2026/27 FINANCIAL POLICIES · Attachment 12 - Non-Current Asset Accounting Policy

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Attachment 12 – Non-Current Asset Accounting Policy


Objective

The objectives of this policy are to:
•    Ensure compliance with Australian Accounting Standards, the Local Government Act 2009 and
     the Local Government Regulation 2012
•    Ensure all processes undertaken in relation to the content of this policy are appropriately
     documented and defensible to external audit
•    Ensure all asset movements are recorded in the financial asset register on a timely basis
•    Stipulate how an asset is accounted for on acquisition (including construction and contribution)
     at initial recognition stage for accounting and reporting purposes
•    Prescribe how to account for costs post initial asset recognition including when to expense or
     capitalise asset renewal, upgrade or expansion expenditure
•    Ensure the effective management and minimisation of capital work in progress balances
•    Stipulate the valuation methodology and timeframes to be used in valuing non-current assets
     for accounting and reporting purposes
•    Prescribe the circumstances as to when an asset can be derecognised from the financial asset
     register.

Non-Current Assets

1       Asset Classes

A ‘class’ of non-current assets is a grouping of assets of a similar nature and use in Council’s
operations and which, for the purposes of disclosure, is shown as a single item in Council’s general
purpose financial statements. The classes of property, plant and equipment assets are shown in the
following table:

 Asset Class                     Asset Class Examples
 Land                            Council owned land.
 Buildings                       Community, cultural and commercial buildings, housing, sheds, public
                                 amenities.
 Plant and Equipment             Office furniture and equipment, computer hardware, motor vehicles,
                                 trucks, yellow plant, trailers, mowers and boats.
 Other Infrastructure Assets     Internal roads and car parks, landscaping, fencing, structures (BBQ
                                 shelters, rotundas, gazebos), playground equipment, recreational
                                 playing courts, shade covers and irrigation systems, park furniture, fibre
                                 optics, boat ramps and pontoons, waste management and solar energy.
 Intangibles                     Software and licences where Council has exclusive rights to use the
                                 software or hold ownership of the intellectual property for the customised
                                 software. Software that meets the criteria as SaaS (Software as a
                                 Service Arrangement) must be expensed as utilised and reported in the
                                 Statement of Comprehensive Income.
 Network Assets
 Road and Bridge Network         Road structures, kerb and channel, footpaths, traffic calming devices,
                                 roundabouts, bus shelters bridges and major culverts.
 Storm Water                     Box culverts, pipes, manholes, stormwater pits and bio-retention basins.




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Attachment 12 – Non-Current Asset Accounting Policy


2      Asset Recognition

An asset is recognised as a non-current asset in the financial asset register if it meets all of the
following criteria:
•     Council has control over the asset
•     It is probable that future economic benefits associated with the asset will flow to Council
      (including non-cash service benefits)
•     The cost or fair value of the asset can be measured reliably
•     The cost or fair value of the asset exceeds Council’s asset recognition threshold
•     The asset is expected to be used for more than one financial year.

Costs on assets incurred after initial recognition will be capitalised when the expenditure either
renews, extends or upgrades the asset’s underlying service potential.


3      Recognition Thresholds for Non-Current Assets

Recognition thresholds to be applied on initial acquisition of an asset are as follows:

 Asset Class                           Threshold
 Land*                                                 $1
 Buildings                                         $5,000
 Other Infrastructure Assets                       $5,000
 Plant and Equipment**                             $5,000
 Intangible Assets                                 $5,000
 ICT Equipment                                     $1,000
 Network Assets
 Roads and Bridge Network                               $1
 Storm Water                                            $1
* Minor land parcels have no realisable market value and possess limited or negligible service potential. These minor land
parcels are recorded in Council’s financial asset register at nominal value according to materiality.

The thresholds detailed in the table above must be disclosed by way of note in Council’s general
purpose financial statements.

4        Asset Valuation Method

Assets are to be recorded and maintained in Council’s enterprise management system as either a
financial asset or an operating (non-financial) asset. On initial recognition financial assets will be
measured at fair value based on the cost of the asset. Where an asset is acquired at no cost (i.e.
developer contributed assets) or for nominal consideration, the value is deemed to be its fair value at
the date of acquisition. Fair value is deemed to be either:
•     Market Value if there is market evidence; or
•     Depreciated Current Replacement Cost if there is no market evidence.

