LOCAL GOVERNMENT C ACCOUNTING PRACTICE AND FINANCIAL REPORTING Code Update 26 1(a... · Code of...

LOCAL GOVERNMENT CODE OF ACCOUNTING PRACTICE

AND FINANCIAL REPORTING

Update No. 26 December 2017

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Code of Accounting Practice and Financial Reporting (Update 26) General Purpose Financial Statements A-1

ACKNOWLEDGEMENTS The Office of Local Government acknowledges the Australian Accounting Standards Board for their assistance in providing definitions from its Glossary of Terms for use in this document. The Office of Local Government would like to thank Carmen Ridley, Principal, Australian Financial Reporting Solutions for her assistance in the development of this Code update.

The Office of Local Government would also like to thank the Institute of Public Works Engineering Australasia (IPWEA) for allowing sections of their Infrastructure Financial Management Guidelines to be used in the Code.

© Commonwealth of Australia 2017 All legislation herein is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain reproduction and publication of Commonwealth legislation. In particular, s. 182A of the Act enables a complete copy to be made by or on behalf of a particular person. For reproduction or publication beyond that permitted by the Act, permission should be sought in writing from the Australian Accounting Standards Board. Requests in the first instance should be addressed to the Administration Director, Australian Accounting Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria, 8007

ACCESS TO SERVICES The Office of Local Government is located at: Levels 1 & 2 5 O’Keefe Avenue Locked Bag 3015 NOWRA NSW 2541 NOWRA NSW 2541 Phone 02 4428 4100 Fax 02 4428 4199 TTY 02 4428 4209 Email [email protected] Website www.olg.nsw.gov.au

OFFICE HOURS Monday to Friday 8.30am to 5.00pm (Special arrangements may be made if these hours are unsuitable) All offices are wheelchair accessible.

ALTERNATIVE MEDIA PUBLICATIONS Special arrangements can be made for our publications to be provided in large print or in an alternative media format. If you need this service, please contact our Client Services on 02 44284100

DISCLAIMER While every effort has been made to ensure the accuracy of the information in this publication, the Office of Local Government expressly disclaims any liability to any person in respect of anything done or not done as a result of the contents of the publication or the data provided. © NSW Office of Local Government 2017 978-1-922001-68-9

Produced by the Office of Local Government

www.olg.nsw.gov.au

mailto:[email protected]

http://www.olg.nsw.gov.au/

http://www.olg.nsw.gov.au/


Introduction and overview

Purpose The Local Government Code of Accounting Practice and Financial Reporting (the Code) prescribes the forms of financial statements approved by the Office of Local Government (the Office).

The Code applies to each NSW council in respect of its general purpose financial statements, special purpose financial statements and special schedules.

The Code is intended to facilitate the practical and effective implementation of the Australian Accounting Standards and aims to provide:

a basis for providing assistance in the interpretation and application of management reporting, accounting, auditing and financial reporting requirements of Chapter 13 of the Local Government Act 1993 (NSW) (the Act) – “How are councils made accountable for their actions?”

a mechanism which will ensure that appropriate accounting policies and practices are implemented by all councils

a basis for audit and review functions to be undertaken in the context of comprehensive and approved accounting standards

reliable, comparable and readily comprehensible financial information which will be invaluable for making and evaluating decisions about the allocation of scarce resources, and which will assist in assessing the performance, financial position, finances and investments of councils

enhanced accountability of councils to the community.

The accounting, financial and other reporting requirements in this update (Update No. 26) of the Code apply to the general purpose and special purpose financial statements and the special schedules prepared by local governments for the financial year commencing 1 July 2017 and for subsequent years unless otherwise stated. The Code prescribes the minimum disclosures required where the balances/transactions are material (councils can add additional disclosures at their discretion) and should tailor these illustrative disclosures to their specific circumstances.

There is no requirement for Councils to disclose immaterial or disclosures which are not relevant to their operations.

Where additional information is added, the information must:

- not be inconsistent with Australian Accounting Standards;

- not obscure material information required by Australian Accounting Standards;

- not be disclosed in the financial statements if it is more appropriate to be shown elsewhere;

- include information about why it is relevant to the users understanding of the financial statements; and

- state that it is unaudited (if applicable).

In some cases, where the standards provide options (as with the valuation of investment properties at cost or fair value), the Code will prescribe which option councils must adopt.

Purpose of the Code

The purpose of the Code is to:

(a) Establish a framework for the preparation and reporting of estimates of income and expenditure. [Clause 201, Local Government (General) Regulation 2005 (NSW) the Regulation.]

(b) Provide guidance on the application of professionally based accounting standards and various legislative requirements.

(c) Specify the accounting records and practices to be followed to ensure adequate systems and internal controls are in place to manage council’s resources. [Clause 206, the Regulation.]

(d) Establish financial reporting requirements to govern the form and content of financial statements of local governments. [Clause 214, the Regulation.]

(e) Specify the matters that an auditor must consider and comment on when conducting audits. [Clause 227, the Regulation.]

The purpose of the illustrative financial statements in this document is to highlight disclosure requirements, provide sample disclosures and worked examples, and serve as a convenient reference to source material.


The fictitious circumstances of our example council, NSW Council, have been chosen to illustrate the most common and significant accounting issues and associated disclosures under Australian Accounting Standards rather than being taken as absolute wording or mandatory requirements for all Councils. These issues may not necessarily apply to all councils, nor are they exhaustive, and therefore these example financial statements should be tailored to the specific balances/transactions and

circumstances of each council.

Authority of Code

For the purpose of Section 405 of the Act, the Code, issued by the Minister for Local Government and published by the Office of Local Government (OLG), details the requirements of estimates of income and expenditure that a council must include in its draft operational plan for each financial year.

For the purpose of Section 412 of the Act, the Code, issued by the Minister and published by the Office, details the accounting records and accounting practices that a council must accord with in managing resources under its control.

For the purposes of Section 413(2b) and (3b) of the Act, the Code, issued by the Minister and published by the Office, details the financial reporting requirements that a council must incorporate when preparing its financial statements.

For the purposes of Section 415(3) of the Act and the Regulation, the auditor, in auditing a council’s general purpose financial statements, must consider and provide comment on the following matters:

(a) Relating to the Income Statement. The gain(/loss) from continuing activities for the year, including the effect of depreciation; the result for the year before capital amounts, level of grants and contributions; and the level of rates increase for the year.

(b) Relating to the Statement of Financial Position. Consideration and comment should also be provided on the utilisation of overdraft facilities.

(c) Relating to performance. Performance indicators and trends, including current ratios, debt servicing, rates coverage, rates outstanding and the level of loan indebtedness, restricted assets, and level of asset renewal.

(d) Relating to the Statement of Cash Flows. The effect on the statement of cash flows of material items such as borrowings or large Section 94 contributions.

(e) Relating to legislative compliance. The meeting of all statutory reporting requirements relating to Division 2 of Chapter 13 of the Act, the Regulation, and any legislatively prescribed standards.

(f) Relating to other matters. The auditor should comment on other such matters which are material, such as the effect of the introduction of new accounting standards, the effect of significant initiatives undertaken and future plans of council where these can be quantified and are sufficiently firm to comment on.

Foreign investment

Pursuant to Section 625 of the Act, a council may only invest money on the basis that all investments must be denominated in Australian dollars.

Legislative requirements for financial statements

The illustrated financial statements within the Code refer to the year-end date of 30 June 2018.

A graphical illustration of the legislative requirements pertaining to financial statements is provided at Appendix D. The dates specified are the latest applicable for the particular legislative requirements to be satisfied. All timetable deadlines are applicable from the financial year ending 30 June 2018.

All councils are required to submit their financial statements on or before 31 October 2018.

Councils are required to have access to the Australian Accounting Standards (www.aasb.gov.au).

Other information

The Code applies to the accounting, financial and other reporting requirements of the general purpose and special purpose financial statements and the special schedules prepared by NSW councils.

Where there has been a change in council policy which affects the calculation of performance ratios that change in policy must be stated and the ratios under the new policy must be provided for the current period and two previous years.

The headers on the top right-hand corner of the Statements and Notes are not mandatory.

http://www.aasb.gov.au/


Monitoring and review

OLG will ensure that the Code remains current, and will provide amendments by way of publication on OLG’s website http://www.olg.nsw.gov.au/strengthening-local-government/supporting-and-advising-councils/accounting-practice

Industry feedback is actively encouraged to assist the Office in the development and delivery of sound financial policies that cater for the practical needs of councils. Feedback may be provided to the following email address ([email protected]) or by contacting Laura Love, Senior Policy Officer on 02 44284178.

Date of issue of financial statements

OLG has determined that the date when the financial statements are authorised for issue is the date on which a council’s financial statements are signed. A council should disclose that it has the power to amend and reissue the financial statements in cases where critical information is received from public submissions, or where the OLG directs the council to amend the statements.

Lodgement of financial statements

Councils must electronically lodge a complete set of audited financial statements (General Purpose Financial Statements, Special Purpose Financial Statements and Special Schedules) with the Office of Local Government by no later than the close of business on 31 October following the financial year end. Faxed copies of financial statements are not acceptable.

A council’s financial statements lodged with OLG will be deemed deficient if they:

(a) have a missing or an incomplete statement by the council as required by Section 413 (2c) of the Act

(b) have missing either of the two audit reports as required by Section 417 (1) of the Act and

(c) have incomplete statements and/or notes to the accounts.

Where a council’s financial statements are deemed deficient, the council will be required to re-lodge its reports and, if necessary, provide public notice of any amendments made in accordance with the Regulation.

Any request for extension to lodge financial statements must be in writing and lodged not later than 17 October following the financial year end. An application for an extension must:

(a) specify the reason(s) for which the extension is sought

(b) specify the period for which the extension is sought

(c) attach a copy of the audit notification of the council’s intention to seek an extension, and

(d) provide the lodgement dates of financial statements and details of any extensions sought (irrespective of approval) for the previous three years.

PENNY HOLLOWAY ACTING CHIEF EXECUTIVE OFFICE OF LOCAL GOVERNMENT

http://www.olg.nsw.gov.au/strengthening-local-government/supporting-and-advising-councils/accounting-practice

mailto:[email protected]


Local Government Code of Accounting Practice and Financial Reporting Update 26

Contents

General purpose financial statements A6 – A131

Special purpose financial statements B1 – B15

Special schedules C1 – C27

Appendices D1 – D35

The Code prescribes the minimum disclosures required for balances/transactions which are material to council. Councils can add additional disclosures at their discretion. In some cases, where the standards provide options (as with the valuation of investment properties at cost or fair value), the Code will prescribe which option councils must adopt.

Notes and line items need only be included if applicable, and additional notes may be added as required – note that in the Code there are linitems with nil or immaterial balances, these are included for completeness to show Councils the line items which may be relevant to them and should not be taken as required to be included where Councils

actual balances are not material.

Code of Accounting Practice and Financial Reporting (Update 26Update 26) General Purpose Financial Statements A-6

NSW Council

General purpose financial statements for the year ended 30 June 2018

Contents

Page

Statement by Councillors and Management A- 8

Income Statement A-10

Statement of Comprehensive Income A-11

Statement of Financial Position A-15

Statement of Changes in Equity A-17

Statement of Cash Flows A-19

Notes to the Financial Statements A-21

Auditor’s Reports A-XXX

AASB101(46)(b),(d)

AASB101(126)(a)

NSW Council is constituted under the Local Government Act 1993 (NSW) and has its principal place of business at:

NSW Council XXXX Street XX NSW 2XXX. AASB110(17)

Through the use of the internet, we have ensured that our reporting is timely, complete and available at minimum cost. All press releases, financial statements and other information are publicly available on our website: www.council.nsw.gov.au.

http://www.council.nsw.gov.au/

NSW Council Financial statements 30 June 2018


Commentary – Financial statements

Accounting standard for financial statements presentation and disclosures AASB101(10) 1. Per AASB 101, a 'complete set of financial statements' comprises: (a) a s a statement of financial position as at the end of the period (b) a statement of profit or loss and other comprehensive income for the period (c) a statement of changes in equity for the period (d) a statement of cash flow for the period (e)

notes, comprising a summary of significant accounting policies and other explanatory notes

(e1) comparative information in respect of the preceding period, and

(f) a Statement of Financial Position as at the beginning of the earliest comparative period (only if the council has applied an accounting policy retrospectively, made a retrospective restatement of items, or reclassified items in its financial statements).

AASB101(11) The statements must all be presented with equal prominence.

Consistency AASB101(45) 2. The presentation and classification of items in the financial statements shall be retained from one

period to the next unless: (a) it is apparent, following a significant change in the nature of the council’s operations or a

review of its financial statements, that another form of presentation or classification would be more appropriate, having regard to the criteria for the selection and application of accounting policies in AASB108 Accounting Policies, Changes in Accounting Estimates and Errors; or

(b) an Australian Accounting Standard requires a change in presentation.

Materiality and aggregation AASB101(29) 3. Each material class of similar items shall be presented separately in the financial statements. Items

of a similar nature or function shall be presented separately unless they are immaterial.

Comparative information AASB101(41) 4. When the presentation or classification of items in the financial statements is amended,

comparative amounts shall be reclassified unless the reclassification is impracticable. When comparative amounts are reclassified, a council shall disclose:

(a) the nature of the reclassification (b) the amount of each item or class of items that is reclassified (c) the reason for the reclassification.

