RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Where the units of water supplied cannot be reliably measured due to inherent uncertainties in the business activities, the entity recognises revenue at the best estimate of the expected future benefit which is the average meter reading for the past 3 months, while the units of water consumed are verified/investigated. The inherent uncertainties in the business activities, which may result from: • Meter inaccuracies • Mechanical faults Upon identification of the of the cause of the suspected meter inaccuracies or mechanical faults the average reading is updated and a catchup reflecting the over/under recognition of revenue for the period is recognised. Summary of Principal Accounting Policies and Significant Judgements 3.13 Revenue from contracts with customers (Continued)

Such revenue is recognised in the period where the uncertainty is resolved as a variable consideration. The related receivable is amended in the same period as a change in estimate, therefore accounted for prospectively.

Step 4: Allocate the transaction price to the performance obligations in the contract.

The transaction price for installation services are charged as capital contribution and are established per contract.

The transaction price for sale of potable water is in respect of units of water consumed and the gazette price for the area of service and type of customer.

The allocation of the payment shall be applied to the capital first before interest.

The transaction price for installation services are charged as capital contribution and are established per contract.

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

The revenue from the sale of potable water is recognised over time, as the customer simultaneously receives and consumes the benefits provided by Rand Water as the performance obligation is fulfilled.

Revenue from the sale of potable water is recognised over time at the metering point, this is the point where the units of water supplied to the customer for a specific period is read for billing purposes, and recognised as revenue. This is performed at an agreed point in time during a calendar month period.

Non‑potable Water Revenue is recognised when the recognition criteria as defined in IFRS 15 is met.

The Group recognises over time, at the abstraction point, the sum of the cost of raw water at the gazette price and a recovery of direct expenses incurred for the abstraction of the raw water for the rights shared with Rand Water and a management fee of 10%. Rand Water recognises revenue from the Vaalkop scheme based on an annual calculated recovery rate. The recovery rate is applied consistently for the current financial period to which it relates. The recovery rate represents the recovery of cost incurred to operate and maintain the scheme, for the benefit of the specific group of customers.

The recovery rate is assessed annually, and an over/under recovery component is built into the next financial year, depending on the determined recovery rate as compared to actual costs incurred.

216