AFRICAN DAWN ANNUAL REPORT 2019 49 Accounting Policies continued small, homogeneous assets. The group uses an ECL provisioning model based on historical roll rates and applies forward-looking industry available knowledge to provide a forward economic over-lay onto the historical rates. The loss allowance is reduced by the collateral in place over all its trade receivables. The collateral mainly consist out of directors loans which have been given up as security for selected debtors. The value of the collateral is considered before incorporating it within the impairment calculation. Adjustments to the ECL provision are recognised through use of a loss allowance account. The ECL gain or loss is included in other operating expenses in profit or loss as a movement in credit loss allowance. The group stratifies the ECL provision results into similar groups to ensure results are stable and appropriate to predict future cash flows for clients with similar characteristics. Refer to the classes of trade receivables above for the stratification criteria. The ECL provision is calculated as the excess of the balance of a loan above the present value of its expected cash flows, discounted using the effective interest rate on the financial instrument as calculated at initial recognition (initiation fee plus interest). Default The group considers that a default has occurred when a debtor is more than 75 days past due upon which the debtor is transferred to collection book. Unless it has reasonable and supportable information that demonstrates otherwise. Write off policy The group writes off a receivable when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery. Any recoveries made are recognised in profit or loss. From the trade receivables allocated to the collections book, loans that are 180 days overdue are fully written off unless the debtor was transferred to the legal book. Bad debt recovered In the event that debt which has been written off is recovered the bad debt recovered is recognised directly in the profit and loss statement. Credit risk Details of credit risk are included in the trade and other receivables note and the financial instruments and risk management Note 33. Derecognition Refer to the derecognition section of the accounting policy for the policies and processes related to derecognition. Any gains or losses arising on the derecognition of trade and other receivables is included in profit or loss in the derecognition gains (losses) on financial assets at amortised cost line item. Loans advanced including group loans Classification and measurement. Loans are initially recognised at fair value. Loans for which repayment terms have been set are classified as financial assets subsequently measured at amortised cost, using the effective interest method. The loans are held to collect contractual cash flows on the principal amount and interest over the term of the loan. Loans for which no repayment terms have been set are regarded as being repayable on demand. These loans are discounted from the first day repayment can be demanded. Impairment The group has established a policy to perform an assessment, at the end of each reporting period, of whether an advance’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. Based on the above process, the group groups its advances into Stage 1, Stage 2 and Stage 3, as described below (the advances can alternate between stages):
AFDAWN AR FINAL 2019
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