ANNUAL FINANCIAL STATEMENTS 2024
for the year ended 30 September 2024
for the year ended 30 September 2024
| 21 | Trade and other receivables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Right-of-return assetsA right-of-return asset is recognised for the right to recover the goods expected to be returned by customers. The asset is measured at the former carrying amount of the inventory, less any expected costs to recover the goods and any potential decreases in value. The group updates the measurement of the asset for any revisions to the expected level of returns and any additional decreases in the value of the returned products. Impairment of financial assetsThe group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures where there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures where there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables and contract assets, the group applies a simplified approach in calculating ECLs. Therefore, the group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. In terms of inter-company amounts and investments, the group evaluates potential impairments based on the net asset value of the subsidiary company and its liquidity. The group considers a financial asset in default when contractual payments are 60 days past due the standard credit terms which is 30 days to 45 days, and the repayment profile of customers. Eighty-five percent of all customers have payment terms of 30 days or less. Sixty days past due is considered to be an appropriate indicator of default on the group's financial assets when considered against the group's customer base, the trading terms for which are predominantly 30 days. This is also informed by the group's extensive experience with its customer base. However, in certain cases, the group may also consider a financial asset to be in default when internal or external information indicates that the group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. Factors taken into consideration would include external market and economic outlook reports, observable trends and cyclicality. In terms of inter-company amounts, the group evaluates potential impairments based on the nature of the entity, and its liquidity and solvency position. Even with the consideration of forward-looking information relevant to the industries and environment in which the group companies operate, the credit risk relating to these entities is very low and no/ limited provisioning is required. No further IFRS 7/ ECL disclosure is provided in this regard. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
21.1 |
Analysis of trade and other receivables
Trade receivables, which generally have 30 to 60-day terms, are non-interest-bearing and are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
21.2 |
Expected credit loss*
Considering that IFRS 9 does not provide an explicit guide or any specific requirements the group has opted to use a provision matrix approach to calculate the ECL. This involves allocating individual trade debtors into groups that share similar credit risk characteristics. Customers' risk ratings are determined by applying the following criteria:
Low risk receivables are considered as fully performing receivables where customers are in compliance with their credit terms. This is supported by Tiger Brands' assessment of the financial soundness of the customer, customer trading patterns and their credit rating. Medium-risk receivables are those performing receivables where there has been an increase in their credit risk since the time the credit was granted. These receivables are further classified into the following categories and allocated a risk rating which is then used to calculate the expected future credit loss:
These risk ratings are reviewed bi-annually and adjusted accordingly. The percentage used to calculate the ECL for each risk segment was determined by:
The company makes use of selective trade credit insurance. For those debtors that are not insured, the full carrying value of the outstanding debt was included in the calculation of the ECL. For those debtors that are insured, only the uninsured portion of the debt was included in the calculation of the ECL. Once all internal measures to collect contractual cash flows have been exhausted, the group will engage the assistance of a debt collection agency in an attempt to secure payment. Twice a year an assessment of the outstanding amounts owed by the customer together with detailed information from the debt collection agency is undertaken and the decision made as to whether collection efforts should continue or be suspended. The timing of this decision is uncertain as it will depend on the facts and merits of the collection efforts and is based on the cost versus benefit of continuing the collection effort. A process of identifying specific impairments is included in the total impairment provision. Management will raise a specific impairment provision when all internal and or pre-legal efforts to collect overdue debt have been exhausted.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
21.3 |
Past due analysis
* Comprised of customers with high credit ratings and with a sound payment history As at 30 September, the ageing of all other receivables was as follows:
* Restated to exclude all non-financial instruments. In the prior year, VAT receivable and pension fund contribution holiday were included in the ageing |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
21.4 |
Trade receivable analysis
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
21.5 |
Collateral held
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||