Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2021

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

General Information

Country of domicile	Botswana
Nature of operations and principal activities	Safeguard the fairness, stability and efficiency of the non-bank financial sector.
Directors	Ms. M. V. Kabomo (Chairperson); Ms. L. T. Tema (Tenure ended on 17 October 2020); Ms. L. Lephole (Tenure commenced on 01 August 2020); Ms. P. Masalela; Dr. L. S. Senatla; Mr. K. Olebile; Ms. I. M. Ramalohlanye; Ms. H. D. Hlanti
Chief Executive Officer	Mr. O. A. Motshidisi (Tenure commenced on 01 September 2020)
Registered office	3rd Floor; Exponential Building; Plot 54351; Central Business District; Off P G Matante; Gaborone
Business address	Plot 54351; Central Business District; Off PG Matante; Gaborone Botswana
Bankers	Stanbic Bank of Botswana Limited
Auditors	Grant Thornton; Chartered Accountants; A Botswana Member of Grant Thornton International Ltd
Functional currency	Botswana Pula "BWP"

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Contents

	Page
Board Responsibilities and Approval of the Annual Financial Statements	3
Independent Auditor's Report	4 - 7
Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 March 2021	8
Statement of Financial Position as at 31 March 2021	9
Statement of Changes in Funds for the year ended 31 March 2021	10
Statement of Cash Flows for the year ended 31 March 2021	11
Accounting Policies	12 - 20
Notes to the Annual Financial Statements	21 - 35
The following supplementary information does not form part of the annual financial statements and is unaudited:
Detailed Income Statement	36 - 37

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Board Responsibilities and Approval of the Annual Financial Statements

The directors are required in terms of the Non-Bank Financial Institutions Regulatory Authority Act, 2016 to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the Authority as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Authority and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Authority and all employees are required to maintain the highest ethical standards in ensuring the Authority's business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Authority is on identifying, assessing, managing and monitoring all known forms of risk across the Authority. While operating risk cannot be fully eliminated, the Authority endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the Authority's cash flow forecast for the year to 31 March 2022 and, in light of this review and the current financial position, they are satisfied that the Authority has or had access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently auditing and reporting on the Authority's annual financial statements. The annual financial statements have been examined by the Authority's external auditors and their report is presented on pages 4 to 7.

The annual financial statements set out on pages 9 to 37, which have been prepared on the going concern basis, were approved by the board of directors on 26 AUG 2021 and were signed on their behalf by:

Approval of financial statements

[Signature]
Director

[Signature]
Director

Gaborone

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Independent Auditor's Report

Other information

The directors are responsible for the other information. The other information comprises the general information and Statement of Director Responsibility, which we obtained prior to the date of this auditor's report, and other sections of the annual report, which are expected to be made available to us after that date. Other information does not include the annual financial statements and our auditor's report thereon.

Our opinion on the annual financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the annual financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the annual financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, 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 Annual Financial Statements

The directors are responsible for the preparation and fair presentation of the annual financial statements in accordance with International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the annual financial Statements, the directors are responsible for assessing the Authority'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 Authority or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Authority's financial reporting process.

Auditor's responsibilities for the audit of the Annual Financial Statements

Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 International Standards on Auditing 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 annual financial statements.

As part of an audit in accordance with International Standards on Auditing, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the annual 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 Authority's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

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Independent Auditor's Report

• Conclude on the appropriateness of the directors' 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 Authority's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the annual 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 Authority to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors 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 directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the annual financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Reporting on Other Legal and Regulatory Requirements

As required by the Non-Bank Financial Institutions Regulatory Authority Act, 2016, we report to you, based on our audit, that:

• all the information and explanation which, to the best of the auditor's knowledge and belief, were necessary for the performance of the auditor's duties;
• The accounts and related records of the Regulatory Authority have been properly kept
• The Regulatory Authority has complied with all the financial provisions of this Act with which it is its duty to comply with: and
• The statement of accounts prepared by the Authority was prepared on a basis consistent with that of the preceding year and represents a true and fair view of the transactions and financial affairs of the Regulatory Authority.

