Level of Assurance These financial statements have been audited in accordance with the applicable requirements of the Municipal Finance Management Act, 56 of 2003. I am responsible for the preparation of these annual financial statements for the year ended 30 June 2015 set out on pages 1 to 76 within the meaning of section 126 (1) of the Municipal Finance Management Act and have signed them on behalf of the municipality. External auditors are responsible for the independent review and reporting of the municipality's financial statements.
I confirm that the remuneration of the councilors and the actual remuneration are within the upper limits of the framework provided for in Article 219 of the Constitution, read with the Act on Remuneration of Civil Servants and with the determination of the Minister of Provinces and Local Government in accordance with this act. The results of operations and the state of the municipality are in fully apparent from the annual financial statements and, in our opinion, do not require additional comments. A municipality's ability to continue as a going concern depends on a number of factors.
The municipality's ability to continue as a going concern depends on a number of important factors, which are discussed in note 50. The accountant is not aware of any matter or circumstance that has arisen since the end of the financial year.
Presentation of Financial Statements
Significant judgements and sources of estimation uncertainty
Significant judgements and sources of estimation uncertainty (continued) Impairment testing
Significant judgements and sources of estimation uncertainty (continued) Comparative Information
Investment property
Investment property (continued) Fair value
Property, plant and equipment
Property, plant and equipment (continued)
The gain or loss that arises when a tangible fixed asset ceases to be recognized is included in profit or loss when the item ceases to be recognized. The gain or loss as a result of derecognition of a tangible fixed asset is. Assets that the municipality holds for the purpose of letting to others and then routinely sells as part of ordinary operations are transferred to inventories when the letting ends and the assets are available for sale.
All cash flows on these assets are included in cash flows from operating activities in the cash flow statement.
Intangible assets
Intangible assets (continued)
Heritage assets
Heritage assets (continued) Subsequent measurement
Financial instruments
Financial instruments (continued)
Financial instruments at cost are investments in remaining shares that do not have a published market price on an active market and whose fair value cannot be reliably measured. The municipality initially measures the financial asset and financial liability at fair value, increased by transaction costs that can be attributed directly to the acquisition or issuance of the financial asset or financial liability. The municipality initially measures the financial asset and financial liability at fair value [if subsequently measured at fair value].
If the market for a financial instrument is not active, the municipality determines the fair value by means of a valuation technique. If the fair value of an investment in a residual interest valued at fair value can no longer be determined reliably, the municipality reclassifies the investment from fair value to cost. The carrying amount at the date when the fair value is no longer available becomes cost.
If a reliable measurement becomes available for an investment in a residual interest for which a measurement was not previously available, and the instrument should have been measured at fair value, the entity reclassifies the instrument from cost to fair value. If there is objective evidence that an impairment loss has been incurred on an investment in a residual interest that is not measured at fair value because its fair value cannot be measured reliably, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of the estimated future cash flows discounted at the similar financial market rate of return.
Financial instruments (continued) Derecognition
The difference between the carrying amount of a financial liability (or portion of a financial liability) that has matured or been transferred to another party and the consideration paid, including noncash assets transferred or liabilities assumed, is recognized as a surplus or deficit. All liabilities that are forgiven, forgiven or assumed by another municipality through a non-exchange transaction are accounted for in accordance with the GRAP standard for income from non-exchange transactions (taxes and transfers). Interest relating to a financial instrument or component that is a financial liability is recognized as income or expense in surplus or deficit.
Dividends or similar distributions relating to a financial instrument or a component that is a financial liability are recognized as revenue or expense in profit or loss. Losses and gains relating to a financial instrument or a component that is a financial liability are recognized as revenue or expense in profit or loss. Distributions to holders of residual interest are recognized by the municipality directly in the net assets.
Income taxes [where applicable] in respect of distributions to holders of residual interests and with transaction costs incurred on residual interests are accounted for in accordance with the International Accounting Standard on Income Taxes. In accounting for a transfer of a financial asset that does not qualify for derecognition, the municipality does not set off the transferred asset and the associated liability.
Leases
A financial asset and a financial liability are only set off and the net amount presented in the balance sheet when the municipality currently has a legally binding right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and discharge the liability at the same time.
Leases (continued) Operating leases - lessor
Inventories
Impairment of cash-generating assets
Impairment of cash-generating assets (continued)
Impairment of cash-generating assets (continued) Recognition and measurement (individual asset)
Impairment of cash-generating assets (continued) Reversal of impairment loss
Impairment of non-cash-generating assets
Impairment of non-cash-generating assets (continued)
Impairment of non-cash-generating assets (continued) Recognition and measurement
Employee benefits
Employee benefits (continued)
In measuring its obligation for defined benefits, the municipality recognizes actuarial gains and losses in surplus or deficit in the reporting period in which they occur. Current service cost is the increase in the present value of the defined benefit obligation resulting from the employee's service in the current period. Interest cost is the increase over a period in the present value of a defined benefit obligation that arises because the benefits are one period closer to settlement.
