Rand Water | Integrated Annual Report 2025

Consolidated Annual Financial Statements for the year ended 30 June 2025

SUMMARY OF PRINCIPAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS (CONTINUED) 2.7 Provisions and contingent liabilities Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a rate that reflects current market assessments of the time value of money and the risks specific to the obligation. Various estimates and assumptions have been applied by management in arriving at the carrying value of provisions. Management further relies on input from the Group’s lawyers in assessing the probability of items of a contingent nature. Significant judgement is applied in estimating the ultimate rehabilitation cost that will be required in future to rehabilitate the Group’s sludge disposal site, related to the purification process of its potable water. Ultimate cost may significantly differ from current estimates. Changes to the estimates for provision are recognised in the statement of Financial Perfomance except for changes relating to the rehabilitation provision, which is adjusted against the cost of the item of Property, Plant The application of IFRS 15: Revenue from Contracts with Customers requires the Group to make judgements that affect the determination of the amount and timing of revenue from contracts with customers (Refer to Note 3.13 and Note 23). The Group uses forecasted and budgeted financial data to determine the tariff charged to customers, which are then negotiated with the customers and then finally gazetted by parliament. (Refer to the Board Report). The Group used the practical expedient described in paragraph 63 of IFRS 15 and did not adjust the promised amount of consideration for the effects of a significant financing component because it has assessed that for most of the contracts the period between when the Group transfers the goods and services to the customer and when the customer pays for the consideration is one year or less. 3. Annual financial statements 3.1 Basis of consolidation The Group recognises that control is the single basis for consolidation for all types of entities in accordance with IFRS 10 Consolidated Financial Statements. The consolidated financial information includes the financial statements of the company, its subsidiaries, interest in associates and joint arrangements and structured entities. The Group, regardless of the nature of its involvement with an entity, shall determine whether it is a parent by assessing whether it controls the investee. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. i) Subsidiaries Subsidiaries are entities over which the Group has control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group up until when that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries are consistent with the policies adopted by the Group. and Equipment. 2.8 Revenue Control

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Rand Water | Integrated Annual Report 2025