GRANT THORNTON
Chartered Accountants
Certified Auditor: Sunny Mulakulam (Memb No:20050097) Certified Auditor of Public Interest Entity Certificate Number: CAP 0034 2021

06 SEP 2021
Gaborone

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Independent Auditor's Report

To the members of Non-Bank Financial Institutions Regulatory Authority

Opinion

We have audited the accompanying annual financial statements of Non-Bank Financial Institutions Regulatory Authority set out on pages 8 to 35, which comprise the statement of financial position as at 31 March 2021, and the statement of profit or loss and other comprehensive income, statement of changes in funds and statement of cash flows for the year then ended, and notes to the annual financial statements, including a summary of significant accounting policies.

In our opinion, the annual financial statements give a true and fair view of the financial position of Non-Bank Financial Institutions Regulatory Authority as at 31 March 2021, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Non-Bank Financial Institutions Regulatory Authority Act, 2016.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the annual financial statements section of our report. We are independent of the Authority in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B) (IESBA Code) and other independence requirements applicable to performing audits of annual financial statements in Botswana. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and in accordance with other ethical requirements applicable to performing audits in Botswana. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Independent Auditor's Report

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the annual financial statements of the current period. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon, and the report below is not intended to constitute separate opinions on those key audit matters.

Key audit matter	How the matter was addressed in our audit
Recognition of revenue; ; The Authority relies on Supervisory levies and Government grants to sustain its activities. The activities include those that are recurrent in nature for administrative purpose and for the remuneration of its employees.	• We have performed walkthroughs on the revenue cycle to gain an understanding of when the revenue is recognised.; • We obtained the invoice listing from the operating system and determined that income has been appropriately recorded in the general ledger. We selected a sample of invoices raised from each category to verify that the levy has been appropriately recognised in the system and compare the details of the invoice to the information in the Authority's system.; • We have reviewed the Authority's credit policy on receivables and assessed that appropriate provision is made on overdue accounts where the recoverability of the balances was doubtful, in line with requirements of IFRS 9, which was adopted by the Authority.
Operating expenses; ; The operations of the Authority are supported by significant expenditure/purchases and moreover compliance with the procurement procedures has been flagged as a significant risk. Thus, the matter has been considered key to the audit	• We obtained an understanding of controls surrounding procurement and performed walk-throughs to ensure they were operating effectively during the year; • We selected a monetary unit sample and tested the same to ensure that the disbursements were following the Authority's policies and were legitimately for the purpose of the Authority's operations

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 March 2021

Figures in Pula	Note	2021	2020
Government grants	3	11 633 117	19 978 053
Amortisation of governments grants	4	3 660 372	6 326 829
Other operating income	5	6 676 634	2 604 811
Supervisory levies	6	67 314 982	58 766 691
Total revenue		89 285 105	87 676 384
Movement in credit loss allowances	7	(1 836 975)	(965 423)
Staff costs	8	(58 171 793)	(54 361 666)
Consultancy costs	9	(526 516)	(1 914 144)
Administrative expenses	10	(11 315 761)	(14 194 991)
Other operating expenses	11	(10 110 252)	(10 391 629)
Total operating expenses		(81 961 297)	(81 827 853)
Operating surplus		7 323 808	5 848 531
Finance income	12	848 860	861 701
Finance costs	13	(207 140)	(278 273)
Total operating surplus		7 965 528	6 431 959
Other comprehensive income		-	-
Total comprehensive income for the year		7 965 528	6 431 959

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Statement of Financial Position as at 31 March 2021

Figures in Pula	Note	2021	2020
Assets
Non-Current Assets
Property, plant and equipment	14	4 664 609	3 595 084
Right-of-use assets	15	14 298 399	2 497 061
Intangible assets	16	-	3 126 460
		18 963 008	9 218 605
Current Assets
Trade and other receivables	17	1 338 785	295 660
Cash and cash equivalents	18	28 602 469	20 384 967
		29 941 254	20 680 627
Total Assets		48 904 262	29 899 232
Funds and Liabilities
Funds
Revaluation reserve		442 795	442 795
Reserves		6 921 540	2 830 792
Accumulated income		10 433 478	6 558 700
		17 797 813	9 832 287
Liabilities
Non-Current Liabilities
Lease liabilities	15	12 090 483	-
Government grants	19	8 897 681	10 723 898
African Development Bank Grant	20	-	255 451
		20 988 164	10 979 349
Current Liabilities
Trade and other payables	21	1 941 655	2 011 026
Lease liabilities	15	2 336 866	2 793 855
Short term employee benefits	22	5 839 764	4 282 715
		10 118 285	9 087 596
Total Liabilities		31 106 449	20 066 945
Total Funds and Liabilities		48 904 262	29 899 232

