Code of Accounting Practice and Financial Reporting ... Update 23... · The Local Government Code of Accounting Practice and Financial Reporting ... by the Office details the accounting

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LOCAL GOVERNMENT CODE OF ACCOUNTING PRACTICE

AND FINANCIAL REPORTING

(GUIDELINES)

Update No. 23 March 2015

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ACKNOWLEDGEMENTS The Office of Local Government acknowledges the Australian Accounting Standards Board, CPA Australia Ltd and Chartered Accountants – Australia and New Zealand for their assistance in providing definitions from its Glossary of Terms for use in this document. © Commonwealth of Australia 2015 All legislation herein is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain reproduction and publication of Commonwealth legislation. In particular, s. 182A of the Act enables a complete copy to be made by or on behalf of a particular person. For reproduction or publication beyond that permitted by the Act, permission should be sought in writing from the Commonwealth available from the Australian Accounting Standards Board. Requests in the first instance should be addressed to the Administration Director, Australian Accounting Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria, 8007

ACCESS TO SERVICES The Office of Local Government is located at: Levels 1 & 2 5 O’Keefe Avenue Locked Bag 3015 NOWRA NSW 2541 NOWRA NSW 2541 Phone 02 4428 4100 Fax 02 4428 4199 TTY 02 4428 4209 Level 9, 6 – 10 O’Connell Street PO Box R1772 SYDNEY NSW 2000 ROYAL EXCHANGE NSW 1225 Phone 02 9289 4000 Fax 02 9289 4099 Email [email protected] Website www.olg.nsw.gov.au

OFFICE HOURS Monday to Friday 8.30am to 5.00pm (Special arrangements may be made if these hours are unsuitable) All offices are wheelchair accessible.

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DISCLAIMER While every effort has been made to ensure the accuracy of the information in this publication, the Office of Local Government expressly disclaims any liability to any person in respect of anything done or not done as a result of the contents of the publication or the data provided. © NSW Office of Local Government 2015 ISBN 1 920766 41 3 Produced by the Office of Local Government

www.olg.nsw.gov.au

http://www.olg.nsw.gov.au/

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Introduction and overview

Purpose The Local Government Code of Accounting Practice and Financial Reporting (the Code) prescribes the form of the financial statements approved by the Office of Local Government (the Office).

The Code applies to each NSW Council in respect of its general purpose financial statements, special purpose financial statements and special schedules.

The Code is intended to facilitate the practical and effective implementation of Australian Accounting Standards and aims to provide:

A basis of providing assistance in the interpretation and application of management reporting, accounting, auditing and financial reporting requirements of Chapter 13 of the Local Government Act – “How are councils made accountable for their actions?”.

A mechanism which will ensure that appropriate accounting policies and practices are implemented by all councils.

A basis for audit and review functions to be undertaken in the context of comprehensive and approved accounting standards.

Reliable, comparable and readily comprehensible financial information which will be invaluable for making and evaluating decisions about the allocation of scarce resources and which will assist in assessing the performance, financial position, finances and investments of councils.

Enhanced accountability of councils to the community.

The accounting, financial and other reporting requirements in Code Update #22 apply to all financial statements prepared by local governments for the financial period commencing 1 July 2014 and for subsequent years unless otherwise stated. The Code prescribes the minimum disclosures required – Councils can add additional disclosures at their discretion. In some cases where the standards provide options – as with the valuation of investment properties at cost or fair value – the Code will prescribe which option Councils must adopt.

Purpose of Code

The purpose of the Code is to:

(a) Establish a framework for preparation and reporting of estimates of income and expenditure. [Clause 201– Local Government (General) Regulation (LGGR)]

(b) Provide guidance on the application of professionally based accounting standards and various legislative requirements.

(c) Specify the accounting records and practices to be followed that ensure adequate systems and internal controls are in place to manage council’s resources [Clause 206 – LGGR]

(d) Establish financial reporting requirements to govern the form and content of financial statements of local governments [Clause 214 – LGGR]

(e) Specify the matters that an auditor must consider and comment on when conducting audits [Clause 227 – LGGR]

The purpose of the illustrative financial statements is to highlight disclosure requirements, provide sample disclosures and worked examples and serve as a convenient reference to source material. The fictitious circumstances of our example Council, NSW Council, have been chosen to illustrate the most common and significant accounting issues and associated disclosures under Australian Accounting Standards. These issues may not necessarily apply to all councils nor are they exhaustive.

Authority of Code

For the purpose of Section 405 of the Act, the Code issued by the Minister and published by the Office details the requirements of estimates of income and expenditure that a council must include in its draft operational plan for the year.

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For the purpose of Section 412 of the Act, the Code issued by the Minister and published by the Office details the accounting records and accounting practices that a council must accord with in managing resources under its control.

For the purpose of Section 413(2b) and (3b) of the Act, the Code issued by the Minister and published by the Office details the financial reporting requirements that a council must incorporate when preparing its financial statements.

For the purpose of Section 415(3) LG Act and the LGGR the auditor, in auditing a council’s general purpose financial statements, must consider and provide comment on the following matters:

(f) Relating to the Income Statement. The gain/(loss) from continuing activities for the year including the effect of depreciation, the result for the year before capital amounts, level of grants and contributions and the level of rates increase for the year.

(g) Relating to the Statement of financial position. Consideration and comment should also be provided on the utilisation of overdraft facilities.

(h) Relating to Performance. Performance indicators and trends including current ratios, debt servicing, rates coverage, rates outstanding and the level of loan indebtedness, restricted assets and level of asset renewal.

(i) Relating to the Statement of cash flows. The effect on the statement of cash flows of material items such as borrowings or large section 94 contributions.

(j) Relating to Legislative Compliance. The meeting of all statutory reporting requirements relating to Division 2 of Chapter 13 of the LG Act and relating to the LGGR and any legislatively prescribed standards.

(k) Relating to Other Matters. The auditor should comment on other such matters which are material such as the effect of the introduction of new accounting standards, the effect of significant initiatives undertaken or future plans of council where these can be quantified and are sufficiently firm to comment on.

Foreign investment

Pursuant to Section 625 of the Local Government Act 1993, a Council may only invest money on the basis that all investments must be denominated in Australian dollars.

Legislative requirements for financial statements

A tabular and graphical illustration of the legislative requirements pertaining to financial statements is provided at Appendix D and E. The dates specified are the latest applicable for the particular legislative requirements to be satisfied. All timetable deadlines are applicable from the financial year ending 30 June 2015.

Councils are required to have access to the Australian Accounting Standards (www.aasb.gov.au).

Monitoring and review

The Office of Local Government will ensure that the Code remains current and will provide amendments by way of

publication on the Office’s internet home page, www.olg.nsw.gov.au.

Industry feedback is actively encouraged to assist the Office in the development and delivery of sound financial policies that cater for the practical needs of councils.

The Office of Local Government would like to thank CaseWare Australia and New Zealand for their assistance in the development of this Code update.

The Office of Local Government would also like to thank the Institute of Public Works Engineering Australia (IPWEA) for allowing sections of their Infrastructure Financial Management Guidelines to be used in the Code.

STEVE ORR ACTING CHIEF EXECUTIVE OFFICE OF LOCAL GOVERNMENT

http://www.olg.nsw.gov.au/

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Local Government Code of Accounting Practice and Financial Reporting Update 23

Contents

General purpose financial statements A6 – A141

Special purpose financial statements B1 – B16

Special schedules C1 – C27

Appendices D1 – D44

The Code prescribes the minimum disclosures required – Councils can add additional disclosures at their discretion. In some cases where the standards provide options – as with the valuation of investment properties at cost or fair value – the Code will prescribe which option Councils must adopt.

Councils must complete the five primary reports and Notes 1 to 27 in the format prescribed:

(a) The Income statement, Statement of comprehensive income, Statement of financial position and Statement of changes in equity are to be replicated with all lines from the Code even if nil value.

(b) Where there is both an expense and income line displayed then one of these can be deleted when not in use.

(c) The Statement of cashflows line items in the Code need only be included where applicable to Council.

(d) Within Notes 1 to 20 line items that are not applicable can be left out.

Notes 1 to 20 and 27 are mandatory even if of nil value. Thereafter notes need only be included if applicable and additional notes may be added as required.

For Notes 1, 13(b), 14, 17, 19 and 21 the following also apply:

Note 1 – Summary of significant accounting policies Councils are to disclose only significant accounting policies that are relevant to them. The Code provides examples of possible disclosures, but these may not be relevant to all councils.

Note 13(b) – Statement of performance measures by fund Do not complete unless Council has Water and/or Sewer Funds.

Note 14 – Investment properties If Council has no Investment properties, then a statement to this effect can replace the detail specified.

Note 17 – Developer contributions If Council has no Developer contributions, then a statement to this effect can replace the detail specified.

Note 19 – Interests in other entities Exclude sections for interests in other entity types that are not relevant to Council. Where Council has no interests in other entities a statement to this effect can replace the specified lines.

Note 21 – Results by fund Do not complete unless Council has Water and/or Sewer Funds.

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NSW Council

General purpose financial statements for the year ended 30 June 2015

Contents

Page General purpose financial statements Statement by Councillors and Management A-9

Income Statement A-11

Statement of Comprehensive Income A-12

Statement of Financial Position A-16

Statement of Changes in Equity A-18

Statement of Cash Flows A-20

Notes to the Financial Statements A-23

Auditors’ reports A-143

AASB101(46)(b),(d)

These financial statements are general purpose financial statements of NSW Council and its controlled entities and are presented in the Australian currency.

AASB101(126)(a)

NSW Council is constituted under the Local Government Act (1993) and has its principal place of business at:

NSW Council XXXX Street XX NSW 2XXX. AASB110(17) The financial statements were authorised for issue by the Council on XX 2015. Council has the power to

amend and reissue the financial statements.

Through the use of the internet, we have ensured that our reporting is timely, complete, and available at minimum cost. All press releases, financial statements and other information are readily available on our website: www.council.nsw.gov.au.

NSW Council Financial statements 30 June 2015

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Commentary – Financial statements

Accounting standard for financial statements presentation and disclosures AASB101(10) 1. According to AASB 101, a 'complete set of financial statements' comprises: (a) a s a statement of financial position as at the end of the period (b) a statement of comprehensive income for the period (c) a statement of changes in equity for the period (d) a statement of cash flow for the period (e) notes, comprising a summary of significant accounting policies and other explanatory notes,

and (f) if the council has applied an accounting policy retrospectively, made a retrospective

restatement of items or has reclassified items in its financial statements: a statement of financial position as at the beginning of the earliest comparative period.

AASB101(11) The statements must all be presented with equal prominence.

Consistency AASB101(45) 2. The presentation and classification of items in the financial statements shall be retained from one

period to the next unless: (a) it is apparent, following a significant change in the nature of the council’s operations or a review

of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, or

(b) an Australian Accounting Standard requires a change in presentation.

Materiality and aggregation AASB101(29) 3. Each material class of similar items shall be presented separately in the financial statements. Items

of a similar nature or function shall be presented separately unless they are immaterial.

Comparative information AASB101(40) 4. In some cases, narrative information provided in the financial statements for the previous period(s)

continues to be relevant in the current period. For example, details of a legal dispute, the outcome of which was uncertain at the end of the immediately preceding reporting period and that is yet to be resolved, are disclosed in the current period. Users benefit from information that the uncertainty existed at the end of the immediately preceding reporting period, and about the steps that have been taken during the period to resolve the uncertainty.

AASB101(41) 5. When the presentation or classification of items in the financial statements is amended, comparative amounts shall be reclassified unless the reclassification is impracticable. When comparative amounts are reclassified, a council shall disclose:

(a) the nature of the reclassification (b) the amount of each item or class of items that is reclassified (c) the reason for the reclassification.

AASB101(42) 6. When it is impracticable to reclassify comparative amounts, a council shall disclose: (a) the reason for not reclassifying the amounts (b) the nature of the adjustments that would have been made if the amounts had been

reclassified.

Three statements of financial position required in certain circumstances AASB101(38),(39) 7. If a council has applied an accounting policy retrospectively, restated items retrospectively or

reclassified items in its financial statements, it must present a third statement of financial position and associated notes as at the beginning of the earliest comparative period presented. However, where the retrospective change in policy or the restatement has no effect on this earliest statement of financial position, we believe that it would be sufficient for the council to merely disclose that fact.

Date of Issue of Financial Statements OLG 8. The Office of Local Government has determined that the date when the financial statements are

authorised for issue is the date on which the Council’s audit report is signed. Council should disclose that it has the power to amend and reissue the financial statements in cases where critical information is received from public submissions or where the OLG directs Council to amend the statements.

NSW Council Financial statements 30 June 2015 (continued)

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Commentary – Financial statements (continued)

OLG Lodgement of Financial Statements Policy statement 9. Councils must lodge a complete set of financial statements with the Office of Local Government by

no later than the close of business on the 31st October following the financial year end. Fax copies of financial statements are not acceptable.

10. A Council’s financial statements lodged with the Office of Local Government will be deemed to be deficient if they:

(a) have missing or an incomplete statement by Council required by Section 413(2)(c) LG Act (b) have missing either of the two audit reports required by Section 417(1) LG Act (c) have incomplete statements and/or notes to the accounts (d) have material errors (e) have failed to comply with requirements of local government legislation or the Australian

Accounting Standards and have not disclosed non compliance.

11. Where financial statements are deemed to be deficient, Council will be required to re-lodge their reports and if necessary, provide public notice of any amendments made in accordance with the LG (General) Regulations.

12. Any request for extension to lodge financial statements must be in writing and lodged not later than 17 October. An application for an extension must:

(a) specify the reason(s) for which the extension is sought (b) specify the period for which the extension is being sought (c) attach a copy of the audit notification of council’s intention to seek an extension, and (d) provide the lodgement dates of financial statements and details of any extensions sought

(irrespective of approval) for the previous 3 years.

13. No extensions will be approved beyond 30 November following the financial year end. Requests for extensions to submit financial statements will not be authorised unless there are extraordinary circumstances. Requests for extension on the grounds of computer difficulties and/or lack of staff resources will not be considered extraordinary.

NSW Council Statement by Councillors and Management For the year ended 30 June 2015

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NSW Council

General purpose financial statements for the year ended 30 June 2015

Statement by Councillors and Management made pursuant to Section 413(2)(c) of the Local Government Act 1993 (as amended) The attached General Purpose Financial Statements have been prepared in accordance with:

The Local Government Act 1993 (as amended) and the Regulations made thereunder.

The Australian Accounting Standards and professional pronouncements.

The Local Government Code of Accounting Practice and Financial Reporting.

To the best of our knowledge and belief, these Statements:

presents fairly the Council’s operating result and financial position for the year, and

accords with Council’s accounting and other records.

We are not aware of any matter that would render this Report false or misleading in any way.

Signed in accordance with a resolution of Council made on ……………………………………..

Councillor’s Name Mayor

Councillor’s Name Councillor

General Manager’s Name General Manager

Responsible Accounting Officer's Name Responsible Accounting Officer

NSW Council Statement by Councillors and Management For the year ended 30 June 2015 (continued)

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Commentary – Statement by Councillors and Management

LGA – Sec. 413 (2) (C) Dating and signing of report 1. The Statement must be made in accordance with a resolution of the Council and specify the date on

which it was made.

NSW Council Income statements and statements of comprehensive income For the year ended 30 June 2015

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NSW Council

Income statement for the year ended 30 June 2015

Original budget(1)

2015 $’000 Notes

Actual 2015 $’000

Actual 2014 $’000

Income from continuing operations Revenue: 34,597 Rates and annual charges 3a 35,307 33,610 24,555 User charges and fees 3b 24,588 22,871 3,285 Interest and investment revenue 3c 5,591 6,920 2,605 Other revenues 3d 4,422 4,116 14,238 Grants and contributions provided for operating purposes 3e,f 10,875 13,456 34,864 Grants and contributions provided for capital purposes 3e,f 45,436 15,078 Other Income: 188 Net gain from the disposal of assets 5 1,156 814

- Net share of interests in joint ventures and associates using the equity method 19 7 -

114,332 Total income from continuing operations 127,382 96,865 Expenses from continuing operations 29,114 Employee benefits and on-costs 4a 28,246 28,044 1,616 Borrowing costs 4b 1,267 1,232 26,298 Materials and contracts 4c 29,901 23,977 12,279 Depreciation and amortisation 4d 15,048 12,052 - Impairment 4d - - 7,835 Other expenses 4e 7,089 7,081 - Interest and investment losses 3c - - - Net Loss from the disposal of assets 5 -

- Net share of interests in joint ventures and associates using the equity method 19 - 12

77,142 Total expenses from continuing operations 81,551 72,398 37,190 Operating result from continuing operations 45,831 24,467

- Operating result from discontinued operations 24 - -

37,190 Net operating result for the year 45,831 24,467

Attributable to: 37,190 – Council 45,831 24,467 - – Non-controlling interests - -

2,326

Net operating result for the year before grants and contributions provided for capital purposes 395 9,389

Note:

(1) Original budget as approved by Council – refer Note 16.

The above Income statement should be read in conjunction with the accompanying notes.

NSW Council Income statements and statements of comprehensive income For the year ended 30 June 2015 (continued)

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NSW Council

Statement of comprehensive income for the year ended 30 June 2015

Notes

Actual 2015 $’000

Actual 2014 $’000

Net operating result for the year – from Income statement 45,831 24,467 Other comprehensive income

Amounts which will not be reclassified subsequently to operating result

Gain (loss) on revaluation of infrastructure, property, plant and equipment

20b

8,515

63,783

Adjustment to correct prior period errors 20d - -

Amounts which will be reclassified subsequently to operating result when specific conditions are met Gain (loss) on revaluation of available-for-sale investments 20b - -

Realised available-for-sale investment gains recognised in revenue 20b - -

Total other comprehensive income for the year 8,515 63,783 Total comprehensive income for the year 54,346 88,250

Attributable to – Council

54,346 88,250

– Non-controlling interests - -

The above Statement of comprehensive income should be read in conjunction with the accompanying notes.


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Commentary – Income statement and statement of comprehensive income

Accounting standard for income statement and statement of comprehensive income One or two statements AASB101(81) 1. Entities have a choice to present all items of income and expense recognised in a period either: (a) in a single statement of comprehensive income, or (b) in two statements (as done by NSW Council): (i) a separate income statement which displays components of profit or loss, and (ii) a statement of comprehensive income which begins with profit or loss and displays

components of other comprehensive income.

AASB101(12) 2. Where a council elects to prepare a separate income statement, it must present this income statement immediately before the statement of comprehensive income.

Additional line items AASB101(85) 3. Additional line items, headings and subtotals shall be presented in the statement of comprehensive

income and the income statement (where applicable) when such presentation is relevant to an understanding of the council’s financial performance.

Revenue of equity accounted investments AASB101(82)(c) Framework(74)

4. The share of the profit or loss of associates and joint ventures accounted for using the equity method should be presented as a separate line item, commonly below other expenses and finance costs. It should not be included as part of the council’s revenue. The share of an associate’s or joint venture council’s profit is in the nature of a net gain. It does not represent a gross inflow of economic benefits and hence does not satisfy the definition of revenue in AASB 118 Revenue.

Extraordinary items not permitted AASB101(87) 5. A council shall not present any items of income and expense as extraordinary items, either in the

statement of comprehensive income or in the notes.

Discontinued operations AASB5(33)(a),(b) AASB101(82)(e)

6. Entities shall disclose a single amount in the statement of comprehensive income (or separate income statement) comprising the total of (i) the post-tax profit or loss of discontinued operations and (ii) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation. An analysis of this single amount is also required by paragraph 33 of AASB 5 Non current Assets Held for Sale and Discontinued Operations. This analysis may be presented in the notes or in the statement of comprehensive income (separate income statement). In the case of NSW Council it is presented in note 24.

Components of other comprehensive income AASB101(7) 7. Components of other comprehensive income (OCI) are items of income and expense (including

reclassification adjustments) that are specifically required or permitted by other Australian Accounting Standards to be included in other comprehensive income and are not recognised in profit or loss. They currently include:

(a) changes in the revaluation surplus relating to property, plant and equipment or intangible assets (b) actuarial gains and losses on defined benefit obligations (c) gains and losses arising from translating the financial statements of a foreign operation (d) gains and losses on remeasuring available for sale financial assets (e) the effective portion of gains and losses on hedging instruments in a cash flow hedge (f) the investor’s share of the other comprehensive income of equity-accounted investments, and (g) current and deferred tax credits and charges in respect of items recognised in other

comprehensive income.

The OCI section shall present line items for amounts of OCI in the period, classified by nature (including share of the OCI of associates and joint ventures accounted for using the equity method) and grouped into those that, in accordance with other Australian Accounting Standards:

(i) will not be reclassified subsequently to profit or loss and (ii) will be reclassified subsequently to profit or loss when specific conditions are met.

AASB 101.82A


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Discontinued operations 8. AASB 5 is unclear as to whether entities need to separate out items of other comprehensive income

between continuing and discontinued operations. We believe that it would be consistent with the principles of AASB 5 to do so, as it would provide a useful base for predicting the future results of the continuing operations.

Information to be presented either in the statement of comprehensive income or in the notes Material items of income and expense AASB101(97) 9. When items of income and expense are material, their nature and amount must be disclosed separately

either in the statement of comprehensive income (income statement) or in the notes.

10. Councils should ensure that each class of expenses includes all items related to that class. Material restructuring cost may, for example, include redundancy payments (ie employee benefit cost), inventory write downs (changes in inventory) and impairments in property, plant and equipment. It would not be acceptable to show restructuring costs as a separate line item in an analysis of expenses by nature where there is an overlap with other line items.

Reclassification adjustments AASB101(92),(94)

11. A council shall also disclose separately any reclassification adjustments relating to components of other comprehensive income either in the statement of comprehensive income or in the notes.

AASB101(7),(95) 12. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. They arise, for example, on disposal of a foreign operation, on derecognition or impairment of an available for sale financial asset and when a hedged forecast transaction affects profit or loss.

Classification of Expenses OLG 13. The Office of Local Government has determined that expenses are to be classified by nature in the

Income statement as prescribed and by function in Note 2(a).

Materiality AASB101(29)

14. Each material class of expense should be separately disclosed, and unclassified expenses should be immaterial both individually and in aggregate.

Goods and Services Tax (GST) UIG1031(6),(7) 15. UIG 1031 Accounting for the Goods and Services Tax (GST) provides that revenues and expenses

must be recognised net of the amount of GST, except that where GST relating to expense items is not recoverable from the taxation authority it must be recognised as part of the item of expense. We recommend that entities that are not able to recover GST relating to particular expense items should include a policy note indicating which expense items disclosed in the financial statements are inclusive of non recoverable GST.


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Offsetting AASB101(32) 16. Assets and liabilities, and income and expenses, must not be offset unless required or permitted by an

Australian Accounting Standard. Examples of income and expenses that are required or permitted to be offset are as follows:

AASB101(34)(a) (a) gains and losses on the disposal of non current assets, including investments and operating assets, are reported by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses

AASB101(34)(b) (b) expenditure related to a provision that is recognised in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and reimbursed under a contractual arrangement with a third party (eg a supplier’s warranty agreement) may be netted against the related reimbursement

AASB101(35) (c) gains and losses arising from a group of similar transactions are reported on a net basis, for example, foreign exchange gains and losses or gains and losses arising on financial instruments held for trading. Such gains and losses are, however, reported separately if they are material.

17. Income which falls under the scope of AASB 118 Revenue cannot be netted off against related expenses.

Original budget OLG 18. The Office of Local Government requires the presentation of Original Budget figures in the Income

statement for comparability.

19. The last line on the Income statement being ‘Net operating result for the year before grants and contributions provided for capital purposes’ is provided as a key industry indicator of financial performance. This line stands alone.

OLG Income Statement Policy Statement 20. Councils must prepare on an annual basis, a detailed statement of income and expenditure (budget)

on an accruals basis presented to Council in both income statement format and Note 2(a) format, before the commencement of the new financial year (1 July).

21. The statement of income and expenditure (budget) result must be compared to the actual result reported in Council’s Income Statement and Note 2a.

22. Clean Energy Future scheme – grants, subsidies etc.

There are a large number of programs associated with the ‘Clean Energy Future’ arrangements under which Councils may recoup a portion of the costs involved in projects of various types. These recoupments carry a range of descriptions, including grants, subsidies etc.

Income earned from any of these arrangements should be shown separately in note 3d

23. LIRS income

Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the council. In some cases, this may not be probable until the consideration is received or until an uncertainty is removed. (AASB 118 para. 18) LIRS subsidy payments are revenue and revenue is recognised periodically as and when loan repayments are made and invoices are raised.

NSW Council Statement of financial position As at 30 June 2015

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NSW Council

Statement of financial position as at 30 June 2015

Notes

Actual 2015 $’000

Actual 2014 $’000

ASSETS Current assets Cash and cash equivalents 6a 12,797 13,488 Investments 6b 61,241 57,207 Receivables 7 11,695 9,728 Inventories 8 2,017 6,332 Other 8 29 846 Non-current assets classified as held for sale 22 - -

Total current assets 87,779 87,601

Non-current assets Investments 6b 39,737 35,265 Receivables 7 81 269 Infrastructure, property, plant and equipment 9 918,542 873,502 Investments accounted for using equity method 19 362 333 Investment property 14 - - Intangible assets 25 - - Other 8 5,746 2,810

Total non-current assets 964,468 912,179

Total assets 1,052,247 999,780

LIABILITIES Current liabilities Payables 10a 9,215 7,179 Borrowings 10a 3,443 3,383 Provisions 10a 5,902 6,266

Total current liabilities 18,560 16,828

Non-current liabilities Payables 10a - - Borrowings 10a 15,314 18,750 Provisions 10a 1,113 1,310

Total non-current liabilities 16,427 20,060

Total liabilities 34,987 36,888

Net assets 1,017,260 962,892

EQUITY Retained earnings 20 598,568 552,715 Revaluation reserves 20 418,692 410,177 Council equity interest - - Non-controlling equity interest - -

Total equity 1,017,260 962,892

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

NSW Council Statement of financial position As at 30 June 2015 (continued)

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Commentary – Statement of Financial Position

Information to be presented In the statement of financial position AASB101(54),(55) 1. Additional line items, headings and subtotals shall be presented in the statement of financial position

when such presentation is relevant to an understanding of the council’s financial position.

Either in the statement of financial position or in the notes AASB101(61) 2. For each asset and liability line item that combines amounts expected to be recovered or settled (a)

no more than twelve months after the reporting period, and (b) more than twelve months after the reporting period, a council shall disclose the amount expected to be recovered or settled after more than twelve months.

AASB101(70) 3. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within twelve months after the reporting period. Similarly, some current liabilities, such as trade payables and some accruals for employee and other operating costs, are part of the working capital used in the council’s normal operating cycle. Such operating items are classified as current liabilities even if they are due to be settled more than twelve months after the reporting period.

Operating cycle AASB101(68) 4. The operating cycle of a council is the time between the acquisition of assets for processing and their

realisation in cash or cash equivalents. When the council’s normal operating cycle is not clearly identifiable, its duration is assumed to be twelve months.

Fair value AASB 13 5. Fair value is measured in accordance with AASB 13 Fair Value Measurement which is defined as:

“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.”

NSW Council Statement of changes in equity For the year ended 30 June 2015

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NSW Council

Statement of changes in equity for the year ended 30 June 2015

Actual 2015 $’000

Actual 2014 $’000

Notes

ref. Retained earnings

Asset revaluation

reserve Other

reserves

Council equity

interest

Non-controlling

interest Total equity Retained earnings

Asset revaluation

reserve Other

reserves

Council equity

interest

Non-controlling

interest Total equity

Opening balance 20 552,715 410,177 - 962,892 - 962,892 534,796 345,644 - 880,440 - 880,440 Correction of errors 22 - - 22 - 22 (6548) 750 - (5798) - (5798) Changes in Accounting

Policies - - - - - - - - - - - - Restated opening

balance 20 552,737 410,177 - 962,914 - 962,914 528,248 346,394 - 874,642 - 874,642 Net operating result

for the year 20 45,831 - - 45,831 - 45,831 24,467 - - 24,467 - 24,467 Other comprehensive

income 20 - 8,515 - 8,515 - 8,515 63,783 - 63,783 - 63,783 Total comprehensive

income 20 45,831 8,515 - 54,346 - 54,346 24,467 63,783 - 88,250 - 88,250

Closing balance 20 598,568 418,692 - 1,017,260 - 1,017,260 552,715 410,177 - 962,892 - 962,892

The above Statement of changes in equity should be read in conjunction with the accompanying notes.

NSW Council Statement of changes in equity For the year ended 30 June 2015

(continued)

A-19

Commentary – Statements of changes in equity

AASB101(106) 1. The statement of changes in equity shall include: (a) total comprehensive income for the period, showing separately the total amounts attributable

to owners of the parent and to non controlling interests (b)

for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with AASB 108

AASB101(106)(d) (c)

for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:

(i) profit or loss (ii) other comprehensive income, and (iii) transactions with owners in their capacity as owners, showing separately

contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in loss of control.

AASB101(108) 2. Components of equity include each class of contributed equity, the accumulated balance of each class of other comprehensive income and retained earnings.

AASB101(106A) 3. The reconciliation of changes in each component of equity shall also show separately each item of comprehensive income. However, this information may be presented either in the notes or in the statement of changes in equity. NSW Council has elected to provide the detailed information in note 20.

Presentation of dividends AASB101(107) 4. The amount of dividends recognised as distributions to owners during the period must be disclosed

either in the statement of changes in equity or in the notes.

