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
 14 Fair value measurements continued

     Accumulated Depreciation
     In determining the level of accumulated depreciation, bridges are disaggregated into significant components
     which exhibit different useful lives. Useful lives are an estimate of the total service capacity in years for that
     type of asset.

     Stormwater
     A comprehensive valuation of stormwater infrastructure was undertaken by independent valuers Aurecon
     Australia Pty Ltd effective 30 June 2015.

     As there is a significant level of professional judgement used in determining the valuation due to the level
     of unobservable data, the valuation of drainage assets has been determined as Level 3.

     The fair value unit rates were determined using the prevailing market costs for supply and installation
     of similar assets or their modern equivalent. The methodology for calculation of unit rates from first
     principles consists of breaking down each asset into its cost components such as demolition,
     reinstatement, excavation, construction, delivery and installation. The models used to determine the
     unit rates included internal selection of variables for asset size, depth, location and soil type.
     .
     Accumulated Depreciation
     In determining the level of accumulated depreciation, stormwater assets are disaggregated into significant
     components which exhibit different useful lives. Useful lives are an estimate of the total service capacity
     in years for that type of asset.

     Sensitivity Analysis - Roads, Bridge and Stormwater Network
     As detailed above Council's road, bridge and stormwater network has been valued using written down current
     replacement cost. This method utilises a number of inputs that require judgement and are therefore classed as
     unobservable. While these judgements are made with the greatest care, and based upon years of experience,
     different judgements could result in a different valuation. The table below summarises the effect that changes
     in the most significant unobservable inputs would have on the valuation:


     Significant                                Relationship of unobservable
                                  Range of inputs
     unobservable input                         inputs to fair value
     Number of Labour hours   5-100hrs/linear   The higher the labour hours, the
                              metre or sqm      higher the fair value
     Standard material usage Varies depending The higher the usage quantities,
     quantities               upon the type of  the higher the fair value
                              material
     Condition rating (useful As specified      The higher the condition rating,
     life)                    above – 0H/0M     the lower the fair value.
                              (lowest) to 6H/6M
                              (highest)
     Remaining useful life       5-100 years          The longer the remaining useful
                                                      life, the higher the fair value.




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