SYDNEY PORTS CORPORATION ANNUAL REPORT 12

Cash-flow hedges that meet the strict criteria for hedge
accounting are accounted for as follows:
■■ The effective portion of the gain or loss on the hedging
instrument is recognised directly in equity, while the
ineffective portion is recognised in profit or loss.
■■ Amounts taken to equity are transferred out of equity
and included in the measurement of the hedged
transaction (finance costs) when the forecast
transaction occurs.
■■ The Corporation tests each of the designated cash-flow
hedges for effectiveness on a six-monthly basis both
retrospectively and prospectively. If the testing falls
within the 80:125 range (100 being fully effective), the
hedge is considered highly effective and continues to
be designated as a cash-flow hedge.
■■ At each reporting date, the Corporation measures
ineffectiveness. For interest rate cash-flow hedges, any
ineffective portion is taken to other expenses in the
statement of comprehensive income.
■■ If the forecast underlying transaction is no longer
expected to occur, amounts recognised in equity are
transferred to the statement of comprehensive income.
If the hedging instrument expires or is sold, terminated
or exercised without replacement or rollover, or if its
designation as a hedge is revoked (due to it being
ineffective), amounts previously recognised in equity
remain in equity until the forecast transaction occurs.
Derecognition of financial instruments
The derecognition of a financial instrument takes place
when the Corporation no longer controls the contractual
rights that comprise the financial instrument. This is
normally the case when the instrument is sold, or all the
cash flows attributable to the instrument are passed
through to an independent third party.
(h) Property, plant and equipment
Property, plant and equipment is initially recognised at
acquisition cost, including any costs directly attributable to
the asset and any restoration costs associated with the
asset. The cost of self-constructed assets includes the cost
of materials and direct labour and any other costs directly
attributable to bringing the assets to a working condition
for their intended use. Cost is the amount of cash or cash
equivalents paid or the fair value of the other consideration
given to acquire the asset at the time of its acquisition or
construction or, where applicable, the amount attributed to
that asset when initially recognised in accordance with the
specific requirements of other Australian Accounting
Standards. Assets acquired at no cost or for nominal
consideration are initially recognised at their fair value at
the date of acquisition.
The cost of replacing a component of an item of property,
plant and equipment is recognised in the carrying amount
of the item if it is probable that the future economic
benefits embodied within the component will flow to the
Corporation, and its cost can be measured reliably. The
carrying amount of the replaced part is derecognised when
the carrying amount of the replacement part is recognised.
The cost of day-to-day servicing of property, plant and
equipment is recognised in profit or loss as incurred.
Fair value is the amount for which an asset could be
exchanged between knowledgeable, willing parties in
an arm’s length transaction.
All repair and maintenance costs are recognised in profit or
loss in the statement of comprehensive income as incurred.
Gains and losses on disposal are determined by comparing
the proceeds with the carrying amount. These are included
in profit or loss in the statement of comprehensive income.
Land and buildings held to provide a port facility to
facilitate trade and commerce are accounted for as
property, plant and equipment infrastructure assets under
AASB 116, notwithstanding that the land and buildings
may be leased to external parties. Land and buildings that
are not integral or associated with port activities and
leased with the principal objective of earning rentals or
for capital appreciation, or both, are accounted for as
investment properties under AASB 140.
(i) Valuation of property, plant and equipment
Property, plant and equipment is valued at fair value in
accordance with Australian Accounting Standards and
the NSW Treasury Policy Paper on Valuation of Physical
Non-Current Assets. Property, plant and equipment is
measured on an existing use basis where there are no
feasible alternative uses in the existing natural, legal,
financial and socio-political environment. However, in the
limited circumstances where there are feasible alternative
uses, assets are valued at their highest and best use.
Fair value of property, plant and equipment is determined
based on the best available market evidence, including
current market selling prices for the same or similar assets.
Where there is no available market evidence, the asset’s
fair value is measured at its market buying price, the best
indicator of which is the replacement cost of the asset’s
remaining future economic benefits. Where an asset is
specialised, or the market buying price and market selling
price differ materially because the asset is usually bought
and sold in different markets, or the asset would only be
sold as part of the sale of the cash-generating operation of
which the asset is a part, fair value is measured at market
buying price. The best indicator of an asset’s market
buying price is the replacement cost of the asset’s
remaining future economic benefits. Non-specialised
assets with short useful lives are measured at depreciated
historical cost, as a surrogate for fair value.
(ii) Valuation of land
Land is valued at fair value having regard to its highest and
best use. However, where there are natural, legal and
socio-political restrictions on the use of land such that
there is no feasible alternative use in the near future, such
land is valued at market value for its existing use, because
that is its highest and best use.
(iii) Valuation of specialised plant and infrastructure
Specialised plant and infrastructure is measured at market
buying price, the best indicator of which is the replacement
cost of the asset’s remaining future economic benefits.
Infrastructure assets include roadways and bridges,
wharves, jetties and breakwaters.
Sydney PortS CorPoration finanCial rePort 2011/12 51