Revenue from exchange transactions
Rendering of services
The LGU recognizes revenue from rendering of services by reference to the
stage of completion when the outcome of the transaction can be estimated
reliably. The stage of completion is measured by reference to labor hours
incurred to date as a percentage of total estimated labor hours.
Where the contract outcome cannot be measured reliably, revenue is recognized
only to the extent that the expenses incurred.
Interest income
Interest income is accrued using the effective yield method. The effective yield
discounts estimated future cash receipts through the expected life of the
financial asset to that asset’s net carrying amount. The method applies this yield
to the principal outstanding to determine interest income each period.
3.4 Property, plant, and equipment
All property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. Cost includes expenditure that is directly
attributable to the acquisition of the items. When significant parts of property,
plant and equipment are required to be replaced at intervals, the LGU
recognizes such parts as individual assets with specific useful lives and
depreciates them accordingly. Likewise, when a major inspection is performed,
its cost is recognized in the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognized in surplus or deficit as incurred. Where an
asset is acquired in a non-exchange transaction for nil or nominal consideration
the asset is initially measured at its fair value.
Depreciation on assets is charged on a straight-line basis over the useful life of
the asset.
Depreciation is charged at rates calculated to allocate cost or valuation of the
asset less any estimated residual value over its remaining useful life:
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. In the first year of implementation of the PPSAS, the LGU did
not recognize the Public Infrastructure in the books of accounts.
12
