In applying IFRS 9 Financial Instruments, management makes judgements and assumptions in determining the impairment losses to be recognised in relation to financial assets. The ECL allowances for financial assets are based on assumptions about risk of default and expected loss rates. Judgement is used in making these assumptions and selecting the inputs to the impairment calculation, based on past history, existing market conditions as well as forward-looking estimates at the end of each reporting period.
The following judgements and assumptions were applied for trade and other receivables:
The trade and other receivables are categorised into public sector entities, corporate entities as well as SMEs. Intercompany debtors are classified as SMEs, and the same PD and LGD multipliers as used for external trade and other receivables are used to calculate intercompany ECLs. Where Exxaro company is indebted to related parties, Exxaro's external credit rating is used to determine its PD and LGD multipliers.
The table below sets out the PD and LGD multipliers used.
| Percentage of gross trade receivables % |
PD % |
LGD % |
||
| 2023 | Public sector entities | 54 | 6.11 | 53.00 |
|---|---|---|---|---|
| Corporate entities | 9 | 0.11 to 2.43 | 29.00 | |
| SMEs | 37 | 4.48 | 26.44 | |
| 2022 | Public sector entities | 45 | 6.44 | 55.00 |
| Corporate entities | 13 | 2.22 to 3.50 | 28.0 to 33.0 | |
| SMEs | 42 | 4.82 | 35.10 |
The following judgements and assumptions were applied for ESD loans:
The ESD loans are categorised as SMEs and the PD and LGD is determined on the basis similar to that of trade receivables for performing loans. ESD loans that are over 90 days outstanding are classified as non-preforming are provided for in full. These are non-interest bearing loans granted to ESD applicants.
The table below sets out the PD and LGD multipliers used.
| Percentage of ESD loans % |
PD % |
LGD % |
||
| 2023 | Performing | 51 | 4.48 | 26.44 |
|---|---|---|---|---|
| Non-performing | 49 | 100.00 | 100.00 | |
| 2022 | Performing | 65 | 4.82 | 35.10 |
| Non-performing | 35 | 100.00 | 100.00 |
IR