ECIC IR 2023

ANNUAL Financial Statements for the year ended 31 March 2023

E

D

H

S

I

L I

N

B

2

0

A

0

T

S

1

E

E X P O R T C R E

L T D

O C

A S

C

R I

D I

F

T

A

I

N

H

S

T

U

U

R

O

A

S

N

F

C

O

E

N

C

O

O

I

R

T

P

A

O

R

Notes to the Financial Statements

(b) Salvages Management considers the amount of salvages at reporting date. Each potential salvage is assessed individually and where the recognition criteria are met, an appropriate amount is recognised as receivable after careful consideration. (c) Fair value measurement – Liability for interest make‑up Interest make‑up was an export incentive scheme. This allowed local banks and other financiers to offer buyers of South African export goods and services financing for projects at internationally competitive rates. The fair value of the liability is determined on a discounted cash flow basis of all future IMU payments on existing agreements. The IMU payments extend out to 2029 and discounted to allow for time value of money using a US Treasury Bills Yield Curve adjusted to allow for credit default spread. To avoid double counting in anticipation of a default event, the IMU liability is adjusted to isolate the portion of IMU housed within the Incurred But Not Reported (IBNR) insurance reserve. This is done by recalculating the fair value of the IMU liability on the contracts which carry IBNR and applying the corresponding LGD and claim likelihood. This eliminates the exact portion of the IMU liability held within the insurance provisions. The projected IMU payments are determined by multiplying the IMU rate with the projected outstanding balance of the facility. The IMU rate is a function of the applicable liquidity premium, funding margin, earnings margin and the statutory costs. The liability is not tax deductible as it is an existing liability which was taken over from the dtic . However, foreign exchange gains and losses arising from currency movement are taxable or deductible for taxation purposes. The fair value of the investment is determined on a discounted cash flow basis of expected future free cash flows to equity during the explicit forecast period and in perpetuity at a rate that reflects the risk inherent in the future cash flows. The discount rate applied in determining the fair value is the cost of equity which is determined using the Capital Asset Pricing Model (CAPM). The Corporation makes estimates and judgements when forecasting the expected future free cash flow and the discount rate. When making estimates and judgments, management take into account the following: c nature of the investee’s business; c historical and projected financial information; c the global and regional economic outlook; and c the global constraints and uncertainties casted by the impact of COVID‑19 pandemic on international trade and overall economic activities in the short‑to‑medium term. – Financial assets with a fair value hierarchy of level 3 Financial assets available for sale The Corporation assesses its trade and other receivables for recoverability at the end of each reporting period. In determining whether a provision for doubtful debts should be recorded in the statement of comprehensive income, the Corporation makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The provision for doubtful debts is calculated on a project basis, based on indicators present at the reporting date. However, for future premiums the adjustment is made to unearned premium reserve. – Impairment of non‑financial assets The process for determining the critical estimates, judgements and assumptions made has been disclosed in note 1.11. (d) Impairment of financial and non‑financial assets – Recoverability of trade and other receivables

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