j. Budget information
The annual budget is prepared using the modified cash basis, that is, all planned costs
and income are presented in a single statement to determine the needs of the LGU. As
a result of the adoption of the Modified cash basis for budgeting purposes, there are
basis, timing or entity differences that would require reconciliation between the actual
comparable amounts and the amounts presented as a separate additional financial
statement in the statement of comparison of budget and actual amounts. Explanatory
comments are provided in the notes to the annual financial statements; first, the
reasons for overall growth or decline in the budget are stated, followed by details of
overspending or underspending on line items.
k. Significant judgments and sources of estimation uncertainty
Judgments
In the process of applying the LGU’s accounting policies, management has made
judgments, which have the most significant effect on the amounts recognized in the
consolidated financial statements.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial
year, are described below. The LGU based its assumptions and estimates on
parameters available when the consolidated financial statements were prepared.
However, existing circumstances and assumptions about future developments may
change due to market changes or circumstances arising beyond the control of the
LGU. Such changes are reflected in the assumptions when they occur.
Useful lives and residual values
The useful lives and residual values of assets are assessed using the following
indicators to inform potential future use and value from disposal:
i. The condition of the asset is based on the assessment of experts employed
by the LGU;
ii. The nature of the asset, its susceptibility and adaptability to changes
in technology and processes;
iii. The nature of the processes in which the asset is deployed; and
iv. Changes in the market in relation to the asset.
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