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)

3.6 Financial instruments (continued)

Recognition and measurement

The Group recognises cash and cash equivalents and term deposit investments, at fair value plus or minus transaction costs that are directly attributable to the acquisition of the financial assets at initial recognition. It is the Group's intention to hold cash and cash equivalent and term deposit investments to collect contractual cash flows and their cash flows represent solely payments of principal and interest. Subsequently, cash and cash equivalents and term deposit investments are measured at amortised cost using the effective interest rate method to the gross carrying amount except when the financial assets were purchased or originated credit impaired subsequently.

Financial assets at fair value through other comprehensive income

Investment in bonds

Financial assets measured at fair value through other comprehensive income investments comprise of investment in bonds or debt securities. (note 9).

Recognition and measurement

At initial recognition the Group recognises the investment in bonds consisting of sovereign bonds and state owned entity (SOE) bonds at the fair value or transaction price plus transaction costs directly attributable to the acquisition of the financial asset. Subsequently, the investment in bonds is measured at fair value through other compressive income. It is the Group's business model to collect both contractual cash flows and selling financial asset and that contain contractual terms that give rise on specified dates to cash flows that are solely payments of principal. Related fair value gains and losses are recognised in other comprehensive income based on movements of observable quoted prices of an identical asset in an active market and realized in profit or loss when sold. The finance income is calculated using the effective interest rate method to the gross carry amount unless the financial assets is credit impaired. The Group recognises expected credit losses on financial assets measured at amortised cost and fair value through other comprehensive income. A general approach is applied by the Group to derive expected credit losses for cash and cash equivalent, investment in bonds and term deposit investments. Expected credit losses on these financial assets is calculated on an unbiased, probability weighted amount which is determined by evaluating the range of reasonably possible outcomes, the time value of money and considering all reasonable and supportable forward-looking information which were available to the Group without undue cost or effort at the reporting date. Impairment recognition and measurement financial assets

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Rand Water | Integrated Annual Report 2025