Mr LJ Mahlangu - Municipal Demarcation Board

De-recognition
An item of intangible assets is derecognised when
the asset is disposed or when there are no economic
benefits or service potential from the use of
the asset.
K. LEASES
A lease is classified as a finance lease whenever
the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All
other leases are classified as operating leases.
The Board as a lessee
Assets held under finance leases are recognised as
assets of the Board at their fair value at the inception
of the lease or, if lower, at the present value
of the minimum lease payments. The corresponding
liability to the lessor is included in the statement
of financial position as a finance lease obligation.
Lease payments are apportioned between finance
charges and reduction of the lease obligation so as
to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are
charged to surplus or deficit for the period.
Capitalised lease assets are depreciated in accordance
with the accounting policy applicable to
property, plant and equipment.
Operating leases
A lease is classified as an operating lease if it does
not transfer substantially all the risks and rewards
incidental to ownership.
In event that lease incentives are received to enter
into operating lease, such incentives are recognised
as liability. The aggregate benefit of incentives
is recognised as reduction of rental expense
on a straight line basis, except where another
systematic basis is more representative of the
time pattern in which economic benefits from the
leased asset are consumed.
Rentals payable under operating leases are
charged to the statement of financial performance
on a straight-line basis over the term of the lease.
L. IRREGULAR EXPENDITURE
Irregular expenditure comprises expenditure,
other than unauthorised expenditure, incurred in
contravention of or that is not in accordance with
a requirement of any applicable legislature, including:
the Public Finance Management Act 1 of 1999
(as amended by Act 29 of 1999); the State Tender
Board Act, 1968 (Act No. 86 of 1968 or any regulation
made in terms of that Act.
Irregular expenditure is raised as receivables in
the statement of financial position until it has been
confirmed that the amounts are irrecoverable.
Once confirmed, as irrecoverable it is charged to
the statement of financial performance in the period
in which they were incurred.
M. FRUITLESS AND WASTEFUL EXPENDITURE
Fruitless and wasteful expenditure means expenditure
that was made in vain and would have been
avoided had reasonable care been exercised.
Fruitless and wasteful expenditure is raised as
receivables in the statement of financial position
until it has been confirmed that the amounts are irrecoverable.
Once confirmed, as irrecoverable it is
charged to the statement of financial performance
in the period in which they were incurred.
N. FINANCIAL INSTRUMENTS
Recognition
Financial assets and financial liabilities are recognised
on the Board’s statement of financial position
when the Board becomes a party to the contractual
provisions of the instrument.
The entity recognises financial assets using trade
date accounting.
The categories of financial assets for the entity are
as follows:
Available for sale investments are financial assets
that are designated as available for sale or are not
classified as:
MUNICIPAL DEMARCATION BOARD - Annual Report 2012 56