SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT FINANCIAL STATEMENTS 31 MARCH 2019 2 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT (PAU) NATURE OF BUSINESS The main objective of the Project is to promote the acceleration of the preparation of priority regional power generaborm and transmission projects in the region of the Southern African Power Pool. SAPP COORDINATION CENTRE BOARD MEMBERS: Mr. BJ Mbuere ua Mbuare (Co-ordination Centre Board Chairman) (NamPower) Mr S. Dihwa* (Co-ordination Centre Executive Director) Mr Edward Rugoyi (Botswana Power Company) Mr Titus Mwandemena (Copperbelt Electricity Corporation Mr Adento Sousa Electricidade de Mozambique) Mr Patnck Kadewa Electncity Supply Corporation of Malawi) Mr Naresh Singh ;Eskom, Mr. Wilson Masango :Eswathni Electricity Company) Mr. Adriano Jonas (Hidroelectrica de Cahora Bassa) Mr. Mohlomi Seitiheko (Lesotho Electricity Company) Mr. Justin Loongo (Lunsemfwa Hydro Power Company) Mr. Virgillo Laisse (Mozambique Transmission Company) Mr. John Nyongesa (Ndola Energy) Mr. Tony Ramos (Rede Nacioal de Transporte de Electricidade) Mr Alex Kadiayi (Societe Nationale d'Electricidade) Mr Isaac Chanli (Tanzania Electricity Supply Company) Mr Raphael Katsande .Zimbabwe Electricity Supply Authority) Mr Abraham Sashi (Zambia Electricity Supply Company) REGISTERED OFFICE: 24 Golden Stairs Road Emerald Hill Harare, Zimbabwe INDEPENDENT AUDITOR: PnceawaterhouseCoopers Chartered Accountants (Zimbabwe) Building Number 4 Arundel Office Park, Norfolk Road Mount Pleasant Harare. Zimbabwe PRINCIPAL BANKER: Stanbic Bank Botswana Limited Plot 50672, Off Samora Machel Drive Fairground Office Park Gaborone, Botswana INDEX TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 Page STATEMENT OF DIRECTORS RESPONSIBILITY 3 INDEPENDENT AUDITOR'S REPORT 4-5 STATEMENT OF FINANCIAL POSITION 6 STATEMENT OF INCOME AND EXPENDITURE AND ::THER COMPREHENSIVE INCOME 7 STATEMENT OF CHANGES IN MEMBERS' FUNDS 8 SI ATEMENT OF CASH FLOWS 9 NOTES TO THE FINANCIAL STATEMENTS 10-25 The financial statements have been presented in the United States of America dollar ("US"). 3 STATEMENT OF DIRECTORS RESPONSIBILITY to the members of SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT It is the Directors' responsibility to ensure that the financial statements fairly present the state of affairs of the Project. The external auditor is responsible for independently auditing and reporting on the financial statements The Directors have assessed the ability of the Project to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate However, the Directors believe that under the current economic environment a continuous assessment of the ability of the Project to continue to operate as a going concern will need to be performed to determine the continued appropnateness of the going concern assumption that has been applied in the preparation of these financial statements I he financial statements set out in this report have been prepared by management in accordance with International Financial Reporting Standards "IFRS") The statements are based on appropnate accounting policies which are supported by reasonable and prudent judgements and estimates The Project's internal and accounting control systems are designed to provide reasonable assurance as to the integrity and reliability of the financial statements and to adequately safeguard, verify and maintain accountability of its assets Such controls are based on established written policies and procedures and all employees are required to maintain the highest ethical standards in ensuring that the entity's business practices are conducted in a manner which in all reasonable circumstances is above reproach. Issues that came to the attention of the Directors have been addressed and the Directors confirm that the system of internal and accounting control is operating in a satisfactory manner The Project's financial statements which are set out below on pages 6 to 25 were, in accordance with their responsibilities approved by the Directors on 5 December 2019 and are signed on its behalf by BJ buere ua Mbuere Mr S. Dihwa Co-Qunstion Centre Board Chairperson Co-ordination Centre Executive Director A pwc INDEPENDENT AUDITOR'S REPORT to the members of SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT Report on the audit of the financial statements Our opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Southern African Power Pool Projects Advisory Unit ("SAPP PAU"), (the "Project" as at 31 March 2019, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. What we have audited PAU's financial statements set out on pages 6 to 25 comprise: the statement of financial position as at 31 March 2019; *the statement of income and expenditure and other comprehensive income for the year then ended; * the statement of changes in members' funds for the year then ended; * the statement of cash flows for the year then ended; and * the notes to the financial statements, which include a summary of significant accounting policies. Basis for opinion We conducted our audit in accordance with International Standards an Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Project in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) issued by the International Ethics Standards Board for Accountants and other independence requirements applicable to performing audits of financial statements in Zimbabwe, We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and other ethical requirements applicable to performing audits of financial statements in Zimbabwe. Other information The Directors are responsible for the other information. The other information comprises the information included in the Southern African Power Pool - Projects Advisory Unit Financial Statements 31 March 2019. Other information does not include the financial statements on pages 6 to 25 and our auditors report thereon. Our opinion on the financial statements does not cover the other information and we do not and will not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial statements The Directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and for such internal controls as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Project or to cease operations, or have no realistic alternative but to do so PricewaterhouseCoopers, Building No. 4, Arundel Office Park, Norfolk Road, Mount Pleasant PO Box 453, Harare, Zimbabwe T: +263 (4) 338362-8, F: +263 (4) 338395, www.pwc.com TI Rwodri- Sero partner The Partnershp's pincipal place of business is at Anrdel OfMce Park, Norfaik Road. Mount Pleasantk Harare. Zl bawe where a iist of the Partnersnamies Is availale for inspecton. pwc INDEPENDENT AUDITOR'S REPORT (continued) Auditors responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion, Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate. they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations. or the override of internal control * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. * Conclude on the appropriateness of the Executive Committees' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation We communicate with the members regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the members with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards Tinashe I Rwodzi Registered Public Auditor Partner for and on behalf of PricewaterhouseCoopers Chartered Accountants (Zimbabwe) Public Accountants and Auditors Board, public auditor certificate number 100 Institute of Chartered Accountants of Zimbabwe, public practice certificate number 253568 5 December 2019 Harare, Zimbabwe SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2019 2019 2018 ASSETS Notes US$ US$ Non-current assets Property and equipment 11 37860 43256 Intangible asset 12 2467 3289 Total non - current assets 40327 46545 Current assets Other receivables 13 14980 14694 Cash and cash equivalents 14 321 860 412 599 Total current assets 336840 427293 TOTAL ASSETS 377167 473838 FUNDS AND LIABILITIES