Financial assets carried at amortized cost
For financial assets carried at amortized cost, the LGU first assesses whether objective
evidence of impairment exists individually for financial assets that are individually
significant, or collectively for financial assets that are not individually significant. If the
LGU determines that no objective evidence of impairment exists for an individually
assessed financial asset, whether significant or not, it includes the asset in a group of
financial assets with similar credit risk characteristics and collectively assesses them for
impairment. Assets that are individually assessed for impairment and for which an
impairment loss is, or continues to be, recognized are not included in a collective
assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of
the loss is measured as the difference between the assets carrying amount and the present
value of estimated future cash flows (excluding future expected credit losses that have
not yet been incurred). The present value of the estimated future cash flows is discounted
at the financial asset’s original effective interest rate. If a loan has a variable interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and
the amount of the loss is recognized in surplus or deficit. If, in a subsequent year, the
amount of the estimated impairment loss increases or decreases because of an event
occurring after the impairment was recognized, the previously recognized impairment
loss is increased or reduced by adjusting the allowance account. If a future write-off is
later recovered, the recovery is credited to finance costs in surplus or deficit.
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IPSAS 29 are classified as financial liabilities at
fair value through surplus or deficit or loans and borrowings, as appropriate. The LGU
determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value, and in the case of loans and
borrowings.
The LGU’s financial liabilities include trade and other payables and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification.
Financial liabilities at fair value through surplus or deficit
Financial liabilities at fair value through surplus or deficit include financial liabilities
held for trading and financial liabilities designated upon initial recognition as at fair value
through surplus or deficit.
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