SALGA annual report 2016/17 SALGA ANNUAL REPORT 201617 PRINTED FINAL | Page 178

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

1.5 Property, plant and equipment( continued)

Subsequent expenditure of an item of property, plant and equipment is recognised as an asset if and only if:

a) it is probable that the future economic benefits or service potential associated with the item will flow to SALGA; and b) the cost or fair value of the item can be measured reliably.

Costs of the day-to-day servicing are recognised in surplus and deficit as incurred.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

Following initial recognition at cost, land and buildings classified as property, plant and equipment is carried at revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Revaluations are made with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset.

Any increase in an asset’ s carrying amount, as a result of a revaluation, is credited directly to a revaluation surplus. The increase is recognised in surplus or deficit to the extent that it reverses a revaluation decrease of the same asset previously recognised in surplus or deficit.

Any decrease in an asset’ s carrying amount, as a result of a revaluation, is recognised in surplus or deficit in the current period. The decrease is debited directly to a revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

The revaluation surplus in equity related to a specific item of property, plant and equipment is transferred directly to retained earnings when the asset is derecognised.

The revaluation surplus in equity related to a specific item of property, plant and equipment is transferred directly to retained earnings as the asset is used. The amount transferred is equal to the difference between depreciation based on the revalued carrying amount and depreciation based on the original cost of the asset.

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives taking into account their estimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows:

Leased assets( Equipment)

Straight-line

The shorter of useful life or lease term( 24 to 36 months)

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