Toowoomba Regional Council
Notes to the Financial Statements
for the year ended 30 June 2016
Note 13. Fair Value Measurements (continued)
(3) Valuation techniques used to derive Level 2 and Level 3 Fair Values (continued)
Buildings - Residential and Specialised Buildings (Levels 2 & 3) (continued)
The main Level 3 inputs used are derived and evaluated as follows:
Relationship between asset consumption rating scale and the level of consumed service potential – Under the cost
approach the estimated cost to replace the asset is calculated and then adjusted to take account of an accumulated
depreciation. Replacement cost is determined by actual construction or purchase prices for recent projects,
Registered Valuers' database, Rawlinson's Construction Guide or similar guides, benchmarking against other
valuations, development of costs using Registered Valuers' models for specific asset types.
Adjustment for accumulated depreciation is achieved by the valuer determining an asset consumption rating scale for
each asset type based on the interrelationship between a range of factors. These factors and their relationship to the
fair value require professional judgment and include asset condition, legal and commercial obsolescence and the
determination of key depreciation related assumptions such as residual value, useful life and pattern of consumption
of the future economic benefit. The consumption rating scales were based initially on the past experience of the
valuation firm and industry guides and were then updated to take into account the experience and understanding of
Council’s own engineers, asset management and finance staff. The results of the valuation were further evaluated by
confirmation against Council’s own understanding of the assets and the level of remaining service potential.
Roads
Current Replacement Cost
The Current Replacement Cost of Council's road network as at 30 June 2015 was determined by independent,
external Registered Valuers as at 30 June 2015 using the cost approach.
Cost Approach - Depreciated Replacement Cost - Level 3 valuation inputs
Under the cost approach the estimated replacement cost of the network is determined by componentising the
assets into significant parts with different useful lives and taking into account a range of factors. While the unit rates
based on square metres could be supported from market evidence (Level 2) other inputs (such as estimates of
residual value, useful life, pattern of consumption and asset condition) required extensive professional judgement and
impacted significantly on the final determination of fair value. As such these assets were classified as having been
valued using Level 3 valuation inputs.
The main Level 3 inputs used are derived and evaluated as follows:
Asset Condition - The nature of road network infrastructure is that there is a very large number of assets which
comprise the network and as a result it is not physically possible to inspect every asset for the purposes of
completing a valuation. As a consequence reliance is placed on the accuracy of data held in the asset management
system and its associated internal controls. This includes regular planned inspections and updates to the system
following maintenance activities and renewals treatments. To provide assurance over the accuracy of this information
and taking into account the cost-benefit of undertaking physical inspections the valuation relies upon a sampling
approach where the data held in the system is verified by physical inspection.
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TOOWOOMBA REGIONAL COUNCIL Annual Report 2015 - 2016
Financial report CHAPTER 6
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