Where the contract outcome cannot be measured reliably, revenue is recognized
only to the extent that the expenses are 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 for each period.
Rental income
Rental income arising from operating leases on investment properties is
accounted for on a straight-line basis over the lease term and included in
revenue.
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 depreciate 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.
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. The LGU
derecognizes items of property, plant and equipment and/or any significant part
of an asset upon disposal or when no future economic benefits or service
potential is expected from its continuing use. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the surplus or
deficit when the asset is derecognized.
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