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.
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.
Rental income
Rental income arising from operating leases on investment properties is accounted for
on a straight-line basis over the lease terms and included in revenue.
d. 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.
Leased assets may consist of vehicles and machinery.
The assets’ residual values and useful lives are reviewed, and adjusted prospectively,
if appropriate, at the end of each reporting period. An asset’s carrying amount is
written down immediately to its recoverable amount, or recoverable service amount
if the asset’s carrying amount is greater than its estimated recoverable amount or
recoverable service amount.
12
