Assets Dissposed

The policy is subjected to adjustments made by the National Treasurer].

1. To safeguard the fixed assets of the Municipality and to ensure the effective use of the existing resources.

2. To emphasize a culture of accountability regarding the Municipality’s fixed assets.

3. To ensure that effective control measures are disclosed to management and staff, by means of clear and comprehensive written documentation.

4. To establish a formal set of financial procedures that can be implemented to ensure the Municipality is in compliance with the General Accepted Municipal Accounting Procedures (GAMAP) and the Municipal Finance Management Act (MFMA).

5. To establish the criteria that must be met before capital expenditure can be capitalized as an asset in the Balance Sheet.

6. To classify the different categories of assets according to the asset’s nature, use and location.

7. To impose regulations to determine the value of assets that will be entered in the books and records of the Municipality.

8. To impose rules to establish the profitable life of the category of assets and calculation of depreciation per asset category.

9. To set criteria for the future revaluation of assets, procedures for the scrapping and sale of assets and procedures for the management and control of assets.

10. To establish procedures for the annual physical verification of assets.

11. To set procedures on the handling of assets under finance leases and on the inventory of assets.

DEFINITIONS

These definitions were taken from the General Accepted Municipal Accounting Practice guidelines regarding assets:

1. Fixed Assets

A fixed asset is an asset with a useful life of more than one year and is used in the business of the Municipality.

Characteristics of depreciatory fixed assets are the following:

1. It is estimated that the asset will be used for more than one financial period.

2. Has a limited useful life.

3. Is used in a process of delivering services.

“An Asset” is a resource controlled by the Municipality from which future economic benefits or potential services provision are expected to flow to the Municipality.

Property, Plant and equipment are tangible assets that:

1. Are kept by the Municipality for use in the production or supply of goods or services, for leasing to other organisations or administrative purposes.

2. Are expected to be used for more than one period.

Infrastructure Asset are assets that are part of a network of similar assets.

For example roads, water reticulation schemes and sewerage purification works.

Community Assets are assets that contribute to the community’s well being.

For example parks, libraries and fire stations.

Heritage Assets are significant cultural resources. For example works of art, manuscripts, historical buildings and statues.

Investment Properties are properties acquired for economic and capital gain, for example plant and equipment (e.g. Sewerage plant), motor vehicles, furniture and fittings.

2. Cost

Cost of a fixed asset includes the cost necessarily incurred to take it in the condition and to the location essential for its intended use (e.g. purchase price plus transport and installation).

VAT must be included in the cost of a fixed asset only if the tax cannot be claimed (e.g. VAT on passenger vehicles acquired).

3. Useful Life

Is either:

1. The period of time over which an asset is expected to be used by the Municipality.

2. The number of production units expected by the Municipality to be produced by the asset.

4. Residual Value

Is the net amount that the Municipality expects to get for an asset at the end of its useful life less the expected cost of the disposal.

5. Fair Value

Is the amount for which an asset could be exchanged between capable; willing parties in an arm’s length transaction.

6. Contributory Value

Is the amount at which an asset is included in the Balance Sheet less any accumulated depreciation.

7. Recoverable Amount

Is the amount that the Municipality expects to recover from future use of an asset including its residual value on disposal.

8. A Finance Lease

Is a lease which in effect transfers substantially all the risk and rewards associated with ownership of an asset from the lessor to the lessee.

9. An Operating lease

Is a lease other than a finance lease where substantially all the risks and rewards associated with ownership are not transferred to the lessee.

10. Development

Is the application of research findings or other knowledge to a plan or design for the production of new substantially improved materials, devices, products, processes or services before the commencement of commercial production or use. Development will only be constituted a capital expense if it can be linked to an asset.

11. Research

Is a primary and planned investigation undertaken with the purpose to acquire new scientific or technical knowledge and insight. Research will only constitute a capital expense when it can be linked to an asset.

12. Depreciation

Is the systematic allocation of the depreciatory amount of an asset in its useful life.

13. Depreciatory Amount

Is the cost of an asset or any other amount that substitutes the cost of an asset e.g. fair value of the asset that is reflected in the Financial Statements.

14. Municipality

Means a municipality as described in Section 2 of the Municipal System Act, 2000 (Act 32 of 2000).

15. Municipal Council

Refers to the members appointed in terms of Section 157 of the Constitution, 1996 (Act 1 of 1996) who make decisions regarding the execution of powers and functions of the municipality.

16. Municipal Manager

Means a person appointed in terms of Section 82(1)(a) or (b) of the Municipal Structures Act, 1998 (Act 117 of 1998) who is the chief of administration and the accounting officer of the municipality.

General Accepted Municipal Accounting Procedures (GAMAP)

Municipal Finance Management Act 2003 (MFMA)

Assets disposed of as at 14 May 2010