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)

3.13 Revenue from contracts with customers (continued)

Sale of potable water

Revenue from the sale of water is recognised in profit or loss at the point where the customer obtains control, which is at the metering point in terms of IFRS 15 when: Step 1: Identify the contract(s) with customer The Group recognises revenue when a contract to provide bulk water to the customer exists. A contract can be a written contract or based on the Ministerial Directive (Section 41 of the Water Services Act (WSA)), due to an extension of a service area. The goods and services to be provided can be identified. The payment terms are clearly identifiable for the goods to be transferred. The contract has commercial and or legislative substance as aligned to the provisions of the PFMA and the WSA. It is probable that the Group will collect the consideration to which it will be entitled, in exchange for the water that will be transferred to the customer. The credit management committee assesses at contract inception the credit profile of the customer. The Group assesses the ability and intent of the customer to pay when the consideration becomes due, which may reflect that the probability to collect may not be met. The following are the triggers that will be assessed on an ongoing basis to establish the customer’s ability and intent to pay, either of the following probability of default must be met: • Court order that enforces the supply or delivery of services or goods under unfavourable conditions to the Group; or • Socio-Political factors that impact the supply or delivery of services/goods under unfavourable conditions to the Group or; • Composite of customer base (Indigent vs Urban areas); • Economic strength of the customer; • A municipality that has been place under Section 136, 137, 139 and/or 154 of the Municipal Finance Management Act (MFMA) or an entity that is placed on business rescue or liquidation, with no payment arrangement in place or; • Initiation of the Inter-Governmental Relations Act process or; • Non-payment for three consecutive months or; • Formal written communication indicating the customer’s inability to meet its obligations as they become due. Where probability of default criteria is met, the Group shall not recognise revenue from the date when the entity became aware of the applicable trigger. Subsequent to the probability of default criteria being met, revenue will be recognised on a cash basis, until the probability of default is remedied. Where the probability of default criteria is subsequently not met, the Group recognises revenue on an accrual basis in line with the provisions of IFRS 15.

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Rand Water | Integrated Annual Report 2025