AFRICAN DAWN ANNUAL REPORT 2019 53 Accounting Policies continued Refer to Note 33, for further information on the specific estimates and assumptions used to assess the recoverability of trade receivables. Discounting of interest free loans and loans that bear interest at non-market related rates The following judgements are made relating to these loans: * Credit loans that have no repayment terms are: - classified as financial liabilities at amortised cost; - included in current liabilities (because the company does not have the right to defer payment for at least 12 months after the reporting date;) and - not discounted because the amount that could be demanded by the lender is equal to the carrying amount of the loans. * Credit loans that have repayment terms are: - classified as financial liabilities at amortised cost; - split between non-current liabilities and current liabilities in accordance with the terms. - Loans that are interest free or bear interest at a rate that is not market related are discounted at a market related rate. The imputed interest is deferred onto the Statement of Financial Position and included as part of the loan balance. * Debit loans that have no repayment terms are: - classified as financial assets; - split between non-current assets and current assets in accordance with the intention of the lender; - assessed for impairment; and - not discounted because the amount that could be demanded by the lender is equal to the carrying amount of the loans. * Debit loans that have repayment terms are: - classified as financial assets; - split between non-current assets and current assets in accordance with the terms and the intention of the lender; - assessed for impairment; and - Loans that are interest free or bear interest at a rate that is not market related are discounted at a market related rate. The imputed interest is deferred onto the Statement of Financial Position and included as part of the loan balance. 2019 & 2018 The interest rates that have been applied in the discounting is an effective interest rate of 11,44% (2018: 11.44%). Useful lives of property, plant and equipment and intangible assets Property, plant and equipment is depreciated and intangible assets are amortised on a straight-line basis over its estimated useful life to residual value. Residual values and useful lives are based on management's best estimates and actual future outcomes may differ from these estimates. When the estimated useful life of an asset differs from previous estimates, the change is applied prospectively in the determination of the depreciation or amortisation charge. The residual values, useful lives and depreciation / amortisation methods applied to property, plant and equipment and intangible assets are reviewed by management on an annual basis, taking into account market conditions as well as historical trends. IFRS9 estimates Significant increases in credit risk (SICR) In terms of IFRS9, all loans and advances are assessed at each reporting date to determine whether there has been a significant increase in credit risk (SICR). In cases where SICR has occurred an impairment equal to the lifetime expected credit loss (ECL) is recognised. If, at reporting date the ECL has not increased the company recognises a 12 month ECL. The company identifies SICR on clients that are up-to-date on their loans but who have been subject to SICR events. The company considers the following to be SICR events. An assessment of the credit quality of the client is performed at inception of the loan. Subsequently, a SICR is also noted when loans have fallen into arrears.
AFDAWN AR FINAL 2019
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