2015-10-14 Audit & Risk Committee Meeting - Draft Annual Financial Statements

NOOSA SHIRE COUNCIL

Notes to the Financial Statements
For the year ended 30 June 2015

  1. 13       Property, plant and equipment
              Each class of property, plant and equipment is carried at cost or fair value less, where applicable,
              any accumulated depreciation and accumulated impairment losses. Items of property, plant and
              equipment with a total value of less than $5,000, except for land and network assets (which have
              a recognition threshold of $1), are treated as an expense in the year of acquisition. All other items
              of property, plant and equipment are capitalised.


              The classes of property plant and equipment recognised by the council are reported in note 13.


  1. 13 (a)       Acquisition of assets
              Acquisitions of assets are initially recorded at cost. Cost is determined as the fair value of the
              assets given as consideration plus costs incidental to the acquisition, including freight in,
              architect's fees and engineering design fees and all other establishment costs.

              Property, plant and equipment received in the form of contributions, are recognised as assets and
              revenues at fair value by Council valuation where that value exceeds the recognition thresholds
              for the respective asset class. Fair value is the price that would be received to sell the asset in an
              orderly transaction between market participants at the measurement date.


  1. 13 (b)       Capital and operating expenditure
              Direct labour and materials and an appropriate proportion of overheads incurred in the acquisition
              or construction of assets are treated as capital expenditure. Assets under construction are not
              depreciated until they are completed and commissioned, at which time they are reclassified from
              work in progress to the appropriate property, plant and equipment class.

              Routine operating maintenance, repair costs and minor renewals to maintain the operational
              capacity and useful life of the non-current asset is expensed as incurred, while expenditure that
              relates to replacement of a major component of an asset to maintain its service potential is
              capitalised.

  1. 13 (c)        Valuation
              Land, buildings, infrastructure and heritage and cultural assets are measured on the revaluation
              basis, at fair value, in accordance with AASB116 Property, Plant and Equipment and AASB 13
              Fair Value Measurement . Fair value means the price that would be received to sell an asset or
              paid to transfer a liability in an orderly transaction between market participants at the
              measurement date.


              Non-current physical assets measured at fair value are revalued, where required, so that the
              carrying amount of each class of asset does not materially differ from its fair value at the reporting
              date. This will be achieved by engaging independent, professionally qualified valuers to
              determine the fair value for each class of property, plant and equipment assets at least once
              every 3 years. This process involves the valuer physically sighting a representative sample of
              Council assets across all asset classes and making their own assessments of the condition of the
              assets at the date of inspection.


              Council uses internal engineers to assess the condition and cost assumptions associated with all
              infrastructure assets, the results of which are considered in combination with the relevant indices
              independently published for the Sunshine Coast Region. Together these are used to form the
              basis of a management valuation for infrastructure asset classes in each of the intervening years.
              With respect to the valuation of the land and improvements, and buildings classes in the
              intervening years, management engage independent, professionally qualified valuers to perform
              a "desktop" valuation. A desktop valuation involves management providing updated information
              to the valuer regarding additions, deletions and changes in assumptions such as useful life,
              residual value and condition rating. The valuer then determines suitable indices which are applied
              to each of these asset classes.


              On revaluation, accumulated depreciation is restated proportionately with the change in the
              carrying amount of the asset and any change in the estimate of remaining useful life.




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