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AFRICAN DAWN ANNUAL REPORT 2020

Accounting Policies continued

• Interest income on trade receivables and originating fees
Revenue is measured at the amount that the group expects to be entitled to. This measurement takes into account rebates and trade discounts
allowed and excludes value-added tax. Revenue is recognised basis on a time spent basis.
Management have elected to apply the practical expedient available and carry revenue and the related receivable at the undiscounted value for
all contracts with customers where management expects at contract inception, the period between revenue recognition and when repayment for
those goods or services will be one year or less.

The Group applies the revenue recognition criteria set out below to each separately identifiable component of the sales transaction. The
consideration received from these multiple-component transactions is allocated to each separately identifiable component in proportion to their
relative standalone selling price.
Commission income

Commission income is derived from the sale of insurance premiums to micro-financing debtors as well as collection commission where the group
earns commission from collecting debts.

For insurance commission the group acts as an agent by offering insurance products under-written by an external party. The group therefore
receives a commission based on the number of premiums written by the external company and recognises only the commission earned, once
under-written, per the agreement between the parties.

Collection commission relates to collecting services provided by the group to external parties. The group earns commission based on a fixed
portion that the group collects. These commissions are earned as amounts are collected. Revenue is recognised at a point in time when the
insurance premiums are sold or when collection services have been finalised.

Administration fees

Monthly administration fees are charged on micro-finance debtors classified as trade receivables. Fees are recognised when the services are
provided and determined as a fixed cost for each debtor for the period that their loan remains outside of default or in the legal book. No
administration fees are charged on loans in default or in the legal book. Revenue is recognised on a straight line basis over time as the services
are rendered.
Interest income

Interest income is recognised in profit or loss using the effective-interest method taking into account the expected timing and amount of cash
flows. Interest income is recognised for micro-financing debtors; which are measured at amortised cost and classified as trade receivables.

Once a financial asset or a group of similar financial assets have been categorised as a stage 3 receivable (credit impaired and legal receivables),
interest income is recognised on the carrying value of the receivable net of impairment losses recognised.

Origination fees on loans granted

These fees are charged upfront, are capitalised into the loan, and are primarily based on the cost of granting the loan to the individual. These
origination fees are considered an integral part of the loan agreement and are therefore recognised as an integral part of the effective interest rate
and are accounted for over the shorter of the original contractual term and the actual term of the loan using the effective interest rate method.
Related transaction costs are also deferred and recognised as an adjustment to the effective interest rate.

The Group does not capitalise any related operating costs which are not integral to the creation of micro-financing loans, as these costs are not
directly attributable to individual transactions and are recorded in profit and loss as incurred.

Rendering of services
Revenue is recognised basis on a time spent basis.

The Group generates revenues from consulting and advisory services. Consideration received for these services is initially deferred, included in
other liabilities, and is recognised as revenue in the period when the service is performed.

The Group determines the stage of completion by considering both the nature and timing of the services provided and its customer’s pattern
of consumption of those services, based on historical experience. The stage of completion is determined with reference to services provided in
relation to the total services to be provided as agreed between the parties.

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