David Edgerton FCPA Director Quality + Expertise + Flexibility + Innovation = Confidence & Real Value Asset Accounting Update

Agenda Key changes to standards and concepts New and proposed standards CPA Australia Guide

AAAB May 2015 Decisions CRC v DRC – (AASB13 and AASB136 amendments) Residual Value – Residual Value definition and disposal – Additional level of componentisation (SL & LL) – SL & LL – ‘not physically identifiable’ (express as %) – Each part to be depreciated – OK to use ‘blended’ approaches – Depreciation to be based on ‘Depreciable Amount’ – Valuation Depreciation different to Financial Reporting Depreciation (i.e. valuation and depreciation are NOT linked)

For example: 20m dredged channel Fair Value ADAD Replacement Cost Long Short ValuationDepreciation

AASB ‘Appropriate Componentisation

Valuation based on what market participants would pay (not directly linked to depreciation expense)

Each part to be depreciated over their useful life

AASB13 disclosures AASB13 Asset Class different to AASB116 Asset Class

Disclosures General Disclosures (policies and reconciliations) For each ‘Asset Class’ – Valuation Techniques and Inputs – If level 3 For each level 2 input (no disclosures) For each level 3 input – Where did it come from – How was it evaluated – Quantitative info (eg. min and max) – How reliable is it (sensitivity +/- %) – Impact ($) on Fair Value Measurement Temporary Relief (but only for specialised valued using cost approach)

APV Methodology

Upfront Liaison with council All assets ‘componentised’ Components split into ‘SL’ & ‘LL’ Splits and assumptions confirmed with council based on council experience Valuation Profiles – non-linear or SL Depreciation – SL – Short UL based on min and max range and experience – Long UL based on professional judgement

Valuation

Depreciation

Post Inspection Draft provided to council for review Refinement of assumptions Production of final and report APV responds to audit queries (inc Auditors Package)

Output For each component – Short Life (Gross, FV, Depr, UL, RUL) – Long Life (Gross, FV, Depr, UL, RUL) – Total (Gross, FV, Depr) – Weighted Average (UL, RUL) Enables full compliance without need to double asset register or destroy one-to-one relationship with Asset Management System

New and proposed standards Service Concession Arrangements Leases

Service Concession Arrangements ED261 Service Concession Arrangements Issued July 2015 aligned with IPSAS 32 If criteria are met then recognise in the books of the grantor – – Asset and – Corresponding liability (based on Financial or Right to Operate model)

Leases New AASB16 Applicable periods beginning after 1 Jan 2019 Finance and Operating Leases gone ALL Leases now on books May elect to exclude short-term or low value leases Record asset & liability Extensive disclosures

CPA Australia’s eGuide CPA Australia’s Guide to asset valuation and depreciation for not-for-profit and public sector physical assets under accrual based accounting standards Download from CPA website Or Extensive Project Team Peer Review Julie Sinclair (SA Treasury) Covers high level, technical and practical issues

Questions David Edgerton FCPA Web: Mob: Work:(07)