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ACCOUNTING FOR
PUBLIC ASSETS

CopyrightRedeemer Krah -2014
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2014
What is Public Asset?
Public asset refers to resources
(economic, cultural or historical)
that are controlled by a
government or its entities as a
result of past event from which
future benefits (economic,
historical or cultural) are expected
to flow to the government.
In public sector assets have more
than economic benefit. For
example, heritage asset has
cultural and historical
significance.

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Categories of Public Assets
There are two categories of
public assets:
Financial assets
Non-financial assets

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What are Financial Assets?
They are include cash and bank
accounts plus securities and
investment accounts that can be
readily converted into cash.
They assets are more liquid and
non-physical resources.
They are derived from cash balance
or moneys paid out of the public
funds for a public purpose that
either requires repayment or
confers ownership right on the
government
Examples are: Cash and bank,
advances, loans, revenues
receivables, equity investment and
investment in other securities.
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What are Non-financial assets?
These are assets that have physical
substance and are long live assets
Examples include:
Inventories ( consumable and non
consumable stores)
Property plant and equipment (eg
furniture, equipment, motor vehicle,
premises)
Infrastructure ( roads, bridges, water
network systems, sewage systems etc)
Heritage assets
Natural assets (gold, diamond, crude
oil deposit)
Military assets

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Acquisition of public assets
Mode of acquiring public assets
include:
Outright cash purchase
Leasing/hire purchase
Construction (roads, etc)
Nationalization (confiscation of
private asset in accordance with
law)
Natural deposit
Heritage
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ACCOUNTING FOR
FINANCIAL ASSETS
Let examine each financial asset
into much detail.
The financial assets includes:
Cash/bank
Advances and loans
Investment in securities
In general, these financial assets
are represented on the statement
of financial position, regardless of
whether modified accrual or
accrual accounting is used.
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Accounting and
management of Cash
Cash is very important resource of
every entity; blood of business.
Cash management and control is
a critical concern in public
financial management.\
Cash management and control
involves
Cash forecast
Collection and disbursement
Custody (cash holdings)
Cash accounting and reconciliation.



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1. Cash forecast
Cash forecast (a. k. a cash budget)
is a very important tool in cash
management.
It shows projected cash collection
(cash inflows) ,cash disbursement
and the cash balance for a given
period, say one month from now.
MDAs and others are required to
prepare cash forecast to guide the
disbursement of allocations.

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Benefits of Cash Forecast
It helps in planning sources of cash
within the a planning period.
It helps in planning disbursement
of cash
It provides information about future
cash position (liquidity) of the entity
for decision making.
It serves as a control over cash
resources.

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2. Cash Collection and
Disbursement
The management and control
practices over collection and
disbursement include:
Prompt lodgment of collection into
appropriate bank account
Using bank accounts for holding
cash balances. Only absolute
minimum cash holding is allowed
Ensuring that collections and
disbursement are made by cheque,
bank transfer or direct payment to
the bank.

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3.Custody of cash holding
Custody of cash stock is essential
element of cash management
that ensures that theft and
misapplication of cash is avoid
As general rule, cash holdings
should be kept at absolute
minimum level.
The safest place to keep cash
stock is the bank therefore all
cash stock should be lodged into
the bank account.
Only authorized officers should
be allowed to hold authorized
cash balances.

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Authorized Cash Balance.
It is the amount of cash that may be
held by an officer during periods
when their offices are closed for
business.
It also includes uncrossed cheques
held by an officer
Any officer who finds that the cash
balance held by him exceeds the
authorized cash balance must
arrange to transfer the excess to a
reserve cash safe or a vault/strong
room.
Failure to comply constitute
financial indiscipline.
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Determinants of Authorized cash
balance include:
The needs of the public business
The availability of banking facilities
during working hours
The availability of safe
accommodation and seniority of
key-holders
General security of the building in
which the safe is located.


