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Significant Accounting Policies (Policy)
 12 Months Ended
Jun. 30, 2021
Significant Accounting Policies [Abstract]  
Principles Of Consolidation
Principles of consolidation
 
The financial
 
statements of
 
entities which
 
are controlled
 
by Net1,
 
referred to
 
as subsidiaries,
 
are consolidated.
 
Inter-company
accounts and transactions are eliminated upon consolidation.
 
 
The Company, if it is the primary beneficiary,
 
consolidates entities which are considered to be variable interest entities (“VIE”).
The primary beneficiary is considered
 
to be the entity that will absorb
 
a majority of the entity's expected losses,
 
receive a majority of
the entity's expected residual returns, or both. No entities were required to be consolidated as a result of these requirements during the
years ended June 30, 2021, 2020 and 2019.
Business Combinations
Business combinations
 
 
The
 
Company
 
accounts
 
for
 
its
 
business
 
acquisitions
 
under
 
the
 
acquisition
 
method
 
of
 
accounting.
 
The
 
total
 
value
 
of
 
the
consideration paid
 
for acquisitions is
 
allocated to
 
the underlying
 
net assets acquired,
 
based on their
 
respective estimated fair
 
values.
The Company uses a number
 
of valuation methods to
 
determine the fair value of
 
assets and liabilities acquired,
 
including discounted
cash
 
flows,
 
external
 
market
 
values,
 
valuations
 
on
 
recent
 
transactions
 
or
 
a
 
combination
 
thereof,
 
and
 
believes
 
that
 
it
 
uses
 
the
 
most
appropriate
 
measure
 
or
 
a
 
combination
 
of
 
measures
 
to
 
value
 
each
 
asset
 
or
 
liability.
 
The Company
 
recognizes
 
measurement-period
adjustments in the reporting period in which the adjustment amounts are determined.
Use Of Estimates
Use of estimates
 
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
 
that
affect
 
the
 
reported
 
amounts
 
of
 
assets
 
and
 
liabilities
 
and
 
disclosure
 
of
 
contingent
 
assets
 
and
 
liabilities
 
at
 
the
 
date
 
of
 
the
 
financial
statements
 
and
 
the reported
 
amounts
 
of
 
revenues
 
and
 
expenses during
 
the reporting
 
period.
 
Actual results
 
could
 
differ
 
from
 
those
estimates.
Translation Of Foreign Currencies
Translation of foreign
 
currencies
 
The primary functional currency of the consolidated entities is the South African Rand (“ZAR”) and its reporting currency is the
U.S. dollar.
 
Assets and
 
liabilities are
 
translated at
 
the exchange
 
rates in
 
effect at
 
the balance
 
sheet date.
 
Revenues and
 
expenses are
translated at
 
average rates
 
for the
 
period. Translation
 
gains and
 
losses are
 
reported in
 
accumulated other
 
comprehensive income
 
in
total
 
equity.
 
The Company
 
releases the
 
foreign
 
currency
 
translation
 
reserve
 
included
 
in accumulated
 
other
 
comprehensive
 
income
attributable to a foreign entity upon sale or complete, or
 
substantially complete, liquidation of the investment in that foreign entity and
includes the release in the gain or loss reported
 
related to the sale or liquidation of the foreign entity.
 
Foreign exchange transactions are translated at the spot rate ruling at the date of the transaction. Monetary items are translated at
the closing
 
spot rate
 
at the
 
balance sheet
 
date. Transactional
 
gains and
 
losses are
 
recognized
 
in selling,
 
general and
 
administration
expense on the Company’s consolidated
 
statement of operations for the period.
Cash, Cash Equivalents And Restricted Cash
Cash, cash equivalents and restricted cash
 
Cash and cash equivalents
 
include cash on hand and
 
funds deposited in bank accounts
 
with financial institutions that
 
are liquid,
unrestricted
 
and readily
 
available. Cash
 
that is
 
restricted
 
as to
 
use is
 
classified as
 
restricted
 
cash and
 
includes cash
 
in certain
 
bank
accounts that have been ceded to Nedbank Limited
 
(“Nedbank”) as well as cash drawn under the Company’s
 
borrowings and used to
fund its ATMs,
 
refer to Note 11.
Allowance For Doubtful Accounts Receivable
Allowance for doubtful accounts receivable
 
 
Allowance for doubtful finance loans receivable
 
The
 
Company
 
regularly
 
reviews the
 
ageing
 
of outstanding
 
amounts
 
due
 
from
 
borrowers
 
and
 
adjusts
 
the
 
allowance
 
based
 
on
management’s
 
estimate
 
of
 
the
 
recoverability
 
of
 
the
 
finance loans
 
receivable.
 
The
 
Company
 
writes
 
off
 
microlending
 
finance
 
loans
receivable and
 
related service
 
fees and
 
interest if
 
a borrower
 
is in
 
arrears with
 
repayments for
 
more than
 
three months
 
or dies.
 
The
Company
 
writes
 
off
 
working
 
capital
 
finance
 
receivables
 
and
 
related
 
fees
 
when
 
it
 
is
 
evident
 
that
 
reasonable
 
recovery
 
procedures,
including where deemed necessary,
 
formal legal action, have failed.
 
Allowance for doubtful accounts receivable
 
A specific
 
provision is
 
established where
 
it is considered
 
likely that all
 
or a portion
 
of the amount
 
due from customers
 
renting
point of sale (“POS”) equipment, receiving support and maintenance or transaction services or purchasing licenses or SIM cards from
the Company
 
will not
 
be recovered.
 
Non-recoverability is
 
assessed based
 
on a
 
review by
 
management of
 
the ageing
 
of outstanding
amounts, the location and the payment history of the customer in relation
 
to those specific amounts.
Inventory
Inventory
 
Inventory
 
is valued
 
at the
 
lower of
 
cost and
 
net realizable
 
value. Cost
 
is determ
 
ined on
 
a first-in,
 
first-out basis
 
and includes
transport and handling costs.
Property, Plant And Equipment
Property,
 
plant and equipment
 
Property,
 
plant and
 
equipment are
 
shown at
 
cost less accumulated
 
depreciation. Property,
 
plant and
 
equipment are
 
depreciated
on the straight-line basis at rates
 
which are estimated to amortize the
 
assets to their anticipated residual values
 
over their useful lives.
Within the following asset classifications, the
 
expected economic lives are approximately:
 
Computer
 
equipment
 
3
 
to
 
8
 
years
 
Office
 
equipment
 
2
 
to
 
10
 
years
 
Vehicles
 
3
 
to
 
8
 
years
 
Furniture
 
and
 
fittings
 
3
 
to
 
10
 
years
 
 
The gain or loss arising
 
on the disposal or retirement
 
of an asset is determined
 
as the difference between
 
the sales proceeds and
the
 
carrying
 
amount
 
of
 
the
 
asset
 
and
 
is
 
recognized
 
in
 
income.
Leases
Leases
 
The Company determines whether an arrangement is a lease at
 
inception. Operating leases are included in operating lease right-
of-use assets (“ROU”),
 
operating lease liability
 
- current, and
 
operating lease liability
 
– long term
 
in its consolidated
 
balance sheets.
The Company
 
does not
 
have any
 
significant finance
 
leases as
 
of June
 
30, 2021
 
and 2020,
 
respectively,
 
but its
 
policy is
 
to include
finance leases in property and equipment, other payables,
 
and other long-term liabilities in its consolidated balance sheets.
 
