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 LGU’s needs. 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 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.
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;
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