AASB101(42) 5. When it is impracticable to reclassify comparative amounts, a council shall disclose: (a) the reason for not reclassifying the amounts (b) the nature of the adjustments that would have been made if the amounts had been

reclassified.

Three statements of financial position required in certain circumstances AASB101(38),(39) 6. If a council has applied an accounting policy retrospectively, restated items retrospectively, or

reclassified items in its financial statements, it must present a third Statement of Financial Position as at the beginning of the earliest comparative period presented. Refer to Note 15.

NSW Council Statement by Councillors and Management For the year ended 30 June 2018


NSW Council

General purpose financial statements for the year ended 30 June 2018

Statement by Councillors and Management made pursuant to Section 413 (2c) of the Local Government Act 1993 (NSW) (as amended) The attached general purpose financial statements have been prepared in accordance with:

the Local Government Act 1993 (NSW) (as amended) and the regulations made thereunder

the Australian Accounting Standards and other pronouncements of the Australian Accounting Standards Board

the Local Government Code of Accounting Practice and Financial Reporting.

To the best of our knowledge and belief, these statements:

present fairly NSW Council’s operating result and financial position for the year

accord with NSW Council’s accounting and other records.

We are not aware of any matter that would render this report false or misleading in any way.

Signed in accordance with a resolution of Council made on ……………………………………..

Councillor’s name Mayor

Councillor’s name Councillor

General Manager’s name General Manager

Responsible Accounting Officer's name Responsible Accounting Officer

NSW Council Statement by Councillors and Management For the year ended 30 June 2018


Commentary – Statement by Councillors and Management

LGA – Sec. 413 (2) (C) Dating and signing of report 1. The Statement by Councillors and Management must be made in accordance with a resolution of

the council and specify the date on which it was made.

NSW Council Income Statement and Statement of Comprehensive Income For the year ended 30 June 2018 7


NSW Council

Income Statement for the year ended 30 June 2018

Original unaudited

budget 2018

$’000 Notes

Actual 2018

$’000

Actual 2017 $’000

Income from continuing operations Revenue: 34,597 Rates and annual charges 3a 35,307 33,610 24,555 User charges and fees 3b 24,588 22,871 3,285 Interest and investment revenue 3c 5,591 6,920 2,605 Other revenues 3d 4,422 4,116

14,238 Grants and contributions provided for operating purposes 3e,f 10,875 13,456

34,864 Grants and contributions provided for capital purposes 3e,f 45,436 15,078 Other Income: 188 Net gain from the disposal of assets 5 1,156 814 - Fair value increment on investment properties 11 - -

- Net share of interests in joint ventures and associates using the equity method

17 7 -

114,332 Total income from continuing operations 127,382 96,865 Expenses from continuing operations 29,114 Employee benefits and on-costs 4a 28,246 28,044 1,616 Borrowing costs 4b 1,267 1,232 26,298 Materials and contracts 4c 29,901 23,977 12,279 Depreciation and amortisation 4d 15,048 12,052 - Impairment 4d - - 7,835 Other expenses 4e 7,067 7,081 - Interest and investment losses 3c - - - Net loss from the disposal of assets 5 - - Fair value decrement on investment properties 11 - -

- Net share of interests in joint ventures and associates using the equity method 17 - 12

77,142 Total expenses from continuing operations 81,551 72,398 37,190 Operating result from continuing operations 45,853 24,467 - Operating result from discontinued operations 24 - -

37,190 Net operating result for the year 45,853 24,467

Attributable to: 37,190 – Council 45,853 24,467 - – non-controlling interests - -

2,326

Net operating result for the year before grants and contributions provided for capital purposes 417 9,389

The above Income Statement should be read in conjunction with the accompanying notes.

NSW Council Income Statement and Statement of Comprehensive Income For the year ended 30 June 2018


NSW Council

Statement of Comprehensive Income for the year ended 30 June 2018

Notes

Actual 2018

$’000

Actual 2017 $’000

Net operating result for the year – from Income Statement 45,853 24,467 Other comprehensive income

Amounts that will not be reclassified subsequently to operating result

Gain(/loss) on revaluation of infrastructure, property, plant and equipment

15b 8,515 64,533

Amounts that will be reclassified subsequently to operating result when specific conditions are met Gain(/loss) on revaluation of available-for-sale investments 15b - -

Realised available-for-sale investment gains / (losses) recognised in operating result 15b - -

Total other comprehensive income for the year 8,515 64,533 Total comprehensive income for the year 54,368 89,000

Attributable to – Council

54,368 89,000

– non-controlling interests - -

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.



Commentary – Income Statement and Statement of Comprehensive Income

Income Statement and Statement of Comprehensive Income AASB101(81)(12) 1. Council must present (a) a separate Income Statement that displays components of profit or loss, and (b) a Statement of Comprehensive Income that begins with profit or loss and displays

components of other comprehensive income.

Additional line items AASB101(85) 2. Additional line items, headings and subtotals shall be presented in the Statement of

Comprehensive Income and the Income Statement (where applicable to council) when such presentation is relevant to an understanding of the council’s financial performance.

Revenue of equity accounted investments AASB101(82)(c) Framework(74)

3. The share of the profit or loss of associates and joint ventures accounted for using the equity method should be presented as a separate line item, commonly below other expenses and finance costs. It should not be included as part of the council’s revenue. The share of an associate’s or joint venture council’s profit is in the nature of a net gain. It does not represent a gross inflow of economic benefits and hence does not satisfy the definition of revenue in AASB118 Revenue.

Extraordinary items not permitted AASB101(87) 4. A council shall not present any items of income and expense as extraordinary items, either in the

Income Statement or in the notes.

Discontinued operations AASB5(33)(a),(b) AASB101(82)(e)

5. Councils shall disclose a single amount in the Income Statement comprising the total of (a) the post-tax profit or loss of discontinued operations, and (b) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation.

An analysis of this single amount is also required by paragraph 33 of AASB5 Non-current Assets Held for Sale and Discontinued Operations. This analysis should be presented in the notes to the financial statements – refer Note 22.

Non-current assets held for sale

1. AASB 5.38 6. If Council has any non-current assets held for sale then the cumulative income or expenses recognised in other comprehensive income relating to these assets should be presented separately.

Components of other comprehensive income AASB101(7) 7. Components of other comprehensive income (OCI) are items of income and expense (including

reclassification adjustments) that are specifically required or permitted by other Australian Accounting Standards to be included in other comprehensive income and are not recognised in profit or loss. They currently include:

(a) changes in the revaluation surplus relating to property, plant and equipment* (b) re-measurement of defined benefit obligations (c) gains and losses arising from translating the financial statements of a foreign operation (d) gains and losses on re-measuring available-for-sale financial assets* (e) the effective portion of gains and losses on hedging instruments in a cash flow hedge (f) the investor’s share of the other comprehensive income of equity-accounted investments*,

and (g) current and deferred tax credits and charges in respect of items recognised in other

comprehensive income. * Amounts which may be relevant to Councils.

AASB101.82A

8. The share of other comprehensive income of associates and joint ventures accounted for using equity method; and other comprehensive income from discontinued operation should be included in the Statement of Comprehensive Income if relevant.



Commentary – Income Statement and Statement of Comprehensive Income (continued)

Information to be presented either in the Income Statement or in the notes

Material items of income and expense

AASB101(97) 9. When items of income and expense are material, their nature and amount must be disclosed separately, either in the Income Statement or in the notes.

10. Councils should ensure that each class of expenses includes all items related to that class. Material restructuring costs, for example, include redundancy payments (i.e. employee benefit costs), inventory write downs (changes in inventory) and impairments in property, plant and equipment. It would not be acceptable to show restructuring costs as a separate line item in an analysis of expenses by nature where there is an overlap with other line items.

AASB101(29)

11. Each material class of income and expense should be separately disclosed, and unclassified income and expenses should be immaterial both individually and in aggregate.

Reclassification adjustments AASB101(92),(94) 12. A council shall also disclose separately any reclassification adjustments relating to components of

other comprehensive income in the notes to the financial statements.

AASB101(7),(95) 13. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. They arise, for example, on de-recognition or impairment of an available-for-sale financial asset.

Classification of expenses OLG 14. The Office of Local Government has determined that expenses are to be classified by nature in the

Income Statement as prescribed and by function in Note 2(a).

Goods and Services Tax (GST) Interpretation 1031(6),(7)

15. Interpretation 1031 Accounting for the Goods and Services Tax (GST) provides that revenues and expenses must be recognised net of the amount of GST, except that where GST relating to expense items is not recoverable from the taxation authority, it must be recognised as part of the item of expense.



Commentary – Income Statement and Statement of Comprehensive Income (continued)

Offsetting AASB101(32) 16. Assets and liabilities, and income and expenses must not be offset unless required or permitted by

an Australian Accounting Standard. Examples of income and expenses that are required or permitted to be offset are as follows:

AASB101(34)(a) (a) gains and losses on the disposal of non-current assets, including investments and operating assets, are reported by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses

AASB101(34)(b) (b) expenditure related to a provision that is recognised in accordance with AASB137 Provisions, Contingent Liabilities and Contingent Assets and reimbursed under a

contractual arrangement with a third party (e.g. a supplier’s warranty agreement) may be netted against the related reimbursement.

AASB101(35) (c) gains and losses arising from a group of similar transactions are reported on a net basis, for example, and losses arising on financial instruments held for trading. Such gains and losses are, however, reported separately if they are material.

17. Income that falls under the scope of AASB118 Revenue cannot be netted off against related expenses.

Original budget OLG 18. The Office of Local Government requires the presentation of original budget figures in the Income

Statement for comparability.

19. The last line on the Income Statement, being ‘Net operating result for the year before grants and contributions provided for capital purposes’, is provided as a key industry indicator of financial performance. This line stands alone.

OLG Income Statement 20. Councils must prepare, on an annual basis, a detailed statement of income and expenditure

(budget) on an accruals basis. The statement must be presented to Council in both income statement format and Note 2(a) format, before the commencement of the new financial year (1 July).

21. The statement of income and expenditure (budget) result must be compared to the actual result reported in council’s Income Statement and Note 2a.

22. Local Infrastructure Renewal Scheme (LIRS) income

2. LIRS subsidy payments are revenue which is recognised periodically as and when loan repayments are made and invoices are raised. LIRS subsidy payments are required to be reported in Note 3 Section (e), Grants/Special Purpose.

NSW Council Statement of Financial Position As at 30 June 2018


NSW Council

Statement of Financial Position as at 30 June 2018

Notes

Actual 2018

$’000

Actual 2017 $’000

ASSETS Current assets Cash and cash equivalents 6a 12,797 13,488 Investments 6b 61,241 57,207 Receivables 7 11,695 9,728 Inventories 8 2,017 6,332 Other 8 29 846 Non-current assets classified as held for sale 9 - -

Total current assets 87,779 87,601

Non-current assets Investments 6b 39,737 35,265 Receivables 7 81 269 Infrastructure, property, plant and equipment 10 918,542 873,502 Investment property 11 - - Intangible assets 12 - - Inventories 8 5,746 2,810 Investments accounted for using equity method 17 362 333 Other - -

Total non-current assets 964,468 912,179

Total assets 1,052,247 999,780

LIABILITIES Current liabilities Payables 13 8,407 6,538 Income received in advance 13 808 641 Borrowings 13 3,443 3,383 Provisions 14 5,902 6,266

Total current liabilities 18,560 16,828

Non-current liabilities Payables 13 - - Borrowings 13 15,314 18,750 Provisions 14 1,113 1,310

Total non-current liabilities 16,427 20,060

Total liabilities 34,987 36,888

Net assets 1,017,260 962,892

EQUITY Accumulated surplus 15 598,568 552,715 Revaluation reserves 15 418,692 410,177 3. Other reserves (specify) 4. 15 - - Non-controlling equity interest - -

Total equity 1,017,260 962,892

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

NSW Council Statement of Financial Position As at 30 June 2018


Commentary – Statement of Financial Position

Information to be presented In the Statement of Financial Position AASB101(54),(55) 1. Additional line items, headings and subtotals shall be presented in the Statement of Financial

Position when such information is relevant to an understanding of the council’s financial position.

Either in the Statement of Financial Position or in the notes AASB101(61) 2. For each asset and liability line item that combines amounts expected to be recovered or settled

(a) no more than 12 months after the reporting period, and (b) more than 12 months after the reporting period, a council shall disclose the amount expected to be recovered or settled after more than 12 months.

Fair value AASB13 3. Fair value is measured in accordance with AASB13 Fair Value Measurement which is defined as:

“the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

NSW Council Statement of Changes in Equity For the year ended 30 June 2018


NSW Council

Statement of Changes in Equity For the year ended at 30 June 2018

Actual 2018 $’000

Actual 2017 $’000

Accumulated

surplus Revaluation

reserve

Other reserves [specify]

Council equity

interest

Non-controlling

interest Total equity

Accumulated surplus

Revaluation reserve

Other reserves

Council equity

interest

Non-controlling

interest Total equity

Opening balance 552,715 410,177 - 962,892 - 962,892 528,226 345,644 - 873,870 - 873,870 Correction of errors - - - - - 22 22 - - 22- - 22 Changes in accounting policies - - - - - - - - - - - - Restated opening balance 552,715 410,177 - 962,892 - 962,914 528,248 345,644 - 873,892 - 873,892 Net operating result for the year 45,853 - - 45,853 - 45,831 24,467 - - 24,467 - 24,467 Other comprehensive income - 8,515 - 8,515 - 8,515 64,533 - 64,533 - 64,533 Total comprehensive income 45,853 8,515 - 54,346 - 54,346 24,467 64,533 - 89,000 - 89,000 Transfers between equity items - - - - - - - - - - - -

Closing balance 598,568 418,692 - 1,017,260 - 1,017,2

60 552,715 410,177 - 962,892 - 962,892

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

NSW Council Statement of Changes in Equity For the year ended 30 June 2018


Commentary – Statements of Changes in Equity

AASB101(106) 1. The Statement of Changes in Equity shall include: (a) total comprehensive income for the period, showing separately the total amounts

attributable to the Council and to non-controlling interests (b)

for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with AASB108

AASB101(106)(d) (c)

for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:

(i) profit or loss (ii) other comprehensive income, and (iii) transactions with owners in their capacity as owners, showing separately

contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in loss of control.

