3.13 Related parties
The LGUs regard 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 Mayor and
Vice-Mayor, Sanggunian Members, Committee Officials and Members, Accountant,
Treasurer, Budget Officer, General Services, and all Chiefs of Departments/Divisions.
3.14 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 underspending
online items.
3.15 Significant judgments and sources of estimation uncertainty
Judgments
In the process of applying the LGUs’ accounting policies, management has made
judgments, which have the most significant effect on the amounts recognized in the
consolidated financial statements.
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 LGUs 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 LGUs. 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 LGUs:
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