Members' funds Acuumulated funds (100248) 442937 Total members' funds (100 248) 442 937 Special funds; tarid Bank 42612 - Mozambique Zambia project 114 489 - Solwezi -Kolwezi project 103 408 - Solwezi project 19 785- Total special funds 280294 - Current liabilities Accounts payables 1 197121 30901 Total special funds and current liabilities 477415 30901 TOTAL FUNDS AND LIABILITIES 377167 473838 The above statemenl of financial possLion should be read with the accompanying notes These financial statements were approved by the Board of Directors on 5 December 2019 and signed on its behalf by Ma Mr S. Dihwa o a tire Board Co-ordination Centre Executive Director Chairpe on SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT STATEMENT OF INCOME AND EXPENDITURE AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2019 2019 2018 Notes US$ US$ INCOME Grant income 5 5141008 2973965 Other income 6 8173 4423 Total income 5149181 2978388 EXPENDITURE Administrative costs 7 210443 167995 Staff costs 8 483843 638415 Travel and subsistence 9 875447 185909 Consultancy services 10 4122633 1750845 Total expenditure 5692366 2743164 (Deficlt)/Surplus for the year (543185) 235 224 The above statement of income and expenditure should be read with the accompanying notes SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT STATEMENT OF CHANGES IN MEMBERS' FUNDS FOR THE YEAR ENDED 31 MARCH 2019 Accumulated funds Total US$ USS YEAR ENDED 31 MARCH 2018 Balance at 1 April 2017 207713 207713 Surplus far the year 235224 235224 Balance at 31 March 2018 442937 442937 YEAR ENDED 31 MARCH 2019 Balance at 1 April 2018 (previously stated) 442 937 442 937 Restatement as a result of adoption of IFRS 9 and 15 Deficit for the year (543185) (543185) Balance at 31 March 2019 (100 2484 (1 248 The above statement of changes in members' funds should be read with the accompanying notes SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2019 2019 2018 Notes US$ US$ CASH FLOWS FROM OPERATING ACTIVITIES (Deficit)/Surplus for the year .543 185, 235224 Adjustments for Depreciation of property and equipment 11 12616 14121 Amortisation of software 822 822 Operating cash flow before working capital changes (529747) 250167 Net effect of working capital changes :7 446228 19156 Cash (used)1generated from operations (83519) 269323 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition cf property and equipment 11 (7220) - Net cash flows utilised in Investing activities (7 220) - Net (decrease)tlncrease In cash and cash equivalents (90739) 269323 Cash and cash equivalents at beginning of the year 412599 143276 Cash and cash equivalents at end of the year 14 321860 412599 The above statement of cash flows should be read with the accompanying notes 10 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 1 GENERAL INFORMATION Southern African Power Pool - Projects Advisory Unit (the "Project") is a Project of Southern African Power Pool. 1.1 Nature of business The main objective of the Project is to promote the acceleration of the preparation of priority regional power generation and transmission projects in the region of the Southem African Power Pool. 1.2 Legal status of SAPP-PAU The Projects Advisory Unit ("PAU") is a Project of the Southern African Power Pool ("SAPP") and it is not a separate legal entity The amounts presented and disclosed in the financial statements of the PAU are included in the SAPP-Coordination Centre ("SAPP-CC") financial statements 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below These policies have been consistently applied to all the years presented, unless otherwise stated 2.1 Basis of preparation The Project's financial statements have been prepared in accordance with International Financial Reporting Standards, ("IFRS") and -ntemational Financial Reporting Committee ,"IFRIC"1 interpretations. The financial statements are based on statutory records that are maintained under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Project's accounting policies The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.The accounting policies are consistent with the previous period, except for the adoption of IFRS 9 ("Financial lnstruments"! and IFRS 15 ("Revenue from contracts with customers") which has resulted in more disclosures and assessments than would have been in the prior periods. 2.1.1 Changes in accounting policies and disclosures a) International Financial Reporting Standards and amendments Issued and effective for the first time for 31 March 2019 Number _ Efictive date Executive summary IFRS 9- Financial Annual periods This standard replaces the guidance in IAS 39. It includes requirements on Instruments (2009 and 2010) beginning on or the classification and measurement of financial assets and liabilities; it also after includes an expected credit losses model that replaces the current incurred " Financial liabilities 1 January 2018 loss impairment model * Derecognition of financial instruments (published July * Financial assets 2014) * General hedge accounting Amendment to IFRS 9 Annual periods The IASB has amended IFRS 9 to align hedge accounting more closely with -'Financial instruments', beginning on or an Organisation's risk management. The revised standard also establishes after a more principles-based approach to hedge accounting and addresses - on general hedge 1 January 2018 inconsistencies and weaknesses in the current model in IAS 39. Effective 1 accounting January 2018. Early adoption of the above requirements has specific transitional rules that need to be followed. Entities can elect to apply IFRS 9 for any of the following: * The own credit risk requirements for financial liabilities. * Classification and measurement (C&M) requirements for financial assets. * C&M requirements for financial assets and financial liabilities. * The full current version of IFRS 9 (that is, C&M requirements for financial assets and financial liabilities and hedge accounting). Effective 1 January 2018. Amendment to IFRS 9 Annual periods The narrow-scope amendment covers two issues: -'Financial instruments' beginning on or a The amendments allow companies to measure particular prepayable after financial assets with so-called negative compensation at amortised cost - prepayment features with 1 January 2019 or at fair value through other comprehensive income if a specified negative compensation and condition is met-instead of at fair value through profit or loss. It is likely - modification of financial to have the biggest impact on banks and other financial services entities. liabilities * How to account for the modification of a financial liability. The amendment confirms that most such modifications will result in immediate recognition of a gain or loss. This is a change from common practice under IAS 39 today I -A ...W K - i Whn-4, 4 .. -f l..-4 k-..- " _ -4.- SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) 2.1.1 Changes in accounting policies and disclosures (continued) a) International Financial Reporting Standards, interpretations and amendments Issued and effective for 31 March 2018 lNumber Effective date Executive summary IFRS 15 - Revenue from Annual periods The FASB and IASB issued their long awaited converged standard on contracts with customers. beginning on or revenue recognition on 29 May 2014 It is a single, comprehensive revenue ,after recognition model for all contracts with customers to. achieve greater 1 January 2018 consistency in the recognition and presentation of revenue Revenue is recognised based on the satisfaction of performance obligations, which .published April occurs when control of good or service transfers to a customer 2016), Amendment to IFRS 15 - Annual penods The IASB has amended IFRS 15 to clarify the guidance. but there were no Revenue from contracts with Ieginning on or major changes to the standard itself The amendments comprise customers. after clarifications of the guidance on identifying performance obligations, 1 January 2018 accounting for licences of intellectual property and the principal versus agent assessment ;gross versus net revenue presentation) New and amended (published April illustrative examples have been added for each of these areas of guidance 2016: The IASB has also included additional practical expedients related to transition to the new revenue standard. IFRS 16 - Leases Annual periods This standard replaces the current guidance in IAS 17 and is a far reaching beginning on or change in accounting by lessees in particular. -after 1 January 2019 - earlier Under IAS 17, lessees were required to make a distinction between a finance application lease 'on balance sheet, and an operating lease !off balance sheet IFRS 16 permitted if iFRS 15 now requires lessees to recognise a lease liability reflecting future lease is also applied payments and a rght-of-use asset' for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases (published of low-value assets: however this exemption can only be applied by lessees January 2016). I For lessors, the accounting stays almost the same. However as the lASB has updated the guidance on the definition of a lease %as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under IFRS 16, a contract is, or contains. a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration IFRS 16 supersedes IAS 1.1. 'Leases' IFRIC 4. 'Determining whether an Arrangement contains a ease'. SIC 15, 'Operating Leases - Incentives' and SIC 27, 'Evaluating the Substance of Transactions Involving the Legal Form of a Lease'. Amendments to IFRS 2 - Annual periods This amendment clarifies the measurement basis for cash-settled, 'Share-based payments' beginning on or share-based payments and the accounting for modifications that change an 'after 1 January award from cash-settled to equity-settled. It also introduces an exception to Clarifying how to account 12018 the principles in IFRS 2 that will require an award to be treated as if it was Ifor certain types of wholly equity-settled, where an employer is obliged to withhold an amount for share-based payment (published the employee's tax obligation associated with a share-based payment and transactions. June 2016) pay that amount to the tax authorrly Amendment to IFRS 4, Annual periods These amendments introduce two approaches: an overlay approach and 'nsurance contracts beginning on a deferral approach The amended standard will: Regarding the January 2018 0 Give all companies that issue insurance contracts the option to recognise implementation of IFRS 9, in other comprehensive income. rather than profit or loss. the volatility that 'Financial instruments .:published could anse when IFRS 9 is applied before the new insurance contracts September standard is issued and 2016) a Give companies whose activities are predominantly connected with insurance an optional exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing financial - instruments standard - AS 39. 12 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) 2.1.1 Changes In accounting policies and disclosures (continued) a) International Financial Reporting Standards, interpretations and amendments Issued and effective for 31 March 2019 (continued) Effectfife date Executive summary IFRS 9 - Financial Annual penods This standard replaces the guidance in IAS 39. It includes requirements on instruments ,2009 and beginning on the classification and measurement of financial assets and liabilities: it also 2010, or after 1 includes an expected credit losses model that replaces the current incurred Financial liabilities January 2018 lass impairment model Derecognition of financial instruments (published July Financial assets 2014: General hedge accountirhg Amendment to IFRS 9 Annual penods The IASB has amended IFRS 9 to align hedge accounting more closely '-'Financial instruments beginning on with an Organisation's risk management. The revised standard also or after establishes a more pnnciples-based approach to hedge accounting and - on general hedge addresses inconsistencies and weaknesses in the current model in IAS 39. accounting 1 January 2018 Early adoption of the above requirements has specific transitional rules that need to be followed. Entities can elect to apply IFRS 9 for any of the following. The own credit risk requirements for financial liabilities. Classification and measurement (C&M) requirements for financial assets. C&M requirements for financial assets and financial liabilities The full current version of IFRS 9 (that is, C&M requirements for financial assets and financial liabilities and hedge accounting). The transitional provisions described above are likely to change once the IASB completes all chases of IFRS 9. IFRS 15 - Revenue from Annual periods The FASB and IASB issued their long awaited converged standard on contracts with customers, beginning on or revenue recognition on 29 May 2014. It is a single, comprehensive revenue lafter recognition model for all contracts with customers to achieve greater 1 January 2018 consistency in the recognition and presentation of revenue. Revenue is I recognised based on the satisfaction of performance obligations, which (published May occurs when control of good or service transfers to a customer. 12014 Amendment to IFRS 15 - Annual periods The lASB has amended IFRS 15 to clarify the guidance, but there were no Revenue from contracts beginning on or major changes to the standard itself. The amendments comprise with customers. iafter I clarifications of the guidance on identifying performance obligations, 1 January 2018 accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended (published April illustrative examples have been added for each of these areas of guidance, 2016) The IASB has also included additional practical expedients related to J transition to the new revenue standard. Annual improvements Annual periods These amendments impact 2 standards: 2014-2016 beginning on or - IFRS 1,' First-time adoption of IFRS', regarding the deletion of short term after 1 January exemptions for first-time adopters regarding IFRS 7. IAS 19, and IFRS 10. 12018 - JAS 28,'Investments in associates and joint ventures' regarding measuring an associate or joint venture at fair value. IAS 26 allows venture capital (published Organisations, mutual funds, unit trusts and similar entities to elect December measuring their investments in associates or joint ventures at fair value 2016) through profit or loss (FVTPL). The Board clarified that this election should be IImade separately for each associate or joint venture at initial um.cNgnition. Amendment to IAS 40, Annual periods These amendments clarify that to transfer to, or from, investment properties 'investment property beginning on or there must be a change in use To conclude if a property has changed use after 1 January there should be an assessment of whether the property meets the definition. Transfers of investment 2018 This change must be supported by evidence. property (published December 1nim I 13 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) 2.1.1 Changes In accounting policies and disclosures (continued) b) International Financial Reporting Standards, interpretations and amendments Issued and effective for 31 March 2019 (continued) Number Effective data Executive summary IFRIC 22, 'Foreign currency Annual penods This IFRIC addresses foreign currency transactions or parts of transactions transactions and advance beginning on or where there is consideration that is denominated or priced in a foreign consideration' after 1 January currency The interpretation provides guidance for when a single payment/ 2018 receipt is made as well as for situations where multiple payment/receipts are made The guidance aims to reduce diversity in practice. ,published lDecember 2016) c) International Financial Reporting Standards, interpretations and amendments issued but not effective for 31 March 2019 Number Effectlivelth -. Eikicutive suitns, Amendment to lAS 1, Annual periods These amendments to IAS 1 and IAS 8 and