Stage 1: the loss allowance measured at an amount equal to 12-month expected credit losses
Debtors where there have not been a significant increase in credit risk since initial recognition:
Portfolio impairment (non-legal clients) – A group impairment assessment: debtors are not individually assessed but
debtors with similar credit risks and characteristics are grouped. The group is then assessed for impairment.
Stage 2: the loss allowance measured at an amount equal to lifetime expected credit losses
Debtors whose credit risk have increased significantly since initial recognition:
Portfolio impairment (non-legal) clients:
A group impairment assessment, debtors are not individually considered, debtors with similar credit risks and
characteristics are grouped together. The group is then assessed for impairment. These debtors have not been
handed over to the legal department for collection as yet, but there is an indicator of impairment. The two
most significant indicators of impairment identified in the current financial year is arrears (non-compliance with
debtor terms) and lower yield due to the late planting season. During the year stage 2 trade debtors increased to
60% for 2020, from 57% in 2019 (see note 24.1.2.). Allowances for lifetime expected losses were made specifically
for loans.
Stage 3: financial assets that are purchased or originated credit-impaired
Debtors whose credit risk have increased significantly since initial recognition:
Specifically impaired (legal clients): This will typically be the case where the debtor is already handed over to
the legal department for recovery. The impairment represents the actual risk (LGD) for possible bad debt determined
by the legal department, taking into account all securities and the client’s balance sheet. The factors that
influence management’s estimates and judgement include whether customers that have been handed over to
the legal department for collection, are specifically provided for based on the exposure and the estimation of the
quality and expected realisation of securities held for the specific customers.
Counter-party risk
The credit crunch raises generic questions regarding the ability and appetite of financiers for funding. Absa Bank
and Nedbank as key financiers are regarded as excellent counter-parties and therefore fall within acceptable
levels of counter-party risk. Counter-party risk relating to credit extension to clients is managed actively and is
considered to be within acceptable levels.
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SENWESBEL ANNUAL FINANCIAL STATEMENTS 2020 Senwesbel Limited Reg no: 1996/017629/06