Page 288 - SAMRC AnnualReport 2025-26

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2026
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

1.8 Financial instruments (continued)

The best evidence of fair value is quoted prices in an active market. If the market for a financial instrument
is not active, the entity establishes fair value by using a valuation technique. The objective of using a
valuation technique is to establish what the transaction price would have been on the measurement date
in an arm’s length exchange motivated by normal operating considerations. Valuation techniques include
using recent arm’s length market transactions between knowledgeable, willing parties, if available,
reference to the current fair value of another instrument that is substantially the same, discounted cash
flow analysis and option pricing models. If there is a valuation technique commonly used by market
participants to price the instrument and that technique has been demonstrated to provide reliable
estimates of prices obtained in actual market transactions, the entity uses that technique. The chosen
valuation technique makes maximum use of market inputs and relies as little as possible on entity-
specific inputs. It incorporates all factors that market participants would consider in setting a price and
is consistent with accepted economic methodologies for pricing financial instruments. Periodically, the
entity calibrates the valuation technique and tests it for validity using prices from any observable current
market transactions in the same instrument (i.e. without modification or repackaging) or based on any
available observable market data.
The fair value of a financial liability with a demand feature (e.g. a demand deposit) is not less than
the amount payable on demand, discounted from the first date that the amount could be required to
be paid.

Impairment

Recognition of expected credit losses
General approach
The entity recognises a loss allowance for expected credit losses on a financial asset that is measured
in accordance with paragraphs 4.2, a lease receivable, or a loan commitment and a financial guarantee
contract to which the impairment requirements apply in accordance with paragraphs 1.3(e), 4.7(c) or (d).
Subject to paragraphs 5.28 to 5.30, at each reporting date, an entity measures the loss allowance for a
financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that
financial instrument has increased significantly since initial recognition.

If the entity measured the loss allowance for a financial instrument at an amount equal to lifetime
expected credit losses in the previous reporting period, but determines at the current reporting date
that the above paragraph is no longer met, the entity measures the loss allowance at an amount equal
to 12-month expected credit losses at the current reporting date.

Subject to paragraphs 5.28 to 5.30, if, at the reporting date, the credit risk on a financial instrument
has not increased significantly since initial recognition, the entity measures the loss allowance for that
financial instrument at an amount equal to 12-month expected credit losses.
The entity recognises in surplus or deficit, as an impairment gain or loss, the amount of expected credit
losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that
is required to be recognised in accordance with GRAP 104 (revised 2019).

The entity applies a low credit risk exemption to cash and cash equivalents. Bank balances are held
with the Corporation for Public Deposits (wholly owned SARB subsidiaries) and Public Investment
Corporation; ABSA Bank Ltd and at First National Bank, which both have a national scale rating to zaA-1.
These instruments are assessed as low credit risk at the reporting date. A 12-month expected credit loss
(ECL) is applied and the resulting ECL allowance is nil.

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