glossary of financial terms
Actuarial gains or losses
Actuarial gains and losses comprise:
| (a) | experience adjustments (the effects of differences
between the previous actuarial assumptions and what has
actually occurred); and |
| (b) | the effects of changes in actuarial assumptions. |
Amortised cost
The amount at which a financial asset or financial liability is
measured at initial recognition, minus principal repayments, plus
or minus the cumulative amortisation using the effective
interest rate method of any difference between that initial
amount and the maturity amount, and minus any reduction for
impairment or uncollectibility.
Binomial option pricing model
A valuation equation that assumes the price of the underlying
asset changes through a series of discrete upward or
downward movements.
Black-Scholes model
A valuation equation that assumes the price of the underlying
asset changes continuously through the option’s expiration
date by a statistical process known as geometric Brownian
motion.
Business segment
A distinguishable component of an entity that is engaged in
providing an individual product or service or a group of related
products or services that is subject to risks and returns that
are different from those of other business segments.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term highly liquid investments that are
readily convertible to known amounts of cash and which are
subject to an insignificant risk of change in value.
Cash flow hedge
A hedge of the exposure to variability in cash flows that:
| (a) | is attributable to a particular risk associated with a
recognised asset or liability or a highly probable forecast
transaction; and |
| (b) | could affect profit or loss. |
Cash-generating unit
The smallest identifiable group of assets that generates cash
inflows that are largely independent of the cash inflows from
other assets or groups of assets.
Company
Woolworths Holdings Limited – a legally incorporated
business entity registered in terms of the Companies Act,
(no. 61 of 1973), as amended in South Africa.
Consolidated financial statements
The financial results of the group presented as those of a single
economic entity.
Contingent liability
| a) | A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of an entity. | |
| b) | A present obligation that arises from past events but is not recognised because: | |
| i. | it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or | |
| ii. | the amount of the obligation cannot be measured with sufficient reliability. | |
Control
The power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
Credit risk
The risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an
obligation.
Currency risk
The risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in foreign
exchange rates.
Deferred bonus plan
The deferred bonus plan allows eligible employees to acquire
Woolworths Holdings shares at the ruling market price out of
a portion of their declared annual bonus. A matching award of
Woolworths shares will be made to the participant after a
period of three years on the condition that the participant
remains in the employ of the employer company and retains
the bonus share over the period.
Deferred tax assets
The amount of income taxes recoverable in future periods in
respect of:
| (a) | deductible temporary differences; |
| (b) | the carryforward of unused tax losses; and |
| (c) | the carryforward of unused tax credits. |
Deferred tax liabilities
The amounts of income tax payable in future periods in
respect of taxable temporary differences.
Defined benefit plan
Post-employment benefit plans other than defined contribution
plans.
Defined contribution plan
Post-employment benefit plans under which an entity pays
fixed contributions into a separate fund, and in respect of
which the entity will have no legal or constructive obligation to
pay further contributions if the fund does not hold sufficient
assets to pay all employee benefits relating to employee
service in the current and prior periods.
Derivative
A financial instrument or other contract with all three of the
following characteristics:
| (a) | its value changes in response to the change in a specified
interest rate, financial instrument price, commodity price,
foreign exchange rate, index of prices or rates, credit rating
or credit index, or other variable, provided in the case of a
non-financial variable that the variable is not specific to a
party to the contract (sometimes called the ‘underlying’); |
| (b) | it requires no initial net investment or an initial net
investment that is smaller than would be required for
other types of contracts that would be expected to have a
similar response to changes in market factors; and |
| (c) | it is settled at a future date. |
Dilution
A reduction in earnings per share or an increase in loss per
share resulting from the assumption that convertible
instruments are converted, that options or warrants are
exercised, or that ordinary shares are issued upon the
satisfaction of specified conditions.
Disposal group
A group of assets to be disposed of, by sale or otherwise,
together as a group in a single transaction, and liabilities directly
associated with those assets that will be transferred in the
transaction.
Equity-settled share-based payment transaction
A share-based payment transaction in which the entity
receives goods or services as consideration for equity
instruments of the entity (including shares or share options).
Fair value
The amount for which an asset could be exchanged or a
liability settled, between knowledgeable, willing parties in an
arm’s length transaction.