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4. Cash Accounting and
Reconciliation
Proper cash records are important
in cash management and control
The main cash records may
include analytical cash book,
petty cash book, imprest books
etc.
The cash records must be
reconciled periodically to ensure
control and deter fraud.
Bank reconciliation is the most
common control over cash
accounting.


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Accounting for Imprest
Imprest is a sum of cash advanced to
a public officer to meet payments
which are otherwise inconvenience
to disburse from public funds through
the normal payment procedures.
HODs requires approval from CAG to
operate an imprest.
Types of imprest (two):
Standing imprest- imprest held
throughout the financial year and
replenished as necessary by
presentation of paid payment vouchers
to the HOD.
Special Imprest- issued for making
particular payments which must be fully
retired by the date specified in the
approval to operate the imprest
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Accounting for Imprest (cont)
Sub-imprest- an imprest holder may
issue part of the imprest to a
subordinate officer for purposes of
the main imprest.
However, the imprest holder retains
the responsibility for the custody and
accounting for the sub-imprest
issued.
Retirement of imprest:
Imprest should be retired at the close of
a financial year and any unretired
imprest should treated as a personal
advance of the imprest holder.
Failure to retire imprest is financial
indiscipline, unless occasioned by death
or invalidity.
Unretired imprest should be reported to
CAG and AG
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Cash Reconciliation
Accounting records on cash requires
regularly reconciliation as means of
control and determent of fraud.
Most common approach is to
reconcile the bank statement
balances with the cash book records
(that is bank reconciliation
statement)
Purpose of Bank reconciliation:
Cash control mechanism
Detection of errors in either records
To detect and deter fraud
Tracking bank fees and charges

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Preparing Bank Reconciliation
Adjust the cash book with
informational differences such as
bank charges, cheque book charges,
dividend received, standing orders,
direct credits etc to arrive at
adjusted cash book balance
Identify all unpresented cheques
from the bank statement and add
the total to the adjusted cash
balance
Similar, look for unaccredited
cheques and deduct the total from
the adjusted cash book balance
Adjust for errors committed by the
bank.
There you are with the reconciled
balances.


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Accounting for Advances
Advances are moneys lent out
from the public funds on
condition of repayment within
one year.
Examples include:
Vehicle advances
Salary advances
Special advances
Rent/accommodation advances
Contract advance (mobilization)
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Provisions on Advances
MOF is the chief authority for the
issue and management of all
advances from the consolidated
fund.
MOF may delegate the responsible
for issue and managing advances to
HOD or chief finance officer not
below director.
There are two authorities for
payment of advances from the
consolidated fund:
General authority
Special authority.
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Establishing of Advance
Scheme
A scheme establishing an advance in
a department must be submitted to
MOF who presents to Parliament for
approval.
Typical content of an advance
scheme include:
Public purpose to be served by the
scheme
Estimated cost of the scheme
Proposed rules for operating the
scheme ( including terms and
conditions e.g recovery modalities)
Any interest charge on the advance (if
any)
Means of promulgating the rules
Maximum amount of advance allowed

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Responsibility of a head of
department
HOD, as advance administering
authority must ensure that:
Total advances granted to an officer
do not exceed the authorized
maximum
Advances are granted to only
persons entitle to receive them
Advances granted are duly
recovered in accordance with the
advance agreement.
Maintain proper records on
advances granted and history of
recovery.

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Conditions for granting of
an advance
An advance should not be
granted to a public officer if:
Any advance of the same class in
the name of the officer has not
been fully repaid
Any advance of any class in the
name of the officer is not being
regularly recovered
Any advance is outstanding against
the officer on account of losses,
uncleared cheques or unretired
impressed.
The normal installment of recovery
will let the totals deductions exceed
50% of the net monthly salary after
statutory deductions.
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Recovery of Advances
HOD or any officer to whom the
administering authority has been
delegated must ensure that
advances issued are duly
recovered in accordance with that
agreement.
Methods of recovery of advance
Deduction from payment due from
government to the borrower (eg
deduction from salaries, contract
payments etc)
Direct payment to government by
the borrower/proxy
Borrowers estate in case of death
Other feasible means.
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Other advances
Contract advances
It refers to amounts advanced to a
contractor prior to the performance
of the contract. It popularly known
as mobilization payment.
It is provided to facilitate the work
of Ghanaian contractors by
providing financial assistance to
these contractors.
Contract advance clause in the
contract agreement requires the
prior approval of the MOF.
Contract advances should be
recovered from contract payments
by the head of department.



