Annual Report 2009 - LWUA

Annual Report 20091. Loans payable, Government of the Philippines (Note 14)2. Loans payable – Foreign, net of current portion (Note 15)3. Loans Payable – Local (Note 16)And in adherence with Paragraphs 60 and 62 of PAS 1 on the distinction of a liability either as a current or a non-current liability, Loans Payable,Government of the Philippines decreased by P143,551,069 while Loans Payable, Foreign decreased by the same amount.The affected accounts were disclosed in detail under Notes 4, 6, and 13 of the Notes to Financial Statements.Revenue RecognitionThe Corporation employs the modified accrual basis of accounting where revenues are recognized to the extent that it is probable that theeconomic benefits associated with the transactions will flow to the corporation and the amount can be measured reliably.Cash EquivalentsCash Equivalents are short term highly liquid investments that are readily convertible to known amounts of cash with original maturities of threemonths or less from dates of acquisition and that are subject to insignificant risk of changes in value.InvestmentsInvestments in government bonds and treasury notes are valued at cost. The difference between the net proceeds from the sale of governmentsecurities and its cost is recorded under the “Income (Loss) on Sale of Government Securities” account. Realized gains or losses are includedin determining the net income for the period in which they occur.Bad DebtsFor performing loans, estimated uncollectible accounts are determined at 25% of interest receivable and current portion of long-term loansreceivable, and 4% of long-term portion of loans receivable. On the other hand, non-performing loans and loans to non-operational WaterDistricts are provided with a 40% allowance.Property, Plant and Equipment (PPE)Property and equipment are carried at cost, less accumulated depreciation, which is computed using the straight-line method over the estimateduseful lives of the assets ranging from five (5) to thirty (30) years. As of balance sheet date, there was no indication that an item of LWUA’sPPE is impaired , using the assessment procedure provided in IAS 36. LWUA uses the Cost Model in recognizing an item of PPE. Under thismodel, there is no need for appraisal or revaluation of PPE.Repairs and maintenance costs are charged to operations as incurred and significant renewals and betterments are capitalized. When assetsare retired or otherwise disposed of, the cost and the related accumulated depreciation are removed from the accounts and any resulting gain orloss is credited or charged to current operations.InventoriesInventories are stated at cost determined by the first-in, first-out method. Subsequent change in accounting policy from FIFO method to theMoving Average Method shall take place upon completion of the Computerized Supplies Inventory System.Income TaxDeferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financialreporting bases of assets and liabilities and their related tax bases. Deferred tax assets and liabilities are measured using the tax rates expectedto apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.The account “Deferred Tax Asset” is presented and classified under “Other Non-Current Assets”, net of the Deferred Tax Liability, as follows:2009 2008Deferred Tax Assets 485,544,555 403,124,165Deferred Tax Liability 261,681,142 261,681,142Net Deferred Tax 223,863,412 141,443,023Foreign Currency TransactionsOutstanding loans from USAID, DANIDA and other foreign currency denominated loans where the Corporation undertakes the foreign exchangefluctuation risk are stated at their current values.Engineering Services/Well DrillingTo ensure the successful implementation of the water supply system financed by the Corporation, well drilling and engineering services arerendered to the water districts for a fee. Expenses relative to these services are booked as “Deferred Charges” when incurred and eventuallytransferred to the receivable when billed or expense accounts when the implementation of the water supply system is discontinued.31