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# AFRICAN DAWN ANNUAL REPORT 14

Notes to the Financial Statements
Group Company
2012 2011 2012 2011
R '000 R '000 R '000 R '000
34. Risk management continued
The maximum liquidity risk is calculated below assuming that the convertible bonds are settled for cash.
Current within Current within Non-current After 5
6 moths 6 to 12 months 2 to 5 years years
Borrowings 1,091 7,558 8,088 -
Lease commitments 2,160 - - -
Trade and other payables 6,198 - - -
Tax 9,113 9,113 - -
18,562 16,671 8,088 -
Interest rate risk (Financial risk)
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument (financial asset or financial liability) will
fluctuate because of changes in market interest rates. The group manages the risk by minimising the effect of long term borrowings
linked to prime by keeping the rate at a lower rate to the interest that is charged to debtors. At 28 February 2014, the group is exposed
to changes in market interest rates (Prime) through borrowings at variable interest rates linked to prime. The current effect of interest
rate risk is assessed as being immaterial, supported by the fact that that the group’s borrowings and receivables are subject to similar
interest rate risks. The table in note 16 illustrates the sensitivity of profit to a reasonably possible change in interest rates of +/-1% on
liabilities. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations
are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date
that are sensitive to changes in interest rates. All other variables are held constant. The effect on the assets of an increase or decrease
in the prime interest rate by 1% is calculated as profit R117,370 or loss (R117,370) respectively.
AFRICAN DAWN 7 0 ANNUAL REPORT 2014

AFRICAN DAWN ANNUAL REPORT 14

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