consequential amendments 'Presentation of financial beginning on or to other IFRSs: statements' and IAS 8. after 1 January - use a consistent definition of materiality through IFRSs and the 'Accounting policies, 2020. Conceptual Framework for Financial Reporting; changes in accounting clarify the explanation of the definition of material; and estimates and errors' an incorporate some of the guidance in IAS 1 about immaterial information. the definition of material. The amended definition is "Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of I general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting Organisation." Amendments to IAS 19, Annual periods These amendments require an Organisation to: 'Employee benefits' on lon or after 1 Use updated assumptions to determine current service cost and net interest plan amendment, January 2019 for the remainder of the period after a plan amendment, curtailment or curtailment or settlement, settlement; and (issued Recognise in profit or loss as part of past service cost, or a gain or loss on 'February 2018) settlement, any reduction in a surplus (recognised or unrecognised). This reflects the substance of the transaction, because a surplus that has been used to settle an obligation or provide additional benefits is recovered. The impact on the asset ceiling is recognised in other comprehensive income, and it is not reclassified to profit or loss The impact of the amendments is to confirm that these effects are not offset. Amendment to IFRS 3. Annual periods This amendment revises the definition of a business. According to feedback 'Business combinations' !on or after 1 received by the IASB, application of the current guidance is commonly thought January 2020 to be too complex, and it results in too many transactions qualifying as Definition of a business business combinations. More acquisitions are likely to be accounted for as (Published asset acquisitions. October 2018) To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an 'input and a substantive process are present (including for early stage companies that have not generated outputs). To be a business without outputs, there will now need to be an oicranised workforce. Amendments to IFRS 9 - Annual periods The narrow-scope amendment covers two issues: 'Financial instruments' on beginning on or - The amendments allow companies to measure particular prepayable prepayment features with ,after 1 January financial assets with so-called negative compensation at amortised cost or at negative compensation 2019 fair value through other comprehensive income if a specified condition is land modification of met-instead of at fair value through profit or loss It is likely to have the financial liabilities. biggest impact on banks and other financial services entities How to account for the modification of a financial liability The amendment confirms that most such modifications will result in immediate recognition of a gain or loss. This is a change from common practice under IAS 39 today and will affect all kinds of entities that have r nrqotiated bor r Lmings 14 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) 2.1.1 Changes in accounting policies and disclosures (continued) c) International Financial Reporting Standards, Interpretations and amendments issued but not effective for 31 March 2019 (continued) Numbe Effiatve date Etecutive.summarq IFRS 16 - Leases Annual periods This standard replaces the current guidance in IAS 17 and is a far reaching beginning on or change in accounting by lessees in particular, after I January 2019 - earlier Under IAS 17 lessees were required to make a distinction between a finance application lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 permitted if IFRS 15 now requires lessees to recognise a lease liability reflecting future lease is also applied. payments and a 'right-of-use asset' for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases :published of low-value assets however, this exemption can only be applied by lessees. January 2016) For lessors. the accounting stays almost the same, However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a penod of time in exchange for consideration. IFRS 16 supersedes IAS 17 'Leases' IFRIC 4 'Determining whether an Arrangement contains a Lease SIC 15, Operating Leases - Incentives' and SIC 27, 'Evaluating the Substance of Transactions Involving the Legal Form of a Lease' IFRS 17, 'Insurance Annual periods The IASB issued IFRS 17, 'Insurance contracts', and thereby started a new contracts' beginning on or epoch of accounting for insurers. Whereas the current standard, IFRS 4, after 1 January allows insurers to use their local GAAP, IFRS 17 defines clear and consistent 2021 rules that will significantly increase the comparability of financial statements. For insurers, the transition to IFRS 17 will have an impact on financial Early application is statements and on key performance indicators. permitted for entities that apply Under IFRS 17, the general model requires entities to measure an insurance IFRS 9, 'Financial contract at initial recognition at the total of the fulfilment cash flows Instruments', and (comprising the estimated future cash flows, an adjustment to reflect the time IFRS 15, 'Revenue value of money and an explicit risk adjustment for non-financial risk) and the from Contracts with contractual service margin. The fulfilment cash flows are remeasured on a Customers', at or current basis each reporting period. The unearned profit (contractual service before the date of margin) is recognised over the coverage period. initial application of IFRS 17 Aside from this general model, the standard provides, as a simplification, the premium allocation approach. This simplified approach is applicable for !(published May certain types of contract, including those with a coverage period of one year or 2017) less. For insurance contracts with direct participation features, the variable fee approach applies. The variable fee approach is a variation on the general model. When applying the variable fee approach, the Organisation's share of the fair value changes of the underlying items is included in the contractual service margin. As a consequence, the fair value changes are not recognised in profit or loss in the penod in which they occur but over the remaining life of the contract. .Amendments to IAS 28 Annual periods The amendments clarified that companies account for long-term interests in 'Investments in associates beginning on or an associate or joint venture, to which the equity method is not applied, using and joint ventures' - afier 1 January IFRS 9 long-term interests in 2019 associates and joint The amendments are effective from 1 January 2019, with early application ventures (published permitted October 20171 15 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) 2.1.1 Changes In accounting policies and disclosures (continued) c) International Financial Reporting Standards, Interpretations and amendments issued but not effective for 31 March 2019 (continued) Number *Effective date E*Tecutive summary Annual improvements Annual periods These amendments include minor changes to: cycle 2015-2017 beginning on or IFRS 3, 'Business combination' - a company remeasures its previously after 1 January held interest in a joint operation when it obtains control of the business. 