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Statement of Changes in Funds for the year ended 31 March 2021

Figures in Pula	Revaluation reserve	Statutory Reserve	Accumulated loss/gain	Total Funds
Balance at 1 April 2019	442 795	2 830 792	126 741	3 400 328
Surplus for the year	-	-	6 431 959	6 431 959
Other comprehensive income	-	-	-	-
Surplus for the year	-	-	6 431 959	6 431 959
Balance at 31 March 2020	442 795	2 830 792	6 558 700	9 832 287
Balance at 1 April 2020	442 795	2 830 792	6 558 285	9 832 285
Surplus for the year	-	-	7 965 528	7 965 528
Other comprehensive income	-	-	-	-
Surplus for the year	-	-	7 965 528	7 965 528
Transfer between reserves	-	4 090 748	(4 090 748)	-
Total changes recognised directly in Statement of Funds	-	4 090 748	(4 090 748)	-
Balance at 31 March 2021	442 795	6 921 540	10 433 478	17 797 813

Statutory Reserve
Section 23 (2) of the Non-Bank Financial Institutions Regulatory Act, 2016, requires that an annual estimate not exceeding 10 per cent (10%) of the total expenditure provided for in the estimates, be provided for as a reserve. The Statutory Reserve provided is adequate for the level of expenditure incurred. The purpose of the reserve is to be utilised for unforseen regulatory expenditure.

The Regulatory Authority believes that based on the current budget, the statutory reserve is adequate and in compliance with section 23 (2) of the Non-Bank Financial Institutions Regulatory Act, 2016.

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Statement of Cash Flows for the year ended 31 March 2021

Figures in Pula	Note(s)	2021	2020
Cash flows from operating activities
Cash generated from operations	24	10 733 733	8 494 627
Finance costs		(207 140)	(278 273)
Net cash from operating activities		10 526 593	8 216 354
Cash flows from investing activities
Purchase of Property, plant and equipment	14	(1 623 110)	(421 946)
Sale of Property, plant and equipment	14	44 407	-
Interest income		848 860	861 701
Net cash from investing activities		(729 843)	439 755
Cash flows from financing activities
Government grants		1 578 703	421 946
Payment on lease liabilities	25	(3 157 951)	(2 868 089)
Net cash from financing activities		(1 579 248)	(2 446 143)
Total cash and cash equivalents movement for the year		8 217 502	6 209 966
Cash and cash equivalents at the beginning of the year		20 384 967	14 175 001
Total cash and cash equivalents at end of the year	18	28 602 469	20 384 967

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1. Significant accounting policies

The annual financial statements have been prepared in accordance with International Financial Reporting Standards. The annual financial statements have been prepared on the historical cost basis, except for certain financial instruments measured at fair value, and incorporate the principal accounting policies set out below. They are presented in Pula.

These accounting policies are consistent with the previous period.

1.1 Statement of Compliance

The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and the Non-Bank Financial Institutions Regulatory Authority Act 2016.

1.2 Significant judgements and sources of estimation uncertainty

The preparation of financial statements in conformity with the International Financial Reporting Standards requires the use of certain critical accounting estimates and judgements concerning the future. Estimates and judgements are continually evaluated and are based on historical factors coupled with expectations about future events that are considered reasonable. In the process of applying the Authority's accounting policies, management has made the following estimates that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next year.

Key Areas of estimation and judgement

The key assumption concerning the future and other key sources of estimation uncertainty and judgements at the reporting date, that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year as this involves assessments or decisions that are particularly complex or subjective, are discussed below:

Depreciation charges and residual values

For depreciation purposes, a significant component is defined as equal to or greater than 20% of total cost of the asset and each significant component with different useful lives is depreciated separately. The depreciation methods reflect the pattern in which economic benefits attributable to the assets flow to the entity. The useful lives of these assets can vary depending on a variety of factors, including but not limited to the technological obsolescence, maintenance programs, refurbishments, product life cycles and the intention of management. Residual values of assets are determined by estimating the amount that the entity would currently obtain from the disposal of the asset already of age and in the condition expected at the end of its useful life. The estimation of the useful life and residual values of an asset is a matter of judgement based on the past experience of the Authority with similar assets and the intention of management. Assessment of the asset condition and usefulness are key assumptions used to determine the assets' useful lives and residual values.

