the economic life of the commercial property) that it retains all the significant
risks and rewards of ownership of the properties and accounts for the contracts
as operating leases
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:
a) The condition of the asset based on the assessment of experts employed
by the LGU;
b) The nature of the asset, its susceptibility and adaptability to changes in
technology and processes;
c) The nature of the processes in which the asset is deployed; and
d) Changes in the market in relation to the asset
Impairment of non-financial assets – cash-generating assets
The recoverable amounts of cash-generating units and individual assets have
been determined based on the higher between value-in-use calculations and fair
values less costs to sell. These calculations require the use of estimates and
assumptions. It is reasonably possible that the assumptions may change, which
may then impact management’s estimations and require a material adjustment
to the carrying value of tangible assets.
The LGU reviews and tests the carrying value of assets when events or changes
in circumstances suggest that the carrying amount may not be recoverable.
Cash-generating assets are grouped at the lowest level for which identifiable
cash flows are largely independent of cash flows of other assets and liabilities.
If there are indications that impairment may have occurred, estimates of
expected future cash flows are prepared for each group of assets. Expected
future cash flows used to determine the value in use of tangible assets are
inherently uncertain and could materially change over time.
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