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AFRICAN DAWN ANNUAL REPORT 2020

Accounting Policies continued

1.4 Right-of-use assets and lease liability

As described in Note 1.2 the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information has not
been restated. This means comparative information is still reported under IAS 17 and IFRIC 4.

Accounting policy applicable from 1 March 2019
The Group as a lessee

For any new contracts entered into on or after 1 March 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as
‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.

Measurement and recognition of leases as a lessee

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet.
The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by
the Group.
In assessing the lease period of the office facilities, management considers the nature of the office to be adaptable to variety of facilities and as
a result the likelihood of the extending of the lease term or termination of the lease term are both possible. The agreed lease period is therefore
used in determining the lease payment until such time as the likelihood of extending or terminating the lease becomes probable.

The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful
life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted
using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest.

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a
right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over
the lease term. Assets with a value below R100,000 are considered to be low value assets.

On the statement of financial position, right-of-use assets have been included in property, plant and equipment.

Accounting policy applicable before 1 March 2019

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the lessee, all other leases are
classified as operating leases.

Operating leases – lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts
recognised as an expense and the contractual payments are recognised as an operating lease liability. This liability is not discounted.
1.5 Borrowing costs

Borrowing costs are recognised in profit or loss in the period in which they are incurred.

1.6 Employee benefits
Short-term employee benefits

The Group provides only short-term employee benefits. There are no post retirement employee benefits.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in
the case of non-accumulating absences, when the absence occurs.

The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such
payments as a result of past performance.
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