Supervisory Levies

Where supervisory levies are calculated on information that has not been audited, the Regulatory Authority assumes that estimates have been used and will place reliance on the information submitted by the regulated entities as a basis for calculation.

Impairment testing

The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-inuse calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of assets.

The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including supply and demand, together with economic factors such as exchange rates, inflation and interest.

Provisions

Provisions were raised and management determined an estimate based on the information available.

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1.3 Intangible assets

An intangible asset is recognised when:

• it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
• the cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

The amortisation period and the amortisation method for intangible assets are reviewed every period-end.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item	Average useful life
Risk Based Supervisory System (RBSS)	5 years
Enterprise Resource Planning (ERP)	5 years

1.4 Property, plant and equipment

Property, Plant and Equipment is stated at cost, net of accumulated depreciation and / or accumulated impairment losses, if any. All plant and equipment are measured at historical cost less depreciation and impairment losses. Historical costs includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs such as replacement parts and major inspections 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 Authority and the cost of the item can be measured reliably. All day-to-day repairs and maintenance are charged to the surplus or deficit during the financial period in which they are incurred.

Motor vehicles is subsequently measured at revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Revaluations are made with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting year. The assets are revalued every 2-3 years.

When an item of property, plant and equipment is revalued, the gross carrying amount is adjusted consistently with the revaluation of the carrying amount. The accumulated depreciation at that date is adjusted to equal the difference between the gross carrying amount and the carrying amount after taking into account accumulated impairment losses.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the asset.

Any increase in an asset's carrying amount, as a result of a revaluation, is recognised in other comprehensive income and accumulated in the revaluation reserve in equity. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.

Any decrease in an asset's carrying amount, as a result of a revaluation, is recognised in profit or loss in the current year. The decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation reserve in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in the revaluation reserve in equity.

The revaluation reserve related to a specific item of property, plant and equipment is transferred directly to retained income when the asset is derecognised.

The revaluation reserve related to a specific item of property, plant and equipment is transferred directly to retained income as the asset is used. The amount transferred is equal to the difference between depreciation based on the revalued carrying amount and depreciation based on the original cost of the asset, net of deferred tax.

Depreciation is charged so as to write off the cost of the assets over their estimated useful lives on a straight-line basis, to estimated residual values. Where significant parts of an item have different useful lives to the item itself, these parts are depreciated separately over their useful lives. The methods of depreciation, useful lives and residual values are reviewed annually, with the effect of any change in estimates accounted for prospectively. Depreciation is not charged to an asset if its estimated residual value exceeds or is equal to its carrying amount. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or derecognised.

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1.4 Property, plant and equipment (continued)

The useful lives of items of property, plant and equipment have been assessed as follows:

Item	Depreciation method	Average useful life
Leasehold property	Lease term	Lease term
Furniture and fixtures	Straight line	10 years
Motor vehicles	Straight line	4-5 years
Office equipment	Straight line	6-7 years
Computer equipment	Straight line	3-7 years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its continued use or disposal. Any gain or loss arising from the derecognition of an item of property, plant and equipment, determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, is included in profit or loss when the item is derecognised.

1.5 Impairment of non-financial assets

At each financial reporting date, the Authority reviews the carrying amount of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indications exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Authority estimates the recoverable amount of the cash generating section to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating section) is estimated to be less than its carrying amount, its carrying amount is reduced to its recoverable amount. Impairment losses are recognised in the surplus or deficit in those categories consistent with the function of the impaired asset.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating-section) is increased to the revised estimate of its recoverable amount. This is done so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in the prior years. A reversal of an impairment loss is recognised in the surplus or deficit.