AASB101(108) 2. Components of equity include, the accumulated balance of each class of other comprehensive income, and accumulated surplus.

AASB101(106A) 3. The reconciliation of changes in each component of equity shall also show separately each item of comprehensive income in the Statement of Changes in Equity.

NSW Council Statement of Cash Flows for the year ended 30 June 2018


NSW Council

Statement of Cash Flows for the year ended 30 June 2018

Original Unaudited

Budget 2018

$’000 Notes

Actual 2018

$’000

Actual 2017 $’000

Cash flows from operating activities Receipts: 35,576 Rates and annual charges 34,968 34,185 24,750 User charges and fees 25,259 22,575 3,285 Investment revenue and interest 5,177 5,549 49,102 Grants and contributions 50,805 25,614 - Deposits and retentions received 126 36 4,340 Other 9,642 10,067 Payments: (29,295) Employee benefits and on-costs (28,794) (26,972) (27,863) Materials and contracts (30,986) (25,564) (1,616) Borrowing costs (1,298) (1,167) - Deposits and retentions refunded - (9,002) Other (11,229) (10,908)

49,277

Net cash provided from (or used) in operating activities 16(b) 53,670 33,415

Cash flows from investing activities Receipts: - Sale of investments 79,563 128,724 4,347 Sale of infrastructure, property, plant and equipment 6,088 1,526 - Sale of interests in joint ventures/associates - - - Proceeds from boundary adjustment - - - Other 237 271 Payments: - Purchase of investments (87,258) (127,545) (79,636) Purchase of infrastructure, property, plant and equipment (49,615) (44,835) - Purchase of interests in joint ventures/associates - - - Other - -

(75,289)

Net cash provided from (or used in) investing activities (50,985) (41,859)

Cash flows from financing activities Receipts: 12,166 Borrowings and advances - 11,000 - Other - - Payments: (3,592) Borrowings and advances (3,376) (2,964) - Lease liabilities - - - Other - -

8,574

Net cash provided from (or used in) financing activities (3,376) 8,036

(17,438)

Net increase(/decrease) in cash and cash equivalents (691) (408)

119,913

Cash and cash equivalents at beginning of reporting period 13,488 13,896

102,475 Cash and cash equivalents at end of reporting period 16(a) 12,797 13,488

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

NSW Council Statement of Cash Flows for the year ended 30 June 2018


Commentary – Statement of Cash Flows

Reporting cash flows On a net basis AASB107(22),(23) 1. Cash flows arising from the following operating, investing or financing activities may be

reported on a net basis: (a) cash receipts and payments on behalf of customers when the cash flows reflect the

activities of the customer rather than those of the council (e.g. rents collected on behalf of, and paid over to, the owners of properties), and

(b) cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short (e.g. advances made for, and repayment of principal amounts relating to credit card customers).

From operating activities OLG 2. OLG requires all councils to use the direct method in reporting cash flows from operating

activities whereby major classes of gross cash receipts and gross cash payments are disclosed.

Expenditure on unrecognised assets to be classified as operating cash flows AASB107(16) 3. Cash flows can only be classified as arising from investing activities if they result in the

recognition of an asset in the Statement of Financial Position. Examples of expenditure that should be classified as operating cash flows on this basis are:

(a) expenditures on advertising or promotional activities, staff training and research and development, and

(b) transaction costs related to a business combination.

Budget figures OLG 4. OLG requires the presentation of original budget figures in the Statement of Cash Flows for

comparability. Changes in ownership interest in a subsidiary without loss of control AASB107(42A), (42B)

5. Cash flows arising from changes in ownership interest in a subsidiary that do not result in a loss of control shall be classified as cash flows from financing activities.

Goods and Services Tax (GST) Interpretation 1031(10) 6. Cash flows shall be included in the Statement of Cash Flows on a gross basis.

Interpretation1031(11) 7. The GST component of cash flows arising from investing and financing activities that is recoverable from, or payable to, the taxation authority shall be classified as operating cash flows and will be included in receipts from customers or payments to suppliers as appropriate.

Interest and dividends OLG 8. OLG requires the payment and/or receipt of interest and dividends to be classified as

operating cash flows.

NSW Council Notes to the financial statements 30 June 2017


NSW Council

Notes to the Financial Statements for the year ended 30 June 2018

Contents of the Notes to the Financial Statements Page

Note 1 Basis of preparation A-22

Note 2(a) Functions or activities A-27

Note 2(b) Components of functions or activities A-28

Note 3 Income from continuing operations A-30

Note 4 Expenses from continuing operations A-38

Note 5 Gain or loss from disposal of assets A-44

Note 6(a) Cash and cash equivalents A-45

Note 6(b) Investments A-47

Note 6(c) Restricted cash, cash equivalents and investments A-49

Note 7 Receivables A-51

Note 8 Inventories and other assets A-53

Note 9 Non-current assets classified as held for sale A-55

Note 10(a) Infrastructure, property, plant and equipment A-57

Note 11 Investment properties A-62

Note 12 Intangible assets A-64

Note 13 Payables and borrowings A-66

Note 14 Provisions A-72

Note 15 Accumulated surplus, revaluation reserves, changes in accounting policies, changes in accounting estimates and errors

A-77

Note 16 Statement of cashflow information A-81

Note 17 Interests in other entities A-83

Note 18 Commitments A-92

Note 19 Contingencies A-95

Note 20 Financial risk management A-97

Note 21 Material budget variations A-104

Note 22 Discontinued operation A-106

Note 23 Fair Value Measurement A-108

Note 24 Related Party Transactions A-112

Note 25 Events after the reporting period A-115

Note 26 Statement of developer contributions A-117

Note 27 Results by fund A-120

Note 28(a) Statement of performance measures – consolidated results A-123

Note 28(b) Statement of performance measures by fund A-124

Note 1 Basis of preparation



These financial statements were authorised for issue by Council on dd/mm/2018. Council has the power to amend and reissue these financial statements.

AASB101(119) AASB101(112)(a),(b)

The principal accounting policies adopted in the preparation of these [consolidated] (delete if not applicable) financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

AASB1054(7)-(9)

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Australian Accounting Interpretations, the Local Government Act 1993 (NSW) and Regulations, and the Local Government Code of Accounting Practice and Financial Reporting. NSW Council is a not-for-profit entity. The financial statements are presented in Australian dollars and are rounded to the nearest thousand dollar.

New and amended standards adopted by Council AASB108(28) Refer to Appendix H for an example note for new and amended standards adopted by Council during the

reporting period.

Early adoption of standards NSW Council has not elected to apply any pronouncements before their operative date in the annual

reporting period beginning 1 July 2017.

Historical cost convention AASB101(117)(a) These financial statements have been prepared under the historical cost convention, as modified by the

revaluation of certain financial assets and liabilities and certain classes of property, plant and equipment and investment property.

Significant accounting estimates and judgements AASB101(122),(125) The preparation of financial statements requires the use of certain critical accounting estimates. It also

requires management to exercise its judgement in the process of applying the council's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the council and that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions NSW Council makes estimates and assumptions concerning the future. The resulting accounting

estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include:

(a) estimated fair values of investment properties – refer note 11 (b) estimated fair values of infrastructure, property, plant and equipment – refer note 10 (c)

(d) estimated tip remediation provisions – refer note 14 employee benefit provisions – refer note 14.

Significant judgements in applying the council's accounting policies (e) Impairment of receivables Council has made a significant judgement about the impairment of a number of its

receivables – refer note 7. AASB101(110) Monies and property received by Council

(a) The Consolidated Fund LGA s.409(1) In accordance with the provisions of Section 409(1) of the Local Government Act 1993 (NSW), all money

and property received by Council is held in the council’s Consolidated Fund unless it is required to be held in the council’s Trust Fund.

Cash and other assets of the following entities have been included as part of the Consolidated Fund:

general purpose operations

water service

sewerage service

Memorial Hall Committee

Oval Management Committee

Park Management Committee.

LGA s.411 (b) The Trust Fund In accordance with the provisions of Section 411 of the Local Government Act 1993 (NSW) (as amended),

a separate and distinct Trust Fund is maintained to account for all money and property received by the council in trust which must be applied only for the purposes of, or in accordance with, the trusts relating to those monies. Trust monies and property subject to Council’s control have been included in these reports.



Note 1 Basis of preparation (continued)

The following Trust monies and properties are held by Council but not considered to be under the control of Council and therefore are excluded from these financial statements:

Provide details of any such monies / properties, delete if not applicable.

A separate statement of monies held in the Trust Fund is available for inspection at the council office by any person free of charge.

(c) County Councils Council is a member of the Holly Weeds County Council, a body corporate established under the Local

Government Act 1993 (NSW) to control weeds in the Cumberland Plains Region. Council is one of five constituent members and neither controls nor significantly influences the county council. Accordingly, the county council has not been consolidated in the financial statements.

Goods and Services Tax (GST)

Interpretation 1031(6),(7) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Interpretation 1031(8),(9) Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position.

Interpretation 1031(10),(11)

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities that are recoverable from, or payable to, the taxation authority are presented as operating cash flows.

AASB108(30)

New accounting standards and interpretations issued but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods. NSW Council's assessment of the impact of the new standards and interpretations relevant to them is set out in Appendix J.

[Note: this information is up-to-date at the date of writing – October 2017. However, councils are required to review the AASB website for standards issued between October 2017 and the date of approval of their financial statements for other relevant standards which have been issued. The standards and impacts described below should also be reviewed to ensure they are appropriate for Council.]



Commentary –Basis of preparation

Significant accounting policies 1. Significant accounting policies must be included in the financial statements, these have been

included with the relevant note and should provide the following information: AASB101(117) (a) (a) the measurement basis (or bases) used in preparing the financial statements, and

(b) (b) the other accounting policies used that are relevant to an understanding of the financial statements.

Whether to disclose an accounting policy 2. In deciding whether a particular accounting policy should or should not be disclosed, management

considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in the reported financial performance and financial position. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in Australian Accounting Standards. Some Australian Accounting Standards specifically require disclosure of particular accounting policies, including choices made by management between the different policies that the Standards allow. For example, AASB116 Property, Plant and Equipment requires disclosure of the measurement bases used for classes of property, plant and equipment. AASB123 Borrowing Costs requires disclosure of whether borrowing

costs are recognised immediately as an expense or capitalised as part of the cost of qualifying assets.

Going concern AASB101(25) 3.

When preparing financial statements, management shall make an assessment of a council’s ability to continue as a going concern. Financial statements shall be prepared on a going-concern basis unless management either intends to liquidate the council or to cease trading, or has no realistic alternative but to do so. When management, in making its assessment, is aware of material uncertainties related to events or conditions that may cast significant doubt upon the council’s ability to continue as a going concern, those uncertainties shall be disclosed. When the financial statements are not prepared on a going-concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the council is not regarded as a going concern.

Accrual basis of accounting AASB101(27) 4. A council shall prepare its financial statements, except for cash flow information, using the accrual

basis of accounting.

Consistency AASB101 (45) 5. Consistent accounting policies must be employed in the preparation and presentation of consolidated

financial statements. Adjustments to achieve consistency must be made where the accounting policies adopted by entities within the consolidated financial statements are dissimilar.

Significant judgements AASB101(122) 6. A council shall disclose, the judgements, apart from those involving estimations, that management

has made in the process of applying the council’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

AASB101(123) 7. In the process of applying the council’s accounting policies, management makes various judgements, apart from those involving estimations, that can significantly affect the amounts recognised in the financial statements. For example, management makes judgements in determining:

(a) whether financial assets are held-to-maturity investments (b) whether an asset should be classified as held-for-sale or an operation meets the definition of a

discontinued operation (c) whether a lease is an operating or finance lease.

8. When considering the investments in other entities held by council, the significant judgements and assumptions note should include those decisions made by a council in determining:

(a) that it has control of another entity (b) that it has joint control of an arrangement or significant influence over another entity (c) the type of joint arrangement (i.e. joint operation or joint venture) when the arrangement

has been structured through a separate vehicle.



Commentary –Basis of preparation (continued)

Some examples of disclosures needed by the council may include the fact that:

It does not control another entity even though it holds more than half of the voting rights of that entity.

It controls another entity even though it holds less than half of the voting rights of that entity.

It is an agent or a principal.

It does not have significant influence over another entity even though it holds 20% or more of the voting rights of that entity.

It has significant influence over another entity even though it holds less than 20% of the voting rights of that entity.