NSW Council Contents of the notes to the financial statements 30 June 2015

A-20

NSW Council

Statement of cash flows for the year ended 30 June 2015

Budget 2015 $’000 Notes

Actual 2015 $’000

Actual 2014 $’000

Cash flows from operating activities Receipts: 35,576 Rates and annual charges 34,968 34,185 24,750 User charges and fees 25,259 22,575 3,285 Investment revenue and interest 5,177 5,549 49,102 Grants and contributions 50,805 25,614 - Deposits and retentions received 126 36 4,340 Other 9,642 10,067 Payments: (29,295) Employee benefits and on-costs (28,794) (26,972) (27,863) Materials and contracts (30,986) (25,564) (1,616) Borrowing costs (1,298) (1,167) - Deposits and retentions refunded - (9,002) Other (11,229) (10,908)

49,277 Net cash provided (or used) in operating activities 11(b) 53,670 33,415 Cash flows from investing activities Receipts: - Sale of investments 79,563 128,724 - Sale of investment property - - 3,126 Sale of real estate assets 5,046 879 1,221 Sale of infrastructure, property, plant and equipment 1,042 647 - Sale of interests in joint ventures/associates - - - Proceeds from Boundary adjustment - - - Other 237 271 Payments: - Purchase of investments (87,258) (127,545) - Purchase of investment property - - (73,820) Purchase of infrastructure, property, plant and equipment (46,211) (41,531) (5816) Purchase of real estate (3,404) (3,304) - Purchase of interests in joint ventures/associates - - - Other - -

(75,289) Net cash provided by (or used in) Investing activities (50,985) (41,859) Cash flows from financing activities Receipts: 12,166 Borrowings and advances - 11,000 - Other - - Payments: (3,592) Borrowings and advances (3,376) (2,964) - Lease liabilities - - - Other - -

8,574 Net cash provided by (or used in) financing activities (3,376) 8,036

(17,438)

Net increase/(decrease) in cash and cash equivalents (691) (408)

119,913

Cash and cash equivalents at beginning of reporting period 11(a) 13,488 13,896

102,475 Cash and cash equivalents at end of reporting period 11(a) 12,797 13,488

The above Statement of cash flows should be read in conjunction with the accompanying notes.

NSW Council Notes to the financial statements 30 June 2015 (continued)

A-21

Commentary – Statement of cash flows

Reporting cash flows On a net basis AASB107(22),(23) 1. Cash flows arising from the following operating, investing or financing activities may be reported

on a net basis: (a) cash receipts and payments on behalf of customers when the cash flows reflect the

activities of the customer rather than those of the council (eg rents collected on behalf of, and paid over to, the owners of properties), and

(b) cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short (eg advances made for, and repayment of, principal amounts relating to credit card customers).

From operating activities OLG 2. The Office of Local Government requires all Councils to use the direct method in reporting cash

flows from operating activities whereby major classes of gross cash receipts and gross cash payments are disclosed.

Expenditure on unrecognised assets to be classified as operating cash flows AASB107(16) 3. Cash flows can only be classified as arising from investing activities if they result in the recognition

of an asset in the statement of financial position. Examples of expenditure that should be classified as operating cash flows on this basis are:

(a) expenditures on advertising or promotional activities, staff training and research and development, and

(b) transaction costs related to a business combination.

From investing and financing activities OLG 4. The Office of Local Government requires the presentation of Original Budget figures in the Cash

flow statement for comparability.

Sale of property, plant and equipment held for rental to others Changes in ownership interest in a subsidiary without loss of control AASB107(42A), (42B)

5. Cash flows arising from changes in ownership interest in a subsidiary that do not result in a loss of control shall be classified as cash flows from financing activities.

Goods and Services Tax (GST) UIG1031(10) 6. Cash flows shall be included in the statement of cash flows on a gross basis, subject to

paragraph 8 below.

UIG1031(11) 7. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority shall be classified as operating cash flows and will be included in receipts from customers or payments to suppliers, as appropriate.

Interest and dividends AASB107(31) 8. The Office of Local Government requires the payment and/or receipt of interest and dividends to

be classified as operating cash flows.

Additional recommended disclosures AASB107(50) 9. Additional information may be relevant to users in understanding the financial position and liquidity

of a council. Disclosure of this information, together with a commentary by management, is encouraged.


A-22

NSW Council

Notes to the financial statements for the year ended 30 June 2015

Contents of the notes to the financial statements Page

Note 1 Summary of significant accounting policies A-23

Note 2(a) Functions or activities A-42

Note 2(b) Components of functions or activities A-43

Note 3 Income from continuing operations A-45

Note 4 Expenses from continuing operations A-53

Note 5 Gain or loss from disposal of assets A-58

Note 6(a) Cash and cash equivalents A-59

Note 6(b) Investments A-61

Note 6(c) Restricted cash, cash equivalents and investments A-64

Note 7 Receivables A-66

Note 8 Inventories and other assets A-69

Note 9(a) Infrastructure, property, plant and equipment A-72

Note 9(b) Restricted infrastructure, property, plant and equipment A-73

Note 10(a) Payables, borrowings and provisions A-77

Note 10(b) Description of and movements in provisions A-78

Note 11 Reconciliation of operating result to net cash movement from operating activities A-84

Note 12 Commitments A-86

Note 13(a) Statement of performance measures – consolidated results A-88

Note 13(b) Statement of performance measures by fund A-89

Note 14 Investment properties A-93

Note 15 Financial risk management A-95

Note 16 Material budget variations A-102

Note 17 Statement of developer contributions A-104

Note 18 Contingencies A-109

Note 19 Interests in other entities A-111

Note 20 Revaluation reserves and retained earnings A-119

Note 21 Results by fund A-122

Note 22 Non-current assets classified as held for sale A-125

Note 23 Events occurring after statement of financial position date A-127

Note 24 Discontinued operation A-129

Note 25 Intangible assets A-131

Note 26 Reinstatement, rehabilitation and restoration liabilities A-133

Note 27 Fair Value Measurement A-136

Note: Notes 1 to 20 and 27 are mandatory and must be presented in the order specified. Notes 21 to 26 need only be included if applicable. Notes 13(b) and 21 need only be included if Council has Water and Sewer Funds


A-23

[Councils should include relevant accounting policies only – delete those policies which are not applicable]

Note 1 Summary of significant accounting policies

AASB101(112)(a),(b) The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

AASB101(119) (a) Basis of preparation

AASB1054(7)-(9) (Revised)

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Australian Accounting Interpretations, the Local Government Act (1993) and Regulation, and the Local Government Code of Accounting Practice and Financial Reporting. NSW Council is a not for-profit council for the purpose of preparing the financial statements.

(Revised) (i) New and amended standards adopted by Council AASB108(28) Refer to Appendix L for an example note for new and amended standards adopted by Council during the

reporting period.

(Revised) (ii) Early adoption of standards NSW Council has not elected to apply any pronouncements before their operative date in the annual reporting

period beginning 1 July 2014.

(iii) Historical cost convention AASB101(117)(a) These financial statements have been prepared under the historical cost convention, as modified by the

revaluation of certain financial assets and liabilities and certain classes of property, plant and equipment and investment property.

(iv) Critical accounting estimates and judgements AASB101(122),(125) The preparation of financial statements requires the use of certain critical accounting estimates. It also

requires management to exercise its judgement in the process of applying the Council's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the council and that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions NSW Council makes estimates and assumptions concerning the future. The resulting accounting

estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below.

(i) Estimated fair values of investment properties. (ii) Estimated fair values of infrastructure, property, plant and equipment. (iii) Estimated tip remediation provisions. Critical judgements in applying the council's accounting policies (i) Impairment of Receivables Council has made a significant judgement about the impairment of a number of its receivables

in Note 7. (ii) Projected Section 94 Commitments Council has used significant judgement in determining future Section 94 income and

expenditure in Note 17. AASB101 (b) Revenue recognition

Council recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the council and specific criteria have been met for each of the Council’s activities as described below. Council bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

AAS27 Revenue is measured at the fair value of the consideration received or receivable. Revenue is measured on major income categories as follows:


A-24

Note 1 Summary of significant accounting policies (continued)

(b) Revenue recognition (continued)

(i) Rates, annual charges, grants and contributions Rates, annual charges, grants and contributions (including developer contributions) are recognised as

revenues when the Council obtains control over the assets comprising these receipts. Developer contributions may only be expended for the purposes for which the contributions were required but the Council may apply contributions according to the priorities established in work schedules.

Control over assets acquired from rates and annual charges is obtained at the commencement of the rating year as it is an enforceable debt linked to the rateable property or, where earlier, upon receipt of the rates.

Control over granted assets is normally obtained upon their receipt (or acquittal) or upon earlier notification that a grant has been secured, and is valued at their fair value at the date of transfer.

Revenue is recognised when the Council obtains control of the contribution or the right to receive the contribution, it is probable that the economic benefits comprising the contribution will flow to the Council and the amount of the contribution can be measured reliably.

Where grants or contributions recognised as revenues during the financial year were obtained on condition that they be expended in a particular manner or used over a particular period and those conditions were undischarged at reporting date, the unused grant or contribution is disclosed in Note 3(g). The note also discloses the amount of unused grant or contribution from prior years that was expended on Council’s operations during the current year.

A liability is recognised in respect of revenue that is reciprocal in nature to the extent that the requisite service has not been provided at reporting date.

(ii) User charges and fees User charges and fees (including parking fees and fines) are recognised as revenue when the service has

been provided, the payment is received, or when the penalty has been applied, whichever first occurs.

(iii) Sale of plant, property, infrastructure and equipment The profit or loss on sale of an asset is determined when control of the asset has irrevocably passed to the

buyer.

(iv) Interest Interest income is recognised using the effective interest rate at the date that interest is earned.

(v) Rent Rental income is accounted for on a straight-line basis over the lease term.

(vi) Dividend income Revenue is recognised when the Council’s right to receive the payment is established, which is generally

when shareholders approve the dividend.

(vii) Other income Other income is recorded when the payment is due, the value of the payment is notified or the payment is

received, whichever occurs first.

AASB101(110) (c) Principles of consolidation

(i) The Consolidated Fund LGA s.409(1) In accordance with the provisions of Section 409(1) of the LGA 1993, all money and property received by

Council is held in the Council’s Consolidated Fund unless it is required to be held in the Council’s Trust Fund.


A-25


(c) Principles of consolidation (continued)

The following entities have been included as part of the Consolidated fund:

General purpose operations

Water service

Sewerage service

Memorial Hall Committee

Leisure Centre Pty Limited

Performing Arts Centre Pty Limited

Oval Management Committee

Park Management Committee.

LGA s.411 (ii) The Trust Fund In accordance with the provisions of Section 411 of the Local Government Act 1993 (as amended), a separate

and distinct Trust Fund is maintained to account for all money and property received by the Council in trust which must be applied only for the purposes of or in accordance with the trusts relating to those monies. Trust monies and property subject to Council’s control have been included in these reports.

Trust monies and property held by Council but not subject to the control of Council, have been excluded from these reports. A separate statement of monies held in the Trust Fund is available for inspection at the Council office by any person free of charge.

(iii) County Councils Council is a member of the Holly Weeds County Council, a body corporate established under the Local

Government Act to control weeds in the Cumberland Plains Region. Council is one of 5 constituent members and neither controls or significantly influences the County Council. Accordingly, the County Council has not been consolidated or otherwise included in the financial statements.

AASB 10

AASB 10 AASB 11

(iv) Interests in other entities The consolidated financial statements include the financial position and performance of controlled entities from the date on which controls is obtained until the date that control is lost. Intragroup assets, liabilities, equity, income, expenses and cashflows relating to transaction between entities in the consolidated entity have been eliminated in full for the purpose of these financial statements. Appropriate adjustments have been made to a controlled entity’s financial position, performance and cash flows where the accounting policies used by that entity were different from those adopted by the consolidated entity. All controlled entities have a June financial year end.

A list of controlled entities is contained in Note 19 to the financial statements.

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Council has control. Control is established when the Council is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity.

Joint Arrangements

AASB 11 Joint Arrangements defines a joint arrangement as an arrangement of which two or more parties have joint control and classifies these arrangements as either joint ventures or joint operations. The Council has determined that it has [both joint ventures and joint operations / only joint ventures / only joint operations] – Councils to delete as applicable.

Joint operations:

In relation to its joint operations, where the venturer has the rights to the individual assets and obligations arising from the arrangement, the Council has recognised:

Its assets, including its share of any assets held jointly;

Its liabilities, including its share of any liabilities incurred jointly;

Its revenue from the sale of its share of the output arising from the joint operation;

Its share of the revenue from the sale of the output by the joint operation;

Its expenses, including its share of any expenses incurred jointly.

These figures are incorporated into the relevant line item in the primary statements.


A-26


Joint ventures:

Joint ventures are those joint arrangements which provide the Council with rights to the net assets of the arrangements. Interests in joint ventures are accounted for using the equity method in accordance with AASB 128 Associates and Joint Ventures. Under this method, the investment is initially recognised as cost and the carrying amount is increased or decreased to recognise the Council’s share of the profit or loss and other comprehensive income of the investee after the date of acquisition.

If the Council’s share of losses of a joint venture equals or exceeds its interest in the joint venture, the Council discontinues recognising its share of further losses.

The Council’s share in the joint ventures gains or losses arising from transactions between itself and its joint venture are eliminated.

Adjustments are made to the joint ventures accounting policies where they are different from those of the Council for the purpose of the consolidated financial statements.

Associates

Interests in associates, where the Council has significant influence over the investee, are accounted for using the equity method in accordance with AASB 128 Associates and Joint Ventures. Under this method, the investment is initially recognised as cost and the carrying amount is increased or decreased to recognise the Council’s share of the profit or loss and other comprehensive income of the investee after the date of acquisition.

(d) Business Combinations

Business combinations are accounted for by applying the acquisition method which requires an acquiring entity to be identified in all cases. The acquisition date under this method is the date that the acquiring entity obtains control over the acquired entity. The fair value of identifiable assets and liabilities acquired are recognised in the consolidated financial statements at the acquisition date. Goodwill or a gain on bargain purchase may arise on the acquisition date, this is calculated by comparing the consideration transferred and the amount of non-controlling interest in the acquiree with the fair value of the net identifiable assets acquired. Where consideration is greater than the assets, the excess is recorded as goodwill. Where the net assets acquired are greater than the consideration, the measurement basis of the net assets are reassessed and then a gain from bargain purchase recognised in profit or loss. All acquisition related costs are recognised as expenses in the periods in which the costs are incurred except for costs to issue debt or equity securities. Any contingent consideration which forms part of the combination is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity then it is not re-measured and the settlement is accounted for within equity. Otherwise subsequent changes in the value of the contingent consideration liability are measured through profit or loss.

AASB101(110) (e) Leases

AASB117(20),(25) Leases of property, plant and equipment where Council, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that Council will obtain ownership at the end of the lease term.

AASB117(33) UIG115(5)

Leases in which a significant portion of the risks and rewards of ownership are not transferred to Council as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

AASB117(39) Lease income from operating leases where Council is a lessor is recognised in income on a straight-line basis over the lease term.



A-27

AASB101(110) (f) Impairment of assets

AASB136(9),(10) Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

Where an asset is not held principally for cash generating purposes and would be replaced if the Council was deprived of it then depreciated replacement cost is used as value in use, otherwise value in use is estimated by using a discounted cash flow model.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

AASB101(110) (g) Cash and cash equivalents

AASB107(6),(8),(46) For Statement of cashflow presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

AASB101(110)

(h) Receivables

AASB7(21) AASB139(46)(a)

Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Receivables are generally due for settlement within 30 days.

Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of receivables) is used when there is objective evidence that Council will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

AASB7(21) AASB7(B5)(d)

The amount of the impairment loss is recognised in the income statement within other expenses. When a receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.

AASB101(110) (i) Inventories

AASB101(110) (i) Raw materials and stores, work in progress and finished goods AASB102(9),(10),(25), (36)(a)

Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost includes the transfer from equity of any gains/losses on qualifying cash flow hedges relating to purchases of raw material. Costs are assigned to individual items of inventory on basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

AASB101(110) (ii) Land held for resale/capitalisation of borrowing costs AASB102(9),(10),(23), (36)(a) AASB123(11),(25)

Land held for resale is stated at the lower of cost and net realisable value. Cost is assigned by specific identification and includes the cost of acquisition, and development and borrowing costs during development. When development is completed borrowing costs and other holding charges are expensed as incurred.

AASB123(11),(13), (23)

Borrowing costs included in the cost of land held for resale are those costs that would have been avoided if the expenditure on the acquisition and development of the land had not been made. Borrowing costs incurred while active development is interrupted for extended periods are recognised as expenses.


A-28


AASB101(110) (j) Non-current assets (or disposal groups) held for sale and discontinued operations

AASB5(6),(15) Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.

AASB5(20)-(22) An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition.

AASB5(25) Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

AASB5(38) Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position.

AASB5(31),(32),(33)(a) A discontinued operation is a component of the entity council that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the Income statement.

AASB101(110) AASB7(21)

(k) Investments and other financial assets

Classification AASB139(45),(60) Council classifies its financial assets in the following categories: financial assets at fair value through profit or

loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

AASB101(110) (i) Financial assets at fair value through profit or loss AASB101(57),(59) AASB139(9),(45)

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

(ii) Loans and receivables AASB139(9) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in other receivables (note 8) and receivables (note 7) in the statement of financial position.

(iii) Held-to-maturity investments AASB139(9) Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and

fixed maturities that Council’s management has the positive intention and ability to hold to maturity. If Council were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets.

(iv) Available-for-sale financial assets AASB139(9) AASB7(21),(B5)(b)

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term.


A-29


AASB101(110) AASB7(21)

(k) Investments and other financial assets (continued)

Recognition and de-recognition AASB139(38),(43) AASB7(21),(B5)(c)

Regular purchases and sales of financial assets are recognised on trade-date - the date on which Council commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and Council has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities.

Subsequent measurement AASB139(46)(a) Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective

interest method.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security (note Council’s obligations under Section 625 of the Local Government Act and S212 of the LG (General) Regulation 2005).. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in equity.

AASB7(27) Details on how the fair value of financial instruments is determined are disclosed in note 1(l).

Impairment AASB139(58),(59) Council assesses at the end of each reporting period whether there is objective evidence that a financial

asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

(i) Assets carried at amortised cost AASB139(63) (Revised)

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price.

OLG Investment Policy Council has an approved investment policy complying with Section 625 of the Local Government Act and

S212 of the LG (General) Regulation 2005. Investments are placed and managed in accordance with that policy and having particular regard to authorised investments prescribed under the Ministerial Local Government Investment Order. Council maintains an investment policy that complies with the Act and ensures that it or its representatives exercise care, diligence and skill that a prudent person would exercise in investing Council funds.

Council amended its policy following revisions to the Ministerial Local Government Investment Order arising from the Cole Inquiry recommendations. Certain investments the Council holds are no longer prescribed, however they have been retained under grandfathering provisions of the Order. These will be disposed of when most financially advantageous to Council.

AASB101(110) (l) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.


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AASB132(92) The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. Council uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Council for similar financial instruments.

AASB101(110) (m) Infrastructure, property, plant and equipment (IPPE)

Council’s assets have been progressively revalued to fair value in accordance with a staged implementation advised by the Office of Local Government. At reporting date the following classes of IPPE were stated at their fair value:

Operational land (External Valuation).

Buildings – Specialised/Non Specialised (External Valuation).

Water/Sewerage Networks (Internal Valuation).

Plant and equipment (as approximated by depreciated historical cost).

Road assets – roads, bridges and footpaths (Internal Valuation).

Drainage assets – (Internal Valuation).

Bulk earthworks – (Internal Valuation).

Community land – (Internal Valuation).

Land Improvements (as approximated by depreciated historical cost).

Other structures (as approximated by depreciated historical cost).

Other assets (as approximated by depreciated historical cost).

Water and sewerage network assets are indexed annually between full revaluations in accordance with the latest indices provided in the NSW Office of Water – Rates Reference Manual. For all other assets, Council assesses at each reporting date whether there is any indication that a revalued asset’s carrying amount may differ materially from that which would be determined if the asset were revalued at the reporting date. If any such indication exists, Council determines the asset’s fair value and revalue the asset to that amount. Full revaluations are undertaken for all assets on a 5 year cycle.

Increases in the carrying amounts arising on revaluation are credited to the asset revaluation reserve. To the extent that the increase reverses a decrease previously recognising profit or loss relating to that asset class, the increase is first recognised in profit or loss. Decreases that reverse previous increases of assets in the same class are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the class; all other decreases are charged to the Income statement.

AASB116(12) Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Council and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

AASB116(50),(73)(b) Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives, as follows:


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AASB101(110) (m) Infrastructure, property, plant and equipment (IPPE) (continued)

AASB116(73)(c) Office equipment 5 – 10 years Pumps and telemetry 15 – 20 years

Office furniture 10 – 20 years Drains 80 – 100 years

Vehicles and road making equipment 5 – 8 years Culverts 50 – 80 years

Other plant and equipment 5 – 15 years Flood control structures

80 – 100 years

Buildings – Masonry 50 – 10 0

years Sealed roads – Surface

20 years

– Other 20 – 40 years – Structure 50 years

Playground equipment 5 – 15 years Unsealed roads 20 years

Benches, seats etc 10 – 20 years Bridge – Concrete

100 years

Dams and reservoirs 80 – 100

years – Other 50 years

Bores 20 – 40 years Bulk earthworks Infinite

Reticulation pipes – PVC 70 – 80 years

– Other 25 – 75 years

AASB116(51) The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

AASB136(59) An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

AASB116(68),(71) AASB116(41)

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

Land, other than land under roads, is classified as either operational or community in accordance with Part 2 of Chapter 6 of the Local Government Act (1993). This classification is made in Note 9(a).

AASB101(119) (n) Investment property

AASB140(75)(a), (75)(d)

Investment property, principally comprising freehold office buildings, is held for long-term rental yields and is not occupied by the Council. Investment property is carried at fair value, which is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, Council uses alternative valuation methods such as recent prices in less active markets or discounted cash flow projections. These valuations are reviewed annually by a member of the Australian Property Institute. Changes in fair values are recorded in profit or loss as part of other income.

AASB108(28)(c) AASB140(8)(e) AASB2008-5(68)

Investment property includes properties that are under construction for future use as investment properties. These are also carried at fair value unless the fair value cannot yet be reliably determined. Where that is the case, the property will be accounted for at cost until either the fair value becomes reliably determinable or construction is complete.

AASB101(110) (o) Payables

AASB132(60)(a),(60)(b)

These amounts represent liabilities for goods and services provided to the Council prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

AASB101(110) AASB7(21)

(p) Borrowings

AASB139(43),(47) (Revised)

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

AASB139(39),(41) Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or finance cost.

AASB101(60) Borrowings are classified as current liabilities unless Council has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.


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AASB101(110) AASB123(29)(a)

(q) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

AASB101(110) (r) Provisions

AASB137(14),(24), (63)

Provisions are recognised when Council has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

AASB137(36),(45), (47),(60)

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

(s) Employee benefits

(Revised) (i) Short-term obligations AASB119(10),(11) Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave

expected to be wholly settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.

(Revised) (ii) Other long term employee benefit obligations 60,61 AASB119(128) The liability for long service leave and annual leave which is not expected to be wholly settled within 12 months

after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

AASB101(69)(d) The obligations are presented as current liabilities in the statement of financial position if the council does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.

AASB101(110) (iii) Retirement benefit obligations All employees of the Council are entitled to benefits on retirement, disability or death. Council contributes to

various defined benefit plans and defined contribution plans on behalf of its employees.

Defined Benefit Plans

AASB119(54),(64) A liability or asset in respect of defined benefit superannuation plans would ordinarily be recognised in the statement of financial position, and measured as the present value of the defined benefit obligation at the reporting date plus unrecognised actuarial gains (less unrecognised actuarial losses) less the fair value of the superannuation fund’s assets at that date and any unrecognised past service cost. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the reporting date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. However, when this information is not reliably available, Council accounts for its obligations to defined benefit plans on the same basis as its obligations to defined contribution plans i.e as an expense when it becomes payable.

AASB119(44) Defined Contribution Plans

Contributions to defined contribution plans are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.


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AASB1045 (t) Land under roads

Council has elected not to recognise land under roads acquired before 1 July 2008 in accordance with AASB 1051. Any land under roads that was recognised before 1 July 2008 was derecognised at 1 July 2008 against the opening balance of retained earnings.

Land under roads acquired after 1 July 2008 is recognised in accordance with AASB 116 – Property, Plant and Equipment.

Land under roads is land under roadways and road reserves including land under footpaths, nature strips and median strips.

(u) Self insurance

Council has decided to self-insure for various risks including public liability and professional indemnity. A provision for self-insurance has been made to recognise outstanding claims the amount of which is detailed in Note 10. Council also maintains cash and investments to meet expected future claims and these are detailed in Note 6(c).

(v) Intangible assets

AASB1O1(1l0)) (New)

IT development and software Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service, direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight line bases over periods generally ranging from 3 to 5 years.

IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where Council has an intention and ability to use the asset.

(w) Crown Reserves

Crown Reserves under Council’s care and control are recognised as assets of the Council. While ownership of the reserves remains with the Crown, Council retains operational control of the reserves and is responsible for their maintenance and use in accordance with the specific purposes to which the reserves are dedicated.

Improvements on Crown Reserves are also recorded as assets, while maintenance costs incurred by Council and revenues relating the reserves are recognised within Council’s Income Statement. Representations from both State and Local Government are being sought to develop a consistent accounting treatment for Crown Reserves across both tiers of government.

(x) Rural Fire Service assets

Under section 119 of the Rural Fire Services Act 1997, “all fire fighting equipment purchased or constructed wholly or from money to the credit of the Fund is to be vested in the council of the area for or on behalf of which the fire fighting equipment has been purchased or constructed”. Until such time as discussions on this matter have concluded and the legislation changed, Council will (will not) recognise rural fire service assets including land, buildings, plant and vehicles.

AASB101(110) (y) Goods and Services Tax (GST)

UIG1031(6),(7) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

UIG1031(8),(9) Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.

UIG1031(10),(11) Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.


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AASB108(30) (Revised)

(z) New accounting standards and interpretations issued not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015 reporting periods. NSW Council's assessment of the impact of the new standards and interpretations relevant to them is set out below.

[Note: this information is up-to-date at the date of writing – March 2015, however Councils are required to review the AASB website for standards issued between March 2015 and date of approval of their financial statements for other relevant standards which have been issued. The standards and impacts described below should also be reviewed to ensure they are appropriate for Council].

PRONOUNCEMENTS AASB 9 Financial Instruments and associated amending standards

NATURE OF THE CHANGE IN ACCOUNTING POLICY

Significant revisions to the classification and measurement of financial assets, reducing the number of categories and simplifying the measurement choices, including the removal of impairment testing of assets measured at fair value. The amortised cost model is available for debt assets meeting both business model and cash flow characteristics tests. All investments in equity instruments using AASB 9 are to be measured at fair value.

Amends measurement rules for financial liabilities that the entity elects to measure at fair value through profit and loss. Changes in fair value attributable to changes in the entity’s own credit risk are presented in other comprehensive income.

Chapter 6 Hedge Accounting supersedes the general hedge accounting requirements in IAS 39 Financial Instruments: Recognition and Measurement, which many consider to be too rules-based and arbitrary. Chapter 6 requirements include a new approach to hedge accounting that is intended to more closely align hedge accounting with risk management activities undertaken by entities when hedging financial and non-financial risks. Some of the key changes from AASB 139 are as follows:

to allow hedge accounting of risk components of non-financial items that are identifiable and measurable (many of which were prohibited from being designated as hedged items under AASB 139);

changes in the accounting for the time value of options, the forward element of a forward contract and foreign-currency basis spreads designated as hedging instruments; and

modification of the requirements for effectiveness testing (including removal of the ‘bright-line’ effectiveness test that offset for hedging must be in the range 80-125%).

Revised disclosures about an entity’s hedge accounting have also been added to AASB 7 Financial Instruments: Disclosures.

Impairment of assets is now based on expected losses in AASB 9 which requires entities to measure:

the 12-month expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or

full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument.

EFFECTIVE DATE

EXPECTED IMPACT ON THE FINANCIAL STATEMENTS (INDICATIVE WORDING ONLY – COUNCIL SHOULD INSERT INFORMATION RELEVANT TO THEM) PRONOUNCEMENT NATURE OF THE CHANGE IN ACCOUNTING POLICY

EFFECTIVE DATE

Annual reporting periods beginning on or after 1 January 2018.

The available-for-sale investments held will be classified as fair value through OCI and will no longer be subject to impairment testing. The impairment loss recognised in the current year financial statements in relation to these statements was $x.

Other impacts on the reported financial position and performance have not yet been determined.

(iv) AASB 2014 – 10 Sale or contribution of Assets between an Investor and its Associate or Joint Venture

(v) The amendments address an acknowledged inconsistency between the requirements in AASB 10 and those in AASB 128 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture.

The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

Annual reporting periods beginning on or after 1 January 2016


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EXPECTED IMPACT ON THE FINANCIAL STATEMENTS (INDICATIVE WORDING ONLY – COUNCIL SHOULD INSERT INFORMATION RELEVANT TO THEM)


This will only have impact for Councils with associates or joint ventures where there has been a sale or contribution of assets between the entity and its investor.

If Council does not have an associate or joint venture then this standard should not be included in the note.

If Council has made or anticipates making a sale or contribution with its joint venture or associate then the impact should be documented.

