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 )
Water - Passive Assets & Wastewater - Passive Assets Current Replacement Cost The fair value of water and wastewater passive assets as at 30 June 2015 was determined by Council using the cost approach based on information provided by independent , external registered valuers . 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 independent , registered valuers . A full valuation of Council ' s water and wastewater assets is planned for the 2018 / 19 financial year .
Cost Approach - Depreciated Replacement Cost - Level 3 valuation inputs Under the cost approach the estimated replacement cost of the network is determined by componentising the assets into significant parts with different useful lives and taking into account a range of factors and applying unit rates provided by the independent external valuers . While the unit rates based on linear metres could be supported from market evidence ( Level 2 ) other inputs ( such as estimates of residual value , useful life , pattern of consumption and asset condition ) required extensive professional judgement and impacted significantly on the final determination of fair value . As such these assets were classified as having been valued using Level 3 valuation inputs .
The main Level 3 inputs used are derived and evaluated as follows :
Asset Condition - The nature of water and wastewater network infrastructure is that there is a very large number of buried assets which comprise the network and as a result it is not physically possible to inspect every asset for the purposes of completing a valuation . As a consequence reliance is placed on the accuracy of data held in the asset management system and its associated internal controls . This data includes installation dates and the results of inspections carried out during planned and unplanned maintenance . The data is then applied as a proportion of the expired service potential to determine the accumulated depreciation . To provide assurance over the accuracy of this information and taking into account the cost-benefit of undertaking physical inspections , the valuation relies upon a sampling approach where the data held in the system is verified by physical inspection .
Stormwater Drainage Assets A full valuation of Storm Water Drainage assets was undertaken by independent , external , Registered Valuers , effective 30 June 2017 . Due to the specialised nature of Council ' s drainage assets , the valuations have been undertaken on a cost approach , an accepted valuation methodology under AASB 13 . The cost approach is deemed a level 3 input . Under this approach , the following process has been adopted :
Current Replacement Cost Where there is no market , the net current value of an asset is the gross current value less accumulated depreciation to reflect the consumed or expired service potential of the asset . Published / available market data for recent projects , and / or published cost guides are utilised to determine the estimated replacement cost ( gross value ) of the asset , including allowances for preliminaries and professional fees .
Accumulated Depreciation 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 accumulated depreciation applied .
Annual Report 2016 - 2017 I TOOWOOMBA REGIONAL COUNCIL 69