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AFRICAN DAWN Annual Report 2016

Accounting Policies continued • Origination fees on loans granted These fees are charged upfront, are capitalised into the loan, and are primarily based on the cost of granting the loan to the individual. In accordance with IAS 18 - Revenue, these origination fees are considered an integral part of the loan agreement and are therefore recognised as an integral part of the effective interest rate and are accounted for over the shorter of the original contractual term and the actual term of the loan using the effective interest rate method. The deferred portion of the fees is recorded in the statement of financial position as a provision for deferred administration fees. The group does not defer any related operating costs, as these are all internal costs which are not directly attributable to individual transactions and as such are primarily absorbed infrastructure costs. • Monthly service fees These are fees which form an integral part of the effective interest rate and are charged to the customers on a monthly basis. These fees are recognised as part of the effective interest rate over the shorter of the original contractual term and the actual term of the loans and receivables. Beyond the original contractual term of the loan, the fee is recognised in profit or loss as it is charged to the customer on a monthly basis. While both these components are regarded as integral parts of the effective interest rate, they are not accounted for as interest income, but as non-interest income. Rendering of services The Group generates revenues from consulting and advisory services. Consideration received for these services is initially deferred, included in other liabilities, and is recognised as revenue in the period when the service is performed. The Group determines the stage of completion by considering both the nature and timing of the services provided and its customer’s pattern of consumption of those services, based on historical experience. Where the promised services are characterised by an indeterminate number of acts over a specified period of time, revenue is recognised on a straight- line basis. Revenue from consulting services is recognised when the services are provided by reference to the contract’s stage of completion at the reporting date using percentage complete method. Rental income The Group earns rental income from properties in possession. Rental income is recognised on a straight-line basis over the term of the lease. Investment income Investment income relates to interest earned on cash and cash equivalents and is recognised on the same basis as interest income as outlined above. Dividend income Dividend income is recognised when the right to receive payment is established on the ex-dividend date for equity instruments and is included in dividend income under non-interest revenue. Dividend income is recognised separately from other fair value movements. 1.16 Financial instruments Financial instruments, as reflected on the statement of financial position, include all financial assets, financial liabilities, and equity instruments. They exclude prepayments, deferred income, investments in subsidiaries, investments in associates, property and equipment, deferred taxation, taxation receivable / payable, provisions, intangible assets and goodwill. Financial instruments are accounted for under IAS 32 - Financial Instruments: Presentation and IAS 39 - Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures. AFRICAN DAWN ANNUAL REPORT 2016 45


AFRICAN DAWN Annual Report 2016
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