The financial statements are prepared on an accrual basis and in accordance with historical cost convention, unless otherwise stated, and are presented in South African rand. These financial statements have been prepared in accordance with the Standards of General Recognized Accounting Practices (GRAP). Standards Board in accordance with Section 122(3) of the Municipal Finance Management Act (Act No. 56 of 2003).
The accounting policies applied correspond to those used to present the previous year's annual financial statements, unless expressly stated otherwise. Standards, amendments to standards and interpretations effective for financial periods beginning on or after 1 April 2012. In the current year, the municipality has adopted the following interpretations which are in force for the current financial year and which are relevant to its operations.
Impairment of Non-cash-generating Assets
Revenue from Non-exchange Transactions (Taxes and Transfers) GRAP 24 Presentation of Budget Information in Financial Statements
Employee Benefits – issued March 2009
Segment Reporting – issued February 2011
Significant judgments and sources of estimation uncertainty
The use of available information and the application of judgment is inherent in forming estimates. In determining whether an impairment loss should be recorded in surplus or deficit, the municipality makes judgments about whether there is observable evidence that indicates a measurable decline in the estimated cash flows from the financial asset. In determining whether an impairment loss should be recorded in surplus or deficit, the municipality makes judgments as to whether there is observable data indicating a significant impairment of the relevant assets.
No significant assets have been written down in the financial year, as the municipality is currently in the process of renovating the majority of its infrastructure assets. Provisions are recognized when the municipality has a current or actual obligation as a result of past events, and it is probable that an inflow of resources involving financial benefits will be required to settle the obligation and a reliable estimate of the provision can be made. Long-term provisions are discounted back to the present value with a discount rate based on the average borrowing cost to the municipality.
The municipality reviews and tests the carrying value of assets when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount.
PROPERTY, PLANT AND EQUIPMENT 1 INITIAL RECOGNITION
- SUBSEQUENT MEASUREMENT -REVALUATION MODEL (LAND, BUILDINGS, and other Infrastructure assets)
- DEPRECIATION AND IMPAIRMENT
- DERECOGNITION
The scrap value, the useful life of an asset and the depreciation method are reviewed annually, and any changes are recognized as a change in accounting estimate in the income statement. The municipality tests for impairment where there is an indication that an asset may be impaired. An assessment of whether there is an indication of possible impairment is carried out on each accounting day.
If the carrying amount of an item of property, plant and equipment exceeds its estimated recoverable amount (or recoverable service value), it is immediately written down to recoverable amount (or recoverable service value) and an impairment loss is charged to the statement of financial results. Property, plant and equipment are derecognised when the asset is disposed of or when no further economic benefits or service potential are expected from using the asset. The gain or loss resulting from the disposal or retirement of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount and is included in the statement of financial results.
INVESTMENT PROPERTY 1 INITIAL RECOGNITION
- SUBSEQUENT MEASUREMENT
- INVESTMENTS
- TRADE AND OTHER RECEIVABLES
- TRADE PAYABLES AND BORROWINGS
- CASH AND CASH EQUIVALENTS
Under the fair value model, investment properties are carried at fair value at the reporting date. Any gain or loss arising from a change in the fair value of the property is included in surplus or deficit in the period in which it arises. Depreciation is calculated on the depreciable amount using the straight-line method over the estimated useful life of the assets.
Financial assets are categorized by their nature as either financial assets at fair value through profit or loss, held to maturity, loans and receivables, or available for sale. Financial liabilities are categorized as either at fair value through profit or loss or financial liabilities carried at amortized cost ("other"). The subsequent measurement of financial assets and liabilities depends on this categorization and, in the absence of an approved GAAP standard on financial instruments, is in accordance with IAS 39.
Investments, which include short-term deposits invested in registered commercial banks, are categorized either as held to maturity when the criteria for that categorization are met, or as loans and receivables, and are measured at amortized cost. When investments are impaired, the carrying amount is corrected by the impairment loss, which is recognized as an expense in the period when the impairment is identified. Impairments are calculated as the difference between the carrying amount and the present value of the expected future cash flows arising from the instrument.
Upon disposal of an investment, the difference between the net disposal proceeds and the carrying amount is debited or credited to the Statement of Financial Performance. Trade and other receivables are categorized as financial assets: loans and receivables and are initially recognized at fair value and subsequently carried at amortized cost. An impairment of trade receivables is accounted for by reducing the carrying amount of trade receivables through the use of an allowance account and the amount of the loss is recognized in the Statement of Financial Performance within operating expenses.
Subsequent recovery of previously written-off amounts is credited to business expenses in the statement of financial operations. They are classified as financial liabilities at amortized cost, initially recognized at fair value and subsequently measured at amortized cost, which is the initial book value less repayments plus interest. Debts related to overdrafts on bank accounts are classified as financial liabilities: other financial liabilities shown at amortized cost.
UNAUTHORISED EXPENDITURE
FRUITLESS AND WASTEFUL EXPENDITURE
PROVISIONS
LEASES
- MUNICIPALITY AS LESSEE
- MUNICIPALITY AS LESSOR
REVENUE
- REVENUE FROM EXCHANGE TRANSACTIONS
- REVENUE FROM NON-EXCHANGE TRANSACTIONS
- GRANTS, TRANSFERS AND DONATIONS
Grants, transfers and donations received or receivable are recognized when the resources transferred meet the criteria for recognition as an asset. A corresponding liability is raised to the extent that the grant, transfer or donation is conditional. The liability is transferred to income as and when the conditions attached to the award are met.
BORROWING COSTS
RETIREMENT BENEFITS
CONSTRUCTION CONTRACTS AND RECEIVABLES
Gain on disposal of property, plant and equipment (2,002) Contributions to bad debts. iIncrease) decrease in other debtors 19 267. The Committee felt that the investment markets were too volatile and the future of the Fund. The actuary is satisfied that the assets of the Fund are appropriate given the liabilities.
