OMBUD COUNCIL ANNUAL REPORT 2024/25

PART F: FINANCIAL INFORMATION

1.6 FINANCIAL INSTRUMENTS A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity. Financial instruments are classified in the following categories: Financial Instrument at amortised cost. RECEIVABLES Receivables which are not accounted for as statutory receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment losses. A provision for impairment loss is established when there is objective evidence that not all amounts due will be collected according to original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the asset is reduced by the amount of the impairment loss which is recognised in the statement of financial performance. When the trade receivable is uncollectable, it is written off and subsequent recoveries of amounts previously written off are credited in the statement of financial performance. PAYABLES Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Statutory receivables are receivables that arise from legislation or supporting regulations and require settlement by another entity in cash.The Ombud Council’s statutory receivables is made up of transfers received from the National Treasury for its establishment payable by the FSCA and Levy received from the financial institutions collected by the FSCA in accordance with applicable legislation. The statutory receivables are initially recognised at their transaction amount. Subsequently, statutory receivables are measured at their transaction amount, plus any accrued interest or other charges (where applicable) and, less any accumulated impairment losses and any amounts derecognised. Statutory receivables are recognised as follows: ● if the transaction is an exchange transaction, using the policy on revenue from exchange transactions; or ● if the transaction is a non-exchange transaction, using the policy on revenue from non-exchange transactions. An impairment loss is established when there is an indication that a statutory receivable, or a group of statutory receivables that are due, will not be collected according to the original terms of the receivables. Significant financial difficulty of the debtor which may be evidenced by an application for debt counselling or business rescue, probability that the debtor will enter sequestration, liquidation or other financial re-organisation, default, bankruptcy or delinquency in payments, and adverse changes in international, national or local economic conditions are considered indicators that the trade receivable is impaired. The amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate. Where the carrying amount is higher than the estimated future cash flows, the carrying amount of the statutory receivable, is reduced, through the use of an allowance account. When the statutory receivable is uncollectable, it is written off and subsequent recoveries of amounts previously written off are credited in the statement of financial performance. 1.7 STATUTORY RECEIVABLES IDENTIFICATION

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OMBUD COUNCIL ANNUAL REPORT 2024/25