Mr LJ Mahlangu - Municipal Demarcation Board

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C. ACCRUAL BASIS The financial statements have been prepared on the accrual basis. D. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES The Board makes estimates and assumptions that affect the reported amounts of assets and liabilities within the current and subsequent financial years. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There does, however, not appear to be a significant risk that these assumptions will cause significant adjustments to the carrying amount of assets and liabilities within the subsequent financial years. (i) Fair value estimation The carrying value of trade receivables and payables are assumed to approximate their fair values. (ii) Impairment testing The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. (iii) Useful lives of property, plant and equipment and intangible assets The Board re-assesses the useful lives and residual lives of property, plant and equipment and intangible assets on an annual basis. In reassessing the useful lives and residual values of property, plant and equipment management considers the condition and use of the individual assets, to determine the remaining period over which the asset can and will be used. 53 MUNICIPAL DEMARCATION BOARD - Annual Report 2012 E. REVENUE FROM EXCHANGE TRANSACTIONS Exchange transactions are transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value to another entity in exchange. Measurement Revenue is measured at fair value of the consideration received or receivable on an accrual basis. Sales of goods Revenue from the sale of goods is recognised when: • significant risks and rewards of ownership of the goods have been transferred to the buyer; • the amount can be measured reliably; and it is probable that future economic benefits or service potential will flow to the Board. Interest income Revenue arising from the use of others of entity assets yielding interest is recognised when: • it is probable that future economic benefits or service potential will flow to the Board; and • the amount can be measured reliably. Interest is recognised using the effective interest rate method. F. REVENUE FROM NON-EXCHANGE TRANSACTIONS Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange. Recognition An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised for the same inflow.
Measurement Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the entity. Conditional grants Revenue received from grants are recognised as income when the entity complies with the conditions of the grant. The revenue is deferred and recognised as a liability to the extent that the conditions of the grant have not been met. G. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are tangible noncurrent assets that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period. The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost. The cost, if any, also includes the necessary costs of dismantling and removing the assets and restoring the site on which it is located. Initial Recognition The cost of an item of property, plant and equipment is recognised as an asset when: (i) It is probable that the future economic benefits or service potential associated with the item will flow to the entity; and (ii) The cost of the item can be measured reliably. Subsequent Measurement Property, plant and equipment are initially recognised as assets on acquisition date and are initially recorded at cost. Where an asset is acquired at no cost, or for a nominal cost, its cost is measured at its fair value as at the date of acquisition. Property, plant and equipment are subsequently measured at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the Board and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of financial performance during the financial period in which they are incurred. Depreciation Subsequent to initial measurement property, plant and equipment are depreciated on a straight line basis over their estimated useful lives to their estimated residual values. The useful lives of property plant and equipment are as follows: Office equipment 5 - 12 years Motor vehicles 5 - 8 years Computer equipment 3 - 9 years Furniture and fittings 10 -15 years Leasehold improvement 5 years When there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. At each reporting date, the residual values and useful lives of all property, plant and equipment are reviewed and adjusted if necessary. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciation charge for each period is recognised in surplus or deficit. De-recognition An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. MUNICIPAL DEMARCATION BOARD - Annual Report 2012 54
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ANNUAL REPORT 2011l12
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ANNUAL REPORT: MUNICIPAL DEMARCATIO
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MDB embarked on a programme of Muni
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SENIOR RESEARCHER: COMPLIANCE EXECU
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Mr LJ Mahlangu - Municipal Demarcation Board

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