AFRICAN DAWN ANNUAL REPORT 2017 48 Accounting Policies continued The assets that have been tested for impairment are as follows: • Goodwill 2017 and 2016 - refer to note 4 • Intangible assets 2017 and 2016 - refer to note 5 Insurance revenue Certain of the micro finance debtors chose to purchase insurance from Elite and Elite Two in 2016. 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 bore 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 was 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 1.11 for the accounting policy regarding the impairment of loans. Refer to note 35, 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. An impairment has been recognised, refer to note 4 for further information about the estimates and assumptions used. Discounting of interest free loans Several loans are interest free or bear interest at a rate that is not market related. The following judgements are made relating to these loans: • Credit loans that have no repayment terms are: • classified as liabilities at amortised cost, • included in current liabilities (because the company does not have the right to defer payment for at least 12 months after the reporting date;) and • not discounted because the amount that could be demanded by the lender is equal to the carrying amount of the loans. • Credit loans that have repayment terms are: • classified as liabilities at amortised cost, • split between non-current liabilities and current liabilities in accordance with the terms; and • discounted over the repayment period with deemed interest expense being recognised subsequent to the initial recognition. • Debit loans that have no repayment terms are: • classified as loans and receivables; • split between non-current assets and current assets in accordance with the terms and the intention of the lender; • assessed for impairment; and • discounted over the estimate repayment period with deemed interest income being recognised subsequent to the initial recognition. • Debit loans that have repayment terms are: • classified as loans and receivables; • split between non-current assets and current assets in accordance with the terms and the intention of the lender; • assessed for impairment; and • discounted over the repayment period with deemed interest income being recognised subsequent to the initial recognition.
AFRICAN DAWN 2017
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