Public Infrastructures were not previously recognized in the books. The LGU availed of
the 5-year transitional provision for the recognition of the Public Infrastructure. For the
first year of implementation of the PPSAS (2015), the LGUs did not recognize the Public
Infrastructure in the books of accounts.
3.5 Impairment of non-financial assets
Impairment of cash-generating assets
At each reporting date, the LGU assesses whether there is an indication that an asset may
be impaired. If any indication exists, or when annual impairment testing for an asset is
required, the LGU estimates the asset’s recoverable amount. An asset’s recoverable
amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell
and its value in use and is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups
of assets.
Where the carrying amount of an asset or the cash-generating unit exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present
value using a discount rate that reflects current market assessments of the time value of
money and the specific risks associated with the asset. In determining fair value less costs
to sell, recent market transactions are considered, if available. If no such transactions can
be identified, an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are
recognized in the statement of financial performance in those expense categories
consistent with the nature of the impaired asset.
For assets, an assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer exist or may have
decreased. If such an indication exists, the LGU estimates the asset’s or cash-generating
unit’s recoverable amount. A previously recognized impairment loss is reversed only if
there has been a change in the assumptions used to determine the asset’s recoverable
amount since the last impairment loss was recognized. The reversal is limited so that the
carrying amount of the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognized for the asset in prior years. Such a reversal is recognized
in surplus or deficit.
Impairment of non-cash-generating assets
The LGU assesses at each reporting date whether there is an indication that a non-cash-
generating asset may be impaired. If any indication exists, or when annual impairment
testing for an asset is required, the LGU estimates the asset’s recoverable service amount.
An asset’s recoverable service amount is the higher of the non-cash generating asset’s
fair value less costs to sell and its value in use.
Where the carrying amount of an asset exceeds its recoverable service amount, the asset
is considered impaired and is written down to its recoverable service amount.
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