2019 IFRS I11,Joint arrangements', - a company does not remeasure its previously held interest in a joint operation when it obtains joint control of published the business. December IAS 12,' Income taxes'- The amendment clarified that the income tax 2017 consequences of dividends on financial instruments classified as equity should be recognised according to where the past transactions or events that generated distnbutable profits were recognised. lAS 23,' Borrowing costs' - a company treats as part of general borrowings any borrowing originally made to develop an asset when the asset is ready for its intended use or sale. IFRIC 23, 'Uncertainty over Annual periods IFRIC 23 provides a framework to consider, recognise and measure the income tax treatments beginning on or accounting impact of tax uncertainties. The Interpretation provides specific after 1 January guidance in several areas where previously IAS 12 was silent. The 2019 Interpretation also explains when to reconsider the accounting for a tax uncertainty Most entities will have developed a model to account for tax Published 7 uncertainties in the absence of specific guidance in IAS 12. These models .Iune 2017; might, in some circumstances, be inconsistent with IFRIC 23 and the impact on tax accounting could be material. Management should assess the existing models against the specific guidance in the Interpretation and consider the impact on income tax accounilng 2.2 Going concern The Project's forecasts and projections, taking into account reasonably possible changes in performance, show that the Project should be able to operate within the level of its current financing. After making enquiries, the management team has a reasonable expectation that the Project has adequate resources to continue in operational existence for the foreseeable future The Project therefore continues to adopt the going concern basis in preparing its financial statements 2.3 Revenue recognition In line with the IFRS 15, 'Revenue from contracts with customers', Revenue is recognised as an amount that reflects the consideration to which the Project is expected to be entitled in exchange for transferring goods and or services to a customer The Project recognises revenue using the five-step process as follows; a) Identifies contracts with the customers. b) Identifies the separate performance obligation in the contract. c) Determines the transaction price of the contract which takes into account estimates of vanable consideration and time value of money. d) Allocates the transaction price to each of the separate performance obligations on the relative stand-alone selling pnce of each distinct good or service to be delivered. e) Recognises revenue as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, and any other contingent events. Such estimates are determined using either the " expected value" or most likely amount method. The measurement of variable consideration is subject to constraining pnnciple whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur The measurement constraint continues until the uncertainty associated with the vanable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised and revenue deferred in the form of a separate refund liability or deposits from customers. The Organisation has adopted IFRS 15 for the 2019 financial year using the modified retrospective transition election The revenue is assessed as being recognised at a point in time and therefore, there were no significant retrospective adjustments to opening equity Refer to the following assessment: IFRS 15 Adjustments.fir Adjusted LIAS 18 IFRS 1 blance. US$ US$ tis$ Revenue streams Grant income 2973965 229732975 '10 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.3 Revenue recognition (continued) There were also no significant changes in contract assets and liabilities. The Project recognises revenue as follows: a) Grant income Grant income for specific projects is recognised when the respective expenditure has been incurred which is at a point in time. The funds are received when the grant contracts are agreed and deferred income is recognised for the full amounts received The Project however recognises for grant income using IAS 20, "Accounting for Government Grants and Disclosure of Government Assistance" b) Interest income Interest income is recognised when it is probable that the economic benefits will flow to the Project and the amount of revenue can be measured reliably. Interest income and expense are recognised in profit or loss using the effective interest method. The 'effective interest rate' is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset. When calculating the effective interest rate for financial instruments, the Project estimates future cash flows considering all contractual terms of respective financial assets, but not expected credit losses. The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate. Interest income is earned on financial investments, can be measured reliably. 2.4 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of the Project are measured using the currency of the primary economic environment in which the Project operates ("the functional currency"). The financial statements are presented in the United States of America dollar ("US5"), which is the Projects functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of income and expenditure 2.5 Operating expenses Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin. 2.6 Property and equipment Property plant and equipment is stated at historical cost less depreciation and any impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition and installation of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Project and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. 2.6.1 Depreciation Property and equipment are stated at cost or revalued amount less accumulated depreciation and any accumulated impairment losses Depreciation is provided using the straight line method in order to allocate the historical cost or valuation of property and equipment over their estimated useful lives. Depreciation is provided for at the following rates per annum: Computer equipment 33.33% Office equipment 20% Office furniture and fittings 10% Intangible assets 20% Any gain or loss arising on derecognition of the asset ,calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of income and expenditure in the year the asset is derecognised. The Directors make an assessment of the useful lives and residual values of the assets on an annual basis. 2.7 Impairment of non-financial assets Assets that have an indefinite useful life, for example land, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows 'cash-generating units) Non- financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.8 Intangible assets The computer software licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using a straight line method to allocate the cost of computer software licences over their estimated useful life of 5 years. 2-9 Financial assets 2.9.1 Classification and recognition The Project has applied IFRS 9 retrospectively, but has elected not to restate comparative information. As a result, the comparative information provided continues to be accounted for in accordance with the Project's previous accounting policy The Project has adopted IFRS 9 from 1 January 2018. The standard introduced new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely for payment of principal and interest as well as selling the asset on the basis of its fair value. AlI other financial assets are classified and measured at fair value through profit or loss unless the Project makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or Foss, the standard requires the portion of the change in fair value that relates to the Project's own credit nsk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the Project. New impairment requirements use an 'expected credit loss('ECL) model to recognise an allowance Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted For receivables the general approach to measuring expected credit losses using a 12 month expected loss allowance is employed. 