The Accounting Officer is required by the Municipal Finance Management Act (Law 56 of 2003) to keep adequate records and is responsible for the content and integrity of the annual accounts and related financial information included in this report. The Accounting Officer is of the opinion, based on the information and disclosures provided by management, that the system of internal control provides reasonable assurance that the financial records can be relied upon in the preparation of the financial statements.
Presentation of Annual Financial Statements
Going concern assumption
Significant judgements and sources of estimation uncertainty
Significant judgements and sources of estimation uncertainty (continued) Provisions
Property, plant and equipment
Property, plant and equipment (continued)
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the asset is derecognised. The profit or loss arising from the derecognition of a property, plant and equipment is.
Site restoration and dismantling cost
Items of property, plant and equipment are derecognised when the asset is disposed of or when no further economic benefits or service potential are expected from the use of the asset. Compensation from third parties for an item of property, plant and equipment that is impaired, lost or given up is recognized in surplus or deficit when the compensation becomes receivable.
Intangible assets
Depreciation for each period is recognized in surplus or deficit, unless it is included in the carrying amount of another asset.
Intangible assets (continued)
Financial instruments
Financial instruments (continued)
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 book value and the amount received is recognized as surplus or deficit.
Leases
Impairment of non-cash-generating assets
Impairment of non-cash-generating assets (continued) Value in use
Statutory receivables
Statutory receivables (continued)
Employee benefits Short-term 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 employee service in prior periods, which results in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. In measuring its defined benefit liability, the municipality recognizes past service costs as an expense in the reporting period in which the plan is amended. 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, if applicable, past service costs, the municipality attributes benefits to years of service according to the plan's benefit formula.
Employee benefits (continued) Other long-term employee benefits
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) Rendering of services
Revenue from non-exchange transactions
Revenue from non-exchange transactions (continued) Recognition
Revenue from non-exchange transactions (continued)
Borrowing costs
Service concession arrangements: Grantor
Comparative figures
Unauthorised expenditure
Fruitless and wasteful expenditure
Irregular expenditure
Revaluation reserve
Grants in aid
Commitments
Budget information
Related parties
Events after reporting date
Value-added Tax (VAT)
Accumulated surplus
New standards and interpretations
Standards and interpretations effective and adopted in the current year
Standards and interpretations issued, but not yet effective
Segment Reporting
New standards and interpretations (continued)
The purpose of this standard is to establish accounting principles for the transferee and the transferor in a transfer of functions between entities under common control. A transfer of functions between entities under common control is a reorganization and/or redistribution of functions between entities that are ultimately controlled by the same entity before and after a transfer of functions. In the event of a transfer of functions between entities under common control, the assets and liabilities shall be recognized (by the transferee) at their carrying amounts and shall be derecognized (by the transferor) at their carrying amounts.
The purpose of this Standard is to establish accounting policies for the acquirer in a transfer of functions between entities that are not under common control. A transfer of functions between entities not under common control is a reorganization and/or redistribution of functions between entities that are not ultimately controlled by the same entity before and after a transfer of functions. In the case of a transfer of functions between entities that are not under common control, the assets and liabilities (by the acquirer) must be recognized at their fair values at the acquisition date.
There are certain specific recognition and measurement principles and exceptions to the recognition and measurement principles for transfers of functions between entities that are not under common control.
New standards and interpretations (continued) GRAP 107: Mergers
Related Parties
If the reporting entity itself is such a plan, the sponsoring employers are associated with the entity. The standard further states that a related party transaction is a transfer of resources, services or obligations between the reporting entity and a related party, whether or not a price is charged. Only related party transactions where the transactions are not entered into within normal operating procedures or on terms no more or less favorable than those it would use to transact with any other entity or person are disclosed.
The standard requires that management remuneration should be disclosed per person and in total. The standard has been approved by the Accounting Standards Board, but the effective date has not yet been determined by the Minister of Finance. The municipality expects to adopt the standard for the first time once it takes effect.
It is unlikely that the standard will have a significant impact on the municipality's annual accounts.
Consolidation – Special purpose entities
The GRAP standard on Consolidated and Separate Financial Statements requires the consolidation of economic entities that are controlled by the reporting entity. However, the GRAP Standard does not provide clear guidelines for the consolidation of SPEs. This interpretation of the GRAP Standards does not apply to post-employment benefit plans or other long-term employee benefit schemes to which the GRAP Standard on Employee Benefits applies.
Even if the transfer does qualify as a sale, the provisions of the Standard of GRAP on Consolidated and Separate Financial Statements and this Interpretation of the Standards of GRAP may mean that the entity must consolidate the SPE. This interpretation of the standards of GRAP does not address the circumstances in which sales treatment for the entity or the elimination of the. The municipality expects to adopt the interpretation for the first time in the 2016 annual financial statements.
