Investor Presentaiton
ANNUAL REPORT 2020
68
Notes to the Financial Statements
For the year ended 31 December 2020
4
Use of Judgements and Estimates
Fair Value Measurement
In preparing these financial statements, management has made judgements, estimates and assumptions that affect
the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to estimates are recognised prospectively.
a)
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the
amounts recognised in the consolidated financial statements is included in the following notes:
• Note 5 - Revenue: Revenue is recognised when persuasive evidence exists that the significant risks and rewards
of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs
and possible return of goods can be estimated reliably, there is no continuing management involvement with the
goods and the amount of revenue can be measured reliably.
b)
Assumptions and Estimations Uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment in the year ending 31 December 2020 is included in the following notes:
Defined benefit obligations
The cost of the defined benefit pension plan, long service awards, and other post-employment benefits and the
present value of these defined benefit obligations are determined using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual developments in the future. These include the
determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to
the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive
to changes in these assumptions. All assumptions are reviewed at each reporting date.
Income taxes and Deferred tax
The Company is subject to income taxes within Nigeria, which does not require much judgement in terms of
provision for income taxes but a certain level of judgement is required for recognition of the deferred tax assets.
Management is required to assess the ability of the Company to generate future taxable economic earnings
that will utilise the deferred tax assets. Assumptions over the generation of future taxable profits depends on
management's estimates of future cash flows. This estimate of future taxable income are based on forecast cash
flows from operations.
Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk of default, expected loss rates and
maximum contractual period. The Company uses judgement in making these assumptions and selecting the inputs
to the impairment calculation, based on the Company's past history, existing market conditions as well as forward
looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed
note 23.
Estimation of useful life
The estimation of the useful lives and residual values of assets is based on management's judgement. Any material
adjustment to the estimated useful lives of items of property and equipment will have an impact on the carrying
value of these items.
Financial instruments measured at fair value
Level 1
Level 2
Level 3
Recurring fair value measurement 2020
Financial assets
Derivative asset
Recurring fair value measurement 2019
Financial assets
Derivative asset
Valuation techniques used to determine fair value
#'000
#'000
2,867,272
1,404,116
#'000
Total
#'000
2,867,272
1,404,116
In detemining the fair value of the derivative asset, the Company used the present value of future cash flows based
on the forward exchange rates at the balance sheet date.
Financial instruments not measured at fair value
In thousands of naira
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Borrowings
2020
2019
Carrying
value
Fair
value
Carrying
value
Fair
value
88,702,534 88,702,534
17,986,655 17,986,655
106,689,189 106,689,189
7,857,211
14,797,025
22,654,236
7,857,211
14,797,025
22,654,236
92,318,922 92,318,922
72,575,415 72,575,415
164,894,337 164,894,337
68,532,097
68,532,097
2,086,943
70,619,040
2,086,943
70,619,040
The fair value for cash and cash equivalents, trade and other receivables, trade and other payables are not
significantly different from their carrying amount.
For the majority of the borrowings, the fair values are not materially different to their carrying amounts, since the
borrowings are of a short-term nature.
They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including
own credit risk.
FrieslandCampina WAMCO Nigeria PLC
FrieslandCampina WAMCO Nigeria PLC
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