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)
Residual values
The residual value, and the useful life and
depreciation method of each asset are reviewed at
the end of each reporting date. If the expectations
differ from previous estimates, the change
is accounted for as a change in accounting
estimate.
Reviewing the useful life of an asset on an annual
basis does not require the entity to amend the
previous estimate unless expectations differ from
the previous estimate.
Each part of an item of property, plant and
equipment with a cost that is significant in
relation to the total cost of the item is depreciated
separately.
The depreciable amount of an asset is determined
by deducting the residual value of an asset from
its original cost (or revalued amount, where
applicable).
The depreciation charge for each period is
recognised in surplus or deficit unless it is
included in the carrying amount of another asset.
The gain or loss arising from derecognition
of an item of property, plant and equipment
is included in surplus or deficit when the item
is derecognised. The gain or loss arising from
derecognition of an item of property, plant
and equipment is determined as the difference
between the net disposal proceeds, if any, and
the carrying amount of the item.
The carrying amount of property, plant and
equipment is reviewed for impairment when
events or changes in the circumstances indicate
that the carrying amount may not be recoverable.
Specific categories of property, plant and
equipment:
Land and buildings
Land and buildings are separable assets and are
accounted for separately, even when they are
acquired together. Land has an unlimited useful
life and therefore is not depreciated.
Buildings have a limited useful life and therefore
are depreciable assets.
The useful lives of the land and buildings are re-
assessed annually.
Furniture and fittings and office equipment
No residual value is assessed for assets where the
value of the residual is considered immaterial
in relation to the cost of the asset. Management
intends using the assets shown in the statement
of financial position over their entire economic
life.
The residual values of motor vehicles are set as
determined by market forces. When setting a
residual value for a motor vehicle consideration
is given to the expected useful life and expected
proceeds that could be received today if the same
vehicle at the end of its useful life were to be sold.
Office equipment and furniture and fittings are
not currently componentised as no component
accounting is considered necessary due to the
nature of office furniture and fittings and office
equipment, namely, that the useful lives of
individual components do not differ from the
whole.
Estimated useful lives are based on past
experience and historical information.
IT equipment
Derecognition •
Items of property, plant and equipment are
derecognised when the asset is disposed-off or
when there are no further economic benefits or
service potential expected from the use of the
asset. •
•
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IT equipment can be separated into the
following components:
computer hardware; and
computer software (integral part and
embedded into hardware)
SALGA ANNUAL REPORT
2016/17