HSRC Integrated Annual Report 2018/2019

100 / HSRC INTEGRATED ANNUAL REPORT 2018/19 PART E: ANNUAL FINANCIAL STATEMENTS Provisions are not recognised for future operating losses. If the HSRC has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. Contingent assets and contingent liabilities are not recognised. Provisions are measured as the present value of the estimated future outflows required to settle the obligation. In the process of determining the best estimate of the amounts that will be required in future to settle the provision management considers the probability of the potential outcomes of the provisions raised, and provides the best estimate required to settle the provision. 1.14 Financial Instruments, Commitments and Contingent Assets/Liabilities 1.14.1 Trade and Other Receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. 1.14.2 Trade and Other Payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Accruals, being goods and services delivered and not invoiced as at 31 March, are included in trade and other payables. 1.14.3 Cash and Cash Equivalents Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand, including funds invested in call accounts held with our bankers and the reserve bank. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. 1.14.4 Other Financial Assets Other financial assets are carried in the statement of financial position at cost. 1.14.5 Commitments Commitments are not recognised in the statement of financial position as a liability or as expenditure in the statement of financial performance but are included in the notes to the financial statements. 1.14.6 Contingent Assets and Liabilities Contingent assets and liabilities are included in the notes to the financial statements when it is probable that an inflow or outflow of economic benefits will flow to or from the HSRC. Contingent assets and liabilities are not recognised in the statement of financial performance and statement of financial position. 1.14.7 Key Judgements and Estimates Applied by Management on Financial Instruments Impairment of trade and other receivables An allowance for the impairment of trade receivables is established when there is objective evidence that the HSRC will not be able to collect all amounts due according to the original terms of receivables agreed on when a contractual relationship was entered into. The calculation of the amount to be allowed for impairment of receivables requires the use of estimates and judgements. Significant financial difficulties of the debtor, and default or delinquency in payments (more than 120 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured for all debtors with indications of impairment. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of financial performance within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in the statement of financial performance. 1.15 Related Parties The HSRC operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. All transactions are at arm’s length. Due to the nature of the organisation, transactions with other organs have been disclosed, including those entities falling within the stable of the DST. This disclosure enhancement provides additional information for users. Key management is defined as being individuals with the authority and responsibility for planning directing and controlling the activities of the entity. We regard all individuals, from the level of Executive management and Council members as key management per the definition of the financial reporting standard. 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, in their dealings with the entity. 1.16 Restatements and Adjustments When necessary, comparative figures have been reclassified or adjusted to conform to changes in presentation in the current period. The nature and reason for such reclassifications and restatements are also disclosed. Refer to Note 26 for a detailed disclosure of prior year errors recorded. ACCOUNTING POLICIES for the period ended 31 March 2019 (continued)