AFRICAN DAWN ANNUAL REPORT 2019 42 Accounting Policies continued Financial impact of initial application of IFRS 9 Impact on profit or loss, other comprehensive income and total comprehensive income Impact on profit (loss) for the year has been included in the statement of changes in equity as the group decided not to restate prior years. Taxation impact The adoption of IFRS 9 results in a tax credit to the group’s reserves based on the statutory tax rate of 28%. The amended tax legislation in section 11(jA) of the Income Tax Act, which is effective from when IFRS 9 applies, allows for a 25% doubtful debt allowance relating to the impairment (stage 1). The allowance is increased to 40% where the impairment is measured at an amount equal to the lifetime ECL (i.e. stage 2), and to 85% where the impairment is on a lifetime ECL and the loan meets the definition of “default” in terms of Regulation 67 of section 90 of the Banks Act (stage 3). Effectively, from our 2019 tax year of assessment, we will claim 25% allowance on stage 1, 40% on stage 2 and 85% allowance on loans classified as stage 3. ° IFRS 15 Revenue from Contracts with Customers In the current year, the company has applied IFRS 15 Revenue from Contracts with Customers (as revised in April 2016) and the related consequential amendments to other IFRSs. IFRS 15 replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC-31 Revenue - Barter Transactions Involving Advertising Services. IFRS 15 introduces a 5-step approach to revenue recognition. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Details of these new requirements as well as their impact on the company financial statements are described below. Refer to the revenue accounting policy for additional details. The company has applied IFRS 15 with an initial date of application of 01 March 2018 in accordance with the cumulative effect method, by recognising the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity at 01 March 2018. The comparative information has therefore not been restated. As the current policies comply with the IFRS15 standards there is no financial impact but the disclosure has been amended in compliance with IFRS15. The effect of the adoption of the accounting policies is indicated in the notes to the financial statements as below: IFRS 9 policy disclosure refer to note 1.15 and financial effect refer to note 1.2. IFRS 15 policy disclosure refer to note 1.13 and financial effect refer to note 21. 1.3 Basis of consolidation Subsidiaries Subsidiaries are those entities that are controlled by the Group. Control The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group considers all facts and circumstances relevant to its involvement with an entity to evaluate whether control exists and assesses any changes to the facts and circumstances relevant to the entity and reassesses the consolidation requirements on a continuous basis. Changes in ownership interest in subsidiaries without change in control Transactions with non-controlling interests that do not result in the loss of control are accounted for as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid or received and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.
AFDAWN AR FINAL 2019
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