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other Advances (cont)
Loss advance
Refers to advances resulting from
responsibility of a loss occasioned
by government
An officer responsible for a loss
should be charged with the liability
as an advance in his name subject
to subsequent investigations.
Thus an advance account is opened
in the name of the officer.
HOD is required to report losses in
excess of the forecast to the MOF.
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Accounting for loans
Loans are moneys lent out from
the public funds on condition of
repayment within periods
exceeding one year
Two types of loan granted from
the consolidated fund:
General loan are granted in
accordance with an approved loan
scheme
Specific loans are loans that
requires parliamentary approval as
matter of policy.
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General and specific
loans
General loans are approved,
administered and accounted for
according to the procedures for
granting loans under the financial
regulations and the schemes.
Specific loans is passed through
the MOF to Parliament for
approval.
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Procedures for granting
Specific Loans
The procedures involved are:
Proposal for the granting the specific
loans together with the terms and
conditions is submitted to the MOF
MOF makes recommendations and
present the proposals to parliament
for approval to negotiate the loan
Loan agreement is drawn up in
consultation of Attorney General
Loan agreement is submitted to
parliament through the MOF for
approval.
MOF endorses the final loan
agreement
Copies submitted to CAG and Attorney
General
Loan is disbursed, interest collected,
and recovery ensured by the
administering authority
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Accounting for Equity
Investment
Equity investment refers to moneys
paid for stock or shares in any
institution that confers ownership
right upon the GOG.
Procedures for making Investment
Proposal for purchase of stock or share
(include prospectus, designated
administering authority) is submitted
to the MOF for Approval
MOF evaluates the proposal and
approves it or otherwise,
CAG and the Attorney General are
informed about the pending purchase
and furnish them with the agreement.
Administering Authority arranges for
the payment for the stock/shares
through CAG

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Responsibilities of
Administering Authority
The department or body designated
as administering authority of the
investment has the following
responsibilities:
Act on behalf of the GoG in exercising
ownership rights
Protect public interest in the operation
of the company
Receive the annual accounts of the
company and advise GOG accordingly
Collect and keep the stock/share
certificate in safe custody
Ensure the due collection of dividend
and lodge same into the consolidated
fund.
Report to the MOF about the
investment


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Matters Reported to the
MOF on the Investment
The administering authority is
required to furnish MOF with the
following information
A forecast of dividend to included in
the years revenue estimate
Failure of the company to present
audited annual reports
Distribution of profits
Delay in declaration and payment of
dividend
Any shortfall in companies profit and
the reasons
Any information on improper
management practices that endangers
the investment
Any representation or directions made
to the company.

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Financial Loss
Financial loss refers to deprivation
of the public occasioned by misuse
or management of the financial
assets
Categories of financial loss include
Irrecoverable advances and loan
result from debtors default and
guarantee default
Irregular advances and loans as
result from expenditure wrongly
charged to advances or
advances/loans made without
recovery agreement
Reduction of financial assets
resulting from capital restructuring
or failure
Loses on sale of securities.

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Accounting for Non-
Financial Assets
Non-financial asset is collective
term for inventory (government
stores) and Capital assets.
Therefore, there are two aspects
of accounting for non-financial
assets :
Accounting for inventory
(government stores)
Accounting for capital assets.


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Accounting for Government
Stores (inventory)
Government stores are made up
of supplies of consumable and
non consumables which are
received, stored and available for
issue.
Features of government store are
They are physically visible
They are movable
They are available for use
Exclude scraps, obsolete and
unserviceable item.