1.6 Revenue from regulated entities

The Authority recognises revenue from the following major sources:

• Supervisory levies
• License fees
• Penalties and interest
• Finance income
• Government Grant

Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Authority recognises revenue when it transfers control of a product or service to a customer.

The Supervisory levies

The supervisory levies and licence fees were promulgated into law through Statutory Instrument No.54 of 2020 of the Republic of Botswana, which was published in the Government Gazette of the 27 March 2021. Supervisory levies are charged and are payable in two equal portions, on or before the 30th April and 31st October of each financial year. Registered non-bank financial institutions are required to pay levies on an annual basis in terms of the Non-Bank Financial Institutions Regulatory Authority Act 2016. Supervisory levies are recognised at point in time. The Regulatory Authority may, on application, waive payment of some or all of a supervisory levy, penalty levy or a fee. The levies are fixed in nature and there are no separate performance obligations identified.

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1.6 Revenue from regulated entities (continued)

License fees

License fees are recognised on licensing of the relevant supervised entities and are recognised at the point in time. Some classes of regulated entities are charged annual licence fees, such fees are recognised by the Authority as revenue.

Penalties and interest

Penalties and interest are recognised in the surplus or deficit on penalizing those regulated entities that have defaulted in meeting the necessary regulatory guidelines.

Finance Income

Revenue is recognised as interest accrues (using the effective interest method). Finance income is recognised in the surplus or deficit.

Government Grant

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to the purchase of an asset, it is recognised as capital grant in the statement of financial position and released to the statement of comprehensive income in equal amounts over the expected useful life of the related asset. Where the Authority receives a nonmonetary grant, the asset and the grant are recorded at nominal amounts and released to the total surplus or deficit over the expected useful life of the relevant asset by equal annual installments.

1.7 Translation of foreign currencies

Foreign currency transactions

Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Foreign exchange translation gains or losses arising on the settlement of monetary items or on translating monetary items or on translating monetary items at rates different from those used when translating at initial recognition during the period or in the financial statements are taken to the statement of comprehensive income in the period they arise.

1.8 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. The Regulatory Authority had no eligible assets or borrowing costs for the period reported.

1.9 Employee benefits

Pension

The Regulatory Authority operates a defined contribution scheme for the employees. Payments to the scheme are charged as an expense to the statement of comprehensive income as they fall due.

Gratuity

The Regulatory Authority provides for gratuity benefits for employees on fixed term contracts in line with the Employment Act Chapter 47:01 and the relevant employment contracts. Gratuity expenses are recognised immediately, to the extent that the benefits are amortised on a straight-line basis over the period of service, until the benefits become payable. The charge is made to expenses in the statement of comprehensive income and a separate provision in the statement of financial position.

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1.9 Employee benefits (continued)

Leave pay provision

The Regulatory Authority recognises, in full, employee's right to annual leave entitlement in respect of past service. The recognition is made each year and is calculated based on accrued leave days not taken during the year. The charge is made to expenses in the statement of comprehensive income and a separate provision in the statement of financial position.

1.10 Government grants

Government grants are recognised when there is reasonable assurance that:

• the Authority will comply with the conditions attaching to them; and
• the grants will be received.

Government grants are recognised as income over the periods necessary to match the related costs that they are intended to compensate.

A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable.

Government grants related to assets, including non-monetary grants at fair value, are presented in the statement of financial position by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.

Grants relating to the acquisition of property, plant and equipment are credited to the income statement on a straight line basis over the expected useful lives of the related assets. The related costs are shown at cost less accumulated depreciation. When an asset financed through grants is disposed of, the total unamortised portion of the grant relating to the asset is recognised in profit and loss in the year of disposal.

1.11 Financial instruments

Financial instruments held by the Authority are classified in accordance with the provisions of IFRS 9 Financial Instruments.

Broadly, the classification possibilities, which are adopted by the Authority as applicable, are as follows:

Financial assets:

• Amortised cost.

Financial liabilities:

• Amortised cost.

Note 27 Financial instruments and risk management presents the financial instruments held by the Authority based on their specific classifications.

All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

The specific accounting policies for the classification, recognition and measurement of each type of financial instrument held by the Authority are presented below:

Trade and other receivables

Classification

Trade and other receivables, excluding, when applicable, VAT and prepayments, are classified as financial assets subsequently measured at amortised cost (note 17).

