AFRICAN DAWN ANNUAL REPORT 2019 52 Accounting Policies continued This judgement is based on a careful consideration of the following: * Financial statements should be prepared on a going concern basis unless it is intended to liquidate the entity or to cease trading or there is no realistic alternative but to do so. * In considering whether the going concern assumption is appropriate, all available information is taken into account, including information about the foreseeable future. * Where there are material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern, those uncertainties should be disclosed. * The material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern are outlined in the table below. The table also outlines the actions being taken to manage these uncertainties and also the current status of these uncertainties and actions. Uncertainty Action Status Operating losses incurred by the group Additional funding to be over the last two years. obtained in the group. During the current year there was a specific share placement and R9.3 million was raised. Some of these funds were used to settle the SARS liability as well as recapitalize Elite with R5 million. The directors are currently also sourcing additional funding. With the R5 million already invested and potential additional funding Elite will be able to grow and generate profit going forward. Afdawn's ability to pay ongoing operational expenses. Directors and various parties have provided and continue to provide funding and other ongoing operational expenses. Management are investigating other opportunities for revenue growth. The directors have waived their right to claim unpaid salaries for this period and the holding company of Arvesco has provided a letter of comfort to cover ongoing expenses while additional funding is sought. Elite Group is positioning itself to do point of sales lending and management are evaluating the opportunity to establish a commercial finance business line in PTF2. We draw attention to the fact that the group incurred a net loss of R9,39 million (2018: R2,66 million) and that the company incurred a net loss of R3,92 million (2018: R3,08 million) during the year ended 28 February 2019. Having regard to the nature of the uncertainties, the actions being taken and also the current status of these uncertainties, the judgment of the management and board is that it is appropriate that the financial statements be prepared on the going concern basis. Significant estimation uncertainty Impairment of non-financial assets The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair value less costs of disposal. These calculations require the use of estimates and assumptions. It is reasonably possible that certain key assumptions may change, which may then impact our estimations and may then require a material adjustment to the carrying value of assets. The assets that have been tested for impairment and the specific estimates and assumptions are as follows: • Goodwill 2019 and 2018 - refer to Note 4 • Investment in subsidiaries – refer to Note 6 Loss allowance of trade receivables in Elite The amount recognised related to the impairment of receivables by Elite and Elite Two requires the use of significant estimates and assumptions. The Group reviews its loans to assess impairment at least on a monthly basis. In determining whether an impairment loss should be recognised, the Group makes judgements as to whether there has been an adverse change in the payment status of borrowers in a Group, or national or local economic conditions that correlate with defaults on assets in the Group. Management uses estimates based on historical loss experience for assets with similar credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing requires significant judgement and estimation. Refer Note 1.11 for the accounting policy regarding the impairment of loans.
AFDAWN AR FINAL 2019
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