RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Where the carrying amount of the qualifying asset exceeds its recoverable amount or net realisable value, the carrying amount is written down. The capitalisation of borrowing costs commences when expenditures for the asset have occurred, borrowing costs have been incurred, and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation is suspended during extended periods in which active development is interrupted. Qualifying assets are assets that necessarily take a substantial period of time (more than 12 months) to get ready for their intended use or sale, borrowing costs are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. When the construction of a qualifying asset is completed in parts and each part is capable of being used while construction continues on other parts, capitalisation of borrowing costs ceases when substantially all the activities necessary to prepare that part for its intended use or sale are completed. When a temporary delay is a necessary part of the process of getting the qualifying asset ready for its intended use, the Group will not suspend the capitalisation of borrowing costs. However, if the temporary delay is not necessary and expected then capitalisation will be suspended. Summary of Principal Accounting Policies and Significant Judgements 3.5 Borrowing costs (Continued)

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

3.6 Financial instruments

The Group recognises a financial asset or financial liability in its statement of financial position when and only when it becomes party to the contractual provisions of the instrument, in terms of IFRS 9.

Financial Instruments are classified on initial recognition depending on the purpose for which the instruments were obtained for and will be used.

The classification of the Group’s financial asset is based on the business model and the cash flow characteristics and shall be measured either at:

a. Amortised cost.

b. Fair value through other comprehensive income.

c. Fair value through profit or loss.

Rand Water recognises expected credit losses on all financial assets as listed below:

The Group’s financial assets comprise of:

a. Cash and cash equivalents.

b. Trade and other receivables.

c. Investments.

d. Loans receivable.

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