PRONOUNCEMENTS NATURE OF THE CHANGE IN ACCOUNTING POLICY EFFECTIVE DATE

AASB 2014 – 3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations [AASB 1 and AASB 11]

This Standard amends AASB 11 to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. The amendments require:

(a) the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in AASB 3 Business Combinations, to apply all of the principles on business combinations accounting in AASB 3 and other Australian Accounting Standards except for those principles that conflict with the guidance in AASB 11; and

(b) the acquirer to disclose the information required by AASB 3 and other Australian Accounting Standards for business combinations.

This Standard also makes an editorial correction to AASB 11.

Annual periods beginning on or after 1 January 2016

EXPECTED IMPACT ON THE FINANCIAL STATEMENTS (INDICATIVE WORDING ONLY)

PRONOUNCEMENT

NATURE OF THE CHANGE IN ACCOUNTING POLICY EFFECTIVE DATE EXPECTED INPACT ON THE FINANCIAL STATEMENTS (INDICATIVE WORDING ONLY – COUNCILS SHOULD INSERT INFORMATION RELEVANT TO THEM

If a joint operation is acquired during the reporting period, then this standard clarifies the accounting for the acquisition to be in accordance with AASB 3, i.e. assets and liabilities acquired to be measured at fair value

If the entity has not acquired a joint operation then there will be no impact on adoption of this standard and therefore this standard should be deleted from this note..

AASB 15 Revenue from contracts with customers and associated amending standards

AASB 15 introduces a five step process for revenue recognition with the core principle of the new Standard being for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the entity expects to be entitled in exchange for those goods or services

Accounting policy changes will arise in timing of revenue recognition, treatment of contracts costs and contracts which contain a financing element

AASB 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements

Annual reporting periods beginning on or after 1 January 2017

The changes in revenue recognition requirements in AASB 15 may cause changes to the timing and amount of revenue recorded in the financial statements as well as additional disclosures. The impact of AASB 15 has not yet been quantified.

EFFECTIVE DATE Annual reporting periods beginning on or after 1 January 2017.


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Commentary – Summary of significant accounting policies

Summary of accounting policies Contents 1. A summary of significant accounting policies must include: AASB101(108)(a) (a) the measurement basis (or bases) used in preparing the financial statements, and AASB101(108)(b) (b) the other accounting policies used that are relevant to an understanding of the financial

statements.

Whether to disclose an accounting policy AASB101(110) 2. In deciding whether a particular accounting policy should be disclosed, management considers

whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in the reported financial performance and financial position. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in Australian Accounting Standards. Some Australian Accounting Standards specifically require disclosure of particular accounting policies, including choices made by management between different policies they allow. For example, AASB 116 Property, Plant and Equipment requires disclosure of the measurement bases used for classes of property, plant and equipment. AASB 123 Borrowing Costs requires disclosure of whether borrowing costs are recognised immediately as an expense or capitalised as part of the cost of qualifying assets.

Changes in Accounting policies Initial application of Australian Accounting Standard AASB108(28) 3. When initial application of an Australian Accounting Standard has an effect on the current period or

any prior period, would have such an effect except that it is impracticable to determine the amount of the adjustment, or might have an effect on future periods, a council shall disclose:

(a) the title of the Australian Accounting Standard (b) when applicable, that the change in accounting policy is made in accordance with its

transitional provisions (c) the nature of the change in accounting policy (d) when applicable, a description of the transitional provisions (e) when applicable, the transitional provisions that might have an effect on future periods (f) for the current period and each prior period presented, to the extent practicable, the amount

of the adjustment: (i) for each financial statement line item affected, and (ii) if AASB 133 Earnings per Share applies to the council, for basic and diluted

earnings per share (g) the amount of the adjustment relating to periods before those presented, to the extent

practicable, and (h) if retrospective application required by paragraph 19(a) or (b) of AASB 108 Accounting

Policies, Changes in Accounting Estimates and Errors is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied.

Financial statements of subsequent periods need not repeat these disclosures. AASB108(29)

Voluntary change in accounting policy 4. When a voluntary change in accounting policy has an effect on the current period or any prior

period, would have an effect on that period except that it is impracticable to determine the amount of the adjustment, or might have an effect on future periods, a council shall disclose:

(a) the nature of the change in accounting policy (b) the reasons why applying the new accounting policy provides reliable and more relevant

information (c) for the current period and each prior period presented, to the extent practicable, the

amount of the adjustment: (i) for each financial statement line item affected, and (ii) if AASB 133 applies to the council, for basic and diluted earnings per share (d) the amount of the adjustment relating to periods before those presented, to the extent

practicable, and (e) before those presented, the circumstances that led to the existence of that condition and

a description of how and from when the change in accounting policy has been applied. Financial statements of subsequent periods need not repeat these disclosures.


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Commentary – Summary of significant accounting policies (continued)

Where compliance with an Australian Accounting Standard is misleading AASB101(21) 5. In the extremely rare circumstances in which management concludes that compliance with a

requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the Framework, the council shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by disclosing:

(c) the title of the Australian Accounting Standard in question, the nature of the requirement, and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the Framework, and

(b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation.

Going concern AASB101(23) 6.

When preparing financial statements, management shall make an assessment of a council’s ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the council or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the council’s ability to continue as a going concern, those uncertainties shall be disclosed. When the financial statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the council is not regarded as a going concern.

Accrual basis of accounting AASB101(25) 7. A council shall prepare its financial statements, except for cash flow information, using the accrual

basis of accounting.

Consolidated financial statements AASB127(28),(29) AASB128(26)

8. Consistent accounting policies must be employed in the preparation and presentation of consolidated financial statements. Adjustments to achieve consistency must be made where the accounting policies adopted by entities within the consolidated council are dissimilar and are not required by another accounting standard.

Revenue recognition - multiple element arrangements 9. Entities may enter into transactions with their customers which include different elements such as the

sale of a good and the provision of services. Where this is the case, the accounting policy note should discuss the accounting for these types of transactions.

Arrangements involving the legal form of a lease UIG127(4),(10)

10. The accounting for an arrangement in the legal form of a lease must reflect the substance of the arrangement. All aspects and implications of the arrangement must be evaluated to determine its substance, with weight given to those aspects and implications that have an economic effect. All aspects of an arrangement that does not, in substance, involve a lease under AASB 117 Leases must be considered in determining the appropriate disclosures that are necessary to understand the arrangement and the accounting treatment adopted

UIG127(10) 11. The following must be disclosed in each period that an arrangement exists:

(a) a description of the arrangement including: (i) the underlying asset and any restrictions on its use (ii) the life and other significant terms of the arrangement (iii) the transactions that are linked together, including any options, and (b) the accounting treatment applied to any fee received, the amount recognised as revenue in the

period, and the line item of the income statement in which it is included.

UIG127(11) 12. The disclosures required in accordance with paragraph 11 above must be provided individually for each arrangement or in aggregate for each class of arrangement. A class is a grouping of arrangements with underlying assets of a similar nature (eg power plants).

Lease incentives UIG115(3) 13. All incentives for the agreement of a new or renewed operating lease shall be recognised as an integral

part of the net consideration agreed for the use of the leased asset, irrespective of the incentive’s nature or form or the timing of payments.


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UIG115(4) 14. The lessor shall recognise the aggregate cost of incentives as a reduction in rental income over the lease term, on a straight-line basis unless another systematic basis is representative of the time pattern over which the benefit of the leased asset is diminished.

UIG115(5) 15. The lessee shall recognise the aggregate benefit of incentives as a reduction of rental expense over the lease term, on a straight-line basis unless another systematic basis is representative of the time pattern of the lessee’s benefit from the use of the leased asset.

UIG115(6) 16. Costs incurred by the lessee, including those in connection with a pre-existing lease (eg costs for termination, relocation or leasehold improvements), shall be accounted for by the lessee in accordance with Australian Accounting Standards applicable to those costs, including costs which are effectively reimbursed through an incentive arrangement.

Financial instruments AASB7(21),(B5) 17. Disclosure of the measurement bases of financial instruments may include: (a) the criteria for designating financial assets as available-for-sale (b) whether regular way purchases and sales of financial assets are accounted for at trade date or

at settlement date (c) how net gains or net losses on each category of financial instruments are determined (eg whether

the net gains or losses on items at fair value through profit or loss include interest or dividend income)

(d) the criteria the council uses to determine that there is objective evidence that an impairment loss has occurred

(e) when the terms of financial assets that would otherwise be past due or impaired have been renegotiated, the accounting policy for financial assets that are subject to renegotiated terms.

Allowance account AASB139(63) AASB7(B5)(d)

18. Financial assets that are carried at amortised cost, such as loans and receivables, must be written down for impairment if there is objective evidence that an impairment loss has been incurred. The standard provides a choice to recognise the loss as a direct reduction from the carrying amount or through use of an allowance account. Where an allowance account is used, additional explanations must be included in the accounting policy note, being:

(a) the criteria for determining when the carrying amount of impaired financial assets is reduced directly and when the allowance account is used, and

(b) the criteria for writing off amounts charged to the allowance account against the carrying amount of impaired financial assets.

Fair value determined using valuation technique - difference on initial recognition

AASB7(28) 19. If the market for a financial instrument is not active its fair value must be determined using a valuation technique. In these circumstances, there may be a difference between the fair value at initial recognition (established based on the transaction price) and the amount that would be determined at that date using the valuation technique. If there is such a difference a council shall disclose (by class of financial instrument) the accounting policy for recognising that difference in profit or loss (see AASB 139 paragraph AG76A).

Financial assets and liabilities at fair value through profit or loss AASB139(9) 20. A financial asset or financial liability is classified as at fair value through profit or loss if it is either: (a) classified as held for trading (acquired or incurred principally for the purpose of selling or

repurchasing it in the near future, part of a portfolio of identified financial instruments that are managed together and for which there is evidence of recent actual pattern of short-term profit-taking, or a derivative that is not a designated hedging instrument), or

(b) upon initial recognition designated as at fair value through profit or loss.

AASB139(9),(11A) 21. Financial instruments can only be designated at fair value through profit or loss if permitted under paragraph 11A of AASB 139 (relating to contracts that contain embedded derivatives), or when doing so results in more relevant information because either:

(a) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases, or

(b) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the council’s key management personnel (as defined in AASB 124 Related Party Disclosures).


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AASB101(117) AASB7(B5)(a)

22. A council which has such instruments will need to provide disclosure of the related accounting policy in accordance with AASB 101. AASB 7 Financial Instruments: Disclosure states that this policy disclosure may include:

(a) the nature of the financial assets or financial liabilities the council has designated as at fair value through profit or loss

(b) the criteria for so designating such financial assets or financial liabilities on initial recognition (c) how the council has satisfied the conditions for such designation, and (d) a narrative description of (i) the circumstances underlying the measurement and recognition inconsistency that would

otherwise arise, or (ii) how designation as at fair value through profit or loss is consistent with the council’s

documented risk management or investment strategies. Property, plant and equipment AASB116(3) 23. AASB 116 Property, Plant and Equipment prescribes the accounting treatment for property, plant and

equipment. AASB 116 does not apply to: (a) property, plant and equipment classified as held for sale in accordance with AASB 5 Non-current

Assets Held for Sale and Discontinued Operations (b) biological assets related to agricultural activity (refer to AASB 141 Agriculture) (c) the recognition and measurement of exploration and evaluation assets (refer to AASB 6

Exploration for and Evaluation of Mineral Resources), or (d) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative

resources.

However, the Standard applies to property, plant and equipment used to develop or maintain the assets described in (b)-(d).

Provisions AASB137(47) 24. When a provision is measured by estimating the cash flows required to settle the obligation, the carrying

amount of the provision must be the present value of those cash flows at the reporting date. The pre-tax discount rate (or rates) shall reflect current market assessments of the time value of money and the risks specific to the liability. The discount rate(s) shall not reflect risks for which future cash flow estimates have been adjusted.

Retirement benefit obligations AASB119(56) 25. Entities must determine the present value of defined benefit obligations and the fair value of any plan

assets with sufficient regularity that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the reporting date. Councils receive a standard letter from LGSA each year providing information to include in their accounts in respect of the defined benefit funds that councils and employees contribute to. Councils should therefore ensure that the words included in the note are consistent with the specific letter received.

Australian Accounting Standard issued but not yet effective AASB108(30) 26. When a council has not applied a new Australian Accounting Standard that has been issued but is not

yet effective, the council shall disclose: (a) this fact, and (b) known or reasonably estimable information relevant to assessing the possible impact that

application of the new Australian Accounting Standard will have on the council’s financial statements in the period of initial application.

AASB108(31) 27. In complying with paragraph 30 above, a council considers disclosing: (a) the title of the new Australian Accounting Standard (b) the nature of the impending change or changes in accounting policy (c) the date by which application of the Standard is required (d) the date as at which it plans to apply the Standard initially, and (e) either: (i) a discussion of the impact that initial application of the Standard is expected to have on

the council’s financial statements, or (ii) if that impact is not known or reasonably estimable, a statement to that effect.


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OLG 28. The Office of Local Government has determined that new standards and interpretations are not to be adopted early by councils.

Significant judgements AASB101(122) 29. A council shall disclose, in the summary of significant accounting policies or other notes, the judgements,

apart from those involving estimations, that management has made in the process of applying the council’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

AASB101(123) 30. In the process of applying the council’s accounting policies, management makes various judgements, apart from those involving estimations, that can significantly affect the amounts recognised in the financial statements. For example, management makes judgements in determining:

(a) whether financial assets are held to maturity investments (b) when substantially all the significant risks and rewards of ownership of financial assets and lease

assets are transferred to other entities (c) whether, in substance, particular sales of goods are financing arrangements and therefore do not

give rise to revenue (d) whether the substance of the relationship between the council and a special purpose council

indicates that the special purpose council is controlled by the council, and (e) whether an asset should be classified as held-for-sale or an operation meets the definition of a

discontinued operation.

31. The significant judgements and assumptions note should include those decisions made by a Council in determining: 1) That is has control of another entity; 2) That is it has joint control of an arrangement or significant influence over another entity; 3) The type of joint arrangement (i.e. joint operation or joint venture) when the arrangement has been

structured through a separate vehicle.

Some examples of disclosures needed by the Council maybe the fact that:

It does not control another entity even though it holds more than half of the voting rights of the other entity;

It controls another entity even though it holds less than half of the voting rights of the other entity;

It is an agent or a principal;

It does not have significant influence even though it holds 20% or more of the voting rights of another entity;

It has significant influence even though it holds less than 20% of the voting rights of another entity.

Sources of estimation uncertainty

AASB101(125) 32. A council shall disclose in the notes information about the assumptions concerning the future, and other sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next annual reporting period. In respect of those assets and liabilities, the notes shall include details of:

(a) their nature, and (b) their carrying amount as at the end of the reporting period.

AASB101(126) 33. Determining the carrying amounts of some assets and liabilities requires estimation of the effects of uncertain future events on those assets and liabilities at the end of the reporting period. For example, in the absence of recently observed market prices used to measure the following assets and liabilities, future oriented estimates are necessary to measure the recoverable amount of classes of property, plant and equipment, the effect of technological obsolescence on inventories, provisions subject to the future outcome of litigation in progress, and long term employee benefit liabilities such as pension obligations. These estimates involve assumptions about such items as the risk adjustment to cash flows or discount rates used, future changes in salaries and future changes in prices affecting other costs.

AASB101(127) 34. The assumptions and other sources of estimation uncertainty disclosed relate to the estimates that require management’s most difficult, subjective or complex judgements. As the number of variables and assumptions affecting the possible future resolution of the uncertainties increases, those judgements become more subjective and complex, and the potential for a consequential material adjustment to the carrying amounts of assets and liabilities normally increases accordingly.


A-41


AASB101(128) 35. The disclosures are not required for assets and liabilities with a significant risk that their carrying amounts might change materially within the next annual reporting period if, at the end of the reporting period, they are measured at fair value based on recently observed market prices (their fair values might change materially within the next annual reporting period but these changes would not arise from assumptions or other sources of estimation uncertainty at the end of the reporting period).

AASB101(129) 36. The disclosures are presented in a manner that helps users of financial statements to understand the judgements management makes about the future and about other sources of estimation uncertainty. The nature and extent of the information provided varies according to the nature of the assumption and other circumstances. Examples of the types of disclosures made are:

(a) the nature of the assumption or other estimation uncertainty (b) the sensitivity of carrying amounts to the methods, assumptions and estimates underlying their

calculation, including the reasons for the sensitivity (c) the expected resolution of an uncertainty and the range of reasonably possible outcomes within

the next annual reporting period in respect of the carrying amounts of the assets and liabilities affected, and

(d) an explanation of changes made to past assumptions concerning those assets and liabilities, if the uncertainty remains unresolved.

AASB101(130) 37. It is not necessary to disclose budget information or forecasts in making the disclosures.

AASB101(131) 38. When it is impracticable to disclose the extent of the possible effects of an assumption or another source of estimation uncertainty at the end of the reporting period, the council discloses that it is reasonably possible, based on existing knowledge, that outcomes within the next annual reporting period that are different from assumptions could require a material adjustment to the carrying amount of the asset or liability affected. In all cases, the council discloses the nature and carrying amount of the specific asset or liability (or class of assets or liabilities) affected by the assumption.

AASB101(132) 39. The disclosures of particular judgements management made in the process of applying the council’s accounting policies do not relate to the disclosures of sources of estimation uncertainty.

AASB101(133) 40. The disclosure of some assumptions is required by other Australian Accounting Standards. For example, AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires disclosure, in specified circumstances, of major assumptions concerning future events affecting classes of provisions. AASB 7 Financial Instruments: Disclosures requires disclosure of significant assumptions applied in estimating fair values of financial assets and financial liabilities that are carried at fair value. AASB 116 Property, Plant and Equipment requires disclosure of significant assumptions applied in estimating fair values of revalued items of property, plant and equipment.

41. The Code applies to the accounting, financial and other reporting requirements of all financial statements prepared by NSW local governments.

42. Where there has been a change in council policy, which affects the calculation of performance ratios, then that change in policy must be stated and the ratios under the new policy must be provided for the current period and 2 previous years.

43. Councils have the option to continue to recognise or not to recognise Rural Fire assets in their accounts until such time as the control issue is agreed upon with the Rural Fire Service.

44. Local Councils are required to complete quarterly budget review statements as detailed in Appendix F.


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Note 2(a) Functions or activities

Functions/Activities Income, expenses and assets have been directly attributed to the following functions or activities. Details of those functions or activities are provided in Note 2(b).

Income from

continuing operations

Expenses from


Operating results from


Grants included in income from


Original budget

2015 $’000

Actual

2015 $’000

Actual

2014 $’000

Original budget

2015 $’000

Actual

2015 $’000

Actual

2014 $’000

Original budget

2015 $’000

Actual

2015 $’000

Actual

2014 $’000

Actual

2015 $’000

Actual

2014 $’000

Governance 136 - 134 1,342 1,112 1,233 (1,206) (1,112) (1,099) 177 Administration 664 8,486 5,654 2,588 2,910 3,258 (1,924) 5,576 2,396 Public Order Safety 4,443 7,972 3,667 3,761 3,402 4,590 682 4570 (923) 4,250 245 Health 351 414 1,044 802 1,117 729 (451) (703) 315 Environment 1,149 1,299 1,278 2,338 2,514 2,455 (1,189) (1,215) (1,177) 37 30 Community Services & Education 7,121 6,883 6,665 8,226 8,141 7,789 (1,105) (1,258) (1124) 4,541 4,168 Housing & Community Amenities 705 1,955 1,478 4,182 7,070 5,194 (3,477) (5,115) (3,716) 314 325 Water Supplies 26,182 26,953 14,920 12,599 12,328 12,096 13,583 14,625 2,824 14,276 127 Sewerage Services 24,181 24,952 12,919 10,598 10,328 10,095 13,583 14,624 2,824 12,275 126 Recreation & Culture 1,309 2,998 3,274 1,933 1,886 2,003 (624) 1,112 1,271 Fuel & Energy Agriculture 297 293 247 458 436 365 (161) (143) (118) Mining, manufacturing &

Construction (99) 63 6,235 5,961 5,569 (6,334) (5,898) (5,569) 204 81 Transport & Communication 4,475 5,379 4,014 10,522 11,870 10,195 (6,047) (6,491) (6,181) 989 2,233 Economic Affairs Enterprise 10,859 9,154 8,629 11,558 12,476 6,815 (699) (3,322) 1,814 211 138

Total functions & activities 81,773 96,801 63,923 77,142 81,551 72,386 4,631 15,250 (8,463) 37,274 7,473

Shares of gains or losses in associates & joint ventures using

the equity method - 7 - - - 12 - 7 (12) - -

General purpose income 32,559 30,574 32,942 - - 32,559 30,574 32,942 2,557 4,817

Net operating result for the year(1) 114,332 127,382 96,865 77,142 81,551 72,398 37,190 45,831 24,467 39,831 12,290

Note:

(1) As reported on the Income statement


A-43

Note 2(b) Components of functions or activities

Details of the functions or activities reported on in Note 2(a) are as follows:

Governance Costs relating to the Council’s role as a component of democratic government, including elections, members’ fees and expenses, subscriptions to local authority associations, meetings of council and policy making committees, area representation and public disclosure and compliance.

Administration This includes corporate support and other support services.

Public order and safety Fire protection, animal control, beach control, enforcement of local government regulations, emergency services, other.

Health Administration and inspection, immunisations, food control, insect/vermin control, noxious plants, health centres, other.

Environment Noxious plants and insect/vermin control, other environmental protection, solid waste management, street cleaning, drainage, stormwater management.

Community services and education Administration, family day care, child care, youth services, other family and children, aged and disabled, migrant services, Aboriginal services, other community services, education.

Housing and community amenities Housing, town planning, domestic waste management services, other waste management services, street other sanitation and garbage, urban stormwater drainage, environmental protection, public, cemeteries, public conveniences, other community amenities.

Water supplies

Sewerage services

Recreation and culture Public libraries, museums, art galleries, community centres, public halls, other cultural services, swimming pools, sporting grounds, parks and gardens (lakes), other sport and recreation.

Fuel and energy – Gas supplies

Agriculture

Mining, manufacturing and construction Building control, abattoirs, quarries and pits, other.

Transport and communication Urban roads, sealed rural roads, unsealed rural roads, bridges, footpaths, aerodromes, parking areas, bus shelters and services, water transport, RMS works, street lighting, other.

Economic Affairs Camping areas, caravan parks, tourism and area promotion, industrial development promotion, saleyards and markets, real estate development, commercial nurseries, other business undertakings.

NSW Council

Notes to the financial statements 30 June 2015

(continued)

A-44

Commentary – Functions or activities

AASB1052 1. For each broad function or activity, disclosure by note is required of the nature, objectives and carrying amount of assets attributable to each function or activity. Disclosure is also required of the income (with separate disclosure of grants) and expenses for the reporting period which are attributable to each function or activity. The information is to be aggregated and reconciled back to the Income Statement, Statement of financial position and Grant Note (3e).

OLG Policy statements 2. For the purposes of financial reporting under this Code, costs are to be allocated to functions and activities

when they can be attributable on a reliable basis

3. Council’s overhead expenses, which cannot be allocated to functions and activities on a reliable basis, must be kept in the Administration function.

4. Reliably attributable overheads allocated to capital projects form part of the cost of the asset.

5. Costs of governance must be separately identified in Note 2a and Special Schedule 1 and must not be incorporated into other functions or activities such as Administration.

OLG commentary 6. Function or Activities may be presented in Council’s own Integrated Planning and Reporting or Delivery

Program format in lieu of the prescribed format. However, Governance must still be separately identified as per Policy Statement 5.

7. The definition of general purpose income for the purposes of disclosure in Note 2 (a) is the aggregation of the following income items disclosed in Note 3 viz., ordinary rates (does not include special purpose), general purpose untied grants, interest on (overdue rates and annual charges, internally restricted assets and general council cash and investments) and ex-gratia rates.

NSW Council


(continued)

A-45

Note 3 Income from continuing operations

Actual 2015 $’000

Actual 2014 $’000

(a) Rates and annual charges

Ordinary rates Residential 18,307 17,465 Farmland 641 621 Business 6,823 6,512 Mining - -

Total ordinary rates 25,771 24,598

Special rates Water supply - - Sewerage services - - Environmental - - Infrastructure - - Drainage - - Town improvement 594 573 Parking - - Main-street - - Tourism - - Other (specify if material) - -

Total special rates 594 573

Annual charges (pursuant to s496, 496A, 496B, 501 & 611) Domestic waste management services 5,553 5,143 Water supply 3,389 3,296 Sewerage services - - Drainage - - Stormwater management services - - Waste management services (not domestic) - - Coastal Protection - - Section 611 charges - - Waste levy - - Other (specify if material) - -

Total annual charges 8,942 8,439

Total rates and annual charges 35,307 33,610

Council has used 20XX valuations provided by the NSW Valuer General in calculating its rates.

NSW Council


(continued)

A-46

Note 3 Income from continuing operations (continued)

Actual 2015 $’000

Actual 2014 $’000

(b) User charges and fees

User charges - - Domestic waste management services - - Water supply services 7,006 6,097 Sewerage services 7,050 6,388 Drainage services - - Waste management services (not domestic) 2,008 1,963 Other (specify if material) 386 378

Total user charges 16,450 14,826

Fees

Aerodrome 841 1,026 Aged care 116 97 Building services – Other 458 399 Caravan parks 673 702 Child care 1,846 1,983 Inspection fees 479 550 Leisure centre 913 768 Parking fees 440 478 Planning and building – Regulatory 294 248 Private works 738 317 Quarry - 5 Registration fees 255 - RMS works (State Roads not controlled by Council) - - s603 certificates 67 63 Other (specify if material) 1018 1409

Total fees 8,138 8,045

Total user charges and fees 24,588 22,871

NSW Council


(continued)

A-47


(c) Interest and Investment revenue (losses)(1)

Actual 2015 $’000

Actual 2014 $’000

Interest and Dividends – Overdue rates and charges(2) 298 313 – Cash and Investments 4,482 5,270 – Other - - Fair value adjustments – Investments 811 764 – Other - 573 Impairment losses - - – Investments - - – Other - - Available for sale revaluation reserves realised - - Premiums recognised on financial instrument transactions – Interest free loan from State Government - - Amortisation of discounts and premiums on financial instrument transactions – Interest free loan provided - - Other – Specify if material - -

Total interest and investment revenue (losses)(1) 5,591 6,920

Note:

(1) Where interest and investment revenue nets to an overall loss, this is carried to the interest and investment losses line on the Income statement.

(2) Includes interest from special rates

NSW Council


(continued)

A-48


Actual 2015 $’000

Actual 2014 $’000

(d) Other revenues

Fair value adjustments – investment properties - - Reversal of IPPE revaluation decrements previously expensed - - Parking fines 364 294 Other fines 336 309 Recycling income (non domestic) 99 63 Rental income: – Investment property 781 409 – Other property 206 499 Insurance claims 217 232 Commissions and Agency fees 112 88 Computer Bureau income - - Miscellaneous sales 1,090 813 Other charges for overdue rates and charges 154 49 Other (specify if material) 1,063 1,360

Total other revenue 4,422 4,116

NSW Council


(continued)

A-49


Operating Capital

Actual 2015 $’000

Actual 2014 $’000

Actual 2015 $’000

Actual 2014 $’000

(e) Grants

General purpose (Untied) Financial assistance 2,238 4,498 - - Pensioner’ rates subsidies: – General 319 319 - - Special purpose Pensioners’ rate subsidies: – Water 129 127 - - – Sewer 128 126 - - – DWM 66 63 - - Water supplies - - 26,294 - Sewerage services 1,794 1,712 93 - Community centres 61 123 191 60 Street lighting 117 117 - - Transport (Flood Works, Road to Recovery) 113 112 - - NSW Rural Fire Services 208 86 - - Other (specify if material) 3686 4762 4394 185

Total grants 8,859 12,045 30,972 245

Comprising: – Commonwealth funding 2,845 3,437 29,493 245 – State funding 5,865 8,462 733 - – Other funding 149 146 746 -

8,859 12,045 30,972 245

(f) Contributions

Developer contributions: –Section 94 160 - 7,032 6,793 – Section 94A levies - - - - – Planning agreements - - - - RMS contributions (Regional/Local, Block Grants) - - - - Section 64: – Water - - 3,685 4,832 – Sewerage - - 3,650 2,900 – Stormwater - - - - Dedications - 41 - - Paving 1,274 1,263 - - Kerb and gutter - - - 153 Other (specify if material) 582 107 97 155

Total contributions 2,016 1,411 14,464 14,833

Total grants and contributions 10,875 13,456 45,436 15,078

NSW Council


(continued)

A-50


Actual 2015 $’000

Actual 2014 $’000

(g) Restrictions relating to grants and contributions

Certain grants and contributions are obtained by Council on the condition

they be spent in a specified manner: Grants and contributions recognised in the current period which have not

been spent 17,396 11,454 Less: Grants and contributions recognised in previous reporting periods which

have been spent in the current reporting period (5,696) (8,635)

Net increase/(decrease) in restricted grants and contributions 11,700 2,819

NSW Council


(continued)

A-51

Commentary – Income

General requirement Income AASB118 1. The definition of income encompasses revenue and gains. Revenue arises in the course of a

council’s ordinary activities and is referred to by a variety of different names, including sales, fees, interest, dividends, royalties and rent. Gains represent other items that meet the definition of income and are often reported net of related expenses.

2. Income is generally recognised when earned. Recognition of income depends on whether: an increase in future economic benefits related to an asset that can be measured reliably

has arisen; and A decrease of a liability that has arisen can be measured reliably. AASB118(35)(b) 3. Disclosure is required of the amount of each significant category of revenue recognised during the

period, including revenue arising from: AASB118(35)(b)(i) (a) The sale of goods AASB118(35)(b)(ii) (b) The rendering of services AASB118(35)(b)(iii) (c) Interest AASB118(35)(b)(iv) (d) Royalties AASB118(35)(b)(v) (e) Dividends

Exchange of goods and services AASB118(35)(c) 4. Disclosure is required of the amount of revenue arising from exchanges of goods or services

included in each significant category of revenue.

