been incurred. Capitalization ceases when construction of the asset is complete.
Further, borrowing costs are charged to the statement of financial performance.
3.10 Related parties
The LGU regards a related party as a person or an entity with the ability to exert
control individually or jointly, or to exercise significant influence over the
LGU, or vice versa. Members of key management are regarded as related
parties and comprise the Governor, Mayors, Vice-Governors and Vice-Mayors,
Sanggunian Members, Committee Officials and Members, Accountants,
Treasurers, Budget Officers, General Services and all Chiefs of Departments/
Divisions.
3.11 Budget information
The annual budget is prepared on 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 under spending on line items.
3.12 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.
Operating lease commitments – LGU as lessor
The LGU has entered into property leases of certain of its properties. The LGU
has determined, based on an evaluation of the terms and conditions of the
arrangements, (such as the lease term not constituting a substantial portion of
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.
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