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)

Measurement and recognition of expected credit losses

The Groups’ lifetime expected credit losses result from possible default events over the entire expected life of a financial instrument utilising the provision matrix approach and time value of money loss approach. The impairment loss is included in other operating expenses in profit or loss as a movement in credit loss allowance.

The trade and other receivables are classified into:

Type of receivable

Definition

Categories of receivable

Performing

Performing relates to those trade receivables that service their debt within the contractual terms. These customers maintain their debt aging levels below 45 days. Relates to those trade receivables that do not service their debt within the contractual terms. These receivables either pay late or make part payments on the debt when it falls due but maintain their debt aging of between 45 and 90 days

Mines

Municipalities

Under‑performing

Retail

Industries

Non‑performing

Relates to those trade receivables that are 90 days and beyond. These receivables may also have met the triggers defined under the revenue section in determining the probability to collect.

Other non‑performing debtors

Financial liabilities

Interest bearing borrowings

The Group recognises a financial liability once it becomes a party to the contractual terms of the financial instrument. It is Group’s intention to hold interest bearing borrowings instruments to maturity. Interest bearing borrowings are initially measured at fair value being the proceeds paid at transaction date minus attributable transaction costs. Discounts and premiums arising from issued interest bearing borrowings are amortised over the period of the instrument until maturity to the statement of financial performance as finance cost.

Subsequently, interest bearing borrowings are measured at amortised cost using the effective interest rate method.

A financial liability, or part of a financial liability, is derecognised once the obligation specified in the contract relating to the financial liability is discharged, cancelled or has expired.

Trade and other payables The Group recognises a financial liability once it becomes a party to the contractual terms of the financial instrument. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non‑current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

A financial liability, or part of a financial liability, is derecognised once the obligation specified in the contract relating to the financial liability is discharged, cancelled or has expired.

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