AFRICAN DAWN ANNUAL REPORT 2019 47 Accounting Policies continued Once a financial asset or a group of similar financial assets have been categorised as a stage 3 receivable (credit impaired), interest income is recognised on the carrying value of the receivable net of impairment losses recognised. 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. 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 Group does not capitalise any related operating costs which are not integral to the creation of micro-financing loans, as these costs are not directly attributable to individual transactions and are recorded in profit and loss as incurred. 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. The stage of completion is determined with reference to services provided in relation to the total services to be provided as agreed between the parties. 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. 1.15 Financial instruments Financial instruments held by the company are classified in accordance with the provisions of IFRS 9 Financial Instruments. Broadly, the classification possibilities, which are adopted by the company as applicable, are as follows: Financial assets which are debt instruments: • Amortised cost. (This category applies only when the contractual terms of the instrument give rise, on specified dates, to cash flows that are solely payments of principal and interest on principal, and where the instrument is held under a business model whose objective is met by holding the instrument to collect contractual cash flows). Financial liabilities: • Amortised cost. Note 1.15 Financial instruments and risk management presents the financial instruments held by the company based on their specific classifications. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The specific accounting policies for the classification, recognition and measurement of each type of financial instrument held by the company are presented below:
AFDAWN AR FINAL 2019
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