Notes to the Financial Statements continued 15. Non-current assets held for sale and discontinued operations In 2013 the non-current assets held for sale of R4,128,829 consisted of: • ERF 1593 - ERF 1599 Volksrust, Mpumulanga which was sold during 2014 for a loss of R311,141. • Partially developed land at ERF149 Anzac, Extension 2, Benoni, Gauteng has been re-classified in 2014 as property in possession as no viable buyer had been found. The carrying amount is R3,140 million (2014: 3,420 million). Refer to note 10. AFRICAN DAWN 86 ANNUAL REPORT 2015 Non-current assets held for sale Discontinued operations In 2014 in line with the new vision for the Group, management decided to discontinue the personal and short term financing division of the Group including Elite which includes, Elite Cell and Nexus. All these were classified as discontinued operations. The directors were in discussion with potential buyers for the acquisition of Elite and Elite Cell. The Company’s assets and liabilities were reclassified as non-current assets held for sale. A contract for the sale of Elite Group was concluded in May 2014, but the buyers were in breach of the contract and the contract was cancelled, a penalty of R1,315,789 was received (refer to note 25). The discontinued operations and non-current assets held for sale have thus been reclassified into operations. Nexus went into liquidation on 18 October 2014 and has been deconsolidated from that date (refer to note 38). For details on the remaining discontinued operation refer to note 33. The Elite impairment test was done as follows: Amount Elite carrying amount in African Dawn Capital Ltd R’000 10,882 The recoverable amount Elite has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which Elite operates. The key assumptions, long term growth rates and discount rates used in the value-in-use calculations are as follows: Compounded annual revenue increase % 1 3% to 5% Compounded annual total operating cost increase % 2 5% WACC 17.37% Recoverable amount of Elite R'000 12,334 1. Revenue increase is based on past performance and management’s expectation of growth. Management expects growth of 3% for 3 years and 5% for 2 years. 2. Operating costs are the fixed costs of Elite which do not vary significantly with loans made. Management forecasts these costs based on the current structure of the business, and adjusts for inflationary increases and these do not reflect any future restructurings or cost saving measures. The recoverable amount calculated based on value in use exceeded the carrying amount by R1 452,000. An annual revenue growth rate of 4,5%, annual operating costs growth rate of 5,5 % or a rise in WACC to 18,5% would, all changes taken in isolation, result in the recoverable amount being equal to the carrying amount. No impairment was necessary.
AFRICAN DAWN 2015 Annual Report
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