Pick n Pay Stores Limited and its subsidiaries

Selected notes to the summarised financial statements

for the year ended 29 February 2012

 

3. 

REVENUE AND PRIOR YEAR ADJUSTMENT 
 

Revenue comprises turnover, other trading income and interest received. 
 

The Group has reviewed the terms of its franchise agreements in Botswana, Lesotho and Swaziland, and the interpretation of its role in the supply of inventory to those franchisees. 
 

In the past, Pick n Pay purchased inventory on behalf of its franchisees and sold this onto the franchisees at no margin. As such, the accounting treatment of the transaction was to recognise the purchases as part of Group cost of merchandise sold and the sales as part of Group turnover, with no impact on gross profit. 
 

The substance of the relationship has changed over time, with the franchisees ordering and receiving directly from suppliers, albeit facilitated through the Pick n Pay supply chain. 
 

We believe it more appropriate therefore, to reflect Pick n Pay’s role in the transaction as that of an agent, earning a franchise fee only. Therefore we will no longer be recognising the turnover and corresponding cost of merchandise sold in the Group statement of comprehensive income. Prior year disclosures have been adjusted accordingly as follows: 
 

No restatement of the prior year statement of financial position is required as the prior year adjustment has had no impact on earnings. 

 

GROUP
 

As previously
stated
2011 
Rm 

Prior year
adjustment
2011 
Rm 

As restated
2011 
Rm 

Revenue 

52 216.7 

(760.8)

51 455.9 

Turnover 

51 945.8 

(760.8)

51 185.0 

Cost of merchandise sold 

(42 859.6)

760.8 

(42 098.8)

Gross profit 

9 086.2 

— 

9 086.2 

No restatement of the prior year statement of financial position is required as the prior year adjustment has had no impact on earnings.