RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Summary of Principal Accounting Policies and Significant Judgements 3.2 Property, plant and equipment (Continued)

The depreciation charge for each period is recognised in profit or loss.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Financial Performance when the asset is derecognised. The low value asset class recognises assets at an initial acquisition value of R10 000 and lower and is depreciated within the financial year of acquisition. This category of assets is deemed to be insignificant in relation to the asset base, but are annually reviewed to determine the cumulative impact on depreciation to quantify the significance thereof. Future adjustments of this threshold is based on the time value of money calculation and adjusted from time to time.

3.3 Intangible assets

Owned

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Acquired computer software is capitalised on the basis of the costs incurred to acquire and bring into use the specific software. Costs associated with researching or maintaining computer software programmes are recognised as an expense as incurred. Software is tested for indicators of impairment on an annual basis. If found that such indicators exist, then the recoverable amount is determined and compared with the carrying amount. An impairment loss will be recognised if the carrying amount is higher than the recoverable amount. Costs that are directly associated with the development of identifiable software products controlled by the Group, that will probably generate economic benefits beyond one year that can be measured reliably, are recognised as intangible assets. Costs include employee costs incurred as a result of developing software and an appropriate proportion of relevant overheads. The useful life of the servitudes will remain in force as long as the relevant infrastructure underlying the servitude is still in use. A servitude will only become impaired if the infrastructure i.e. pipeline to which the servitude is linked is derecognised, therefore servitudes are rights granted to the Group for an indefinite period of time. In practice, a derecognised pipeline will be refurbished or replaced by a new pipeline and therefore the likelihood of an impairment of a servitude right is remote. The estimated useful life of water use licence is estimated based on the relevant contractual agreements. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

An intangible asset are derecognised on disposal or when no future economic benefits are expected from its use or disposal.

Right of use intangible asset

Where the Group receives from its executive authority a transfer of an item of property, plant and equipment to utilise in the provision or supply of goods and services to a customer, the Group recognises such transferred asset as a right of use intangible asset and measures the transferred asset on initial recognition at its fair value.

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