In assessing value in use, the LGU adopted the depreciation replacement cost approach.
Under this approach, the present value of the remaining service potential of an asset is
determined as the depreciated replacement cost of the asset. The depreciated replacement
cost is measured as the reproduction or replacement cost of the asset, whichever is lower,
less accumulated depreciation calculated based on such cost, to reflect the already
consumed or expired service potential of the asset. In determining fair value less costs to
sell, the price of the assets in a binding agreement in an arm's length transaction, adjusted
for incremental costs that would be directly attributed to the disposal of the asset is used.
If there is no binding agreement, but the asset is traded on an active market, fair value
less cost to sell is the asset's market price less cost of disposal. If there is no binding sale
agreement or active market for an asset, the LGU determines fair value less cost to sell
based on the best available information.
For each asset, 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 indication exists, the LGU estimates the asset's recoverable service
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 service 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 service 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.
3.6 Financial instruments
Financial assets
Initial recognition and measurement
Financial assets are classified as financial assets at fair value through surplus or deficit,
loans and receivables, held-to-maturity investments, or available-for-sale financial
assets, as appropriate. The LGU determines the classification of its financial assets at
initial recognition.
Purchases or sales of financial assets that require delivery of assets within a time frame
established by regulation or convention in the marketplace (regular way trades) are
recognized on the trade date, i.e., the date that the LGU commits to purchase or sell the
asset.
The LGU’s financial assets include: cash and short-term deposits; trade and other
receivables; loans and other receivables; and quoted and unquoted financial instruments.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification.
Financial assets at fair value through surplus or deficit
Financial assets at fair value through surplus or deficit include financial assets held for
trading and financial assets designated upon initial recognition at fair value through
surplus and deficit. Financial assets are classified as held for trading if they are acquired
to sell or repurchase in the near term. Financial assets at fair value through surplus or
deficit are carried in the statement of financial position at fair value with changes in fair
value recognized in surplus or deficit.
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