The financial statements have been prepared in accordance with Generally Accepted Accounting Practice (GAAP), issued by the Accounting Standards Board (ASB) pursuant to section 122(3) of the Municipal Finance Management Act, 2003 (Act no 56 of 2003). The financial statements have been prepared in accordance with Generally Accepted Accounting Practice (GAAP), issued by the Accounting Standards Board (ASB) in accordance with section 122(3) of the Municipal Finance Management Act, 2003 (Act No 56 of 2003).
Presentation currency
These financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention as the basis of measurement, unless otherwise specified. A summary of the significant accounting policies consistently applied in the preparation of these financial statements is disclosed below.
Going concern assumption
Significant judgements and sources of estimation uncertainty
Significant judgements and sources of estimation uncertainty (continued) Impairment testing
Investment property is derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits or service potential are expected from its sale. Gains or losses arising from the retirement or sale of investment property are the difference between the net sale proceeds and the carrying amount of the asset and are recognized in surplus or deficit in the period of retirement or disposal.
Property, plant and equipment
Where investment property is acquired through a non-exchange transaction, the cost is its fair value at the date of acquisition. Compensation from third parties for investment property that is impaired, lost or relinquished is recognized as surplus or deficit when the compensation becomes receivable.
Property, plant and equipment (continued)
Items of property, plant and equipment are derecognised when the asset is sold or when no further economic benefits or service potential are expected from the use of the asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised.
Site restoration and dismantling cost
The gain or loss arising from the 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.
Heritage assets
Financial instruments
An entity recognizes a financial asset or a financial liability in its statement of financial position when the entity becomes a party to the contractual provisions of the instrument. An entity measures a financial asset and liability initially at fair value plus transaction costs directly attributable to the acquisition or issuance of the financial asset or liability.
Financial instruments (continued)
If there is objective evidence that an impairment loss has occurred on a financial asset measured at amortized cost, the amount of the loss is determined as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding future credit losses that are not are made) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced directly OR through the use of a provision.
Financial instruments (continued) Derecognition
In accounting for a transfer of a financial asset that does not qualify for derecognition, the entity does not offset the transferred asset and the related liability. The municipality is responsible for calculating VAT at the standard rate (14%) in terms of section 7 (1) (a) of the VAT Law in relation to the supply of goods or services, unless the supplies are specifically at the rate zero. within the meaning of section 11, excluded within the meaning of section 12 of the VAT Act or included for VAT purposes.
Leases
The difference between the carrying amount of a financial liability that has matured or been transferred to another party and the consideration paid, including noncash assets transferred or liabilities assumed, is recognized as a surplus or deficit. Interest relating to a financial instrument or component that is a financial liability is recognized as income or expense in surplus or deficit.
Leases (continued) Operating leases ‐ lessor
Inventories
Impairment of cash‐generating assets
The carrying amount of a cash-generating unit is determined on a basis that corresponds to the manner in which the recoverable amount of the cash-. An impairment loss is recognized for a cash-generating unit if the recoverable amount of the unit is less than the carrying amount of the unit.
Impairment of cash‐generating assets (continued) Reversal of impairment loss
Impairment of non‐cash‐generating assets
A reversal of an impairment loss on a non-cash-generating asset is recognized immediately in profit or loss. Any reversal of an impairment loss on a revalued non-cash-generating asset is treated as a revaluation increase.
Employee benefits
The municipality assesses at each reporting date whether there are indications that an impairment loss recognized in previous periods for a non-cash-generating asset no longer exists or has decreased. An impairment loss recognized 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 value since the last impairment loss was recognised. After a reversal of an impairment loss is recognised, the depreciation charge (amortization) for the non-cash-generating asset is adjusted in future periods to allocate the revised carrying amount of the non-cash-generating asset less any residual value. , on a systematic basis over the remaining useful life.
Employee benefits (continued)
The municipality has a duty to provide long-term benefits to all its employees. According to the rules for the long-term benefit scheme, which the municipality established and operates, an employee (who is on the terms of employment applicable at any time) is entitled to cash assistance, calculated according to the rules of the scheme, after and 30 years of continued service. Actuarial gains and losses on the long benefits are booked in the income statement.
Provisions and contingencies Provisions are recognised when
Provisions and contingencies (continued) Decommissioning, restoration and similar liability
Revenue from exchange transactions
An inflow of funds from a non-exchange transaction recognized as an asset is recognized as revenue, except to the extent that a liability is also recognized in connection with the same inflow. Income from non-exchange business is measured in the amount of the increase in net assets recognized by the municipality. When a municipality recognizes an asset as a result of a non-exchange transaction, it also recognizes revenue equal to the amount of the asset measured at fair value on the date of acquisition, unless a liability must also be recognized. .
Revenue from non‐exchange transactions (continued) Taxes
Investment income
Borrowing costs
Comparative figures
Unauthorised expenditure Unauthorised expenditure means
Fruitless and wasteful expenditure
Irregular expenses incurred and identified during the current financial year and which were approved before the end of the year and/or before the closing of the annual accounts must also be properly recorded in the register of irregular expenses. Irregular expenses incurred and identified during the current financial year, and for which condonation is awaited at the end of the year, must be registered in the register of irregular expenses. Irregular expenditure incurred and identified during the current financial year, which has not been approved by the national finance minister or the relevant authority, must be properly recorded in the Register of Irregular Expenditure.
