annrep 1011 1 to 148.qxp - Department of Defence

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D E P A R T M E N T O F D E F E N C EDepartment of Defence and Military VeteransVote 21ACCOUNTING POLICIESfor the year ended 31 March 2011it is treated as an asset until it is recovered from the responsible person or written-off as irrecoverable in the statementof financial performance.3.8 Irregular expenditure4. AssetsIrregular expenditure is recognised as expenditure in the statement of financial performance. If the expenditure is notcondoned by the relevant authority it is treated as an asset until it is recovered or written-off as irrecoverable.4.1 Cash and cash equivalentsCash and cash equivalents are carried in the statement of financial position at cost.Bank overdrafts are shown separately on the face of the statement of financial position.For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held, othershort-term highly liquid investments and bank overdrafts.4.2 Other financial assetsOther financial assets are carried in the statement of financial position at cost.4.3 Prepayments and advancesAmounts prepaid or advanced are recognised in the statement of financial position when the payments are made andare derecognised as and when the goods/services are received or the funds are utilised.Prepayments and advances outstanding at the end of the year are carried in the statement of financial position at cost.4.4 ReceivablesReceivables included in the statement of financial position arise from cash payments made that are recoverable fromanother party (including departmental employees) and are derecognised upon recovery or write-off.Receivables outstanding at year-end are carried in the statement of financial position at cost plus any accrued interest.Amounts that are potentially irrecoverable are included in the disclosure notes.4.5 Investments4.6 LoansCapitalised investments are shown at cost in the statement of financial position.Investments are tested for an impairment loss whenever events or changes in circumstances indicate that theinvestment may be impaired. Any impairment loss is included in the disclosure notes.Loans are recognised in the statement of financial position when the cash is paid to the beneficiary. Loans that areoutstanding at year-end are carried in the statement of financial position at cost plus accrued interest.4.7 InventoryAmounts that are potentially irrecoverable are included in the disclosure notes.Inventories that qualify for recognition must be initially reflected at cost. Where inventories are acquired at no cost,or for nominal consideration, their cost shall be their fair value at the date of acquisition.All inventory items at year-end are reflected using the FIFO cost formula.186ANNUAL REPORT FY 2010/2011
D E P A R T M E N T O F D E F E N C EDepartment of Defence and Military VeteransVote 21ACCOUNTING POLICIESfor the year ended 31 March 20114.8 Capital assets4.8.1 Movable assetsInitial recognitionA capital asset is recorded in the asset register on receipt of the item at cost. Cost of an asset is defined as the totalcost of acquisition. Where the cost cannot be determined accurately, the movable capital asset is stated at fair value.Where fair value cannot be determined, the capital asset is included in the asset register at R1.All assets acquired prior to 1 April 2002 are included in the register at R1.Subsequent recognitionSubsequent expenditure of a capital nature is recorded in the statement of financial performance as "expenditure forcapital assets" and is capitalised in the asset register of the department on completion of the project.Repairs and maintenance is expensed as current "goods and services" in the statement of financial performance.4.8.2 Immovable assetsInitial recognitionA capital asset is recorded on receipt of the item at cost. Cost of an asset is defined as the total cost of acquisition.Where the cost cannot be determined accurately, the immovable capital asset is stated at R1 unless the fair value forthe asset has been reliably estimated.Subsequent recognitionWork-in-progress of a capital nature is recorded in the statement of financial performance as "expenditure for capitalassets". On completion, the total cost of the project is included in the asset register of the department that isaccountable for the asset.5. Liabilities5.1 PayablesRepairs and maintenance is expensed as current "goods and services" in the statement of financial performance.Recognised payables mainly comprise of amounts owing to other governmental entities. These payables are carriedat cost in the statement of financial position.5.2 Contingent liabilitiesContingent liabilities are included in the disclosure notes to the financial statements when it is possible thateconomic benefits will flow from the department, or when an outflow of economic benefits or service potential isprobable but cannot be measured reliably.5.3 Contingent assetsContingent assets are included in the disclosure notes to the financial statements when it is possible that an inflow ofeconomic benefits will flow to the entity.5.4 CommitmentsCommitments are not recognised in the statement of financial position as a liability or as expenditure in the statementof financial performance but are included in the disclosure notes.ANNUAL REPORT FY 2010/2011 187
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annrep 1011 1 to 148.qxp - Department of Defence

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