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NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
For the year ended 31 May 2016
BLUE LABEL INTEGRATED ANNUAL REPORT 2016
116
3.
Financial instruments and financial risks
continued
3.1 Financial assets continued
3.1.1 Loans receivable continued
The Group considers its maximum exposure in respect of loans receivable, without taking into account any collateral
and financial guarantees, to be as follows:
2016
R’000
2015
R’000
Group 1
5 427
—
Group 2
98 340
74 083
Group 3
360
219
104 127
74 302
The rating groups for counterparties are categorised as follows:
Group 1 – New customers/related parties (less than six months).
Group 2 – Existing customers/related parties (more than six months) with no defaults in the past.
Group 3 – Existing customers/related parties (more than six months) with some defaults in the past.
All defaults were fully recovered or are in the process of being recovered.
3.1.2 Trade and other receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. If collection is expected in the normal operating cycle of the business, they are classified as current assets.
If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will not be able to collect all amounts due according to
the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount
of the provision is recognised in the income statement.
Critical accounting estimates and assumptions
Management has assessed the probabilities on the contingent sale arrangement.
2016
R’000
2015
R’000
Trade receivables
2 474 675
2 642 059
Less:
Provision for impairment
(13 850)
(10 927)
2 460 825
2 631 132
Sundry debtors
40 570
34 265
Contingent consideration receivable*
15 860
17 757
Prepayments
72 382
68 958
VAT
92 833
15 960
Receivables from related parties (refer to note 8)
25 719
9 178
2 708 189
2 777 250
Less:
Amounts included in current portion of trade and other receivables**
(2 679 023)
(2 712 165)
29 166
65 085
* Ukash was disposed of in April 2015. The proceeds included a contingent receivable of R17.5 million. The contingent
consideration arrangement requires the acquirer to pay in cash to the Group an additional amount of R18.1 million if certain
warranties are achieved. The amounts are receivable in four six-month intervals commencing 30 September 2015. In the current
year, the Group received R5.8 million relating to this.
** Included in the amount above are starter pack debtors that have a cycle period which may be in excess of 12 months.
Fair value estimation
Fair value measurement hierarchy:
•
Level 1: fair value based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
•
Level 2: fair value based on inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); or
•
Level 3: fair value based on inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs).