RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Summary of Principal Accounting Policies and Significant Judgements 3.6 Financial instruments (Continued)

The Group shall classify financial liabilities at amortised cost except for:

a. financial liabilities at fair value through profit or loss and derivatives that are liabilities, which shall be subsequently measured at fair value.

b. financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies.

c. financial guarantee contracts.

d. commitments to provide a loan at a below‑market interest rate.

The Group’s financial liabilities comprise of:

a. Interest bearing borrowings

b. Trade and other payables

The Group does not have embedded derivatives and or hybrid contracts, and shall test against the definition of such financial instruments when such contracts are entered into, and the principles of IFRS 9, IFRS 7 and IAS 32 shall be adopted.

The Group further does not have equity instruments other than those that relates to the shares held in its subsidiary Rand Water Services, these instruments are dealt with under IFRS 10: Consolidated Financial Statements, are eliminated upon consolidation.

The specific accounting policies for the classification, recognition and measurement of each type of financial instrument held by the Group are presented below:

Financial assets at amortised cost

Cash and cash equivalents

Cash and cash equivalents comprise of cash on hand, call deposits, fixed deposit, notice deposit and investments in money market instruments with financial institutions that are readily convertible to a known amount of cash with original maturities of three months or less from date of acquisition, all of which are available for use by the Group unless otherwise stated.

Loans receivable at amortised cost

Classification Loans to employees are classified as financial assets subsequently measured at amortised cost.

Recognition and measurement Loans receivable are recognised when the Group becomes a party to the contractual provisions of the loan. The loans are measured, at initial recognition, at fair value plus transaction costs, if any. Loans receivable consist of micro loans granted to qualifying employees.

Subsequent to initial recognition, loans are measured at amortised cost using the effective interest rate method, less any accumulated impairment losses.

206