A ROU asset
 
represents the
 
Company’s
 
right to use
 
an underlying
 
asset for the
 
lease term and
 
the lease liabilities
 
represent its
obligation to
 
make lease
 
payments arising
 
from the
 
lease arrangement.
 
Operating lease
 
ROU assets
 
and liabilities
 
are recognized
 
at
commencement date based on
 
the present value of
 
lease payments over the
 
lease term. As
 
most of the
 
Company’s leases do not provide
an implicit rate,
 
the Company generally
 
uses its incremental
 
borrowing rate
 
based on
 
the estimated rate
 
of interest for
 
collateralized
borrowing over
 
a similar term
 
of the lease
 
payments at commencement
 
date. The operating
 
lease ROU asset
 
also includes any
 
lease
prepayments made
 
and excludes lease
 
incentives. The
 
terms of the
 
Company’s
 
lease arrangements may
 
include options to
 
extend or
terminate
 
the
 
lease
 
when
 
it is
 
reasonably
 
certain
 
that
 
the Company
 
will exercise
 
that
 
option.
 
Lease
 
expense
 
for
 
lease payments
 
is
recognized on a straight-line basis over the lease term.
 
The Company does not recognize right-of-use assets and lease liabilities for lease arrangements with a term of twelve months or
less. The Company
 
accounts for all
 
components in a
 
lease arrangement as
 
a single combined
 
lease component. Costs
 
incurred in the
adaptation of leased properties to
 
serve the requirements of
 
the Company (leasehold improvements) are
 
capitalized and amortized over
the shorter of the estimated useful life of the asset and the remaining term of
 
the lease.
Equity-accounted Investments
Equity-accounted investments
 
 
The Company uses the equity
 
method to account for
 
investments in companies when
 
it has significant influence but
 
not control
over
 
the operations
 
of the
 
company.
 
Under the
 
equity method,
 
the Company
 
initially records
 
the investment
 
at cost
 
and
 
thereafter
adjusts the carrying value of the investment to recognize
 
the proportional share of the equity-accounted company’s net income or loss.
In addition, when an investment qualifies for the equity
 
method (as a result of an increase in the level of ownership
 
interest or degree
of influence),
 
the cost
 
of acquiring
 
the additional
 
interest in
 
the investee
 
is added
 
to the
 
current basis
 
of the
 
Company’s
 
previously
held interest and the equity method would be applied
 
subsequently from the date on which the
 
Company obtains the ability to exercise
significant influence over the investee.
 
 
The Company
 
releases a
 
pro rata
 
portion of
 
the foreign
 
currency translation
 
reserve related
 
to an
 
equity-accounted investment
that is
 
included
 
in accumulated
 
other comprehensive
 
income to
 
earnings upon
 
the sale
 
of a
 
portion of
 
its ownership
 
interest in
 
the
equity-accounted
 
investment.
 
The
 
release
 
of
 
the
 
pro
 
rata
 
portion
 
of
 
the
 
foreign
 
currency
 
translation
 
reserve
 
is
 
included
 
in
 
the
measurement of
 
the gain
 
or loss
 
on sale
 
of a
 
portion of
 
the Company’s
 
ownership interest
 
in the
 
equity-accounted investment.
 
The
Company does not recognize cumulative losses in excess of its investment or
 
loans in an equity-accounted investment except if it has
an obligation to provide additional financial support.
 
 
Dividends received from an equity-accounted investment reduce the carrying value
 
of the Company’s investment. The Company
has elected to classify distributions received from equity method investees using the nature of the distribution approach.
 
This election
requires the Company to evaluate
 
each distribution received on
 
the basis of the source of
 
the payment and classify the
 
distribution as
either
 
operating
 
cash
 
inflows
 
or
 
investing
 
cash
 
inflows.
 
The
 
Company
 
reviews
 
its
 
equity-accounted
 
investments
 
for
 
impairment
whenever events or circumstances indicate that the carrying amount of
 
the investment may not be recoverable.
Goodwill
Goodwill
 
Goodwill
 
represents
 
the
 
excess
 
of
 
the
 
purchase
 
price
 
of
 
an
 
acquired
 
enterprise
 
over
 
the
 
fair
 
values
 
of
 
the
 
identifiable
 
assets
acquired and liabilities assumed. The Company tests for impairment
 
of goodwill on an annual basis and at any other time if events
 
or
circumstances change that would more likely than not reduce the fair
 
value of the reporting unit goodwill below its carrying amount.
 
 
Circumstances that
 
could trigger
 
an impairment test
 
include but are
 
not limited to:
 
a significant adverse
 
change in the
 
business
climate or legal
 
factors; an adverse
 
action or assessment
 
by a regulator;
 
unanticipated competition; loss
 
of key personnel;
 
the likelihood
that a reporting unit or
 
significant portion of a reporting
 
unit will be sold
 
or otherwise disposed; and results
 
of testing for recoverability
of a significant asset group within a reporting unit. If goodwill is allocated to a reporting unit
 
and the carrying amount of the reporting
unit exceeds
 
the fair value
 
of that reporting
 
unit, an impairment
 
loss is recorded
 
in the statement
 
of operations.
 
Measurement of
 
the
fair value
 
of a reporting
 
unit is based
 
on one
 
or more
 
of the following
 
fair value
 
measures: the amount
 
at which the
 
unit as a
 
whole
could be
 
bought or sold
 
in a current
 
transaction between
 
willing parties; present
 
value techniques
 
of estimated
 
future cash flows;
 
or
valuation
 
techniques
 
based
 
on
 
mul
tiples
 
of
 
earnings
 
or
 
revenue,
 
or
 
a
 
similar
 
performance
 
measure.
Intangible Assets
Intangible assets
 
Intangible assets are shown at
 
cost less accumulated amortization. Intangible assets
 
are amortized over the following useful
 
lives:
 
Customer
 
relationships
 
1
 
to
 
15
 
years
 
Software
 
and
 
unpatented
 
technology
 
3
 
to
 
5
 
years
 
FTS
 
patent
 
10
 
years
 
Exclusive
 
licenses
 
7
 
years
 
Trademarks
 
3
 
to
 
20
 
years
 
 
Intangible assets
 
are periodically
 
evaluated for
 
recoverability,
 
and those
 
evaluations take
 
into account
 
events or
 
circumstances
that warrant revised estimates of useful lives or that indicate that impairment
 
exists.
Debt And Equity Securities
Debt and equity securities
 
Debt securities
 
The Company is required to
 
classify all applicable debt securities
 
as either trading securities, available for
 
sale or held to
 
maturity
upon investment in the security.
 
