AFRICAN DAWN ANNUAL REPORT 2017 Accounting Policies continued The material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern are outlined below 45 This judgement is based on a careful consideration of the following. Financial statements should be prepared on a going concern basis unless it is intended to liquidate the entity or to cease trading or there is no realistic alternative but to do so. In considering whether the going concern assumption is appropriate, all available information is taken into account, including information about the foreseeable future. Where there are material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern, those uncertainties should be disclosed. The material uncertainties relating to events or conditions which may cast doubt upon the ability to continue as a going concern are outlined in the table below. The table also outlines the actions being taken to manage these uncertainties and also the current status of these uncertainties and actions. Uncertainty Action Status Timing of the amount payable to SARS Ability of Afdawn and all of its subsidiaries to meet ongoing commitments. The risk of this uncertainty materialising in a manner that could affect the relevance of the going concern assumption could arise. Elite has been repaying the Sandown loan on a monthly basis, but has not fully complied with the agreed repayment schedule. Sandown could demand repayment of the loan. The strategy regarding Elite and Knife Capital needs to be re-evaluated. The directors have engaged with tax advisors to assist them in making a submission to SARS and to negotiate a settlement agreement. A number of actions are being taken to mitigate the risk of this uncertainty materialising. These include: (a) The Candlestick transaction was concluded and we await transfer of the property. b) Consideration is given to sell certain other assets c) the collection of a debtor become highly likely . d) The Elite transaction got shareholder approval in June 2016. Elite has made arrangement with Sandown on a monthly basis when needed. Elite concluded the transaction with Dzothe in June 2016 . A deposit of R2million was paid and Dzothe was in breach with the rest of purchase consideration . The transaction was cancelled 12 May 2017. The current relationship with SARS is constructive and conducive to an amicable outcome. A compromise offer was submitted to SARS by legal advisors and we await the result from SARS. Various payment and funding options are available to the board to be considered. The Candlestick property was transferred on 12 May 2017 and the Nedbank bond plus the PTF3 and Blue Dot were settled plus most of the trade creditors were settled. There is ongoing engagement with funders. The Elite transaction was cancelled and Company has the right to claim and recover damages from Dzothe Elite has ongoing negotiations with Sandown. These negotiations centre on accommodating Elite’s ability to repay the loan over longer period. Sandown has agreed to extend terms of the repayment to three years. Elite has repaid R7,2m of the original R15m Sandown loan. The board of Afdawn has to explore all its options. The extension of the Sandown debt repayment period will enable Elite to fund itself in the short term. The success of the Knife business model needs to be re-evaluated and restructured accordingly. Having regard to the nature of the uncertainties, the actions being taken and also the current status of these uncertainties, the judgment of the management and board is that it is appropriate that the financial statements be prepared on the going concern basis.
AFRICAN DAWN 2017
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