i) Land and Building

Accounting policy relating to Land and Building covers cost measurement and recognitions and depreciation policies.

Cost Measurement and Recognition

• Initial recognition of land and building is at historical cost. Subsequent recognition is on carrying amount or revaluation.
• All acquisitions of land and building, as well as improvements, will be capitalized when the criteria of recognition in accordance with the IPSAS are met.
• Land and building should be derecognized when potential benefits cannot be expected to flow to the entity.

Depreciation/impairment

• The depreciable/amortization amount of the building be allocated over its useful life in accordance with the depreciation method.
• It is assumed that the residual value for all assets will be zero.
• The calculation of depreciation/amortization will stop where an asset is disposed of, held for sale, or is fully depreciated.
• Impairment of the building should be written off.
• The calculations of depreciation will commence in the year the asset is put to use for its intended purpose.
• Impairment loss shall be recognized immediately in the Covered Entity’s income statement unless the asset is carried at a revalued amount.
• Where the impairment loss relates to a revalued asset, the impairment is first offset against its revaluation reserve balance. Any remaining impairment loss shall be recognized immediately in the Covered Entity’s Income Statement.
• After recognizing the impairment loss, the depreciation charge shall be adjusted by taking into account the revised carrying amount, residual value, and remaining useful life.

ii) Inventory

Accounting policy for inventory is as follows.

Measurement

• Inventory for sale shall be recognized at the lower of cost and net realizable value.
• Inventory not for sale shall be recognized at the lower of cost and current replacement cost.
• Inventory acquired through non-exchange transactions should be measured at fair value at the date of acquisition.

Recognition

• Inventory sold, exchanged, or distributed shall be recognized as an expense at the carrying amount in the period in which the revenue relates, exchange, or distribution is made.
• Write-offs in inventory should be recognized as an expense in the period it relates.