b) Finished goods and work in progress: cost of direct materials and labor
and a proportion of manufacturing overheads based on the normal
operating capacity, but excluding borrowing cost.
After initial recognition, inventory is measured at the lower cost and net
realizable value. However, to the extent that a class of inventory is distributed
or deployed at no charge or for a nominal charge, that class of inventory is
measured at the lower of cost and current replacement cost.
Net realizable value is the estimated selling price in the ordinary course of
operations, less the estimated costs of completion and the estimated costs
necessary to make the sale, exchange, or distribution. Inventories are
recognized as an expense when deployed for utilization or consumption in the
ordinary course of operations of the LGU.
3.7 Changes in accounting policies and estimates
The LGU recognizes the effects of changes in accounting policy
retrospectively. The effects of changes in accounting policy are applied
prospectively if retrospective application is impractical.
The LGU recognizes the effects of changes in accounting estimates
prospectively by including in surplus or deficit.
3.8 Foreign currency transactions
The LGU does not have any foreign currency transactions.
3.9 Borrowing costs
Borrowing costs are capitalized against qualifying assets as part of property,
plant and equipment. Such borrowing costs are capitalized over the period
during which the assest is being acquired or constructed and borrowings have
been incurred. Capitalization ceases when construction of the asset is
complete. Further, borrowing costs are charged to the statement of financial
performance.
3.10 Related parties
The LGU regards a related party as a person or an entity with the ability to
exert control individually or jointly, or to exercise significant influence over
the LGU, or vice versa. Members of key management are regarded as related
parties and comprise the Mayors, Vice-Mayors, Sanggunian Members,
Committee Officials and Members, Accountants, Treasurers, Budget Officers,
General Services and all Chiefs of Departments/Divisions.
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