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AFRICAN DAWN ANNUAL REPORT 14

Accounting Policies continued 1.10 Significant judgements and sources of estimation uncertainty continued Impairment testing The recoverable amounts of cash generating units and individual assets are determined based on the higher of value in use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. The Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Loan write-offs The outstanding balances (net of amount owed and related impairment) of clients are continuously followed up and assessed for successful repayment. Credit managers have the mandate to write balances off once all avenues for collections have been explored and found to be unsuccessful. 1.11 Share capital, reserves, treasury shares and dividends Ordinary shares are classified as equity. Share capital represents the nominal value of shares issued. Share premium includes any premiums received on the issue of share capital. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares, or for the acquisition of a business, are included in the cost of acquisition as part of the purchase consideration. Other components of equity includes: Insurance reserves - Contractual percentage of received insurance premiums kept as reserve. Convertible instrument reserve - Equity portion of compounded financial instrument (Convertible Bonds). Any dividend distribution payable to equity shareholders is included in other liabilities when the dividends have been approved prior to the reporting date. 1.12 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities Deferred income tax is provided in full, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Withholding tax Prior to 1 April 2012, distributions of dividends was subject to secondary tax on companies (STC), this expense was per the applicable tax law and was disclosed as part of the tax expense in the income statement. Subsequent to 1 April 2012, STC was replaced by a withholding tax on the declaration of dividends or deemed dividends (as defined in the tax act). The new withholding tax is not a tax for the company. AFRICAN DAWN 4 1 ANNUAL REPORT 2014


AFRICAN DAWN ANNUAL REPORT 14
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