Woolworths Holdings Limited - Impact of SAICA Circular 7/2005

Woolworths Holdings Limited - Impact of SAICA Circular 7/2005                   
Woolworths Holdings Limited                                                     
Registration number: 1929/001986/06                                             
ISIN:  ZAE000063863                                                             
JSE Code: WHL                                                                   
("Woolworths")                                                                  
Impact of SAICA Circular 7/2005                                                 
Following the recent press releases from both the South African Institute of    
Chartered Accountants (SAICA) and the JSE Limited, SAICA has issued a circular, 
number 7/2005 explaining the requirements of IAS17 (AC105) - Leases in respect  
of operating leases which include fixed rental increases.  The process of using 
International Financial Reporting Standards (IFRS) has focussed attention on the
way in which standards are applied and it has become apparent that in South     
Africa lease expenditure and income with fixed rental increases have generally  
been applied on a basis which is inconsistent with international practice.      
IAS 17(AC105) states that lease payments/income should be recognised as an      
expense/income on a straight-line basis over the lease term unless another      
systematic basis is more representative of the time pattern of the user"s       
benefit.  Many South African lessees and lessors have recognised rental expenses
and income respectively, based on the cash flows in the lease agreement on the  
basis that it was considered that the increased cash flows arose as a result of 
the increased benefits arising from the leased asset.  It is now considered that
the definition of "user"s benefit" is only affected by factors which impact the 
physical usage of the property.                                                 
The straight-line method results in similar impact in the income statement in   
each reporting period irrespective of the fact that cashflows differ.  In the   
case of a lessee with aggregate leases tending towards the beginning of the     
lease terms, this would result in a charge to the income statement higher than  
the cash flows, giving rise to a lease accrual.  Aggregate leases tending       
towards the end of the lease terms would result in a lower charge to the income 
statement with a concomitant release of the accrual.                            
Woolworths have assessed the impact of the change in interpretation of the      
statement and advise that the impact is not material on a year on year basis.   
The impact will be a decrease in earnings per share and headline earnings per   
share of 2.9 cents on the financial results to be released for the year ended 30
June 2005. For the comparative year ended 30 June 2004, headline earnings per   
share will be restated by 3.1 cents, from 78.6 cps to 75.5 cps.  The impact of  
the lease accrual on opening retained income at 1 July 2003 is a negative R243m.
As the change in interpretation has no cash impact, it will have no effect on   
the cash distribution declaration.                                              
The full accounting impact of the change will be provided in the financial      
results issued on the 25th August 2005.                                         
Cape Town                                                                       
5 August 2005                                                                   
Contacts:                                                                       
Norman Thomson, Finance Director - 083 251 6354                                 
Ralph Buddle, Group Finance Executive - 083 412 4923                            
Cherrie Lowe, Head of Corporate Governance - 021 407 3160                       
Sponsor                                                                         
RAND MERCHANT BANK (A division of FirstRand Bank Limited)                       
Date: 05/08/2005 10:01:07 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department