annual report 2011–12 - Parliament of New South Wales - NSW ...

Department of Transport
Notes to the financial statements
for the year ended 30 June 2012
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
(o)
Assets (cont'd)
(ii)
Capitalisation and initial recognition (cont'd)
Generally property, plant and equipment and intangible assets with a greater value than $5,000 are
capitalised except for computer equipment which is normally capitalised irrespective of the $5,000
threshold where it is considered to be part of a network of assets.
(iii)
Valuation of property, plant and equipment
Subsequent to initial recognition, property, plant and equipment are valued in accordance with the
''Valuation of Physical Non-Current Assets at Fair Value'' Policy and Guidelines Paper (TPP 07-1). This
policy adopts fair value in accordance with AASB 116 Property, Plant and Equipment and AASB 140
Investment Property.
Property, plant and equipment is measured on the basis of the fair value of its 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. Market evidence is available and
used for the following major items of property, plant and equipment:
! Land under roads valued at existing use, based on an en globo valuation approach or proxy such
as open space land;
! Land under trackwork valued at existing use (adjacent land use values);
! Non-specialised land and buildings, which include commercial and general purpose buildings for
which there is a secondary market.
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 depreciated replacement cost.
The depreciated replacement cost method is used to revalue specialised buildings (designed for a specific
limited purpose), trackwork and rail infrastructure systems, road infrastructure systems, maritime
infrastructure systems, buses, ferries and certain plant and equipment. Depreciated replacement cost for
these types of assets is based on the “incremental optimised replacement cost”. Optimised replacement
cost is the minimum cost, in the normal course of business, to replace the existing asset with a
technologically modern equivalent asset with the same economic benefits, adjusting for any overdesign,
overcapacity and redundant components. Incremental optimisation means that optimisation is limited to
the extent that optimisation can occur in the normal course of business using commercially available
technology.
Non-specialised assets such as computer and office equipment with short useful lives are measured at
depreciated historical cost, as a surrogate for fair value.
(iv)
Revaluation of property, plant and equipment
The entities in the group revalue each class of property, plant and equipment at least every five years or
with sufficient regularity to ensure that the carrying amount of each asset in the class does not differ
materially from its fair value at reporting date. Revaluations are performed by independent and / or inhouse
professionally qualified valuers.
Non-specialised assets with short useful lives are measured at depreciated historical cost, as a surrogate
for fair value. This is because any difference between fair value and depreciated historical cost is unlikely
to be material.
When revaluing non-current assets by reference to current prices for assets newer than those being
revalued (adjusted to reflect the present condition of the assets), the gross amount and the related
accumulated depreciation are separately restated.
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Transport for NSW Annual Report 2011–12