2.9.2 Reclassification The loans and other receivables were reclassified to financial assets at amortised costs. Reclassifications were made at fair value as of the reclassification date. Fair value became the new cost or amortised cost as applicable, and no reversal of fair value gains or losses recorded before reclassification date were subsequently made. 2.9.3 Subsequent measurement The measurement at initial recognition did not change on adoption of IFRS 9, see description above. Subsequent to the initial recognition, loans and receivables were carried at amortised cost. Gains or losses arising from changes in the fair value were recognised as follows: a) for financial assets at amortised cost. b) for other monetary securities - in other gainl(losses) net. 2.9.4 Impairment of financial assets The Project assessed at the end of each reporting period whether there was objective evidence that a financial asset or group of financial assets was impaired. A financial asset or group of financial asset was impaired and impairment losses were incurred only if there was objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that the loss event (events) had an impact on the estimated future cash flows of the financial asset or group of financial assets that could be reliably estimated. The Project has the following financial instruments that are subject to the expected credit loss model: a) Other receivables which includes staff debtors, grant income receivables and deposits b) Cash and cash equivalents Whilst cash ad cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. 2.9.5 Other receivables The Project applies the IFRS 9 general approach model to measuring expected credit losses which uses a 12 month expected loss allowance for all other receivables. To measure the expected credit losses, other receivables have been grouped based on shared credit risk characteristics and the days past due. The Project has therefore concluded that the expected loss rates for other receivables are a reasonable approximation of the loss rates. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables The Project identified the GDP rate to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.9 Financial assets (continued) 2.9.6 Derecognition Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Project has transferred substantially all the risks and rewards of ownership. 2.9.7 Classification and measurement On 1 April 2018 (the date of initial application of IFRS 9), the Project's management has assessed which business models apply to the financial assets held by the Project and has classified its financial instruments into the appropriate IFRS 9 categories. The main effects resulting from this reclassification are as follows: F1rancial.assets abralr value' Loans'and through profit or, Amortised recelvables less cast Closing balance 31 March USS Us4 2018 - IAS 39 Reclassify other receivables to amortised cost 14 694 - 14 694 Reclassify cash and cash equivalents to amortised cost 412 599 - 412 599 Opening balance I April 2018 427 293 - 412 599 Reclassification from loans and receivables Loans and receivables that would have previously been classified as loans and receivables have been reclassified to other receivables which are recognised at amortised cost There was no difference between the previous carrying amount and the revised carrying amount of the other financial assets at 1 April 2018 to be recognised in opening retained earnings. Reclassification of financial Instruments on adoption of IFRS 9 On the date of initial application, 1 April 2018 the financial instruments of the Project were as follows with any reclassifications noted, Measurement category Carrying amount Original New Orlginal New Difference IAS 39 IFRS 9 (IAS 39) USS US$ Current financial assets Other receivables Loans and receivables Amortised cost 14694 14694 Cash and cash equivalents Loans and ,receivables Amortised cost 412 599 412 599 - The reclassifications of the 'financial instruments on adoption of IFRS 9 did not result in any changes to measurements. 2.10 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. 3 FINANCIAL RISK MANAGEMENT 3.1 Financial risk factors Financial risks comprise financial instruments to which the Project is exposed during or at the end of the reporting period. Financial risks comprise market risk (including the effects of changes in foreign currency exchange rates and interest rates), credit risk and liquidity risk. The Project's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Project's financial performance The Finance Working Group ("FWG") provides principles for overall risk management, as well as policies covering specific areas a) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, Market risk comprises three types of risk; price risk, currency risk and interest rate risk. (1) Price risk Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk and currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market. The Project is not exposed to commodity price risk. (Ii) Foreign exchange risk Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Project is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the South African rand. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations denominated in a currency that is not the entity's functional currency. SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) a) Market risk (ii) Foreign exchange risk (continued) The table below summarises the Project's exposure to foreign exchange risk as at 31 March 2019 Included in the table are the Project's assets and liabilities at carrying amounts categorised by currency. 2019 2018 US$ US$ Assets South Afncan rand 13021 13548 13021 13548 Liabilities South Afncan rand - - Net currency position 13021 13548 There were no hedges in place as at 31 March 2019:2018. USSniW (ii) Cash flow and fair value Interest rate risk Interest rate risk arises from borrowings The Project does not have any borrowings at the year end (2018 US$nil) b) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge a contract. Credit risk is managed by the Board. Credit risk arises from cash and cash equivalents, deposits with banks, as well as credit exposures to customers, including outstanding receivables and committed transactions. For banks, only those with a strong capital base and international shareholder support, as well as good independently-rated scores are used. For receivables, senior management assess the credit quality of the customer, taking into account its financial position, past experience and other factors. The Project's maximum exposure to credit risk by class of financial asset is as follows Other receivables (note 13) 14980 14694 Cash and cash equivalents (note 14) 32860 412599 336840 427293 The fair value of receivables at 31 March 2019 approximates the carrying amounts. The Project's significant debtors are staff debtors, who make up most of the accounts receivables balance. The Project is confident about the ability of the staff members to settle their amounts due The concentration of credit risk is therefore suitably managed The fair value of cash and cash equivalents at the reporting date approximates the carrying amounts. The financial institutions holding cash and cash equivalents of the Project have the following credit ratings Rating AA- 321860 412599 321 860 412 599 There is no significant concentration of credit risk with respect to cash and cash equivalents as the Project holds cash accounts with large financial institutions with sound financial and capital cover The ratings have been obtained from the latest available ratings by the Global Rating Company 20 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The Project's liquidity position is monitored by management and reviewed by the FWG On demand and less than At 31 March 2019 one month USS Assets Cash and bank (note 14) 321 860 Trade receivables (note 13) 3 198 Total assets 325 058 Liabilities Accounts payables (excluding statutory liabilities) (note 15) 197 121 Total liabilities 197 121 Liquidity position/gap 127 937 Cumulative liquidity gap 127937 At 31 March 2018 Assets Cash and bank (note 14) 412 599 Trade receivables (note 13) 3 198 Total assets 415 797 Liabilities Accounts payables (excluding statutory liabilities) (note 15) 30 901 Total liabilities 30 901 Liquidity positionigap 384 896 Cumulative liquidity gap 384 896 3.2 Capital risk management The Project's objectives when managing capital are to safeguard the Project's ability to continue as a going concern. The Project is funded by the World Bank and as such there are no borrowings to support the capital structure for which capital risk management would be considered necessary 3.3 Fair value estimation Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Project takes into account the characteristics of the asset or liability it market participants would take those characteristics into account when pricing the asset or liability at the measurement date Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, in addition, for financial reporting purposes, fair value measurements are categorised into level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety which are described as follows. Level 1 - Quoted prices unadjusted' in active markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly that is. as prices: or indirectly that is, denved from prices). Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) The hierarchy requires the use of observable market data when available The Project considers relevant and observable market pnces in its valuations where possible The carrying amounts of financial liabilities and financial assets carried at amortised cost closely approximate their fair values. The impact of discounting is not significant due to market terms ,rates and tenor; and because these are short term in nature 21 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 4.1 Critical accounting estimates and judgements The Project makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below' (a) Useful lives of property, plant and equipment The Project's management determines the estimated useful lives residual values and related depreciation charges for its property and equipment. This estimate is based on projected life cycles for these assets. It could change significantly as a result of technical innovation and other factors. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write off or write down technically obsolete or non- strategic assets that have been abandoned or sold. (b) Revenue from contracts with customers The Organisation has adopted IFRS 15 for the first time during the year. The complexity involved in the interpretation of the contractual terms including timing of revenue recognition and any contractual liabilities and assets that arise with customers and translating this into the requirements of the accounting standard is an area of significant judgement. In addition, the Organisation considers the extend of any financing components in contracts with customers and the presence of variable consideration. Refer to note 2 3 for more policy information. (c) Currency considerations On 1 October 2018, the Reserve Bank of Zimbabwe :host country) issued a monetary policy statement that directed a separation of foreign currency Bank Accounts (FCAs) into two categories, Nostro FCAs and the RTGS FCA. The Nostro FCAs were to hold individual foreign currencies permissible in Zimbabwe's multi-currency economy at that time The RTGS FCA would be held at the same value as the US dollar Mobile money and Bond notes and coins would be treated in the same way as the RTGS FCA. The Monetary Policy Statement of 20 February 2019 presented new policies Furthermore, in February 2019, an electronic currency called the RTGS dollar was introduced through Statutory Instrument 33 of 2019 :S I 33 with an effective date of 22 February 2019 and the currency commenced trading at a rate of RTGS dollar 2 5 to the USS 1. In addition S.I. 33 fixed the exchange rate between the RTGS dollar and the US$ at a rate of 1:1 for penods before the effective date. The rate of 1:1 is consistent with the rate mandated by the Reserve Bank of Zimbabwe ("RBZ") at the time it issued the bond notes as currency and the time that the bank account balances were split between RTGS FCA bank balances and Nostro FCA bank balances in October 2018. through 22 February 2019, Subsequently, the Public Accountants and Auditors Board (PAAB) on 21 March 2019 issued guidance regarding 'financial reporting and auditing guidance on currency considerations under the environment prevailing for financial years beginning on or after 1 January 2018 The guidance specified that preparers are expected to assess the impact of the Project's inability to comply with the requirements of IAS 21: Effects of changes in foreign exchange rates'. Southern African Power Pool - Projects Advisory Unit is a Project of the Southern African Power Pool whose business is to facilitate the trading of power between entities in the Southern African Development Community :SADC) providing advisory services for various power generating projects within the region. SAPP - PAU is a not-for-profit Project whose income is from foreign donors. member contributions and administration fees earned based on the volume of power traded between members Throughout the 2019 financial year the majonty of the Project's business transactions were conducted in USS including its grant income. The total income for the year 2019 was all earned in USS. Other income from interest received was all earned from bank accounts denominated in USS, domiciled in Botswana. Expenses were mainly incurred in real USS as the majonty of the Project's bank accounts and balances were in US$. Based on the foregoing, there was no change in the Project's functional and presentation currency, as most banking arrangements are outside of Zimbabwe. In addition. almost all of the Project's business was carried out in the USS. (d) Inflation The Project has not applied the principles of IAS 29, Financial Reporting in Hyperinflationary Economies. in the preparation of the financial statements. The standard does not prescribe when hyperinflation arises The official annual inflation rate for Zimbabwe was 175.66% in June 2019. Subsequent to June 2019 Zimbabwe suspended calculation and publication of annual inflation rates until February 2020 in order to rebase consumer price indices' after introduction of a new currency Though the environment in which the Project operates met some of the requirements of lAS 29, reporting based on the standard would have been in conflict with the laws and regulations of Zimbabwe, the pnmary economic environment. Subsequent to year end. the Public Accountants and Auditors Board i'PAAB') issued a pronouncement that Zimbabwe is a hypennflationary environment effective July 1, 2019. The Project is not significantly affected by hyperinflation as the functional currency remains the USS. SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2019 2018 5 GRANT INCOME US$ US$ Advances from SAPP-Coordination Centre - - Receipts from World Bank 2579127 2085525 Receipts from African Development Bank 1698530 502204 Receipts from Development Bank of South Africa 863 251 - Sundry income - 1043 Utility funds (note 5.1) - 385193 5141008 2973965 Timing of revenue recognition Point in time 5 141 008 2 973 965 Over time . . 5 141 008 2973965 5.1 UTILITY FUNDS Electncidade de Mozambique - 47475 Societe Nationale d'Electricidade - 145051 Zambia Electricity Supply Company -192667 - 385193 Timing of revenue recognition Point in time - 385193 Over time . - 385 193 6 OTHER INCOME Interest received 288 304 Gain on foreign exchange translation 7885 4119 8173 4423 Timing of revenue recognition Point in time 8173 4423 Over time - . 