Grants and contributions AASB1004 5. Separate disclosure is required of the nature and amount of grants and contributions recognised as

revenue where the related expenditure has not been incurred; the grants and contributions that relate to a future reporting period expenditure or services; or the grants and contributions that relate to future reporting periods for the purpose of establishing a rate. Grants and contributions recognised as revenue in prior reporting periods that were utilised in the current reporting period must also be disclosed.

Revenue 6. Revenue should be measured at the fair value of the consideration received or receivable.

7. Revenue arising from the sale of goods should be recognised when a council transfers the significant risks and rewards of ownership and collectability of the related receivable is reasonably assured.

8. Revenue from the rendering of services should be recognised by reference to the state of completion of the transaction at the statement of financial position date. Revenue is recognised in the accounting periods in which the services are rendered under the percentage-of-completion method. The recognition of revenue on this basis provides useful information on the extent of service activity and performance during a period.

9. Interest income is recognised using the effective interest rate method. Dividends are recognised when the shareholder’s right to receive payment is established.

10. When the outcome of a service contract cannot be estimated reliably, revenue should be recognised only to the extent of costs incurred that it is probable will be recovered; contract costs should be recognised as an expense as incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss should be recognised as an expense immediately.

Policy statements OLG Rates and annual charges 11. LIRS subsidy payments are revenue. Revenue is recognised periodically as and when loan

payments are made and invoices are raised.

12. Revenue raised from Rates (ordinary and special) and Annual Charges shall be disclosed in total in the Income statement and appear separately in the notes to the financial statements.

13. Pensioner rate rebates shall be netted off against revenue raised and disclosed in Note 3 as part of rates and annual charges.

NSW Council


(continued)

A-52

Commentary – Income (continued) OLG Ordinary rates 14. Section 493 of the LGA 1993 states that there are 4 categories of the ordinary rate. They are: Farmland Residential Mining Business

15. These categories may, at Council’s discretion, be divided into sub-categories in accordance with Section 529 of the Act. Examples of ordinary rates would include farmland ordinary, residential ordinary, business - NSW Council city centre and mining - gold.

16. The process of categorisation of land and the application of ordinary rating is described in Section 6 of the “Council Rating and Revenue Raising Manual” (Rates Manual). For the purpose of financial reporting, revenue raised from the four categories of ordinary rates must be disclosed as per Note 3(a) of this Code.

17. Councils should include the relevant date of the valuation specific to them.

Contributions and grants

18. Contributions are defined as non-reciprocal transfers to the local government in the sense that it is not required to give value in exchange for contributions directly to the contributor. Examples include grants, donations and regulatory fees. Other examples are development contributions and contributions to works by adjoining owners.

19. Government grants can either be monetary or otherwise and may be tied or untied. Tied grants are required to be used for a specific purpose such as construction of a road or child-care centre. Untied grants may be applied for any purpose council considers appropriate.

Grants and contributions – Operating or Capital? 20 Grants and contributions are to be classified as operating or capital depending on the purpose for

which they were received and not on the purpose for which they were spent. General purpose grants and contributions are all classified as operating regardless of how they are spent.

Domestic Waste Management (DWM) Services 21 An annual charge for domestic waste management (DWM) services must be made for each parcel

of rateable land for which the service is available.

22. The DWM charge is to be based on the cost of providing the service and must not be directly funded from ordinary rates.

23. Determination of the DWM charge must consist of all reasonable costs in providing the service. Reasonable costs can include operating costs and capital costs, which can be reliably charged to the period.

24. All revenues applicable to the DWM service must be restricted to the DWM activity.

25. All revenues and expenditures applicable to the DWM service must be accounted for as a distinct activity from any trade waste or other garbage activity.

26. Any surplus or deficit derived as a result of providing the DWM service for a period must be maintained in the DWM activity, and in the case of a surplus the cash component held as a restricted asset.

27. Records which are used to substantiate reasonable cost that are maintained outside financial reporting requirements must be reflected in Council’s own internal management reporting. Internal costing of the DWM service should be based on a management accounting approach.

28. Where a Council includes a provision for future asset replacement in its calculation of “reasonable cost”, the amount, purpose and expected expenditure of those funds must be reflected in Council’s integrated planning and reporting systems.

29. For discussion on Domestic Waste Management (DWM) Services, refer to the Rating & Revenue Raising Manual.

Interest and investment losses 30. If Council has experienced net interest and investment losses during the period then they are to be

shown on the Income statement as an Expense line. For example, a significant write-down in the value of Council CDO’s may offset other interest and investment revenue resulting in an overall loss for the period. Only use this expense item if there is an overall loss for the period.

NSW Council


(continued)

A-53

Note 4 Expenses from continuing operations

Actual 2015 $’000

Actual 2014 $’000

(a) Employee benefits and on costs

Salaries and wages 20,900 19,626 Travelling 1 10 Employee leave entitlements 3,088 3,552 Superannuation 2,748 2,962 Workers’ Compensation Insurance 663 1,472 FBT 122 110 Payroll tax 191 189 Training costs (excluding salaries) 140 123 Other (specify if material) 393 - Less: Capitalised costs (-) (-)

Total employee costs expensed 28,246 28,044

Number of FTE employees 366 348

(b) Borrowing costs

Interest on overdrafts 4 3 Interest on loans 1,248 1,232 Interest on advances - - Charges on finance leases - - Other debts (specify if material) - - Discounts recognised on financial instrument transactions: – Interest free loan to Sporting Club - - Amortisation of discounts and premiums: – Remediation (Tip) 15 (3) – Interest free loan received - - – Other (specify) - - Less: Capitalised costs (-) (-)

Total borrowing costs expensed 1,267 1,232

NSW Council


(continued)

A-54

Note 4 Expenses from continuing operations (continued)

Actual 2015 $’000

Actual 2014 $’000

(c) Materials and contracts

Raw materials and consumables 29,311 23,121 Contractor and consultancy costs (specify material contracts/

consultancies) - - Remuneration of Auditors(1) 62 55 Legal fees: – Planning and development 107 71 – Other 244 270 Operating leases: – Buildings - - – Computers - - – Motor vehicles - - – Other 177 460 Other – (specify if material) - -

Total materials and contracts 29,901 23,977

(1) During the year the following fees were paid or payable for services

provided by the Council’s auditor – Audit Firm Australia: (i) Audit and other assurance services Audit and review of financial statements 62 55 Other assurance services: – Audit of regulatory returns - - –Due diligence services - -

Total remuneration for audit and other assurance services 62 55

AASB1054(10)(b),(11) (ii) Taxation services GST advice - -

Total remuneration for taxation services - -

Total remuneration of Audit Firm Australia 62 55

NSW Council


(continued)

A-55

Note 4 Expenses from continuing operations (continued)

Depn/ Amor

Actual 2015 $’000

Depn/ Amor

Actual 2014 $’000

Imp(1) Actual

2015 $’000

Imp Actual 2014 $’000

(d) Depreciation, amortisation and

impairment

Intangibles – software - - - - Plant and equipment 1,423 1,438 - - Office equipment 178 153 - - Furniture and fittings 22 69 - - Property, plant and equipment leased Land improvements (depreciable) 39 32 - - Buildings – Non specialised 2,249 551 304 - – Specialised 884 180 - - Other structures 790 601 2 - Infrastructure: – roads, bridges and footpaths 2,786 2,433 - - – stormwater drainage 1,197 1,186 - - – water supply network 2,739 2,695 - - – sewerage network 2,645 2,619 - - - other infrastructure - - - - Other assets: – heritage collections - - - - – library books 96 95 - - – other (specify if material) - - - - Tip asset - - - - Less: Capitalised costs/Impairment reversals/

impairments offset against asset revaluation reserves(1) (-) (-) (306) (-)

Total depreciation and total impairment 15,048 12,052 - -

Actual 2015 $’000

Actual 2014 $’000

(e) Other expenses

Other expenses for the year including the following: Revaluation decrements – IPPE - - Bad and doubtful debts - - Mayoral fee 38 37 Councillors’ fees 210 201 Councillors’ (incl. Mayor) expenses 118 86 Insurance 1436 1345 Street lighting 807 806 Electricity 2,744 2,913 Telephone 355 357 Contributions and donations 189 320 Planning levy 1,072 991 Waste levy - - Emergency services levy (to include FRNSW, SES and

RFS levies) - - Other levies - - Other – (specify if material) 120 25

Total other expenses from continuing operations 7,089 7,081

Note:

(1) Impairment losses for revalued assets are to be firstly offset against the amount in the revaluation surplus for the class of asset, with only the excess to be recognised in the Income Statement. Show gross impairment and the amount of impairment offset against asset revaluation reserves.

NSW Council


(continued)

A-56

Commentary – Expenses

Material items AASB101(86),(87) 1. When items of income and expense are material, their nature and amount shall be disclosed

separately either on the face of the income statement or in the notes. Circumstances that would give rise to the separate disclosure of items of income and expense include:

(a) write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs

(b) restructurings of the activities of a council and reversals of any provisions for the costs of restructuring

(c) Disposals of items of property, plant and equipment (d) Disposals of investments (e) discontinued operations (f) litigation settlements, and (g) other reversals of provisions.

Borrowing costs AASB123(4),(5)(a)-(e) 2. For the purposes of AASB 123, borrowing costs (or finance costs) are interest and other costs

incurred by a council in connection with the borrowing of funds. Borrowing costs may include: (a) interest on bank overdrafts and short-term and long-term borrowings (b) amortisation of discounts or premiums relating to borrowings (c) amortisation of ancillary costs incurred in connection with the arrangement of borrowings (d) finance charges in respect of finance leases. Interest expense is recognised on an accrual basis. Where interest expense includes a discount or

premium arising on the issue of a debt instrument, the discount or premium is amortised using the effective interest rate method. The effective interest rate is the rate that discounts the estimated future cash payments through the expected life of the debt instrument to the carrying amount of the debt instrument.

OLG The Office of Local Government has determined that borrowing costs are to be capitalised in respect to the acquisition, production or construction of a qualifying asset.

Capitalisation commences when expenditures and borrowings are being incurred for the asset, and when activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation should be suspended when development of the asset is interrupted for extended periods. It should cease when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

The accounting policy for borrowing costs must be followed consistently for all qualifying assets. It is not acceptable to capitalise borrowing costs in relation to some qualifying assets and expense them in relation to others.

AASB118 Expenses 3. The definition of expenses encompasses losses as well as those expenses that arise in the course

of the council’s ordinary activities.

Expenses that arise in the course of the council’s ordinary activities include employee benefit expenses, amortisation and depreciation. They usually take the form of an outflow or depletion of assets such as cash and cash equivalents, inventory and property, plant and equipment.

Losses represent other items that meet the definition of expenses.

NSW Council


(continued)

A-57

Commentary – Expenses (continued)

Recognition Recognition of expenses depends on whether: 4. a decrease in future economic benefits related to an asset that can be measured reliably has

arisen; and an increase of a liability that can be measured reliably has arisen.

Cost of goods sold is usually recognised in the income statement on the basis of a direct association between the costs incurred and the earning of specific items of income. This process, commonly referred to as the matching of costs with revenues, involves the simultaneous or combined recognition of revenues and expenses that result directly and jointly from the same transactions or other events. However, the application of the matching concept does not allow the recognition of items in the statement of financial position that do not meet the definition of assets or liabilities (ie deferred costs).

Expenses should be disclosed on the face of the income statement either by function (a council should disclose in the notes details of expenses by nature under this method) or by nature.

Audit remuneration disclosure requirements AASB1054(10) 5. Councils must disclose fees to each auditor or reviewer, including any network firm, separately for:

(a) the audit or review of the financial statements, and (b) all other services performed during the period.

OLG Materials and contracts 6. Councils are encouraged to present materials and contracts in a format that best represents their

own activities. Even though insurance, street lighting, electricity, heating and telephone may be considered contracts they are to be shown as ‘Other’ expenses. Major contracts would typically include garbage and recycling contracts, road maintenance, parks maintenance, computer support, and venue management.

7. A Council must not enter into a contract for the acquisition of goods or services without an approved order except in the following circumstances: (a) contracts made out of petty cash advances (b) contracts resulting from credit/procurement cards which have been approved by Council and are within authorised terms and conditions (c) recurring contracts where an order in writing has been previously made.

8. Carbon tax expense This item relates to amount paid directly to the Government under the carbon tax regime. There is no requirement to identify and disclose other cost increases suffered as a consequence of the introduction of the carbon tax.

The carbon tax is defined by the Australian Bureau of Statistics as a tax on production, accordingly, the Australian Accounting Standards in relation to income tax do not apply.

NSW Council


(continued)

A-58

Note 5 Gain or loss from the disposal of assets

Actual 2015 $’000

Actual 2014 $’000

Gain (or loss) on disposal of Infrastructure, Property, Plant and Equipment

Proceeds from disposal 1,042 647 Less: Carrying amount of assets sold (1,213) (345)

Gain (or loss) on disposal (171) 302

Gain (or loss) on disposal of Real Estate assets held for sale Proceeds from sales 5,046 879 Less: Cost of sales (3,719) (367)

Gain (or loss) on disposal 1,327 512

Gain (or loss) on disposal of Investment Property Proceeds from disposal - - Less: Carrying value of Investment Property - -

Gain (or loss) on disposal - -

Gain (or loss) on disposal of Financial assets Proceeds from disposal 79,563 128,724 Less: Carrying value of Financial assets (79,563) (128,724)

Gain (or loss) on disposal - -

Net gain (or loss) from disposal of assets 1,156 814

NSW Council


(continued)

A-59

Note 6(a) Cash and cash equivalents

Actual

2015 Actual 2014

$'000 $'000 Cash at bank and on hand 1,540 2,398 Deposits at call 11,257 11,090

12,797 13,488

NSW Council


(continued)

A-60

Commentary - Current assets - Cash and cash equivalents

Definitions of cash and cash equivalents AASB107(6) 1. Cash is cash on hand and demand deposits. Cash equivalents are short-term, highly liquid

investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

2. This includes cash on hand, cash at bank, at call and term deposits maturing within 3 months from date of acquisition.

NSW Council


(continued)

A-61

Note 6(b) Investments

The following financial assets are held as investments:

Actual 2015

Actual 2014

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Financial assets at fair value through Profit and Loss – Held for trading 4,991 15,737

7,040 11,515

Held to maturity investments 56,250 24,000 50,167 23,750 Available for sale financial assets - - - - Total 61,241 39,737 57,207 35,265 Financial assets at fair value through

Profit and Loss – Held for trading

At beginning of year 7,040 11,515 6,070 15,995 Revaluation to Income statement 578 233 578 186 Additions - 10,008 2,999 3,001 Disposals (8,646) - (10,274) - Transfers between Current/Non Current 6,019 (6,019) 7,667 (7,667) At end of year 4,991 15,737 7,040 11,515 Comprising of: – Capital Projected Investments 991 1,709 2,031 957 – NCD’s, FRNs 4,000 14,028 5,009 9,028 – Other Long Term Financial Assets - - - 1,530 – Listed equity securities - - - - 4,991 15,737 7,040 11,515 Held to maturity investments At beginning of year 50,167 23,750 55,199 15,050 Additions 66,250 11,000 104,213 17,905 Disposals (70,917) - (118,450) - Transfer between Current/Non current 10,750 (10,750) 9,205 (9,205) At end of year 56,250 24,000 50,167 23,750 Comprising of: – Long Term Deposits 56,250 24,000 50,167 23,750 56,250 24,000 50,167 23,750 Available for sale financial assets At beginning of year - - - - Additions Disposals - - Revaluation to Equity - - At end of year - - - Comprising of: – Equity Linked Notes - - - - - -

Note:

Refer to Note 27 Fair value measurement for information regarding the fair value of investments held. Cash and Cash Equivalents are not measured at Fair Value

NSW Council


(continued)

A-62

Commentary – Financial assets

AASB139 Financial assets 1. A financial asset is: cash; a contractual right to receive cash or another financial asset; a contractual

right to exchange financial instruments with another council; or an equity instrument of another council.

2. There are four categories of financial asset: At fair value through profit or loss - all financial assets acquired for the purpose of generating

a profit from short-term fluctuations in price, or part of a portfolio with a pattern of short-term profit taking;

Held-to-maturity - non-derivative financial assets with fixed or determinable payments and maturity that a council has the positive intention and ability to hold to maturity (conditions for this category are tightly defined in AASB 139);

Loans and receivables - non-derivative financial assets with fixed or determinable payments that are not quoted in an active market; and

Available-for-sale – the remainder; or those financial assets designated in this category by management.

AASB139 Recognition and initial measurement 3. All financial assets should be measured initially at fair value, being the fair value of the consideration

given, including transaction costs (such as advisers’ and agents’ fees and commissions, duties and levies by regulatory agencies). Transaction costs are recognised in the income statement when the financial asset is carried at fair value through profit or loss.

AASB139 Subsequent measurement 4. The classification of financial assets drives their subsequent measurement, which is as follows: At fair value through profit or loss — carried at fair value with gains and losses reported in

income. The only exemption to the use of fair value is in rare cases in which the fair value of such an equity instrument cannot be measured reliably, in which case they are carried at cost less impairment;

Held-to-maturity — carried at amortised cost unless designated at fair value; Loans and receivables — carried at amortised cost unless designated at fair value; and Available-for-sale — carried at fair value with gains and losses reported in equity. The only

exemption to the use of fair value is in rare cases in which the fair value of such an equity instrument cannot be measured reliably, in which case they are carried at cost less impairment.

AASB139 Tainting of held-to-maturity financial assets 5. Special provisions apply where a council sells or reclassifies ‘more than an insignificant’ amount of

held-to-maturity investments.

AASB136 Impairment of financial assets 6. Where there are indicators of impairment, all financial assets except those carried at fair value through

profit or loss should be subject to an impairment test. The indicators should provide objective evidence of impairment as a result of a past event that occurred subsequent to the initial recognition of the asset. Expected losses as a result of future events are not recognised, no matter how likely.

7. Indicators of impairment of debt instruments include significant financial difficulty of the issuer, high probability of bankruptcy, granting of concessions to the issuer, the disappearance of an active market because of financial difficulties, breach of contract and adverse change in observable data (for example, increase in unemployment or crash of the property market).

8. Indicators of impairment of equity instruments include significant changes with an adverse effect on general economic factors (such as technological changes), or significant or prolonged decline in the fair value below its cost. As equity represents a residual interest in a council’s net assets, equity instruments are likely to be impaired before debt securities.

NSW Council


(continued)

A-63

Commentary – Financial assets (continued)

Financial assets designated at fair value through profit or loss AASB7(8)(a) 9. Entities that have both financial assets that are held for trading and those that were, upon initial

recognition, designated by the council as financial assets at fair value through profit or loss shall disclose separately the carrying amounts of both classes of financial assets.

Impairment of financial assets 10. A council shall disclose:

AASB7(20)(e) (a) the amount of any impairment loss recognised in profit and loss separately for each significant class of financial asset

AASB7(20)(d) (b) the amount of interest income accrued on impaired financial assets, in accordance with paragraph AG93 of AASB 139

AASB7(37)(b) (c) an analysis of financial assets that are individually determined to be impaired, and

AASB7(37)(c) (d) a description of collateral held by the council as security and other credit enhancements and, unless impracticable, an estimate of their fair value.

NSW Council


(continued)

A-64

Note 6(c) Restricted cash, cash equivalents and investments

Actual 2015

Actual 2014

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Total cash, cash equivalents and investments 74,038 39,737

70,695 35,265

External restrictions 47,030 39,737 35,267 35,265 Internal restrictions 16,739 - 22,659 - Unrestricted 10,269 - 12,769 - 74,038 39,737 70,695 35,265

Notes

Opening balance

$’000

Transfers to restrictions

$’000

Transfers from

restrictions $’000

Closing balance

$’000 External restrictions Included in liabilities Specific purpose unexpended

loans (A) 2,230 - (1,623) 607 RMS advances (B) - - - - Self-insurance claims (C) - - - - Other (specify if material) - - - - 2,230 - (1,623) 607 Other Developer contributions:-

General Fund (D)

13,083

5,562 (1,031) 17,614 Water Fund (D) 13,795 3,154 (638) 16,311 Sewer Fund (D) 10,198 2,183 (407) 11,974 RMS contributions (E) 121 - (121) - Specific purpose unexpended

grants:- General (F) 3,783 1,553 - 5,336

Water Fund (F) 2,303 1,445 - 3,748 Sewer Fund (F) 141 - - 141 Water (G) 3,326 2,476 - 5,802 Sewerage (H) 20,737 3,716 - 24,453 Domestic waste management (I) - - - - Stormwater management 815 384 (418) 781 Other (specify if material) - - - - Total external restrictions 70,532 20,473 (4,238) 86,767

Internal restrictions Plant replacement 506 69 (35) 540 Infrastructure replacement 709 44 (141) 612 Employee leave entitlements 2,815 62 (241) 2,636 Other 18,629 4,682 (10,360) 12,951 Total internal restrictions 22,659 4,857 (10,777) 16,739 Total restrictions 93,191 25,330 (15,015) 103,506

A Loan moneys which must be applied for the purposes for which the loans were raised. B Advances by the Roads and Traffic Authority for works on the State's classified roads. C Self Insurance liability resulting from reported claims or incurred claims not yet reported. D Development contributions which are not yet expended for the provision of services and amenities in

accordance with contributions plans. E RMS Contributions which are not yet expended for the provision of services and amenities in accordance

with those contributions. F Grants which are not yet expended for the purposes for which the grants were obtained. (See Note 1.) G-I Water, Sewerage and Domestic Waste Management (DWM) funds are externally restricted assets which

must be applied for the purposes for which they were raised.

NSW Council


(continued)

A-65

Commentary – Restrictions of cash, cash equivalents and investments

AASB1004 1. The total and restricted amount of assets (the use of which is restricted by regulation or other externally imposed requirements) must be disclosed together with details of the nature, extent and movement of the external restrictions.

OLG 2. Assets restricted by resolution of Council to be disclosed with details of the nature, extent and movement of the internal restrictions.

3. Councils must maintain a separate record of money it has invested under section 625 of the Act. The record (investment register) must specify:

(a) the source and the amount of money invested (b) particulars of the security or form of investment in which the money was invested, and (c) If appropriate, the rate of interest to be paid, and the amount of money that the council has

earned, in respect of the money invested.

4. Councils must maintain an investment policy that complies with the Act, the LGGR, the Order and ensure it or its representatives exercise care, diligence and skill that a prudent person would exercise in investing council funds.

5. Internal restrictions shall include those assets the uses of which are only restricted by a resolution of Council.

NSW Council


(continued)

A-66

Note 7 Receivables

Actual 2015

Actual 2014

Purpose

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Rates and annual charges 2,798 - 2.459 - Interest and extra charges 332 - 317 - User charges and fees 1,536 - 1,551 - Accrued revenues 1251 - 1,750 - Deferred debtors 186 81 235 269 Government grants and subsidies 1,200 - 865 - Loan to Sporting Club 1,614 - 4 - Other (specify if material) 2,915 - 5,176 - Total 11,832 81 9,900 269 Less: Provision for impairment: – Rates and annual charges - - – Interest and extra charges - - - - – User charges and fees - - - - – Other (specify if material) (137) - (172) - 11,695 81 9,728 269

Restricted receivables Externally restricted receivables Water supply 2,089 - 2,090 - Sewerage services 1,003 - 1,129 - Domestic waste management - - - - Parking - - - - Drainage - - - - Town improvement - - - - Other (specify if material) - - - - Total externally restricted receivables 3,092 - 3,219 - Unrestricted receivables 8,603 81 6,509 269 Total receivables 11,695 81 9,728 269

NSW Council


(continued)

A-67

Commentary – Receivables

Prepayments AASB101(75)(b) 1. Prepayments are presented as receivables in accordance with paragraph 75(b) of AASB 101

Presentation of Financial Statements. However, the future economic benefit of these assets is the receipt of goods or services rather than the right to receive cash or another financial asset. Prepayments are therefore not financial assets as defined in AASB 132 Financial Instruments: Presentation and are not included in any of the disclosures that are required under AASB 7 Financial Instruments: Disclosures.

Fair value AASB7(29)(a) 2. For financial instruments such as short-term receivables and payables, no disclosure of fair value is

required when the carrying amount is a reasonable approximation of fair value.

Impaired receivables AASB7(37)(b) 3. Entities must provide an analysis of financial assets that are individually determined to be impaired.

However, there is no specific requirement to disclose the ageing of those financial assets. Other forms of analyses will be equally acceptable.

Past due but not impaired AASB7 Appendix A AASB7(37)(a)

4. A financial asset is past due when a counterparty has failed to make a payment when contractually due. AASB 7 requires disclosure of an analysis of the age of financial assets that are past due but for which there is no evidence at the reporting date that the assets are impaired.

Collateral accepted AASB7(15) 5. Where a council holds collateral (of financial or non-financial assets) that it is permitted to sell or

repledge in the absence of default by the owner of the collateral, it shall disclose: (a) the fair value of the collateral held (b) the fair value of any such collateral sold or repledged and whether the council has an obligation

to return it, and (c) any terms and conditions associated with its use of this collateral.

AASB7(38) 6. When a council has obtained financial or non-financial assets during the period by taking possession of collateral held or by calling on other credit enhancements (eg guarantees) it shall disclose the nature and carrying amount of the assets obtained and, if the assets are not readily convertible into cash, its policies for disposing of such assets or for using them in its operations.

Impairment of financial assets AASB7(20)(d) 7. In addition to the nature and amount of any impairment loss recognised in profit and loss, entities

shall also disclose the amount of interest income accrued on impaired financial assets, in accordance with paragraph AG93 of AASB 139, where applicable.

Renegotiated financial assets that would otherwise be past due or impaired AASB7(36)(d),(B5)(g) 8. If the council has any financial assets that would otherwise be past due or impaired but that have

been renegotiated, it must disclose their carrying amount and should also consider disclosing its accounting policy for financial assets that are the subject of renegotiated terms.

Fair value determined using valuation technique - difference on initial recognition AASB7(28)(b) 9. If there is a difference between the fair value at initial recognition (being the transaction price) and

the amount that would be determined at that date using the valuation technique, a council shall disclose (by class of financial instrument) the aggregate difference yet to be recognised in profit or loss at the beginning or the end of the period and a reconciliation of changes in the balance of this difference.

De-recognition of financial assets AASB7(13) 10. A council may have transferred financial assets (refer to paragraphs 15 - 32 of AASB 139 Financial

Instruments: Recognition and Measurement) in such a way that part or all of the financial assets do not qualify for de-recognition. The council shall disclose for each class of such financial assets:

(a) the nature of the assets (b) the nature of the risks and rewards of ownership to which the council remains exposed (c) when the council continues to recognise all of the asset, the carrying amounts of the asset

and of the associated liability (d) when the council continues to recognise the assets to the extent of its continuing involvement,

the total amount of the original assets, the amount of the assets that the council continues to recognise and the carrying amount of the associated liabilities.

NSW Council


(continued)

A-68

Commentary – Receivables (continued)

OLG Unknown owners and postponed rates Policy statements 11. Amounts due for rates from unknown owners or rates, which have been postponed under the Local

Government Act, shall not be recognised as revenues or as assets in the financial statements.

12. Rate debtors shall be shown net of amounts due from unknown owners and postponed rates.

OLG commentary 13. As Council has little control over amounts due from unknown owners and it would not appear possible

to reliably measure the proportion of rates due from unknown owners, which will subsequently be collected, they are not to be included as revenue or assets in the financial statements.

14. With regard to rates that have been postponed under the Local Government Act, it is considered that they also do not qualify as revenue or as assets.

15. The amount due from unknown owners and postponed rates should be deducted from the total rates levied and only the net amount recognised as revenue in the Income Statement. At the same time, contra asset accounts, Unknown Owners' Suspense and Postponed Rates Suspense, should be created. Only the net receivables for rates will be recognised in the Statement of financial position. If the rates are collected, the entries should be reversed and if the rates are subsequently written off the debits should be made against the contra asset accounts.

NSW Council


(continued)

A-69

Note 8 Inventories and other assets

Actual 2015

Actual 2014

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Inventories Real estate (refer (a) below) 1,389 5,746 5,709 2,810 Stores and materials 483 - 448 - Trading stock 145 - 175 - Other (specify if material) - - - - Total inventories 2,017 5,746 6,332 2,810 (a) Real estate development Residential 525 1,240 - - Industrial/Commercial 864 4,506 5,709 2,810 Other properties - - - - Total real estate held for sale 1,389 5,746 5,709 2,810 (Valued at the lower of cost and net

realisable value)

Represented by: Acquisition costs 513 2,397 859 2,810 Development costs 876 3,349 4,850 - Borrowing costs - - - - Other holding costs - - - - Other properties – Book value - - - - - - - - Less: Provision for Under Recovery - - - - Total real estate held for sale 1,389 5,746 5,709 2,810 (b) Inventories not expected to be

realised within the next 12 months - -

- 300 Other assets Prepayments 29 - 846 - Other (specify if material) - - - - Total other assets 29 - 846 -

Note: Refer to Note 27 Fair value measurement for information regarding the fair value of other assets held.

