Page 48 - SABN AR 2021

The SABN currently has two revenue contracts (listed below) with the SARB in which the SABN acts in the capacity of the lessor and which were assessed against the criteria of IFRS 16. These contracts contain an operating lease and are recognised as lease revenue. They are disclosed further in Note 14 on revenue.
Revenue contracts that fall within the scope of IFRS 16
– The ‘Manage service agreement between the SABN and the SARB for the acceptance of delivery, storage, safeguarding and dispatch of banknotes’; and
– The ‘Lease agreement between the SABN and the SARB for the use of the Disaster Recovery site’. There are no other supplier contracts that fall within the scope of IFRS 16.
Operating leases
Manage service agreement between the SABN and the SARB for the acceptance of delivery, storage, safeguarding and dispatch of banknotes
The SABN has concluded a service level agreement for the acceptance of delivery, storage, safeguarding and dispatch of banknotes, which is for the rental of the Pretoria North Depot building to the SARB and the management thereof on its behalf.
The contract is renewable annually with the SARB; however, in substance, the lease term is the remaining useful life of the Pretoria North Depot and is dependent on the SARB deciding to outsource the management thereof to the SABN.
Lease revenue recognised in terms of IFRS 16 relates to amounts charged to the SARB for the rental of the Pretoria North Depot building. The remainder of the income arising from the contract relates to the management fee charged, which is based on the recovery of costs incurred to manage the depot. This non-lease portion has been classified as revenue to be recognised in terms of IFRS 15, Revenue from Contracts with Customers.
Lease agreement between the SABN and the SARB for the use of the Disaster Recovery site
The SABN has concluded a rental contract with the SARB to lease the Disaster Recovery site. This contract is renewable annually. The full lease has been classified as an operating lease and is disclosed under lease revenue.
1.7 Inventories
Inventories are stated at the lower cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Costs incurred in bringing each product to its present location and useable condition is accounted for as follows:
– Raw materials are presented at actual cost on a weighted-average cost basis.
– Work in progress and finished goods are valued at standard cost, which approximates actual cost on
a weighted-average cost basis.
– The value of work in progress includes direct costs and an appropriate portion of overhead expenditure.
– Consumable stock and maintenance spares are valued at weighted-average cost.
– Redundant stock is identified and written down to the lower of its estimated economic or net
realisable values.
– When inventories are sold, the carrying amount of those inventories are recognised as an expense in the
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South African Bank Note Company (RF) Proprietary Limited
period in which the related revenue is recognised.
Annual Report 2021