RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023 Summary of Principal Accounting Policies and Significant Judgements 1.3 Standards and Interpretations in issue but not yet effective (Continued)

IAS 1 Presentation of Financial Statements

Disclosure of accounting policy information policies : An entity shall disclose material accounting policy information (see paragraph 7). Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of financial statements will make. The amendment has been reviewed and the impact on Rand Water and its subsidiaries is assessed as medium, as the Group needs to continuously review and ensure that material accounting policy that influence decision making is correctly and appropriately included. 2. Significant judgements and sources of estimation uncertainty The preparation of the annual financial statements requires the Group’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and estimates and assumptions of the reported amounts of revenues and expenditures during the reporting period. The determination of estimates requires the exercise of judgements based on various assumptions and other factors such as historical experience, current and expected economic conditions, and in some cases actuarial techniques. Actual results could differ from those estimates. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are recognised prospectively. If indicators exist of a loss in value e.g. Assets Under Construction, then management will make an estimate of such loss in value taking cognisance of the current state of the asset to its state required at the completion of construction and an appropriate adjustment will be made for such loss in value. Such loss in value must then be recognised in profit and loss during the reporting period. The following key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, have a risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year: 2.1 Impairment of financial assets The Group considers a financial asset in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. The expected credit loss is calculated as expected gross carrying amount of the financial asset at assessment date multiplied by expected credit loss rate. 2.2 Useful lives and residual values The useful lives and residual values of property, plant and equipment, as well as the useful lives of the intangible assets are reviewed at each reporting date. Management’s estimation of the useful lives is based on historical trend analyses and other available information. The residual values are management’s best estimates based on useful lives as well as other available information.

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