3.6 Inventories
Inventories are recognized and measured at cost upon initial recognition. Inventories
are recognized as expenses when issued for utilization or consumption in the ordinary
course of operations.
3.7 Prepayments and Deferred Charges
Prepayments are recorded under the asset method. Adjusting entries are prepared at
the end of the year to record the portion of the prepayment representing the expense
incurred during the current accounting period.
3.8 Investment Property
Investment Property is land, a building, part of a building, or both, held by the owner
or a lessee under a finance lease to earn rentals or for capital appreciation, or both.
3.9 Property, Plant and Equipment
Property, Plant and Equipment (PPE) are recognized at cost. Cost includes the
purchase price and expenditures directly attributable to the acquisition of the asset.
After recognition, PPE is stated at cost less accumulated depreciation.
The straight-line method is adopted in the computation of depreciation over the useful
life of the asset, assigning a residual value of at least 10%.
The estimated useful life of the asset is based on the estimated useful life of PPE by
classification issued by COA. Depreciation starts on the month following the date of
the purchase. Assets acquired prior to CY 2002 were not subjected to depreciation.
The LGU derecognizes items of property, plant and equipment and/or any significant
part of an asset upon disposal or when no future economic benefits or service
potential is expected from its continuing use. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the assets) is included in the surplus or deficit
when the asset is derecognized.
Public Infrastructures were not previously recognized in the books. The LGU availed
of the five-year transitional provision for the recognition of the public infrastructure.
For the first year of implementation of the IPSAS, the LGU did not recognize the
public infrastructure in the books of accounts.
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