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Accounting Disclosure
Treatment of government store
(inventories) depends on the
policy on basis of accounting.
Under cash basis and modified
accrual basis:
Inventories treated as expenditure
in the period in which they are
acquired, irrespective of whether
they are used up or not.
No inventory is reported on the
statement of financial position.
Under accrual basis,
closing inventory is valued using
recommended method and show
on the statement of financial
position as asset.


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Types of Government Stores
Joint stores
These are stores jointly acquired by
two or more departments for the
purpose of economy and
convenience.
Heads of departments acquiring
such stores shall be responsible for
their respective share of the
resources committed to the joint
stores.
Consumable store
Store that are used up in the day to
day operations of an entity.
Examples include stationary, fuel
and lubricants, refreshment items,
cleaning agents, etc

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Non-consumable stores
They are stores that remain in use
for more than one year. They long
live items.
Two Types of NCS:
Expendable store- they are used for a
period between 2-5 years. Examples
are computers, Tv set, shovels,
calculators, etc
Non-Expandable- they are used for
very long period, usually beyond 5
years. Examples include plant and
equipment, furniture and fittings,
premises, etc

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Allocated stores
They are stores procured from
already existing budget provision
and as such are chargeable to the
sub-head responsible for the
expenditure.
It may be directly procured or
received from unallocated stores
Unallocated stores
Stores acquired for general use.
The sub-head to be charged is not
known as the time of procurement.
The cost is charged to unallocated
stores in the budget estimate.

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Acquisition of Government
Stores
Governments stores can only be
procured from VAT registered
persons.
The procurement of stores should
be in accordance with the Public
Procurement Act 2003 (Act 663)
Under the procurement law, there
are five approved methods of
procuring stores:
Competitive tendering
(Domestic/international)
Restricted tendering
Two-stage tendering
Single sourcing
Quotation from at least three suppliers
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Responsibilities of Heads
of Department for stores
HODs are responsible for the
general management and
accountability for government
stores.
HOD may delegate store functions
to an officer, called store keeper
However, HODs remain
accountable for stores in his
department from the time of
purchase to the time they are no
further in use or value to
government.
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Discharge of
Accountability for stores
HODs are release of their
accountability for stores when:
Stores are consumed in the normal
course of public business and
records attest to that.
Stores are worn out in the normal
course of public business and
deletion is approved by MOF
Stores are lost, stolen, damaged or
rendered unserviceable other than
wear and tear and deletion is
approved by the MOF.
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Trading in government
stores
Any form of transaction in stores
resulting into transfer ownership of
government stores is prohibited
unless authorized by an
enactment.
Transactions prohibited included
Transfer to a department/person
Lease
Loan
sale
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Duties/responsibilities of
public officer in Charge of
stores
Public officer in charge of stores has
the following responsibilities
To exercise general control over all
activities in Stores Department
To ensure safe keeping both as to
quality and quantity of materials.
To maintain proper store records such
store ledgers, bin cards etc
To initiate purchase requisitions for the
replacement of stock of all regular stores
items whenever the stock level of any
item of store approaches the minimum
limit fixed in respect thereof.
To initiate action for stoppage of further
purchasing when the stock level
approaches the maximum limit.


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Responsibilities (cont)
To check and receive purchased
materials forwarded by the
receiving department and to
arrange for the storage in
appropriate places.
To reserve a particular material for a
specific job when so required.
To issue materials only in required
quantities against authorized
requisition notes/material lists.
To check the book balances, with
the actual physical stock at frequent
intervals by way of internal control
over wrong issues, pilferage, etc.
To restrict access by an
unauthorized persons
Report all losses, damages and
shortages to the HOD