Sources of estimation uncertainty AASB101(125) 9. A council shall disclose in the notes information about the assumptions concerning the future, and

other sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next annual reporting period. In respect of those assets and liabilities, the notes shall include details of:

(a) their nature, and (b) their carrying amount as at the end of the reporting period.

AASB101(126) 10. Determining the carrying amounts of some assets and liabilities requires estimation of the effects of uncertain future events on those assets and liabilities at the end of the reporting period. For example, in the absence of recently observed market prices, future-oriented estimates are necessary to measure the recoverable amount of classes of property, plant and equipment, the effect of technological obsolescence on inventories, provisions subject to the future outcome of litigation in progress, and long-term employee benefit liabilities such as pension obligations. These estimates involve assumptions about such items as the risk adjustment to cash flows or discount rates used, future changes in salaries, and future changes in prices affecting other costs.

AASB101(127) 11. The assumptions and other sources of estimation uncertainty disclosed relate to the estimates that require management’s most difficult, subjective or complex judgements. As the number of variables and assumptions affecting the possible future resolution of the uncertainties increases, those judgements become more subjective and complex, and the potential for a consequential material adjustment to the carrying amounts of assets and liabilities normally increases accordingly.

AASB101(128) 12. The disclosures are not required for assets and liabilities with a significant risk that their carrying amounts might change materially within the next annual reporting period if, at the end of the reporting period, they are measured at fair value based on recently observed market prices. Such fair values might change materially within the next annual reporting period but these changes would not arise from assumptions or other sources of estimation uncertainty at the end of the reporting period.

AASB101(129) 13. The disclosures are presented in a manner that helps users of financial statements to understand the judgements management makes about the future, and about other sources of estimation uncertainty. The nature and extent of the information provided varies according to the nature of the assumption and other circumstances. Examples of the types of disclosures made are:

(a) the nature of the assumption or other estimation uncertainty (b) the sensitivity of carrying amounts to the methods, assumptions and estimates underlying

their calculation, including the reasons for the sensitivity

(c) the expected resolution of an uncertainty and the range of reasonably possible outcomes within the next annual reporting period in respect of the carrying amounts of the assets and liabilities affected

(d) an explanation of changes made to past assumptions concerning those assets and liabilities if the uncertainty remains unresolved.

AASB101(130) 14. It is not necessary to disclose budget information or forecasts in making the disclosures.

AASB101(131) 15. When it is impracticable to disclose the extent of the possible effects of an assumption or another source of estimation uncertainty at the end of the reporting period, the council discloses that it is reasonably possible, based on existing knowledge, that outcomes within the next annual reporting period that are different from assumptions could require a material adjustment to the carrying amount of the asset or liability affected. In all cases, the council discloses the nature and carrying amount of the specific asset or liability (or class of assets or liabilities) affected by the assumption.



Commentary –Basis of preparation (continued)

AASB101(132) 16. The disclosures of particular judgements that management has made in the process of applying the council’s accounting policies do not relate to the disclosures of sources of estimation uncertainty.

AASB101(133) 17. The disclosure of some assumptions is required by other Australian Accounting Standards. For example, AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires disclosure,

in specified circumstances, of major assumptions concerning future events affecting classes of provisions. AASB 7 Financial Instruments: Disclosures requires disclosure of significant assumptions applied in estimating fair values of financial assets and financial liabilities that are carried at fair value. AASB 116 Property, Plant and Equipment requires disclosure of significant assumptions applied in

estimating fair values of revalued items of property, plant and equipment.

Non-consolidation of Trust Funds

OLG 18. It should be rare that Councils have Trust funds which they do not believe that they control and therefore are not consolidating. Councils should carefully consider the control guidance in AASB 10 and Appendix H.

Australian Accounting Standard issued but not yet effective AASB108(30) 19. When a council has not applied a new Australian Accounting Standard that has been issued but is not

yet effective, the council shall disclose:

(a) this fact, and (b) known or reasonably estimable information relevant to assessing the possible impact that

application of the new Australian Accounting Standard will have on the council’s financial statements in the period of initial application.

AASB108(31) 20. In complying with Paragraph 33 above, a council shall consider disclosing:

(a) the title of the new Australian Accounting Standard (b) the nature of the impending change or changes in accounting policy (c) the date by which application of the Standard is required (d) the date at which it plans to apply the Standard initially, and (e) either: (i) a discussion of the impact that initial application of the Standard is expected to have on

the council’s financial statements; or (ii) if that impact is not known or reasonably estimable, a statement to that effect.

OLG 21. Unless otherwise specified the Office of Local Government has determined that new standards and interpretations are not to be adopted early by councils.



Note 2(a) Functions or activities

Functions/Activities Income, expenses and assets have been directly attributed to the following functions or activities. Details of those functions or activities are provided in Note 2(b).

Income from continuing operations

Expenses from continuing operations

Operating results from continuing operations

Grants included in

income from

continuing operations

Total assets held

(current and non-current)

Original unaudited

budget 2018 $’000

Actual 2018 $’000

Original unaudited

budget 2018 $’000

Actual 2018 $’000

Original unaudited

budget 2018 $’000

Actual 2018 $’000

Actual 2018 $’000

Actual 2018 $’000

Governance 136 1,342 1,112 (1,206) (1,112) 177 2,974 Administration 664 8,486 2,588 2,910 (1,924) 5,576 57,560 Public Order & Safety 4,493 6,972 3,761 4,402 732 2570 4,250 33,220 Health 351 414 802 1,117 (451) (703) 61,374 Environment 1,149 1,299 2,338 2,514 (1,189) (1,215) 37 1,142 Community Services & Education

7,121 6,883 8,226 8,141

(1,105) (1,258) 4,541 15,725 Housing & Community Amenities 705 1,955 4,182 6,070 (3,477) (4,115) 314 25,157 Water Supplies 27,182 27,953 12,599 12,328 14,583 15,625 14,276 256,582 Sewerage Services 23,181 23,952 10,598 10,328 12,583 13,624 12,275 254,581 Recreation & Culture 1,309 2,998 1,933 1,886 (624) 1,112 986 Fuel & Energy Agriculture 297 293 458 436 (161) (143) 3,207 Mining, Manufacturing & Construction (99) 63 6,235 5,961 (6,334) (5,898) 204 47,318 Transport & Communication 4,475 5,379 10,522 10,870 (6,047) (5,491) 989 263,550 Economic Affairs 10,809 10,154 11,558 13,454 (749) (3,300) 271 28,309

Total functions & activities 81,773 96,801 77,142 81,529 4,631 15,228 37,334 1,051,885

Shares of gains or losses in associates & joint ventures using the equity method - 7 - - - 7 - 362

General purpose income 32,559 30,574 - - 32,559 30,574 18,977 -

Net operating result for the year 114,332 127,382 77,142 81,529 37,190 45,853 56,311 1,052,247



Note 2(b) Components of functions or activities

Details of the functions or activities reported on in Note 2(a) are as follows:

Governance: includes costs relating to Council’s role as a component of democratic government, including

elections, councillors’ fees and expenses, subscriptions to local authority associations, meetings of council and policy-making committees, public disclosure (e.g. GIPA), and legislative compliance. Administration: includes corporate support and other support services, engineering works and any council

policy compliance. Public order and safety: includes Council’s fire and emergency services levy, fire protection, emergency

services, beach control, enforcement of regulations and animal control. Health: includes immunisation, food control, health centres etc. Environment: includes noxious plants and insect/vermin control; other environmental protection; solid waste

management, including domestic waste; other waste management; other sanitation; and garbage, street cleaning, drainage and stormwater management. Community services and education: includes administration and education; social protection (welfare);

migrant, Aboriginal and other community services and administration (excluding accommodation – as it is covered under ‘housing and community amenities’); youth services; aged and disabled persons services; children’s services, including family day care; child care; and other family and child services.

Housing and community amenities: includes public cemeteries; public conveniences; street lighting; town

planning; other community amenities, including housing development and accommodation for families and children, aged persons, disabled persons, migrants and Indigenous persons. Water: water services. Sewerage: sewer services. Recreation and culture: includes public libraries; museums; art galleries; community centres and halls,

including public halls and performing arts venues; sporting grounds and venues; swimming pools; parks; gardens; lakes; and other sporting, recreational and cultural services. Fuel and energy: includes gas supplies. Agriculture: includes the administration of agricultural services; supervision and regulation of the agricultural

industry; operation of flood control and irrigation systems; and operation of support services to farmers, including vet services, pest control services, crop inspection, and crop grading services. Mining, manufacturing and construction: includes building control, quarries and pits, mineral resources,

and abattoirs. Transport and communication (urban local, urban regional): includes sealed and unsealed roads, bridges,

footpaths, parking areas, and aerodromes. Economic affairs: includes camping areas and caravan parks; tourism and area promotion; industrial

development promotion; sale yards and markets; real estate development; commercial nurseries; and other business undertakings.

NSW Council

Notes to the financial statements 30 June 2018


Commentary – Functions or activities

AASB1052.11 1. For each broad function or activity, disclose the nature, objectives and carrying amount of assets attributable to each function or activity and the income (with separate disclosure of grants) and expenses for the reporting period that are attributable to each function or activity. The information is to be aggregated and reconciled back to the Income Statement, Statement of Financial Position, and Grant Note (3e).

OLG 2. OLG recommends that functions or activities be presented in Council’s own Integrated Planning and Reporting or Delivery Program format in lieu of the prescribed format.

3. For the purposes of financial reporting under this Code, costs are to be allocated to functions and activities when they can be attributed on a reliable basis.

4. Council’s overhead expenses that cannot be allocated to functions and activities on a reliable basis must be kept in the ‘Administration’ function.

5. Reliably attributable overheads allocated to capital projects form part of the cost of the asset.

6.. The definition of general purpose income for the purposes of disclosure in Note 2(a) is the aggregation of the following income items disclosed in Note 3: ordinary rates (does not include special purpose rates); general purpose untied grants; interest on overdue rates, on annual charges, on internally restricted assets, and on general council cash and investments; and ex gratia payments.

NSW Council



Note 3 Income from continuing operations

Actual 2018

$’000

Actual 2017 $’000

(a) Rates and annual charges

Ordinary rates Residential 18,307 17,465 Farmland 641 621 Business 6,823 6,512 Mining - -

Total ordinary rates 25,771 24,598

Special rates Water supply - - Sewerage services - - Environmental - - Infrastructure - - Drainage - - Town improvement 594 573 Parking - - Main street - - Tourism - - Other (specify if material) - -

Total special rates 594 573

Annual charges (pursuant to s496, 496A, 496B, 501 & 611) Domestic waste management services 5,553 5,143 Water supply 3,389 3,296 Sewerage services - - Drainage - - Stormwater management services charge - - Waste management services (not domestic) - - Coastal protection - - Section 611 charges - - Waste levy - - Other (specify if material) - -

Total annual charges 8,942 8,439

Total rates and annual charges 35,307 33,610

5. Council has used 20XX valuations provided by the NSW Valuer General in calculating its rates.

Accounting policy for rates and charges

Rates, annual charges, grants and contributions (including developer contributions) are recognised as revenue when the council obtains control over the assets comprising these receipts. Developer contributions may only be expended for the purposes for which the contributions were required, but the council may apply contributions according to the priorities established in work schedules.

Control over assets acquired from rates and annual charges is obtained at the commencement of the rating year as it is an enforceable debt linked to the rateable property or, where earlier, upon receipt of the rates.

NSW Council



Note 3 Income from continuing operations (continued)

Actual 2018

$’000

Actual 2017 $’000

(b) User charges and fees

User charges - - Domestic waste management services - - Water supply services 7,006 6,097 Sewerage services 7,050 6,388 Drainage services - - Waste management services (not domestic) 2,008 1,963 Other (specify if material) 386 378

Total user charges 16,450 14,826

Fees

Private works 738 317 RMS works (state roads not controlled by council) - - Building services – other 458 399 Planning and building – regulatory 294 248 Inspection fees 479 550 s603 certificates 67 63 Registration fees 255 - Parking fees 440 478 Caravan parks 673 702 Leisure centre 913 768 Child care 1,846 1,983 Aerodrome 841 1,026 Aged care 116 97 Quarry - 5 Other (specify if material) 1,018 1,409

Total fees 8,138 8,045

Total user charges and fees 24,588 22,871

Accounting policy for user charges and fees

User charges and fees are recognised as revenue when the service has been provided.

(c) Interest and Investment revenue

Actual 2018

$’000

Actual 2017 $’000

Interest – Overdue rates and charges 298 313 – Cash and investments 4,482 5,270 – Other - - Fair value adjustments – Investments 811 764 – Other - 573 Gain on sale of available-for-sale investments - - Premiums recognised on financial instrument transactions – Interest-free loan from state government - - Amortisation of discounts and premiums on financial instrument transactions – Interest-free loan provided - - Other (specify if material) - -

Total interest and investment revenue (losses)) 5,591 6,920

Accounting policy for interest and investment revenue

Interest income is recognised using the effective interest rate at the date that interest is earned.

NSW Council



Actual 2018

$’000

Actual 2017 $’000

(d) Other revenues

Reversal of revaluation decrements previously expensed - - Parking fines 1,618 1,156 Other fines 336 309 Recycling income (non-domestic) 99 63 Rental income: – Investment property - - – Other property 206 499 Insurance claims 217 232 Commissions and agency fees 112 88 Computer bureau income - - Other (specify if material) 1,834 1,769

Total other revenue 4,422 4,116

Accounting policy for other revenue

Council recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the council, and specific criteria have been met for each of the council’s activities as described below. Council bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Parking fees and fines are recognised as revenue when the service has been provided, or when the penalty has been applied, whichever occurs first.

