AFRICAN DAWN ANNUAL REPORT 2018 Notes to the Financial Statements continued Annual Financial Statements For the year ended 28 February 2018 80 36. Risk Management Risk Management definitions For the purposes of risk management, the following definitions are applicable: * Credit risk – the risk that the Group may not recover amounts it is owed (debit balances - receivables, bank, debit loans). * Liquidity risk – the risk that the Group may not be able to pay an amount as it becomes due. * Interest rate risk - Cash flow interest rate risk – the risk that the cash flows will change because the interest rate has changed. - Fair value interest rate risk – the risk that the fair value of the instrument will change because the interest rate has changed. * Equity price risk - the risk that the cash flows or fair value of the instrument will change because the share price has changed. * Commodity price risk - the risk that the cash flows or fair value of the instrument will change because the commodity price has changed. Concentrations of risk There are no concentrations of risks. Exposure The Group is exposed to credit risk, interest rate risk and liquidity risk as follows: Financial instrument Credit Risk Liquidity risk Cashflow interest rate risk Fair value interest rate risk Non-Interest rate risk Loans to Group companies Yes No No Yes* No Trade receivables Yes No Yes Yes* No Other receivables Yes No No Yes* Yes Cash and cash equivalents Yes No Yes No No Borrowings No Yes Yes Yes* Yes Loans from Group companies No Yes No No Yes Loans from directors No Yes No Yes No Trade payables No Yes No No Yes *Balances that are either interest free or where interest is earned / paid at less than a market related rate. From an operational perspective, there is no interest rate risk. However, from an IFRS perspective, these loans are discounted and deemed interest income / expense is recognised. Therefore such loans give rise to fair value interest rate risk.
AFRICAN DAWN 2018 Annual Report
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