 
Trading
 
Debt securities
 
acquired by
 
the Company
 
which it
 
intends
 
to sell
 
in the
 
short-term
 
are classified
 
as trading
 
securities and
 
are
initially measured
 
at fair
 
value. These
 
debt securities
 
are subsequently
 
measured at
 
fair value
 
and realized
 
and unrealized
 
gains and
losses
 
from
 
these
 
trading
 
securities
 
are
 
included
 
in
 
the
 
Company’s
 
consolidated
 
statement
 
of
 
operations.
 
Classification
 
of
 
a
 
debt
security as a trading
 
security is not precluded
 
simply because the Company
 
does not intend to sell
 
the security in the
 
short term. The
Company had no debt securities that were classified as trading securities as of
 
June 30, 2021 and 2020,
 
respectively.
 
Available for sale
 
Debt
 
securities
 
acquired
 
by the
 
Company
 
that
 
have
 
readily
 
determinable
 
fair values
 
are classified
 
as available
 
for
 
sale if
 
the
Company has not classified them as trading securities or if it does not
 
have the ability or positive intent to hold the debt security until
maturity.
 
The Company is
 
required to make
 
an election to
 
account for these
 
debt securities as
 
available for
 
sale. These available
 
for
sale debt securities
 
are initially measured
 
at fair value. These
 
debt securities are
 
subsequently measured at
 
fair value with unrealized
gains
 
and
 
losses
 
from
 
available
 
for
 
sale
 
investments
 
in
 
debt
 
securities
 
reported
 
as
 
a
 
separate
 
component
 
of
 
accumulated
 
other
comprehensive income, net of deferred income
 
taxes, in shareholders’ equity. The Company had no
 
debt securities that were classified
as available for sale securities as of June 30, 2021 and 2020, respectively.
 
Held to maturity
 
Debt securities acquired by the Company which it has the ability and the positive intent to hold to maturity are classified as held
to maturity debt securities. The Company is required to make an election to classify these debt securities as held to maturity and these
securities are carried at amortized cost. The amortized cost
 
of held to maturity debt securities
 
is adjusted for amortization of premiums
and accretion of discounts to maturity.
 
Interest received from the held to
 
maturity security together with this amortization
 
is included
in interest income in the Company’s consolidated statement of operations. The Company had a
 
held to maturity security as of June
 
30,
20
2
1
 
and
 
20
20
,
 
respectively,
 
refer
 
to
 
Note
 
8
.
 
 
2.
 
 
SIGNIFICANT
 
ACCOUNTING
 
POLICIES
 
(continued)
 
 
Debt and equity securities (continued)
 
Debt securities (continued)
 
Impairment of debt securities
 
The Company’s
 
available for sale
 
and held
 
to maturity debt
 
securities with unrealized
 
losses are reviewed
 
quarterly to identify
other-than-temporary impairments in value.
 
With regard to available for sale and held to maturity debt securities, the Company considers (i) the ability and intent to hold the
debt security for a
 
period of time to
 
allow for recovery of
 
value (ii) whether it
 
is more likely than
 
not that the Company
 
will be required
to sell the debt security;
 
and (iii) whether it
 
expects to recover the
 
entire carrying amount of
 
the debt security.
 
The Company records
an impairment
 
loss in its
 
consolidated statement
 
of operations representing
 
the difference between
 
the debt securities
 
carrying value
and the current fair value as
 
of the date of the impairment
 
if the Company determines that
 
it intends to sell the debt
 
security or if that
it is
 
more likely
 
than not
 
that it
 
will be
 
required to
 
sell the
 
debt security
 
before recovery
 
of the
 
amortized cost
 
basis. However,
 
the
impairment loss
 
is split
 
between a
 
credit loss
 
and a
 
non-credit loss
 
for debt
 
securities that
 
the Company
 
determines that
 
it does
 
not
intend to sell or that it is more likely than not that it will
 
not be required to sell the debt securities before the recovery of the amortized
cost basis. The credit loss portion, which is measured as the difference
 
between the debt security’s cost
 
basis and the present value of
expected future cash flows,
 
is recognized in the Company’s
 
consolidated statement of operations.
 
The non-credit loss portion,
 
which
is measured
 
as the
 
difference between
 
the debt
 
security’s
 
cost basis and
 
its current
 
fair value,
 
is recognized
 
in other
 
comprehensive
income, net of applicable taxes.
 
Equity securities
 
Equity
 
securities
 
are
 
measured
 
at
 
fair
 
value.
 
Changes
 
in
 
the
 
fair
 
value
 
of
 
equity
 
securities
 
are
 
recorded
 
in
 
the
 
Company’s
consolidated statement
 
of operations within
 
the caption titled
 
“change in fair
 
value of equity
 
securities”. The
 
Company may elect
 
to
measure equity securities without readily determinable fair
 
values at its cost
 
minus impairment, if any, plus or minus changes
 
resulting
from observable price changes in orderly transactions for the identical or
 
a similar investment of the same issuer (“cost minus
 
changes
in observable
 
prices equity
 
securities”). Changes
 
in the fair
 
value of
 
the Company’s
 
cost minus
 
changes in
 
observable prices
 
equity
securities during the year ended June 30, 2021,
 
are discussed in Note 8. There were
 
no changes in the fair value
 
of the Company’s cost
minus
 
changes
 
in
 
observable
 
prices
 
equity
 
securities
 
during
 
the
 
year
 
ended
 
June
 
30,
 
2020.
 
The
 
Company
 
performs
 
a
 
qualitative
assessment on
 
a quarterly
 
basis and
 
recognizes an
 
impairment loss
 
if there
 
are sufficient
 
indicators that
 
the fair
 
value of
 
the equity
security is less than its carrying value.
 
Policy reserves and liabilities
 
 
Reserves for policy benefits and claims payable
 
The Company determines its reserves for policy benefits under
 
its life insurance products using a model which estimates claims
incurred
 
that have
 
not been
 
reported
 
and
 
total
 
present
 
value
 
of disability
 
claims-in-payment
 
at
 
the balance
 
sheet
 
date. This
 
model
allows for
 
best estimate
 
assumptions based
 
on experience
 
(where sufficient)
 
plus prescribed
 
margins,
 
as required
 
in the
 
markets in
which these products are offered, namely South Africa.
 
