Accounting Policies continued 1.20 Significant judgements and sources of estimation uncertainty (continued) AFRICAN DAWN 62 ANNUAL REPORT 2015 Impairment of non-financial assets The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in- use calculations and fair value less costs of disposal. These calculations require the use of estimates and assumptions. It is reasonably possible that certain key assumptions may change, which may then impact our estimations and may then require a material adjustment to the carrying value of assets. The assets that have been tested for impairment are as follows: • Goodwill (2015) - refer to note 4 • Intangible assets (2015) - refer to note 5 • Elite (2015 and 2014) - refer to note 15 • Elite Two (2015) - refer to note 7 Insurance revenue Certain of the micro finance debtors choose to purchase insurance from Elite and Elite Two. The insurance covers the debtor in the event of death, disability or loss of employment. The Group does not re-insure the debts and therefore bears the risk in such situations. IFRS 4 - Insurance Contracts, is not applicable to the Company because the Company does not administrator the insurance contracts. All the administration of the contracts is conducted by Guardrisk. Although the Group is not an insurer, the revenue has been described as insurance revenue to differentiate it from other categories of revenue. Estimation uncertainty Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Impairment of trade receivables in Elite and Elite Two The amount recognised related to the impairment of receivables by Elite and Elite Two requires the use of significant estimates and assumptions. The Group reviews its loans to assess impairment at least on a monthly basis. In determining whether an impairment loss should be recognised, the Group makes judgements as to whether there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the Group. Management uses estimates based on historical loss experience for assets with similar credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing requires significant judgement and estimation. Refer note 1.13 for the accounting policy regarding the impairment of loans. Subsequent to February 2015, a material prior period error relating to the 2014 and 2013 impairment of debtors in Elite was discovered. This resulted in an additional amount of R6,732,077 being recognised as an impairment for 2014 and R7,455,429 for 2013. As a result, the 2014 and 2013 financial statements have been restated (refer to note 42). The amount recognised in 2015 for the impairment of Elite debtors was R10,845,633. Refer to note 44, for further information on the specific estimates and assumptions used to assess the recoverability of trade receivables. Goodwill impairment - Knife Capital Group The goodwill of R8,076,000 relating to the acquisition of Knife Capital Group was tested for impairment at year end. No impairment has been recognised. Refer to note 4 for further information about the estimates and assumptions used.
AFRICAN DAWN 2015 Annual Report
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