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Government Accounting: Accounting For Non-Profit Organizations
Government Accounting: Accounting For Non-Profit Organizations
Government Accounting: Accounting For Non-Profit Organizations
&
Accounting for non-profit organizations
Learning Objectives
1. State the initial and subsequent
measurements of items of PPE of
government entities.
2. Describe the following and state their
peculiar accounting requirements: Heritage
Assets, Infrastructure Assets, and
Reforestation Projects.
3. Account for Borrowing Costs by a
government entity.
GOVT ACCTG & ACCTG FOR NPOs by:
Z.B.Millan
Definition of Terms
• When used in this Manual, the following terms shall mean:
• Carrying Amount – is the amount at which an asset is recognized after deducting any
accumulated depreciation and accumulated impairment losses.
• Cost – is the amount of cash or cash equivalents paid and the fair value (FV) of the other
consideration given to acquire an asset at the time of its acquisition or construction.
• Depreciation – is the systematic allocation of the depreciable amount of an asset over its
useful life.
• Depreciable Amount – is the cost of an asset, or other amount substituted for cost, less its
residual value.
• Entity-specific Value – is the present value (PV) of the cash flows an entity expects to arise
from the continuing use of an asset and from its disposal at the end of its useful life or
expects to incur when settling a liability.
Definition of Terms – cont.
• Exchange Transactions – are transactions in which one entity receives assets or services,
or has liabilities extinguished, and directly gives approximately equal value (primarily in
the form of cash, goods, services, or use of assets) to another entity in exchange.
• Fair Value – is the amount for which an asset could be exchanged or a liability settled,
between knowledgeable, willing parties in an arm’s length transaction.
• Impairment Loss of a Non Cash-generating Asset – is the amount by which the carrying
amount of an asset exceeds its recoverable service amount.
• Non-exchange Transactions – are transaction where an entity either receives value from
another entity without directly giving approximately equal value in exchange, or gives
value to another entity without directly receiving approximately equal value in exchange.
k .Property, Plant and Equipment
…are:
a. tangible assets;
b. held for use in the production or supply of
goods, services or program outputs, for
rental to others, or for administrative
purposes, and not intended for resale in
the ordinary course of operations; and
c. expected to be used for more than one
reporting period
• 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 the period over which an asset is expected to be available for use by an entity; or
the number of production or similar units expected to be obtained from the asset by an entity.
• Value in use of a cash generating asset – the present value of the estimated future cash flows
expected to be derived from the continuing use of an asset and from its disposal at the end of
its useful life.
• Value in use of a non-cash generating asset – the present value of the asset’s remaining service
potential
Recognition
• An item of PPE is recognized if it meets the definition of a
PPE and the recognition criteria for assets, as well as the
capitalization threshold of ₱15,000.
• The threshold is applied on a per item basis, except as
follows:
– Individual items with values below the threshold but
work together as a group are recognized as PPE if the
total cost of the group is ₱15,000 or more
– Bulk acquisitions of small items of PPE are recognized
as PPE if their aggregate cost is ₱15,000 or more.
• Items below the capitalization threshold are recognized as
inventories (i.e., Semi-Expendable Property).
b. Replacement costs
– The carrying amount of the old part is
derecognized and charged as loss.
– The cost of the new part is capitalized.
– If the carrying amount of the old part
cannot be determined, the cost of the new
part is used as the basis.