The best estimate assumptions include (i) mortality and morbidity assumptions reflecting the company’s
 
most recent experience
and (ii) claim reporting delays reflecting Company specific and industry experience. Most of the disability claims-in-payment reserve
is
 
reinsured
 
and
 
the
 
reported
 
values
 
were
 
based
 
on
 
the
 
reserve
 
held
 
by
 
the
 
relevant
 
reinsurer.
 
The
 
values
 
of
 
matured
 
guaranteed
endowments are increased by late payment interest (net of the asset manageme
 
nt fee and allowance for tax on investment income).
 
Deposits on investment contracts
 
For
 
the
 
Company’s
 
interest
-
sensitive
 
life
 
contracts,
 
liabilities
 
approximate
 
the
 
policyholder’s
 
account
 
value.
 
 
 
Policy Reserves And Liabilities
Policy reserves and liabilities
 
 
Reserves for policy benefits and claims payable
 
The Company determines its reserves for policy benefits under
 
its life insurance products using a model which estimates claims
incurred
 
that have
 
not been
 
reported
 
and
 
total
 
present
 
value
 
of disability
 
claims-in-payment
 
at
 
the balance
 
sheet
 
date. This
 
model
allows for
 
best estimate
 
assumptions based
 
on experience
 
(where sufficient)
 
plus prescribed
 
margins,
 
as required
 
in the
 
markets in
which these products are offered, namely South Africa.
 
The best estimate assumptions include (i) mortality and morbidity assumptions reflecting the company’s
 
most recent experience
and (ii) claim reporting delays reflecting Company specific and industry experience. Most of the disability claims-in-payment reserve
is
 
reinsured
 
and
 
the
 
reported
 
values
 
were
 
based
 
on
 
the
 
reserve
 
held
 
by
 
the
 
relevant
 
reinsurer.
 
The
 
values
 
of
 
matured
 
guaranteed
endowments are increased by late payment interest (net of the asset manageme
 
nt fee and allowance for tax on investment income).
 
Deposits on investment contracts
 
For
 
the
 
Company’s
 
interest
-
sensitive
 
life
 
contracts,
 
liabilities
 
approximate
 
the
 
policyholder’s
 
account
 
value.
Reinsurance Contracts Held
Reinsurance contracts held
 
The Company enters into reinsurance
 
contracts with reinsurers under
 
which the Company is compensated
 
for the entire amount
or a portion of losses arising on one or more of the insurance contracts it issues.
 
The expected benefits to which the Company is entitled
 
under its reinsurance contracts held are recognized as reinsurance assets.
These assets consist
 
of short-term
 
balances due from
 
reinsurers (classified within
 
Accounts receivable,
 
net and other
 
receivables) as
well as long-term receivables (classified within other long-term assets) that are dependent on the expected claims and benefits arising
under the
 
related reinsurance
 
contracts. Amounts
 
recoverable from
 
or due
 
to reinsurers
 
are measured
 
consistently with
 
the amounts
associated with the reinsured contracts and
 
in accordance with the terms of each reinsurance contract. Reinsurance assets are assessed
for impairment at
 
each balance sheet
 
date. If there
 
is reliable
 
objective evidence that
 
amounts due may
 
not be recoverable,
 
the Company
reduces the carrying amount of the reinsurance asset to its recoverable amount and recognizes that impairment loss in its consolidated
statement of operations. Reinsurance premiums are recognized
 
when due for payment under each reinsurance contract.
Redeemable Common Stock
Redeemable common stock
 
Common stock
 
that is
 
redeemable (1)
 
at a
 
fixed or
 
determinable price
 
on a
 
fixed or
 
determinable date,
 
(2) at
 
the option
 
of the
holder, or (3) upon the occurrence of an
 
event that is not solely
 
within the control of Company is
 
presented outside of total Net1 equity
(i.e. permanent equity). Redeemable common stock is initially recognized at issuance
 
date fair value and the Company does not
 
adjust
the issuance date fair value if redemption is not
 
probable. The Company re-measures the redeemable
 
common stock to the maximum
redemption
 
amount
 
at
 
the
 
balance
 
sheet
 
date
 
once
 
redemption
 
is
 
probable.
 
Reduction
 
in
 
the
 
carrying
 
amount
 
of
 
the
 
redeemable
common
 
stock is
 
only appropriate
 
to the
 
extent that
 
the Company
 
has previously
 
recorded increases
 
in the
 
carrying
 
amount of
 
the
redeemable equity instrument as the redeemable common stock may be not be carried at an amount that is less than the initial amount
reported outside of permanent equity.
 
Redeemable common stock is reclassified as permanent equity when presentation outside
 
permanent equity is no longer required
(if, for example, a redemption
 
feature lapses, or there
 
is a modification of the
 
terms of the instrument). The
 
existing carrying amount
of the redeemable common
 
stock is reclassified to permanent
 
equity at the date of
 
the event that caused the
 
reclassification and prior
period consolidated financial statements are not adjusted.
Revenue Recognition
Revenue recognition
 
 
The
 
Company
 
recognizes
 
revenue
 
upon
 
transfer
 
of
 
control
 
of
 
promised
 
products
 
or
 
services
 
to
 
customers
 
in
 
an
 
amount
 
that
reflects
 
the
 
consideration
 
the
 
Company
 
expects
 
to
 
receive
 
in
 
exchange
 
for
 
those
 
products
 
or
 
services.
 
The
 
Company
 
enters
 
into
contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted
for as separate performance obligations. Revenue is recognized net of allowances
 
for returns and any taxes collected from customers,
which are subsequently remitted to governmental authorities.
 
Nature of products and services
 
Processing fees
 
 
The Company
 
earns processing
 
fees from
 
transactions processed
 
for its
 
customers. The
 
Company provides
 
its customers
 
with
transaction processing services that
 
involve the collection, transmittal
 
and retrieval of
 
all transaction data
 
in exchange for
 
consideration
upon completion of
 
the transaction. In
 
certain instances, the
 
Company also provides
 
a funds collection
 
and settlement service
 
for its
customers. The Company considers these services as a single performance obligation.
 
The Company’s contracts specify a transaction
price for
 
services provided.
 
Processing revenue
 
fluctuates based
 
on the
 
type and
 
the volume
 
of transactions
 
processed. Revenue
 
is
recognized on the completion of the processed transaction.
 
Customers that have a bank account managed by the
 
Company are issued cards that can be
 
utilized to withdraw funds at an ATM
or to transact
 
at a merchant
 
point of sale
 
device (“POS”). The
 
Company earns processing
 
fees from transactions
 
processed for
 
these
customers. The
 
Company’s
 
contracts specify
 
a transaction
 
price for
 
each service
 
provided (for
 
instance, ATM
 
withdrawal, balance
enquiry,
 
etc.). Processing
 
revenue fluctuates
 
based on
 
the type
 
and volume
 
of transactions
 
performed
 
by the
 
customer.
 