Financial asset
Any asset that is:
| (a) | cash; |
|
| (b) | an equity instrument of another entity; |
|
| (c) | a contractual right: |
|
| i. | to receive cash or another financial asset from another entity; or | |
| ii. | to exchange financial assets or financial liabilities with
another entity under conditions that are potentially
favourable to the entity; or |
|
| (d) | a contract that will or may be settled in the entity’s own
equity instruments and is: |
|
| i. | a non-derivative for which the entity is or may be
obliged to receive a variable number of the entity’s
own equity instruments; or |
|
| ii. | a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose, the entity’s own equity instruments do not include instruments that are themselves contracts for the future receipt or delivery of the entity’s own equity instruments. | |
Financial asset or financial liability at fair value through profit or loss
A financial asset or financial liability that meets either of the
following conditions:
| (a) | it is classified as held for trading. A financial asset or
financial liability is classified as held for trading if it: |
|
| i. | is acquired or incurred principally for the purpose of selling or repurchasing it in the near term; | |
| ii. | forms part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of shortterm profit-taking; or | |
| iii. | is a derivative (except for a derivative that is a financial
guarantee contract or a designated and effective
hedging instrument). |
|
| (b) | upon initial recognition it is designated by the entity as at
fair value through profit or loss. An entity may use this
designation only when permitted or when doing so results
in more relevant information, because either: |
|
| i. | it eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise
from measuring assets or liabilities or recognising the
gains and losses on them on different bases; or |
|
| ii. | a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel. | |
Financial instrument
Any contract that gives rise to a financial asset of one entity
and a financial liability or equity instrument of another entity.
Financial liability
Any liability that is:
| (a) | a contractual obligation: |
|
| i. | to deliver cash or another financial asset to another entity; or | |
| ii. | to exchange financial assets or financial liabilities with
another entity under conditions that are potentially
unfavourable to the entity; or |
|
| (b) | a contract that will or may be settled in the entity’s own
equity instruments and is: |
|
| i. | a non-derivative for which the entity is or may be
obliged to deliver a variable number of the entity’s
own equity instruments; or |
|
| ii. | a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose the entity’s own equity instruments do not include instruments that are themselves contracts for the future receipt or delivery of the entity’s own equity instruments. | |
Firm commitment
A binding agreement for the exchange of a specified quantity
of resources at a specified price on a specified future date or
dates.
Forecast transaction
An uncommitted but anticipated future transaction.
Functional currency
The currency of the primary economic environment in which
the entity operates.
Geographical segment
A distinguishable component of an entity that is engaged in
providing products or services within a particular economic
environment and that is subject to risks and returns that are
different from those of components operating in other
economic environments.
Grant date
The date at which the entity and another party (including an
employee) agree to a share-based payment arrangement, being
when the entity and the counterparty have a shared
understanding of the terms and conditions of the arrangement.
At grant date the entity confers on the counterparty the right
to cash, other assets, or equity instruments of the entity,
provided the specified vesting conditions, if any, are met. If that
agreement is subject to an approval process, grant date is the
date when that approval is obtained.
Group
The group comprises Woolworths Holdings Limited and all its
subsidiaries.
Hedge effectiveness
The degree to which changes in the fair value or cash flows of
the hedged item that are attributable to a hedged risk are
offset by changes in the fair value or cash flows of the hedging
instrument.
Hedged item
A liability or highly probable forecast transaction that exposes
the entity to risk of changes in fair value or future cash flows
and is designated as being hedged.
Hedging instrument
A designated derivative or, for a hedge of the risk of changes in
foreign currency exchange rates only, a designated nonderivative
financial asset or non-derivative financial liability,
whose fair value or cash flows are expected to offset changes
in the fair value or cash flows of a designated hedged item.
Held-for-trading financial instrument
See financial asset or financial liability at fair value through
profit or loss.
Intangible asset
An identifiable non-monetary asset without physical substance.
Interest rate risk
The risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest
rates.
Intrinsic value
The difference between the fair value of the shares to which
the counterparty has the (conditional or unconditional) right
to subscribe or which it has the right to receive, and the price
(if any) the counterparty is (or will be) required to pay for
those shares.
Liquidity risk
The risk that the entity will encounter difficulty in meeting
obligations associated with financial liabilities.
Loans and receivables
Non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market, other than:
| (a) | those that the entity intends to sell immediately or in the
near term, which shall be classified as held-for-trading, and
those that the entity upon initial recognition designates as
at fair value through profit or loss; |
| (b) | those that the entity upon initial recognition designates as
available-for-sale; or |
| (c) | those for which the holder may not recover substantially
all of its initial investment, other than because of credit
deterioration, and which shall be classified as available-forsale. |
Long-term incentive plan
The long-term incentive plan provides eligible employees with
the opportunity to acquire Woolworths Holdings Limited
shares by way of conditional awards of shares which are
subject to the fulfilment of predetermined performance
conditions covering a three-year period.
