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( continued)
When SALGA is assessing whether there is any indication that an asset may be impaired, at a minimum the following indications are considered:
External sources of information
a) Cessation, or near cessation, of the demand or need for services provided by the asset. b) Significant long-term changes with an adverse effect on the entity have taken place during the period or will take place in the near future, in the technological, legal or government policy environment in which the entity operates.
Internal sources of information
a) Evidence is available of physical damage of an asset. b) Significant long-term changes with an adverse effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected to be used. These changes include the asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, or plans to dispose of an asset before the previously expected date. c) Evidence is available from internal reporting that indicates that the service performance of an asset is, or will be, significantly worse than expected.
Value in use
Value in use of a non-cash-generating asset is the present value of the asset’ s remaining service potential.
The present value of the remaining service potential of non-cash-generating assets is determined using the following approach:
Service units approach
The present value of the remaining service potential of the asset is determined by reducing the current cost of the remaining service potential of the asset before impairment, to conform to the reduced number of service units expected from the asset in its impaired state. The current cost of replacing the remaining service potential of the asset before impairment is determined as the depreciated reproduction or replacement cost of the asset before impairment, whichever is lower.
Recognition and measurement
If the recoverable service amount of a non-cashgenerating asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount. This reduction is an impairment loss.
An impairment loss is recognised immediately in surplus or deficit.
Reversal of an impairment loss
SALGA assess at each reporting date whether there is any indication that an impairment loss recognised in prior periods for a non-cashgenerating asset may no longer exist or may have decreased. If any such indication exists, the recoverable service amount of that asset is estimated.
An impairment loss recognised in prior periods for a non-cash-generating asset is reversed if there has been a change in the estimates used to determine the asset’ s recoverable service amount since the last impairment loss was recognised.
The carrying amount of the asset is increased to its recoverable service amount. The increase is a reversal of an impairment loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined( net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior periods.
185 SALGA ANNUAL REPORT 2016 / 17