2014-01-13 Deamalgamation Report Attachment

Attachment 3:   Discussion Paper – Balance Sheet Allocation Methodology




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Attachment 3:       Discussion Paper — Balance Sheet Allocation Methodology
                                                                                         21 October 2013

 Sunshine Coast Council

 De-amalgamation Transfer

 Position Paper - Balance Sheet Allocation Methodology

 Background

 Sections 38 and 39 of the Local Government (De-amalgamation Implementation) Regulation 2013 and Section
 6.1 of the de-amalgamation transfer methodology requires the transfer committee to decide on the
 separation of assets and liabilities between the continuing (i.e. SCC) Council and new (i.e.NSC) Council to
 determine the opening balance sheet position for both entities as at 31 December 2013.

 The de-amalgamation transfer methodology and its appendix (refer to Appendix A of this document) provides
 a proposed balance sheet allocation methodology that may be used to determine the separation of balance
 sheet items. The de-amalgamation transfer methodology is based largely on the Queensland Treasury
 Corporation (QTC) methodology (refer to Appendix B of this document) used to determine the 1 July 2012
 opening balance sheet position that was utilised as part of the Boundary Commissioner's assessment.

 It is a requirement that the sum of the balance sheets for NSC and SCC must equal the balance sheet used for
 statutory reporting purposes by the existing Council as at 30 June 2013 and 31 December 2013. As such it is a
 requirement that the methodology to apportion asset and liabilities be considered and agreed to as soon as
 possible for planning requirements (although it is acknowledged that actual figures will most likely not be
 known until late January 2014 and interim arrangements will need to be considered).

 Proposed Balance Sheet Methodology

 The de-amalgamation transfer methodology provides a separation methodology for each traditional balance
 sheet line item (i.e. receivables, payables, cash etc.) In most cases the undertaking of the asset and liability
 separation will be able to be performed on a locational basis (i.e. physical assets, receivables, inventories,
 employee provisions) utilising specific identifiers (i.e. physical location, employees), consistent with the
 transfer methodology. Where identification of ownership by physical location becomes more difficult (i.e.
 cash, debt, intangibles), a methodology has been proposed that is principally based on the suggested method
 by QTC.

 The following table proposes the methodology to apply to each balance sheet item to determine the split of
 assets and liabilities as at 31 December 2013.

 Balance Sheet Item        Proposed Allocation Method
 Cash and cash equivalents | Cash balance as at 31 December 2013 to be allocated per the QTC methodology and
                          adjusted for additional items which may include:
                          Adjustment for the transfer of rates debtors

                          Adjustment for restricted cash and levies
                          Adjustment for other balance sheet items not being transferred to NSC
                          FAG Grant received in advance

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