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
1.11 Impairment of non-cash-generating
assets
1.9 Cash and cash equivalents
Cash comprises cash on hand and demand
deposits.
Cash and cash equivalents are measured at
amortised cost.
Cash equivalents are short-term, highly liquid
investments that are readily convertible to
known amounts of cash and which are subject to
an insignificant risk of changes in value.
Cash equivalents are held for the purpose of
meeting short-term cash commitments rather
than for investment or other purposes. For an
investment to qualify as a cash equivalent it must
be readily convertible to a known amount of cash
and be subject to an insignificant risk of changes
in value. Therefore, an investment normally
qualifies as a cash equivalent only when it has a
short maturity of, say, three months or less from
the date of acquisition.
SALGA does not have an overdraft facility and is
restricted in terms of section 66(3)(c) of the PFMA
to borrow money, subject to the approval of the
Minister (Executive Authority) in concurrence
with the Minister of Finance.
1.10 Revaluation reserve
The revaluation reserve results from the
revaluation of property, plant and equipment
while still owner occupied. It remains after
treating the same assets as investment property
since they were vacated by the entity.
Upon transfer of the owner-occupied property to
investment property the revaluations surplus is
treated in the following manner:
• any remaining part of the increase
is credited directly to net assets in
revaluation surplus. On subsequent
disposal of the investment property,
the revaluation surplus included in net
assets may be transferred to accumulated
surpluses or deficits. The transfer from
revaluation surplus to accumulated
surpluses or deficits is not made through
surplus or deficit.
184
Non-cash-generating assets are assets other
than cash-generating assets.
Impairment is a loss in the future economic
benefits or service potential of an asset, over and
above the systematic recognition of the loss of
the asset’s future economic benefits or service
potential through depreciation (amortisation).
Recoverable service amount is the higher of a
non-cash-generating asset’s fair value less costs
to sell and its value in use.
Useful life is either:
a) the period of time over which an asset is
expected to be used by SALGA; or
b) the number of production or similar units
expected to be obtained from the asset by
SALGA.
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 or 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 does its assets form part
of a group of assets that generate cash flows
independently from other assets.
Identification
When the carrying amount of a non-cash-
generating asset exceeds its recoverable service
amount, it is impaired.
SALGA assesses at each reporting date whether
there is any indication that a non-cash-generating
asset may be impaired. If any such indication
exists, SALGA estimates the recoverable service
amount of the asset.