23. OPERATING SEGMENTS

Operating segments

The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets or reports material revenues.

The Company currently has three reportable segments: South African transaction processing, International transaction processing and Financial inclusion and applied technologies. The South African transaction processing and Financial inclusion and applied technologies segments operate mainly within South Africa and the International transaction processing segment operates mainly within South Korea, Hong Kong and the European Union. The Company's reportable segments offer different products and services and require different resources and marketing strategies and share the Company's assets.

The South African transaction processing segment currently consists mainly of a welfare benefit distribution service provided to the South African government and transaction processing for retailers, utilities, medical-related claim service customers and banks. Fee income is earned based on the number of recipient cardholders paid. Utility providers and banks are charged a fee for transaction processing services performed on their behalf at retailers. This segment has individually significant customers that each provides more than 10% of the total revenue of the Company. For the year ended June 30, 2016, there was one such customer, providing 21% of total revenue (2015: one such customer, providing 24% of total revenue; 2014: one such customer, providing 27% of total revenue).

The International transaction processing segment consists mainly of activities in South Korea from which the Company generates revenue from the provision of payment processing services to merchants and card issuers through its VAN. This segment generates fee revenue from the provision of payment processing services and to a lesser extent from the sale of goods, primarily point of sale terminals, to customers in South Korea. Fees generated from payment services processing and other processing activities by Transact24 and Masterpayment are included in this segment. Finally, the segment includes start up costs related to ZAZOO in the United Kingdom and India and generates transaction fee revenue from transaction processing of UEPS-enabled smartcards in Botswana.

The Financial inclusion and applied technologies segment derives revenue from the provision of short-term loans as a principal and the provision of smart card accounts, as a fixed monthly fee per card is charged for the maintenance of these accounts. This segment also includes fee income and associated expenses from merchants and card holders using the Company's merchant acquiring system, the sale of prepaid products (electricity and airtime) as well as the sale of hardware and software. Finally, the Company earns premium income from the sale of life insurance products and investment income through its insurance business.

Corporate/eliminations includes the Company's head office cost center and the amortization of acquisition-related intangible assets. The $1.9 million fair value gain resulting from the acquisition of Transact24 (refer to Note 3) and the $2.2 million gain resulting from the change in accounting for Finbond (refer to Note 15) that were recognized during the year ended June 30, 2016, have been allocated to corporate/ elimination. The charges related to the BEE equity instrument issued during the year ended June 30, 2014 (refer to Note 17), and the profit related to the deconsolidation of subsidiaries and disposal of business (refer to Note 19), during the year ended June 30, 2014, has been allocated to corporate/eliminations.

The reconciliation of the reportable segments revenue to revenue from external customers for the years ended June 30, 2016, 2015 and 2014, respectively, is as follows:


	Revenue
						From
		Reportable		Inter-		external
		Segment		segment		customers
South African transaction processing	$	212,574	$	17,615	$	194,959
International transaction processing		169,807		-		169,807
Financial inclusion and applied technologies		249,403		23,420		225,983
Total for the year ended June 30, 2016		631,784		41,035		590,749

South African transaction processing	$	236,452	$	20,521	$	215,931
International transaction processing		164,554		-		164,554
Financial inclusion and applied technologies		272,600		27,106		245,494
Total for the year ended June 30, 2015		673,606		47,627		625,979

South African transaction processing		261,577		11,543		250,034
International transaction processing		152,725		-		152,725
Financial inclusion and applied technologies		207,595		28,698		178,897
Total for the year ended June 30, 2014		621,897		40,241		581,656

The Company does not allocate interest income, interest expense or income tax expense to its reportable segments. The Company evaluates segment performance based on segment operating income before acquisition-related intangible asset amortization which represents operating income before acquisition-related intangible asset amortization and allocation of expenses allocated to Corporate/Eliminations, all under GAAP. The reconciliation of the reportable segments measure of profit or loss to income before income taxes for the years ended June 30, 2016, 2015 and 2014, respectively, is as follows:


		For the years ended June 30,
		2016			2015			2014
Reportable segments measure of profit or loss	$	129,774		$	150,538		$	144,038
Operating income: Corporate/Eliminations		(15,406	)		(22,019	)		(42,240	)
Interest income		15,292			16,355			14,817
Interest expense		(3,423	)		(4,456	)		(7,473	)
Income before income taxes	$	126,237		$	140,418		$	109,142

The following tables summarize segment information which is prepared in accordance with GAAP for the years ended June 30, 2016, 2015 and 2014:


		For the years ended June 30,
		2016			2015			2014
Revenues
South African transaction processing	$	212,574		$	236,452		$	261,577
International transaction processing		169,807			164,554			152,725
Financial inclusion and applied technologies		249,403			272,600			207,595
Total		631,784			673,606			621,897
Operating income (loss)
South African transaction processing		51,386			51,008			61,401
International transaction processing		23,389			26,805			21,952
Financial inclusion and applied technologies		54,999			72,725			60,685
Subtotal: Operating segments		129,774			150,538			144,038
Corporate/Eliminations		(15,406	)		(22,019	)		(42,240	)
Total		114,368			128,519			101,798
Depreciation and amortization
South African transaction processing		6,157			7,093			7,036
International transaction processing		21,852			17,846			15,823
Financial inclusion and applied technologies		1,158			808			874
Subtotal: Operating segments		29,167			25,747			23,733
Corporate/Eliminations		11,227			14,938			16,553
Total		40,394			40,685			40,286
Expenditures for long-lived assets
South African transaction processing		5,101			7,008			3,425
International transaction processing		28,029			28,205			19,393
Financial inclusion and applied technologies		2,667			1,223			1,088
Subtotal: Operating segments		35,797			36,436			23,906
Corporate/Eliminations		-			-			-
Total	$	35,797		$	36,436		$	23,906

The segment information as reviewed by the chief operating decision maker does not include a measure of segment assets per segment as all of the significant assets are used in the operations of all, rather than any one, of the segments. The Company does not have dedicated assets assigned to a particular operating segment. Accordingly, it is not meaningful to attempt an arbitrary allocation and segment asset allocation is therefore not presented.

It is impractical to disclose revenues from external customers for each product and service or each group of similar products and services.

Geographic Information

Revenues based on the geographic location from which the sale originated for the years ended June 30, are presented in the table below:

		2016		2015		2014

South Africa	$	422,022	$	461,425	$	428,931
South Korea		158,609		160,853		146,667
Rest of world		10,118		3,701		6,058
Total	$	590,749	$	625,979	$	581,656

Long-lived assets based on the geographic location for the years ended June 30, are presented in the table below:


	Long-lived assets
		2016		2015⁽¹⁾		2014⁽¹⁾

South Africa	$	69,213	$	72,467	$	105,627
South Korea		221,459		230,109		253,147
Rest of world		49,105		20,058		6,593
Total	$	339,777	$	322,634	$	365,367

(1) As described in Note 1, during the year ended June 30, 2016, the Company identified a balance sheet misclassification between current assets and long-term assets. Long-lived assets for fiscal 2015 and 2014, have been restated, and have increased by $27.4 million and $23.3 million, respectively.