Where an asset was acquired in prior financial years and has yet to be recorded in Council’s financial
asset register, the asset is to be brought to account at the fair value as at the date of recognition.




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The valuation method applicable to each asset class subsequent to initial recognition is as follows:

 Asset Class                 Measurement      Measurement / Frequency
                             Model
 Land                        Revaluation      1. Full asset class revaluation by external independent
 Buildings                   Revaluation         valuer every 5 years.
 Other Infrastructure        Revaluation      2. Desktop asset class revaluations (either by external
 Assets                                          independent valuer or internally) undertaken at least
                                                 once between full revaluation cycles.
 Plant and Equipment         Cost             Annually
 Intangible Assets           Cost             Annually
 Network Assets
 Roads and Bridge            Revaluation      1. Full asset class revaluation by external independent
 Network                                         valuer every 5 years.
 Storm Water                 Revaluation      2. Desktop asset class revaluations (either by external
                                                 independent valuer or internally) undertaken at least
                                                 once between full revaluation cycles.

Cost model - Assets are carried at their initial cost, less any accumulated depreciation and any
accumulated impairment losses.

Revaluation model – Assets that are in their first year of capitalisation are carried at their initial cost,
less any accumulated depreciation and any accumulated impairment losses. Subsequent to their
first year of capitalisation, assets are carried at their depreciated current replacement cost. For
assets that have not yet been subject to a formal appraisal, depreciated current replacement cost
increment or decrement factors will be applied to the initial asset cost.

5       Depreciation

The straight-line depreciation or amortisation method is adopted by Council to reflect patterns of
consumption for all non-current assets other than those assets considered not subject to
depreciation.

6       Periodic Review of Asset Assumptions

Asset depreciation and amortisation rates, useful lives, asset condition (used to assess remaining
useful lives), residual values and potential asset impairment are to be reviewed periodically to ensure
the assumptions are reflective of current conditions and expectations at the end of each financial
year. The remaining useful life of an asset should be reassessed whenever a major addition or any
significant partial disposal of the asset occurs.

7       Asset Revaluations

All asset classes subject to a revaluation process are to be revalued at Fair Value. 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.

With the exception of assets that remain valued at cost, a full revaluation is required every five years.
Full revaluations for applicable asset classes are completed simultaneously for all underlying assets
within the asset class. Such revaluations should be completed within one financial year; however, it
is permissible to complete the process over two concurrent financial years whenever deemed
necessary due to resource or data management limitations. Council’s Audit and Risk Committee is
to endorse the scope and methodology of all comprehensive valuations.




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8      Asset Impairment

All assets including intangible assets are to undergo impairment testing on an annual basis by asset
custodians as detailed in Council’s asset responsibility matrix.

9      Asset Derecognition

A financial asset is to be derecognised and removed from the financial asset register whenever:
•     The asset is destroyed, abandoned or decommissioned with no future economic benefit
      expected to be generated from its use
•     The asset is scrapped, sold or traded
•     The asset is lost or stolen or
•     Control of the asset is transferred to another entity.

All assets derecognised from the financial asset register require authorisation by the respective
asset custodian.

Partial derecognition of an infrastructure asset is to occur whenever:
•     A significant component or section of an infrastructure asset is destroyed, abandoned or
      decommissioned with no future economic benefit expected to be generated from its use; or
•     Major renewal works have been undertaken resulting in a significant component or section of
      an infrastructure asset being replaced.

Derecognition should be accounted for in the same financial year in which the asset was removed
from service.

10     Security and Physical Control over Non-Current Assets

The asset custodians shall assume full responsibility for assets within their control. The nature of
some asset classes, such as infrastructure assets which cannot be physically removed, are subject
to regular physical inspection for asset management planning purposes and are inspected for
revaluation purposes. As such they do not require a separate physical stocktake.

The remaining assets (i.e. fleet and ICT equipment) are required to be verified via an annual
stocktake which may include a rolling process conducted over a number of years.

11     Work in Progress

Quarterly reviews of work in progress are to be undertaken to ensure that projects are either
currently in progress or are financially completed and ready to capitalise. Project Managers are
required to review projects monthly to assess reportable progress and determine when constructed
and contributed assets are ready to be commissioned or put into service.

Resulting non-current asset recognitions should be accounted for in the same financial year in
which the relevant assets reach practical completion.