NSW Council


(continued)

A-70

Note 8 Inventories and other assets (continued)

Externally restricted inventories and

other assets

Actual 2015

Actual 2014

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Water Stores and materials 416 - 395 - Trading stock - - - - Prepayments - - 141 - Total water 416 - 536 - Sewerage Stores and materials 59 - 51 - Trading stock - - - - Prepayments - - 80 - Total sewerage 59 - 131 - DWM Stores and materials - - - - Trading stock - - - - Prepayments - - - - Total DWM - - - - Other Stores and materials - - - - Trading stock - - - - Prepayments - - - - Total other - - - - Total externally restricted inventories and

other assets 475 -

667 - Unrestricted inventories and other assets 1,571 5,746 6,511 2,810 Total inventories and other assets 2,046 5,746 7,178 2,810

NSW Council


(continued)

A-71

Commentary – Inventories

AASB102 Recognition and initial measurement 1. Inventories should be recognised when the risks and rewards of ownership are transferred to the

council and the asset recognition criteria are met.

2. Assets held in a council’s premises may not qualify as inventories if they are held on consignment (ie on behalf of another council and no liability to pay for the goods exists unless they are sold).

3. Inventories should initially be recognised at cost. Cost of inventories includes import duties, transport and handling costs and any other directly attributable costs less trade discounts, rebates and subsidies.

AASB102 Subsequent measurement 4. Inventories should be valued at the lower of cost and net realisable value (NRV), NRV is the estimated

selling price in the ordinary course of business, less the costs of completion and selling expenses.

5. The cost of inventories used should be assigned by using either the first-in, first-out (FIFO) or weighted average cost formula. Last-in, first-out (LIFO) is not permitted. A council should use the same cost formula for all inventories that have a similar nature and use to the council. Where inventories have a different nature or use, different cost formulas may be justified. The cost formula used should be applied on a consistent basis from period to period.

Not-for-profit entities 6. In respect of not-for-profit entities, disclosure is required of the following: AASB102(Aus36.1)(a) (a) the accounting policies adopted in measuring inventories held for distribution, including the cost

formula used AASB102(Aus36.1)(b) (b) the total carrying amount of inventories held for distribution and the carrying amount in

classifications appropriate to the council AASB102(Aus36.1)(c) (c) the amount of inventories held for distribution recognised as an expense during the period in

accordance with paragraph Aus34.1 of AASB 102 AASB102(Aus36.1)(d) (d) the amount of any write-down of inventories held for distribution recognised as an expense in

the period in accordance with paragraph Aus34.1 of AASB 102 AASB102(Aus36.1)(e) (e) the amount of any reversal of any write-down that is recognised as a reduction in the amount of

inventories held for distribution recognised as expense in the period in accordance with paragraph Aus34.1 of AASB 102

AASB102(Aus36.1)(f) (f) the circumstances or events that led to the reversal of a write-down of inventories held for distribution in accordance with paragraph Aus34.1 of AASB 102

AASB102(Aus36.1)(g) (g) the carrying amount of inventories held for distribution pledged as security for liabilities AASB102(Aus36.1)(h) (h) the basis on which any loss of service potential of inventories held for distribution is assessed,

or the bases when more than one basis is used.

NSW Council


(continued)

A-72

Note 9(a) Infrastructure, property, plant and equipment

Notes -

Exclude investment properties and non-current assets held for sale.

Additions to Buildings and Infrastructure are made up of Asset Renewals ($1,870) and New Assets ($17,959).

Renewals are defined as replacements of existing assets as opposed to the acquisition of new assets.

The ‘Water Supply network’ and ‘Sewerage network’ asset classes do not include those fixed assets belonging to the water and sewer funds which form part of other asset classes, eg land, buildings etc.

See Note 9b for all the classes of fixed assets belonging to the water and sewer funds.

Refer to Note 27 Fair Value Measurement for information regarding the fair value of IPP & E.

By asset type

At 30 June 2014 Movements during year At 30 June 2015

Cost $’000

Fair value $’000

Accum depn and impairment

$’000 WDV $’000

Additions $’000

WDV of disposals $’000

Depn and impairment

$’000

Transfers/ Adjustments

$’000

Revaluation increments/

(decrements) $’000

Cost $’000

Fair value $’000

Accum depn and

impairment $’000

WDV $’000

Capital WIP 29,013 - - 29,013 37,151 - - (17,072) - 49,092 - - 49,092

Plant and equipment - 19,644 13,038 6,606 2,685 (670) (1,423) - - - 19,945 12,747 7,198

Office equipment - 3,536 2,850 686 127 - (178) - - - 3,662 3,027 635

Furniture and fittings - 1,492 958 534 - - (22) - - - 1,492 980 512

Leased plant and equipment - - - - - - - - - - - - -

Land – Operational - 68,017 - 68,017 1,578 - - (1,119) - - 68,476 - 68,476

Land – Community - 34,351 - 34,351 208 - - - - - 34,559 - 34,559

Land under roads:- Pre 01/07/08 - - - - - - - - - - - - -

Land under roads - Post 01/07/08 - 2,922 - 2,922 6 - - (1,352) 408 - 1,984 - 1,984

Non deprec. land improvements - 193 - 193 - - - 1,082 - - 1,275 - 1,275

Depreciable land improvements - 1,125 419 706 - (143) (39) 704 - - 1,621 393 1,228

Buildings – Non specialised - 84,965 33,684 51,281 837 - (2,553) 4,504 - - 90,339 36,270 54,069

Buildings – Specialised - 33,628 11,879 21,749 192 (238) (884) 2,105 - - 35,330 12,406 22,924

Other structures - 29,791 6,441 23,350 2,253 (138) (792) 6784 - - 38,659 7,202 31,457

Infrastructure:

– Roads - 300,495 47,484 253,011 6,293 - (2,786) 289 - - 307,077 50,270 256,807

- Bridges - - - - - - - - - - - - -

- Footpaths - - - - - - - - - - - - -

– Bulk Earthworks (non-deprec) - - - - - - - - - - - - -

– Stormwater drainage - 121,790 - 76,726 946 (24) (1,197) 226 - - 122,934 - 76,677

– Water supply network - 256,311 102,793 153,518 1,769 - (2,739) - 4,298 - 265,534 108,688 156,846

– Sewerage network - 226,966 79,996 146,970 2,606 - (2,645) - 4,115 - 235,927 84,881 151,046

- Open Space / Recreational Assets - - - - - - - - - - - - -

- Swimming Pools - - - - - - - - - - - - -

- Other Open Space/Recreational assets - - - - - - - - - - - - -

- Other infrastructure - - - - - - - - - - - - -

Other assets:

– Heritage collections - - - - - - - - - - - - -

– Library books - 2,604 2,313 291 90 - (96) - - - 2,695 2,410 285

– Other - 2,977 - 2,977 - - - - - - 2,977 - 2,977

Tip asset - 634 50 584 - - - (106) - - 528 50 478

Quarry asset - 64 47 17 - - - - - - 64 47 17

Other remediation assets - - - - - - - - - - - - -

Totals 29,013 1,191,505 347,016 873,502 56,741 (1,213) (15,354) (3,955) 8,821 49,092 1,235,078 365,628 918,542

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Note 9(b) Restricted infrastructure, property, plant and equipment

Refer to Note 27 Fair Value Measurement for information regarding the fair value of IPP &E

Actual 2014 $’000

Actual 2015 $’000

Cost Fair value

Accum depn and impairment WDV Cost Fair value

Accum depn and impairment WDV

Water supply

WIP - 9,940 - 9,940 - 36,222 - 36,222

Plant and equipment - 1,710 1,285 425 - 1,849 1,335 514

Office equipment - - - - - - -

Furniture and fittings - 22 7 15 - 22 8 14

Land:

– Operational land - 3,483 - 3,483 - 3,483 - 3,483

– Community land - 6,809 - 6,809 - 6,809 - 6,809

Non depreciable land improvements - 38 - 38 - 38 - 38

Land improvements – depreciable - 657 177 480 - 547 177 370

Buildings - 2,490 1,212 1,278 - 2,491 1,259 1,232

Other structures - 3,182 871 2,311 - 3,275 959 2,316

Infrastructure – Water supply - 256,581 103,063 153,518 - 265,534 108,688 156,846

Total water supply - 284,912 106,615 178,297 - 320,270 112,426 207,844

Sewerage services

WIP - - - - - 2,762 1,906 856

Plant and equipment - 3,402 2,420 982 - - - -

Office equipment - - - - - - -

Furniture and fittings - - - - - - - -

Land:

– Operational land - 2,808 - 2,808 - 2,045 - 2,045

– Community land - 129 - 129 - 129 - 129

– Non depreciable land improvements - - - - - - - -

Land improvements – depreciable - - - - - - - -

Buildings - 68 13 55 - 68 13 55

Other structures - - - - - - - -

Infrastructure – Sewerage assets - 226,966 79,996 146,970 - 235,927 84,881 151,046

Total sewerage services - 233,373 82,429 150,944 - 240,931 86,800 154,131

Domestic waste management

WIP - 16,456 - 16,456 - - -

Plant and equipment - 746 541 205 - 762 553 209

Land:

– Operational land - - - - - - - -

– Community land - 1,806 - 1,806 - 1,806 - 1,806

– Non depreciable land improvements - - - - - 1,082 - 1,802

Land improvements – depreciable - - - - - 704 13 691

Buildings - 3,074 509 2,565 - 9,754 653 9,101

Other Structures - 3,837 1,061 2,776 - 11,884 1,300 10,584

Total DWM - 25,919 2,111 23,808 - 25,992 2,519 23,473

Totals restrictions - 544,204 191,155 353,049 - 587,193 201,745 385,448

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OLG Where there is no market-based evidence of fair value, councils need to estimate fair value using the depreciated replacement cost approach. Depreciated replacement cost “is the current replacement cost of an asset less, where applicable, accumulated depreciation calculated on the basis of such cost to reflect the already consumed or expired future economic benefits of the asset”.

Commentary – Infrastructure, property, plant and equipment

AASB116 Recognition and initial measurement 1. IPPE should be recognised when it meets the recognition criteria of an asset.

2. IPPE is measured initially at cost. Cost includes the fair value of the consideration given to acquire the asset (net of discounts and rebates) and any directly attributable cost of bringing the asset to working condition for its intended use (inclusive of import duties and taxes).

3. Directly attributable costs are the cost of site preparation, delivery, installation costs, relevant professional fees, and the estimated cost of dismantling and removing the asset and restoring the site (to the extent that such a cost is recognised as a provision).

Subsequent measurement 4. Classes of IPPE should be carried at historical cost less accumulated depreciation and any

accumulated impairment losses, or at a revalued amount less any accumulated depreciation and subsequent accumulated impairment losses. The depreciable amount of IPPE (being the gross carrying value less the estimated residual value) should be depreciated on a systematic basis over its useful life.

5. Subsequent expenditure relating to an item of IPPE should be evaluated under the general recognition provisions above.

6. Plant and equipment may have parts with different useful lives. Depreciation should be calculated based on each individual part’s life. In case of replacement of one part, the new parts should be capitalised to the extent that they meet the recognition criteria of an asset, and the carrying amount of the parts replaced should be derecognised appropriately.

7. The cost of a major inspection or overhaul of an item occurring at regular intervals over the useful life of the item is capitalised only where the council has clearly identified as a separate component of the asset an amount representing major inspection or overhaul and has already depreciated that component to reflect the consumption of benefits that are to be subsequently replaced. The carrying amount of the parts replaced should be appropriately derecognised. In all other circumstances such costs are expensed as incurred.

Depreciation \ 8. A variety of depreciation methods can be used to allocate the depreciable amount of an asset on a

systematic basis over its useful life. These methods include the straight-line method, the diminishing balance method and the units of production method. Straight-line depreciation results in a constant charge over the useful life if the asset’s residual value does not change. The diminishing balance method results in a decreasing charge over the useful life. The units of production method results in a charge based on the expected use or output. The council selects the method that most closely reflects on the expected pattern of consumption of the future economic benefits embodied in the asset. That method is applied consistently from period to period unless there is a change in the expected pattern of consumption of those future economic benefits.

AASB116 / AASB 13 Revaluation OLG 9. Councils need to assess at each reporting date whether there is any indication that a revalued asset’s

carrying amount may differ materially from that which would be determined if the asset were revalued at the reporting date. If any such indication exists, the council determines the asset’s fair value and revalues the asset to that amount. It is recommended that full revaluations occur at least every five years, so councils should develop a plan for assessing the need for any revaluations, allowing sufficient time to undertake the revaluation process and meet reporting requirements.

10. The fair value of IPPE is defined as:

“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.”

Fair value is determined in accordance with its highest and best use as defined in AASB 13.

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Commentary – Infrastructure, property, plant and equipment (continued)

Revaluation (continued)

The current replacement cost is the lowest cost of replacing the economic benefits of the existing asset and should be assessed on the basis of design and construction using modern technology. This is also referred to as the Modern Engineering Equivalent Replacement Asset or MEERA approach.

All new assets are measured initially at their cost of acquisition. However, the initial valuation of developer provided assets should be on the basis of their current replacement cost.

For water supply and sewerage assets, it can be reasonably assumed that the assets will be in place indefinitely in order to maintain these essential services. Therefore, there is normally no need to consider any dismantling or removal and restoration cost in the assessment of fair value. However, if Council decides to decommission a particular asset, the relevant removal and restoration costs are to be included.

11. When an item of IPPE is revalued, its entire class should be revalued. Revaluations should be made

with sufficient regularity to ensure that the carrying amount of the items does not differ materially from their fair value at the statement of financial position date.

OLG The Office has stated that councils should undertake the revaluation of assets at every five years (unless there has been material changes to the valuations beforehand).

Unless there have been material changes, the remaining asset classes will need to be revalued in accordance with the table below.

Asset Class Due

Roads, bridges, footpaths, drainage, bulk earth works 30 June 2015

Community land, other assets, other structures land improvements

30 June 2016

Water and sewer 30 June 2017

Property, plant and equipment, operational land, buildings 30 June 2018

Land Under Roads (LUR) if applicable 30 June 2019

Councils that wish to revalue assets at fair value prior to these dates may do so provided that all the assets in that class are valued at their fair value.

Assets do not need to be indexed between full revaluations except in the case of water and sewerage network assets where valuations are to be annually indexed in accordance with the Rates Reference Manual issued by the NSW Office of Water.

12. The profit or loss on disposal of an asset is determined as the difference between the net disposal

proceeds and the carrying amount of the asset.

OLG 13. Where a Council revalues depreciable assets, OLG has determined any accumulated depreciation

at the date of the revaluation is treated by (a) restating proportionately with the change in the gross carrying amount of the asset so that

the carrying amount of the asset after revaluation equals its revalued amount.

AASB116(40.1, and 40.2)

14. In respect of not-for-profit entities, if the carrying amount of a class of assets 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 debited directly to equity under the heading of Revaluation reserve to the extent of any credit balance existing in any revaluation reserve in respect of the same class of asset. Revaluation increases and revaluation decreases relating to individual assets within a class of infrastructure, property, plant and equipment shall be offset against one another within that class but shall not be offset in respect of assets in different classes.

Clean Energy Legislation –Impairment 15. Councils will need to consider whether the passage of the Clean Energy Legislation (Clean Energy

Act 2011 and supporting legislation) could be an impairment indicator and hence require them to reassess specifically the recoverable amount of the relevant assets to determine whether any write downs are required. Councils that will be significantly affected should explain the potential impact of the legislation on their future results and disclose the key assumptions used in impairment tests, including an explanation of whether the legislation has been factored into the impairment calculation and, if so, how.

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Commentary – Infrastructure, property, plant and equipment (continued)

Classes of property, plant and equipment AASB116(37) 16. A class of property, plant and equipment is a grouping of assets similar nature and use in the council's

operation.

17. Each council will have different classes, depending on their individual operations. The number of classes that are separately disclosed also depends on materiality. However, the 'plant and equipment' of an entitycouncil will normally include assets of quite different nature and use. It will therefore not be sufficient to provide the information required in AASB 116 only for two classes, being 'land and buildings' and 'plant and equipment'. Rather, entities should provide a further breakdown or, alternatively, use a more specific narrative to illustrate that the entitycouncil has only one major class of plant and equipment.

See Special Schedule 7 for further information on asset classes.

18. The classes of property, plant and equipment used in Note 9 should reflect those used in Special Schedule 7 – Report on Infrastructure Assets. It should be noted that within the Buildings asset class ‘Other Buildings’ Category may include assets such as childcare centres, aged care facilities and multi-purpose centres for example. Cultural Facilities may include assets such as museums, art galleries and entertainment centres. "Other Structures" is designed for the following types of infrastructure assets: statues, fences, monuments, clock towers and so on. "Open Space/Recreational Assets" may include assets such as swimming pools (but not including buildings, plant & equipment, car parks etc that are associated with the swimming pool), playground equipment, BBQ’s and outdoor fitness facilities. "Other infrastructure" may include jetties, boat ramps, sea/rock/retaining walls etc.

OLG 19. For the purpose of the table in note 9(a), where an asset class is at fair value, then all assets in that

class are shown in the fair value column regardless of whether some assets have been recently acquired and have not yet been revalued.

AASB116(74)(b) 20. Disclosure is required of the amount of expenditures recognised in the carrying amount of an item of property, plant and equipment in the course of its construction. This can be done as separate disclosure or by adding another class of assets called ''Construction in progress'' (or similar) to the reconciliation.

Compensation for impairment AASB116(65),(66) 21. Compensation from third parties for items of property, plant and equipment that were impaired, lost or

given up shall be included in profit or loss when the compensation becomes receivable. Impairments or losses of items of property, plant and equipment and any related claims for compensation from third parties are separate economic events that must be accounted for separately.

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Note 10(a) Payables, borrowings and provisions

Actual 2015

Actual 2014

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Payables Goods and services 7,219 - 5,309 - Accrued wages and salaries 744 - 745 - Accrued expenses – Other 82 - 128 - Payments received in advance 808 - 641 - Deposits and retentions 245 - 119 - Other payables (specify if material) 117 - 237 - Total payables 9,215 - 7,179 - Current payables not expected to be

settled within the next 12 months - -

- - Borrowings Bank overdraft - - - - Loans: – Secured(1) 3,443 15,314 3,383 18,750 – Unsecured - - - - Government advances - - - - Ratepayers’ advances - - - - Finance lease liability - - - - Deferred payment liabilities - - - - Other (Specify if material) - - - - Total interest bearing liabilities 3,443 15,314 3,383 18,750 Provisions(2) Annual leave 2,102 - 2,090 - Sick leave 182 - 183 - Long service leave 2,618 504 2,776 610 Gratuities - - - - Self insurance – Workers compensation 1,000 - 1,217 - – Public Liability - - - - – Other - - - - Asset remediation (Note 26) - 609 - 700 Carbon tax - - - - Other (Specify if material) - - - - Total provisions 5,902 1,113 6,266 1,310 Current provisions not expected to be

settled within the next 12 months 2,720 -

1,276 - Liabilities relating to restricted assets Domestic waste management - - - - Water 2,006 1,971 861 2,780 Sewer 219 - 359 - Self-insurance - - - - Total restricted liabilities 2,225 1,971 1,220 2,780 Liabilities related to unrestricted assets 16,335 14,456 15,608 17,280 Total 18,560 16,427 16,828 20,060

Notes:

(1) Loans are secured over the income of Council.

(2) Vested ELE is all carried as a current provision.

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Note 10(b) Description of and movements in provisions

The movement in each class of provision (excluding those relating to employee benefits) is presented in the

table below.

Class of provision

Opening balance $’000

Increases in provision $’000

Payments $’000

Re-measurement

$’000

Closing balance $’000

Gratuities - - - - - Self-insurance - - - - - Asset remediation 700 (106) - 15 609 Carbon tax - - - - - Other - - - - -

Total 700 (106) - 15 609

[insert a description of each class of provision shown in the table above as to its nature and purpose and related uncertainties].

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Commentary – Liabilities

AASB Definition Framework 1. A liability is a present obligation of the council arising from past events, the settlement of which is

expected to result in an outflow of resources embodying economic benefits.

2. Present obligation may be legally enforceable as a consequence of a binding contract or statutory requirement or a council’s policy/practice (such as to rectify faulty products beyond the warranty period).

AASB137 Commitments 3. A decision by management to acquire assets in the future does not in itself give rise to a present

obligation. A council may be committed to acquire tangible or intangible assets in order to use PPE under operating lease agreements for a future period. A commitment may not always therefore be recognised.

AASB119 Employee benefits 4. Employee benefits are all forms of consideration given by a council in exchange for services rendered

by its employees. These benefits include salary-related benefits (such as wages, salaries, profit-sharing, bonuses and long-service leave), termination benefits (such as severance or redundancy pay) and post-employment benefits (such as retirement benefit plans).

Post-employment benefits 5. Post-employment benefits include pensions, termination indemnity, and post-employment life

insurance and medical care. Pensions and termination indemnities are provided to employees either through defined contribution plans or defined benefit plans.

6. Whether an arrangement is a defined contribution plan or a defined benefit plan depends on the substance of the transaction rather than the form of the agreement. For example, a termination indemnity scheme, whereby employee benefits are payable regardless of the reason for the employee’s departure, is accounted for as a defined benefit plan. Special consideration needs to be given to multi-employer plans.

Defined contribution plans 7. The cost of defined contribution plans is the contribution payable by the employer for that accounting

period.

Defined benefit plans 8. Due to the nature of local government defined benefit plans, it is not possible to account for these

schemes as multi-employer defined benefit plans. In accordance with AASB 119 they are therefore accounted for as defined contribution plans.

Early termination obligation 9. Early termination obligations should be recognised as a liability when the council is ‘demonstrably

committed’ to terminating the employment before the normal retirement date.

10. A council is ‘demonstrably committed’ when, and only when, it has a detailed formal plan for the early termination without realistic possibility of withdrawal. Where such benefits are long term, they should be discounted using the same rate as above for defined benefit obligations. ‘Normal’ termination obligations should be accrued as the obligation arises from past service.

Classification of employee benefits provisions as non-current AASB101(60) 11. Irrespective of how the amount is measured, an employee benefits provision can only be classified

on the statement of financial position as a non-current liability if there is no possibility the council could have to pay out the provision within the next 12 months. This means, for example, that where employees are entitled to take their long service leave or accrued annual leave during the next 12 months, the provision relating to them must be recorded as a current liability even though the employees may not be expected to take the leave for an extended period.

AASB139 Financial liabilities 12. A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange

financial instruments with another council.

Recognition and initial measurement 13. There are two categories of financial liabilities: At fair value through profit or loss — liabilities acquired for the purpose of generating a

profit from short-term fluctuations in price or part of a portfolio with a pattern of short-term profit taking.

Other liabilities – the remainder [most Council liabilities]

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Commentary – Liabilities (continued)

Subsequent measurement 14. The classification of financial liabilities drives their subsequent measurement, which is as follows: At fair value through profit or loss – carried at fair value, with gains and losses reported

in income. Other liabilities – carried at amortised cost unless designated fair value.

Fair value disclosure AASB7(29)(a) 15. For financial instruments such as short-term payables, no disclosure of fair value is required when

the carrying amount is a reasonable approximation of fair value. Where the carrying amount is not a reasonable approximation of fair value, disclosure of the fair value is required by paragraph 25 of AASB 7 Financial Instruments: Disclosures.

AASB137 Provisions and contingencies Definition 16. A provision is a liability of uncertain timing or amount. Provisions can be distinguished from other

liabilities such as trade payables and accruals because there is uncertainty about the timing or amount of the future expenditure required in settlement. Although it is sometimes necessary to estimate the amount or timing of accruals, the uncertainty is generally much less than for provisions.

17. AASB 137 distinguishes between:

(a) provisions - which are recognised as liabilities (assuming that a reliable estimate can be made) because they are present obligations and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations, and

(b) contingent liabilities - which are not recognised as liabilities because they are either: (i) possible obligations, as it has yet to be confirmed whether the council has a

present obligation that could lead to an outflow of resources embodying economic benefits, or

(ii) present obligations that do not meet the recognition criteria in this standard (because either it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or a sufficiently reliable estimate of the amount of the obligation cannot be made).

18. A provision should be recognised only when: the council has a present obligation to transfer

economic benefits as a result of past events; it is probable (more likely than not) that such a transfer will be required to settle the obligation; and a reliable estimate of the amount of the obligation can be made.

19. The amount recognised as a provision should be the best estimate of the unavoidable expenditure required to settle in full the present obligation, and should be discounted at a pre-tax rate that reflects current market assessment of the time value of money and those risks specific to the liability that have not been reflected in the best estimate of the expenditure.

20. A present obligation arises from an obligating event and may take the form of either a legal obligation or a constructive obligation. An obligating event leaves the council no realistic alternative to settling the obligation. If the council can avoid the future expenditure by its future actions, it has no present obligation, and no provision is required. For example, a council cannot recognise a provision based solely on the intent to incur expenditure at some future date.

Onerous contracts 21. If a council has an onerous contract (the unavoidable costs of meeting the obligations under the

contract exceed the economic benefits expected to be received under it), the present obligation under the contract should be recognised as a provision.

Restructuring provisions 22. There are specific requirements as to when a provision for restructuring is recorded and what costs

are included in the provision. The council should demonstrate a constructive obligation to restructure. The constructive obligation should be demonstrated by: (a) a detailed formal plan identifying the main features of the restructuring; and (b) raising a valid expectation to those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features to those affected.

23. A restructuring plan does not create a present obligation at the statement of financial position date if it is announced after that date, even if it is announced before the financial statements are approved. No obligation arises for the sale of an operation until the council is committed to the sale (ie there is a binding sale agreement).

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24. The provision should only include incremental costs necessarily entailed by the restructuring and not those associated with the council’s ongoing activities. Any expected gains on the sale of assets should not be taken into account in measuring a restructuring provision.

Recovery 25. Where the council expects to recover from a third party some or all of the amounts required to settle

a provision and has no obligation for that part of the expenditure to be met by the third party, it should offset the anticipated recovery against the provision and disclose the net amount.

26. In all other cases, the provision and any anticipated recovery should be presented separately as a liability and an asset respectively; however, an asset can only be recognised if it is virtually certain that settlement of the provision will result in a reimbursement, and the amount recognised for the reimbursement should not exceed the amount of the provision. Net presentation is permitted in the income statement.

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Subsequent measurement 28. Management should perform an exercise at each reporting date to identify the best estimate of the

unavoidable expenditure required to settle in full the present obligation, discounted at an appropriate rate. The increase in provision due to the passage of time is recognised as an interest expense.

Long-term borrowings AASB101(72) 29. A council classifies its financial liabilities as current when they are due to be settled within twelve

months after the reporting date, even if: (a) the original term was for a period longer than twelve months, and (b) an agreement to refinance, or to reschedule payments, on a long-term basis is completed after

the reporting date and before the financial statement is authorised for issue.

AASB101(73) 30. If a council expects, and has the discretion, to refinance or roll over an obligation for at least twelve months after the reporting date under an existing loan facility, it classifies the obligation as non-current, even if it would otherwise be due within a shorter period. However, when refinancing or rolling over the obligation is not at the discretion of the council (for example, there is no agreement to refinance), the potential to refinance is not considered and the obligation is classified as current.

Breached undertakings AASB101(74) 31. When a council breaches an undertaking under a long-term loan agreement on or before the reporting

date with the effect that the liability becomes payable on demand, the liability is classified as current, even if the lender has agreed, after the reporting date and before the authorisation of the financial statement for issue, not to demand payment as a consequence of the breach. The liability is classified as current because, at the reporting date, the council does not have an unconditional right to defer its settlement for at least twelve months after that date.

AASB101(65),(66) 32. When a breach occurred during the period, and the breach has not been remedied or the terms of the loan payable have not been renegotiated by the reporting date, the effect of the breach on the classification of the liability as current or non-current is determined under AASB 101 Presentation of Financial Statements.

Breached undertakings (continued) Set-off of assets and liabilities AASB132(42) 33. A financial asset and a financial liability shall be offset and the net amount presented in the statement

of financial position when, and only when, a council: (a) currently has a legally enforceable right to set off the recognised amounts, and (b) intends either to settle on a net basis, or to realise the asset and settle the liability

simultaneously.

OLG Provision for self-insurance Policy statements

34. A provision shall be made to recognise liabilities for outstanding claims (uninsured losses) arising from a decision to undertake self-insurance. The provision shall comprise liabilities for expected future payments in respect of events which have occurred up to the end of the reporting period relating to:

Unpaid reported claims. Claims incurred but not reported (IBNR). Adjustments to the assessed liability for outstanding claims arising from the availability of

further claims information (claims incurred but not enough reported (IBNER)). Direct and indirect claims settlement costs.

35. The amount of the outstanding liability must be assessed each year on the basis of the measurement process set out in paragraphs 34 to 36 of AASB 1023 General Insurance Contracts. An actuarial assessment of the outstanding liability should be obtained if the liability cannot be ascertained from historical records. The amount of the outstanding liability shall be disclosed in the notes to the financial statements.

36. Cash or specific investments must be held for either: (a) the full amount of the provision or a banker's guarantee arranged for that amount or (b) an amount determined to be adequate by an independent actuarial assessment made in the

current financial year.

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37. A provision shall not be created as a means of setting aside funds to meet commitments which may arise in the future from future events.

OLG commentary 38. In regard to workers' compensation self-insurance, self-insurers are required by WorkCover, as a

condition of a self-insurance licence to meet certain requirements. WorkCover does not require the mandatory setting aside of funds to meet the outstanding claims liability. However it does require that provision be recognised for an actuarially assessed figure for this outstanding claims liability. Additionally, self-insurers are required to lodge security in accordance with the actuarial assessment plus a contingency margin, which is calculated by WorkCover. The security is either placed with Treasury in cash or met by the lodgement of a Banker's Deed of Understanding with WorkCover.

