HSRC Integrated Annual Report 2018/2019

HSRC INTEGRATED ANNUAL REPORT 2018/19 / 99 maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposals values. The HSRC reassessed assets useful lives as at 31 March 2019, with depreciation decreasing by R1.3 million annually in future financial years. 1.11 Employee Benefits 1.11.1 Short-term Employee Benefits The cost of short-term employee benefits (those payable within 12 months after the service is rendered, such as cost to company (CTC), allowances and performance bonuses) are recognised in the period in which the service is rendered and are not discounted. 1.11.2 Post-employment Benefit Costs 1.11.2.1 Pension Funds The entity contributes to a pension fund for the benefit of its employees. The plan is a defined contribution plan. The entity identifies as defined contribution plans, any post-employment plan in terms of which it has no obligation to make further contributions to the plan over and above the monthly contributions payable on behalf of employees (for example in the event of a funding shortfall). Contributions made towards the fund are recognised as an expense in the statement of financial performance in the period that such contributions become payable. This contribution expense is measured at the undiscounted amount of the contribution paid or payable to the fund. A liability is recognised to the extent that any of the contributions have not yet been paid. Conversely an asset is recognised to the extent that any contributions have been paid in advance. Pensions are provided for employees by means of two separate pension funds to which contributions are made. These are the HSRC Pension Fund (HSRCPF), and the Associated Institutions Pension Fund (AIPF). 1.11.2.2 Post-retirement Medical Aid Benefits The entity contributes to a medical aid for the benefit of its employees. The plan is a defined benefit plan. The cost of providing these benefits is determined based on the projected unit credit method and actuarial valuations are performed every year. The HSRC contributed voluntarily to post-retirement medical aid benefits of specific employees who opted to remain on the previous conditions of service when the benefit was terminated. The HSRC does not provide for post-retirement medical aid benefits to any other category of employees. 1.11.3 Key Estimates and Assumptions Applied by Management on Employee Benefits 1.11.3.1 Post-retirement Medical Aid Benefits The cost of post-employment medical benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return of assets, future salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. Refer to Note 12 for a full disclosure of post-retirement benefits as at 31 March 2019. 1.11.3.2 Leave Accrual The leave pay accrual is based on actual days accrued at the rate of remuneration at the reporting date, being 31 March. Annually costs of living adjustments are processed. Changes in the rate of remuneration are determined annually and are effective from the first date of the financial year. Leave accrual for all staff is capped to the maximum amount that an employee accumulates in a 12 month cycle. 1.12 Foreign Currency Transactions Transactions in foreign currencies are accounted for at the rate of exchange ruling on the date of the transaction. Assets and liabilities in foreign currencies are translated at the rate of exchange ruling at the reporting date. Exchange differences arising from translations are recognised in the statement of financial performance in the period in which they occur. A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At each reporting date foreign currency monetary items are translated using the closing rate. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognised in surplus or deficit in the period in which they arise. 1.13 Provisions and contingencies Provisions are recognised when: • the HSRC has a present obligation as a result of past events; • it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligations; and • a reliable estimate can be made of the obligation. ACCOUNTING POLICIES for the period ended 31 March 2019 (continued)