12     Materiality

Materiality plays an essential part in the decision making process and preparation of the general
purpose financial statements. This is because information contained or omitted 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.


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

DEFINITIONS

The following definitions inform this policy and related guidelines.

 Accumulated                The aggregate portion of an assets total service capacity (excluding any
 depreciation               residual value) that has been consumed to date.
 Active market              A market in which all the conditions exist:
                            a) Homogeneous market of traded assets
                            b) Willing buyers and sellers available
                            c) Prices are available to the public.
                            A market in which transactions for the sale of similar assets or liabilities take
                            place with sufficient frequency and volume to provide pricing information on an
                            ongoing basis
 Amortisation               The systematic allocation of the cost of an intangible asset (less any residual
                            value) over its useful life to reflect patterns of periodic consumption
 Asset                      Future economic benefits controlled by Council as a result of past transactions
                            or other past events.
 Asset class                A grouping of assets of a similar nature and use in any entities operations
 Asset custodian            The Council Officer responsible for managing an asset
 Asset recognition          The process whereby an asset is included in the financial asset register and
                            Council’s Statement of Financial Position as a non-current asset
 Capital expenditure        The amount of cash (or cash equivalents) paid or the fair value of the other
                            consideration given to acquire an asset at the time it is acquired or
                            constructed. Paragraphs 16 to 28 of AASB 116 Property, Plant and Equipment
                            provide guidance about the elements of cost and measurement of cost. The
                            cost of an item of property, plant and equipment includes:
                            •   its purchase price, including taxes and duties
                            •   if self-constructed, the purchase price will include the labour, materials and
                                resources incurred, but will exclude internal profit margins
                            •   the direct costs of bringing the asset to its intended operating location and
                                condition
                            •   the initial estimate of the costs of dismantling and removing the item and
                                restoring the site on which it is located (eg landfill sites), where the
                                obligation is recognised and measured in accordance with AASB 137
                                Provisions, Contingent Liabilities and Contingent Assets
 Carrying amount            The amount at which an assets value is recognised after deducting any
                            accumulated depreciation and accumulated impairment losses.
 Capitalisation threshold   The cost limit above which physical non-current assets are recognised in an
                            entity’s asset register as items of property, plant and equipment.
 Complex asset              Assets with multiple connected components that can be separately identified
                            and replaced.
 Component                  A significant part of a complex asset that is separable and has a different
                            useful life or pattern of consumption to other significant parts.
                            Connected asset parts that have different physical characteristics and which
                            can be separately replaced at different times over the assets life cycle.
 Comprehensive              A revaluation which entails significant levels of physical inspection and
 valuation                  evaluation of all inputs, such as methodologies, assumptions, condition, and
                            unit rates.
 Contributed asset          An asset that is acquired by Council at nominal or no cost, usually by way of an
                            agreement with property developers, through State Government arrangements
                            or bequeathed to Council.



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 Cost model                 An accounting policy that may be applied for the measurement of an entire
 (valuation)                asset class. After recognition as an asset, an item of property, plant and
                            equipment shall be carried at its cost, less any accumulated depreciation and
                            any accumulated impairment losses.
 Control                    Ability for Council to obtain benefits flowing from the asset and to restrict the
                            access of others to those benefits.


