GDF Annual Report - Gauteng Provincial Treasury

SECTION 4: ANNUAL FINANCIAL STATEMENTSstatement of financial position when the payments aremade and are derecognised as and when the goods/services are received or the funds are utilised.Prepayments and advances outstanding at the endof the year are carried in the statement of financialposition at cost.4.4 ReceivablesReceivables included in the statement of financialposition arise from cash payments made that arerecoverable from another party (including departmentalemployees) and are derecognised upon recovery orwrite-off.Receivables outstanding at year-end are carried in thestatement of financial position at cost plus any accruedinterest. Amounts that are potentials irrecoverable areincluded in the disclosure notes.4.5 InventoryInventories that qualify for recognition must be initiallyreflected at cost. Where inventories are acquired at nocost, or for nominal consideration, their cost shall betheir fair value at the date of acquisition.All inventory items at year-end are reflected using theweighted average cost or FIFO cost formula.4.6 Capital assets4.6.1 Movable assetsInitial recognitionA capital asset is recorded in the asset register onreceipt of the item at cost. Cost of an asset is definedas the total cost of acquisition. Where the cost cannotbe determined accurately, the movable capital assetis stated at fair value. Where fair value cannot bedetermined, the capital asset is included in the assetregister at R1.All assets acquired prior to 1 April 2002 are included inthe register R1.Subsequent recognitionSubsequent expenditure of a capital nature isrecorded in the statement of financial performance as“expenditure for capital assets” and is capitalised inthe asset register of the department on completion ofthe project.Repairs and maintenance is expensed as current“goods and services” in the statement of financialperformance.4.6.2 Immovable assetsInitial recognitionA capital asset is recorded on receipt of the item atcost. Cost of an asset is defined as the total cost ofacquisition. Where the cost cannot be determinedaccurately, the immovable capital asset is stated atR1 unless the fair value for the asset has been reliablyestimated.Subsequent recognitionWork-in-progress of a capital nature is recorded in thestatement of financial performance as “expenditurefor capital assets”. On completion, the total costof the project is included in the asset register of thedepartment that is accountable for the asset.Repairs and maintenance is expensed as current“goods and services” in the statement of financialperformance.5. Liabilities5.1 PayablesRecognised payables mainly comprise of amountsowing to other governmental entities. These payablesare carried at cost in the statement of financial position.5.2 Contingent liabilitiesContingent liabilities are included in the disclosurenotes to the financial statements when it is possiblethat economic benefits will flow from the department,or when an outflow of economic benefits or servicepotential is probable but cannot be measured reliably.Gauteng Department of Finance175