HSRC Integrated Annual Report 2018/2019

96 / HSRC INTEGRATED ANNUAL REPORT 2018/19 PART E: ANNUAL FINANCIAL STATEMENTS ACCOUNTING POLICIES for the period ended 31 March 2019 (Continued) Revenue from non-exchange transactions is generally recognised to the extent that the related receipt or receivable qualifies for recognition as an asset and there is no liability to repay the amount. The following is classified as revenue from non-exchange transactions. 1.5.2.1 Parliamentary Grants Revenue from parliamentary grants is measured at the amount of theMediumTermExpenditure Framework (MTEF) allocation received by the entity, excluding Valued Added Tax (VAT). The grant received or receivable is recognised when the resources that have been transferred meet the criteria for recognition as revenue and there is not a corresponding liability in respect of related conditions. Where such conditions associated with the grant have not been met, a liability is recognised. 1.5.2.2 Other Non-exchange Revenues Resulting in Recognition of Assets Assets and revenue arising from transfer transactions are recognised in the period in which the transfer arrangement becomes binding. Where a transfer is subject to conditions that, if unfulfilled, require the return of the transferred resources, the entity recognises a liability until the condition is fulfilled. 1.6 Taxes The HSRC is exempt from income tax in terms of Section 10(1)(a) of the Income Tax Act (Act No. 58 of 1962). 1.7 Property, Plant and Equipment Initial Recognition of Cost Property, plant and equipment (other than land and buildings and artwork) are measured at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. The cost of an item of property, plant and equipment is recognised as an asset when: • It is probable that future economic benefits associated with the item will flow to the entity; and • The cost of the item can be measured reliably. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. All other repair and maintenance costs are recognised in the statement of financial performance as incurred. Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Valuations of our HSRC Pretoria property are performed every three years based on the income capitalisation method. The market value is determined from the ability of the property to generate rental income taking into account the related expenses, rental income which is capitalised at a market-related rate and the risk, age and condition of the property with existing buildings. Any surpluses that occur due to the revaluation of land and buildings are allocated to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised. A revaluation deficit is recognised in the statement of financial performance, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve. Artwork is measured at fair value less accumulated depreciation and impairment losses recognised after the date of the revaluation. Valuations of artwork are performed every five years based on the current market value method. The market value factored into each assessment is the artist, the medium used, the size in relation to the overall aesthetic appeal (to themarket) of each artwork. Any surpluses that occur due to the revaluation of artwork is allocated to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the statement of financial performance. A revaluation deficit is recognised in the statement of financial performance, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve. The revaluation surplus included in net assets in respect of an item of property, plant and equipment is transferred directly to accumulated surpluses or deficits when the asset is derecognised. This involves transferring the whole of the surplus when an asset is retired or disposed of. Transfers from revaluation surplus to accumulated surpluses or deficits are not made through surplus or deficit. 1.7.1 Depreciation of Assets Depreciation is applied on a straight-line basis, with the exception of mobile clinics that are depreciated based on mileage travelled. Specific treatment of depreciation on the respective assets is as follows: 1.7.1.1 Freehold Land Land has an unlimited useful life and therefore is not depreciated but stated at fair value. 1.7.1.2 Freehold Buildings The HSRC identified the following major components of buildings: • Lifts • Telephone system • Fixtures • Buildings