[Councils should ensure that each material other revenue stream has an accounting policy, for example: - Rental income is accounted for on a straight-line basis over the lease term. - Miscellaneous sales are recognised when physical possession has transferred to the customer which is

deemed to be the point of transfer of risks and rewards.] Other revenue is recorded when the payment is due, the value of the payment is notified, or the payment is

received, whichever occurs first.

NSW Council




Operating Capital

Actual 2018

$’000

Actual 2017 $’000

Actual 2018

$’000

Actual 2017 $’000

(e) Grants

General purpose (untied) Financial assistance 2,238 4,498 - - Pensioners’ rate subsidies: – General 319 319 - - Special purpose (tied) Pensioners’ rate subsidies: – Water 129 127 - - – Sewer 128 126 - - – DWM 66 63 - - Water supplies - - 26,294 - Sewerage services 1,794 1,712 93 - Community centres 61 123 191 60 Street lighting 117 117 - - Transport (Flood Works, Road to Recovery) 113 112 - - NSW Rural Fire Services 208 86 - - Other (specify if material) 3,686 4,762 4,394 185

Total grants 8,859 12,045 30,972 245

Comprising: – Commonwealth funding 2,845 3,437 29,493 245 – State funding 5,865 8,462 733 - – Other funding 149 146 746 -

8,859 12,045 30,972 245

Accounting policy for grants

Control over contributions is normally obtained upon their receipt (or acquittal) and is valued at the fair value

of the contributed asset at the date of transfer.

NSW Council




Operating Capital

Actual 2018

$’000

Actual 2017 $’000

Actual 2018

$’000

Actual 2017 $’000

(f) Contributions

Developer contributions (s93 & s94 – EP&A Act, s64 of the LGA): Cash S 93F – contributions using planning agreements - - - - S 94 – contributions towards amenities/services 160 - 7,032 6,793 S 94A – fixed development consent levies - - - - S 64 – water supply contributions - - 3,685 4,832 S 64 – sewerage service contributions - - 3,650 2,900 S 64 – stormwater contributions - - - - Other developer contributions (specify if material) - - - - Non-cash - - - - Other developer contributions (specify if material - - - -

Total developer contributions 160 14,367 14,525

Other contributions:

Cash - - - - Dedications - 41 - - Kerb and gutter - - - 153 Paving 1,274 1,263 - - RMS contributions (regional roads, block grant) - - - - Other (specify if material) 582 107 97 155 Non-cash - - - - Subdivision Dedications (other than by S94) - - - - Other (specify if material) - - - -

Total other contributions 1,856 1,411 97 308

Total contributions 2,016 1,411 14,464 14,833

Total grants and contributions 10,875 13,456 45,436 15,078

NSW Council




Actual 2018

$’000

Actual 2017 $’000

(g) Unspent grants and contributions

Certain grants and contributions are obtained by Council on the condition they be spent in a specified manner.

Grants and contributions recognised in the current period that have not

been spent. 17,396 11,454 Grants and contributions received for the provision of goods and services

in a future period 2,157 1,520 Grants and contributions recognised in previous reporting periods that

have been spent in the current reporting period. (5,696) (8,635)

Where grants or contributions recognised as revenues during the financial year were obtained on condition

that they be expended in a particular manner, or used over a particular period, and those conditions were un-discharged at reporting date, the unused grant or contribution is disclosed above.

A liability is recognised in respect of revenue that is reciprocal in nature to the extent that the requisite service has not been provided at reporting date.

NSW Council



Commentary – Income

General requirement

Income AASB118 1. 1

. The definition of income encompasses revenue and gains. Revenue arises in the course of a council’s ordinary activities and is referred to by a variety of names, including rates, fees, interest, dividends and rent. Gains represent other items that meet the definition of income and are often reported net of related expenses.

AASB118(35)(b) 2. 2. Disclosure is required of the amount of each significant category of revenue recognised during the period and Notes 3(a) to 3(f) have provided an appropriate breakdown for a council.

3. If there are any individually material items that are losses, then they should be shown as expenses rather than being netted off income.

Grants and contributions AASB1004 4. 4

. Separate disclosure is required of the nature and amount of grants and contributions recognised as revenue where the related expenditure has not been incurred; the grants and contributions that relate to a future reporting period expenditure or services; or the grants and contributions that relate to future reporting periods for the purpose of establishing a rate. Grants and contributions recognised as revenue in prior reporting periods that were utilised in the current reporting period must also be disclosed. Refer note 3(g).

Revenue 5. 5

. Revenue should be measured at the fair value of the consideration received or receivable.

6. 6. Revenue arising from the sale of goods should be recognised when a council transfers the significant risks and rewards of ownership and the collectability of the related receivable is reasonably assured.

7. 7. Revenue from the rendering of services should be recognised by reference to the state of completion of the transaction at the Statement of Financial Position date. Revenue is recognised in the accounting periods in which the services are rendered under the percentage-of-completion method. The recognition of revenue on this basis provides useful information on the extent of service activity and performance during a period.

8. 8. Interest income is recognised using the effective interest rate method. Dividends are recognised when the shareholder’s right to receive payment is established.

9. 9. When the outcome of a service contract cannot be estimated reliably, revenue should be recognised only to the extent of costs incurred that it is probable will be recovered; contract costs should be recognised as an expense as incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss should be recognised as an expense immediately.

10. If rental income for Council is material then Council should refer to the commentary in Note 18 and include a lessor rental commitment note.

OLG 11. 10.

LIRS subsidy payments are revenue. Revenue is recognised periodically as and when loan payments are made and invoices are raised. LIRS subsidy payments are required to be reported in Note 3 Section (e) ‘Grants – Special Purpose’.

12. 11.

Revenue raised from Rates (ordinary and special) and Annual Charges shall be disclosed in total in the Income Statement and appear separately in the notes to the financial statements.

13. 12.

Pensioner rate rebates shall be netted off against revenue raised and disclosed in Note 3 as part of rates and annual charges.

NSW Council



Commentary – Income (continued) OLG

Ordinary rates – Note 3(a) 14. 1

3.

Section 493 of the LGA 1993 states that there are 4 categories of the ordinary rate. They are:

farmland residential mining business.

15. 14.

These categories may, at Council’s discretion, be divided into sub-categories in accordance with Section 529 of the Act. Examples of ordinary rates would include farmland ordinary, residential ordinary, business (NSW Council city centre), and mining (gold).

16. 15.

The process of categorisation of land and the application of ordinary rating is described in Section 6 of the Council Rating and Revenue Raising Manual (Rates Manual). For the purpose of financial reporting, revenue raised from the four categories of ordinary rates must be disclosed as per Note 3(a) of this Code.

17. 16.

Councils should include the relevant date of the valuation specific to them for determination of rates.

User Charges and Fees – Note 3(b)

Domestic Waste Management (DWM)

18. 17 An annual charge for DWM services must be made for each parcel of rateable land for which the service is available.

19. 18 All revenues applicable to the DWM service must be restricted to the DWM activity.

20. 19.

All revenues and expenditures applicable to the DWM service must be accounted for as a distinct activity from any trade waste or other garbage activity.

21. 20.

Any surplus or deficit derived as a result of providing the DWM service for a period must be maintained in the DWM activity, and in the case of a surplus the cash component held as a restricted asset.

Fire and Emergency Services Levy (FESL) implementation funding

22. 21 Revenue received from Treasury for costs associated with the categorisation of land, rating systems configurations etc. will be reported as ‘Fees’ ‘Other’ in Note 3 Section (b) User charges and fees.

Interest and investment losses – Note 3(c) 23. 2

2.

Any individually material impairment losses should be shown as an expense in Note 4(d), rather than being netted against income.

24. Include interest from special rates.

Contributions and grants – Notes 3(e) and 3(f) 25. 2

3.

Contributions are defined as non-reciprocal transfers to the local government in the sense that it is not required to give value in exchange for contributions directly to the contributor. Examples include grants, donations and regulatory fees. Other examples are development contributions and contributions to works by adjoining owners.

26. 24.

Government grants can either be monetary or otherwise, and may be tied or untied. Tied grants are required to be used for a specific purpose such as construction of a road or child-care centre. Untied grants may be applied for any purpose council considers appropriate.

Grants and contributions – operating or capital? 27. 2

5 Grants and contributions are to be classified as operating or capital depending on the purpose for which they were received and not on the purpose for which they were spent. General purpose grants and contributions are all classified as operating regardless of how they are spent.

NSW Council



Note 4 Expenses from continuing operations

Actual 2018

$’000

Actual 2017 $’000

(a) Employee benefits and on-costs

Salaries and wages 21,041 19,759 Employee leave entitlements 3,088 3,552 Superannuation 2,748 2,962 Workers’ Compensation Insurance 663 1,472 FBT 122 110 Payroll tax 191 189 Other (specify if material) 393 - Less: capitalised costs (-) (-)

Total employee costs expensed 28,246 28,044

Accounting policy for employee benefits and on-costs

Employee benefit expenses are recorded when the service has been provided by the employee.

Retirement benefit obligations

All employees of the council are entitled to benefits on retirement, disability or death. Council contributes to various defined benefit plans and defined contribution plans on behalf of its employees.

AASB119(44) AASB119(54),(64)

Superannuation plans

Contributions to defined contribution plans are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. Council participates in a Defined Benefit Plan under the Local Government Superannuation Scheme, however, when sufficient information to account for the plan as a defined benefit is not available and therefore Council accounts for its obligations to defined benefit plans on the same basis as its obligations to defined contribution plans, i.e. as an expense when it becomes payable – refer to Note 19 for more information.

(b) Borrowing costs Interest on overdrafts 4 3 Interest on loans 1,248 1,232 Interest on advances - - Charges on finance leases - - Other debts (specify if material) - - Discounts recognised on financial instrument transactions: – Interest-free loan to Sporting Club - - Amortisation of discounts and premiums: – Remediation (tip) 15 (3) – Interest-free loan received - - – Other (specify) - - Less: capitalised costs (-) (-)

Total borrowing costs expensed 1,267 1,232

AASB123(8) Accounting policy for borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

NSW Council



Note 4 Expenses from continuing operations (continued)

Actual 2018

$’000

Actual 2017 $’000

(c) Materials and contracts Raw materials and consumables 29,311 23,121 Contractor and consultancy costs (specify material contracts/

consultancies) - - Remuneration of auditors 62 55 Legal fees: – Planning and development 107 71 – Other 244 270 Operating leases: – Buildings - - – Computers - - – Motor vehicles - - – Other 177 460 Other (specify if material) - - Less: capitalised costs (-) (-)

Total materials and contracts 29,901 23,977

AASB117(33) Interpretation 115(5)

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are not transferred to Council as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the Income Statement on a straight-line basis over the period of the lease.

Auditors’ remuneration During the year the following fees were paid or payable for services

provided by the Auditor-General: (i) Audit and other assurance services Audit and review of financial statements 62 Other assurance services - -

Total remuneration for audit and other assurance services 62 - (ii) Other non-assurance services (specify type of non-assurance services) - -

- -

Total fees paid or payable to the Auditor-General 62 -

AASB1054(10)(b),(11) During the year the following fees were paid or payable for services

provided by other audit firms (i) Audit and other assurance services Audit and review of financial statements - 55 Other assurance services - -

Total remuneration for audit and other assurance services - 55 (ii) Taxation services GST advice - -

Total remuneration for taxation services - - (iii) Other non-assurance services - - (specify type of non-assurance services) - -

- -

Total fees paid or payable to other audit firms - 55

Total remuneration of auditors 62 55

NSW Council




Actual

2018 $’000

Actual 2017 $’000

(d) Depreciation amortisation and

impairment

Depreciation and amortisation Intangibles – software - - Plant and equipment 1,423 1,438 Office equipment 178 153 Furniture and fittings 22 69 Leased plant and equipment Depreciable land improvements 39 32 Infrastructure – Buildings 3,133 731 – Other structures 790 601 – Roads, bridges and footpaths, other road assets 2,786 2,433 – Stormwater drainage 1,197 1,186 – Water supply network 2,739 2,695 – Sewerage network 2,645 2,619 – Swimming pools - - – Other open space/recreational assets (specify if

material)

- -

– Other infrastructure - - Other assets: – Heritage collections - - – Library books 96 95 – Other (specify if material) - - Tip asset - - Quarry asset - - Other remediation assets (specify if material) - -

Total depreciation and amortisation costs 15,048 12,052

Impairment of IPPE Infrastructure Assets – Buildings 306 - – Other structures - - – Roads, bridges and footpaths, other road assets - - – Water supply network - - – Sewerage network - - – Stormwater drainage - - – Open space/recreational assets - - – Other infrastructure - - – Other - -

Total impairment costs (IPPE) 306 -

Impairment of Investments –Investments other than available for sale - - –Available for sale investments - -

Total impairment costs (Investments) - -

Less: impairment reversals/impairments offset against

revaluation reserve)

(306) (-)

Total depreciation, amortisation and impairment 15,048 12,052

Accounting policy for depreciation, amortisation and impairment expenses

Depreciation and amortisation

Depreciation and amortisation are calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives. Useful lives are included in Note 10 for IPPE assets and Note 12 for intangible assets.

