RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Irregular expenditure Where expenditure has been incurred that does not comply with any law or regulation, the Group recognises that expenditure as irregular expenditure. Irregular expenditure is recognised when it is confirmed and to the extent that the expenditure is recognised in accordance with IFRS. Summary of Principal Accounting Policies and Significant Judgements 3.20 Fruitless, wasteful and irregular expenditure (Continued)

Irregular expenditure is derecognised when it is either: (a) condoned by the relevant authority if no official was found to be liable in law; (b) recovered from an official liable in law; (c) written‑off if it is irrecoverable from an official liable in law; or (d) written‑off if it is not condoned and not recoverable. 3.21 Events after reporting date

Events may occur between the end of the reporting period and the date when the consolidated annual financial statements are authorised for issue which may present information that should be considered in the preparation of financial statements. Only events that provide further evidence about conditions that existed at the end of reporting period are adjusted for in the consolidated annual financial statements. Non‑adjusting events are disclosed in the consolidated annual financial statements accordingly. 3.22 Contract assets A contract asset is an entity’s right to consideration in exchange for goods or services transferred to a customer, conditioned on future performance. It arises when the Group transfers goods or performs services in advance of receiving consideration from the customer. The Group recognises a contract asset on the recoverable projects wherein work is performed based on the stage of completion. As the milestones are reached the entity recognises the work‑in‑progress as a contract asset. In addition to this, contract asset is recognised for the days to which potable or non‑potable water has been supplied to a customer but not yet billed, as it falls outside the meter reading timelines. The loss allowance for contract assets is measured and recognised in terms of IFRS 9. The Group uses simplified approach applied to the related receivable to estimate the credit losses over the expected life of contract assets. 3.23 Contract liabilities A contract liability arises when the Group receives consideration from its customer (or has the unconditional right to receive consideration) in advance of performance (previously described as amounts received in advance), as reflected by the income received in advance on recoverable projects. 3.24 Transfer of function The transfer of function as of the transfer date are measured at their carrying amounts. The difference between the carrying amounts of the assets acquired, the liabilities assumed and the consideration paid to the transferor is recognised in accumulated reserves for the period. The Group applies the provisions of AC101 (IAS 1) Presentation of financial statements and adopted the provisions within the GRAP 105 Transfer of function to account for the transfer of functions as gazetted by the Minister of Water and Sanitation.

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