They have been classified in this manner because their contractual terms give rise, on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding, and the Authority's business model is to collect the contractual cash flows on trade and other receivables.

*

Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1.11 Financial instruments (continued)

Recognition and measurement

Trade and other receivables are recognised when the Authority becomes a party to the contractual provisions of the receivables. They are measured, at initial recognition, at fair value plus transaction costs, if any.

They are subsequently measured at amortised cost.

The amortised cost is the amount recognised on the receivable initially, minus principal repayments, plus cumulative amortisation (interest) using the effective interest method of any difference between the initial amount and the maturity amount, adjusted for any loss allowance.

Impairment

The Authority recognises a loss allowance for expected credit losses on trade and other receivables, excluding VAT and prepayments. The amount of expected credit losses is updated at each reporting date.

The Authority measures the loss allowance for trade and other receivables at an amount equal to lifetime expected credit losses (lifetime ECL), which represents the expected credit losses that will result from all possible default events over the expected life of the receivable.

Measurement and recognition of expected credit losses

The Authority makes use of a provision matrix as a practical expedient to the determination of expected credit losses on trade and other receivables. The provision matrix is based on historic credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current and forecast direction of conditions at the reporting date, including the time value of money, where appropriate.

The customer base is widespread and does not show significantly different loss patterns for different customer segments. The loss allowance is calculated on a collective basis for all trade and other receivables in totality. Details of the provision matrix is presented in note 17.

An impairment gain or loss is recognised in profit or loss with a corresponding adjustment to the carrying amount of trade and other receivables, through use of a loss allowance account. The impairment loss is included in other operating expenses in profit or loss as a movement in credit loss allowance (note 17).

Write off policy

The Authority writes off a receivable when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Receivables written off may still be subject to enforcement activities under the Authority recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.

Credit risk

Details of credit risk are included in the trade and other receivables note (note 17) and the financial instruments and risk management note (note 27).

Derecognition

Refer to the derecognition section of the accounting policy for the policies and processes related to derecognition.

Any gains or losses arising on the derecognition of trade and other receivables is included in profit or loss in the derecognition gains (losses) on financial assets at amortised cost line item.

Trade and other payables

Classification

Trade and other payables (note 21), excluding VAT and amounts received in advance, are classified as financial liabilities subsequently measured at amortised cost.

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1.11 Financial instruments (continued)

Recognition and measurement

They are recognised when the Authority becomes a party to the contractual provisions, and are measured, at initial recognition, at fair value plus transaction costs, if any.

They are subsequently measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.

Trade and other payables expose the Authority to liquidity risk and possibly to interest rate risk. Refer to note 27 for details of risk exposure and management thereof.

Derecognition

Refer to the "derecognition" section of the accounting policy for the policies and processes related to derecognition.

Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents consist of cash, cash deposits on call and short-term fixed deposit accounts in banks. Cash and cash equivalents are subsequently carried at amortised cost. Due to the short-term nature of these, the amortised cost approximates its fair value.

The Authority's financial assets include cash and cash equivalents and trade and other receivables.

Derecognition

Financial assets

The Authority derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Authority neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Authority recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Authority retains substantially all the risks and rewards of ownership of a transferred financial asset, the Authority continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities

The Authority derecognises financial liabilities when, and only when, the Authority obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

1.12 Provisions

Provisions are recognised when the Authority has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate of the amount can be made. Provisions are measured at the directors' best estimate of expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect of the time value of money is material.

1.13 Leases

The company assesses whether a contract is, or contains a lease, at the inception of the contract.

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.

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1.13 Leases (continued)

In order to assess whether a contract is, or contains a lease, management determine whether the asset under consideration is "identified", which means that the asset is either explicitly or implicitly specified in the contract and that the supplier does not have a substantial right of substitution throughout the period of use. Once management has concluded that the contract deals with an identified asset, the right to control the use thereof is considered. To this end, control over the use of an identified asset only exists when the company has the right to substantially all of the economic benefits from the use of the asset as well as the right to direct the use of the asset.

In circumstances where the determination of whether the contract is or contains a lease requires significant judgement, the relevant disclosures are provided in the significant judgments and sources of estimation uncertainty section of these accounting policies.