NSW Council



Impairment of financial assets AASB139(58),(59) Council assesses at the end of each reporting period whether there is objective evidence that a financial

asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Accounting policy for other expenses

Other expenses are recorded on an accruals basis as the Council receives the goods or services.


Impairment of non-financial assets AASB136(9),(10) Intangible assets that have an indefinite useful life, or are not yet available for use, are tested annually for

impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Impairment losses for revalued assets are firstly offset against the amount in the revaluation surplus for the class of asset, with only the excess to be recognised in the Income Statement.

Actual 2018 $’000

Actual 2017 $’000

(e) Other expenses

Cost of sales - - Bad and doubtful debts - - Mayoral fee 38 37 Councillors’ fees 210 201 Councillors’ (incl. Mayor) expenses 118 86 Insurance 1,436 1,345 Street lighting 807 806 Electricity 2,744 2,913 Telephone 355 357 Contributions and donations 189 320 Planning levy 1,072 991 Waste levy - - Emergency services levy (includes FRNSW, SES &

RFS levies) - - Other levies - - Other (specify if material) 98 25

Total other expenses from continuing operations 7,067 7,081

NSW Council



Commentary – Expenses

Material items AASB101(86) 1. When items of income and expense are material, their nature and amount shall be disclosed

separately, either on the face of the Income Statement or in the notes. Circumstances that would give rise to the separate disclosure of items of income and expense include:

(a) write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs

(b) restructurings of the activities of a council and reversals of any provisions for the costs of restructuring

(c) disposals of items of property, plant and equipment (d) disposals of investments (e) discontinued operations (f) litigation settlements (g) other reversals of provisions.

Borrowing costs AASB123(4),(5)(a)-(e) 2. For the purposes of AASB123, borrowing costs (or finance costs) are interest and other costs

incurred by a council in connection with the borrowing of funds. Interest expense is recognised on an accrual basis. Where interest expense includes a discount

or premium arising on the issue of a debt instrument, the discount or premium is amortised using the effective interest rate method. The effective interest rate is the rate that discounts the estimated future cash payments through the expected life of the debt instrument to the carrying amount of the debt instrument.

Borrowing costs are expensed, unless they relate to the acquisition, construction or production of a qualifying asset (i.e. an asset that take a substantial period of time to get ready for its intended use).

OLG OLG has determined that borrowing costs are to be capitalised in respect to the acquisition, production or construction of a qualifying asset.

The accounting policy for borrowing costs must be followed consistently for all qualifying assets. It is not acceptable to capitalise borrowing costs in relation to some qualifying assets and expense them in relation to others.

Capitalisation commences when expenditures and borrowings are being incurred for the asset, and when activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation should be suspended when development of the asset is interrupted for extended periods. It should cease when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

AASB118 Expenses 3. The definition of expenses encompasses losses as well as those expenses that arise in the

course of the council’s ordinary activities.

Expenses that arise in the course of the council’s ordinary activities include employee benefit expenses, amortisation and depreciation. They usually take the form of an outflow or depletion of assets such as cash and cash equivalents; inventory; and infrastructure, property, plant and equipment.

Losses represent other items that meet the definition of expenses.

NSW Council



Commentary – Expenses (continued)

Recognition Recognition of expenses depends on whether: 4. (a) a decrease in future economic benefits related to an asset that can be measured reliably

has arisen; and (b) an increase of a liability that can be measured reliably has arisen.

Expenses should be disclosed on the face of the Income Statement by nature.

Audit remuneration disclosure requirements

AASB1054(10) 5. Councils must disclose audit fees separately for:

(a) the audit of the financial statements, and (b) all other services performed during the period.

OLG Materials and contracts 6. Councils are encouraged to present materials and contracts in a format that best represents their

own activities. Even though insurance, street lighting, electricity, heating and telephones may be considered contracts, they are to be shown as ‘Other’ expenses. Major contracts would typically include garbage and recycling contracts, road maintenance, parks maintenance, computer support, and venue management.

Councillors expenses 7. Councillors’ expenses are to be reported in accordance with clause 217(1)(a1) of the Local

Government (General) Regulation 2005. The total amount disclosed in this note should equal the total amount disclosed within Council’s annual report.

Fire and Emergency Services Levy (FESL) implementation expenditure 8. Expenses incurred for the categorisation of land, rating systems configurations etc. will be

reported as ‘Other expenses’ ‘Other’ in Note 4 Section (e).

NSW Council



Note 5 Gain or loss from disposal of assets

Note Actual 2018

$’000

Actual 2017 $’000

Gain (or loss) on disposal of infrastructure, property, plant and equipment

10

Proceeds from disposal 6,088 1,526 Less: carrying amount of assets sold (4,932) (712)

Gain (or loss) on disposal 1,156 814

Gain (or loss) on disposal of investment property 11 Proceeds from disposal - - Less: carrying value of investment property - -

Gain (or loss) on disposal - -

Gain (or loss) on disposal of real estate held for sale 8 Proceeds from disposal - - Less: carrying value of real estate held for sale - -


Gain (or loss) on disposal of financial assets 6 Proceeds from disposal 79,563 128,724 Less: carrying value of financial assets (79,563) (128,724)


Net gain (or loss) from disposal of assets 1,156 814

Accounting policy for disposal of assets

The gain or loss on sale of an asset is determined when control of the asset has irrevocably passed to the buyer and the asset is derecognised.

NSW Council



Note 6(a) Cash and cash equivalents

Actual 2018

Actual 2017

$'000 $'000 Cash at bank and on hand 1,540 2,398 Deposits at call 11,257 11,090

12,797 13,488

Accounting policy for cash and cash equivalents

AASB107(6),(8),(46) For Statement of Cash Flow presentation purposes, cash and cash equivalents include: cash on hand; deposits held at call with financial institutions; other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value; and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Statement of Financial Position.

NSW Council



Commentary – Current assets, cash and cash equivalents

Definitions of cash and cash equivalents AASB107(6) 1. Cash is cash on hand and demand deposits. Cash equivalents are short-term, highly liquid

investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

2. This includes cash on hand, cash at bank, and at call and term deposits maturing within three months from the date of acquisition.

Note: A term deposit with a term of greater than three months from the date of acquisition is classified as a “held-to-maturity asset”, not as a “cash and cash equivalent asset” in the Statement of Financial Position.

3. At each reporting date, councils should consider whether a term deposit meets the definition of ‘cash and cash equivalents’ for the purpose of the Statement of Cash Flows, and classify it as such (although the Statement of Financial Position classification would not change).

NSW Council



Accounting policy for investments

Classification

AASB139(45),(60) Council classifies its investments in the following categories: financial assets at fair value through profit or loss; held-to-maturity investments; and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

AASB101(110) (a) Financial assets at fair value through profit or loss AASB101(57),(59) AASB139(9),(45)

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Assets in this category are held at fair value with changes in value taken through profit or loss at each reporting period.

6. AASB139(9) (b) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that Council’s management has the positive intention and ability to hold to maturity. Assets in this category are measured at amortised cost.

7. AASB7(21)

8. AASB7(B5)(d) ASB139(9) AASB7(21),(B5)(b)

(c) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term. Assets in this category are held at fair value with changes in fair value taken to other comprehensive income.

Recognition and de-recognition AASB139(38),(43) AASB7(21),(B5)(c)

Regular purchases and sales of investments are recognised on trade date: the date on which Council commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the Income Statement. Investments are derecognised when the rights to receive cash flows have expired or have been transferred, and Council has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the Income Statement as gains and losses from investment securities.

9. Impairment of available for sale investments

In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

Note 6(b) Investments

The following financial assets are held as investments:

Actual 2018

Actual 2017

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Financial assets at fair value through: profit and loss – held for trading 4,991 15,737

7,040 11,515 Held-to-maturity investments 56,250 24,000 50,167 23,750 Available for sale financial assets - - - - Total 61,241 39,737 57,207 35,265 Financial assets at fair value through

Profit and loss – held for trading:

– Capital Projected Investments 991 1,709 2,031 957 – Non Convertible Debentures/

Floating Rate Notes 4,000 14,028

5,009 9,028 – Other long-term financial assets - - - 1,530 – Listed equity securities - - - - 4,991 15,737 7,040 11,515 Held-to-maturity investments: – Term deposits 56,250 24,000 50,167 23,750 56,250 24,000 50,167 23,750 Available for sale financial assets: – Equity-linked notes - - - - - -

NSW Council



Commentary – Financial assets - Investments

AASB139 Financial assets 1. A financial asset is: cash; a contractual right to receive cash or another financial asset; a

contractual right to exchange financial instruments with another entity; or an equity instrument of another entity.

2. There are four categories of financial asset: (i) at fair value through profit or loss: all financial assets acquired for the purpose of generating

a profit from short-term fluctuations in price, or part of a portfolio with a pattern of short-term profit taking

(ii) held-to-maturity: non-derivative financial assets with fixed or determinable payments and maturity that a council has the positive intention and ability to hold to maturity (conditions for this category are tightly defined in AASB139)

(iii) loans and receivables: non-derivative financial assets with fixed or determinable payments that are not quoted in an active market – covered in note 7

(iv) available-for-sale: the remainder; or those financial assets designated in this category by management.

AASB139 Recognition and initial measurement 3. All financial assets should be measured initially at fair value, being the fair value of the

consideration given, including transaction costs (such as advisers’ and agents’ fees and commissions, duties and levies by regulatory agencies). Transaction costs are recognised in the Income Statement when the financial asset is carried at fair value through profit or loss.

AASB139 Subsequent measurement 4. The classification of financial assets drives their subsequent measurement, which is as follows: (i) at fair value through profit or loss: carried at fair value with gains and losses reported in

income. The only exemption to the use of fair value is in rare cases in which the fair value of such an equity instrument cannot be measured reliably, in which case they are carried at cost less impairment

(ii) held-to-maturity: carried at amortised cost unless designated at fair value (iii) loans and receivables: carried at amortised cost unless designated at fair value (iv) available-for-sale: carried at fair value with gains and losses reported in equity. The only

exemption to the use of fair value is as described in the first point.

AASB139 Tainting of held-to-maturity financial assets 5. Special provisions apply where a council sells or reclassifies ‘more than an insignificant’ amount

of held-to-maturity investments, i.e. they are not permitted to classify assets as held-to-maturity for the next two reporting periods.

AASB136 Impairment of financial assets 6. Where there are indicators of impairment, all financial assets, except those carried at fair value

through profit or loss, should be subject to an impairment test. The indicators should provide objective evidence of impairment as a result of a past event that occurred subsequent to the initial recognition of the asset. Expected losses as a result of future events are not recognised, no matter how likely.

7. Indicators of impairment of debt instruments include significant financial difficulty of the issuer, high probability of bankruptcy, granting of concessions to the issuer, the disappearance of an active market because of financial difficulties, breach of contract, and adverse change in observable data (for example, an increase in unemployment or a crash of the property market).

8. Indicators of impairment of equity instruments include significant changes with an adverse effect on general economic factors (such as technological changes), or significant or prolonged declines in the fair value below its cost. As equity represents a residual interest in a council’s net assets, equity instruments are likely to be impaired before debt securities.

9. A council shall disclose: AASB7(20)(e) (a) the amount of any impairment loss recognised in profit and loss separately for each

significant class of financial asset AASB7(20)(d) (b) the amount of interest income accrued on impaired financial assets, in accordance with

paragraph AG93 of AASB139 AASB7(37)(b) (c) an analysis of financial assets that are individually determined to be impaired, and AASB7(37)(c) (d) a description of collateral held by the council as security and other credit enhancements

and, unless impracticable, an estimate of their fair value.

NSW Council



Note 6(c) Restricted cash, cash equivalents and investments

Actual 2018

Actual 2017

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Total cash, cash equivalents and investments 74,038 39,737 70,695 35,265

External restrictions 47,030 39,737 35,267 35,265 Internal restrictions 16,739 - 22,659 - Unrestricted 10,269 - 12,769 -

74,038 39,737 70,695 35,265

Notes

Opening balance

$’000

Closing balance

$’000 External restrictions Included in liabilities 2,230 607 General fund

- Domestic waste management - - - Stormwater management 815 781 - RMS contributions 121 - - Other (specify if material) 16,866 22,950

Water fund 19,424 25,861 Sewer fund 31,076 36,568

Total external restrictions 70,532 86,767

Internal restrictions Plant replacement 506 540 Infrastructure replacement 709 612 Employee leave entitlements 2,815 2,636 Other 18,629 12,951

Total internal restrictions 22,659 16,739

Total restrictions 93,191 103,506

10.

11.

12.

13.

14.

15.

16.

NSW Council



Commentary – Restrictions of cash, cash equivalents and investments

AASB107 1.

An entity shall disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the entity that are not available for use by the group.

OLG 2. Internal restrictions shall include those assets the uses of which are only restricted by a resolution of Council. These assets are disclosed with details of the nature, of the internal restrictions.

NSW Council



Note 7 Receivables

Actual 2018

Actual 2017

Purpose

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Rates and annual charges 2,798 - 2,459 - Interest and extra charges 332 - 317 - Other (specify if material) 8,702 81 7,124 269 Total 11,832 81 9,900 269 Less: provision for impairment: – Rates and annual charges - - – Interest and extra charges - - - - – User charges and fees - - - - – Other (specify if material) (137) - (172) - 11,695 81 9,728 269

Restricted/Unrestricted receivables Externally restricted receivables 3,092 - 3,219 - Unrestricted receivables 8,603 81 6,509 269 Total receivables 11,695 81 9,728 269 Impairment AASB139(63)

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss.

