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AFRICAN DAWN ANNUAL REPORT 14

Accounting Policies continued 1.10 Significant judgements and sources of estimation uncertainty In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts represented in the financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. Significant judgements include: Impairment on trade and other receivables The estimation of allowances for impairments is inherently uncertain and depends on many factors. These factors include general economic conditions, structural changes within industries, changes in individual customer circumstances. There are also other external factors such as legal requirements, regulatory specifications and governmental policies that if changes can have a significant effect on the allowances. Trade and other receivables are stated net of impairments. The impairments are either made on an individual receivable or on a collective receivable. Impairment on collective receivables Trade and other receivables are considered impaired if, and only if, there is objective evidence of impairment as a result of events that occurred after initial asset recognition. The event would be the loss making event and would adversely affect the recoverability and reliability of the expected future cashflows. These events include, but are not limited to: Breach of contract: default or delinquency in interest or principal payments, instalment past due date is considered a breach of contract and would affect the reliability to measure future cash flows; Significant financial difficulty of borrower, directly communicated to African Dawn Capital Limited or probable that borrower will enter bankruptcy or financial re-organisation. Data indicating that there is a quantifiable decrease in the estimated future cash flow and recoverability of a grouping of assets, although not yet identified at individual asset. These include fraud at agent levels, adverse change of payment status of groups, local and national conditions relating to identifiable groups. Indication of decrease in value of security held, especially indicators that would adversely affect the value of properties held as security relating to property bridging finance. The Group formally assesses its receivable portfolio for impairment on a monthly basis based on formulated impairment formulas and judgement. The extent to which the current carrying value exceeds the estimated recoverable amount of advances is classified as impairment. Impairments made on individual receivables Substantial receivables, especially relating to property bridging transactions are assessed on an individual basis. The impairments are calculated, based on an approved impairment policy. The impairments were made on judgements and formulated calculations. The impairments were made by taking the following into consideration for each receivable: credibility of borrower, security held, value of security, repayment history, sureties signed and agreed settlement terms. The individual receivable values are assessed to be at least the security value that can be realised within 3 month in an active market. Impairments made on collective receivables Due to the vast number and ever changing status of especially short term, unsecured receivables, the impairments are assessed on a collective grouping of receivables. The impairments are calculated, based on an approved impairment policy. The grouping of the receivables are made based on specific criteria of each receivable, these include: borrower creditability, ageing of last receipt, arrears amount, settlement agreement, status of process to be followed to pursue future cashflows, age of borrower, economical status, repayment instalment. The collective receivable balances are impaired by a percentage that is specifically awarded to the receivables within the collection. The percentage was developed with help of specialised external asset valuators and was based on extensive market knowledge, historical default and recovery rates, repayment trends and statistical techniques. Impairment calculations contain both judgemental and non-judgemental inputs. The extent of judgement utilised in new products is greater than that for older products, given the limited historical experience available for the new products. Receivables older than 90 days become collectable under the legal process of recovery, these receivables fall within a new collection of receivables and approved impairment percentage applied. AFRICAN DAWN 4 0 ANNUAL REPORT 2014


AFRICAN DAWN ANNUAL REPORT 14
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