Notes to the Financial Statements continued 42. Changes to prior year amounts (continued) Material prior period errors and other reclassifications The prior year amounts have been restated for material prior period errors and additional items that have been reclassified as explained below: AFRICAN DAWN 108 ANNUAL REPORT 2015 Prior period errors Reclassification within trade and other receivables (2014) In the prior years, certain debtors that were classified as other receivables in the separate (i.e. company) financial statements of Afdawn were classified as trade receivables on consolidation. In the separate financial statements, the debtors were fully written off and therefore shown as nil. However, on consolidation the gross amount due and an impairment were separately disclosed. These have been retrospectively reclassified on consolidation. There is no impact on the statement of financial position, the statement of profit or loss and other comprehensive income, the statement of changes in equity or the statement of cash flows because the debtors were fully impaired. The impact is included in the impairment as disclosed within note 12. Elite trade receivables - doubtful debt impairment error (2014 and 2013) A material prior period error relating to the additional impairment of loans in Elite was discovered during the year. Part of the credit management process within Elite involves managing debtors within one of three books: • Current book – includes debtors that are paying within their credit terms as well as those that are up to 75 days overdue where after they are transferred to the collections book. • Collections book – debtors remain in collections and will move through the ageing brackets with provisions recognised at varying percentages until they are 180 days overdue at which point they are fully written off unless: • The debtor was previously written off because it was sequestrated or deceased; or • The debtor was transferred to the legal book. • Legal book – includes debtors transferred from the collections book when the debtors have the following legal status: • A debt pack has been signed that would lead to an emolument attachment order; or • The debtor is placed under administration; or • The debtor is placed under debt review. Debtors are written off in the legal book once deceased, sequestrated or the emoluments attachment order has lapsed. Elite has specific percentages that are used to calculate the provision based on the ageing of the debtors. These are outlined below: • Current book – 0% progressing to 30% and then, if required, transferred to the collections book; • Collections book – 45% progressing to 90% and then, if required, either written off or transferred to the legal book; • Legal book – 30% progressing to 90% and then written off if required. In certain circumstances, the debtors that had been moved from the current book to the collections book (or from the collections book to the legal book) were re-aged. For example, a debtor that was 75 days overdue in the current book would be transferred to the collections book with the same ageing as that in the current book being retained initially. However, when a promise to pay was received from the debtor, or the debtor was flagged as being traced or a debt management agreement was entered into with the debtor, the debtor was re-aged to current. The impact of this re- ageing meant that instead of a higher percentage being recognised as provision because the debtor fell into an older ageing bracket, a lower percentage was used because it appeared that the debtor was current. As a result, a material prior period error has occurred. In order to determine the extent of the material prior period error, the Board appointed an independent third-party to assist with the re-ageing and calculation of the impairment in accordance with IAS 39 – Financial Instruments: Recognition and Measurement.
AFRICAN DAWN 2015 Annual Report
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