Company as lessee

A lease liability and corresponding right-of-use asset are recognised at the lease commencement date, for all lease agreements for which the company is a lessee, except for short-term leases of 12 months or less, or leases of low value assets. For these leases, the company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The various lease and non-lease components of contracts containing leases are accounted for separately, with consideration being allocated to each lease component on the basis of the relative stand-alone prices of the lease components and the aggregate stand-alone price of the non-lease components (where non-lease components exist).

However as an exception to the preceding paragraph, the company has elected not to separate the non-lease components for leases of land and buildings.

Details of leasing arrangements where the company is a lessee are presented in note 15 Leases (company as lessee).

Lease liability

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the company uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed lease payments, including in-substance fixed payments, less any lease incentives;
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• the amount expected to be payable by the company under residual value guarantees;
• the exercise price of purchase options, if the company is reasonably certain to exercise the option;
• lease payments in an optional renewal period if the company is reasonably certain to exercise an extension option; and
• penalties for early termination of a lease, if the lease term reflects the exercise of an option to terminate the lease.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability (or right-of-use asset). The related payments are recognised as an expense in the period incurred and are included in operating expenses (note 15).

The lease liability is presented as a separate line item on the Statement of Financial Position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect lease payments made. Interest charged on the lease liability is included in finance costs (note 13).

The company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) when:

• there has been a change to the lease term, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
• there has been a change in the assessment of whether the company will exercise a purchase, termination or extension option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Accounting Policies

1.13 Leases (continued)

• there has been a change to the lease payments due to a change in an index or a rate, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used);
• there has been a change in expected payment under a residual value guarantee, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate;
• a lease contract has been modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recognised in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Right-of-use assets

Right-of-use assets are presented as a separate line item on the Statement of Financial Position.

Lease payments included in the measurement of the lease liability comprise the following:

• the initial amount of the corresponding lease liability;
• any lease payments made at or before the commencement date;
• any initial direct costs incurred;
• any estimated costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, when the company incurs an obligation to do so, unless these costs are incurred to produce inventories; and
• less any lease incentives received.

Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. However, if a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation starts at the commencement date of a lease.

For right-of-use assets which are depreciated over their useful lives, the useful lives are determined consistently with items of the same class of property, plant and equipment. Refer to the accounting policy for property, plant and equipment for details of useful lives.

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. If the expectations differ from previous estimates, the change is accounted for prospectively as a change in accounting estimate. Each part of a right-of-use asset with a cost that is significant in relation to the total cost of the asset is depreciated separately.

The depreciation charge for each year is recognised in profit or loss unless it is included in the carrying amount of another asset.

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Notes to the Annual Financial Statements

2. New Standards and Interpretations

2.1 Standards and interpretations effective and adopted in the current year

In the current year, the Authority has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:

Standard/ Interpretation:	Effective date: Years beginning on or after	Expected impact:
Definition of a business - Amendments to IFRS 3	1 January 2020	The impact of the standard is not material.
Presentation of Financial Statements: Disclosure initiative	1 January 2020	The impact of the standard is not material.
Accounting Policies, Changes in Accounting Estimates and Errors: Disclosure initiative	1 January 2020	The impact of the standard is not material.

2.2 Standards and interpretations not yet effective

The Authority has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the Authority's accounting periods beginning on or after 1 April 2021 or later periods:

Standard/ Interpretation:	Effective date: Years beginning on or after	Expected impact:
IFRS 17 Insurance Contracts	1 January 2021	Unlikely there will be a material impact

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Notes to the Annual Financial Statements