39. Other types of self insurance policies should have specific investments equal to the amount of outstanding claims and supporting records will need to be maintained to identify the component risks and liabilities comprising the provision.

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Note 11 Reconciliation of operating result to net cash movement from operating activities

Notes

Actual 2015 $’000

Actual 2014 $’000

(a) Reconciliation of cash assets Total cash and cash equivalents 6a 12,797 13,488 Less: Bank overdraft 10 - -

Balances as per cash flow statement 12,797 13,488

(b) Reconciliation of net operating result to cash

provided from operating activities

Net operating result from Income statement 45,831 24,467 Add: Depreciation and impairment 15,048 12,052 Increase in provision for doubtful debts 16 Increase in provision for leave entitlements - 986 Increase in other provisions - 437 Decrease in receivables - 706 Decrease in inventories - 22 Decrease in other current assets 817 - Share of loss in joint ventures - 12 Increase in payables 1,910 783 Increase in accrued interest payable - 68 Increase in other liabilities 173 258 Decrements from revaluations - - Loss on sale of assets Loss on boundary adjustment - - Amortisation of discounts and premiums recognised - - Other 15 212

63,794 40,019

Less: Decrease in provision for doubtful debts 35 -

Decrease in employee leave entitlements

470

- Decrease in other provisions 106 3 Increase in receivables 1,981 - Increase in inventories 5 - Increase in other current assets 738 Share of profit in joint ventures 7 - Decrease in payables Decrease in accrued interest payable 46 - Decrease in other current liabilities Reversal of previous revaluation decrements - - Non cash contributions and dedications 5,506 3,674 Gain on sale of assets 1,156 814 Fair value adjustments to investment property Fair value adjustments to financial assets at fair value through

profit and loss

811 1375 Other 1 -

10,124 6,604

Net cash provided from (or used in) operating activities from Statement of cash flows

53,670 33,415

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Note 11 Reconciliation of operating result to net cash movement from operating activities (continued)

Notes

Actual 2015 $’000

Actual 2014 $’000

(c) Non-cash financing and investing activities Acquisition of plant and equipment by means of finance leases - - PwD construction - - Bushfire grants - - S.94 contributions in kind 5,506 3,674 Dedications - - Other (specify if material) - - 5,506 3,674 (d) Financing arrangements Unrestricted access was available at reporting date to the

following:

Bank overdraft facility(1) 3,700 3,700 Corporate credit cards 113 113 3,813 1,000 Note:

(1) The Bank overdraft facility may be drawn at any time and may be terminated by the bank without notice.

(e) Bank guarantees/ Loan guarantees

[Provide details of any bank guarantee that Council has in place.]

NSW Council


(continued)

A-86

Note 12 Commitments

Actual 2015 $’000

Actual 2014 $’000

(a) Capital commitments (exclusive of GST)

Capital expenditure committed for at the reporting date but not recognised in the financial statements as liabilities:

– Buildings 31,739 59,629 – Plant and equipment - -

Total 31,739 59,629

[Provide a description of the commitment in place].

(b) Finance lease commitments

Commitments under finance leases at the reporting date are payable as

follows: – Not later than one year - - – Later than one year and not later than 5 years - - – Later than 5 years - -

Total - -

Minimum lease payments - - Less: Future finance charges - -

Lease liability Representing lease liabilities: – Current - - – Non-current - -

Total - -

[Provide a description of leases] (c) Non-cancellable operating lease commitments

Commitments under non-cancellable operating leases at the reporting

date but not recognised in the financial statements are payable as follows: – Not later than one year 695 606 – Later than one year and not later than 5 years 1,311 1,495 – Later than 5 years - 48

Total 2,006 2,149

[Provide a description of leases] – e.g. The operating leases in place are

for Office equipment and Heavy Plant and equipment. All operating lease agreements are secured only against the Leased Asset. No lease agreements impose any financial restrictions on Council regarding future debt etc.

(d) Repairs and maintenance: investment property

Contractual obligations for future repairs and maintenance - -

Total - -

NSW Council


(continued)

A-87

Commentary – Commitments

Changes to disclosures of commitments 1. Councils now to provide information about commitments as required under specific standards. This

includes contractual commitments: AASB116(74)(c) (a) for the acquisition of property, plant and equipment AASB138(122)(e) (b) for the acquisition of intangible assets AASB140(75)(h) (c) to purchase, construct or develop investment property or for repairs, maintenance or

enhancements AASB117(31)(b), (35)(a)

(d) in relation to finance leases and non-cancellable operating leases.

2. An analysis of the commitments into time bands is only required for lease commitments.

Leasing arrangements AASB117(31)(e), (35)(d)

3. For both finance and operating leases, disclosure is required of a general description of the lessee’s significant leasing arrangements including, but not limited to, the following:

(a) the basis on which contingent rent payable is determined (b) the existence and terms of renewal or purchase options and escalation clauses (c) restrictions imposed by lease arrangements, such as those concerning additional debt, and

further leasing.

Finance leases in the financial statements of lessees: sublease payments AASB117(31)(d) 4. Where applicable, disclosure is required of the total of future minimum sublease payments expected

to be received under non cancellable subleases at the end of the reporting period.

Arrangements containing a lease - payments cannot be separated UIG4(15)(b) 5. Where an arrangement contains an operating lease but the lessee cannot reliably separate the

payments, all payments under the arrangement must be treated as lease payments for the purpose of complying with the disclosure requirements in AASB 117. In addition, the lessee must:

(a) disclose those payments separately from other lease payments that do not include non lease elements

(b) state that the payments include payments for non lease elements.

OLG OLG Commentary

6. Description of leases should include information to explain:

the type of assets which are leased;

term of the lease, including renewal options;

specific terms and conditions, e.g. contingent rentals, sale and leaseback arrangements.

NSW Council


(continued)

A-88

Note 13(a) Statement of performance measures – Consolidated results

Amounts2015 $’000

Current year

indicators 2014 2013

1. Operating performance

Total continuing operating revenue1 excluding capital grants and contributions – operating expenses (1,579)

-1.97% 9.10% 10.07%

Total continuing operating revenue1 excluding capital grants and contributions

79,972

2. Own source operating revenue

Total continuing operating revenue1 less all grants and contributions 69,097 55.10% 69.87% 59.13%

Total continuing operating revenue1 inclusive of all grants and contributions

125,408

3. Unrestricted current ratio

Current assets less all external restrictions 37,182 2.73:1 3.36:1 3.62:1

Current liabilities less specific purpose liabilities

13,615

4. Debt service cover ratio

Operating results1 before capital excluding interest and depreciation/impairment/ amortisation (EBITDA) 14,736

317.38% 489.37% 509%

Principal repayments (from the statement of cash flows) + borrowing interest costs (from the income statement)

4,643

5. Rates and annual charges outstanding percentage

Rates and annual charges outstanding

Rates and annual charges collectible 3,130

38,453 8.14%

7.44%

9.87%

6. Cash expense cover ratio

Current year's cash and cash equivalents including term deposits *12 93,047

14.75% 15.52% 12.56%

Payments from cash flow of operating and financing activities

75,685

1 Excludes fair value adjustments, reversal of revaluation decrements, net gain/loss on sale of assets and net share/loss of interests in joint ventures.

NSW Council


(continued)

A-89

Note 13(b) Statement of Performance Measures by Fund

General

2015 Water

2015 Sewer

2015


Total continuing operating revenue1 excluding capital grants and contributions – operating expenses

9.52% 8.56%

-6.09%

Total continuing operating revenue1 excluding capital grants and contributions


Total continuing operating revenue1 less all grants and contributions

28.70% 70.35% 68.33%

Total continuing operating revenue1 inclusive of all grants and contributions

3. Unrestricted current ratio 0

Current assets less all external restrictions 4.06 : 1 116.08 : 1 2.73 : 1



Operating results1 before capital excluding interest and depreciation/impairment/ amortisation (EBITDA)

458.69% 0.00% 182.35%


5. Rates and annual charges outstanding percentage 16.89%

0.00%

7.16%

Rates and annual charges outstanding

Rates and annual charges collectible


Current year's cash and cash equivalents including term deposits *12

0.00 0.00 14.06

Payments from cash flow of operating and financing activities

____________________________ 1 Excludes fair value adjustments, reversal of revaluation decrements, net gain/loss on sale of assets and net share/loss of interests in joint ventures.

NSW Council


(continued)

A-90

Commentary – Performance indicators


Purpose This ratio measures a Council’s achievement of containing operating expenditure within

operating revenue. It is important to distinguish that this ratio is focussing on operating performance and hence capital grants and contributions, fair value adjustments and reversal of revaluation decrements are excluded. The benchmark is greater than 0%.

Total continuing operations revenue1 excluding capital grants and contributions less operating expenses Total continuing operations revenue1 excluding capital grants and contributions


Purpose This ratio measures fiscal flexibility. It is the degree of reliance on external funding sources

such as operating grants and contributions. A Council’s financial flexibility improves the higher the level of its own source revenue. The benchmark is greater than 60%.

Total continuing operations revenue1 less all grants and contributions Total continuing operations revenue1 inclusive of capital grants and contributions

3. Unrestricted current ratio

Purpose The Unrestricted Current Ratio is specific to local government and is designed to represent

a Council’s ability to meet short term obligations as they fall due. Restrictions placed on various funding sources (e.g. Section 94 developer contributions, RMS contributions) complicate the traditional current ratio used to assess liquidity of businesses as cash allocated to specific projects is restricted and cannot be used to meet a Council’s other operating and borrowing costs. The benchmark is greater than 1.5.

Current assets less all external restrictions____ Current liabilities less specific purpose liabilities

Calculation of unrestricted current ratio Current assets less externally restricted assets Current Assets less All External Restrictions* [per Notes 6-8]. less Inventories shown in Current but not expected to be realised in next 12 months.


Total Current liabilities as shown in the Statement of financial position less Specific Purpose Liabilities [per Note 10(a)]

Specific Purpose Liabilities [per Note 10(a)] less ELE and Deposits/Retentions shown in current but not expected to be paid in next 12 months.

* External restriction shown in current cash and cash equivalents, investments, receivables and other

assets (Notes 6-8 inclusive).

Current assets less all external restrictions (Notes 6, 7 & 8) Specific purpose unexpended loans

RMS Advances

Self insurance claims

Other (incl. in liabilities)

Developer contributions

RMS contributions

Specific purpose unexpended grants

Water

Sewerage

DWM

Other (incl. in revenue)

NSW Council


(continued)

A-91

Commentary – Performance indicators (continued)

Note 7 Restricted receivables (current)

Specific purpose unexpended loans

MS Advances

Self insurance claims

Other (incl. in liabilities)

Developer contributions

RMS contributions

Specific purpose unexpended grants

Water

Sewerage

DWM

Other (incl. in revenue)

Note 8 Restricted other assets (current) Stores and materials (Water, Sewerage, DWM, Other)

Trading stock (Water, Sewerage, DWM, Other)

Prepayments (Water, Sewerage, DWM, Other)

Current liabilities less all specific purpose liabilities (Note 10(a))

Payables (Water, sewerage, DWM, Other)

Interest bearing liabilities (Water, Sewerage, DWM, Other)

Provisions (Water, Sewerage, DWM, Other)


Purpose

This ratio measures the availability of operating cash to service debt including interest, principal and lease payments. The benchmark is greater than 2.

Operating results before capital excluding interest and depreciation (EBITDA)______________________________________________________________


5. Rates and annual charges outstanding

Purpose

To assess the impact of uncollected rates and annual charges on liquidity and the adequacy of recovery efforts.

Rates and annual charges outstanding Rates and annual charges collectible

Rates and annual charges outstanding percentage Rates and annual charges outstanding Outstanding rates and annual charges (current and non-current) [Note 7] and Interest and extra charges (current and non-current) [Note 7].

less

Provision for doubtful debts rates and annual charges (current and non-current) [Note 7] and Provision for doubtful debts interest and extra charges (current and non-current) [Note 7].

Rates and annual charges collectible Rates and annual charges levied for the year [Income statement] and Interest and extra charges levied during the year [Note 3] and Rates and annual charges outstanding for the previous year(s) (current and non-current) [Note 7] and Interest and extra charges (current and non-current) [Note 7].

less

Provision for doubtful debts rates and annual charges (current and non-current) [Note 7] and Provision for doubtful debts interest and extra charges (current and non-current) [Note 7] Provision for doubtful debts rates and annual charges (current and non-current) [Note 7] and Provision for doubtful debts interest and extra charges (current and non-current) [Note 7]

NSW Council


(continued)

A-92

Commentary – Performance indicators (continued)


Purpose This liquidity ratio indicates the number of months a Council can continue paying for its immediate expenses without additional cash inflow. The benchmark is greater than 3 months.

Current year's cash equivalents and term deposits Payments from cash flow of operating and financing activities *12

OLG Performance Indicators Policy Statement

7. Where there has been a change in Council policy which affects the calculation of an indicator, then the change in policy must be disclosed in the Note and the current and previous two periods recalculated in accordance with the revised policy.

1 Excludes fair value adjustments, reversal of revaluation decrements, net gain/loss on sale of assets and net share/loss of interests in joint ventures


A-93

Note 14 Investment properties

Actual 2015 $’000

Actual 2014 $’000

At fair value AASB140(76) Opening balance at 1 July - - AASB140(76)(a) Acquisitions - - AASB140(76)(a) Capitalised subsequent expenditure - - AASB140(76)(c) Classified as held for sale or disposals - - AASB140(76)(d) Net gain (loss) from fair value adjustment - - AASB140(76)(f) Transfer (to) from inventories and owner occupied property - -

AASB140(76) Closing balance at 30 June - -

AASB140(75)(f) (a) Amounts recognised in profit and loss for investment property Rental income - -

Net gain (loss) from fair value adjustment - - Direct operating expenses from property that generated rental income - - Direct operating expenses from property that did not generate rental income - -

- -

AASB140(75)(h) (b) Contractual obligations

Refer to Note 12 for disclosure of any contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

AASB117(56)(c) (c) Leasing arrangements

The investment properties are leased to tenants under long term operating leases with rentals payable monthly. Minimum lease payments receivable on leases of investment properties are as follows.

AASB117(56)(a) Minimum lease payments under non-cancellable operating leases of

investment properties not recognised in the financial statements are receivable as follows:

Within one year - - Later than one year but not later than 5 years - - Later than 5 years - -

- -

Note:

Refer to Note 27 Fair value measurement for information regarding the fair value of investment properties held.


A-94

Commentary - Investment properties

Definition AASB140(5) 1. An investment property is property (land or a building – or part of a building – or both) held (by the

owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for:

(a) use in the production or supply of goods or services or for administrative purposes, or (b) sale in the ordinary course of business.

AASB140(6) 2. A property interest that is held by a lessee under an operating lease may be classified and accounted for as investment property if, and only if, the property would otherwise meet the definition of an investment property above and the lessee uses the fair value model.

Fair value measurements

OLG 3. The Office of Local Government has determined that investment properties are to be valued at ‘fair

value’ in all cases. A full revaluation should be performed every three years, a desktop revaluation may be performed in other years.

See guidance in the Appendix regarding determination of fair value.


A-95

Revised Note 15 Financial risk management

Risk management

Council’s activities expose it to a variety of financial risks including price risk, credit risk, liquidity risk and interest rate risk. The Council's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Council.

Council does not engage in transactions expressed in foreign currencies and is therefore not subject to foreign currency risk.

Financial risk management is carried out by the Finance Section under policies approved by the Council.

Council held the following financial instruments at reporting date:

Carrying value Fair value

2015 $’000

2014 $’000

2015 $’000

2014 $’000

Financial assets Cash and cash equivalents 12,797 13,488 12,797 12,987 Receivables 11,776 9,997 11,776 10,492 Investments

- Financial assets at fair value through profit or loss – Held for trading 20,728 18,555

20,728 17,997 - Available-for-sale financial assets - - - - - Held-to-maturity 80,250 73,917 80,250 74,417 125,551 115,957 125,551 115,893 Financial liabilities Payables 8,407 6,538 8,407 6,983 Borrowings 18,757 22,133 18,757 22,133 27,164 28,671 27,164 29,116

Note:

Refer to Note 27 for fair value information.

Cash and Cash Equivalents are not measured at Fair Value


A-96

Note 15 Financial risk management (continued)

(a) Cash and cash equivalents Financial assets at fair value through profit and loss Available-for-sale financial assets Held-to-maturity investments

Council’s objective is to maximise its return on cash and investments whilst maintaining an adequate level of liquidity and preserving capital. The Finance Section manages the cash and investments portfolio with the assistance of independent advisers. Council has an investment policy which complies with the Local Government Act and Minister’s Order. The policy is regularly reviewed by Council and an Investment Report provided to Council monthly setting out the make-up and performance of the portfolio.

The risks associated with the investments held are:

Price risk – the risk that the capital value of investments may fluctuate due to changes in market prices, whether these changes are caused by factors specific to individual financial instruments or their issuers or factors affecting similar instruments traded in a market.

Interest rate risk – the risk that movements in interest rates could affect returns.

Credit risk – the risk that a contracting council will not complete its obligations under a financial instrument resulting in a financial loss to Council.

Council manages these risks by diversifying its portfolio and only purchasing investments with high credit ratings or capital guarantees. Council also seeks advice from its independent advisers before placing any cash and investments.

The impact on result for the year and equity of a reasonably possible movement in the price of investments held is shown below. The reasonably possible movement was determined based on historical movements and economic conditions in place at the reporting date.

2015 $’000

2014 $’000

AASB131(Aus57.2)(b) Impact of a 10%(1) movement in price of investments: -Equity 2,073 1,800

-Income statement 2,073(2) 1,800(2)

Impact of a 1%(1) movement in interest rates on cash and investments:

-Equity 207 180

-Income statement 207 180

Notes:

(1) Sensitivity percentages based on management’s expectation of future possible market movements. (Price movements calculated on

investments subject to fair value adjustments. Interest rate movements calculated on cash, cash equivalents, managed funds, and FRNs.) (2) Maximum impact.


A-97


(b) Receivables Council’s major receivables comprise rates and annual charges and user charges and fees. The major risk

associated with these receivables is credit risk – the risk that the debts may not be repaid. Council manages this risk by monitoring outstanding debt and employing stringent debt recovery policies. It also encourages ratepayers to pay rates by the due date through incentives.

Credit risk on rates and annual charges is minimised by the ability of Council to recover these debts as a secured charge over the land – that is, the land can be sold to recover the debt. Council is also able to charge interest on overdue rates and annual charges at higher than market rates which further encourages payment.

There are no significant concentrations of credit risk. The level of outstanding receivables is reported to Council monthly and benchmarks are set and monitored for acceptable collection performance.

Council makes suitable provision for doubtful receivables as required and carries out credit checks on most non-rate debtors.

There are no material receivables that have been subject to a re-negotiation of repayment terms. The profile of the Council’s credit risk at reporting date was:

2015

2014

AASB131(Aus57.2)(b) Percentage of Rates and Annual charges: - Current 100% 100% - Overdue debts 0% 0% $2,798 $2,459 Analysis of overdue debts Less than 1 year 1 to 2 years 2 to 5 years Greater than 5 years

Percentage of Other Receivables: - Current 96% 89% - Overdue 4% 11% $8,724 $6,871 Analysis of overdue debts 0 - 30 overdue 30 - 60 overdue 60 - 90 overdue 90 days + overdue


A-98


(c) Payables Borrowings

Payables and borrowings are both subject to liquidity risk – that is the risk that insufficient funds may be on hand to meet payment obligations as and when they fall due. Council manages this risk by monitoring its cash flow requirements and liquidity levels and maintaining an adequate cash buffer. Payment terms can be extended and overdraft facilities drawn upon in extenuating circumstances.

The contractual undiscounted cash flows of Council’s Payables and Borrowings are set out in the maturity table below:

2015 $’000

Due within 1 year

Due between 1

and 5 years Due after

5 years

Total Contractual Cash flows

Carrying values

$’000 $’000 $’000 $’000 $’000

Payables 245 - - 245 8,407

Borrowings 3,516 7,659 7,575 18,750 18,757

3,761 7,659 7,575 18,995 27,164

2014 $’000

Due within 1 year

Due between 1 and 5 years

Due after 5 years

Total Contractual Cash flows

Carrying values

$’000 $’000 $’000 $’000 $’000

Payables 6,538 - - 6,538 6,538

Borrowings 3,382 9,753 8,998 22,133 22,133

9,920 9,753 8,998 28,671 28,671

Borrowings are also subject to interest rate risk – the risk that movements in interest rates could adversely

affect funding costs. Council manages this risk by borrowing long term and fixing the interest rate on a 4 year renewal basis. The Finance Section regularly reviews interest rate movements to determine if it would be advantageous to refinance or renegotiate part or all of the loan portfolio.

The following interest rates were applicable to Council’s borrowings at reporting date:

30 June 2015 30 June 2014

Weighted average interest

rate % Balance

$’000

Weighted average interest

rate %

Balance $’000

Overdraft 9.5 - 9 - Bank Loans – Fixed 6.2 18,757 6.2 22,133 – Variable(1) - - - - 18,757 22,133

Note:

(1) The interest rate risk applicable to Variable Rate Bank Loans is not considered significant.

[Describe any breaches to any loan agreements which have occurred during the reporting period.]


A-99

Commentary – Financial risk management

1. Entities shall disclose sufficient information that enables users of its financial statements to evaluate the significance of financial instruments for its financial position and performance and the nature and extent of risks arising from these financial instruments

Classes of financial instruments AASB7(6),(B1)-(B3) 2. Where AASB 7 requires disclosures by class of financial instrument, the council shall group its

financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. The council shall provide sufficient information to permit reconciliation to the line items presented in the statement of financial position. Guidance on classes of financial instruments and the level of required disclosures is provided in Appendix B of AASB 7.

Level of detail and selection of assumptions – information through the eyes of management AASB7(34)(a) 3. The disclosures in relation to the financial risk management of a council should reflect the information

provided internally to key management personnel. As such, the disclosures that will be provided by a council, their level of detail and the underlying assumptions used will vary greatly from council to council. The disclosures in these illustrative financial statements are only one example of the kind of information that may be disclosed and you should consider carefully what may be appropriate in your individual circumstances.

Nature and extent of risks arising from financial instruments AASB7(31),(32) 4. The financial statements shall include qualitative and quantitative disclosures that enable users to

evaluate the nature and extent of risks arising from financial instruments to which the council is exposed at the end of the reporting period. These risks typically include, but are not limited to, credit risk, liquidity risk and market risk.

Qualitative disclosures AASB7(33) 5. The qualitative disclosures shall discuss for each type of risk: (a) the exposures to the risk and how they arise (b) the council’s objectives, policies and processes for managing the risk and the methods used

to measure the risk (c) any changes in (a) or (b) from the previous period. Quantitative disclosures AASB7(34)(a),(c) 6. A council shall provide for each type of risk, summary quantitative data on risk exposure at the end of

the reporting period, based on information provided internally to key management personnel and any concentrations of risk. This information can be presented in narrative form. Alternatively, entities could provide the data in a table which sets out the impact of each major risk on each type of financial instruments.

Credit risk AASB7(35),(36) 7. For each class of financial instrument, the council shall disclose: (a) the maximum exposure to credit risk and any related collateral held (b) information about the credit quality of financial assets that are neither past due nor impaired (c) the carrying amount of financial assets that would otherwise be past due or impaired whose

terms have been renegotiated (d) an analysis of the age of financial assets that are past due but not impaired (e) an analysis of financial assets that are individually determined to be impaired.

AASB7(34)(c), (B8) IFRS7(IG18)

8. Entities should also explain any concentrations of credit risk if they are not apparent from the other information provided. Concentrations of credit risk could arise from exposure to particular industry sectors or geographical regions, from specific credit ratings or other measure of credit quality and from a limited number of individual counterparties or groups of closely related counterparties.

Liquidity risk AASB7(34),(a),(39) 9. Information about liquidity risk shall be provided by way of: (a) a maturity analysis for non-derivative financial liabilities (including issued financial guarantee

contracts) that shows the remaining contractual maturities (b) a maturity analysis for derivative financial liabilities (see paragraph 12 below for details), and (c) a description of how the council manages the liquidity risk inherent in (a) and (b).


A-100

Commentary – Financial risk management (continued)

AASB7(B11F) 10. In describing how liquidity risk is being managed, a council should consider discussing whether it:

(a) has committed borrowing facilities or other lines of credit that it can access to meet liquidity needs

(b) holds deposits at central banks to meet liquidity needs (c) has very diverse funding sources (d) has significant concentrations of liquidity risk in either its assets or its funding sources (e) has internal control processes and contingency plans for managing liquidity risk (f) has instruments that include accelerated repayment terms (eg on the downgrade of the

council’s credit rating) (g) has instruments that could require the posting of collateral (eg margin calls for derivatives) (h) has instruments that allow the council to choose whether it settles its financial liabilities by

delivering cash (or another financial asset) or by delivering its own shares, or (i) has instruments that are subject to master netting agreements. Maturity analysis AASB7(3),(B11D) 11. The amounts disclosed should be the amounts expected to be paid in future periods, determined by

reference to the conditions existing at the end of the reporting period.

AASB7(B11C)(c) 12. The specific time buckets presented are not mandated by the standard but are based on what is reported internally to the key management personnel. For financial guarantee contracts, the maximum amount of the guarantee must be allocated to the earliest period in which the guarantee could be called.

13. As the amounts included in the maturity tables are the contractual undiscounted cash flows, these amounts will not reconcile to the amounts disclosed in the statement of financial position, in particular as far as borrowings or derivative financial instruments are concerned. Entities can choose to add a column with the carrying amounts which ties into the statement of financial position and a reconciling column if they so wish, but this is not mandatory.

AASB7(B10A) 14. If an outflow of cash could occur either significantly earlier than indicated or be for significantly different amounts from those indicated in the council’s disclosures about its exposure to liquidity risk, the council shall state that fact and provide quantitative information that enables users of its financial statements to evaluate the extent of this risk. This disclosure is not necessary if that information is included in the contractual maturity analysis.

Financing arrangements AASB107(50)(a) AASB7(39)(b)

15. Committed borrowing facilities are a major element of liquidity management. Entities should therefore consider providing information about their undrawn facilities. AASB 107 Statement of Cash Flows also recommends disclosure of undrawn borrowing facilities that may be available for future operating activities and to settle capital commitments, indicating any restrictions on the use of these facilities.

Market risk AASB7(40)(a),(b) 16. Entities shall disclose a sensitivity analysis for each type of market risk (currency, interest rate and

other price risk) to which a council is exposed at the end of the reporting period, showing how profit or loss and equity would have been affected by ‘reasonably possible’ changes in the relevant risk variable, as well as the methods and assumptions used in preparing such an analysis.

AASB7(40)(c) 17. If there have been any changes in methods and assumptions from the previous period, this must be disclosed together with the reasons for such a change.

OLG 18. Councils should ensure that the reasonably possible movements used are realistic for the current

economic climate.

Note: reasonably possible increases do not have to be the same as the reasonably possibly decrease, for example a reasonably possible movement in interest rates could be a 1% decrease and 0.25% increase.

Interest rate risk 19. Sensitivity to changes in interest rates is normally only relevant to financial assets or financial liabilities

bearing floating interest rates. However, sensitivity will also be relevant to fixed rate financial assets and financial liabilities which are remeasured to fair value.


A-101

Commentary – Financial risk management (continued)

Fair value disclosures Financial instruments carried at other than fair value AASB7(25),(29) 20. A council shall disclose the fair value for each class of financial assets and financial liabilities in a way

that permits it to be compared with its carrying amount. Fair values do not need to be disclosed for the following:

(a) where the carrying amount is a reasonable approximation of fair value (b) investments in equity instruments (and derivatives linked to such equity instruments) that do

not have a quoted market price and that are measured at cost in accordance with AASB 139 because their fair value cannot be measured reliably

(c) a contract containing a discretionary participation feature (as described in AASB 4 Insurance Contracts) where the fair value of that feature cannot be measured reliably.

Financial instruments measured at cost where fair value cannot be determined reliably AASB7(30) 21. If the fair value of investments in unquoted equity instruments, derivatives linked to such equity

instruments or a contract containing a discretionary participation feature (as described in AASB 4 Insurance Contracts) cannot be measured reliably the council must disclose:

(a) the fact that fair value information has not been disclosed because it cannot be measured reliably

(b) a description of the financial instruments, their carrying amount and an explanation of why fair value cannot be measured reliably

(c) information about the market for the instruments (d) information about whether and how the council intends to dispose of the financial

instruments (e) if the instruments are subsequently derecognised, that fact, their carrying amount at the time

of de-recognition and the amount of gain or loss recognised.

Carrying amounts are a reasonable approximation of fair value 22. A statement that the carrying amount of financial assets or financial liabilities is a reasonable

approximation of their fair value should only be made if it can be substantiated. That is, entities must have made a formal assessment of the carrying amounts of their financial assets and liabilities in comparison to their fair values and documented this assessment. If the fair values are not a reasonable approximation of the carrying amounts, the fair values must be disclosed. In the current market, we would expect this to be the case more often than not.

23. The appropriate level is determined on the basis of the lowest level input that is significant to the fair value measurement.

Additional information where quantitative data about risk exposure is unrepresentative AASB7(35),(42) 24. If the quantitative data disclosed is unrepresentative of the council’s exposure to risk during the period,

the council shall provide further information that is representative. If the sensitivity analyses are unrepresentative of a risk inherent in a financial instrument (eg where the year end exposure does not reflect the exposure during the year), the council shall disclose that fact and the reason why the sensitivity analyses are unrepresentative.