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Disposal of Stores
Procedures for disposal of stores:
Head of entity convenes a board of
survey made of representative of
affected department
BOS conducts an assessment of the
store and makes a technical report
recommending the appropriate
method for disposal
HOD receives the BOS report and
gives approval
Stores are disposed of accordingly.
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Disposal of stores
Methods of disposal of store
include:
Transfer to other government
department or institutions with or
without financial adjustment
Sale by public tender to the highest
bidder
Sale by public auction with reserved
price
Destruction, dumping or burying
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ACCOUNTING FOR
CAPITAL ASSETS
As indicated, capital assets are
those assets used in operation and
have long live.
The term embraces both tangible
assets (land, buildings, building
improvements, vehicles,
machinery, equipment, works of
art, historical treasures,
infrastructure) and intangible
assets (easements, software,
water rights)

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Capital Assets (cont0
Tangible assets includes:
PPEs*
Infrastructure*
Heritage Assets*
Natural deposits
Military assets

* Will be discussed here
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Accounting for PPEs
PPE is a grouping of capital assets
of similar nature and use in an
entitys operation.
The example separate classes :
Land
Land and building
Machinery
Ships
Aircraft
Motor vehicles
Furniture and fixtures
Office equipment (computers etc)

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Asset Register
It is the financial duty of the HOD to
compile and maintain assets register of
the department as determined by the
CAG.
A fixed asset register is used to ensure
the correct information regarding fixed
asset holdings is recorded and entered
into the accounting system.
The asset register is a cornerstone of an
asset management framework for
entities that it keeps asset information
as well as an historical record of both
financial and non- financial information
over each asset's life-cycle.
It is also used as a check for the physical
existence of fixed assets within the
business, usually at the end of a
financial year.

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Benefits of Assets Register
AR information helps in
asset planning;
assisting in meeting accounting
standards and legislative compliance;
monitoring performance; and
accountability.
Determining likely current condition
of assets;
Determining when assets need to be
replaced;
Determine asset locations and asset
custodians for stock takes;
Determine level and frequency of
asset maintenance programs; and
Determine life-cycle costs by asset,
program and business activity.

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Asset Register (cont)
Information contained in AR include
Description of the asset
Unique code number or reference for
the asset
Date of acquisition
Original cost
Depreciation charged on an annual
basis
Accumulated depreciation charge
Net book value
Date of disposal
Profit or loss on disposal
How the capital expenditure was
financed -hire purchase, loan etc

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Accounting for PPEs
IPSAS 17
Under Cash/ Modified Accrual:
Under these bases, PPEs are
classified as Investment cost and
written off completely in the year of
purchase or construction.
Thus PPEs are not shown on the
statement of financial position
(therefore, no depreciation
charged)
Under Accrual Basis (IPSAS)
Asset is depreciated over its useful
year and charge to Expenditure.
The net book value of the asset is
shown as asset on the statement of
financial position.
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Recognition of PPEs as Asset
under accrual basis.
The cost of PPE is recognized as
an asset if and only if:
The cost of the item can be
measured reliably
It is probable that future economic
benefits associated with the item
will flow to the entity.
PPEs in general do not suffer
recognition problem since the
two critical recognition conditions
are usually.
So its easy for government to
recognize PPE as an asset under
accrual accounting.

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Depreciation of PPEs
Depreciation and amortization are the
systematic allocation of the depreciable
amount of an asset over its useful life.
In the case of an intangible asset, the
term amortization is generally used
instead of depreciation. Both terms
have the same meaning.
Under accrual accounting all PPEs
requires to be depreciated using
appropriate depreciation method
Depreciation charged should be treated
as an expenditure described as
consumption of fixed capital
There is a need to prepare PPE schedule
showing cost, additions, disposals,
accumulated depreciation, depreciation
charge and the net book values

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Impairment of PPEs
IPSAS 21
Impairment refers to a loss in
the future economic benefits or
service potential of an asset, over
and above the systematic
recognition of the loss of the
assets future economic benefits
or service potential through
depreciation.
An asset is impaired when its
carrying amount exceeds its
recoverable amount.
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Impairment of PPEs
(Cont)
The issue of impairment is only
relevant when government
adopts the accrual basis of
reporting.
IPSAS 21 requires an entity to
assess at each reporting date
whether there is any indication
that an asset may be impaired.
In assessing whether there is an
indication of impairment the
Standard requires an entity to
consider, as a minimum, a
number of specified indications
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Impairment (Cont)
Indicators of impairment are
group into two external sources
and internal sources
External sources (indicators)
Cessation, or near cessation, of the
demand or need for services
provided by the asset
Significant changes during the
period in the technological, market,
economic, or legal environment in
which the entity operates.
Increase in market interest rate
which negatively affect the value in
use of the asset