Past service cost is the change in the present value of the defined benefit obligation for employees in prior periods of service, resulting in the current period from the introduction of, or changes in, post-employment benefits or other long-term employee benefits. In measuring the defined benefit obligation, the entity recognizes past service cost as an expense in the reporting period in which the plan is amended. The present value of a defined benefit plan is the present value, net of plan assets, of expected future payments required to settle the obligation arising from the service of employees in the current and prior periods.
The entity takes into account not only its legal obligation under the formal terms of a defined benefit plan, but also any constructive obligation arising from the municipality's informal practices. The present value of these economic benefits is determined using a discount rate that reflects the time value of money. The municipality determines the present value of the defined benefit obligations and the fair value of each asset of the scheme with sufficient regularity so that the amounts recognized in the financial statements do not differ materially from the amounts that would be determined at the reporting date.
The municipality uses the Projected Unit Credit Method to determine the present value of its defined benefit obligations and the related current service costs and, where applicable, past service costs. In determining the present value of its defined benefit obligations and the related current service costs and, where applicable, past service costs, a municipality will attribute benefit to periods of service in terms of the plan's benefit formula. The results of the valuation are updated for any material transactions and other material changes in circumstances (including changes in market prices and interest rates) up to and including the reporting date.
The municipality recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. When it is virtually certain that another party will reimburse all or part of the expenditure required to settle a defined benefit obligation, the right to reimbursement is recognized as a separate asset. In the event of a surplus or deficit, the expense related to a defined benefit plan [OR is not] presented as the net amount of the amount drawn for a benefit.
Employee benefits (continued) Actuarial assumptions
Provisions and contingencies Provisions are recognised when
Provisions and contingencies (continued)
Provisions and contingencies (continued) Decommissioning, restoration and similar liability
Revenue from exchange transactions
Revenue from exchange transactions (continued) Sale of goods
Revenue from non-exchange transactions
Revenue from non-exchange transactions (continued)
Revenue from non-exchange transactions (continued) Taxes
Investment income
Borrowing costs
Comparative figures
Unauthorised expenditure Unauthorised expenditure means
Fruitless and wasteful expenditure
Irregular expenditure
Irregular expenditure (continued)
Budget information
Related parties
Events after reporting date
Events after reporting date (continued)
Value-Added Tax (VAT)
Investment property
Property, plant and equipment
Property, plant and equipment (continued) Reconciliation of property, plant and equipment - 2016
Intangible assets
Employee benefit obligations Long Service Awards Liability
Employee benefit obligations (continued)
As mentioned in the introduction to this report, the valuation is only an estimate of the cost of providing long service leave grant benefits. The actual cost to the Municipality will depend on actual future levels of assumed variables and the demographic profile of the membership.
Employee benefit obligations (continued) Withdrawal rate
Employee benefit obligations (continued) Key assumptions used
Inventories
Consumer debtors Gross balances
Consumer debtors (continued) Rates
Consumer debtors (continued)
Consumer debtors (continued) Reconciliation of allowance for impairment
Finance lease obligation Minimum lease payments due
Unspent conditional grants and receipts
Other financial liabilities At amortised cost
Provisions
Payables from exchange transactions
Service charges
Other income
Property rates Rates received
Government grants and subsidies Operating grants
Government grants and subsidies (continued)
Government grants and subsidies (continued) Municipal System Improvement Grant
Public contributions and donations
Revenue
Revenue (continued)
Employee related costs
Employee related costs (continued)
Remuneration of councillors
Fair value adjustments
Depreciation and amortisation
Impairment of assets Impairments
Finance costs
Auditors' remuneration
Contracted services
Grants and subsidies paid Other subsidies
Cash generated from operations
Commitments Authorised expenditure
Contingencies Labour dispute
Related parties
Change in estimate Provision for landfil sites
Prior period errors
Prior period error - Correction of intangibles assets
Prior period error - Correction of Heritage assets
Prior period error - Correction of creditors and VAT
Prior period errors (continued)
Prior period error - Correction of Community assets
Prior period error - Correction of Buildings
Prior period error - Correction of Land
Prior period error - Correction of Other assets
Prior period errors (continued) Statement of Financial performance
Risk management Financial risk management
Going concern
Events after the reporting date
Unauthorised expenditure
Fruitless and wasteful expenditure
Irregular expenditure (continued)
Additional disclosure in terms of Municipal Finance Management Act (continued) VAT
Utilisation of Long-term liabilities reconciliation
Deviation from supply chain management regulations
Schedule of external loans as at 30 June 2015
Analysis of property, plant and equipment as at 30 June 2016
Analysis of property, plant and equipment as at 30 June 2011
