Annual Report 2019-20

Noosa Shire Council

Notes to the Financial Statements
for the year ended 30 June 2020

Note 15. Fair Value Measurement                           (continued)


Infrastructure, Property, Plant and Equipment
Land (Level 2 and 3)
The fair value of land was last comprehensively valued at 31 March 2018 by independent valuers AssetVal Pty Ltd.

Fair values have been derived based on a combination of market approach and direct comparison by analysing land
sales occurring over the past year within the Noosa Shire Council area.

Where there was an active and liquid market as evidenced by sales transactions of similar property types, a market
approach by way of direct comparison or income methods can be utilised, and are accepted valuation methodologies
under AASB 13. If a market approach is adopted, the valuation is deemed to be a Level 2 input.

The direct comparison method which is considered a Level 2 input on the fair value hierarchy, involves the analysis of
sales evidence and comparisons with the subject land taking into account matters such as area, location and other
general site characteristics. Direct Comparison approach was utilised in the assessment for all Council land assets,
however, the fair value measurement has been either a Level 2 or 3, depending on the assumptions as to:
  - Whether the land is subject to restrictions as to use and/or sale;
  - Whether there is no active market.

Land that is utilised for footpath or access restriction purposes, land that is a volumetric title, or due to its general
characteristics land that has no observable active market have been assessed as a Level 3.

Council applied an index rate to the value of land assets for the period to 31 March 2019. Index for the period from
1 April 2019 to 30 June 2020 shows no significant material changes and therfore the values are considered still at fair
value. As a result, no indexation has been applied to this class for 2019/20.

Buildings (Level 3)
The fair value of Buildings were comprehensively valued at 30 June 2020 by independent registered valuers Australis
Asset Advisory Group. The results of the valuation are a $3.3 million decrement to the fair value of building assets.

For the majority of Council's buildings, there is no active market due to the specialised nature of the assets and
the services they provide. Due to the predominately specialised nature of local government buildings, the valuations
have been undertaken using a cost approach. This is deemed to be a Level 3 input.

Under this approach the cost to replace the asset is calculated and then adjusted to take account of accumulated
depreciation. The valuer disaggregated the building into different components and for each component determined a
value based on the interrelationship between a range of factors. These include asset condition, legal and
commercial obsolescence and the determination of key depreciation related assumptions such as pattern of
consumption and future economic benefit.

Inputs to the valuation include the design and construction, average cost of construction, condition and consumption
score for each component. Where these are supported by observable evidence obtained via inspection and market
evidence they have been classified as a Level 2 inputs. The unobservable inputs (such as estimates pattern of
consumption and (based on the asset consumption score) its relationship to the assessed level of remaining service
potential of the depreciable amount, required extensive professional judgement and impacted significantly on the final
determination of fair value. As these inputs are significant to the valuation the overall valuation has been classified
as Level 3.

The consumption rating scales were based initially on the past experience of the valuation firm and industry guides
and were then updated to take into account the experience and understanding of Noosa Shire Council's own
engineers, asset management and finance staff. The results of the valuation were further evaluated by
confirmation against Noosa Shire Council's own understanding of the assets and the level of remaining service
potential.




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