Financial Statements 2017
Toowoomba Regional Council
Notes to the Financial Statements
for the year ended 30 June 2017
Note 13. Fair Value Measurements (continued)
(3) Valuation techniques used to derive Level 2 and Level 3 Fair Values (continued)
Roads (continued)
Relationship between asset consumption rating scale and the level of consumed service potential – Under
the cost approach the estimated cost to replace the asset is calculated and then adjusted to take account of an
accumulated depreciation. Replacement cost is determined by actual construction or purchase prices for recent
projects, Registered Valuers' database, Rawlinson's Construction Guide or similar guides, benchmarking against
other valuations, and development of costs using Registered Valuers' models for specific asset types. Adjustment for
accumulated depreciation is achieved by the valuer determining an asset consumption rating scale for each asset
type based on the interrelationship between a range of factors. These factors and their relationship to the fair value
require professional judgment and include asset condition, legal and commercial obsolescence and the determination
of key depreciation related assumptions such as residual value, useful life and pattern of consumption of the future
economic benefit. The consumption rating scales were based initially on the past experience of the valuation firm and
industry guides and were then updated to take into account the experience and understanding of Council’s own
engineers, asset management and finance staff. The results of the valuation were further evaluated by confirmation
against Council’s own understanding of the assets and the level of remaining service potential.
Water and Wastewater - Active Assets
Current Replacement Cost
A full valuation of Active Water and Wastewater assets was undertaken by independent, external Registered Valuers,
effective 30 June 2016. The current replacement cost was determined by direct contact between valuer and suppliers,
valuers' in-house database, information supplied by Council on the actual cost of recent projects, and reference guides
such as Rawlinson's Australian Construction Handbook. Non-Construction Intangibles (investigation, design,
management, contract supervision and other project costs) have been costed as percentages of the construction
costs and included in the unit rates.
Council applied an indexation rate of 3.5% to the previously determined fair value to determine fair value as at
30 June 2017. This indexation rate was also provided by an independent, registered valuer. A full valuation of
Council's water and wastewater assets is planned for the 2018/19 financial year.
Accumulated Depreciation
The main Level 3 inputs used are derived and evaluated as follows:
- A condition assessment is applied, which is based on factors such as the age of the asset, overall condition as
noted by the Valuer during inspection, economic and/or functional obsolescence. The condition assessment directly
translates to the level of depreciation applied.
- In determining the level of accumulated depreciation for major assets, we have disaggregated into significant
components which exhibit different patterns of consumption (useful lives). The condition assessment is applied on a
component basis.
- While the replacement cost of the assets could be supported by market supplied evidence (Level 2), the other
unobservable inputs (such as estimates of residual value, useful life, and asset condition) were also required. The
application of these inputs required considerable professional judgment and are therefore considered to be
Level 3 inputs.
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TOOWOOMBA REGIONAL COUNCIL I Annual Report 2016 - 2017