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)

3.20 Fruitless, wasteful and irregular expenditure

Fruitless and wasteful expenditure

Fruitless and wasteful expenditure is defined as expenditure which was made in vain and would have been avoided had reasonable care been exercised. Where a transaction, event or condition was undertaken without value or substance and which did not yield any desired results or outcome and careful application, attentiveness and caution was applied to ensure that the probability of a transaction, event or condition not being achieved as planned is being managed to an acceptable level, such transaction, event or condition is recognised as fruitless and wasteful expenditure. Where expenditure has been incurred that does not comply with any law or regulation, the Group recognises that expenditure as irregular expenditure. Irregular expenditure is recognised when it is confirmed and to the extent that the expenditure is recognised in accordance with IFRS. Irregular expenditure is derecognised when it is either: a) condoned by the relevant authority if no official was found to be liable in law; b) recovered from an official liable in law; c) written-off if it is irrecoverable from an official liable in law; or d) written-off if it is not condoned and not recoverable. 3.21 Events after reporting date Events may occur between the end of the reporting period and the date when the consolidated annual financial statements are authorised for issue which may present information that should be considered in the preparation of financial statements. Only events that provide further evidence about conditions that existed at the end of reporting period are adjusted for in the consolidated annual financial statements. Non-adjusting events are disclosed in the consolidated annual financial A contract asset is an entity's right to consideration in exchange for goods or services transferred to a customer, conditioned on future performance. It arises when the Group transfers goods or performs services in advance of receiving consideration from the customer. The Group recognises a contract asset on the recoverable projects wherein work is performed based on the stage of completion. As the milestones are reached the entity recognises the work-in-progress as a contract asset. In addition to this, contract asset is recognised for the days to which potable or non-potable water has been supplied to a customer but not yet billed, as it falls outside the meter reading timelines. The loss allowance for contract assets is measured and recognised in terms of IFRS 9. The Group uses simplified approach applied to the related receivable to estimate the credit losses over the expected life of contract assets. 3.23 Contract liabilities A contract liability arises when the Group receives consideration from its customer (or has the unconditional right to receive consideration) in advance of performance (previously described as amounts received in advance), as reflected by the income received in advance on recoverable projects. Irregular expenditure statements accordingly. 3.22 Contract assets

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Rand Water | Integrated Annual Report 2025