AFRICAN DAWN ANNUAL REPORT 2018 43 Accounting Policies continued The Group applies the revenue recognition criteria set out below to each separately identifiable component of the sales transaction. The consideration received from these multiple-component transactions is allocated to each separately identifiable component in proportion to its relative fair value. Interest income Interest income is accrued on a yield to maturity basis by reference to the principal outstanding and the interest rate applicable. Interest income is recognised in profit or loss using the effective-interest method taking into account the expected timing and amount of cash flows. Where the Group advances interest-free loans, the interest income is accrued on a yield to maturity basis using an imputed interest rate, taking into account the risk rating of the customers to whom these loans are granted. In instances where a loan is in arrears for greater than 90 days and moved into the collection category, an assessment is made regarding the recoverability of the loan or Group of loans and if necessary, based on available evidence at that date, the accrual of interest from that date is partially or fully suspended and not recognised in profit or loss until recovery is highly likely or actually recovered. • Origination fees on loans granted These fees are charged upfront, are capitalised into the loan, and are primarily based on the cost of granting the loan to the individual. In accordance with IAS 18 - Revenue, these origination fees are considered an integral part of the loan agreement and are therefore recognised as an integral part of the effective interest rate and are accounted for over the shorter of the original contractual term and the actual term of the loan using the effective interest rate method. Related transaction costs are also deferred and recognised as an adjustment to the effective interest rate. The deferred portion of the fees is recorded in the statement of financial position as a credit to trade debtors and unwound to interest income over the term of the loan. The Group does not defer any related operating costs, as these are all internal costs which are not directly attributable to individual transactions and as such are primarily absorbed infrastructure costs. Non-interest income Non-interest income consists primarily of administration fees on loans and advances. Administration fees charged consist of monthly service fees: • Monthly service fees The fee is recognised in profit or loss as it is charged to the customer on a monthly basis. Rendering of services The Group generates revenues from consulting and advisory services. Consideration received for these services is initially deferred, included in other liabilities, and is recognised as revenue in the period when the service is performed. The Group determines the stage of completion by considering both the nature and timing of the services provided and its customer’s pattern of consumption of those services, based on historical experience. Where the promised services are characterised by an indeterminate number of acts over a specified period of time, revenue is recognised on a straight- line basis. Revenue from consulting services is recognised when the services are provided by reference to the contract’s stage of completion at the reporting date using percentage complete method. Rental income The Group earns rental income from properties in possession. Rental income is recognised on a straight-line basis over the term of the lease. Insurance income The group earned insurance income from certain micro-finance debtors. The insurance premiums are managed by a third party and a commission is received based on the premiums which are recognised in revenue when they become due. 1.14 Investment Income Investment income relates to interest earned on cash and cash equivalents and is recognised on the same basis as interest income as outlined above.
AFRICAN DAWN 2018 Annual Report
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