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AFRICAN DAWN Annual Report 2016

Accounting Policies continued The material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern are outlined below This judgement is based on a careful consideration of the following: • Financial statements should be prepared on a going concern basis unless it is intended to liquidate the entity or to cease trading or there is no realistic alternative but to do so. • In considering whether the going concern assumption is appropriate, all available information is taken into account, including information about the foreseeable future. • Where there are material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern, those uncertainties should be disclosed. The material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern are outlined in the table below. The table also outlines the actions being taken to manage these uncertainties and also the current status of these uncertainties and actions. Uncertainty Action Status Timing of the amount payable to SARS (refer to note 12). The directors have engaged with tax advisors to assist them in making a submission to SARS and to negotiate a settlement agreement. The current relationship with SARS is constructive and conducive to an amicable outcome. The legal advisors are awaiting an appointment to finalise with SARS. Ability of Afdawn and all of its subsidiaries to meet ongoing commitments. The risk of this uncertainty materialising in a manner that could affect the relevance of the going concern assumption could arise in a period of about 5 months’ time, refer note 37. A number of actions are being taken to mitigate the risk of this uncertainty materialising. These include: (a) Discussions are under way with various parties that could result in the sale or other realization of various assets (or portions thereof). In one instance the possible transaction would also generate additional income streams. (b) The company has a long-enduring and very constructive relationship with its funders. Experience has proved that these relationships can be relied on to support the continued existence of the group. a) Some of these discussions are at an advanced stage and are considered to have a reasonably high probability of resulting in transactions. b) There is ongoing engagement with funders Elite has been repaying the Sandown loan on a monthly basis, but has not fully complied with the agreed repayment schedule. Sandown could demand repayment of the loan. Elite has made arrangement with Sandown on a monthly basis when needed. Elite has ongoing negotiations with Sandown. These negotiations centre on accommodating Elite’s ability to repay the loan over longer period. Sandown’s continued support is based on the successful conclusion of the recapitalisation of Elite referred to below. Elite has repaid R4,8m of the original R15m Sandown loan. Elite needs to be recapitalized. A third party will acquire 51% of the economic interest in Elite by providing R15m of permanent capital, a further R15m loan funding facility for 5 years and access to a client base. Afdawn will convert a portion of its shareholders loan into equity in Elite. This will give Elite the ability to generate the required cash flow to fund operations, growth and other financial obligations. The shareholder’s loan will be converted into equity as a condition of the sale. A sale agreement has already been signed with a third party. Having regard to the nature of the uncertainties, the actions being taken and also the current status of these uncertainties, AFRICAN DAWN ANNUAL REPORT 2016 51


AFRICAN DAWN Annual Report 2016
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