3.6 Inventories
Inventories are recognized and measured at cost upon initial recognition.
Inventories are recognized as expenses when issued for utilization or
consumption in the ordinary course of operations.
3.7 Prepayments and Deferred Charges
Prepayments are recorded using the asset method. Adjusting entries are
prepared at the end of the year to record the portion of the prepayment
representing the expense incurred during the current accounting period.
3.8 Investment Property
Investment Property is either a land or a building or part of a building or both,
held by the owner or a lessee under a finance lease to earn rentals or for
capital appreciation, or both.
3.9 Property, Plant and Equipment
Property, Plant and Equipment (PPE) are recognized at cost. The cost
includes the purchase price and expenditures directly attributable to the
acquisition of the asset.
After recognition, PPE are stated at cost less accumulated depreciation.
The straight-line method is adopted in the computation of depreciation over
the useful life of the asset, assigning a residual value of at least 10%. The
estimated useful life of the asset is based on the estimated useful life of PPE
by classification issued by COA. Depreciation starts on the month following
the date of the purchase. Assets acquired prior to CY 2002 are not subjected
to depreciation.
The LGU derecognizes items of property, plant and equipment and/or any
significant part of an asset upon disposal or when no future economic benefits
or service potential is expected from its continuing use. Any gain or loss
arising on derecognition of the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of the assets) is included in the
surplus or deficit when the asset is derecognized.
Public Infrastructures were not previously recognized in the books. The LGU
availed of the five-year transitional provision for the recognition of the Public
Infrastructure. For the first year of implementation of the IPSAS, the LGU did
not recognize the Public Infrastructure in the books of accounts.
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