Collectability of receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of receivables) is used when there is objective evidence that Council will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the receivable is impaired. When a receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the Income Statement.

NSW Council



Commentary – Receivables

OLG Unknown owners and postponed rates 1. As Council has little control over amounts due from unknown owners or rates postponed under the

Act, and it would not appear possible to reliably measure the proportion of rates due from unknown owners which will subsequently be collected, they are not to be included as revenue or assets in the financial statements.

2. The amount due from unknown owners and postponed rates should be deducted from the total rates levied and only the net amount recognised as revenue in the Income Statement. At the same time, contra asset accounts, ‘Unknown Owners Suspense’ and ‘Postponed Rates Suspense’, should be created. Only the net receivables for rates will be recognised in the Statement of Financial Position. If the rates are collected, the entries should be reversed, and if the rates are subsequently written off the debits should be made against the contra asset accounts.

AASB 7 3. If impairment of receivables is material, then Councils should include a reconciliation of bad debt provisions for the current and comparative periods.

NSW Council



Note 8 Inventories and other assets

Actual 2018

Actual 2017

Current

$’000 Non-current

$’000 Current

$’000 Non-current

$’000 (a) Inventories At cost: Real estate (refer to (i) below) 1,389 5,746 5,709 2,810 Stores, materials and/or trading stock 628 - 623 - Other (specify if material) - - - -

17. At NRV: 18. Real estate (refer to (i) below) - - - - 19. Stores, materials and/or trading stock - - - 20. Other (specify if material) - - - -

Total inventories 2,017 5,746 6,332 2,810

i. Real estate development

Residential 525 1,240 - - Industrial/commercial 864 4,506 5,709 2,810 Other properties - - - -

Total real estate held for sale 1,389 5,746 5,709 2,810

Represented by: Acquisition costs 513 2,397 859 2,810 Development costs 876 3,349 4,850 - Borrowing costs - - - - Other holding costs - - - - Other properties – book value - - - - Less: provision for under-recovery - - - -

Total real estate held for sale 1,389 5,746 5,709 2,810

ii. Inventories not expected to be

realised within the next 12 months - -

- 300

(b) Total other assets 29 - 846 -

External Restricted/Unrestricted inventories and other assets Externally restricted 475 - 667 - Unrestricted 1,571 5,746 6,511 2,810

Total inventories and other assets 2,046 5,746 7,178 2,810

Accounting policy

Raw materials and stores, work in progress and finished goods AASB102(9),(10),(25), (36)(a) Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net

realisable value. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Inventory held for distribution

Inventory held for distribution is held at cost, adjusted where applicable for any loss of service potential.

Land held for resale/capitalisation of borrowing costs AASB102(9),(10),(23), (36)(a) AASB123(11),(25)

Land held for resale is stated at the lower of cost and net realisable value. Cost is assigned by specific identification and includes the cost of acquisition, and development and borrowing costs during development. When development is completed, borrowing costs and other holding charges are expensed as incurred.

AASB123(11),(13), (23)

Borrowing costs included in the cost of land held for resale are those costs that would have been avoided if the expenditure on the acquisition and development of the land had not been made. Borrowing costs incurred while active development is interrupted for extended periods are recognised as expenses.

NSW Council



Commentary – Inventories

AASB102 Recognition and initial measurement 1. Inventories should be recognised when the risks and rewards of ownership are transferred to the

council and the asset recognition criteria are met.

2. Assets held in a council’s premises may not qualify as inventories if they are held on consignment (i.e. on behalf of another entity, not under the control of Council and no liability to pay for the goods exists unless they are sold).

3. Inventories should initially be recognised at cost. Cost of inventories includes import duties, transport and handling costs, and any other directly attributable costs less trade discounts, rebates and subsidies.

AASB102 Subsequent measurement 4. Inventories should be valued at the lower of cost and net realisable value (NRV). NRV is the

estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

5. The cost of inventories (except for land held for resale) should be assigned by using either the first-in, first-out (FIFO) or weighted average cost formula. Last-in, first-out (LIFO) is not permitted. A council should use the same cost formula for all inventories that have a similar nature and use to the council. Where inventories have a different nature or use, different cost formulas may be justified. The cost formula used should be applied on a consistent basis from period to period.

6. Specific identification should be used to allocate costs to land held for resale.

Inventories held for distribution 7. Where Councils have inventories held for distribution, the following information should be disclosed: AASB102(Aus36.1)(a) (a) the accounting policies adopted in measuring inventories held for distribution, including the

cost formula used AASB102(Aus36.1)(b) (b) the total carrying amount of inventories held for distribution and the carrying amount in

classifications appropriate to the council AASB102(Aus36.1)(c) (c) the amount of inventories held for distribution recognised as an expense during the period in

accordance with paragraph Aus34.1 of AASB102 AASB102(Aus36.1)(d) (d) the amount of any write-down of inventories held for distribution recognised as an expense

in the period in accordance with paragraph Aus34.1 of AASB102 AASB102(Aus36.1)(e) (e) the amount of any reversal of any write-down that is recognised as a reduction in the amount

of inventories held for distribution recognised as expense in the period in accordance with paragraph Aus34.1 of AASB102

AASB102(Aus36.1)(f) (f) the circumstances or events that led to the reversal of a write-down of inventories held for distribution in accordance with paragraph Aus34.1 of AASB102

AASB102(Aus36.1)(g) (g) the carrying amount of inventories held for distribution pledged as security for liabilities AASB102(Aus36.1)(h) (h) the basis on which any loss of service potential of inventories held for distribution is

assessed, or the bases when more than one basis is used.

NSW Council



Note 9 Non-current assets classified as held for sale

Actual 2018 $’000

Actual 2017 $’000

AASB5(38) Land - - Buildings - - Plant and equipment - -

- -

[Where Council has non-current asset classified as held for sale – provide a

description of the asset and the facts and circumstances leading to the expected disposal and the expected manner and timing of that disposal.]

Accounting policy for non-current assets classified as held for sale

AASB5(6),(15) Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets; assets arising from employee benefits; financial assets; and investment properties that are carried at fair value.

AASB5(20)-(22) An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition.

AASB5(25) Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale.

NSW Council



Commentary – Non-current assets classified as held for sale

Definition AASB5(6),(7) 1. A council shall classify a non-current asset as held for sale if its carrying amount will be recovered

principally through a sale transaction, rather than through continuing use. For this to be the case, the asset must be available for sale in its present condition subject only to terms that are usual and customary for sales of such assets, and its sale must be highly probable.

Non-current assets held for sale 2. Non-current assets are classified as held for sale and stated at the lower of their carrying amount

and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use.

3. An impairment loss is recognised for any initial or subsequent write down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of de-recognition.

4. Non-current assets are not depreciated or amortised while they are classified as held for sale.

Discontinued operations 5. This note covers non-current assets held for sale other than those relating to discontinued

operations.


Note 10 (a) Infrastructure, property, plant and equipment

By asset class

At 30 June 2017 Movements during year

At 30 June 2018

Gross carrying amount $’000

Accum. depn. and impairment

$’000

Net carrying amount $’000

Renewals $’000

New assets $’000

Carrying value of disposals

$’000

Depn. and impairment

$’000 Transfers

$’000

Revaluation increments

(/decrements) $’000

Gross carrying amount $’000

Accum. depn. and

impairment $’000

Net carrying amount $’000

Capital WIP 29,013 - 29,013 37,151 - - (17,072) - 49,092 - 49,092

Plant and equipment 19,644 13,038 6,606 2,685 (670) (1,423) - - 21,659 14,461 7,198

Office equipment 3,536 2,850 686 127 - (178) - - 3,662 3,027 635

Furniture and fittings 1,492 958 534 - - (22) - - 1,492 980 512

Leased plant and equipment - - - - - - - - - - -

Land

- operational 68,017 - 68,017 1,578 - - (1,119) - 68,476 - 68,476

- community 34,351 - 34,351 208 - - - - 34,559 - 34,559

-under roads (pre 01/07/08) - - - - - - - - - - -

-under roads (post 01/07/08) 2,922 - 2,922 6 - - (1,352) 408 1,984 - 1,984

- non-deprec. land improvements 193 - 193 - - - 1,082 - 1,275 - 1,275

- depreciable land improvements 1,125 419 706 - (143) (39) 704 - 1,686 458 1,228

Infrastructure:

– Buildings * 118,593 45,563 73,030 1,029 (238) (3,437) 6,609 - 125,993 49,000 76,993

– Other structures * 29,791 6,441 23,350 2,253 (138) (792) 6784 - 38,690 7,233 31,457

– Roads * 300,495 47,484 253,011 6,293 - (2,786) 289 - 307,077 50,270 256,807

– Bridges * - - - - - - - - - - -

– Footpaths * - - - - - - - - - - -

– Other road assets *

– Bulk Earthworks (non-deprec.) * - - - - - - - - - - -

– Stormwater drainage * 121,790 - 76,726 946 (24) (1,197) 226 - 122,938 46,261 76,677

– Water supply network * 256,311 102,793 153,518 1,769 - (2,739) - 4,298 262,378 105,532 156,846

– Sewerage network * 226,966 79,996 146,970 2,606 - (2,645) - 4,115 233,687 82,641 151,046

– Swimming pools * - - - - - - - - - - -

– Other open space/recreational assets * - - - -

- - - - - - -

– Other infrastructure * - - - - - - - - - - -

Other assets:

– Heritage collections - - - - - - - - - - -

– Library books 2,604 2,313 291 90 - (96) - - 2,695 2,410 285

– Other (specify if material) 2,977 - 2,977 - - - - - 2,977 - 2,977

Tip asset 634 50 584 - - - (106) - 528 50 478

Quarry asset 64 47 17 - - - - - 64 47 17

Other remediation assets (specify if material) - - - -

- - - - - - -

Totals 1,220,518 347,016 873,502 56,741 (1,213) (15,354) (3,955) 8,821 1,280,912 365,628 918,542

NSW Council



Note 10 Infrastructure, property, plant and equipment (continued)

Accounting policy

Infrastructure, property, plant and equipment are held at fair value. Independent valuations are performed at least 5 yearly, however the carrying amount of assets is assessed at each reporting date to confirm that it is not materially different from current fair value.

Water and sewerage network assets are indexed at each reporting period in accordance with the Rates Reference Manual issued by Crown Lands and Water (CLAW).

Increases in the carrying amounts arising on revaluation are credited to the revaluation reserve. To the extent that the increase reverses a decrease previously recognising profit or loss relating to that asset class, the increase is first recognised as profit or loss. Decreases that reverse previous increases of assets in the same class are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the class; all other decreases are charged to the Income Statement.

AASB116(12) Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Council and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Income Statement during the financial period in which they are incurred.

AASB116(50),(73)(b)

Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives as follows:

AASB116(73)(c) [Councils should include the useful lives used for each class of infrastructure, property, plant and equipment disclosed in the movement table based on their internal policies.]

AASB116(51) The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. AASB116(68),(71)

AASB116(41) Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Income Statement.

AASB1051 Land under roads

Land under roads is land under roadways and road reserves including land under footpaths, nature strips and median strips. Council has elected not to recognise land under roads acquired before 1 July 2008 in accordance with AASB 1051 Land Under Roads.

Land under roads acquired after 1 July 2008 is recognised in accordance with AASB 116 Property, Plant and Equipment.

Crown Reserves

Crown Reserves under Council’s care and control are recognised as assets of the council. While ownership of the reserves remains with the Crown, Council retains operational control of the reserves and is responsible for their maintenance and use in accordance with the specific purposes to which the reserves are dedicated.

Improvements on Crown Reserves are also recorded as assets, while maintenance costs incurred by Council and revenues relating to the reserves are recognised within Council’s Income Statement.

Rural Fire Service assets

Under section 119 of the Rural Fire Services Act 1997 (NSW), “all firefighting equipment purchased or constructed wholly or from money to the credit of the Fund is to be vested in the council of the area for or on behalf of which the firefighting equipment has been purchased or constructed”. Advice on the accounting treatment of these asset will be provided prior to 30 June 2018.

NSW Council



Commentary – Infrastructure, property, plant and equipment

AASB116 Appendix F contains further guidance on accounting for infrastructure, property, plant and equipment

Recognition and initial measurement 1. IPPE is measured initially at cost. Cost includes the fair value of the consideration given to

acquire the asset (net of discounts and rebates) and any directly attributable cost of bringing the asset to working condition for its intended use (inclusive of import duties and taxes).

2. Directly attributable costs are the cost of site preparation and delivery, installation costs, relevant professional fees, and the estimated cost of dismantling and removing the asset and restoring the site (to the extent that such a cost is recognised as a provision).

Subsequent measurement 3. Classes of IPPE should be carried at a revalued amount less any accumulated depreciation and

subsequent accumulated impairment losses. The depreciable amount of IPPE (being the gross carrying value less the estimated residual value) should be depreciated on a systematic basis over its useful life. The gross carrying amount is the cost or fair value before any depreciation and impairment charges, the net carrying amount is the gross carrying amount after depreciation and impairment charges.

