3.6 PROVISION FOR NON-COMPLIANCE WITH PRE-SEASON GRAIN CONTRACTS
The calculations are based on the following key assumptions:
l Default rate on current deliveries extrapolated to the total extrapolated;
l A fixed recovery rate on defaults; and
l Compensating financial instruments.
For the carrying value of non-compliance provision, refer to note 19.
3.7 USEFUL LIFE AND RESIDUAL VALUE OF PROPERTY, PLANT AND EQUIPMENT
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each reporting
date and adjusted prospectively, if appropriate. This review takes into account the location, condition and nature of the asset.
3.8 IMPAIRMENT OF NON-FINANCIAL ASSETS
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the
higher of its fair value less cost to sell and its value in use. The fair value less cost to sell calculation is based on available data
from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental
costs for disposing of the assets. The value in use calculation is based on a discounted cash flow model. The cash flows are
derived from the budget for the next five years and do not include restructuring activities that the group is not yet committed
to, or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The
recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected
future cash inflows and the growth rate used for extrapolation purposes.
3.9 HINTERLAND HOLDINGS (PTY) LTD IMPAIRMENT
The assessment of the recoverable amount and exposure of the Hinterland Holdings (Pty) Ltd (“Hinterland)” investments,
loans and guarantees requires estimation and judgement around estimates and assumptions used, including:
l The manner in which a restructuring plan may be decided upon and the effective implementation thereof to realise as
much value as possible of the assets in Hinterland;
l The realisation value of assets; and
l The net exposure to creditors.
3.10 LEASES
Determining the lease term of contracts with renewal and termination options – group as lessee
The group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an
option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease,
if it is reasonably certain not to be exercised.
The group has several lease contracts that include extension and termination options. The group applies judgement in
evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it
considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the
commencement date, the group reassesses the lease term if there is a significant event or change in circumstances that is
within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of
significant leasehold improvements or significant customisation to the leased asset).
Refer to note 4 for information on potential future rental payments relating to periods following the exercise date of extension
and termination options that are not included in the lease term.
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SENWESBEL ANNUAL FINANCIAL STATEMENTS 2020 Senwesbel Limited Reg no: 1996/017629/06