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28/04/2025

D3 : Non-financial assets | Annual Report 2017-18

Policy and measurement

Non-financial assets (excluding assets held for sale) are not expected to be sold or realised within the next 12 months.

Asset recognition threshold

Purchases of property, plant and equipment, and intangibles are recognised where they meet an individual asset recognition threshold of $5,000. All purchases under this threshold are expensed in the year of acquisition, other than when they form part of a group of similar items which are significant in total in which case they are recognised on a group basis.

Finance has a number of asset classes. The recognition and measurement policy for each is included below:

Asset class (includes work in progress) Initial Recognition Subsequent Recognition Revaluation Frequency Fair value measured at
Land At cost. Fair value. Assessed annually by management to determine whether it is likely that the carrying amount is materially different from fair value. If likely, revaluations are conducted by independent valuers and revaluation adjustments are made on a class basis. Market selling price or discounted cash flows.
Buildings Market selling price, discounted cash flows or current replacement cost.
Leasehold improvements Current replacement cost.
Infrastructure, plant and equipment Market selling price or current replacement cost.
Investment property At cost, except where acquired at nominal cost, then fair value. Fair value. Annually. Market selling price or discounted cash flows.
Intangibles (including internally developed and externally acquired software) At cost. Cost less accumulated amortisation and accumulated impairment losses. N/A N/A

 

Revaluations

Revaluation adjustments are made on a class basis. For property, plant and equipment, revaluation increments are credited to equity under the heading of asset revaluation reserve except to the extent it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class.

Gains or losses arising from changes in the fair value of investment properties are recognised in the surplus/deficit in the year in which they arise.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset is restated to the revalued amount.

 

Decontamination, restoration and decommissioning costs

Obligations relating to the dismantling, removal, remediation and restoration are recognised in the cost of property, plant and equipment where reliability estimated, with a corresponding provision for remediation costs.

 

Depreciation/amortisation

Depreciable assets are written down to their estimated residual values over their estimated useful lives to Finance using the straight line method of depreciation. Depreciation rates are based on the following useful lives:

Asset class 2018 & 2017 (no change)  
Buildings on freehold land 3 to 100 years This policy is reviewed at each reporting date. If a change is deemed necessary, these are made in the current and future reporting periods as appropriate.
Leasehold improvements Lesser of useful life or lease term
Intangibles 3 to 7 years
Infrastructure, plant and equipment 1 to 45 years  

 

Assets held for sale

Assets held for sale includes properties that have been fully prepared for sale, are being actively marketed at fair value and are likely to settle within the next 12 months. Also included are properties that are currently under offer or contract (contract issued or exchanged but not yet settled) as at the end of the reporting period.

 

D3.1 Property, infrastructure, plant and equipment and intangibles

 

Further information

Domestic property portfolio

Finance provides policy advice, guidance and support on managing Commonwealth property, land and public works across the government; and managing specified major capital works projects and the government’s non-Defence property portfolio within Australia.

The government’s non-defence domestic property portfolio currently has approximately 90 Commonwealth-owned properties across Australia. These include office buildings, law courts, special purpose facilities, heritage assets, vacant land and contaminated sites that have been classified as either investment properties, land, buildings, or assets held for sale.

 

Other assets

Other assets include leasehold improvements, office equipment, information technology and finance lease assets in relation to the electronic work environment.

 

  Administered
  Leasehold improvements Infrastructure Plant and equipment Intangible assets Total
  $’000 $’000 $’000 $’000 $’000
As at 1 July 2017          
Gross book value 25,011  69,997  4,157  3,239  102,404 
Accumulated depreciation, amortisation and impairment (122)  -  -  (2,168)  (2,290) 
Opening balance as at 1 July 2017 26,889  69,997  4,157  1,071  100,114 
Additions          
By purchase 12,929  1,224  3,257  157  17,567 
Items recognised in equity          
Revaluations -  727  2,070  -  2,797 
Items recognised in the surplus/(deficit)          
Depreciation/amortisation expense (11,703)  (2,232)  (2,701)  (560)  (17,196) 
Disposals          
Write-offs (90)  -  (128)  -  (218) 
Closing balance as at 30 June 2018 26,025  69,716  6,655  668  103,064 
Total as at 30 June 2018 represented by          
Gross Book Value          
Fair value (gross) 39,434  69,716  7,759  -  116,909 
Internally developed software -  -  -  1,173  1,173 
Purchased software -  -  -  276  276 
Work in progress - at fair value 1,818  -  1,787  -  3,605 
Work in progress - at cost -  -  -  -  - 
Accumulated depreciation, amortisation and impairment (15,227)  -  (2,891)  (781)  (18,899) 
Total as at 30 June 2018 26,025  69,716  6,655  668  103,064 

 

Further information

Non-financial assets include the Intra Government Communication Network (ICON), leasehold improvements and IT assets for electoral and state offices, and other information technology assets to support Administered outcomes.