A-102

Note 16 Material budget variations

Council’s original budget was adopted by the Council on 23 June 2014. The original projections on which the

budget was based have been affected by a number of factors. These include State and Federal Government decisions including new grant programs, changing economic activity, the weather, and by decisions made by the Council. Material variations of more than 10% are explained below:

Revenues

1. Interest and investment revenue Revenue was up $2.3 million on budget (70%). Council has been successful in obtaining large capital grants

to fund major projects. The timing of payments has provided Council with some opportunity to invest some of these funds until they are required by the project.

2. Operating Grants and contributions Operating Grants and Contributions were down $3.4 million on budget (24%) this is due to 2015 FAGS not received within the year.

3. Capital Grants and contributions Capital Grants and Contributions were down $10.6 million on budget (30%) this is due to expected Grants not

received within the year.

4. Other revenues The increase of $1.8 million on budget (70%) arises due to other revenues in previous years shown as user

charges instead of other revenue.

Expenses

1. Borrowing Costs Actual borrowing expense was $.35 million under budget (22%). Council has been able to renegotiate a loan

for a better than initially anticipated interest rate, together with timing differences that may occur due to the time of the year that the loan is drawn initially, as all loans are budgeted to be fully drawn in the early part of the financial year.

2. Materials and Contracts An increase on budget of $3.6 million (14%) due mainly to a shift in expenditure to asset maintenance, the

original budget has been revised during the year to reflect this during the quarterly review process.

3. Depreciation & Amortisation An increase on budget of $2.8 million (23%). The main influence on this variation is the impact of the Building

revaluation that occurred.


A-103

Commentary – Material budget variations

OLG 1. Where the variance from budget is greater than 10% for the income statement, note 2(a) or the statement of cash flows, Councils should provide sufficient explanations to explain the variances.


A-104

Note 17 Statement of developer contributions

(a) Summary of developer contributions

Purpose

Opening balance

$’000

Contributions received during

year(1) Interest &

investment income earned

during year

$’000

Expended during year

$’000

Internal

borrowings during the

year(4)

$’000

Held as restricted

asset(2)

$’000

Projected

future contribution

s(3)

$’000

Projected cost of

works still outstanding

(3)

$’000

Projected

over/(un

der) funding(3

)

$’000

Cumulative balance

of internal borrowings (to)/from

$’000(5)

Cash

$’000

Non cash

$’000 Drainage 1,685 170 649 104 - - 1,959 298 - 2,257 -

Roads 1,532 733 1,371 95 (603) - 1,757 3,586 (63) 5,280 -

Traffic facilities - - - - - - - - - - - Parking 513 162 - 30 (10) - 695 - - 695 -

Open space 2,500 298 198 148 (415) - 2,531 2,831 (938) 4,424 -

Community facilities 4,799 767 - 294 (7) - 5,853 512 (342) 6,023 - Other (specify) if material 1,981 376 - 33 (124) - 2266 2435 - 4701 -

S94 under plans 13,010 2,506 2,218 704 (1,159) - 15,061 9,662 (1,343) 23,380 -

S94 not under plans 73 - - 4 - - 77 - - 77 - S94A levies - - - - - - - -

Planning agreements - 2,468 - - (62) - 2,406 -

Section 64 23,993 4,047 3,288 1,170 (855) - 28,355 -

Total contributions 37,076 9,021 5,506 1,878 (2,076) - 45,899 -

Notes: Councils must also provide details of each contribution plan under their control in a form provided below.

(1) Reconcilable with Note 3.

(2) Reconcilable with Note 6 (Restricted assets excludes ‘amounts expended in advance’).

(3) Provision of projections is mandatory. Note that these are not applicable to S.94A levies, Planning agreements and Section 64. Projections are based on undiscounted numbers.

(4) Borrowings within and between plans during current period only. Note: General Fund Expenditure in Advance of Contributions is not to be shown here.

(5) Cumulative balance of borrowing within and between plans.


A- 105

Note 17 Statement of developer contributions (continued)

(b) Contribution plan no. 1

Purpose

Opening balance

$’000

Contributions

received during year(1)

Interest & investment

income earned

during year

$’000


$’000

Internal

borrowings during

the year(4)

$’000

Held as restricted

asset(2)

$’000

Projected

future contributions(

3)

$’000

Projected

cost of works still

outstanding(3)

$’000

Projected over/(under) funding(3)

$’000

Cumulative balance of

internal borrowings

(to)/from

$’000(5)

Cash

$’000

Non cash

$’000 Drainage 1,685 170 649 104 - - 1,959 298 - 2,257 - Roads 1,532 733 1,371 95 (603) - 1,757 3,586 (63) 5,280 - Traffic facilities - - - - - - - - - - - Parking 513 162 - 30 (10) - 695 - - 695 - Open space 2,500 298 198 148 (415) - 2,531 2,831 (938) 4,424 - Community facilities 4,799 767 - 294 (7) - 5,853 512 (342) 6,023 - Other (specify) if material 1,981 376 - 33 (124) - 2266 2435 - 4701 - Total 13,010 2,506 2,218 704 (1,159) - 15,061 9,662 (1,343) 23,380 -


A- 106

Note 17 Statement of developer contributions (continued)

(c) Contributions not under plans

Purpose

Contributions

received during year(1)

Interest & investment

income earned

during year

$’000


$’000

Internal

borrowings during

the year(4)

$’000

Held as restricted

asset(2)

$’000

Projected

future contributions(

3)

$’000

Projected

cost of works still

outstanding(3)

$’000

Projected over/(under) funding(3)

$’000

Cumulative balance of

internal borrowings

(to)/from

$’000(5)

Cash

$’000

Non cash

$’000 Drainage - - - - - - - - - - - Roads - - - - - - - - - - - Traffic facilities 73 - - 4 - - 77 - - 77 - Parking - - - - - - - - - - - Open space - - - - - - - - - - - Community facilities - - - - - - - - - - - Other (specify) if material - - - - - - - - - - - Total 73 - - 4 - - 77 - - 77 -


A-107

Commentary – Statement of developer contributions

EPA Act (1979) 1. General principles Section 94 of the NSW Environmental Planning Act (1979) and section 64 of the Local Government

Act (1993) provides NSW local government with a formal legal framework for levying developers for the provision of infrastructure, services and amenities – known as developer contributions.

The three general principles in applying the contributions are: 1. A contribution must be for or relate to, a planning purpose 2. A contribution must fairly and reasonably relate to the subject development; and 3. The contribution must be such that a reasonable planning authority, duly applying its statutory

duties, could have properly imposed.

Council may either: Require a dedication of land A monetary contribution Material public benefit (works in kind); or A combination of some or all of the above.

One of the Fundamental responsibilities of any Council in imposing these contributions is to ensure that the contributions levied are reasonable. That is, the works and facilities to be provided must be as a direct consequence of the development on which the contributions are levied. In keeping with this responsibility, contributions levied on developments are limited to providing amenities and services to the minimum level necessary to sustain an acceptable form of urban development.

Councils can also enter into Planning agreements with developers under Section 93F of the EPA Act. These are voluntary agreements where the developer may dedicate land, pay monetary contributions, provide a material public benefit (or a combination of these) which the Council must apply toward a public purpose.

EPA Act (1979) 2. Accounting Councils must maintain contributions register 1. A council that imposes section 94 conditions or section 94A conditions on development

consents must maintain a contributions register.

2. The council must record the following details in the register: (a) particulars sufficient to identify each development consent for which any such

condition has been imposed (b) the nature and extent of the section 94 contribution or section 94A levy required by

any such condition for each public amenity or service (c) the contributions plan wider which any such condition was imposed (d) the date or dates on which any section 94 contribution or section 94A levy required

by any such condition was received, and its nature and extent. Accounting for contributions and levies 1. A council must maintain accounting records that allow monetary section 94 contributions,

Section 94A levies, and any additional amounts earned from their investment, to be distinguished from all other money held by the council.

2. The accounting records for a contributions plan must indicate the following: (a) the various kinds of public amenities or services for which expenditure is authorised

by the plan (b) the monetary section 94 contributions or section 94A levies received under the plan,

by reference to the various kinds of public amenities or services for which they have been received

(ba) in respect of section 94 contributions or section 94A levies paid for different purposes, the pooling or progressive application of the contributions or levies for those purposes, in accordance with any requirements of the plan or any ministerial direction under Division 6 of Part 4 of the Act

(c) the amounts spent in accordance with the plan, by reference to the various kinds of expenditures or services for which they have been spent.


A-108

Commentary – Statement of developer contributions (continued)

3. A council must disclose the following information for each contributions plan in the notes to its annual financial report.

(a) the opening and closing balances of money held by the council for the accounting period covered by the report

(b) the total amounts received by way of monetary section 94 contributions or section 94A levies during that period, by reference to the various kinds of public amenities or services for which they have been received

(c) the total amounts spent in accordance with the contributions plan during that period, by reference to the various kinds of public amenities or services for which they have been spent

(d) the outstanding obligations of the council to provide public amenities or services by reference to the various kinds of public amenities or services for which monetary section 94 contributions or section 94A levies have been received during that or any previous accounting period.

Councils must prepare annual statements 1. As soon as practicable after the end of each financial year, a council must prepare an annual

statement for the contributions plans in force in its area.

2. The annual statement must disclose, for each contributions plan, the information required by this Office to appear in the notes to its annual financial report.

OLG 3. Councils are required to provide an estimate of the projected over/under funding on its Section 94 contribution obligations only.

Unexpended contributions @ year-end

Projected future

contributions

Projected cost of works still outstanding

Projected over/under

funding

+ - =

4. Some councils previously disclosed General Fund expenditure incurred in lieu of future developer contributions as ‘Expended in Advance’. As Note 17 is a reconciliation of developer contributions received to date, the money ‘expended in advance’ by General Fund is not included in the Statement.


A-109

Note 18 Contingencies

Contingent liabilities

Contingent liabilities

• Council has been named as a defendant in a number of actions for undisclosed damages arising from the flooding of residential properties adjacent to a public road. It is not possible to estimate the potential financial impact of these claims and Council is vigorously defending these actions.

• Council has significant obligations to provide Section 94 infrastructure in new release areas. It is possible that funds contributed may be less than the cost of this infrastructure requiring Council to borrow or use general revenue to fund the difference. (Refer Note 17.)

• Council provides bank guarantees to the value of $4.5 million to secure its self-insurance license for Workers Compensation. The guarantee is provided to WorkCover NSW.

• Council operates a quarry and will have to rehabilitate the site at some future date. At reporting date Council is unable to reliably estimate the financial cost of such work.

Defined benefit plan

Council is party to an Industry Defined Benefit Plan under the Local Government Superannuation Scheme, named The Local Government Superannuation Scheme – Pool B (the Scheme) which is a defined benefit plan that has been deemed to be a “multi-employer fund” for purposes of AASB119 Employee Benefits. Sufficient information is not available to account for the Scheme as a defined benefit plan in accordance with AASB 119, because the assets to the Scheme are pooled together for all Councils.

The amount of employer contributions to the defined benefit section of the Local Government Superannuation Scheme and recognised as an expense for the year ending 30 June 2015 was $XX. The last valuation of the Scheme was performed by Mr Michael Smith, BSc, FIA, FIAA on 20 June 2015 and covers the period ended 30 June 2014.

However the position is monitored annually and the Actuary has estimated that as at 30 June 2015 a deficit still exists. Effective from 1 July 2009, employers are required to contribute additional contributions to assist in extinguishing this deficit. The amount of additional contributions included in the total employer contribution advised above is $XX. Councils expected contributions to the plan for the next annual reporting period is $XX.

The share of this deficit that is broadly attributed to Council is estimated to be in the order of $ XX as at 30 June 2015.

Council’s share of that deficiency cannot be accurately calculated as the Scheme is a mutual arrangement where assets and liabilities are pooled together for all member councils. For this reason, no liability for the deficiency has been recognised in Council’s accounts. Council has, however, disclosed a contingent liability in note 18 to reflect the possible obligation that may arise should the Scheme require immediate payment to correct the deficiency.

Contingent assets

Council has been advised that the State Government proposes to transfer a significant heritage building and associated land to Council in the near future. Documentation is currently being completed to effect the transfer.


A-110

Commentary – Contingencies

Definitions Contingent liabilities AASB137(10) 1. A contingent liability is: (a) a possible obligation that arises from past events and whose existence will be confirmed only

by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the council, or

(b) a present obligation that arises from past events but is not recognised because: (i) it is not probable that an outflow of resources embodying economic benefits will be

required to settle the obligation, or (ii) the amount of the obligation cannot be measured with sufficient reliability.

Contingent assets AASB137(10) 2. A contingent asset is a possible asset that arises from past events and whose existence will be

confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the council.

Disclosure Contingent liabilities AASB137(86) 3. Unless the possibility of any outflow in settlement is remote, a council shall disclose for each

class of contingent liability at the end of the reporting period a brief description of the nature of the contingent liability and, where practicable:

(a) an estimate of its financial effect, measured under paragraphs 36-52 of AASB 137 (b) an indication of the uncertainties relating to the amount or timing of any outflow, and (c) the possibility of any reimbursement.

AASB137(87) 4. In determining which contingent liabilities may be aggregated to form a class, it is necessary to consider whether the nature of the items is sufficiently similar for a single statement about them to fulfil the requirements of paragraphs 85(a) and (b) and 86(a) and (b) of AASB 137.

Contingent assets AASB137(89) 5. Where an inflow of economic benefits is probable, a council shall disclose a brief description of

the nature of the contingent assets at the end of the reporting period, and, where practicable, an estimate of their financial effect, measured using the principles set out for provisions in paragraphs 36-52 of AASB 137.

AASB137(90) 6. It is important that disclosures for contingent assets avoid giving misleading indications of the likelihood of income arising.

Provision and contingent liability arise from the same set of circumstances AASB137(88) 7. Where a provision and a contingent liability arise from the same set of circumstances, a council

makes the disclosures required by paragraphs 84-86 of AASB 137 in a way that shows the link between the provision and the contingent liability.

Not practicable to make required disclosures AASB137(91) 8. Where any of the information required to be disclosed by paragraphs 86 and 89 of AASB 137 is

not disclosed because it is not practicable to do so, that fact shall be stated.

Disclosure that might seriously prejudice the position of the council AASB137(92) 9. In extremely rare cases, disclosure of some or all of the information required to be disclosed by

paragraphs 84-89 of AASB 137 can be expected to prejudice seriously the position of the council in a dispute with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, a council need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed. An example of such disclosure is contained in Appendix D of AASB 137.

Arrangements involving the legal form of a lease UIG127(7) 10. Obligations of an arrangement in the legal form of a lease, including any guarantees provided

and obligations incurred upon early termination, shall be accounted for in accordance with AASB 137, AASB 139 Financial Instruments: Recognition and Measurement or AASB 1023 General Insurance Contracts, depending on the terms.


A-111

Note 19 Interests in other entities

Interests in Interests in subsidiaries

(a) (a) Composition of the Group

Principal place of business / Country of Incorporation

Percentage Owned (%)* 2015


Subsidiaries

Sub 1 Australia

Sub 2 Australia

The percentage ownership interest held is equivalent to the percentage voting rights for all subsidiaries.

Controlled entities with ownership interest of 50% or less

The Council holds 42% of the ordinary shares of Goreng Ltd. Under a management agreement between Council, Goreng and the other shareholder, Council is required to make all the financial and operating policy decisions of Goreng and to ensure that those policies are consistent with the policies of the Group and therefore has control.

(b) Significant restrictions relating to subsidiaries

Provide details of significant restrictions, for example statutory, contractual and regulatory restrictions, on the subsidiary’s ability to access or use the assets and settle the liabilities of the group, i.e:

Those that restrict the ability of a parent or its subsidiaries to transfer cash or other assets to (or from) other entities within the Group.

Guarantees or other requirements that may restrict dividends and other capital distributions being paid, or loans and advance being made or repaid to (or from) other entities within the Group.

(c) Subsidiaries with material non-controlling interests

Name of subsidiary

2015 2014 2015 2014

% ownership held by NCI

Profit / (loss) allocated to NCI

Accumulated NCI of subsidiary

Dividends paid to NCI

Summarised statement of financial position

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Net assets

Summarised statement of profit and loss and other comprehensive income

Revenue

Profit / (loss)

Total comprehensive income

Summarised statement of cash flows

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Net increase / (decrease) in cash and cash equivalents


A-112

Note 19 Interests in other entities (continued)

Interests in subsidiaries (continued)

(d) Consolidated structured entities Where Council has consolidated structured entities, provide details of circumstances where Council or an entity

within the group may be required to provide financial support to that consolidated structured entity and details where support has been provided during the financial reporting period.

(e) Consequences of changes in a Council’s ownership interest in a subsidiary that do not

result in a loss of control

Disposal of ownership interest

During the year, the Council disposed of xx% of its investment in [Name of subsidiary], control was maintained and therefore the Group structure did not change, although the non-controlling interest increased. This effect of this transaction on the equity attributable to the Council is shown below:

[year end date] $

Consideration received

Less: Increase in net assets attributable to NCI

Increase / (decrease) in Council interest

Note: the increase / decrease to Council interest is recorded in the Transactions with Non-controlling Interest

reserve. Acquisition of ownership interest During the year, the Council acquired xx% additional interest in [Name of Subsidiary], control was maintained

and therefore the Group structure did not change, although the non-controlling interest decreased. This effect of this transaction on the Council interest is shown below:

[year end date] $

NCI interest acquired

Less: Consideration paid

Increase / (decrease) in Council interest

Note: the increase / decrease to Council interest is recorded in the Transactions with Non-controlling Interest revenue.

Interests in Joint Arrangements

Type of joint arrangement


Percentage Owned (%)*

2015

Percentage Owned (%)*

2014

Joint arrangements:

Joint arrangement 1

Joint arrangement 2

The percentage ownership interest held is equivalent to the percentage voting rights for all joint arrangements.

Joint arrangements 1

Provide details of the nature of the Council’s relationship with the joint arrangement, for example describing the nature of the activities of the joint arrangement and whether they are strategic to the entity’s activities.

Joint arrangements 2

Provide details of the nature of the Council’s relationship with the joint arrangement, for example describing the nature of the activities of the joint arrangement and whether they are strategic to the entity’s activities.


A-113


Interests in Joint Arrangements (continued)

Material joint ventures

The following information is provided for joint ventures that are material to the Group and is the amount per the JV financial statements, adjusted for fair value adjustments at acquisition date and differences in accounting policies, rather than the Group’s share.

Name of joint venture

2015 2014 2015 2014

Measurement basis (equity method / fair value)

Dividends received from the joint venture


Cash and cash equivalents

Current assets

Non-current assets

Current financial liabilities (excluding trade and other payables and provisions)

Current liabilities



Net assets


Revenue

Interest income

Depreciation and amortisation

Income expense

Income tax expense (income)

Profit / (loss) from continuing operations

Post-tax profit or loss from discontinued operations

Other comprehensive income







Reconciliation of carrying amount of interest in joint venture to summarised financial information for joint ventures accounted for using the equity method:

[Name of joint venture] Current year end $ Prior year end $

Group’s share of xx% of net assets

[insert reconciling items]

Carrying amount

Fair value of investment (if there is a quoted price)


A-114


Interests in Joint Arrangements (continued)

Aggregate information for joint ventures that are not individually material

The Group has interests in a number of joint ventures none of which is considered individually material. The

table below summarises, in aggregate, the financial information of all individually immaterial joint ventures.

Current year end $ Prior year end $

Carrying amount of investments in joint ventures that are not individually material

Share of those joint ventures:

Profit or loss from continuing operations




Unrecognised share of losses

The unrecognised share of losses of joint ventures due to the Council’s interest being reduced to zero under the equity methods are $xx for the reporting period and $xx on a cumulative basis.

Risk associated with the interests in joint ventures

Commitments relating to joint ventures held

Contingent liabilities incurred jointly with other investments over joint ventures held

Interests in Associates




Associates:

Associate 1

Associate 2

The percentage ownership interest held is equivalent to the percentage voting rights for all associates.

Associate 1

Provide details of the nature of the Council’s relationship with the associate, for example describing the nature of the activities of the associate and whether they are strategic to the entity’s activities.

Associate 2

Provide details of the nature of the Council’s relationship with the associate, for example describing the nature of the activities of the associate and whether they are strategic to the entity’s activities.

Associates

All associates have the same year end as the Council. There are no significant restrictions on the ability of associates to transfer funds to the Group in the form of cash dividends or to repay loans or advances made by the council.

Material associates

The following information is provided for associates that are material to the Group and is the amount per the associate’s financial statements, adjusted for fair value adjustments at acquisition date and differences in accounting policies, rather than the Group’s share.


A-115

Note 19 Interests in other entities (continued) Interests in Associates (continued)

Name of associate

2015 2014 2015 2014

Measurement basis (equity method / fair value)

Dividends received from the associate



Current assets

Non-current assets


Current liabilities



Net assets


Revenue

Interest income

Depreciation and amortisation

Income expense

Income tax expense (income)

Profit / (loss) from continuing operations









Reconciliation of carrying amount of interest in associate to summarised financial information for associates accounted for using the equity method:

[Name of associate] Current year end $ Prior year end $

Group’s share of xx% of net assets

[insert reconciling items]

Carrying amount

Fair value of investment (if there is a quoted price)

Aggregate information for associates that are not individually material

The Group has interests in a number of associates none of which is considered individually material. The table below summarises, in aggregate, the financial information of all individually immaterial associates.

Current year end $ Prior year end $

Carrying amount of investments in associates that are not individually material

Share of those associates:

Profit or loss from continuing operations





A-116


Interests in Associates (continued)

Unrecognised share of losses

The unrecognised share of losses of associates due to the Council’s interest being reduced to zero under the equity methods are $xx for the reporting period and $xx on a cumulative basis.

Risks associated with the interest in associates

Contingent liabilities incurred jointly with other investments over associates held


A-117

Commentary – Interests in other entities

(a) Interests in subsidiaries

If the percentage ownership interest is not equivalent to the percentage voting rights then provide details.

Where the significant restrictions exist in relation to subsidiaries, the financial statements should disclose:

Details of the restrictions;

The nature and extent to which protective rights of non-controlling interests can significantly restrict the entity’s ability to access or use the assets and settle the liabilities of the Group (such as when a parent is obliged to settle liabilities of a subsidiary before settling its own liabilities or approval of non-controlling interests is required either to access the assets or to settle the liabilities of a subsidiary)

AASB 12.13 The carrying amount in the consolidated financial statements of the assets and liabilities to which those restrictions apply.

Disposal of a subsidiary that results in loss of control

If Council has disposed of a subsidiary which has resulted in a loss of control, the information below should

be included:

On [insert date], the Council disposed of xx% of its interest in [enter name of entity].

A [profit / loss] of $ xx after income tax was attributable to Council from the disposal and is recorded in the other [income / expenses] line in the income statement.

The carrying amount of the net assets of [enter name of entity] at the date of disposal were:

$


Receivables

Inventory

Enter description

Enter description

Total current assets

Property, plant and equipment

Intangible assets

Enter description

Enter description

Total non-current assets

Trade payables

Provisions

Enter description

Enter description

Total current liabilities

Net assets

Total consideration

- Received in cash

- Cash and cash equivalents disposed of

Net cash received

Net profit / (loss) on disposal

(b) Interests in Joint Ventures


(c) Interests in Associates

For each associate that is material to the Council, the financial statements should include a description of

the nature of the Council’s relationship with the associate, for example the nature of the activities of the associate and whether they are strategic to the Council’s activities.



A-118

Commentary – Interests in other entities

(d) Interest in Unconsolidated Structure Entities

If the Council has any unconsolidated structured entities such as involvement with a community

organisation then the note below needs to included.

Nature of interests

Provide details, including but not limited to the nature, purpose, size and activities of the structured entity

and how it is financed.

Sponsored unconsolidated structured entities Provide details of how the Council has determined which structured entities it has sponsored.

Structured entity type

Total income Assets transferred to structured entities

[income categories]

Carrying amount

Fair value

For example:

The Council considers itself the sponsor of a structured entity where it is primarily involved in the design and establishment of the structured entity. The Council also transfers assets to the sponsored structured entity, it markets products associated with the structured entity in its own name, and provides guarantees regarding the structured entity’s performance.

For some sponsored entities, the Council has no interest at the reporting date. However it has sold assets to those entities with no continuing involvement during the reporting period and has earned fees for selling those assets and for other transactions carried out for the entity.

Nature of risk

Carrying amount of assets and liabilities

The following table shows the carrying amounts of the assets and liabilities recognised in the Council financial statements relating to its interests in unconsolidated structured entities.

Financial statement line item

Loans Investments Commitments / guarantees

Derivative instruments

Total Assets

Total Liabilities

Total

Maximum exposure to loss

The maximum exposure to loss shown in the table below is contingent in nature and may arise as a result of the provision of liquidity facilities and other funding commitments provided by the [entity type] to unconsolidated structured entities in which it has an interest at [year end date]. Provide details of how the maximum exposure to loss was determined.

Structured entity type

Maximum exposure to loss Carrying amount of assets / liabilities that relates to unconsolidated structured entities

Loans Investments Commitments / guarantees

Total Assets Liabilities

Financial support provided without a contractual obligation Provide details of financial support which was provided by the Council without having a contractual obligation to do so – including the type and amount of support provided (including situations in which the Council assisted the structured entity in obtaining financial support) and the reasons for the support. Current intentions to provide financial or other support Provide details of any current intentions to provide financial or other support to an unconsolidated structured entities, including intentions to assist the structured entity in obtaining financial support.


A-119

Note 20 Revaluation reserves and retained earnings

Actual 2015

Actual 2014

Notes $'000 $'000

(a) Retained earnings AASB101(97)(b) Movements in retained earnings were as follows: At beginning of year 552,715 528,286 Adjustment to correct prior period errors (Note 20(c)) 22 (38) Net operating result for the year 45,831 24,467

At end of year 598,568 552,715

(b) Revaluation reserves Infrastructure, property, plant and equipment revaluation reserve 418,692 410,177 Available-for-sale investments revaluation reserve - -

418,692 410,177

AASB101(97)(c) Movements: AASB116(77)(f) Property, plant and equipment revaluation reserve At beginning of year 410,177 345,644 AASB116(39) Revaluations (Note 9) 8,821 63,783 Adjustment to correct prior period errors (Note 20(c)) (306) 750

At end of year 418,692 410,177

Available-for-sale investments revaluation reserve At beginning of year - - AASB132(94)(h)(ii) Revaluation – gross - - AASB132(94)(h)(ii) Transfer to net profit – gross - -

At end of year - -

AASB101(76)(b) Nature and purpose of reserves (i) Infrastructure, property, plant and equipment revaluation reserve AASB116(77)(f) The infrastructure, property, plant and equipment revaluation reserve

is used to record increments and decrements in the revaluation of non-current assets.

(ii) Available-for-sale investments revaluation reserve Changes in fair value are taken to the available-for-sale investments

revaluation reserve, as described in Note 1(k). Amounts are recognised in profit and loss when the associated assets are sold or impaired.

(c) Correction of errors in previous years (i) Retained Earnings 22 -(1) (ii) Revaluation Reserves (306) 750(2)

(284) 750

Notes: (1) Adjusted to retained earnings.

(2) Adjusted to revaluation reserves.


A-120

Commentary – Revaluation reserves and retained earnings

Nature and purpose AASB101(79)(b) 1. A description of the nature and purpose of each reserve within equity must be provided either in the

statement of financial position or in the notes. This applies to each reserve, including general reserves, capital profits reserves and any others in existence.

2. In providing a description of the nature and purpose of the reserves it would be appropriate to refer to any restrictions on their distribution or any other important characteristics.

Prior period errors AASB 108(5) 3. Prior period errors are omissions from, and misstatements in, a council’s financial statements for one

or more prior periods arising from a failure to use, or misuse of, reliable information that: was available when financial statements for those periods were authorised for issue; and could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements. Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud.

Correction AASB108(42) 4. Subject to paragraph 43 of AASB 108 Accounting Policies, Changes in Accounting Estimates and

Errors, a council shall correct material prior period errors retrospectively in the first financial statements authorised for issue after their discovery by:

(a) restating the comparative amounts for the prior period(s) presented in which the error occurred, or

(b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.

AASB108(43) 5. A prior period error shall be corrected by retrospective restatement except to the extent that it is impracticable to determine either the period-specific effects or the cumulative effect of the error. Retrospective restatement is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred.

AASB108(44) 6. When it is impracticable to determine the period-specific effects of an error on comparative information for one or more prior periods presented, the council shall restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable (which may be the current period).

AASB108(45) 7. When it is impracticable to determine the cumulative effect, at the beginning of the current period, of an error on all prior periods, the council shall restate the comparative information to correct the error prospectively from the earliest date practicable.

Disclosure AASB108(49) 8. In applying paragraph 1 above, a council shall disclose the following: (a) the nature of the prior period error (b) for each prior period presented, to the extent practicable, the amount of the correction: (i) for each financial statement line item affected, and (ii) if AASB 133 Earnings per Share applies to the council, for basic and diluted earnings

per share (c) the amount of the correction at the beginning of the earliest prior period presented, and (d) if retrospective restatement is impracticable for a particular prior period, the circumstances

that led to the existence of that condition and a description of how and from when the error has been corrected.

Financial statements of subsequent periods need not repeat these disclosures.

Changes in accounting estimates Recognition AASB108(36) 9. The effect of a change in an accounting estimate, other than a change to which paragraph 37 of AASB

108 applies, shall be recognised prospectively by including it in profit or loss in: (a) the period of the change, if the change affects that period only, or (b) the period of the change and future periods, if the change affects both.


A-121

Commentary – Revaluation reserves and retained earnings (continued)

AASB108(37) 10. To the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, or relates to an item of equity, it shall be recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change.

11. A change in accounting estimate is adjusted in the current and future periods. There is no impact on retained earnings.

