It is the responsibility of the accounting officer to ensure that the annual financial statements fairly reflect the state of affairs of the municipality as at the end of the financial year and the results of its operations and cash flow for the period then ended. Although the accounting officer is primarily responsible for the financial affairs of the municipality, he is supported by the municipality's external auditors. The external auditors are responsible for the independent auditing and reporting on the municipality's annual financial statements.
The annual accounts have been audited by the external auditor of the municipality and their report is included on page 6. The operating results for the year and the state of affairs of the municipality are fully reflected in the attached annual accounts and in my opinion do not require any further explanation.
Presentation of Annual Financial Statements
Presentation currency
Going concern assumption
Significant judgements and sources of estimation uncertainty
Significant judgements and sources of estimation uncertainty (continued) Impairment testing
Investment property
Investment property (continued)
Property, plant and equipment
Property, plant and equipment (continued)
Any decrease in the book value of the asset resulting from the revaluation is recognized in the surplus or deficit of the current period. The reduction is debited to the revaluation surplus to the extent of any credit that exists in the revaluation surplus related to that asset. The revaluation surplus in equity in respect of a particular property, plant and equipment is transferred directly to retained earnings when the asset is derecognised.
The revaluation surplus in capital, which relates to an individual tangible fixed asset, is transferred directly to retained net profit when the asset is used. The amount transferred is equal to the difference between the depreciation based on the revalued book value and the depreciation based on the original cost of the asset.
Site restoration and dismantling cost
Intangible assets
Financial instruments
Financial instruments (continued)
Financial instruments (continued) Classification
If there is objective evidence that an impairment loss has occurred on financial assets measured at amortized cost, the amount of the loss is measured as the difference between the asset's book value and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the initial effective interest rate of the financial asset. The carrying amount of the asset is reduced directly OR through the use of an allowance account. Any difference between the amount received and the amounts recognized and derecognized is recognized in surplus or deficit in the period of the transfer.
Upon derecognition of a financial asset in its entirety, the difference between the accounting value and the sum of the consideration received is recognized in profit or loss. The difference between the carrying amount allocated to the discontinued part and the sum of the consideration received for the discontinued part is recognized in profit or loss.
Leases
In subsequent periods, the company recognizes any income from the transferred asset and all expenses arising from the financial liability. An entity removes a financial liability (or part of a financial liability) from its statement of financial position when it is extinguished – i.e. an exchange between an existing borrower and a lender of debt instruments with significantly different terms is accounted for as an extinguishment of the original financial obligation and a new financial obligation is recognized.
In the same way, a significant change to the terms of an existing financial obligation or a part of it is treated as the expiration of the original financial obligation and a new financial obligation recognized. Interest relating to a financial instrument or a component that is a financial liability is recognized as revenue or expense in profit or loss.
Leases (continued) Finance leases - lessor
Inventories
Inventories (continued)
Impairment of cash-generating assets
Employee benefits
Employee benefits (continued)
When measuring defined benefit obligations, the company recognizes actuarial gains and losses in surplus or deficit in the reporting period in which they occur. Current service costs are the increase in the present value of defined benefit obligations resulting from the employee's service in the current period. Interest expense is the increase in the present value of the defined benefit obligation in the period that occurs because the benefits are one period closer to settlement.
When measuring its defined benefit obligation, the company recognizes previous seniority costs as a cost in the accounting period in which the scheme is changed. The Company uses the Projected Unit Credit method to determine the present value of its defined benefit obligations and the related ongoing service costs and, where applicable, past service costs.
Employee benefits (continued) Actuarial assumptions
Employee benefits (continued) Termination benefits
Provisions and contingencies Provisions are recognised when
Provisions and contingencies (continued)
Determining whether an outflow of resources is probable with respect to financial guarantees requires judgment. Where a fee is received by the municipality for issuing a financial guarantee and/or where a fee is charged on loan obligations, this is taken into account when determining the best estimate of the amount required to settle the obligation at the reporting date.
