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AFRICAN DAWN ANNUAL REPORT 2020

Accounting Policies continued

The material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern are
outlined below:

Uncertainty Action Status
Operating losses incurred by the group Additional funding and equity Post February 2020 year end, Afdawn concluded a long term
over the last three years and potential investment to be obtained in funding commitment from a private equity firm. These
future operating losses in the future. the group. funds will be used predominantly to extend loans through Elites
Furthermore, the group’s total liabilities low cost distribution network as well as to fund operating expenses
the exceed its total assets by R2,902 and settle historical creditors and improve solvency of the group.
million resulting in solvency issues. Refer to note 31.
Afdawn's ability to pay ongoing Directors and various parties With the additional funding as disclosed in note 31, Afdawn’s
operational expenses. have provided and continue wholly owned subsidiary, Elite, will be able to grow its debtors book
to provide funding and other that would generate free cashflow to cover the groups operating
ongoing operational expenses. expenses.
Management are investigating Management of Afdawn are still exploring other business activities
other opportunities for for further revenue generation.
revenue growth. With The directors are currently also sourcing additional funding for
additional funding expanding further growth within the group. They have already secured
the Elite debtors book. funding. Refer to note 31.
Covid-19 effect on going concern The Afdawn group support The group operations comply with the government guidelines
– expected future credit losses on all the government lockdown and the group managed to operate a portion of its operations
customers affected by COVID-19 rules and are monitoring the throughout the lockdown levels and is now fully operational.
through job losses and salary reductions. financial impact closely. Management have included the possible impact of these
Ongoing support from creditors and the uncertainties into a comprehensive cashflow forecast to take into
resumption of profitable lending account the various scenarios of COVID 19 – refer to note 31 for
operations. the impact of COVID-19 post year end.

We draw attention to the fact that the group incurred a net loss of R10,35 million (2019: R9,39 million) and that the company incurred a net loss
of R9,92 million (2019:R3,92 million) during the year ended 29 February 2020. As at that date, the group’s total liabilities exceed its total assets
by R2,902 million.
Having regard to the nature of the uncertainties, the actions being taken and also the current status of these uncertainties, the judgment of the
management and board (as a result of the actions taken mentioned above) is that it is appropriate that the financial statements be prepared on
the going concern basis.

Significant estimation uncertainty

Impairment of non-financial assets
The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations
and fair value less costs of disposal. These calculations require the use of estimates and assumptions. It is reasonably possible that certain key
assumptions may change, which may then impact our estimations and may then require a material adjustment to the carrying value of assets.

The assets that have been tested for impairment and the specific estimates and assumptions are as follows:
• Investment in subsidiaries – refer to Note 5

Loss allowance of trade receivables in Elite

The amount recognised related to the impairment of receivables by Elite and Elite Two requires the use of significant estimates and assumptions.
The Group reviews its loans to assess impairment at least on a monthly basis.

In determining the expected credit loss allowance, the Group makes judgements as to whether there has been an adverse change in the payment
status of borrowers in a Group, or national or local economic conditions that correlate with defaults on assets in the Group.

Management uses estimates based on historical loss experience for assets with similar credit risk characteristics to those in the portfolio when
scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing requires significant
judgement and estimation. Refer note 1.14 for the accounting policy regarding the impairment of loans.
Refer to note 28, for further information on the specific estimates and assumptions used to assess the recoverability of trade receivables.

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