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AFRICAN DAWN ANNUAL REPORT 2020

Accounting Policies continued

Financial liabilities
Borrowings and other loans

Classification

The group recognises a financial liability once it becomes a party to the contractual terms of the financial instrument. Financial liabilities carried
at amortised cost are recognised initially at fair value net of directly attributable transaction costs. Subsequently financial liabilities are stated at
amortised cost using the effective interest rate method.

Recognition and measurement

Loans from group companies, borrowings and loans from directors are classified as financial liabilities at amortised cost. After initial recognition,
borrowings are subsequently measured at amortised cost using the effective interest method.

Loans repayable on demand are discounted from the first day the loans can be demanded.

Interest expense, calculated on the effective interest method, is included in profit or loss in finance costs.
Borrowings expose the company to liquidity risk and interest rate risk. Refer to note 28 for details of risk exposure and management thereof.

Derecognition

A financial liability, or part of a financial liability, is derecognised when the obligation under the liability is discharged or cancelled or expires.
Trade and other payables

Classification

Trade and other payables (note 16), excluding VAT and amounts received in advance, are classified as financial liabilities subsequently measured
at amortised cost.

Recognition and measurement
They are recognised when the company becomes a party to the contractual provisions, and are measured, at initial recognition, at fair value plus
transaction costs, if any.
They are subsequently measured at amortised cost using the effective interest method.

If trade and other payables contain a significant financing component, and the effective interest method results in the recognition of interest
expense, then it is included in profit or loss in finance costs (note 21).
Trade and other payables expose the company to liquidity risk and possibly to interest rate risk. Refer to note 28 for details of risk exposure and
management thereof.
1.15 Segment reporting

The identification of reportable segments and the measurement of segment results are determined based on Group’s internal reporting to
management as well as a consideration of products and services, organisational structures, geographical areas, economic and regulatory
environments and the separable nature of activities or conversely inherent interconnectedness and whether these meet the criteria for aggregation.

The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices..
The Group has three operating segments:

* Investment advisory and investment management
* Micro finance
* Head Office

All inter-segment transfers are carried out at arm’s length prices based on prices charged to unrelated customers in standalone sales of identical
goods or services. For management purposes, the Group uses the same measurement policies as those used in its financial statements..

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