Accounting Policies continued 1.17 Financial instruments (continued) AFRICAN DAWN 54 ANNUAL REPORT 2015 Financial liabilities at amortised cost All financial liabilities, other than those at fair value through profit or loss, are classified as in this category. The following are included in this category: • Borrowings • Loans from group companies • Trade payables • Other payables Subsequent measurement Subsequent to initial measurement, financial instruments are either measured at fair value or amortised cost, depending on their classification. The Group has no financial instruments that are subsequently measured at fair value. Financial liabilities at amortised cost Such liabilities are measured at amortised costs using the effective interest rate. Loans and receivables Loans and receivables are measured at amortised cost using the effective interest rate method, less an allowance for impairment losses. All of the Group’s trade debtors are included in the loans and receivables category. These advances arise when the Group provides money, goods or services directly to a debtor with no intention to trade the receivable. Loans and advances originated by the Group are generally in the form of short-term personal unsecured loans that are paid back in fixed equal instalments with terms of 1 to 6 months. Certain loans are secured – refer to note 44. Impairments Assets carried at amortised cost The Group assesses at each reporting date whether there is objective evidence that an asset or group of assets is impaired. Impairment provisions raised during the year are charged to profit or loss. The Group reviews the carrying amounts of its loans and receivables to determine whether there is any indication that those loans and receivables have become impaired, using objective evidence at a loan level. A loan or receivable is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event(s) has an adverse impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognised. Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Group about the following loss events: • Significant financial difficulty of the debtor. • A breach of contract, such as a default or delinquency in the payment of interest or principal. • The lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider. • It becoming probable that the borrower is over-indebted. • Indication that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the Group, including: • adverse changes in the payment status of borrowers in the Group (e.g. an increased number of delayed payments); or • national or local economic conditions that correlate with defaults on the assets in the Group e.g. an increase in the unemployment rate in the geographical area of the borrowers or adverse changes in industry conditions that affect the borrowers in the Group).
AFRICAN DAWN 2015 Annual Report
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