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AFRICAN DAWN ANNUAL REPORT 14

Notes to the Financial Statements Group Company 2014 2013 2014 2013 R '000 R '000 R '000 R '000 34. Risk management continued Credit risk (Financial risk) Credit risk is the risk that a counterparty fails to repay interest, capital or otherwise to fulfil their contractual obligation under loan agreements or other credit facilities arising from advances made by the Group. The Group is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, investment in bonds. The Elite Group Proprietary Limited’s core business revolves around providing unsecured credit to emerging and middle market consumers, this in its nature involves assuming higher levels of credit risk. Therefore credit risk is the single biggest financial risk and therefore managed in detail and on a day to day level with formalized monthly credit meetings. To accept increased credit risk, an appropriate premium is priced into each credit product to ensure that acceptable returns are generated for shareholders. Credit risk premiums are based on expected probability of defaults and estimated recoveries from defaulters. Credit risk for individuals are mitigated by granting of loans as far as possible to individuals where repayment is received from debit order deductions or payroll deductions. The creditworthiness of all applicants is evaluated in accordance with the National Credit Act and granting of loans is only made to individuals that pass the creditworthiness of NCR and company developed risk and repayment criteria. The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below: Financial instrument Other financial assets - 938 - - Intercompany receivables - - 46,473 49,022 Trade and other receivables 19,047 83,340 2,151 2,697 Cash and cash equivalents 1,084 9,014 397 320 Total 20,131 93,292 49,021 52,039 The group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporate this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties. The maximum exposure to credit risk at the reporting date is the fair value of each class of loan and receivable mentioned. Some of the unimpaired trade receivables are past due as at the reporting date. Information on trade receivables past due but not impaired are as follows: Debtors balance past due but not impaired 1 month past due - 4,887 - - 2 months past due 261 1,724 - - 3 months past due 49 2,096 - - 4 months past due 11,686 18,751 - - 11,996 27,458 - - AFRICAN DAWN 7 1 ANNUAL REPORT 2014


AFRICAN DAWN ANNUAL REPORT 14
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