The LGU’s financial liabilities include trade and other payables, bank overdrafts,
loans and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification.
Financial liabilities at fair value through surplus or deficit
Financial liabilities at fair value through surplus or deficit include financial
liabilities designated upon initial recognition as at fair value through surplus or
deficit.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently
measured at amortized cost using the effective interest method. Gains and losses
are recognized in surplus or deficit when the liabilities are derecognized as well as
through the effective interest method amortization process.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the effective interest rate
.
3.6 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.
3.7 Inventories
Inventory is measured at cost upon initial recognition. To the extent that inventory
was received through non-exchange transactions (for no cost or for a nominal cost),
the cost of the inventory is its fair value at the date of acquisition.
Costs incurred in bringing each product to its present location and condition are
accounted for, as follows:
a) Raw materials: purchase cost using the weighted average cost method; and
b) Finished goods and work in progress: cost of direct materials and labor and
a proportion of manufacturing overheads based on the normal operating
capacity, but excluding borrowing costs.
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