Disclosure AASB108(39) 12. Disclosure is required of the nature and amount of a change in an accounting estimate that has an

effect in the current period or is expected to have an effect in future periods, except for the disclosure of the effect on future periods when it is impracticable to estimate that effect.

AASB108(40) 13. If the amount of the effect in future periods is not disclosed because estimating it is impracticable, that fact shall be disclosed.


A-122

Note 21 Results by Fund

Income Statement by Fund(2)

Actual 2015 $’000

Actual 2015 $’000

Actual 2015 $’000

General(1) Water Sewer Income from continuing operations Revenue: Rates and annual charges 31,559 3,748 - User charges and fees 9,974 7,440 7,174 Interest and investment revenue 3,027 1,034 1,530 Other revenues(4) 4,146 269 7 Grants and contributions provided for operating purposes 10,618 129 128 Grants and contributions provided for capital purposes 11,804 29,980 3,652 Other Income: Net gain from the disposal of assets 979 - 252 Net share of interests in joint ventures and associates using the

equity method 7 - -

Total income from continuing operations 72,114 42,600 12,743 Expenses from continuing operations Employee benefits and on-costs 25,175 1,803 1,268 Borrowing costs 1,132 135 - Materials and contracts 26,015 2,197 1,689 Depreciation and amortisation 9,164 3,001 2,883 Impairment - - - Other expenses(5) 399 4,215 2,475 Interest and investment losses - - - Net Loss from the disposal of assets 75 - Net share of interests in joint ventures and associates using the

equity method - - -

Total expenses from continuing operations 61,885 11,426 8,315 Operating result from continuing operations 10,229 31,174 4,428

Operating result from discontinued operations - - -

Net operating result for the year 10,229 31,174 4,428

Attributable to: – Council 10,229 31,174 4,428 – Non-controlling interests - - -

Net operating result for the year before grants and contributions provided for capital purposes (1,575) 1,194(3) 776(3)

Notes:

(1) General Fund refers to all Council activities except Water and Sewer. (2) Where Council does not have Water and Sewer Funds this note is not required. (3) The relevant operating result used for Water and Sewer is the ‘Operating Result less Grants for Acquisition of Assets’ as reported in Special Schedule 3. This result is respectively:

$’000 Water 1,194 Sewer 776 Actual

2015 $’000 General

Actual

2015 $’000 Water

Actual

2015 $’000 Sewer

(4) Other revenue includes;

Fair Value Adjustments

Reversal of IPPE revaluation decrements previously expensed

(5) Other expenses included;

Revaluation decrements


A-123

Note 21 Results by Fund (continued)

Statement of financial position by Fund(2)

Actual 2015 $’000

Actual 2015 $’000

Actual 2015 $’000

General(1) Water Sewer ASSETS

Current assets

Cash and cash equivalents 8,418 3,224 1,155

Investments 36,491 2,050 22,700

Receivables 9,196 1,883 616

Inventories 1,542 416 59

Other 29 - -

Non-current assets classified as held for sale - - -

Total current assets 55,676 7,573 24,530

Non-current assets

Investments 5,237 21,400 13,100

Receivables 81 - -

Inventories 5,746 - -

Infrastructure, property, plant and equipment 556,567 207,844 154,131

Investments accounted for using equity method 362 - -

Investment property - - -

Intangible assets - - -

Other - - -

Total non-current assets 567,993 229,244 167,231

Total assets 623,699 236,817 191,761

LIABILITIES

Current liabilities

Payables 7,680 1,535 -

Borrowings 3,443 - -

Provisions 5,212 471 219

Total current liabilities 16,335 2,006 219


Payables - - -

Borrowings 13,343 1,971 -

Provisions 1,113 - -

Total non-current liabilities 14,456 1,971 -

Total liabilities 30,791 3,977 219

Net assets 592,878 232,840 191,542

EQUITY

Retained earnings 351,873 126,686 120,009

Revaluation reserves 241,005 106,154 71,533

Council equity interest 592,878 232,840 191,542

Non-controlling equity interest - - -

Total equity 592,878 232,840 191,542

Note:

(1) General Fund refers to all Council activities except Water and Sewer. (2) Where Council does not have Water and Sewer Funds this note is not required.


A-124

Commentary – Results by fund

OLG 1. The statement of financial position and income statement are to be disclosed by fund in order to ascertain the financial position of each fund.

2. General Fund refers to all Council activities except Water and Sewer.

3. No comparatives are required for this note.

4. Results are to be shown as “gross” numbers ie before any consolidation adjustments.

5. This means that adding the numbers across the funds may not necessarily equal the consolidated totals.


A-125

Note 22 Non-current assets classified as held for sale

Actual 2015 $’000

Actual 2014 $’000

AASB5(38) Land - - Buildings - - Plant and equipment - -

- -

Council has a parcel of land which it has made a decision to dispose of. The land is currently available for sale and is actively being marketed by a number of local real estate agents

Refer to Note 27 for fair value measurement information.


A-126

Commentary – Non-current assets classified as held for sale

Definition AASB5(6),(7) 1. A council shall classify a non-current asset as held for sale if its carrying amount will be recovered

principally through a sale transaction rather than through continuing use. For this to be the case, the asset must be available for sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable.

Non-current assets held for sale 2. Non-current assets are classified as held for sale and stated at the lower of their carrying amount and

fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. The exception to this is plant and motor vehicles which are turned over on a regular basis – these are retained in property, plant and equipment.

3. An impairment loss is recognised for any initial or subsequent write down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of de-recognition.

4. Non-current assets are not depreciated or amortised while they are classified as held for sale.

5. Non-current assets classified as held for sale are presented separately from the other assets in the statement of financial position.

Discontinued operations 6. This note covers non-current assets held for sale other than those relating to discontinued operations.


A-127

Note 23 Events occurring after reporting date

(a) On the 10th July 2015 Council’s administration building was destroyed by fire. Council is insured for the

building but it is presently not known whether the insurance is adequate to cover the full cost of reconstruction and business interruption.

The financial effects of the above event have not been brought to account at 30 June 2015.


A-128

Commentary – Events occurring after reporting date

Definitions AASB110(3) 1. Events after reporting date are those events, favourable and unfavourable, that occur between the

reporting date and the date when the financial statement is authorised for issue. Two types of events can be identified:

(a) those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and

(b) those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).

AASB110(8) 2. A council shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting date. For example:

(a) the settlement of a court case confirming the council had a liability at the balance date (b) the discovery of fraud or errors that show the financial statements are incorrect.

AASB110(10) 3. A council shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting date. For example:

(a) The decline in the market value of an investment between balance date and the date when the financial statements are authorised for issue.

AASB110(21) 4. If non-adjusting events are material and could influence economic decisions taken on the basis of the financial statements, then the council should disclose:

(a) the nature of the event; and (b) an estimate of its financial effect, or a statement that the estimate cannot be made.

For example: (a) The destruction of the Council’s administration building by fire. (b) Commencement of major litigation arising from events occurring after balance date (c) Announcement of proposed amalgamations or boundary changes.

AASB101(76) 5. In respect of loans classified as current liabilities, if the following events occur between the end of the reporting period and the date the financial statements are authorised for issue, those events qualify for disclosure as non-adjusting events in accordance with AASB 110 Events after the Reporting Period:

(a) refinancing on a long-term basis (b) rectification of a breach of a long-term loan agreement, and (c) the receipt from the lender of a period of grace to rectify a breach of a long-term loan

agreement ending at least twelve months after the reporting period.

Updating disclosure about conditions at the end of the reporting period AASB110(19),(20) 6. If a council receives information after the reporting period about conditions that existed at the end of

the reporting period, it shall update disclosures that relate to these conditions, in the light of the new information. An example is where evidence becomes available after the reporting period about a contingent liability that existed at the end of the reporting period. In addition to considering whether it should recognise or change a provision under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, a council updates its disclosures about the contingent liability in the light of that evidence.


A-129

Note 24 Discontinued operation

(a) Description

(Provide a description of the discontinued operation)

Financial information relating to the discontinued operation for the period to the date of transfer is set out below.

(b) Income statement and cash flow information

The income statement and cash flow information presented are for the X months ended XX/XX/2015 (2015 column) and the year ended 30 June 2014.

Actual 2015

Actual 2014

$'000 $'000

Revenue - - Expenses - -

Operating result of discontinued operations - - Operating result from discontinued operations - -

Net cash inflow from ordinary activities - - Net cash inflow (outflow) from investing activities (2015) - - Net cash (outflow) from financing activities - -

Net increase in cash generated by the discontinued operations - -

(c) Carrying amounts of assets and liabilities

The carrying amounts of assets and liabilities transferred as at XX/XX/2015 (2015 column) and 30 June 2014 are:

Infrastructure, property, plant and equipment - - Receivables - - Inventories - -

Total assets - - Payables - - Provision for employee benefits - -

Total liabilities - - Net assets - -

Carrying amount of net assets transferred - -


A-130

Commentary – Discontinued operation

Definitions Discontinued operation AASB5(32),(Appendix A) 1. A discontinued operation is a component of a council that either has been disposed of or is classified

as held for sale and: (a) represents a separate major line of business or geographical area of operations (b) is part of a single co-ordinated plan to dispose of a separate major line of business or

geographical area of operations; or (c) is a subsidiary acquired exclusively with a view to resale.

AASB5(Appendix A) 2. A component of a council comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the council.

General requirement AASB5(30) 3. A council shall present and disclose information that enables users of the financial statement to

evaluate the financial effects of discontinued operations.

In the Income statement AASB5(33)(a) 4. A council shall disclose a single amount comprising the total of: (a) the profit or loss of discontinued operations; and (b) the gain or loss recognised on the measurement to fair value less costs to sell or on the

disposal of the assets or disposal group(s) constituting the discontinued operation.

In the Income statement or in the notes or in the notes Analysis AASB5(33)(b) 5. An analysis of the single amount described above must be made into: (a) the revenue, expenses and profit or loss of discontinued operations; (b) the gain or loss recognised on the measurement to fair value less costs to sell or on the

disposal of the assets or disposal group(s) constituting the discontinued operation.

This analysis may be presented in the notes or on the face of the Income statement. If it is presented on the face of the Income statement it must be presented in a section identified as relating to discontinued operations; that is, separately from continuing operations.

Net cash flows AASB5(33)(c) 6. Disclosure is required of the net cash flows attributable to the operating, investing and financing

activities of discontinued operations. These disclosures may be presented either in the notes or on the face of the financial statements.

Prior periods AASB5(34) 7. A council must re-present the disclosures in above for prior periods presented in the financial

statement so that the disclosures relate to all operations that have been discontinued by the reporting date for the latest period presented.


A-131

Note 25 Intangible assets

Software

$'000

Year ended 30 June 2014 Opening net book amount - Additions – acquisition - Amortisation charge(2) -

Closing net book amount -

At 30 June 2014 Cost - Accumulated amortisation and impairment -

Net book amount -

Year ended at 30 June 2015 Opening net book amount - Additions – internal development - Amortisation charge(2) -

Closing net book amount(1) -

At 30 June 2015 Cost - Accumulated amortisation and impairment -

Net book amount -

Notes:

(1) Software includes development costs being an internally generated intangible (2) Amortisation of $x (2014 $x) is included in depreciation amortisation of impairment expense in the Income

Statement.


A-132

Commentary – Intangible assets (AASB 138)

Accounting standards for intangible assets AASB138(118) 1. Paragraph 118 of AASB 138 requires specific disclosures for each class of intangible assets,

distinguishing between internally generated assets and other intangible assets.

Intangible assets AASB138 2. An intangible asset is an identifiable non-monetary asset without physical substance. The

identifiability criterion is met when the intangible asset is separable (ie it can be sold, transferred or licensed), or where it arises from contractual or other legal rights.

Recognition and initial measurement Expenditure on intangibles should be recognised as an asset when it meets the recognition criteria

of an asset.

Acquired intangible assets Intangible assets are measured initially at cost. Cost includes (a) the fair value of the consideration

given to acquire the asset, and (b) any costs directly attributable to the transaction, such as relevant professional fees or taxes.

Internally generated intangible assets The cost of an internally generated intangible asset comprises only the expenditure incurred from the

date when the intangible asset first meets the recognition criteria. Expenditure previously recognised as an expense should not be included in the cost of the asset.

Intangible assets arising from the research phase of an internal project should not be recognised. Intangible assets arising from the development phase of an internal project should be recognised when the council can demonstrate: its technical feasibility, its intention to complete the developments, how the intangible asset will generate probable future economic benefits (for example, the existence of a market for the output of the intangible asset or for the intangible asset itself), the availability of resources to complete the development, and its ability to measure the attributable expenditure reliably.

The recognition criteria are fairly strict. This means that most costs relating to internally generated intangible items will not be allowable for capitalisation and should therefore be expensed as incurred. Examples of such costs Include research costs, start-up costs and advertising costs.. Expenditure paid in advance of receiving the related goods or service can be recognised as an asset irrespective of its future treatment.

Subsequent measurement Intangible assets are carried at cost less any accumulated amortisation and any accumulated

impairment losses.

Intangible assets are amortised unless they have an indefinite useful life. Amortisation should be carried out on a systematic basis over the useful lives of the intangibles. The residual value of such assets at the end of their useful lives must be assumed to be zero, unless there is either a commitment by a third party to purchase the asset or there is an active market for the asset. Management should reassess at every year-end the expected useful lives of the Intangible assets.

An intangible asset has an indefinite useful life when, based on an analysis of all the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the council.

Intangible assets with definite useful lives are considered for impairment where there is an indication that the asset has been Impaired. Intangible assets with indefinite useful lives should be tested annually for impairment and whenever there is an indication of impairment.

Subsequent expenditure relating to intangible assets should be evaluated under the general recognition provisions above.


A-133

Note 26 Reinstatement, rehabilitation and restoration liabilities

Asset remediation Council has legal/public obligation to make, restore, rehabilitate and reinstate the Council Tip and Quarry.

Actual 2015 $’000

Actual 2014 $’000

At beginning of year 700 266 Amounts capitalised to Tip asset – New disturbance - - – Revised costs (106) 437 – Revised life - - – Revised discount rate - - Amortisation of discount – expensed to borrowing costs* 15 (3) Amounts used - - At end of year 609 700

AASB101(110) AASB123(29)(a)

Provisions for close down and restoration and for environmental clean up costs – Tips and quarries

Restoration Close down and restoration costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. Estimated close down and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs, whether this occurs during the development or during the operation phase, based on the net present value of estimated future costs. Provisions for close down and restoration costs do not include any additional obligations which are expected to arise from future disturbance. The costs are estimated on the basis of a closure plan. The cost estimates are calculated annually during the life of the operation to reflect known developments, eg updated cost estimates and revisions to the estimated lives of operations, and are subject to formal review at regular intervals.

Close down and restoration costs are a normal consequence of tip and quarry operations, and the majority of

close down and restoration expenditure is incurred at the end of the life of the operations. Although the ultimate cost to be incurred is uncertain, Council estimates the respective costs based on feasibility and engineering studies using current restoration standards and techniques. Other movements in the provisions for close down and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations and revisions to discount rates are capitalised within property, plant and equipment. These costs are then depreciated over the lives of the assets to which they relate.

Rehabilitation Where rehabilitation is conducted systematically over the life of the operation, rather than at the time of closure,

provision is made for the estimated outstanding continuous rehabilitation work at each reporting date and the cost is charged to the income statement.

Provision is made for the estimated present value of the costs of environmental clean up obligations outstanding at the reporting date. These costs are charged to the income statement. Movements in the environmental clean up provisions are presented as an operating cost, except for the unwinding of the discount which is shown as a borrowing cost. Remediation procedures generally commence soon after the time the damage, remediation process and estimated remediation costs become known, but may continue for many years depending on the nature of the disturbance and the remediation techniques.

As noted above, the ultimate cost of environmental remediation is uncertain and cost estimates can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other locations. The expected timing of expenditure can also change, for example in response to changes in quarry reserves or production rates. As a result there could be significant adjustments to the provision for close down and restoration and environmental clean up, which would affect future financial results.


A-134

Commentary – Reinstatement, rehabilitation and restoration liabilities

UIG1(1) Background 1. Many entities have obligations to dismantle remove and restore items of property, plant and

equipment. Such obligations are referred to as ‘decommissioning, restoration and similar liabilities’. Under Accounting Standard AASB 116 Property, Plant and Equipment, the cost of an item of property, plant and equipment includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which a council incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period. AASB 137 Provisions, Contingent Liabilities and Contingent Assets contains requirements on how to measure decommissioning, restoration and similar liabilities. UIG Interpretation 1 provides guidance on how to account for the effect of changes in the measurement of existing decommissioning, restoration and similar liabilities

UIG1(48) Treatment 2. Changes in the measurement of an existing decommissioning, restoration and similar liability that

result from changes in the estimated timing or amount of the outflow of resources embodying economic benefits required to settle the obligation, or a change in the discount rate, are accounted for as follows.

3. If the related asset is measured using the cost model: (a) subject to paragraph (b), changes in the liability shall be added to, or deducted from, the cost

of the related asset in the current period (b) the amount deducted from the cost of the asset shall not exceed its carrying amount. If a

decrease in the liability exceeds the carrying amount of the asset, the excess shall be recognised immediately in profit or loss; and

(c) if the adjustment results in an addition to the cost of an asset, the council shall consider whether this is an indication that the new carrying amount of the asset may not be fully recoverable. If it is such an indication, the council shall test the asset for impairment by estimating its recoverable amount, and shall account for any impairment loss, in accordance with AASB 136 Impairment of Assets.

4. If the related asset is measured using the revaluation model: (a) changes in the liability alter the revaluation increase or decrease previously recognised on

that asset, so that: (i) a decrease in the liability shall (subject to paragraph 6(b)) be credited directly to the

revaluation reserve in equity, except that it shall be recognised in profit or loss to the extent that it reverses a revaluation decrease on the asset that was previously recognised in profit or loss; or

(ii) an increase in the liability shall be recognised in profit or loss, except that it shall be debited directly to the revaluation reserve in equity to the extent of any credit balance existing in the revaluation reserve in respect of that asset

(b) in the event that a decrease in the liability exceeds the carrying amount that would have been recognised had the asset been carried under the cost model, the excess shall be recognised immediately in profit or loss

(c) a change in the liability is an indication that the asset may have to be revalued in order to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date. Any such revaluation shall be taken into account in determining the amounts to be taken to profit or loss and equity under paragraph 6(a). If a revaluation is necessary, all assets of that class shall be revalued; and

(d) AASB 101 Presentation of Financial Statements requires disclosure on the face of the statement of changes in equity of each item of income or expense that is recognised directly in equity. In complying with this requirement, the change in the revaluation reserve arising from a change in the liability shall be separately identified and disclosed as such.

Notwithstanding paragraph 6, in respect of a not-for-profit council, the requirements of paragraph 6 shall be applied in relation to a class of assets, consistent with the revaluation model requirements of AASB 116 for not-for-profit entities.

5. The adjusted depreciable amount of the asset is depreciated over its useful life. Therefore, once the related asset has reached the end of its useful life, all subsequent changes in the liability shall be recognised in profit or loss as they occur. This applies under both the cost model and the revaluation model.

6. The periodic unwinding of the discount is recognised in profit or loss as a finance cost as it occurs. The allowed alternative treatment of capitalisation under AASB 123 Borrowing Costs is not permitted.


A-135

Commentary – Reinstatement, rehabilitation and restoration liabilities (continued)

7. The discount rate for unwinding the provision can be obtained from the Reserve Bank bond rates (www.rba.gov.au), the rate used should be the rate that most closely matches the expected utilisation of the provision.

8. When remediation works are underway then the balance of the provision is reduced as the costs as incurred.


A-136

Note 27 Fair Value Measurement

The Council measures the following assets and liabilities at fair value on a recurring basis.

Infrastructure, property, plant and equipment

Investment property

Financial assets

Add details of other recurring assets During the reporting period, the council has also measured the following assets at fair value on a non-recurring basis.

Non-current assets classified as held for sale

[Provide reasons for the non-recurring measurement, for example, the carrying amount of the non-current assets held for sale was higher than its fair value and therefore the assets were written down to fair value]. Fair value hierarchy AASB 13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a level in the fair value hierarchy as follows:

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities that the council can access at the measurement date.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 Unobservable inputs for the asset or liability.

The table below shows the assigned level for each asset and liability held at fair value by the Council:

Current Year End Note Level 2 ($) Significant observable inputs

Level 3 ($) Significant unobservable inputs

Total ($)

Recurring fair value measurements

Financial assets

Investments

-At fair value through profit or loss

19,287 1,441 20,728

- Available for sale - - -

- Held to maturity - 80,250 80,250

- Other

Total Financial Assets 19,287 94,488 113,775

Financial liabilities

- Payables - 8,407 8,407

- Loans/Advances - 18,757 18,757

Total Financial Liabilities - 27,164 27,164

Investment properties

- Enter details - - -

Total Investment properties - - -

Infrastructure, Property, Plant and Equipment

- Office Equipment - 8,347 8,347

- Operational Land 68,476 - 68,476

- Community Land - 34,559 34,559

Land Under Roads - 1,984 1,984

- Land Improvements 2,503 2,503

- Buildings] 76,993 - 76,993

- Other structures - 31,457 31,457

- Roads, Bridges and Footpaths

- 256,806 256,806

- Water & Sewerage - Networks

307,892 - 307,892

- Stormwater Drainage - 76,677 76,677

- Work in progress - 49,092 49,092 - Other assets - 3,756 3,756


A-137

Total Infrastructure, Property, Plant and Equipment 453,361 465,181 918,542

Non-recurring fair value measurements

Non-current assets held for sale

- Enter details - - -

[describe any other assets held at non-recurring fair value]

- - -

2014 Note Level 2 ($) Level 3 ($) Total ($)

Recurring fair value measurements

[describe assets held at recurring fair value]

Investments

-At fair value through profit or loss

- Available for sale

- Other (enter details here)

Financial liabilities

- Enter details

Investment properties

- Enter details

Infrastructure, Property, Plant and Equipment

- Insert asset class

[describe any other assets held at recurring fair value]

Non-recurring fair value measurements

[describe assets held at recurring fair value]

Valuation Techniques Level 2 measurements Describe the valuation techniques and the inputs used in the fair value measurement, if there has been a change in the technique then this change and the reason for making it should be disclosed. Level 3 measurements The following information should be provided for all level 3 recurring and non-recurring fair value measurements:

the valuation techniques and the inputs used in the fair value measurement;

any change in the technique and the reason for the change;

how the council decides its valuation policies and procedures and analyses changes in fair value measurements from period to period

quantitative information about the significant unobservable inputs used in the fair value measurement.

The following table summarises the quantitative information relating to the significant unobservable inputs used in deriving the various Level 3 Asset Class fair values.

Class

Fair Value (30/6/15) $'000

ValuationTechnique/s

Unobservable Inputs

Range of Inputs (incl. probable)

Relationship of unobservable inputs to Fair Value

Financial Assets

Fair Value on 1,441 Advisor report Unit price 0-7.25% Capital protection


A-138

initial recognition

has been triggered

Held to maturity

80,250 Bank confirmations

Interest rate 3.5 to 7.15% Investments are mainly held in fixed interest investments

Financial Liabilities

Payables 8,407 Creditor invoices Payment terms

Loans/Advances

18,757 Bank confirmations

Interest rates and terms

548-6.47% Loans are fixed interest loans

IPP&E

Plant, equipment, furniture, fittings and office equipment

8,347 Cost used to approximate far value

Gross replacement cost, useful like and residual value

Varies between each asset

Changes in the replacement in value consumption patterns that may impact on the remaining life may result in significant changes in the fair value

Community Land

34,559 Land values obtained from the NSW Values-General

Land Value, land area

$540-$1,320,000

Significant changes in the land values provided by the NSW Valuer-General

Land Under Roads

1,984 Adjoining blocks averaged m2 rate

Land Value, land area

$0.90 - $249.81

Significant changes in the land values provided by the NSW Valuer-General

Land Improvements

2,503 Cost used to approximate fair value

Asset condition, remaining lives, residual value

Indefinite useful lives

Asset may not be serviceable for an indefinite life.

Other structures



59% in condition 2, estimate life 5-20 Years

Consumption pattern may vary from item to item.

Roads 256,806 Unit rates per m2 or length


43.1% in condition 3, estimated life 5-120 years

Change in the remediation and construction techniques may influence fair value.

Library books

285 Cost used to approximate fair value

Asset condition, remaining lives

Treatment by borrowers

Borrowing history of items may impact on the useful life of the item.

Other – Art Works


The level of appreciation of the asset

Artist Some collection items may be irreplaceable

Stormwater Drainage

76,677 Unit rates per m2 or length


$43.98 to $26,673, 49% in condition 2, expected life 50-100 years

Change in the construction techniques employed may influence fair value.


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Reconciliation of movements A reconciliation of the movements in recurring fair value measurements allocated to Level 3 of the hierarchy is provided below:

2015 ($) 2014 ($)

Balance at 1 July 549,310

Total gains or losses for the period

Recognised in profit or loss - Realised – refer Note 5. (75,959)

Recognised in profit or loss - Unrealised - refer Notes 3 and 4. (6,531)

Recognised in other comprehensive income – Revaluation surplus 174

Other movements

Purchases 128,878

Sales -

Transfers into level 3 -

Transfers out of level 3 -

Other movements (9,039)

Balance at 30 June 586,833

[Provide details of the reasons for any transfers identified in the table above] Unobservable inputs and sensitivities

Asset / liability category

Carrying amount (at fair value)

Key unobservable inputs*

Expected range of inputs

Description of how changes in inputs will affect the fair value

[insert relevant information]

* There were no significant inter-relationships between unobservable inputs that materially affect fair values. (see examples in commentary). Transfers between levels of the hierarchy The following assets / liabilities that are measured at fair value on a recurring basis have been subject to a transfer between levels of the hierarchy. The Councils policy for determining when transfers into different levels of the hierarchy have occurred at [the date of the event or change in circumstances that caused the transfer / the beginning of the reporting period / the end of the reporting period] – delete as applicable. Transfers from Level 2 to Level 3

Asset / Liability $


[Provide details of the reasons for the transfers] Transfers from Level 3 to Level 2

Asset / Liability $


[Provide details of the reasons for the transfers] Highest and best use If applicable, provide details of the assets that have a different highest and best use from the current use and why the non-financial asset is being used in a manner that differs from its highest and best use]. Otherwise include a sentence that all assets valued at fair value in this note are being used for their highest and best use.


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Commentary – Fair value measurement

1. In order for an asset / liability to be disclosed as Level 1 of the fair value hierarchy – there needs to be a quoted market for an identical asset, i.e. shares in listed entities. Councils are not expected to have any Level 1 assets or liabilities.

2. This note should include only assets and liabilities carried or disclosed at fair value, i.e. cash, term deposits, payables etc. are not included in Note 27.

3. The asset classes included in note 27 may be more detailed than those disclosed in Note 9, Councils will need to determine the asset classes appropriate under AASB 13 based on the level of uncertainty and subjectivity in the valuations.

4. Level 1 references in the Code have been removed since it is not expected that Councils have any assets at Level 1.

5. For level 2 and level 3, Councils need to provide a description of the valuation technique(s) and the inputs used in the fair value measurement. If there has been a change in valuation technique (for example, changing from a market approach to an income approach), this change should be disclosed and the reason for it.

6. For level 3 assets, Councils need to provide information about the unobservable inputs used in the valuation, a description of the valuation processes used by the council (including, for example, how a council decides its valuation policies and procedures).

7. A council shall determine appropriate classes of assets and liabilities for these fair value disclosures on the basis of the following:

a. The nature, characteristics and risks of the asset or liability; and b. The level of the fair value hierarchy within which the fair value measurement is categorised.

The number of classes may need to be greater for fair value measurements categorised within Level 3 of the fair value hierarchy because those measurements have a greater degree of uncertainty and subjectivity. Determining appropriate classes of assets and liabilities for which disclosures about fair value measurements should be provided requires judgement.

A council needs to provide sufficient information to permit reconciliation to the line items presented in the statement of financial position.

8. Example disclosures for basis for valuation for investment property

The Council obtains independent valuations of its investment property portfolio on an annual basis and at the end of each reporting period the financial statements reflect the most up-to-date valuation.

The best evidence of fair value is the current price in an active market for similar assets, the following information is used where necessary:

Current prices in an active market for different types of properties or similar properties in a less active market;

Discounted cash flow projections based on management’s best estimates of future cash inflows and outflows;

All investment property valuations are included in level 3 of the hierarchy. The key unobservable input to the valuation is the price per square metre.

The fair value of investment properties is determined by independent, qualified valuers on an annual basis who have experience in the location of the property. The Council reviews the valuation reports and discusses significant movements with the valuers.

As at [year end date] the valuation of the investment property portfolio was performed by FGH Valuers. There has been no change to the valuation process during the reporting period.

9. Example unobservable inputs for investment property

Asset / liability category

Carrying amount (at fair value)

Key unobservable inputs

Expected range of inputs

Description of how changes in inputs will affect the fair value

Investment property

$1m Estimated rental value (per sq mtr)

Rental growth (per annum)

Long term

$700 - $1,000 per square metre

2.5% - 3.5%

9% -

Significant increases (decreases) in estimated rental value (per sqm p.a.) and rent growth p.a. in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in long-term vacancy rate and discount rate in isolation


A-141

vacancy rates

Discount rate

10.5%

8% - 9%

would result in a significantly lower (higher) fair value measurement.

Documents

Code of Accounting Practice and Financial Reporting ... Update 23... · The Local Government Code of Accounting Practice and Financial Reporting ... by the Office details the accounting