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AFRICAN DAWN 2015 Annual Report

Notes to the Financial Statements continued 42. Changes to prior year amounts (continued) The board also initiated a thorough investigation to ascertain the full scope of the material prior period error. This investigation included a legal due diligence into the historic business operations of Elite. No other issues arose as a result of the due diligence. The Company did not recognise any taxation during 2014 and 2013 and does not recognise deferred tax on assessed losses because it does not meet the requirements in IAS 12. As a result, the prior year adjustment has no impact on tax or deferred tax. R3,547,000 was recognised as an impairment against non-current assets held for sale, however the impairment related to the trade receivables in Elite. The impairment error of R14,188,000 includes the impairment for the R3,547,000. AFRICAN DAWN 109 ANNUAL REPORT 2015 Elite Two error (2014) and (2013) An assessment of the relationship between Elite and Elite Two revealed that Elite had significant influence over Elite Two from 2011 until it obtained control in November 2014. This is because Elite had the right to appoint two of the four directors despite it holding no shares in Elite Two. In light of the fact that Elite had not previously accounted for any investment in an associate, no equity accounted earnings relating to Elite Two were recognised in 2012, 2013 and 2014. Instead, a cumulative management fee of R2,259,181 was recognised in 2014. This is therefore a material prior period error which has been retrospectively restated. This resulted in R787,247 being recognised as profit from equity account investment in 2013 and R 1,471,931 in 2014. Elite Two became a subsidiary in November 2014 when 100% of the share capital was purchased from Sandown Capital Proprietary Limited in terms of a purchase agreement. The Company is now consolidated by Afdawn Group. Refer to note 37 for information on the deemed disposal of the associate and the acquisition of the subsidiary. The Company did not recognise any taxation during 2014 and 2013 and does not recognise deferred tax on assessed losses because it does not meet the requirements in IAS 12. As a result, the prior year adjustment has no impact on tax or deferred tax. Elite Cell error (2014) A contract was entered into with Guardrisk insurance company to insure unsecured receivables via a closed cell captive. Elite is the owner of the cell captive and bears all the risk if the cell captive does not have sufficient reserves to settle claims. The cell captive should have been included in the annual financial statements of Elite. Therefore a prior period error has occurred in Elite. The Company did not recognise any taxation during 2014 and does not recognise deferred tax on assessed losses because it does not meet the requirements in IAS 12, as a result, the prior year adjustment has no impact on tax or deferred tax. Non-cash items in the cash flow statement (2014) Several non-cash items were not adjusted against the loss from operations to arrive at the cash generated from operations. These have subsequently been adjusted. This prior year adjustment has no impact on tax or deferred tax. Reclassification Elite Two The loan between Elite and Elite Two was originally classified as other financial assets in 2013 but in 2014 was reclassified as a borrowing. To enhance comparability the amount of R4,192 has been reclassified as borrowings in 2013.


AFRICAN DAWN 2015 Annual Report
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