annual report 2010 - 2011 - Intsika Yethu Municipality

Intsika Yethu Municipality
Annual Financial Statements for the year ended 30 June 2011
Accounting Policies
1.10 Investment income
Investment income is recognised on a time-proportion basis using the effective interest method.
1.11 Borrowing costs
Borrowing costs that are directly attributed to the acquisition, construction or production of qualifying assets are capitalised
to the cost of that asset unless it is inappropriate to do so. The municipality ceases the capitalisation of borrowing costs
when substantially all the activities to prepare the asset for its intended use or sale are complete. It is considered
inappropriate to capitalise borrowing costs where the link between the funds borrowed and the capital asset acquired
cannot be adequately establised. Borrowing costs incurred other than on qualifying asets are recognised as an expense in
surplus or deficit when incurred.
1.12 Unauthorised expenditure
Unauthorised expenditure means:
overspending of a vote or a main division within a vote; and
expenditure not in accordance with the purpose of a vote or, in the case of a main division, not in accordance with
the purpose of the main division.
All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial performance in
the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and
where recovered, it is subsequently accounted for as revenue in the statement of financial performance.
1.13 Fruitless and wasteful expenditure
Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been
exercised.
All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial
performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the
expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.
1.14 Irregular expenditure
(a) this Act; or
(b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or
(c) any provincial legislation providing for procurement procedures in that provincial government.
Irregular expenditure is expenditure that is contrar to the Municipal Finance Management Act (Act No. 56 of 2003), the
Municipality Systems Act (Act No. 32 of 2000), the Public Office Bearers Act (Act No. 20 of 1998) or is in contravention of the
Municipality's supply chain management policy. Irregular expenditure excludes unauthorised expenditure. Irregular expenditure
is accounted for as expenditure in the Statement of Financial Performance and where recovered, it is subsequently accounted
for as revenue in the Statement of Financial Performance.
1.15 Investments
Where the carrying amount of an investment is greater than the estimated recoverable amount, it is written down immediately
to its recoverable amount and an impairment loss is charged to the statement of financial performance.
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