It is unlikely that the interpretation will have a material impact on the financial statements of the municipality.
Jointly controlled entities – Non-monetary contributions by ventures
A transfer of assets from an entity to an SPE qualifies as a sale by that entity. The effective date of this Interpretation is dependent on/in conjunction with the effective date of GRAP 105, 106 and 107.
The standards of GRAP on transfer of functions between entities under common control, transfer of functions between entities not under common control and mergers amended paragraphs to .50 and added paragraphs .51 to .58 and .61 to .62. These amendments must be applied when the municipality applies the Standards of GRAP to transfer of functions between entities under common control, transfer of functions between entities not under common control and mergers. The effective date of this amendment is in conjunction with the effective date of GRAP 105, 106 and 107.
The municipality expects to first approve the change in the 2016 annual financial statements. It is unlikely that the change will have a material impact on the municipality's annual financial statements.
New standards and interpretations (continued) GRAP 32: Service Concession Arrangements: Grantor
The standard applies to a contractual arrangement between a grantor and an operator whereby the operator uses the service concession asset to perform a mandated function on behalf of the grantor for a specified period of time. The operator performing the mandated function on behalf of the grantor may be a private party or another public sector entity. PPP agreements governed and regulated in terms of the PFMA and MFMA are some of the arrangements that fall within the scope of GRAP 32.
For all other plans that meet the audit criteria set forth in paragraph .07 of GRAP 32, the principles in the standard for accounting for such plans apply. An asset made available by the operator, or an upgrade of an existing asset, is recognized as a service concession asset with a corresponding obligation, being the performance obligation, if certain criteria and conditions are met. The municipality expects to apply the standard for the first time as soon as it becomes effective, but has already formulated a basis for this reporting period based on the standard.
Statutory receivables are not contractual receivables, the latter of which would normally meet the definition of a financial asset and would be within the scope of the standard of GRAP on financial instruments.
Service Concession Arrangements where a Grantor Controls a Significant Residual Interest in an Asset This interpretation provides guidance to the grantor where it has entered into a service concession arrangement, but only
GRAP 108 deals only with those claims arising from legislation or an equivalent instrument, such as regulations, by-laws or other documents issued in accordance with legislation, such as ministerial orders and decisions of the cabinet or municipal council. Therefore, to be statutory in nature, special legislation should require the municipality to carry out transactions, such as determining who is to be taxed and at what rates and amounts. Before a grantor can recognize a service concession asset under the GRAP Standard on Service Concession Arrangements: Grantor, both criteria must be met, as set out in paragraph .01 of this note.
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. This interpretation concludes on the recognition of the performance obligation and the right to obtain a substantial interest in a service concession asset. The interpretation has been approved by the Accounting Standards Board, but the effective date has not yet been determined by the Minister of Finance.
The municipality expects to adopt the interpretation for the first time as soon as it takes effect, but has already formulated a basis for this reporting period based on the interpretation.
Changes in Measurement Bases Following the Initial Adoption of Standards of GRAP
Cash and cash equivalents Cash and cash equivalents consist of
Cash is held for the purpose of meeting short-term cash obligations rather than for investment or other purposes. Liquid assets include cash, current bank account, overdraft and short-term deposits with a maturity of three months or less.
Receivables from exchange transactions
Receivables from exchange transactions (continued) Trade and other receivables impaired
Receivables from non-exchange transactions
Property, plant and equipment
Property, plant and equipment (continued) Other information
Intangible assets
Intangible assets (continued) Reconciliation of intangible assets - 2015
Payables from exchange transactions
VAT payable
Unspent conditional grants and receipts
Retirement benefit obligation Defined benefit plan
Retirement benefit obligation (continued)
Provisions for long service awards
Provisions for long service awards (continued) Reconciliation of provisions for long service awards - 2014
Revaluation reserve
Government grants and subsidies
Government grants and subsidies (continued) Skills education training authorities skills levy
Employee related costs
Employee related costs (continued)
Remuneration of councillors (continued) Executive Mayor - Cllr MP Moshodi
Remuneration of councillors (continued) MMC - EHS and public safety: Cllr VE de Beer
Depreciation and amortisation
Contracted services
General expenses
General expenses (continued) Donations
Other receipts
Prior period errors
Prior period errors (continued) 4. Receivables from exchange transactions
Prior period errors (continued) Statement of Financial Performance for the
Prior period errors (continued)
Comparative figures
Going concern
Change in estimate Property, plant and equipment
Unauthorised expenditure
Fruitless and wasteful expenditure
Irregular expenditure
Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
Additional disclosure in terms of Municipal Finance Management Act (continued) VAT
Related parties
Risk management Financial risk management
Events after the reporting date No events took place after the reporting date
Deviation from supply chain management regulations
Financial instruments disclosure Categories of financial instruments
Commitments
Contingencies
Budget differences