Revenue is
recognized
 
on
 
the
 
completion
 
of
 
the
 
processed
 
transaction.
 
 
2.
 
 
SIGNIFICANT
 
ACCOUNTING
 
POLICIES
 
(continued)
 
 
Revenue recognition (continued)
 
Nature of products and services (continued)
 
Account holder fees
 
The Company
 
provides bank accounts
 
to customers
 
and this service
 
is underwritten
 
by a regulated
 
banking institution
 
because
the Company is
 
not a bank. The
 
Company charges its
 
customers a fixed
 
monthly bank account
 
administration fee for
 
all active bank
accounts regardless of
 
whether the account
 
holder has transacted
 
or not.
 
The Company recognizes
 
account holder fees
 
on a monthly
basis on all active bank accounts. Revenue from account holder’s
 
fees fluctuates based on the number of active bank accounts.
 
Lending revenue
 
The Company
 
provides short-term
 
loans to customers
 
in South Africa
 
and charges
 
up-front initiation fees
 
and monthly service
fees. Initiation fees are recognized
 
using the effective interest rate
 
method, which requires the utilization of
 
the rate of return implicit
in the loan,
 
that is, the
 
contractual interest
 
rate adjusted
 
for any
 
net deferred
 
loan fees or
 
costs, premium,
 
or discount
 
existing at the
origination or acquisition of the loan. Monthly service fee revenue is recognized under the contractual terms of the loan. The monthly
service fee amount is fixed upon initiation and does not change over the
 
term of the loan.
 
Technology
 
products
 
 
 
The Company supplies hardware and licenses for its customers to use the Company’s
 
technology. Hardware includes the sale of
POS devices, SIM cards and other consumables which can
 
occur on an ad hoc
 
basis. The Company recognizes revenue from hardware
at the transaction price specified
 
in the contract as the hardware is
 
delivered to the customer.
 
Licenses include the right to use
 
certain
technology developed by the Company and the associated revenue
 
is recognized ratably over the license period.
 
 
Insurance revenue
 
The Company writes
 
life insurance contracts, and
 
policy holders pay
 
the Company a
 
monthly insurance premium at
 
the beginning
of each month. Premium revenue
 
is recognized on a monthly basis net
 
of policy lapses. Policy lapses are provided
 
for on the basis of
expected non-payment of policy premiums.
 
Welfare
 
benefit distribution fees
 
The Company provided
 
a welfare benefits distribution
 
service in South Africa
 
to a customer under
 
a contract which expired
 
on
September
 
30,
 
2018.
 
The
 
Company
 
was
 
required
 
to
 
distribute
 
social
 
welfare
 
grants
 
to
 
identified
 
recipients
 
using
 
an
 
internally
developed
 
payment platform
 
at designated
 
distribution
 
points (pay
 
points) which
 
enabled the
 
recipients
 
to access
 
their grants.
 
The
contract specified a
 
fixed fee per
 
account for one
 
or more grants
 
received by a
 
recipient. The Company
 
recognized revenue for
 
each
grant recipient paid at the fixed fee.
 
Telecom
 
products and services
 
Through DNI, the Company entered into
 
contracts with mobile networks in
 
South Africa to distribute subscriber identity
 
modules
(“SIM”) cards on their behalf. The Company was entitled to receive consideration based on the activation of each SIM as well as from
a percentage of
 
the value loaded onto
 
each SIM. The Company
 
recognizes revenue from these
 
services once the
 
criteria specified for
activation had
 
been met
 
as well
 
as when
 
it was
 
entitled to
 
its consideration
 
related to
 
the value
 
loaded onto
 
the SIM.
 
Revenue from
contracts with
 
mobile networks
 
fluctuates based
 
on the
 
number of
 
SIMs activated
 
as well
 
as on
 
the value
 
loaded onto
 
the SIMs.
 
As
described in Note 23,
 
the Company disposed of its controlling interest in DNI on March 31, 2019.
 
The
 
Company
 
purchases
 
airtime
 
for
 
resale
 
to
 
customers.
 
The
 
Company
 
recognizes
 
revenue
 
as
 
the
 
airtime
 
is
 
delivered
 
to
 
the
customer.
 
Revenue
 
from
 
the
 
resale
 
of
 
airtime
 
to
 
customers
 
fluctuates
 
based
 
on
 
the
 
volume
 
of
 
airtime
 
sold.
 
 
2.
 
 
SIGNIFICANT
 
ACCOUNTING
 
POLICIES
 
(continued)
 
 
Revenue recognition (continued)
 
Significant judgments and estimates
 
The Company was
 
subject to a
 
court process regarding
 
the determination of
 
the price to
 
be charged for
 
welfare benefit distribution
services provided
 
from April
 
1, 2018
 
to September
 
30, 2018.
 
In December
 
2018, the
 
Constitutional Court
 
of South
 
Africa clarified
that it was not required to ratify the price and stated that the parties should reach an agreement on the price, failing which they should
approach
 
the
 
lower
 
courts
 
in
 
South
 
Africa.
 
The
 
Company
 
had
 
initiated
 
discussions
 
with
 
SASSA,
 
but
 
the
 
parties
 
had
 
not
 
reached
agreement regarding the pricing for services provided through September 30, 2018. Management determined, under previous revenue
guidance, that
 
there was
 
no evidence
 
of an
 
arrangement at
 
a fixed
 
and determinable
 
price other
 
than that
 
noted in
 
the court
 
ordered
extension provided
 
in March
 
2018 and
 
did not
 
record any
 
additional revenue
 
related to
 
the services
 
provided from
 
April 1,
 
2018 to
June 30, 2018, and recorded revenue at the rate specified in the contract. Upon adoption of the new revenue guidance on July 1, 2018,
the Company determined that it was unable to estimate
 
the amount of revenue that it is entitled to receive
 
because no agreement with
SASSA had been
 
reached at
 
that date. Accordingly,
 
the Company did
 
not record any
 
additional revenue during
 
the year ended
 
June
30, 2020 and 2019,
 
respectively, related to the price
 
to be charged for
 
welfare benefit distribution services
 
provided through September
30, 2018. The Company recorded
 
revenue at the rate
 
specified in the contract.
 
The Company expected to
 
record any additional revenue
once there was agreement between the Company and SASSA on the fee.
 
However, agreement had not been reached by May 31, 2020,
and following
 
the deconsolidation of
 
CPS, refer to
 
Note 23, any
 
additional revenue earned
 
by CPS after
 
June 1, 2020,
 
would not be
included in the Company’s consolidated
 
financial statements and therefore this matter is no longer considered an area of judgment
 
.
 