 Depreciable amount         The gross value of an asset, less residual value (where appropriate)
 Depreciated current        Current cost of replacement or reproduction of an asset, less deductions for
 replacement cost           physical deterioration of the asset.
 Depreciation               The systematic allocation of the depreciable amount of an asset over the
                            assets useful life which reflects the pattern in which the future economic
                            benefits embodied in the asset are consumed.
 Design life                The estimated period of time an asset can be used based on its design
                            characteristics. Council can intend to consume the economic benefits over a
                            longer or shorter period.
 Desktop review             A desktop valuation review is an assessment of asset values which:
                            a) Does not involve inspection of the assets
                            b) Produces an indicative assessment (with conditions) of value of the asset
                            c) Is prepared by valuers using specified information and documents.
 Disposal                   Removal, demolition, or elimination of an assets service potential, resulting
 (decommissioning)          from a specific management decision. An asset is disposed when Council
                            loses control of the asset at the end of its useful life to the entity – the
                            relocation of an asset into another asset or location does not involve any loss
                            of control of the asset by Council.
 Economic life              The period over which an asset is intended to be economically useful to
                            Council. This can be different to physical life and original design life.
 Fair value                 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
                            (AASB 13 Fair Value Measurement).
 Financial asset register   A enterprise subsidiary system that supports the reported values of property,
                            plant and equipment assets and intangibles controlled by Council that is
                            reconcilable to the general ledger.
 Full revaluation           The process whereby the fair value of all assets within an asset class are
                            updated to reflect current market value or current replacement cost as well as
                            reassessing remaining useful life and residual value.
 Future economic            With respect to not-for-profit entities such as Council, future economic benefits
 benefits                   refer to the ability of an asset to provide goods or services in accordance with
                            the organisation’s objectives.
 Gross carrying amount      The amount at which an asset is recorded (either at cost or fair value) within
 (or gross value)           the financial asset register, excluding any deduction for accumulated
                            depreciation or accumulated impairment losses.
 Highest and best use       The use of a non-financial asset by market participants that would maximise
                            the value of the asset or the group of assets and liabilities (for example, a
                            business) within which the asset would be used.
 Impairment loss            The amount by which the carrying amount of an asset exceeds its recoverable
                            amount.2 Note, AASB 136 Impairment of Assets does not apply to assets
                            regularly revalued under the revaluation model in AASB 116 Property, Plant
                            and Equipment (AASB 2016-4 Amendments to Australian Accounting
                            Standards – Recoverable Amount of Non-Cash- Generating Specialised
                            Assets of Not-for-Profit Entities).




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 Infrastructure assets    Typically large, interconnected networks or programs of composite assets. The
                          components of these assets may be separately maintained, renewed, replaced
                          or disposed of, so that the required level and standard of service from the
                          network of assets is continuously sustained. Generally, the asset components
                          have long lives. They are fixed in place and rarely have any market value.
 Initial cost             The cost incurred to enable a new asset to be in the location and condition
                          necessary for it to operate in the manner intended.
 Intangible asset         An identifiable non-monetary asset without physical substance.
 Interim revaluation      Desktop review of unit rates whereby all asset values within an asset class are
                          adjusted by an indexation factor.
 Market value             The estimated amount for which an asset or liability should exchange on the
                          valuation date between a willing buyer and a willing seller in an arm’s length
                          transaction, after proper marketing and where the parties had each acted
                          knowledgably, prudently, and without compulsion.
 Materiality              Omissions or misstatements of items are material if they could individually or
                          collectively influence the economic decisions that users make on the basis of
                          the financial statements. Materiality depends on the size and nature of the
                          omission or misstatement judged in the surrounding circumstances. The size
                          or nature of the item, or a combination of both, could be the determining factor.
 Modern equivalent        The asset an entity would acquire or construct today if it was deprived of an
                          existing asset using modern material, techniques and design that embodies
                          equivalent service potential.
 Network                  A set of interconnected assets that rely on each other for the provision of a
                          service. Network assets are defined as a group of separately identifiable
                          assets, which, when considered together, are operating to achieve the
                          objectives involved in the provision of a particular service. All assets, which are
                          deemed to form part of a major network within Council (for example roads and
                          stormwater), will be recorded as an asset regardless of the cost of the
                          individual asset.
 Net book value           The amount at which an asset is recorded (either at cost or fair value) within
                          the financial asset register after deducting any accumulated depreciation and
                          accumulated impairment losses. This is the same as an assets carrying
                          amount or written down value
 Nominal consideration    Nil or minimal cost for which an asset has been acquired.
 Obsolescence             Obsolescence is a loss in an assets value as a result of physical deterioration
                          or external factors including functional or economic obsolescence.
                          Functional or technological obsolescence occurs when the service utility of an
                          asset may be reduced if technology has advanced to produce alternatives that
                          provide better or more efficient service.
                          Economic obsolescence occurs when the asset still maintains the same
                          service potential, but demand for that service has ceased.
 Off maintenance          Point in time that the period of “On Maintenance” applicable to contributed
                          assets either expires or ceases.
 On maintenance           Point in time that Council accepts control of an asset handed over by a
                          property developer and assets are recognised in Council’s accounts. The term
                          ‘On Maintenance’ refers to an effective warranty period whereby the
                          responsibility for rectifying defects associated with the contributed assets rests
                          with the developer.
 Pattern of consumption   The pattern on which an assets future economic benefits are expected to be
                          consumed.
 Property, plant and      Council’s recognised physical non-current assets which are tangible items that:
 equipment                a) are held for use in the production or supply of goods or services, for rental
                               to others, or for administrative purposes.
                          b) are expected to be used during more than one period.
 Recognition threshold    The value an asset should exceed on acquisition before it is recognised within
                          the financial asset register and Council balance sheet as a non-current asset.
 Recoverable amount       The higher of an assets fair value, less costs of disposal and its value in use
                          (carrying amount).
 Renewal                  Capital works that reinstate some or all of the original service potential of an
                          asset.


