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 – non- cash generating assets
The LGU reviews and tests the carrying value of non-cash-generating assets
when events or changes in circumstances suggest that there may be a reduction
in the future service potential that can reasonably be expected to be derived
from the asset. Where indicators of possible impairment are present, the LGU
undertakes impairment tests, which require the determination of the fair value
of the asset and its recoverable service amount. The estimation of these inputs
into the calculation relies on the use estimates and assumptions.
Any subsequent changes to the factors supporting these estimates and
assumptions may have an impact on the reported carrying amount of the related
asset.
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