8173 4423 7 ADMINISTRATIVE COSTS Project meetings 37519 31981 Legal fees - 17229 Membership fees - ENTSOE- E Programme Cooperation beyond 2019 56 896 - Courier services - 191 Bank charges 11 059 7423 Exchange losses 4938 9368 Depreciation 12616 14121 Amortisation 822 822 PAU office rentals 36913 43180 Pnrnting and stationery 4317 3272 Rates and water 13733 17495 Electncity 3012 3846 Cleaning services 4235 2990 Telephone and fax 2 174 476 Internet and e-mail 5617 5959 T support 6449 7278 Insurance - 23 Software licences 4960 561 Training and development 3052 736 Entertainment 383 1044 Recruitment costs 998 - Other general expenses 750 - 210443 167995 23 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2019 2018 8 STAFF COSTS USS US$ Basic salaries 389797 617012 Cash in lieu of leave 75709 7633 Medical aid expenses 15982 11992 Bereavement - 19 Staff welfare 825 147 Office groceries 1530 1612 483843 638415 9 TRAVEL AND SUBSISTENCE Travel local 9289 5329 Travel International 469052 108664 Mileage claim - 337 Per diem allowance 146191 33969 Accommodation and meals 244188 35623 Telephone and Internet - 1371 Admin fees - 162 Visa applications 6727 454 875447 185909 10 CONSULTANCY SERVICES Consultancy services 4 100 750 1 750 845 Financial accounting support 6761 - Audit fees - internal 15122 - 4122633 1750845 11 PROPERTY AND EQUIPMENT Computer Office Furniture equipment equipment and fittings Total US$ US$ US$ USS Year ended 31 March 2018 Opening carrying amount 12414 10140 34823 57 377 Transfers - 10560 (10560) - Depreciation; charge for the year (6 853) (4631) (2637) (14 121) Closing carrying amount 5561 16069 21626 43256 At 31 March 2018 Cost 20848 24305 26414 71567 Accumulated depreciation (15287) (8236) (4788) (28 311) Closing carrying amount 5561 16069 21626 43256 Year ended 31 March 2019 Opening carrying amount 5561 16069 21 626 43256 Additions 7220 - - 7220 Depreciation. charge fnr the year (5271) (4 707) ( 2638) ( 12616) Closing carrying amount 7510 11362 18988 37860 At 31 March 2019 Cost 28069 24305 26414 78788 Accumulated depreciation (20559) (12 943) (7426) (40 928) Closing carrying amount 7510 11362 18988 37860 2019 2018 12 INTANGIBLE ASSET US$ US$ Pastel software Carrying amount Balance at 1 April 3289 4111 Amortisation ( 822) ( 822) Balance as at 31 March 2467 3289 24 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2019 2018 13 OTHER RECEIVABLES US$ US$ Restricted Cash- Bank guarantee 11782 11496 Purchases accrual 3198 3198 14 980 14 694 Other receivables includes a restricted balance of US$11 782 :2018:USS11 496, held in an offshore account as part of security arrangements of the lease agreement with the PAU premises landlord. This represents three month's rental charge plus interest received on the security deposit. 13.1 Classification as accounts receivables Other receivables are generally due for settlement within 30 days and therefore are all classified as current. Accounts receivables are recognised initially at the amount of consideration that is unconditional unless they contain a significant financing components, when they are recognised at fair value. The Project holds the accounts receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details of the Project's impairment policies and calculation of the loss allowance are provided in note 13.4. 13.2 Credit risk Impairment of financial assets The Project has the following financial assets that are subject to the expected credit loss model: - other receivables - cash and cash equivalents 13.3 Impairment and risk exposure Information about the impairment of financial assets and the Projects exposure to credit risk can be found on note 3.1 (b). The following terminology Is used when referring to the credit quality of accounts receivables: Stage 1 These are receivables which are up to date with no indication of significant increase in credit risk, Generally these relate to receivables within current and 30 days. Stage 2 These are receivables that have raised a significant increase in credit risk flag due to poor performance and receivables that are up to 2 months in arrears who are in adherence to payment plans. Stage 3 These are receivables that are more than 2 months in arrears or are currently under debt review and are in breach of agreed payment plans. Stage I Stage 2 Stage 3 Total Balance as at 31 March 2019 Other receivables 14980 - - 14 980 Cash and cash equivalents 321 860 - -3321 860 336 840 - - 336840 Cumulative provision - - Net receivables 336 840 - - 336 840 ECL coverage percentage 0% 0% 0% 0% No adjustment was made on opening provision for credit losses as the impact was immaterial. No adjustments were made subsequently at year end on closing provision for credit losses based on factors considered. The Project's debtors cleared their arrears in the past within three months after the preceding year end. Based on forward-looking information and the historical information , the Project has assessed the risk of default by their debtors as low and no expected credit losses have been recognised, 13.4 Accounts receivables are written off when there is no reasonable expectation of recovery Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Project, and a failure to make contractual payments for a period of greater than 91 days past due. Impairment losses on accounts receivables are presented as expected credit losses within the statement of income and expenditure. Subsequent recoveries of amounts previously written off are credited against the same line item. Other financial assets and receivables are considered to be low credit risk when they have a low risk of default and are not impaired. The Project does not hold any collateral as security. 25 SOUTHERN AFRICAN POWER POOL - PROJECTS ADVISORY UNIT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019 (CONTINUED) 2019 2018 14 CASH AND CASH EQUIVALENTS US$ US$ For the purposes of the statement of cash flows, cash and cash equivalents comprise the following balances: Stanbic World Bank USD 82939 85447 Stanbic AFDB-MOZ-ZAM 19772 19919 Stanbic SAPP- PULA 1239 2052 Stanbic SAPP - DBSA (LUAPULA) - 95144 Stanbic AFDB - Solwezi Kolwezi 123193 115173 Stanbic MOZ - ZAM 94717 94864 321 860 412 599 15 ACCOUNTS PAYABLES Other liabilities consist of the following Due to SAPP Coordination Centre 68680 - Trade payables 73 292 30901 Accrued expenses 4815 - Staff leave provision 50334 - 197121 30901 Other payables due to SAPP Coordination Centre relate to expenditure that was funded by SAPP Coordination Centre on behalf of SAPP Projects Advisory Unit for vanous expenses 16 RELATED PARTIES Payments made to key management staff 157753 189732 17 NET EFFECT OF CHANGES IN WORKING CAPITAL Increase/(decrease) in accounts payables 166220 (134966) (Increase)/decrease in other receivable ( 286) (3 527' Decrease/(increase) in special funds 280 294 157648 446228 19155 18 EVENTS AFTER REPORTING DATE As at the date of approval of the financial statements, there were no material adjusting or non-adjusting events after the reporting date. Reserve Bank of Zimbabwe (Legal Tender) Regulations, 2019 On 24 June 2019, Statutory Instrument (S.. 142 of 2019), was promulgated to abandon the multi-currency basket including the United States Dollar and any other foreign currency and effecting the Zimbabwe Dollar as the sole legal tender to be used in Zimbabwe. References to the Zimbabwe Dollar was defined as coterminous with reference to bond notes and coins and the RTGS Dollar. S.1142 of 2019 does not have an impact on the figures in the financial statements for the year ended 31 March 2019. Accordingly, the financial statements have not been adjusted as the Project's functional currency remains the US$. Hyperinflationary considerations - Zimbabwe. The official annual inflation rate for Zimbabwe was 175.66% in June 2019. Subsequent to June 2019. Zimbabwe suspended calculation and publication of annual inflation rates until February 2020 in order to rebase consumer price indices' after introduction of a new currency Though the environment in which the Project operates met some of the requirements of IAS 29, reporting based on the standard would have been in conflict with the laws and regulations of Zimbabwe, the primary economic environment. Subsequent to year end, the Public Accountants and Auditors Board ("PAAB") issued a pronouncement that Zimbabwe is a hyperinflationary environment effective July 1, 2019. The Project is not affected by the principles of hyperinflation as the functional currency remains the US$. Refer to note 4. 19 COMMITMENTS AND CONTINGENCIES There were no known commitments and contingencies as at the end of the year :2018:none).