compressed_Annual Report 2016-ilovepdf-compressed

is impaired. The amount of the provision is the
difference between the asset’s carrying amount
and the present value of estimated future cash
flows, discounted at the original effective interest
rate. The carrying amount of the asset is reduced
through the use of an allowance account, and the
amount of the loss is recognised in the statement
of comprehensive income within ‘Operating
expenses’.
When a fuel levy receivable is uncollectible, it
is written off against the allowance account for
Fuel levy receivables. Subsequent recoveries
of amounts previously written off are credited
against ‘Operating expenses’ in the statement of
comprehensive income.
2.7 PROVISIONS
Provisions are recognised when the Fund has a
present legal or constructive obligation as a result
of past events, it is probable that an outflow of
resources will be required to settle the obligation,
and a reliable estimate of the amount can be
made. Where the Fund expects a provision to
be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a
separate asset but only when the reimbursement
is virtually certain.
The Fund recognises a provision for onerous contracts
when the expected benefits to be derived
from a contract are less than the unavoidable
costs of meeting the obligations under the contract.
Restructuring provisions comprise lease termination
penalties and employee termination payments,
and are recognised in the period in which
the Fund becomes legally or constructively committed
to payment. Costs related to the ongoing
activities of the Fund are not provided in advance.
rate that reflects current market assessments of
the time value of money and, where appropriate,
the risks specific to the liability.
2.8 REVENUE RECOGNITION
Revenue comprises mainly fuel levies, Government
grants/ transfer payments, investment
income and reinsurance income.
2.8.1 Fuel levies
The main income received by the Fund is a levy
that is based on fuel sales known as the Motor
Vehicle Accident Fund Levy. The Levy income is
a charge levied on fuel throughout the country
and the rate of the Levy per litre is determined
by the Ministry of Finance in consultation with the
Minister of Natural Resources and Energy.
The Fund recognises revenue from fuel levies
when the amount of revenue can be reliably
measured and it is probable that future economic
benefits will flow to the Fund.
Revenue is measured at the fair value of the
consideration received or receivable.
2.8.2 Investment income
Investment income comprises interest income on
funds invested.
Interest income is recognised on a time-proportion
basis using the effective interest rate method.
When a receivable is impaired, the Fund reduces
the carrying amount to its recoverable amount,
being the estimated future cash flow discounted
at the original effective interest rate of the
instrument, and continues unwinding the discount
as interest income.
2.8.3 Rental income
Rental income from owner-occupied land and
buildings are recognised in the statement of income
on a straight line basis over the term of each
lease.
Provisions are discounted using a pre-tax discount
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