The carrying amount of the asset is reduced through the use of an allowance
account and the amount of the loss is recognized in surplus or deficit. If, in a
subsequent year, the amount of the estimated impairment loss increases or
decreases because of an event occurring after the impairment was recognized, the
previously recognized impairment loss is increased or reduced by adjusting the
allowance account. If a future write-off is later recovered, the recovery is credited
to finance costs in surplus or deficit.
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IPSAS 29 are classified as financial
liabilities at fair value through surplus or deficit or loans and borrowings, as
appropriate. The LGUs determine the classification of its financial liabilities at
initial recognition.
All financial liabilities are recognized initially at fair value and, in the case of
loans and borrowings.
The LGUs financial liabilities include trade and other payables, loans and
borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification.
Financial liabilities at fair value through surplus or deficit
Financial liabilities at fair value through surplus or deficit include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through surplus or deficit.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently
measured at amortized cost using the effective interest method. Gains and losses
are recognized in surplus or deficit when the liabilities are derecognized as well
as through the effective interest method amortization process.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the effective interest rate.
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