Commitments
Revenue from exchange transactions
Revenue from exchange transactions (continued) Rendering of services
Revenue from non-exchange transactions
Revenue from non-exchange transactions (continued)
Investment income
Borrowing costs
Comparative figures
Unauthorised expenditure Unauthorised expenditure means
Fruitless and wasteful expenditure
Irregular expenditure
Use of estimates
Conditional grants and receipts
Materiality
Budget information
Related parties
Related parties (continued)
Events after reporting date
Value Added Tax (VAT)
Accumulated surplus
Accumulated surplus (continued)
Revaluation reserve
New standards and interpretations
Standards and interpretations effective and adopted in the current year
New standards and interpretations (continued)
- Standards and Interpretations early adopted
The definitions of cash-generating assets and cash-generating unit have been amended to be consistent with the amendments made to clarify the objective of cash-generating assets and non-cash-generating assets below. Additional commentary has been added to clarify the objective of cash-generating assets and non-cash-generating assets. The requirement to disclose the criteria developed to distinguish cash-generating assets from non-cash-generating assets has been amended to be consistent with the amendments made to clarify the objective of non-cash-generating assets and cash-generating assets.
The municipality adopted the standard for the first time in the 2016 annual accounts.
Related parties
Standards and interpretations issued, but not yet effective
The City has not adopted the following Standards and Interpretations, which are published and are mandatory for the City's accounting periods beginning on or after July 1, 2016 or later periods:.
Segment Reporting
Where items have not been recognized as a result of transitional provisions under the Standard of GRAP on Property, Plant and Equipment, recognition requirements of this Standard will not apply to such items until the transitional provision in that Standard expires. Where items have not been recognized as a result of transitional provisions of the Standard of GRAP on Property, Plant and Equipment and the Standard of GRAP on Agriculture, the recognition requirements of the Standard will not apply to such items until the transitional provision in that standard expires. The effective date of the standard has not yet been set by the Minister of Finance.
The municipality expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It is unlikely that the standard will have a material impact on the municipality's annual financial statements.
Service Concession Arrangements: Grantor
Service Concession Arrangements where a Grantor Controls a Significant Residual Interest in an Asset This Interpretation of the Standards of GRAP provides guidance to the grantor where it has entered into a service
A service concession arrangement is a contractual arrangement between a concessionaire and an operator in which the operator uses the service concession asset to provide a mandated function on behalf of the concessionaire for a specified period. The operator is compensated for its services during the term of the service concession arrangement, either through payments or by receiving a right to earn revenue from third-party users of the service concession asset, or the operator is given access to another revenue-generating asset of the concessionaire for its use. Before the grantor can recognize a service concession asset in accordance with the standard of GRAP on Service Concession Arrangements: Grantor, both of the criteria listed in Section .01 of this Interpretation of the GRAP Standards must be met.
In some service concession agreements, the grantor controls only the residual interest in the service concession asset at the end of the agreement, and therefore cannot recognize the service concession asset within the meaning of the GRAP Standard on Service Concession Agreements: Grantor. In this Interpretation of the GRAP Standards, a consensus is reached on the recognition of the performance obligation and the right to obtain a substantial interest in a service concession asset.
- Cash and cash equivalents Cash and cash equivalents consist of
- Consumer debtors disclosure (continued)
- Receivable from exchange transactions Gross balances
- Receivable from exchange transactions (continued) Refuse
- Receivable from exchange transactions (continued) Less: Allowance for impairment
- Inventories
- Other receivables from exchange transactions
- Receivables from non-exchange transactions
- Receivables from non-exchange transactions (continued)
- Investment property
- Property, plant and equipment
The municipality expects to apply the standard for the first time in the 2017 annual accounts. The standard does not introduce any new recognition or measurement requirements for revenues, expenses, assets and/or liabilities arising from principal-agent agreements. However, the Standard provides guidance on whether revenue, expense, assets and/or liabilities should be recognized by an agent or a principal, and also prescribes what information should be disclosed when an entity is a principal or an agent.
Cash and cash equivalents were not pledged as a guarantee for potential financial obligations at the end of the year. The municipality has no restrictions regarding the use of its cash resources and their equivalents. The management of the municipality believes that in the annual financial statements the book values of short-term investment deposits, bank balances and cash and their equivalents, recorded at amortized cost, are approximately the same as their fair value.
