Page 251 - SAMRC Annual Report 2023-24

FINANCIAL INFORMATION

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2024
SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

1.16 Provisions and contingencies
Provisions are recognised when:
• the entity has a present obligation as a result of a past event;
• it is probable that an outflow of resources embodying economic benefits or service potential will be
required to settle the obligation; and
• a reliable estimate can be made of the obligation.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the
present obligation at the reporting date.

Provisions are measured at the present value of the expenditures expected to be made to settle the
obligation using the pre-tax rate that reflects the current market assessments of the time value of money
and the risks specific to the obligation. The increase in the provision due to the passage of time is
recognised as finance charges.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another
party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will
be received if the entity settles the obligation. The reimbursement is treated as a separate asset. The
amount recognised for the reimbursement does not exceed the amount of the provision.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions
are reversed if it is no longer probable that an outflow of resources embodying economic benefits or
service potential will be required, to settle the obligation.

A provision is used only for expenditures for which the provision was originally recognised.
Provisions are not recognised for future operating deficits.

A constructive obligation to restructure arises only when an entity:
• has a detailed formal plan for the restructuring, identifying at least:
– the activity/operating unit or part of an activity/operating unit concerned;
– the principal locations affected;
– the location, function, and approximate number of employees who will be compensated for services
being terminated;
– the expenditures that will be undertaken; and
– when the plan will be implemented; and
• has raised a valid expectation in those affected that it will carry out the restructuring by starting to
implement that plan or announcing its main features to those affected by it.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 43.
1.17 Commitments

Items are classified as commitments when an entity has committed itself to future transactions that will
normally result in the outflow of cash.

Commitments for which disclosure is necessary to achieve a fair presentation is disclosed in a note to the
financial statements, if both the following criteria are met:
• Contracts should be non-cancellable or only cancellable at significant cost (for example, contracts for
computer or building maintenance services); and
• Contracts should relate to something other than the routine, steady, state business of the entity –
therefore salary commitments relating to employment contracts commitments are excluded.

SAMRC ANNUAL REPOR T 2023-24 249