South African Local Government Association
Schedule 3A public entity i.t.o. the Public Finance Management Act, 1999 and recognised i.t.o. the
Organised Local Government Act, 1997
Annual Financial Statements for the year ended 31 March 2017
Accounting Policies
1.3
Significant judgments and sources of
estimation uncertainty (continued)
SALGA determines the appropriate discount rate
at the end of each year. This is the interest rate
that will be used to determine the present value
of estimated future cash outflows expected to
be required to settle the medical obligations.
In determining the appropriate discount rate,
SALGA considers the medical aid inflation that
have terms to maturity approximating the terms
of the related medical liability.
Other key assumptions for medical aid obligations
are based on current market conditions.
Additional information is disclosed in note 7.
Effective interest rate
SALGA uses the prime interest rate to discount
future cash flows for payables and/or expenditure
and the R186 government bond yield rate to
discount the future cash flows in receivables
and/or revenue.
obtain from disposal of the asset, after deducting
the estimated costs of disposal, if the asset was
already of the age and in the condition expected
at the end of its useful life.
Impairment of non-cash generating assets
Criteria developed by SALGA to distinguish non-
cash-generating assets from cash-generating
assets are as follows: SALGA’s mandate or
intention is not in pursuit of commercial return
but service delivery to its members, therefore
assets acquired by SALGA are solely for service
delivery to facilitate service delivery to its
members (i.e. administrative in nature).
There is no uncertainty as to whether SALGA
assets are non-cash generating assets, as SALGA
does not have an asset or class of assets that
operate or generate cash flows independently
from other assets, nor do its assets form part
of a group of assets that generate cash flows
independently from other assets.
1.4 Investment property
Allowance for doubtful debts
Recognition and measurement
For trade receivables an impairment loss is
recognised in surplus and deficit when there
is objective evidence that it is impaired. The
impairment is measured as the difference
between the trade receivables carrying amount
and the present value of estimated future cash
flows discounted at the effective interest rate,
computed at initial recognition.
Investment property is property (land or a
building - or part of a building - or both) held to
earn rental income or for capital appreciation or
both, rather than for:
•
•
•
Useful lives and residual values
SALGA re-assesses the useful lives and residual
values of property, plant and equipment on a yearly
basis. These assessments require judgements and
assumptions to be made by management. The
assessments involve the estimation of months
or years based on past experience and historical
information to determine the estimated period of
time over which an asset is expected to be used.
Other assessments involve the determination of
value where a comparison of the resale value of
the specific asset taking into consideration its age
and condition. This determination represents the
estimated amount that SALGA would currently
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use in the production or supply of goods
or services,
administrative purposes, or
sale in the ordinary course of operations.
Investment property is recognised as an asset
when it is probable that the future economic
benefits or service potential that are associated
with the investment property will flow to SALGA,
and the cost or fair value of the investment
property can be measured reliably.
Investment property is initially recognised at
cost plus any transaction costs included in initial
measurement.
Where investment property is acquired through
a non-exchange transaction, its cost is its fair
value as at the date of acquisition.