Rand Water | Integrated Annual Report 2025

INTEGRATED ANNUAL REPO

Consolidated Annual Financial Statements for the year ended 30 June 2025

3.16 Finance income Interest income comprises interest received or receivable on loans, trade receivables and funds invested. Interest is recognised in the statement of profit or loss, using the effective interest rate method over the period to maturity. Effective interest method is a method of calculating the amortised cost of a financial asset (or group) and of allocating the interest income over the relevant period. Where an investment or a trade and other receivable is determined to be at a non performing stage or other instruments who are assessed to be at stage 3 in terms of IFRS 9. Rand Water Group will recognise interest on the total debt outstanding less expected credit losses. Therefore, interest income will be calculated on the net receivable or net investment. 3.17 Finance costs Finance expenses comprise interest payable on borrowings calculated using the effective interest rate method. The interest expense component is recognised in the statement of profit or loss using the effective interest rate method. The above includes borrowing costs to the extent they are not capitalised to the acquisition, construction or production of a qualifying asset. Effective interest method is a method of calculating the amortised cost of a financial liability (or group) and of allocating the economic benefits will flow to the entity and that these benefits can be measured reliably. The deferred income relating to these contributions are recognised on the following bases: • Capital contributions received relating to the construction of items of property, plant and equipment are initially recorded as income received in advance. The contributions are subsequently recognised as revenue over the economic useful life of the related asset once the related service has been performed or the asset is brought into use. • Contributions relating to income are credited to profit or loss when the related expense is incurred. Income received in advance also include deferred income recognised as a result of items of property, plant and equipment owned by customers or the Executive Authority, but utilised by the Group to generate future economic benefits. The deferred income is recognised in other income over the economic useful life of the related asset. 3.19 Related parties The Group is a 100% controlled entity of the Government of South Africa as represented by the Department of Water and Sanitation. As a Schedule 3B Enterprise in terms of the Public Finance Management Act, the Group recognises only those public entities that are within the same Ministerial control, as related parties. Key management is defined as being individuals with the authority and responsibility for planning, directing and controlling the activities of the entity. The Group considers the key management personnel to be the board members and executives as detailed in the Remuneration Report. Close family members of key management personnel are considered to be those family members who may be expected to influence, or be influenced by key management individuals or other parties related to the entity. Transactions and balances with the related parties as defined by the Group that occurred during the financial period are disclosed as related party transactions or balances. interest expense over the relevant period. 3.18 Income received in advance Income received in advance consists of capital contributions from customers (or other entities) for the construction of items of property, plant and equipment are recognised when it is probable that the contribution will be received, future

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Rand Water | Integrated Annual Report 2025