3.16 Impairment Loss
For the year ended December 31, 2015, as the transition period of converting
accounting policies from New Government Accounting System (NGAS) to
Philippine Public Sector Accounting Standards (PPSAS) there was no recorded
provision for impairment of any assets.
3.17 Financial instruments – financial risk management
Exposure to currency, commodity, interest rate, liquidity and credit risks arises in
the normal course of the LGUs’ operations. This note presents information about
the LGUs’ exposure to each of the mentioned risks, policies and processes for
measuring and managing risk, and the LGUs’ management of capital. Further
quantitative disclosures are included throughout these financial statements. Fair
values set out below, is a comparison by class of the carrying amounts and fair
value of the LGUs’ financial instruments.
The fair value of the financial assets and liabilities are included at the amount at
which the instrument could be exchanged in a current transaction between willing
parties, other than in a forced sale or liquidation.
The following methods and assumptions were used to estimate the fair values:
(a) Cash and short-term deposits, trade receivables, trade payables and other
current liabilities approximate their carrying amounts largely due to the
short-term maturities of these instruments;
(b) Long-term fixed-rate and variable-rate receivables / borrowings are
evaluated by the LGU based on parameters such as interest rates, individual
creditworthiness of the customer and the risk characteristics of the financed
project. Based on this evaluation, allowances are taken to account for the
incurred losses of these receivables and market related interest rates. As at
31 December 2017 the carrying amounts of such receivables, net of
allowances, are not materially different from their calculated fair values;
(c) Fair value of quoted notes and bonds is based on price quotations at the
reporting date. The fair value of unquoted instruments, loans from banks
and other financial liabilities, obligations under finance leases, as well as
other non-current financial liabilities is estimated by discounting future
cash flows using rates currently available for debt on similar terms, credit
risk and remaining maturities;
(d) Fair value of financial assets is derived from quoted market prices in active
markets, if available;
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