At the end of the year, no receivables from currency transactions were pledged as security for any financial obligation. The credit period granted is deemed to be in accordance with the terms used in the public sector, based on established practices and legislation. Receivables from exchange transactions that are less than 3 months past due are not considered to be impaired.
None of the receivables from non-exchange transactions has been pledged at year-end as security for any financial obligation. Receivables from non-exchange transactions that are less than 3 months past due are not assessed for impairment. A register containing the data required under Article 63 of the Municipal Financial Management Act is available for inspection at the registered office of the municipality.
Property, plant and equipment (continued) Revaluations
The effective date of the revaluations for the community's assets, land and buildings was year-end 30 June 2014. No property, plant and equipment was withdrawn from active use and held for disposal during the financial year. No impairment loss was recognized on the municipality's property, plant and equipment at the reporting date.
There have been no changes in the estimated useful life of the municipality's assets for the financial year.
Intangible assets
Consumer deposits
Consumer deposits (continued)
Employee benefit obligations Defined benefit plan
Employee benefit obligations (continued) Calculation of actuarial gains and losses
Employee benefit obligations (continued) Defined contribution plan
Finance lease obligation Minimum lease payments due
Long service awards
Long service awards (continued) Financial Variables
Long service awards (continued) Withdrawal rate
Payables from exchange transactions
Provisions
Unspent conditional grants and receipts
Accumulated surplus
Service charges
Rental of facilities and equipment Premises
Rental of facilities and equipment (continued) Facilities and equipment
Investment revenue Interest revenue
Property rates Rates received
Government grants and subsidies Operating grants
Government grants and subsidies (continued)
Government grants and subsidies (continued) Library Grant
Revenue
Bulk purchases
Contracted services
Debt impairment
Depreciation and amortisation
Employee related costs (continued)
Finance costs
General expenses
Repairs and maintenance
Contingencies Contingent liabilities
Contingencies (continued)
Related parties
Prior period errors
- Prior period error - Overstatement of payables from exchange transactions
Prior period errors (continued) Statement of financial postion
- Prior period error - Understatement of payables from non-exchange transations
- Prior period error - Overstatement of payables from exchange transations
- Prior period error - Overstatement of payables from exchange transations
- Prior period error - Missstatement of Payables from Exchange transactions
Prior period errors (continued)
- Prior period error - Misstatement of intangible assets
- Prior period error - Misstatement of other assets
- Prior period error - Unsupported cost prices of Land and Buildings
- Prior period error - Unsupported cost prices for intangible assets servitudes
- Prior period error - Unsupported cost prices for Community assets
- Prior period error - Unsupported cost prices for Infrastructure Assets
- Prior period error - Misstatement of investment property
- Prior period error - Misstatement of capital work in progress
- Prior period error - Misstatement of Payables from exchange transactions
During the reporting period it was determined that adequate supporting documentation for the cost prices of infrastructure assets could not be obtained and it was decided to apply the revaluation model for these assets as at 30 June 2014. During the reporting period it was found that last year's real estate investment register as at 30 June 2015 was incorrectly stated.
During the reporting period, it was noted that last year's trade payables as of June 30, 2015 were incorrectly presented due to. During the reporting period it was noted that last year's rental register was incorrectly completed on 30 June 2015.
Risk management Financial risk management
Risk management (continued) Credit risk
Risk management (continued)
Going concern
Events after the reporting date
Unauthorised expenditure
Unauthorised expenditure (continued)
Fruitless and wasteful expenditure
Irregular expenditure (continued)
Additional disclosure in terms of Municipal Finance Management Act (continued) Distribution losses - Electricity (Kwh)
Additional disclosure in terms of Municipal Finance Management Act (continued) Pension and Medical Aid Deductions
Additional disclosure in terms of Municipal Finance Management Act (continued) Supply chain management regulations
VAT payable
Financial instruments disclosure Categories of financial instruments
Budget differences Variance Explanations
Repairs and maintenance (continued)
Cost/Revaluation Accumulated depreciation
Renosterberg Local Municipality
Analysis of property, plant and equipment as at 30 June 2011
