necessary to make the sale, exchange, or distribution. Inventories are
recognized as an expense when deployed for utilization or consumption in the
ordinary course of operations of the LGU.
3.7 Changes in accounting policies and estimates
The LGU recognizes the effects of changes in accounting policy
retrospectively. The effects of changes in accounting policy are applied
prospectively if retrospective application is impractical.
The LGU recognizes the effects of changes in accounting estimates
prospectively by including in surplus or deficit.
3.8 Borrowing costs
Borrowing costs are capitalized against qualifying assets as part of property,
plant and equipment. Such borrowing costs are capitalized over the period
during which the asset is being acquired or constructed and borrowings have
been incurred. Capitalization ceases when construction of the asset is complete.
Further, borrowing costs are charged to the statement of financial performance.
3.9 Budget information
The annual budget is prepared on the modified cash basis, that is, all planned
costs and income are presented in a single statement to determine the needs of
the LGU. As a result of the adoption of the Modified cash basis for budgeting
purposes, there are basis, timing or entity differences that would require
reconciliation between the actual comparable amounts and the amounts
presented as a separate additional financial statement in the statement of
comparison of budget and actual amounts.
3.10 Significant judgments and sources of estimation uncertainty
Judgments
In the process of applying the LGU’s accounting policies, management has
made judgments, which have the most significant effect on the amounts
recognized in the consolidated financial statements.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year, are described below. The LGU based its assumptions and
estimates on parameters available when the consolidated financial statements
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