Accounts Receivable, Contract Assets and Contract Liabilities
 
The
 
Company
 
recognizes
 
accounts
 
receivable
 
when
 
its
 
right
 
to
 
consideration
 
under
 
its
 
contracts
 
with
 
customers
 
becomes
unconditional. The Company has no contract assets or contract liabilities.
 
 
Research and development expenditure
 
Research and
 
development
 
expenditure is
 
charged to
 
net income
 
in the
 
period in
 
which it
 
is incurred.
 
During the
 
years ended
June 30, 2021,
 
2020 and 2019, the
 
Company incurred research
 
and development expenditures
 
of $
0.3
 
million, $
1.6
 
million and $
0.7
million, respectively.
 
Computer software development
 
Product
 
development
 
costs in
 
respect
 
of
 
software
 
intended
 
for
 
sale
 
to
 
licensees
 
are
 
expensed
 
as
 
incurred
 
until
 
technological
feasibility is attained.
 
Technological
 
feasibility is attained
 
when the Company’s
 
software has completed
 
system testing and has
 
been
determined to be viable for
 
its intended use. The time between
 
the attainment of technological feasibility
 
and completion of software
development is generally short with immaterial amounts of development
 
costs incurred during this period.
 
 
Costs in
 
respect of
 
the development
 
of software
 
for the
 
Company’s
 
internal use
 
are expensed
 
as incurred,
 
except to
 
the extent
that
 
these
 
costs
 
are
 
incurred
 
during
 
the
 
application
 
development
 
stage.
 
All
 
other
 
costs
 
including
 
those
 
incurred
 
in
 
the
 
project
development and post-implementation stages are expensed as incurred.
 
 
Income taxes
 
 
The
 
Company
 
provides
 
for
 
income taxes
 
using
 
the asset
 
and
 
liability
 
method.
 
This
 
approach recognizes
 
the amount
 
of taxes
payable
 
or
 
refundable
 
for
 
the
 
current
 
year,
 
as
 
well
 
as
 
deferred
 
tax
 
assets
 
and
 
liabilities
 
for
 
the
 
future
 
tax
 
consequence
 
of
 
events
recognized in the financial statements and tax returns. Deferred
 
income taxes are adjusted to reflect the effects of
 
changes in tax laws
or enacted tax rates.
 
 
The Company measured its South African
 
income taxes and deferred income taxes for
 
the years ended June 30, 2021, 2020 and
2019, using the enacted statutory tax rate in South Africa of
28
%.
 
 
In establishing the appropriate deferred tax asset valuation allowances, the Company assesses the realizability of its deferred tax
assets, and based on all available evidence, both
 
positive and negative, determines whether it is more likely than
 
not that the deferred
tax
 
assets
 
or
 
a
 
portion
 
thereof
 
will
 
be
 
realized.
 
 
Research And Development Expenditure
Research and development expenditure
 
Research and
 
development
 
expenditure is
 
charged to
 
net income
 
in the
 
period in
 
which it
 
is incurred.
 
During the
 
years ended
June 30, 2021,
 
2020 and 2019, the
 
Company incurred research
 
and development expenditures
 
of $
0.3
 
million, $
1.6
 
million and $
0.7
million, respectively.
Computer Software Development
Computer software development
 
Product
 
development
 
costs in
 
respect
 
of
 
software
 
intended
 
for
 
sale
 
to
 
licensees
 
are
 
expensed
 
as
 
incurred
 
until
 
technological
feasibility is attained.
 
Technological
 
feasibility is attained
 
when the Company’s
 
software has completed
 
system testing and has
 
been
determined to be viable for
 
its intended use. The time between
 
the attainment of technological feasibility
 
and completion of software
development is generally short with immaterial amounts of development
 
costs incurred during this period.
 
 
Costs in
 
respect of
 
the development
 
of software
 
for the
 
Company’s
 
internal use
 
are expensed
 
as incurred,
 
except to
 
the extent
that
 
these
 
costs
 
are
 
incurred
 
during
 
the
 
application
 
development
 
stage.
 
All
 
other
 
costs
 
including
 
those
 
incurred
 
in
 
the
 
project
development and post-implementation stages are expensed as incurred.
Income Taxes
Income taxes
 
 
The
 
Company
 
provides
 
for
 
income taxes
 
using
 
the asset
 
and
 
liability
 
method.
 
This
 
approach recognizes
 
the amount
 
of taxes
payable
 
or
 
refundable
 
for
 
the
 
current
 
year,
 
as
 
well
 
as
 
deferred
 
tax
 
assets
 
and
 
liabilities
 
for
 
the
 
future
 
tax
 
consequence
 
of
 
events
recognized in the financial statements and tax returns. Deferred
 
income taxes are adjusted to reflect the effects of
 
changes in tax laws
or enacted tax rates.
 
 
The Company measured its South African
 
income taxes and deferred income taxes for
 
the years ended June 30, 2021, 2020 and
2019, using the enacted statutory tax rate in South Africa of
28
%.
 
 
In establishing the appropriate deferred tax asset valuation allowances, the Company assesses the realizability of its deferred tax
assets, and based on all available evidence, both
 
positive and negative, determines whether it is more likely than
 
not that the deferred
tax
 
assets
 
or
 
a
 
portion
 
thereof
 
will
 
be
 
realized.
 
 
2.
 
 
SIGNIFICANT
 
ACCOUNTING
 
POLICIES
 
(continued)
 
 
Income taxes (continued)
 
Reserves for uncertain tax positions are recognized in the financial statements
 
for positions which are not considered more likely
than not
 
of being
 
sustained based
 
on the
 
technical merits
 
of the
 
position on
 
audit by
 
the tax
 
authorities. For
 
positions that
 
meet the
more
 
likely
 
than
 
not standard,
 
the measurement
 
of the
 
tax benefit
 
recognized
 
in the
 
financial statements
 
is based
 
upon
 
the largest
amount of tax benefit that, in management’s judgement, is greater than 50% likely of being realized
 
based on a cumulative probability
assessment
 
of
 
the
 
possible
 
outcomes.
 
The
 
Company’s
 
policy
 
is
 
to
 
include
 
interest
 
related
 
to
 
unrecognized
 
tax
 
benefits
 
in
 
interest
expense and penalties in selling, general and administration in the consolidated
 
statements of operations.
 
The Company has elected the period cost method
 
and records U.S. inclusions in taxable income related to
 
global intangible low
taxed income (“GILTI”)
 
as a current-period expense when incurred.
 
Stock-based compensation
 
Stock-based compensation represents the
 
cost related to
 
stock-based awards granted.
 