Minority interest
The portion of the profit or loss and the net assets of a
subsidiary attributable to equity interest that are not owned,
directly or indirectly through subsidiaries, by the parent.
Monetary items
Units of currency held and assets and liabilities to be received
or paid in a fixed or determinable number of units of currency.
Monte Carlo simulation method
A method that is used to evaluate the probabilities of different
gains or losses being realised over a future period. It is based
on the generation of multiple trials to determine the expected
value of a random variable.
Onerous contract
A contract in which the unavoidable cost of meeting the
obligation under the contract exceeds the economic benefits
expected to be received under it.
Past due
A financial asset is past due when a counterparty has failed to
make a payment when contractually due.
Present value
A current estimate of the present discounted value of the
future net cash flows in the normal course of business.
Reasonably possible change in risk variable
Reasonably possible change in risk variable refers to most likely
change in the risk variable, during the next annual period,
which is judged relative to the economic environments in
which the entity operates, and does not include ‘worst case’
scenarios.
Related party
A party is related to an entity if:
| (a) | directly, or indirectly through one or more intermediaries,
the party: |
|
| i. | controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries); | |
| ii. | has an interest in the entity that gives it significant influence over the entity; or | |
| iii. | has joint control over the entity; |
|
| (b) | the party is an associate of the entity; |
|
| (c) | the party is a joint venture in which the entity is a
venturer; |
|
| (d) | the party is a member of the key management personnel
of the entity or its parent; |
|
| (e) | the party is a close family member of any individual
referred to in (a) or (d) above; |
|
| (f) | the party is an entity that is controlled, jointly controlled
or significantly influenced by, or for which significant voting
power in such entity resides with, directly or indirectly, any
individual referred to in (d) or (e) above; or |
|
| (g) | the party is a post-employment benefit plan for the benefit
of employees of the entity, or of any entity that is a related
party of the entity. |
|
Segment assets
Those operating assets that are employed by a segment in its
operating activities and that either are directly attributable to
the segment or can be allocated to the segment on a
reasonable basis. Segment assets exclude income tax assets, as
well as investments, where the resulting income arising from
the investments is excluded from segment results.
Segment expense
Expense resulting from the operating activities of a segment
that is directly attributable to the segment and the relevant
portion of an expense that can be allocated on a reasonable
basis to the segment. Segment expense does not include:
| (a) | interest, including interest incurred on advances or loans
from other segments; |
| (b) | losses on sales of investments; |
| (c) | an entity’s share of losses of associates, joint ventures, or
other investments accounted for under the equity method; |
| (d) | income tax expense; and |
| (e) | general administrative expenses, head office expenses, and other expenses that arise at the entity level and relate to the entity as a whole. |
Segment result
Segment revenue less segment expense before any adjustments
for minority interest.
Segment revenue
Revenue reported in the entity’s income statement that is
directly attributable to a segment and the relevant portion of
entity revenue that can be allocated on a reasonable basis to a
segment. Segment revenue does not include:
| (a) | interest or dividend income unless the segment’s
operations are primarily of a financial nature; or |
| (b) | gains on sales of investments or gains on extinguishment
of debt unless the segment’s operations are primarily of a
finance nature. |
Share appreciation rights scheme
This scheme gives eligible employees the rights to receive
Woolworths Holdings shares equal to the value of the
difference between the exercise price and the grant price,
subject to the satisfaction of certain performance conditions
within a specific performance period.
Share-based payment transaction
A transaction in which the entity receives goods or services as
consideration for equity instruments of the entity (including
shares or share options), or acquires goods or services by
incurring liabilities to the supplier of those goods or services
for amounts that are based on the price of the entity’s shares
or other equity instruments of the entity.
Share option
A contract that gives the holder the right, but not the
obligation, to subscribe to the entity’s shares at a fixed or
determinable price for a specific period of time.
Subsidiary
A entity over which the group has the power to govern the
financial and operating policies so as to obtain benefits from its
activities.
Treasury shares
An entity’s own equity instruments, held by the entity or other
members of the consolidated group.
Vest
To become an entitlement. Under a share-based payment
arrangement, a counterparty’s right to receive cash, or other
assets, or equity instruments of the entity vests upon
satisfaction of any specified vesting conditions.