Page 61 - annualreport2020

AFRICAN DAWN ANNUAL REPORT 2020

Notes to the Financial Statements continued
Annual Financial Statements For the year ended 29 February 2020

All the loans are unsecured, interest free and have no fixed terms of repayment, except as indicated below.

* The loans are sub-ordinated to the extent that the subsidiaries' liabilities exceed the assets in favour of other creditors of the subsidiaries for as
long as the subsidiaries' liabilities exceeds the assets.

Loans to Group companies impaired

The recoverability of the loans have been assessed based on the net asset value of the subsidiary. The net asset value is calculated by taking
the subsidiary total asset less total liabilities. Where the liabilities of these companies exceed the assets and the disposal of assets would not
be sufficient to settle all the liabilities the loan is fully impaired. The impairment was calculated by allocating the value of the assets to other
creditors first in settlement of those liabilities. The remaining assets were allocated to Afdawn and the impairment was calculated by deducting
the remaining value of the asset from the loan balance. The loans have been assessed as non-performing.

All of the above loans are classified as stage 2, under performing in both 2020 and 2019. The expected credit loss on stage 2 loans has been
calculated based on the lifetime Expected Credit Losses (“ECL”). The ECL is calculated taking into account the net asset value of the subsidiaries
that take into account the ECL calculation of the subsidiary financial assets. The ECL on the financial assets of the subsidiaries took into account
the same assumptions as disclosed note 1.14. This is considered to increase the credit risk of the company, but advances are still expected to be
recovered through a debt management process.

The assets of Elite are substantially the group’s trade and other receivables whose characteristics are encompassed in note 28. In the other
subsidiaries there are no substantial assets other than cash reserves in YueDiligence (Pty) Ltd and African Dawn Wheels (Pty) Ltd. Therefore these
assets are not subject to frequent change.

8. Trade and other receivables

Financial assets at amortised cost: Group Company
2020 2019 2020 2019
R’000 R’000 R’000 R’000
Trade receivables 21,458 26,452 - -
Impaired allowance (12,719) (11,667) - -
Deposits 212 236 - -
Other receivables 177 327 - -
Non-financial receivables:
VAT 33 39 33 34
9,161 15,387 33 34

Refer to note 28 for a detailed analysis of the trade receivables

Exposure to credit risk

Trade receivables inherently expose the group to credit risk, being the risk that the company will incur financial loss if customers fail to make
payments as they fall due. There have been no significant changes in the credit risk management policies and processes since the prior reporting
period. The impairment allowance provided on trade and other receivables was calculated on the general approach.
Interest is charged on outstanding trade receivables.

Details of credit risk are included in the financial instruments and risk management note 28.

Exposure to interest rate risk
Refer to note 28 financial risk management for details of interest rate risk management for amounts due from trade and other receivables.

Fair value of trade and other receivables

Trade and other receivables are carried at amortised cost, with their fair value being approximated by such value.

59