The Company measures
 
equity-based stock-
based compensation cost at
 
the grant date, based on
 
the estimated fair value of
 
the award, and recognizes the
 
cost as an expense on
 
a
straight-line basis (net of estimated forfeitures) over the requisite
 
service period. In respect of awards with only service
 
conditions that
have a graded
 
vesting schedule, the
 
Company recognizes compensation
 
cost on a straight-line
 
basis over the
 
requisite service period
for the
 
entire award.
 
The forfeiture
 
rate is
 
estimated using
 
historical trends
 
of the
 
number of
 
awards forfeited
 
prior to
 
vesting. The
expense is recorded in
 
the statement of operations and
 
classified based on the recipients’
 
respective functions. The Company
 
records
deferred tax
 
assets for awards
 
that result in
 
deductions on the
 
Company’s
 
income tax returns,
 
based on the
 
amount of compensation
cost recognized and the Company’s
 
statutory tax rate in the jurisdiction
 
in which it will receive a deduction.
 
Differences between the
deferred tax
 
assets recognized
 
for financial
 
reporting purposes
 
and the
 
actual tax
 
deduction reported
 
on the
 
Company’s
 
income tax
return are recorded in taxation expense in the statement of operations.
 
Equity instruments issued to third parties
 
Equity instruments issued
 
to third parties represents
 
the cost related to
 
equity instruments granted.
 
The Company measures this
cost at the grant date, based on the
 
estimated fair value of the award, and recognizes the cost as
 
an expense on a straight-line basis (net
of estimated forfeitures) over
 
the requisite service period. The
 
forfeiture rate is estimated based
 
on the Company’s
 
expectation of the
number of
 
awards that will
 
be forfeited
 
prior to vesting.
 
The Company
 
records deferred tax
 
assets for equity
 
instrument awards that
result
 
in
 
deductions
 
on
 
the
 
Company’s
 
income
 
tax
 
returns,
 
based
 
on
 
the
 
amount
 
of
 
equity
 
instrument
 
cost
 
recognized
 
and
 
the
Company’s
 
statutory
 
tax
 
rate
 
in
 
the
 
jurisdiction
 
in
 
which
 
it
 
will
 
receive
 
a
 
deduction.
 
Differences
 
between
 
the
 
deferred
 
tax
 
assets
recognized for financial reporting purposes and the actual tax deduction reported on the Company’s
 
income tax return are recorded in
the statement of operations.
 
Settlement assets and settlement obligations
 
 
Settlement assets comprise (1) cash received from credit card
 
companies (as well as other types of
 
payment services) which have
business relationships
 
with merchants
 
selling goo
 
ds and
 
services via
 
the internet
 
that are
 
the Company’s
 
customers
 
and
 
on whose
behalf it
 
processes the
 
transactions between
 
various parties,
 
(2),
 
up until
 
the sale
 
of FIHRST,
 
refer to
 
Note 23,
 
cash received
 
from
customers on whose behalf the Company processes payroll payments that the Company will disburse to
 
customer employees, payroll-
related payees and other payees designated by the
 
customer, and (3),
 
up until the expiration of the SASSA contract on September 30,
2018, cash
 
received from
 
the South
 
African government
 
that the
 
Company holds
 
pending disbursement
 
to recipient
 
cardholders of
social welfare grants.
 
Settlement obligations comprise (1)
 
amounts that the Company
 
is obligated to disburse
 
to merchants selling goods
 
and services
via the internet that are the
 
Company’s customers and on whose behalf it processes the
 
transactions between various parties and settles
the funds
 
from the credit
 
card companies
 
to the
 
Company’s
 
merchant customers,
 
(2), up until
 
the sale of
 
FIHRST,
 
amounts that
 
the
Company
 
is obligated to pay to customer employees, payroll-related payees and other payees designated
 
by the customer, and (3), up
until the
 
expiration of
 
the SASSA
 
contract on
 
September
 
30, 2018,
 
amounts that
 
the Company
 
is obligated
 
to disburse
 
to recipient
cardholders of social welfare grants.
 
 
The balances
 
at each reporting
 
date may vary
 
widely depending on
 
the timing of
 
the receipts and
 
payments of these
 
assets and
obligations.
 
Recent accounting pronouncements adopted
 
There
 
were
 
no
 
new
 
accounting
 
pronouncements
 
adopted
 
by
 
the
 
Company
 
during
 
the
 
year
 
ended
 
June
 
30,
 
2021.
 
 
Stock-based Compensation
Stock-based compensation
 
Stock-based compensation represents the
 
cost related to
 
stock-based awards granted.
 
The Company measures
 
equity-based stock-
based compensation cost at
 
the grant date, based on
 
the estimated fair value of
 
the award, and recognizes the
 
cost as an expense on
 
a
straight-line basis (net of estimated forfeitures) over the requisite
 
service period. In respect of awards with only service
 
conditions that
have a graded
 
vesting schedule, the
 
Company recognizes compensation
 
cost on a straight-line
 
basis over the
 
requisite service period
for the
 
entire award.
 
The forfeiture
 
rate is
 
estimated using
 
historical trends
 
of the
 
number of
 
awards forfeited
 
prior to
 
vesting. The
expense is recorded in
 
the statement of operations and
 
classified based on the recipients’
 
respective functions. The Company
 
records
deferred tax
 
assets for awards
 
that result in
 
deductions on the
 
Company’s
 
income tax returns,
 
based on the
 
amount of compensation
cost recognized and the Company’s
 
statutory tax rate in the jurisdiction
 
in which it will receive a deduction.
 
Differences between the
deferred tax
 
assets recognized
 
for financial
 
reporting purposes
 
and the
 
actual tax
 
deduction reported
 
on the
 
Company’s
 
income tax
return are recorded in taxation expense in the statement of operations.
Equity Instruments Issued To Third Parties
Equity instruments issued to third parties
 
Equity instruments issued
 
to third parties represents
 
the cost related to
 
equity instruments granted.
 
The Company measures this
cost at the grant date, based on the
 
estimated fair value of the award, and recognizes the cost as
 
an expense on a straight-line basis (net
of estimated forfeitures) over
 
the requisite service period. The
 
forfeiture rate is estimated based
 
on the Company’s
 
expectation of the
number of
 
awards that will
 
be forfeited
 
prior to vesting.
 
The Company
 
records deferred tax
 
assets for equity
 
instrument awards that
result
 
in
 
deductions
 
on
 
the
 
Company’s
 
income
 
tax
 
returns,
 
based
 
on
 
the
 
amount
 
of
 
equity
 
instrument
 
cost
 
recognized
 
and
 
the
Company’s
 
statutory
 
tax
 
rate
 
in
 
the
 
jurisdiction
 
in
 
which
 
it
 
will
 
receive
 
a
 
deduction.
 
