AFRICAN DAWN ANNUAL REPORT 2019 48 Accounting Policies continued Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits. Cash and cash equivalents are stated at amortised cost which approximates fair value due to the short-term nature of these instruments. Trade and other receivables Trade receivables are grouped in terms of the accounting policy into: • Current receivables - includes debtors that are paying within their credit terms as well as those that are up to 75 days overdue where after they are transferred to the collections book. • Collection receivables - debtors remain in collections and will move through the ageing brackets with provisions recognised at varying percentages until they are 180 days overdue at which point they are fully written off unless: * The debtor was previously written off because it was sequestrated or deceased; or * The debtor was transferred to the legal book. • Legal receivables - includes debtors transferred from the collections book when the debtors have the following legal status: * A debt pack has been signed that would lead to an emolument attachment order; or * The debtor is placed under administration; or * The debtor is placed under debt review Classification Trade and other receivables, excluding, when applicable, VAT and prepayments, are classified as financial assets subsequently measured at amortised cost. They have been classified in this manner because their contractual terms give rise, on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding, and the group's business model is to collect the contractual cash flows on trade and other receivables. Recognition and measurement Trade and other receivables are recognised when the group becomes a party to the contractual provisions of the receivables. They are measured, at initial recognition, at fair value plus transaction costs, if any. They are subsequently measured at amortised cost. The amortised cost is the amount recognised on the receivable initially, minus principal repayments, plus cumulative amortisation (interest) using the effective interest method of any difference between the initial amount and the maturity amount, adjusted for any loss allowance. Impairment The Group recognises a loss allowance to the value of the lifetime expected credit losses for trade receivables under the general approach as envisaged by IFRS 9, excluding prepayments, deposits and Value Added Tax. A separate impairment percentage is calculated based on the different portfolios as described above. The Group has established a provision that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The group categorises assets based on their term, there performance as well as the type of receivable as described above. Impairment provisions are applied to these categories of trade receivables in order to calculate the lifetime ECL recognised on trade and other receivables. The Group considers that there has been a significant increase in credit risk when contractual payments are past due and therefore applies a greater impairment percentage to these assets, than those who are fully performing. Measurement and recognition of expected credit losses The provision is based on historic credit loss experience, adjusted for current and forecast direction of economic conditions at the reporting date, including the time value of money, where appropriate. The most significant class of financial asset subject to an ECL provision is trade receivables. Trade receivables mostly comprise a large number of
AFDAWN AR FINAL 2019
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