c) Depreciation for all depreciable components of the road network
was not provided.
2.3.11 Item IV of the Circular provides that road lot component of the road
network system shall not be subject to depreciation. Each depreciable
component of the road network shall be depreciated separately following
the straight-line method of depreciation. Additionally, no residual value
shall be provided for the depreciable components of the road network
system.
2.3.12 Contrary to the foregoing provision, our examination of the trial balances
disclosed that the City Accountant had not provided depreciation for all
depreciable components of the LRN since the adoption of the International
Public Sector Accounting Standards (IPSAS) in CY 2015.
2.3.13 The non-segregation of costs for each road component due to the non-
maintenance of LRNLC affects the computation of depreciation,
considering that the depreciable components have different useful life
spans and, therefore, should have been depreciated separately following
the straight-line method.
2.3.14 Paragraph 21 of the IPSAS No. 17 partly provides that infrastructure
assets meet the definition of property, plant and equipment and should be
accounted for in accordance with this Standard. Examples of
infrastructure assets include road networks, sewer systems, water and
power supply systems, and communication networks.
2.3.15 Thus, the LRN shall be subject to depreciation in accordance with Item
IV.13 of the aforementioned Circular.
2.3.16 As a result of the foregoing, the City’s assets and equity were overstated
by an undetermined amount of depreciation that should have been
provided for each depreciable road component of the road network.
d) Non-disclosure of the total road network system in the Notes to the
Financial Statements (FS)
2.3.17 Item VI.2 of the Circular states that the total road network system shall be
disclosed in the Notes to FS of the Agency. The standard format is
provided in Annex B thereof, as presented below:
“The LGU has a total of kilometers of roads with a total cost of
Php___. For the year ended, the agency spent a total of Php__ for
local road additions, Php____for major repairs and Php____for
the regular maintenance. Reductions in the amount of
Php____were recorded due to derecognition, Php_____ for
impairment and Php___impairment were reversed.”
2.3.18 Also, under Item IX of the Circular, the complete recognition of the
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