	2021	2020
3. Government Grants
Revenue grants	11 633 117	19 978 053
The total grant received from the government are as follows:
Revenue grants	11 633 117	19 978 053
Capital grants	1 578 703	421 947
	13 211 820	20 400 000
4. Amortisaton of governments grants
Amotisation of property, plant and equipment	533 913	907 671
Amortisation of intangible assets	3 126 459	5 419 158
	3 660 372	6 326 829
5. Other operating income
Gains (losses) on disposals, scrappings and settlements	44 407	-
Property, plant and equipment	14	44 407	-
Interest and penalties, registration and renewals	6 055 639	2 291 500
Other income	550 946	313 311
	6 650 992	2 604 811
Foreign exchange gains (losses)
Net foreign exchange gains	25 642	-
Total other operating gains (losses)	6 676 634	2 604 811
6. Supervisory levies
Supervisory levies - Capital Markets	80 708	146 740
Supervisory levies - Lending	31 179 953	26 663 610
Supervisory levies - Finance and leasing companies	1 917 348	1 307 520
Supervisory levies - Insurance	13 090 069	11 770 831
Supervisory levies - Retirement fund and investment institutions	18 346 285	16 350 794
Supervisory levies - Medical Aid	2 700 619	2 527 196
	67 314 982	58 766 691
7. Movement in credit loss allowances
Trade and other receivables	1 836 975	965 423
8. Staff costs
Employee costs
Basic salaries	32 621 463	30 332 096
Allowances	18 908 255	17 738 414
Defined contribution plan expense	6 642 075	6 291 156
	58 171 793	54 361 666
9. Consultancy costs
Other consultancy costs	526 516	1 914 144

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Notes to the Annual Financial Statements

	2021	2020
10. Administrative expenses
Advertising	668 651	73 570
Audit fees	115 139	108 622
Administrative fees	183 624	-
Bank charges	40 427	58 827
Depreciation	3 543 694	4 123 256
Amortisation of RBSS and ERP	3 126 459	5 419 158
Insurance	421 884	441 263
Motor vehicle expenses	20 072	27 884
Office expenses	380 462	7 224
Printing and stationery	437 516	365 617
Recruitment	412 863	126 821
Telephone and fax	855 963	674 946
Travel	-	1 422 358
Staff costs	508 944	791 459
Utilities	600 063	553 986
	11 315 761	14 194 991
11. Other expenses
Board costs	275 134	286 882
Branding and communications	807 765	1 371 837
Cleaning	196 426	199 133
Internet	842 425	627 648
Legal fees	1 143 406	840 707
Repairs and maintenance	601 390	390 931
License fees	3 281 609	4 141 538
Security	120 630	125 725
Subscriptions	1 043 279	909 610
Strategy expenses	639 072	313 055
Training	1 159 116	1 184 563
	10 110 252	10 391 629
12. Finance income
Interest income
Investments in financial assets:
Bank	848 860	861 701
13. Finance costs
Interest expense for leasing arrangements	207 140	278 273

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Non-Bank Financial Institutions Regulatory Authority

Annual Financial Statements for the year ended 31 March 2021

Notes to the Annual Financial Statements

14. Property, plant and equipment
	2021			2020
	Cost or revaluation	Accumulated depreciation	Carrying value	Cost or revaluation	Accumulated depreciation	Carrying value
Leasehold property	125 714	(125 714)	-	125 714	(125 714)	-
Furniture and fixtures	4 588 700	(2 855 168)	1 733 532	4 544 292	(2 633 133)	1 911 159
Motor vehicles	522 783	(235 255)	287 528	522 783	(232 833)	289 950
Office equipment	325 330	(253 894)	71 436	250 836	(248 299)	2 537
IT equipment	5 718 697	(3 146 584)	2 572 113	4 214 489	(2 823 051)	1 391 438
Total	11 281 224	(6 616 615)	4 664 609	9 658 114	(6 063 030)	3 595 084

Reconciliation of property, plant and equipment - 2021

	Opening balance	Additions	Depreciation	Total
Furniture and fixtures	1 911 159	44 407	(222 034)	1 733 532
Motor vehicles	289 950	-	(2 422)	287 528
Office equipment	2 537	74 494	(5 595)	71 436
IT equipment	1 391 438	1 504 209	(323 534)	2 572 113
	3 595 084	1 623 110	(553 585)	4 664 609

Reconciliation of property, plant and equipment - 2020

	Opening balance	Additions	Depreciation	Total
Furniture and fixtures	2 201 127	86 088	(376 056)	1 911 159
Motor vehicles	420 647	-	(130 697)	289 950
Office equipment	5 329	-	(2 792)	2 537
IT equipment	1 504 408	335 858	(448 828)	1 391 438
	4 131 511	421 946	(958 373)	3 595 084

Revaluations
The Authority's motor