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.
Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each
reporting date is determined by reference to quoted market prices or dealer price
quotations (bid price for long positions and ask price for short positions),
without any deduction for transaction costs.
3.7 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.
3.8 Changes in accounting policies and estimates
The LGU recognizes the effects of changes in accounting policy
retrospectively.
The effects of changes in accounting policy are applied prospectively if
retrospective application is impractical.
The LGU recognizes the effects of changes in accounting estimates
prospectively by including in surplus or deficit.
3.9 Borrowing costs
Borrowing costs are capitalized against qualifying assets as part of property,
plant and equipment. Such borrowing costs are capitalized over the period
during which the asset is being acquired or constructed and borrowings have
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