Held-to-maturity investments and loans and receivables
The LGU assesses its loans and receivables (including trade receivables) and its held-to-
maturity investments at the end of each reporting period. In determining whether an
impairment loss should be recorded in surplus or deficit, the LGU evaluates the indicators
present in the market to determine if those indicators are indicative of impairment in its
loans and receivables or held-to-maturity investments. Where specific impairments have
not been identified the impairment for trade receivables, held-to-maturity investments and
loans and receivables is calculated on a portfolio basis, based on historical loss ratios,
adjusted for national and industry-specific economic conditions and other indicators
present at the reporting date that correlate with defaults on the portfolio. These annual loss
ratios are applied to loan balances in the portfolio and scaled to the estimated loss
emergence period.
3.15 Impairment Loss
For the year ended December 31, 2015, as the transition period of converting accounting
policies from New Government Accounting System (NGAS) to Philippine Public Sector
Accounting Standards (PPSAS) there was no recorded provision for impairment of any
assets.
3.16 Financial instruments - financial risk management
Exposure to currency, commodity, interest rate, liquidity, and credit risks arises in the
normal course of the LGU’s operations. This note presents information about the LGU’s
exposure to each of the mentioned risks, policies, and processes for measuring and
managing risk, and the LGU’s management of capital. Further quantitative disclosures are
included throughout these financial statements. The fair values set out below are a
comparison by class of the carrying amounts and fair value of the LGU’s financial
instruments.
The fair value of the financial assets and liabilities is included at the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than
in a forced sale or liquidation.
The following methods and assumptions were used to estimate the fair values:
(a) Cash and short-term deposits, trade receivables, trade payables, and other current
liabilities approximate their carrying amounts largely due to the short-term maturities
of these instruments;
(b) Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the
LGU based on parameters such as interest rates, individual creditworthiness of the
customer and the risk characteristics of the financed project. Based on this evaluation,
allowances are taken to account for the incurred losses of these receivables and market-
related interest rates. As at 31 December 2022, the carrying amounts of such
receivables, net of allowances, are not materially different from their calculated fair
values;
(c) Fair value of quoted notes and bonds is based on price quotations at the reporting date.
The fair value of unquoted instruments, loans from banks and other financial liabilities,
obligations under finance leases, as well as other non-current financial liabilities, is
estimated by discounting future cash flows using rates currently available for debt on
similar terms, credit risk and remaining maturities;
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