 

D3.2 Fair value information by non-financial asset class

Key judgements and estimates

Where possible, assets are valued based upon observable inputs to the extent it is available. Where this information is not available, valuation techniques rely on unobservable inputs.

Independent valuations are obtained annually for land, buildings and investment properties. These valuations include calculations of estimated market cash flows which are adjusted to take into account physical, economic and external factors such as sale prices of comparable assets, replacement cost, expected useful life and adjustments for obsolescence. For investment properties, judgements include income and expenditure, as well as average vacancy periods and costs of establishing a new tenant, as leases become due for renewal and properties become vacant. 

Within the property portfolio, there are a small number of properties where the highest and best use differs from the current use, being:

  • 7 vacant blocks which have a highest and best use of 'office buildings';
  • 1 vacant block which has a highest and best use of 'rural residential';
  • 1 property with an unusable building which has a highest and best use of 'community use'; and
  • 1 property with an unusable building which has a highest and best use of ‘conservation’.

While the fair values for these properties has been measured in the financial statements using the highest and best use for each, they are not being utilised at their highest and best use as Finance is not in the business of development.

Leasehold improvements, and plant and equipment is subject to a formal independent valuation at least once every three years dependent upon an annual risk assessment. In years where a formal valuation is not undertaken, assets are subject to a desktop review. Leasehold improvements for One Canberra Avenue were valued on acquisition in 2016. An independent valuation in relation to all other leasehold improvements and plant and equipment was undertaken as at 30 June 2017.

Finance reviews all reports received from independent valuers to ensure valuations align with its own assumptions and understanding of the respective assets and their circumstances.

 

Fair value measurements

Finance only holds non-financial assets in the following two levels of the fair value hierarchy:

  • Level 2: observable inputs (other than quoted prices in active markets) are used to calculate the fair value of the asset; and
  • Level 3: inputs used to calculate the fair value are not observable.

The following tables set out (by asset class) the valuation technique, inputs used, and the level of the fair value hierarchy per AASB 13 Fair Value Measurement.

    Departmental
Technique / inputs used / level Land Buildings Leasehold improvements Investment property Plant and equipment Assets held for sale Total
  $’000 $’000 $’000 $’000 $’000 $’000 $’000
Market Approach / AMT / 2 135,910 18 - 70,104 13,049 12,254 231,335
Cost Approach / RCN; CEB / 3 - - 25,312 - 13,366 -  38,678
Cost Approach / RCN / 2 - 297,404 - - - -  297,404
Income Approach / AMT / 2 240,104 297,799 - 713,178 - 15,900  1,266,981
Total assets at fair value 30 June 2018 376,104 595,221 25,312 783,282 26,415 28,154  1,834,398
Market Approach / AMT / 2 174,997 6,105 - 63,590 13,490 4,317  262,499
Cost Approach / RCN; CEB / 3 - - 26,740 - 17,377  -  44,117
Cost Approach / RCN / 2 - 284,706 - - -  -  284,706
Income Approach / AMT / 2 212,644 298,200 - 784,113 -  -  1,294,957
Total assets at fair value 30 June 2017 387,641 589,011 26,740 847,703 30,867  4,317  1,886,279

 

  Administered
Technique / inputs used / level Leasehold improvements Infrastructure Plant and equipment Total
  $’000 $’000 $’000 $’000
Cost Approach / RCN;CEB / 3 26,025 69,716 - 95,741
Market Approach / AMT / 2 - - 3,713 3,713
Cost Approach / AMT;CEB / 3 - - 2,942 2,942
Total assets at fair value 30 June 2018 26,025 69,716 6,655 102,396
Cost Approach / RCN;CEB / 3 24,889 69,997 - 94,886
Market Approach / AMT / 2 - - 2,575 2,575
Cost Approach / AMT;CEB / 3 - - 1,582 1,582
Total assets at fair value 30 June 2017 24,889 69,997 4,157 99,043

 

Inputs used

Replacement Cost of New Assets (RCN): the amount a market participant would pay to acquire or construct a new substitute asset of comparable utility.

Consumed Economic Benefits (CEB): obsolescence of assets, physical deterioration, functional or technical obsolescence and conditions of the economic environment specific to the asset.

Adjusted Market Transactions (AMT): market transactions of comparable assets, adjusted to reflect differences in price sensitive characteristics.


Recurring level 3 fair value measurements

There has been $0.9 million transferred from level 2 to level 3 for Plant & Equipment and Leasehold improvements.

There has been $9.1 million transferred from level 2 to level 3 for Plant & Equipment and Leasehold improvements.

Other information

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