Annual Report 2019

Explanatory Notes 30 SEPTEMBER 2019 2. ACCOUNTING POLICIES (CONT’D) 2.6 Significant accounting policies (Cont’d) (d) Recognition of income (Cont’d) Policy effective as from 1 October 2018 (Cont’d) Fees relating to card activities The Group provides its customers with credit card processing services (i.e. authorisation and settlement of transactions) where it is entitled to a fee for each transaction. These services represent a single performance obligation comprised of a series of distinct daily services that are substantially the same and have the same pattern of transfer over the contract period. The fees vary based on the number of transactions processed and are structured as either a fixed rate per transaction processed or at a fixed percentage of the underlying cardholder transaction. The variable fees are allocated to each distinct day, based on the number and value of transactions processed that day, and the allocated revenue is recognised as the entity performs. Revenue from these fees are recognised over time. Factoring fees The Group provides factoring services to its customers and receives fees at a percentage for each transaction agreed with the counterparties. The performance obligation is satisfied at the acceptance of the invoice for which it provides the factoring service and the revenue is recognised at this point. Interest and similar income For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Fees that the Group considers to be an integral part of these financial instruments are recognised in the EIR. Earnings from finance leases are recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return. Commissions or discounts received from merchants on financing of credit agreements are initially recognised and presented in other liabilities in the statement of financial position. The release to profit or loss is recognised in fee and commission income in the statement of profit or loss. Rental income Rental income is recognised in accordance with the substance of the relevant agreement. Rental income from operating leases net of value added taxes is recognised on a straight line basis over the lease term. Dividend income Dividend income is recognised when the Group’s right to receive the payment is established. Management and administration fees Revenue from management and administration services are recognised over time as the services are received and consumed simultaneously. (e) Foreign currencies (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using Mauritian Rupee, the currency of the primary economic environment in which the entity operates (“functional currency”). The consolidated and separate financial statements are presented in Mauritian Rupees, which is the Company’s functional currency. All amounts are in million, rounded to one decimal place except as otherwise stated. (ii) Transactions and balances Foreign currency transactions are translated into Mauritian Rupees using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when deferred in other comprehensive income as qualifying cash flow hedges. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date the fair value was determined. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income. CIM FINANCIAL SERVICES LTD / ANNUAL REPORT 2019 80