Investments
If an irregular expenditure occurred in the previous fiscal year and is only admissible in the following fiscal year, the register and the explanation to the financial statements must be updated with the admissible amount. If liability for irregular expenditure can be attributed to a person, a debt account should be created if such person is legally liable. If the irregular expenditure was not authorized and no person is legally responsible, the related expenditure must remain within the relevant program/item of expenditure, be disclosed as such in a note to the financial statements and updated accordingly in the register of irregular expenditure.
Consumer deposits
Irregular expenses as defined in § 1 of the PFMA are expenses other than unauthorized expenses which have been incurred in violation of or which are not in accordance with a requirement in any applicable legislation, including ‐. b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made under the Act; or (c) any provincial legislation providing for procurement procedures in that provincial government. Irregular expenses are expenses that contravene the Act on Municipal Financial Management (Act No. 56 of 2003), the Act on Municipal Systems (Act No. 32 of 2000), and the Act on Public Officials (Act No. 20 of 1998) or . is inconsistent with the economic entity's supply chain management policy. Irregular expenses are booked as expenses in the statement of financial results, and where they are recovered, they are subsequently booked as income in the statement of financial results.
Unspent conditional grants and receipts
In such a case, no further action is required, with the exception of updating the notes to the financial statements. No further action is required, other than updating the notes to the financial statements. If recovery is not possible, the accounting officer or the accounting authority may write off the amount as impairment of debts and disclose this in the relevant notes to the annual accounts.
Commitments
Related parties
Budget information
Notes to the Financial Statements
New standards and interpretations
- Standards and interpretations effective and adopted in the current year
New standards and interpretations (continued)
- Standards and interpretations issued, but not yet effective
Inventories
Investments Designated at fair value
Investments (continued) Investments at fair value
Level 1
- Other receivables
- VAT receivable
- Consumer receivables Gross balances
- Consumer receivables (continued) Net balance
- Consumer receivables (continued)
- Consumer receivables (continued) Other
- Consumer receivables (continued) Total debtors by consumer classification
- Cash and cash equivalents Cash and cash equivalents consist of
- Cash and cash equivalents (continued) The municipality had the following bank accounts
- Investment property
- Property, plant and equipment
- Property, plant and equipment (continued) Reconciliation of property, plant and equipment ‐ 2014
- Property, plant and equipment (continued) Reconciliation of property, plant and equipment ‐ 2013
- Heritage assets
- Borrowings At amortised cost
- Borrowings (continued) Current liabilities
- Finance lease obligations Minimum lease payments due
- Trade and other payables
- Trade and other payables (continued)
- VAT payable
- Consumer deposits
- Unspent conditional grants Unspent conditional grants comprises of
- Unspent conditional grants (continued)
- Employee benefits Post‐retirement medical aid plan
- Employee benefits (continued)
- Employee benefits (continued) Other assumptions
- Provisions
- Financial instruments disclosure Categories of financial instruments
- Revenue
- Investment revenue Dividend revenue
- Government grants and subsidies Operating grants
- Government grants and subsidies (continued) Municipal systems improvement grant (MSIG)
- Government grants and subsidies (continued)
- Other income
- Rental of facilities Premises
- Rental of facilities (continued)
- Service charges
- Employee related costs
- Employee related costs (continued)
- Remuneration of councillors
- Remuneration of councillors (continued)
- Depreciation and impairment
- Finance costs
- Debt impairment
- Contracted services
- Grants and subsidies paid Other subsidies
- General expenses
- Fair value adjustments
- Loss on disposal of assets
- Comparative figures
- Comparative figures (continued) Statement of Financial Performance
- Prior period errors
- Prior period errors (continued) Statement of Financial Performance
- Cash generated from (used in) operations
- Commitments
- Contingencies
- Contingencies (continued)
- Contingencies (continued) Remuneration of councillors
- Related parties
- Change in estimate Property, plant and equipment
- Financial sustainability
- Events after the reporting date
- Unauthorised expenditure
- Fruitless and wasteful expenditure
- Irregular expenditure
- Risk management (continued) Liquidity risk
No restrictions have been imposed on the municipality regarding the availability of cash and cash equivalents for use. The following cases against the municipality have been identified as contingent liabilities as there is uncertainty about the outcome of the cases. The municipality's ability to continue as a going concern depends on a number of factors.
The council has overall responsibility for establishing and overseeing the municipal risk management framework. The municipality's liquidity risk is the result of available funds to cover future obligations.
Between 2 and 5 years
The municipality manages the liquidity risk through an ongoing evaluation of future commitments and credit facilities. The table below analyzes the municipality's financial liabilities in relevant maturity bands based on the remaining period at the reporting date until the contractual maturity date.
Over 5 years
- Risk management (continued) Interest rate risk
- Additional disclosure in terms of Municipal Finance Management Act Contributions to organised local government
- Additional disclosure in terms of Municipal Finance Management Act (continued) PAYE, UIF and SDL
- Additional disclosure in terms of Municipal Finance Management Act (continued) Councillors' arrear consumer accounts
- Additional disclosure in terms of Municipal Finance Management Act (continued)
- Budget differences
- Budget differences (continued)
- Deviation from supply chain management regulations
Interest received – The main reason for the deviation is a result of the higher consumer receivables. Facility Rentals – The main reason for the variance is a result of under-budgeting rental facilities. Contracted Services – The main reason for the variance is due to the increase in contract staff.
