probable that the economic benefits or service potential related to the asset will
flow to the LGU and can be measured reliably.
The LGU availed of the 5 – year transitional provision for the recognition of
Tax Revenue-Real Property and Special Education Tax. For the first year, there
will be no change in policy for the recognition of the aforementioned tax
revenue.
Revenue from exchange transactions
Rendering of services
The LGU recognizes revenue from rendering of services by reference to the
stage of completion when the outcome of the transaction can be estimated
reliably. The stage of completion is measured by reference to labor hours
incurred to date as a percentage of total estimated labor hours.
Where the contract outcome cannot be measured reliably, revenue is recognized
only to the extent that the expenses incurred.
Sale of goods
Revenue from the sale of goods is recognized when the significant risks and
rewards of ownership have been transferred to the buyer, usually on delivery of
the goods and when the amount of revenue can be measured reliably and it is
probable that the economic benefits or service potential associated with the
transaction will flow to the LGU.
Interest income
Interest income is accrued using the effective yield method. The effective yield
discounts estimated future cash receipts through the expected life of the
financial asset to that asset’s net carrying amount. The method applies this yield
to the principal outstanding to determine interest income each period.
3.4 Property, plant and equipment
All property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. Cost includes expenditure that is directly
attributable to the acquisition of the items. When significant parts of property,
plant and equipment are required to be replaced at intervals, the LGU
recognizes such parts as individual assets with specific useful lives and
depreciates them accordingly. Likewise, when a major inspection is performed,
its costs recognized in the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognized in surplus or deficit as incurred. Where an
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