AFRICAN DAWN ANNUAL REPORT 2019 54 Accounting Policies continued Forward-looking information It is a fundamental principle of IFRS9 that the ECL impairment provision that the company holds against potential future losses should take into account changes in the economic environment in the future. To capture the effects of changes to the economic environment management have taken into consideration market forward-looking impairment rates applied and benchmarked this against their own assessments. Three economic scenarios (negative, baseline and positive scenario) are taken into account when calculating future expected credit losses. The probability of each scenario is determined by management estimation, and are factored into the calculation of the probability of default (“PD”), exposure at default (“EAD”), and the loss given default (“LGD”) within the ECL calculation. Modelling assumptions Historical data may not always be reflective of the future. The way in which it is used by statistical ECL models (PD, EAD, LGD) to estimate the timing and amount of the forecasted cash flows based on historical default data, roll rates and recoveries, requires consideration of sub-segments. These include aspects such as client risk groups, time on book, product term, payment frequency, default statuses, employment, industry and rescheduling status and the behaviour score of the client. 1.19 Share capital and share premium An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Ordinary shares and share premium are classified as equity. Ordinary shares are recoginsed at par value and classified as “Share Capital” in equity. Any amounts received from the issue of shares in excess of par value is classified as “Share Premium” in equity. Where shares are issued at less than par value the difference between par value and issue value is offset against “Share Premium”. 2. New Standards and Interpretations Standards and interpretations not yet effective The company has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the company’s accounting periods beginning on or after 01 March 2019 or later periods:
AFDAWN AR FINAL 2019
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