All financial liabilities are recognized initially at fair value and, in the case of
loans and borrowings.
The LGU’s financial liabilities include trade and other payables, loans and
borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortized cost using the effective interest method. Gains and losses
are recognized in surplus or deficit when the liabilities are derecognized as well
as through the effective interest method amortization process.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the effective interest rate.
Derecognition
A financial liability is derecognized when the obligation under the liability is
discharged, cancelled or expires.
When an existing financial liability is replaced by another from the same lender
on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported
in the consolidated statement of financial position if there is a currently
enforceable legal right to offset the recognized amounts and there is an intention
to settle on a net basis, or to realize the assets and settle the liabilities
simultaneously.
3.8 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and cash at bank, deposits on
call and highly liquid investments with an original maturity of three months or
less, which are readily convertible to known amounts of cash and are subject to
insignificant risk of changes in value. For the purpose of the consolidated
statement of cash flows, cash and cash equivalents consist of cash and short-
term deposits as defined above, net of outstanding bank overdrafts.
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