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Pick n Pay Group of Companies annual financial statements

Accounting policies

Pick n Pay Stores Limited and Pick n Pay Holdings Limited are domiciled in South Africa. The consolidated financial statements for the period ended 3 March 2013 comprise the Pick n Pay Stores Limited Company and its subsidiaries (referred to as “Pick n Pay Stores Group”) and Pick n Pay Holdings Limited Company and its subsidiaries (referred to as “Pick n Pay Holdings Group”) (together referred to as the "Group") and the Group's interest in its associates, TM Supermarkets (Pvt) Limited and Red Apple Retail Company Limited.

The financial statements were approved by the directors and authorised for issue on 22 April 2013.

These consolidated financial statements are presented in South African Rands, which is the Group and Companies' functional currency. All financial information has been rounded to the nearest million, unless otherwise stated.

The consolidated financial statements are prepared on the historical-cost basis except for:

• Derivative financial instruments at fair value through profit or loss;
• Defined-benefit obligations measured at the present value of the future benefit to employees, net of the fair value of fund assets; and
• Investments held at fair value.

All accounting policies have been applied consistently by all Group companies.

STATEMENT OF COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRS)

The Group (consolidated) and Company (separate) financial statements have been prepared in accordance with IFRS and its interpretations adopted by the International Accounting Standards Board, the South African Institute of Chartered Accountants Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listings Requirements and the requirements of the South African Companies Act of 2008.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated and separate financial statements. During the annual financial period under review the Group adopted a 52-week financial reporting calendar for all future annual financial periods. Please refer to note 29 for further information. During the annual financial period under review the Chief Operating Decision Maker of the Group was reviewed and was changed from the Pick n Pay Stores Limited Board to the Executive Committee. The operating segments and the related comparatives have been restated. Please refer to note 26 for further information.

BASIS OF CONSOLIDATION

Investment in subsidiaries

The Group financial statements include the financial statements of the Company and the entities that it controls. Control is achieved where the Company has the power directly or indirectly to govern the financial and operating policies of a Group entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account.

As the Company controls the Pick n Pay Employee Share Purchase Trust (Share Trust), this entity has been consolidated into the Group financial statements.

All business combinations are accounted for by applying the acquisition method of accounting. The financial statements of subsidiaries are included in the consolidated financial statements of the Group, from the date that control commences until the date that control ceases.

On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level of influence retained.

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