Differences
 
between
 
the
 
deferred
 
tax
 
assets
recognized for financial reporting purposes and the actual tax deduction reported on the Company’s
 
income tax return are recorded in
the statement of operations.
Settlement Assets And Settlement Obligations
Settlement assets and settlement obligations
 
 
Settlement assets comprise (1) cash received from credit card
 
companies (as well as other types of
 
payment services) which have
business relationships
 
with merchants
 
selling goo
 
ds and
 
services via
 
the internet
 
that are
 
the Company’s
 
customers
 
and
 
on whose
behalf it
 
processes the
 
transactions between
 
various parties,
 
(2),
 
up until
 
the sale
 
of FIHRST,
 
refer to
 
Note 23,
 
cash received
 
from
customers on whose behalf the Company processes payroll payments that the Company will disburse to
 
customer employees, payroll-
related payees and other payees designated by the
 
customer, and (3),
 
up until the expiration of the SASSA contract on September 30,
2018, cash
 
received from
 
the South
 
African government
 
that the
 
Company holds
 
pending disbursement
 
to recipient
 
cardholders of
social welfare grants.
 
Settlement obligations comprise (1)
 
amounts that the Company
 
is obligated to disburse
 
to merchants selling goods
 
and services
via the internet that are the
 
Company’s customers and on whose behalf it processes the
 
transactions between various parties and settles
the funds
 
from the credit
 
card companies
 
to the
 
Company’s
 
merchant customers,
 
(2), up until
 
the sale of
 
FIHRST,
 
amounts that
 
the
Company
 
is obligated to pay to customer employees, payroll-related payees and other payees designated
 
by the customer, and (3), up
until the
 
expiration of
 
the SASSA
 
contract on
 
September
 
30, 2018,
 
amounts that
 
the Company
 
is obligated
 
to disburse
 
to recipient
cardholders of social welfare grants.
 
 
The balances
 
at each reporting
 
date may vary
 
widely depending on
 
the timing of
 
the receipts and
 
payments of these
 
assets and
obligations.
Recent Accounting Pronouncements Adopted
Recent accounting pronouncements adopted
 
There
 
were
 
no
 
new
 
accounting
 
pronouncements
 
adopted
 
by
 
the
 
Company
 
during
 
the
 
year
 
ended
 
June
 
30,
 
2021.
Recent Accounting Pronouncements Not Yet Adopted As Of June 30, 2021
Recent accounting pronouncements not yet adopted
 
as of June 30, 2021
 
In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance regarding
Measurement of Credit Losses on
Financial Instruments
. The guidance
 
replaces the
 
incurred loss impairment
 
methodology in
 
current GAAP
 
with a methodology
 
that
reflects expected credit losses and
 
requires consideration of a
 
broader range of reasonable and
 
supportable information to inform credit
loss estimates. For
 
trade and
 
other receivables,
 
loans, and
 
other financial
 
instruments, an entity
 
is required
 
to use a
 
forward-looking
expected loss
 
model rather
 
than the incurred
 
loss model for
 
recognizing credit
 
losses, which reflects
 
losses that are
 
probable. Credit
losses relating to available
 
for sale debt
 
securities will also be
 
recorded through an allowance
 
for credit losses rather
 
than as a
 
reduction
in the
 
amortized
 
cost basis
 
of the
 
securities. This
 
guidance is
 
effective
 
for the
 
Company beginning
 
July 1,
 
2023.
 
The Company
 
is
currently assessing the
 
impact of this
 
guidance on its
 
financial statements and
 
related disclosures, but
 
does not expect
 
the impact on
its financial results to be material.
 
In August 2018, the FASB issued guidance
 
regarding
Disclosure Framework: Changes to the Disclosure Requirements
 
for Fair
Value
 
Measurement.
 
The guidance modifies the disclosure requirements related to fair value measurement. This guidance is effective
for the Company beginning July 1, 2021. Early adoption is permitted. The Company is currently assessing the impact of this
 
guidance
on its financial statement’s disclosure.
 
In November
 
2019,
 
the FASB
 
issued guidance
 
regarding
 
Financial
 
Instruments—Credit
 
Losses (Topic
 
326),
 
Derivatives and
Hedging
 
(Topic
 
815),
 
and
 
Leases
 
(Topic
 
842).
 
The
 
guidance
 
provides
 
a
 
framework
 
to
 
stagger
 
effective
 
dates
 
for
 
future
 
major
accounting
 
standards
 
and
 
amends
 
the
 
effective
 
dates
 
for
 
certain
 
major
 
new
 
accounting
 
standards
 
to
 
give
 
implementation
 
relief
 
to
certain types
 
of entities,
 
including Smaller
 
Reporting Companies.
 
The Company
 
is a Smaller
 
Reporting Company.
 
Specifically,
 
the
guidance changes some effective
 
dates for certain
 
new standards on
 
the following topics
 
in the FASB Codification, namely Derivatives
and Hedging
 
(ASC 815);
 
Leases (ASC
 
842); Financial
 
Instruments —
 
Credit Losses
 
(ASC 326);
 
and Intangibles
 
— Goodwill
 
and
Other
 
(ASC
 
350).
 
The
 
guidance
 
defers
 
the
 
adoption
 
date
 
of
 
guidance
 
regarding
Measurement
 
of
 
Credit
 
Losses
 
on
 
Financial
Instruments
 
by the Company
 
from July 1,
 
2020 to July 1,
 
2023, and defers
 
the adoption guidance
 
regarding
Disclosure Framework:
Changes to the Disclosure Requirements
 
for Fair Value
 
Measurement
 
by the Company from July 1, 2020 to July 1, 2021.
 
In January 2020, the FASB issued guidance regarding
 
Clarifying the Interactions Between Topic 321, Topic
 
323, and Topic 815.
 
The guidance
 
clarifies that an
 
entity should
 
consider observable
 
transactions that
 
require an
 
entity to either
 
apply or
 
discontinue the
equity
 
method
 
of
 
accounting
 
for
 
the
 
purposes
 
of
 
applying
 
the
 
measurement
 
alternative
 
in
 
accordance
 
with
 
U.S
 
GAAP
 
guidance
immediately
 
before
 
applying
 
or
 
upon
 
discontinuing
 
the
 
equity
 
method.
 
The
 
guidance
 
also
 
clarifies
 
that,
 
when
 
determining
 
the
accounting for certain forward
 
contracts and purchased options an
 
entity should not consider,
 
whether upon settlement or exercise,
 
if
the
 
underlying
 
securities
 
would
 
be
 
accounted
 
for
 
under
 
the equity
 
method
 
or
 
fair
 
value
 
option.
 
This
 
guidance
 
is
 
effective
 
for
 
the
Company beginning July 1, 2021. Early
 
adoption is permitted. The Company is currently assessing the
 
impact of this guidance on its
financial statement’s disclosure.