Impairment of non-financial assets – cash-generating assets
The recoverable amounts of cash-generating units and individual assets have been
determined based on the higher of value-in-use calculations and fair values less costs to
sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the assumptions may change, which may then impact management’s
estimations and require a material adjustment to the carrying value of tangible assets.
The LGU reviews and tests the carrying value of assets when events or changes in
circumstances suggest that the carrying amount may not be recoverable. Cash-generating
assets are grouped at the lowest level for which identifiable cash flows are largely
independent of cash flows of other assets and liabilities. If there are indications that
impairment may have occurred, estimates of expected future cash flows are prepared for
each group of assets. Expected future cash flows used to determine the value in use of
tangible assets are inherently uncertain and could materially change over time.
Impairment of non-financial assets – non- cash generating assets
The LGU reviews and tests the carrying value of non-cash-generating assets when events
or changes in circumstances suggest that there may be a reduction in the future service
potential that can reasonably be expected to be derived from the asset. Where indicators of
possible impairment are present, the LGU undertakes impairment tests, which require the
determination of the fair value of the asset and its recoverable service amount. The
estimation of these inputs into the calculation relies on the use estimates and assumptions.
Any subsequent changes to the factors supporting these estimates and assumptions may
have an impact on the reported carrying amount of the related asset.
Fair value estimation – financial instruments
Where the fair value of financial assets and financial liabilities recorded in the statement
of financial position cannot be derived from active markets, their fair value is determined
using valuation techniques including the discounted cash flow model. The inputs to these
models are taken from observable markets where possible, but where this is not feasible,
judgment is required in establishing fair values. Judgment includes the consideration of
inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these
factors could affect the reported fair value of financial instruments.
Provisions
Provisions were raised and management determined an estimate based on the information
available. Provisions are measured at the management's best estimate of the expenditure
required to settle the obligation at the reporting date, and are discounted to present value
where the effect is material.
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