RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Notes to the Consolidated Annual Financial Statements 10. Inventories (Continued)

The stores obsolescence for the current year of R535 thousand (2022: R385 thousand; 2021: R530 thousand) relates mainly to the provisions made for stationery stock items and adjustment for fuel . This is a result of stationery stock items being identified as either slow moving, obsolete or could not be used due to changes in technology and the balance relating to adjustments to fuel including provision for shrinkage.

Inventory supply levels have returned to normality, but the rising inflationary outlook and increased interest rates have resulted in higher commodity prices, especially within the chemical supply environment.

Inventory pledged as security

As at 30 June 2023 there was no inventory that the Group has pledged as security.

11. Contract assets

Contract assets

124 387 109 750 117 322 124 387 109 750 117 322

Revenue not recognised

(2 166) (7 519)

(2 311) (4 886)

(2 355) (6 477)

(2 166) (7 519)

(2 311) (4 886)

(2 355)

Loss allowance

(6 477) 114 702 102 553 108 490 114 702 102 553 108 490

Summary of contract assets

‑ Potable water

104 517

93 244

88 027 104 517

93 244

88 027

‑ Non‑potable water Recoverable projects

748

854

1 038

748

854

1 038

9 437 19 425 114 702 102 553 108 490 114 702 102 553 108 490 8 455 19 425 9 437 8 455

Reconciliation of contract assets

Opening balance

102 553 108 490 221 474 102 553 108 490 221 474

Project revenue generated

9 500

40 585

65 073

9 500

40 585

65 073

Project billing Impairment

(6 138) (2 633) (94 446) 105 866

(53 219)

(101 103)

(6 138) (2 633) (94 446)

(53 219)

(101 103)

1 591

8 039

1 591

8 039

Excess days billed Days supply not billed

(89 341)

(174 334)

(89 341)

(174 334)

94 447 89 341 114 702 102 553 108 490 114 702 102 553 108 490 89 341 105 866 94 447

The carrying amount of contract assets are reduced by the lifetime estimated future credit losses recognised during the year determined by reference to ECL Model, Refer to Note 42 for further information relating to expected credit losses recognised on adoption of IFRS 9. Included in contract assets is excess days not billed and recoverable projects work‑in‑progress not yet billed amounting to R106 million (2022: R94 million and (2021: R89 million) as contract assets. In line with the impairment allowance recognised on the trade and other receivables (Note 8), an expected credit loss allowance was recognised on the contract asset amounting to R7.5 million ( (2022: R7.1 million and 2021: R8.8 million).

Management expects that 100% of the transaction price allocated to the unsatisfied contracts as of 30 June 2023 will be recognised as revenue during the next reporting period.

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