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Botswana Institute of Chartered Accountants Annual Report Integrating skills and best practice into the next generation for Botswana’s Transformation Year 2019
Accounting Policies (continued) for the year ended 31 December 2019
Credit risk Details of credit risk are included in the trade and other receivables note (note 20) and the financial instruments and risk management note (note 28). Derecognition Refer to the derecognition section of the accounting policy for the policies and processes related to derecognition. Trade and other payables Classification Trade and other payables (note 25), excluding VAT and amounts received in advance, are classified as financial liabilities subsequently measured at amortised cost. Recognition and measurement They are recognised when the Institute becomes a party to the contractual provisions, and are measured, at initial recognition, at fair value plus transaction costs, if any. They are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other
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premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability. Trade and other payables expose the Institute to liquidity risk and possibly to interest rate risk. Refer to note 28 for details of risk exposure and management thereof. Trade and other payables denominated in foreign currencies payables are When trade denominated in a foreign currency, the carrying amount of the payables are determined in the foreign currency. The carrying amount is then translated to the Pula equivalent using the spot rate at the end of each reporting period. Any resulting foreign exchange gains or losses are recognised in profit or loss in the other operating gains. Details of foreign currency risk exposure and the management thereof are provided in the financial instruments and risk management note (note 28). Derecognition Refer to the “derecognition” section of the accounting policy for the policies and processes related to derecognition.
Derecognition
Reclassification
Financial assets The Institute derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Institute neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset,the Institute recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Institute retains substantially all the risks and rewards of ownership of a transferred financial asset, the Institute continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Financial assets The Institute only reclassifies affected financial assets if there is a change in the business model for managing financial assets. If a reclassification is necessary, it is applied prospectively from the reclassification date. Any previously stated gains, losses or interest are not restated.
Financial liabilities The Institute derecognises financial liabilities when, and only when, the Institute obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
The reclassification date is the beginning of the first reporting period following the change in business model which necessitates a reclassification. There were no financial assets reclassified during the year.
Item
1.7
Financial liabilities Financial liabilities are not reclassified.
associated with the item will flow to the Institute and the cost of the item can be measured reliably.
Property and equipment
All other repairs and maintenance expenditures are charged to the statement of profit or loss and other comprehensive income during the financial period in which they are incurred.
Leasehold land and buildings held for use for administrative purposes or self occupied are stated in the statement of financial position at cost, less accumulated depreciation and accumulated impairment losses. Equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
Depreciation Method
Gains or losses arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss. The useful lives of items of property and equipment have been assessed as follows:
Average Useful Life
Leasehold land Straight line
The shorter of 50 years or remaining lease period
Straight line Leasehold building
The shorter of 50 years or remaining lease period
Furniture and fixtures
Straight line
4 years
Motor vehicles
Straight line
4 years
Office equipment
Straight line
4 years
Computer equipment
Straight line
4 years
Leasehold improvements
Straight line
5 years
Cash and cash equivalents Cash and cash equivalents are stated at carrying amount which is deemed to be fair value. BICA Annual Report 2019
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