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Impairment (cont)
Internal sources :
obsolescence or physical damage of
an asset
the asset becoming idle, plans to
discontinue or restructure the
operation to which an asset
belongs, plans to dispose of an
asset before the previously
expected date, and reassessing the
useful life of an asset
A decision to halt the construction
of the asset before it is complete or
in a usable condition
economic performance of an asset
is, or will be, worse than expected.

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Impairment (cont)
Approaches of determining
impairment:
Depreciated replacement cost
approach
Restoration cost approach
Service unit approach
Treatment of impairment loss in
financial reporting:
An impairment loss shall be recognized
immediately in surplus or deficit.
The entire amount of the impairment
can be treated as a direct increase to
accumulated depreciation based on
the notion that the impairment is
tantamount to a reduction of the
capital assets useful life
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Accounting for
Infrastructure assets
Infrastructure assets are long-
lived capital assets that normally
are stationary in nature and
normally can be preserved for a
significantly greater number of
years than most capital assets.
Examples of infrastructure assets
include
roads,
bridges, tunnels,
drainage systems,
water and sewer systems,
dams, and
lighting systems etc
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Infrastructure Assets
Infrastructure items normally are
reported as networks or
subsystems, rather than as
individual assets in their own
right.
Note that:
land associated with an
infrastructure asset must be
reported separately as land.
buildings associated with
infrastructure should be reported as
buildings, unless they are purely
ancillary to an infrastructure
network or subsystem (rest area
facilities for a state highway)
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Infrastructure (cont)
Modified Approach in lieu of
Depreciation.
Most infrastructure asset have
indefinite useful life which renders
them depreciable.
In such cases, modified approach to
depreciation is adopted
Under this approach governments
are required to capitalize their
infrastructure assets, but they are
not required to report depreciation
expense on those assets, provided
certain conditions are met that
demonstrate the governments
commitment to maintaining
infrastructure at a specified
condition level.
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Infrastructure (cont)
Modified approach
Therefore government treats the
cost of regular improvement in the
infrastructure as an expenditure in
the period in which it as carried out.
If government fails to meet the
conditions necessary for adopting
the modified approach, then the
infrastructure shoud be capitalized
and depreciated.
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Accounting for Heritage
assets
Heritage assets are assets held by
government for their cultural,
historical and environmental
significance.
These are assets that government
intends to preserve indefinitely
because of their unique cultural,
historical and environmental
attributes.
These are not held because of
future economic benefits.
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Heritage Assets (cont)
Examples include:
Monuments
Art and museum collections
Wilderness preservation
Battle fields
Historical buildings
Archaeological sits
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Heritage Assets (cont)
Characteristics of Heritage assets;
Their value is difficult ( or
impossible) to be expressed in
market prices.
There exist legal or statutory
restriction of their disposal by sales
They are often irreplaceable
Their value increases over time
even if their physical condition
deteriorates
It is difficult to estimate their useful
lives.
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Heritage Assets (cont)
Measurement and recognition
In general, it is difficult to measure
the cost of heritage assets reliably
and that most do not have future
economic benefit that will flow to
government.
Therefore, heritage asset are usually
not recognized in the financial
reports because of their inability to
meet the critical conditions for
recognition assets.
However, Heritage asset that meets
the measurement criteria should be
capitalized and depreciated in the
usual manner.
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Valuation Of Assets
It refers to the process of placing
value on assets for the purpose of
recognition.
Methods of asset valuation in the
public sector include
Historical cost
Market values/prices
Fair values
Net realizable value
Replacement cost
Nominal value
Value in use (present value)

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