A provision is recognised when there is a present legal or constructive obligation as a result of a past event for
which it is more likely than not that an outflow of resources will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. A provision to pay a levy is not recognised until the
obligating event specified in the legislation occurs, even if there is no realistic opportunity to avoid the obligation. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of
an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expected outflow of resources required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost. |
| |
At
beginning
of the year
Rm |
Additions
Rm |
Reversals
Rm |
Utilised
Rm |
Net
monetary
loss
Rm |
Exchange
and
other
move-
ments1
Rm |
At end of
the year
Rm |
|
| 2015 |
|
|
|
|
|
|
|
|
| Non-current |
|
|
|
|
|
|
|
|
| Decommissioning provision |
229 |
45 |
– |
(12) |
– |
31 |
293 |
|
| Licence obligations |
137 |
– |
– |
– |
– |
(60) |
77 |
|
| Nigeria provision for regulatory fine |
– |
4 104 |
– |
– |
– |
– |
4 104 |
|
| Other provisions |
180 |
143 |
(29) |
(33) |
27 |
(138) |
150 |
|
| |
546 |
4 292 |
(29) |
(45) |
27 |
(167) |
4 624 |
|
| Current |
|
|
|
|
|
|
|
|
| Bonus provision |
754 |
735 |
(91) |
(722) |
– |
114 |
790 |
|
| Decommissioning provision |
21 |
– |
(19) |
– |
– |
4 |
6 |
|
| Nigeria provision for regulatory fine |
– |
5 183 |
– |
– |
– |
– |
5 183 |
|
| Licence obligations |
74 |
– |
– |
(40) |
– |
60 |
94 |
|
| Other provisions |
2 565 |
620 |
(997) |
(327) |
– |
59 |
1 920 |
|
| |
3 414 |
6 538 |
(1 107) |
(1 089) |
– |
237 |
7 993 |
|
| 1 Includes the effect of hyperinflation. |
| |
At
beginning
of the year
Rm |
Additions
Rm |
Reversals
Rm |
Utilised
Rm |
Net
monetary
loss
Rm |
Exchange
and
other
move-
ments1
Rm |
At end of
the year
Rm |
|
| 2014 |
|
|
|
|
|
|
|
|
| Non-current |
|
|
|
|
|
|
|
|
| Decommissioning provision |
186 |
107 |
(34) |
(30) |
– |
– |
229 |
|
| Licence obligations |
– |
137 |
– |
– |
– |
– |
137 |
|
| Other provisions |
171 |
91 |
(43) |
(16) |
(38) |
15 |
180 |
|
| |
357 |
335 |
(77) |
(46) |
(38) |
15 |
546 |
|
| Current |
|
|
|
|
|
|
|
|
| Bonus provision |
763 |
861 |
(100) |
(761) |
– |
(9) |
754 |
|
| Decommissioning provision |
84 |
3 |
(74) |
(1) |
– |
9 |
21 |
|
| Licence obligations |
257 |
– |
(183) |
– |
– |
– |
74 |
|
| Other provisions |
3 533 |
442 |
(1 065) |
(340) |
– |
(5) |
2 565 |
|
| |
4 637 |
1 306 |
(1 422) |
(1 102) |
– |
(5) |
3 414 |
|
| 1 Includes the effect of hyperinflation. |
Bonus provision
The bonus provision consists of a performance-based bonus, which is determined by reference to the overall Company performance with regard to a set of predetermined key performance measures. Bonuses are payable annually after the Group annual results have been approved.
Decommissioning provision
This provision relates to the estimate of the cost of dismantling and removing an item of property, plant and equipment and restoring the site on which the item was located to its original condition. The Group provides for the anticipated costs associated with the restoration of leasehold property to its original condition at inception of the lease, including removal of items included in property, plant and equipment that are erected on leased land.
The Group only recognises these decommissioning costs for the proportion of its overall number of sites for which it expects decommissioning to take place. The expected percentage has been based on actual experience in the respective operations.
Licence obligations
The licence obligations provision represents the estimated costs to be incurred in fulfilling the Universal Services Obligation (USO) in South Africa. USOs are governed by the Electronic Communications Act.
Nigeria provision for regulatory fine
During October 2015, the Nigerian Communications Commission (NCC) imposed a fine of N1,04 trillion (R80,7 billion1 ) on MTN Nigeria Communications Limited (MTN Nigeria). This fine relates to the timing of the disconnection of 5,1 million MTN Nigeria subscribers who were disconnected in August and September 2015 and is based on a fine of N200 000 for each unregistered subscriber. Subsequently, during December 2015, the NCC revised the amount to N780 billion (R60,6 billion1 ).
MTN Nigeria, acting on external legal advice, has resolved that the manner of the imposition of the fine and the quantum thereof is not in accordance with the NCC’s powers under the Nigerian Communications Act, 2003 and therefore believes there to be valid grounds upon which to challenge the fine. Accordingly, MTN Nigeria followed due process and instructed its lawyers to proceed with an action in the Federal High Court in Lagos seeking the appropriate reliefs.
On 22 January 2016, the judge adjourned the matter to 18 March 2016, in order to enable the parties to try to settle the matter.
Pursuant to the ongoing engagement with the Nigerian authorities, MTN Nigeria on 24 February 2016 made an agreed-without-prejudice good-faith payment of N50 billion (R3,9 billion2 ) to the Federal Government of Nigeria on the basis that this will be applied towards a settlement, when one is eventually, hopefully, arrived at. In an effort to achieve an amicable settlement, MTN has agreed to withdraw the matter from the Federal High Court in Lagos.
In arriving at an appropriate provision at 31 December 2015, management has applied its judgement resulting in a provision being recorded as required in accordance with IFRS, amounting to N119,6 billion (R9,3 billion1 ).
In light of the engagement with the Nigerian authorities, the Group has provided limited disclosure relating to the provision in accordance with IFRS.
Other provisions
The Group is involved in various regulatory and indirect tax matters specific to the respective jurisdictions in which the Group operates. These matters may not necessarily be resolved in a manner that is favourable to the Group. The Group has therefore recognised provisions in respect of these matters based on estimates and the probability of an outflow of economic benefits and should not be construed as an admission of legal liability.
1 Amounts translated at the closing rate at year end of R1 = N12,88.
2 Translated at the 24 February 2016 closing rate of R1 = N12,76. |
