset is determined with reference to its design life as

prescribed by internal experts. The depreciation method reflects the pattern in which economic benefits attributable to the asset flows to the

entity. The useful lives of these assets can vary depending on a variety of factors, including but not limited to technological obsolescence, maintenance programs, refurbishments, customer relationship period, product life cycles and the intention of management.

The residual value of an asset is determined by estimating the amount that the entity would currently obtain from the disposal of the asset after deducting the estimated cost of disposal, if the asset were

already of age and in the condition expected at the end of its useful

life. The estimation of the useful life and residual value of an asset is

a matter of judgment based on the past experience of the company

with similar assets and the intention of management. Further details are given in Note 7.

Debtors impairment

This allowance is created where there is objective evidence, for example the probability of insolvency/bankruptcy or significant financial difficulties of the debtor, that the company will not be able

to collect all the amounts due under the original terms of the invoice. An estimate is made with regards to the probability of insolvency and the estimated value of debtors who will not be able to pay. Financial assets that are assessed not to be impaired individually are

SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)

Impairment of non-financial assets

The company assesses whether there are any indicators of

impairment for all non-financial assets at each reporting date. Non- financial assets are tested for impairment when there are indicators

that the carrying amounts may not be recoverable. Management

expresses judgement and estimates on the impact of technological changes and expected nature of use of the respective assets in the

generation of revenue in the near future.

When value in use calculations are undertaken, management must

estimate the expected future cash flows from the asset or cash-

generating unit and chooses a suitable discount rate in order to

calculate the present value of those cash flows.  

Initial Fair Value of financial Instruments

Financial liabilities, such as preference shares – liability portion have

been valued based on the expected cash flows discounted at current

rates at grant date applicable for items with similar terms and risk characteristics. This valuation requires the company to make estimates

about expected future cash flows and discount rates, and hence they are subject to uncertainty. Further details are given in note 25.9  

ACCOUNTING POLICIES