2016-06-29 Special Meeting Agenda

COUNCIL POLICY – NON CURRENT ASSET ACCOUNTING POLICY


Accounting for Revaluation

When an asset is revalued, the accumulated depreciation is restated proportionately with the change
in the gross carrying amount of the asset and any change in the estimate of the remaining useful
life.

Changes in the carrying amount of an asset due to a revaluation are accounted for in accordance with
AASB 116.

If the carrying amount of a class of assets is increased as a result of a revaluation, the net revaluation
increase shall be recognised in other comprehensive income and accumulated in equity under the
heading of revaluation surplus. However, the net revaluation increase shall be recognised in profit or
loss to the extent that it reverses a net revaluation decrease of the same class of assets previously
recognised in profit or loss.

If the carrying amount of a class of assets is decreased as a result of a revaluation, the net
revaluation decrease shall be recognised in profit or loss. However, the net revaluation decrease
shall be recognised in other comprehensive income to the extent of any credit balance existing in
any revaluation surplus in respect of that same class of asset. The net revaluation decrease
recognised in other comprehensive income reduces the amount accumulated in equity under the
heading of revaluation surplus.

When an asset is disposed of, the amount reported in the asset revaluation surplus in respect of that
asset is retained in the asset revaluation surplus and not transferred to retained surplus.

16    Asset Impairment

All non-current assets including intangible assets are to be reviewed on an annual basis for indicators
of impairment by asset custodians as detailed in the asset responsibility matrix.

Where the fair value of the asset exceeds the recoverable amount it is recorded as an impairment
loss. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value
in use. Where assets have been revalued at fair value there should not be any impairment loss as
the recoverable amount should be equal to the fair value.

An impairment loss is recognised as an expense in the Statement of Comprehensive Income, except
where the asset is at fair value. When there is an impairment loss on a revalued asset the impairment
loss is offset against the asset revaluation surplus of the relevant asset class to the extent available.
Any remaining loss is then expensed in the Statement of Comprehensive Income.

17    Materiality

Materiality plays an essential part in the decision making process and preparation of the financial
statements. This is because information contained or omitted from the financial statements can
impair its usefulness to users.

Materiality is a concept which requires professional judgment. An omission or misstatement of an
item is material if, individually or collectively, it would influence the economic decisions of users of
the financial statements or the accountability of management or governing body.

In assessing materiality the size and nature of the omission or misstatement are usually evaluated
together. The surrounding circumstances should also be considered.




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