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 Remaining useful life    The estimated time remaining until the asset ceased to provide the required
                          level of service or reaches the end of its economic usefulness.
 Reproduction cost        Establishes the current cost of reproducing every component of an asset in a
                          style and form of construction that closely resembles the original – this typically
                          applies to heritage assets.
 Residual value           The estimated consideration receivable from the disposal of an asset, after
                          deducting the estimated costs of disposal, if the asset were already of the age
                          and condition expected at the end of the assets useful life
 Revaluation model        An accounting policy that may be applied for the measurement of an entire
                          asset class. After recognition as an asset, an item of property, plant and
                          equipment whose fair value can be measured reliably shall be carried at a
                          revalued amount. An item’s revalued amount is its fair value at the date of the
                          revaluation less any subsequent accumulated depreciation and subsequent
                          accumulated impairment losses.
 Segment                  A discrete unit of a linear asset such as a road or pipe.
 Service capacity         An assets capacity to achieve its owner’s objectives. Service capacity is
                          synonymous with service potential and economic benefits.
 Unit rates               Asset unit construction rates based on replacement cost principles that exclude
                          specific asset management costs to fully comply with accounting standards
                          and to avoid the potential for double counting of costs
 Useful life              The useful life of an asset can be either:
                          a) the period over which an asset is expected to be available for use by an
                               entity; or
                          b) the number of production or similar units expected to be obtained from the
                               asset by an entity.
 Value in Use             Normally refers to assets that generate some form of cash inflow. Where
                          assets have no cash inflow, value in use is deemed to be depreciated current
                          replacement cost.
 Written-down value       The amount at which an asset is recorded (either at cost or fair value) within
                          the financial asset register after deducting any accumulated depreciation and
                          accumulated impairment losses. This is the same as an assets carrying
                          amount or net book value.

ROLES AND RESPONSIBILITIES

Councillors
Councillors will consider and adopt the Policy.

Chief Executive Officer (CEO) and Executive Team
The CEO and Executive Team will endorse for Council adoption and provide leadership and
commitment in complying with the Policy and relevant legislation and documents.

Financial Services Manager
Policy Owner.

Council Officers
Financial asset management requires a whole of Council approach and is the responsibility of the
Executive Team, Management, Asset Custodians, Asset Management team, the Asset Accountant
and the Financial Accounting Coordinator.

RELEVANT LEGISLATION AND POLICY

Local Government Act 2009
Local Government Regulation 2012
Australian Accounting Standards and Interpretations
Noosa Council Financial Sustainability Policy
Noosa Council Asset Management Policy




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NCA Organisational Guidelines – Depreciation and Amortisation
NCA Organisational Guideline – Derecognition of Non Current Assets
NCA Organisational Guideline – Impairment of Non Current Assets
NCA Organisational Guideline – Recognition of Non Current Assets
NCA Organisational Guideline – Revaluation of Non Current Assets


HUMAN RIGHTS COMPATIBILITY STATEMENT

In developing this Policy, the subject matter has been considered in accordance with the
requirements of the Human Rights Act 2019. It is considered that the subject matter does not conflict
with any human rights, including the right to property and the right to freedom of movement, and
supports a human rights approach to decision making by Council. This policy should be read in
conjunction with the Human Rights Act 2019 and Council’s Human Rights Policy.




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Version control:
  Version          Reason/ Trigger   Change (Y/N)   Endorsed/ Reviewed by        Date

  1.0              Create new                       Financial Accountant         January 2016

  2.0              Review            Y – para 12    Manager Financial Services   May 2016

  3.0              Review            Y              Financial Accountant         May 2017

  4.0              Review            Y              Council                      30/06/2023

  5.0              Review            Y              Council                      28/06/2024

  6.0              Review            Y              Council                      30/06/2025

  7.0              Review            N              Council                      23/06/2026




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