Page 52 - Learn Africa 2021 Annual Report

Learn Africa Plc
Notes to the Financial Statements (cont’d)

For the year ended 31 March 2021

The Company also concluded that revenue is to be recognised over time for some contracts,
because the educational materials do not create an inventory (asset) with alternative use and
the Company has a right to payment for goods delivered. The fact that another entity would
not need to re-perform the service that the Company has provided to date demonstrates
that the customer simultaneously receives and consumes the benefits of the Company’s
performance as it performs.

The Company has determined that the output method is the best method in measuring
the progress of service provided, because it can demonstrate that the invoiced amount
corresponds directly with the value to the customer of the Company’s performance
completed to date.

Financial instruments

Provision for expected credit losses of trade receivables
The Company uses a provision matrix to calculate ECL’s for trade receivables. The
provision rates are based on days past due for groupings of various customer segments
that have similar loss patterns. (i.e. by geography, product type, customer type and rating,
coverage by letters of credit and other forms of credit insurance).

The provision matrix is initially based on the Company’s historical observed default rates.
The Company will calibrate the matrix to adjust the historical credit loss experience
with forward-looking information. For instance, if forecast economic conditions (i.e. gross
domestic product) are expected to deteriorate over the next year which can lead to an
increased number of defaults in the publishing segment of the manufacturing sector, the
historical default rates are adjusted. At every reporting date, the historical observed default
rates are updated and changes in the forward-looking estimates are analysed.

The assessment of the correlation between historical observed default rates, forecast
economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to
changes in circumstances and of forecast economic conditions. The Company’s historical
credit loss experience and forecast of economic conditions may also not be representative of
customer’s actual default in the future. The information about the ECLs on the Company’s
trade receivables is disclosed in Note 14.

Measurement of the expected credit loss allowance for other financial assets
The measurement of the expected credit loss allowance for financial assets measured
at amortised cost is an area that requires the use of complex models and significant

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