2010-11 Annual Report - Taranaki District Health Board

Notes to the Financial Statements
For the Year Ended 30 June 2011
Land and buildings revalued
Land and buildings were revalued as at 30 June 2008 by an independent valuer on the basis of fair value. Changes in valuations are
transferred to an asset revaluation reserve for that class of asset. Where such transfer results in a debit balance in the revaluation
reserve the deficit is transferred to the income statement. Any subsequent revaluation gains are written back through the income
statement only to the extent of past deficits written off. Land and buildings are revalued every five years with the next revaluation
due as at 30th June 2013, unless the value of land and buildings materially alter prior to that date.
Additions
The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable the future economic
benefits or service potential associated with the item will flow to Taranaki District Health Board and the cost of the item can be
measured reliably. In most instances, an item of property, plant and equipment is recognised at its cost.
Subsequent costs
Subsequent costs are added to the carrying value of an item of property, plant and equipment when that cost is incurred if it is
probable that the future economic benefits embodied with the item will flow to Taranaki District Health Board and the cost of the
item can be measured reliably. All other costs are recognised in the income statement an expense as incurred.
Disposals
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected
from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.
Depreciation
Depreciation is calculated on a straight line basis on all tangible property, plant and equipment other than freehold land, at rates
which will write off the cost or valuation of the assets, less estimated residual values, over their estimated useful lives as follows:
Capitalised leases are depreciated over the shorter of the estimated life of the asset and the lease term if there is no reasonable
certainty that Taranaki District Health Board will obtain ownership by the end of the lease term.
Class of Asset Estimated life Depreciation rate
Land not depreciated n/a
Buildings 4 to 33 years 3-22.5%
Plant and equipment 2 to 18 years 5.5-48%
Motor vehicles 3 to 10 years 10-33.3%
(l)
Finance Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Finance leases, which transfer to Taranaki District Health Board substantially all the risks and benefits incidental to ownership of the
leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or
loss.
(m) Operating Leases
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.