2016-06-29 Special Meeting Agenda

COUNCIL POLICY – NON CURRENT ASSET ACCOUNTING POLICY


9      Asset Expenditure

Items that are less than the recognition threshold and do not form part of a complex asset or network
are treated as an operating expense.

The following initial costs are expensed not capitalised:

    General administration and other indirect overhead costs;
    Training costs; and
    Financing Costs - Interest charged on borrowings to fund asset purchase.

Expenditure after Initial Purchase

Costs incurred subsequent to the initial purchase of the asset will only be capitalised when it
improves the condition of the asset beyond its original intended use or service capacity. This can
occur through:

    Extending the service potential provided by the asset; or
    Extending the useful life of the asset.

Repairs and maintenance are to be expensed as incurred, this includes expenditure incurred to
restore an asset to its predetermined condition and/or its required service level. Examples include:

    Work conducted to preserve the asset’s condition and prevent deterioration and failure, i.e.
     regular servicing of vehicles.
    Restoration of an asset to its original state using the same / similar material.
    Replacement of minor asset components.

Spare Parts

Minor items of spare parts are charged to the item of plant and expensed. Major spare parts and
stand-by equipment are recognised as plant and equipment when:

    The expenditure exceeds the asset recognition threshold; and
    The benefit from the item will be for more than one financial year.

10     Asset Disposal /Write-off

An asset is written-off when destroyed, scrapped, lost or stolen and recorded in the Statement of
Comprehensive Income. When consideration is received in the form of proceeds or trade-in, the
asset is to be disposed in the financial asset register and a gain or loss on sale recognised in the
Statement of Comprehensive Income.

If the asset is to be sold, the provisions of AASB5 Non-Current Assets Held for Sale and Discontinued
Operations may apply.

The cost of demolition or removal of the old asset can be capitalised as site preparation costs of the
new asset only if there is:

    No provision for restoration of the old asset; and
    Prior to demolition a formal Council commitment to demolish and build on the site of the old
     asset, e.g. Council meeting minute.

If an asset is demolished or removed and there is no formal commitment to rebuild on the site prior
to demolition or removal, the costs are to be expensed.



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