Toowoomba Regional Council
Notes to the Financial Statements for the year ended 30 June 2017
Note 1 . Significant Accounting Policies ( continued )
Non-current physical assets measured at fair value are re-valued , where required , so that the carrying amount of each class of asset does not materially differ from its fair value at the reporting date . This is achieved by engaging independent , professionally qualified valuers to determine the fair value for each class of property , plant and equipment assets at least once every three years . This process involves the valuer physically sighting a representative sample of Council assets across all asset classes and making their own assessments on the condition of the assets at the date of inspection .
In the intervening years , Council uses internal engineers and asset managers to assess the condition and cost assumptions associated with all infrastructure assets , the results of which are considered in combination with an appropriate cost index for the region . Together these are used to form the basis of a management valuation for infrastructure asset classes in each of the intervening years . With respect to the valuation of the land and site improvements , buildings and major plant asset classes in the intervening years , management engages independent , professionally qualified valuers to perform a " desktop " valuation . A desktop valuation involves management providing updated information to the valuer regarding additions , disposals and changes in assumptions such as useful life , residual value and condition rating . The valuer then determines suitable indices which are applied to each of these asset classes .
An analysis performed by management has indicated that , on average , the variance between an indexed asset value and the valuation by an independent valuer when performed is not significant and the indices used by Council are sound . Further details in relation to valuers , the methods of valuation and the key assumptions used are disclosed in Note 13 .
Any revaluation increment arising on the revaluation of an asset is credited to the appropriate class of the asset revaluation surplus , except to the extent it reverses a revaluation decrement for the class previously recognised as an expense . A decrease in the carrying amount on revaluation is charged as an expense to the extent it exceeds the balance , if any , in the revaluation surplus of that asset class .
On revaluation , accumulated depreciation is restated proportionately with the change in the carrying amount of the asset and any change in the estimate of remaining useful life .
Separately identified components of assets are measured on the same basis as the assets to which they relate .
Capital work in progress
The cost of property , plant and equipment being constructed by the Council includes the cost of purchased services , materials , direct labour and an appropriate proportion of labour overheads .
Depreciation
Land and Heritage Assets are not depreciated as they have unlimited useful lives . Depreciation on other property , plant and equipment assets is calculated on a straight-line basis so as to write-off the net cost or re-valued amount of each depreciable asset , less its estimated residual value , progressively over its estimated useful life to the Council . Management believe that the straight-line basis appropriately reflects the pattern of consumption of all Council assets .
Assets are depreciated from the date of acquisition or , in respect of internally constructed assets , from the time an asset is completed and commissioned ready for use .
Where assets have separately identifiable components that are subject to regular replacement , these components are assigned useful lives distinct from the asset to which they relate . Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciable amount is depreciated over the remaining useful life of the asset to the Council .
Major spares purchased specifically for particular assets that are above the asset recognition threshold are capitalised and depreciated on the same basis as the asset to which they relate .
The depreciable amount of improvements to or on leasehold land is allocated progressively over the estimated useful lives of the improvements to the Council or the unexpired period of the lease , whichever is the shorter .
Depreciation methods , estimated useful lives and residual values of property , plant and equipment
48 TOOWOOMBA REGIONAL COUNCIL I Annual Report 2016 - 2017