4. IPPE may have parts with different useful lives, e.g. components of a road. Depreciation should be calculated based on each individual part’s life. In case of the replacement of one part, the new parts should be capitalised to the extent that they meet the recognition criteria of an asset, and the carrying amount of the parts replaced should be derecognised appropriately.

5. The cost of a major inspection or overhaul of an item occurring at regular intervals over the useful life of the item is capitalised only where the council has clearly identified as a separate component of the asset an amount representing major inspection or overhaul and has already depreciated that component to reflect the consumption of benefits that are to be subsequently replaced. The carrying amount of the parts replaced should be appropriately derecognised. In all other circumstances, such costs are expensed as incurred.

Depreciation 6. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

Each part of an item of IPPE with a cost that is significant in relation to the total cost of the asset should be depreciated separately (componentisation).

The purpose of depreciation is to record the value (or cost) of the asset that has been consumed during the accounting period so that users can obtain an understanding of the Council’s asset and their performance. Depreciation should not be used as a proxy for the amount of future funding required to replace the existing asset nor a mechanism to set users charges or rates based on fully funding depreciation.

7. Straight line method of depreciation reduces the cost of the asset uniformly over the useful life of the asset which is considered the method that most closely reflects the expected pattern of consumption of the future economic benefits embodied in the assets of Councils. The straight line method of depreciation is applied consistently from period to period.

8. Depreciation expense under the straight line method is calculated by dividing the depreciable amount of the IPPE by the useful life of the asset, where depreciable amount is equal to fair value less residual value.

9 OLG preference is for all Councils to use straight line method for depreciation of IPPE, if Councils are using a depreciation method other than straight line then Councils need to have detailed systems and controls to support that alternative model.

AASB116 / AASB13 Revaluation

OLG

10. The fair value of IPPE is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

Fair value is determined in accordance with its highest and best use as defined in AASB13.

Where there is no market-based evidence of fair value, councils will need to estimate fair value using the cost approach method (AASB 13). The cost approach reflects the amount that would be required currently to replace the service capacity of an asset.

The cost approach is generally not appropriate for land since land is not a specialised asset and there is market based evidence available in relation to its fair value.

NSW Council



Commentary – Infrastructure, property, plant and equipment (continued)

Revaluation (continued)

21. 10. 22. All new assets are measured initially at their cost of acquisition. However, the initial valuation of developer-provided assets should be on the basis of their gross replacement cost.

23. 24. For water supply and sewerage assets, it can be reasonably assumed that the assets will be in place indefinitely in order to maintain these essential services. Therefore, there is normally no need to consider any dismantling or removal and restoration cost in the assessment of fair value.

25. 26. When an item of IPPE is revalued, its entire class should be revalued. Revaluations should be made with sufficient regularity to ensure that the carrying amount of the items does not differ materially from their fair value at the Statement of Financial Position date.

OLG OLG has stated that councils should undertake a comprehensive revaluation of assets in accordance with AASB 13 every five years however at each reporting period Councils must assess whether the current carrying amount of assets is materially different from their fair value. If this is the case then the asset class should be revalued for that reporting period regardless of the date of the previous comprehensive revaluation.

Councils should develop their revaluation schedule based on their current practice, the changes in Councils mean that NSW Councils will be on a different schedule and therefore the mandatory revaluation schedule has been removed from the Code. The schedule should be disclosed in the table below:

Asset class Comprehensive Revaluation Due

Water and sewer

Property, plant and equipment, operational land, buildings (including investment properties)

Land Under Roads (LUR), if applicable

Roads, bridges, footpaths, drainage, bulk earth works, other road assets

Community land, all other asset classes, other structures, land improvements

If Council determine that an asset is required to be fair valued then the whole class is subject to revaluation.

Assets other than water and sewerage network assets do not need to be indexed where the carrying amount materially represents fair value. Water and sewerage network assets are to be annually indexed in accordance with the Rates Reference Manual issued by Crown Lands and Water (CLAW).

OLG 27. 11. 28. Where a council revalues depreciable assets, OLG has determined any accumulated depreciation at the date of the revaluation is treated by restating their value proportionately with the change in the gross carrying amount of the asset so that the net carrying amount of the asset after revaluation equals its revalued amount.

AASB116(40.1, and 40.2)

12. For Councils, if the carrying amount of a class of assets decreased as a result of a revaluation, the net revaluation decrease shall be recognised in profit or loss. However, the net revaluation decrease shall be debited directly to equity under the heading of ‘Revaluation Reserve’ to the extent of any credit balance existing in any revaluation reserve in respect of the same class of asset. Revaluation increases and revaluation decreases relating to individual assets within a class of infrastructure, property, plant and equipment shall be offset against one another within that class but shall not be offset in respect of assets in different classes.

Classes of property, plant and equipment

13. A class of property, plant and equipment is a grouping of assets with a similar nature and use in the council's operation.

NSW Council



Commentary – Infrastructure, property, plant and equipment (continued)

Classes of property, plant and equipment (continued)

14. Each council will have different classes, depending on their individual operations. The number of classes that are separately disclosed also depends on materiality. However, a council’s 'plant and equipment' will normally include assets of quite different natures and uses. It will therefore not be sufficient to provide the information required in AASB116 only for two classes, being 'land and buildings' and 'plant and equipment'. Rather, councils should provide a further breakdown or, alternatively, use a more specific narrative to illustrate that the council has only one major class of plant and equipment.

The classes of property, plant and equipment used in Note 10 should reflect those used in Special Schedule 7 – Report on Infrastructure Assets.

‘Other structures’ is designed for the following types of infrastructure assets: statues, fences, monuments, clock towers and so on.

‘Open space/recreational assets’ include assets such as swimming pools (but not including buildings, plant and equipment, car parks etc. that are associated with the swimming pool complex), playground equipment, BBQs and outdoor fitness facilities.

‘Other infrastructure’ includes jetties, boat ramps, sea/rock/retaining walls etc.

NSW Council



Note 11 Investment properties

Actual 2018

$’000

Actual 2017 $’000

At fair value AASB140(76) Opening balance at 1 July - - AASB140(76)(a) Acquisitions - - AASB140(76)(a) Capitalised subsequent expenditure - - AASB140(76)(c) Classified as held for sale or disposals - - AASB140(76)(d) Net gain (loss) from fair value adjustment - - AASB140(76)(f) Transfer (to) from inventories and owner occupied property - - AASB140(76) Closing balance at 30 June - - AASB140(75)(f) (a) Amounts recognised in profit and loss for investment property Rental income - -

Net gain (loss) from fair value adjustment - - Direct operating expenses from property that generated rental income - - Direct operating expenses from property that did not generate rental income - - - -

AASB117(56)(c) (b) Leasing arrangements – Council as lessor

The investment properties are leased to tenants under long-term operating leases with rentals payable monthly. Minimum lease payments receivable on leases of investment properties are as follows.

AASB117(56)(a) Minimum lease payments under non-cancellable operating leases of

investment properties not recognised in the financial statements are receivable as follows:

Within one year - - Later than one year but not later than five years - - Later than five years - -

- -

Accounting policy for investment property

AASB140(75) Investment property, principally comprising freehold office buildings, is held for long-term rental yields and is not occupied by Council. Changes in fair values are recorded in the Income Statement as part of other income.

AASB140(8)(e) Properties that are under construction for future use as investment properties are regarded as investment properties. These are also carried at fair value unless the fair value cannot yet be reliably determined. Where that is the case, the property will be accounted for at cost until either the fair value becomes reliably determinable or construction is complete.

NSW Council



Commentary - Investment properties

Definition AASB140(5) 1. An investment property is property (land or a building, or part of a building, or both) held by the

owner or by the lessee under a finance lease to earn rentals, or for capital appreciation, or both. rather than for:

(a) use in the production or supply of goods or services, or for administrative purposes; or (b) sale in the ordinary course of business.

AASB140(6) 2. A property interest that is held by a lessee under an operating lease may be classified and accounted for as investment property if, and only if, the property would otherwise meet the definition of an investment property above and the lessee uses the fair value model.

NSW Council



Note 12 Intangible assets

Actual 2018

Actual 2017

$'000 $’000

Opening values Gross book value - - Accumulated amortisation - - Accumulated impairment - -

Net book value – opening balance - -

Movements for the year -Purchases - - -Development costs - - -Other capitalised costs (specify if material) - -

-Amortisation charges -Impairment charges

-Gross book value written off - - -Accumulated amortisation charges written off - - -Accumulated impairment charges written off - - Closing values -Gross book value - - -Accumulated amortisation - - -Accumulated impairment - -

Total intangible assets – net book value -

-

The net book value of intangible assets represent:

Software - -

Other assets (specify if material) - -

Accounting policy for intangible assets

IT development and software

Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and services, direct payroll, and payroll-related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from three to five years.

IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility, and where Council has an intention and ability to use the asset.

NSW Council



Commentary – Intangible assets (AASB138)

Intangible assets AASB138 1. An intangible asset is an identifiable, non-monetary asset without physical substance. The

identifiable criterion is met when the intangible asset is separable (i.e. it can be sold, transferred or licensed), or where it arises from contractual or other legal rights.

Acquired intangible assets Intangible assets are measured initially at cost. Cost includes (a) the fair value of the

consideration given to acquiring the asset; and (b) any costs directly attributable to the transaction, such as relevant professional fees or taxes.

Internally generated intangible assets The cost of an internally generated intangible asset comprises only the expenditure incurred from

the date when the intangible asset first meets the recognition criteria. Expenditure previously recognised as an expense should not be included in the cost of the asset.

Intangible assets arising from the research phase of an internal project should not be recognised. Intangible assets arising from the development phase of an internal project should be recognised when the council can demonstrate: its technical feasibility; its intention to complete the developments; how the intangible asset will generate probable future economic benefits (for example, the existence of a market for the output of the intangible asset or for the intangible asset itself); the availability of resources to complete the development; and its ability to measure the attributable expenditure reliably.

The recognition criteria are fairly strict. This means that most costs relating to internally generated intangible items will not be allowable for capitalisation and should therefore be expensed as incurred. Examples of such costs include research costs, start-up costs, and advertising costs. Expenditure paid in advance of receiving the related goods or service can be recognised as an asset irrespective of its future treatment.

Subsequent measurement Intangible assets are carried at cost less any accumulated amortisation and any accumulated

impairment losses. Intangible assets should not be revalued unless there is an active market which is expected to be very rare.

Intangible assets are amortised unless they have an indefinite useful life. Amortisation should be carried out on a systematic basis over the useful lives of the intangibles. The residual value of such assets at the end of their useful lives must be assumed to be zero, unless there is either a commitment by a third party to purchase the asset or there is an active market for the asset. Management should reassess at every year-end the expected useful lives of the council’s intangible assets.

Intangible assets with definite useful lives are considered for impairment where there is an indication that the asset has been impaired. Intangible assets with indefinite useful lives should be tested annually for impairment, as well as whenever there is an indication of impairment.

NSW Council



Note 13 Payables and borrowings

Actual 2018

Actual 2017

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Payables Goods and services 7,219 - 5,309 - Accrued wages and salaries 744 - 745 - Accrued expenses 82 - 128 - Deposits and retentions 245 - 119 - Other payables (specify if material) 117 - 237 - Total payables 8,407 - 6,538 - 29. Income received in advance 30. Payments received in advance 808 - 641 - 31. Ratepayers’ advances - - - - 32. Government advances - - - - 808 - 641 - Borrowings Bank overdraft - - - - Loans: – secured 3,443 15,314 3,383 18,750 – unsecured - - - - Finance lease liability - - - - Deferred payment liabilities - - - - Other (specify if material) - - - - Total borrowings 3,443 15,314 3,383 18,750 (a) Restricted and unrestricted liabilities Liabilities relating to restricted assets Domestic waste management - - - - Water 2,006 1,971 861 2,780 Sewer 219 - 359 - Total restricted liabilities 2,225 1,971 1,220 2,780 Liabilities related to unrestricted

assets 16,335 14,456

15,608 17,280 (b) Current payables not expected to

be settled within the next 12 months - n/a

- n/a (c ) Changes in liabilities arising from financing activities

2017 Cash flows

Non-cash changes 2018

Acquisition Fair value changes

Other non-cash movement

Loans:

– secured

– unsecured

Finance lease liability

Total liabilities from financing activities

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Note 13 Payables and borrowings (continued)

33. (d) Financing arrangements

34. Total facilities The amount of total financing facilities available to Councils at

the reporting date is:

- Bank overdraft facility 3,700 3,700 - Corporate credit cards 113 113 3,813 3,813 Drawn facilities The amount of financing facilities drawn down at the reporting

date is:

- Bank overdraft facility - - - Corporate credit cards 100 95 100 95

The Bank overdraft facility may be drawn at any time and may be terminated by the bank without notice.

Undrawn facilities The amount of undrawn financing facilities available to Councils

at the reporting date is:

- Bank overdraft facility 3,700 3,700 - Corporate credit cards 13 18 3,713 3,718

Details of internal loans for the year ended 30 June 2018

Details of individual internal loans Internal Loan 1 Internal Loan 2 Internal Loan 3

Borrower (by purpose)

Lender (by purpose)

Date of Minister’s approval

Date raised

Term years

Dates of maturity

Rate of interest (%)

Amount originally raised $’000

Total repaid during the year (principal and interest) $’000

Principal outstanding at end of year $,000

Accounting policy for payables and borrowings

Payables AASB132(60)(a),(60)(b) These amounts represent liabilities for goods and services provided to the council prior to the end of

financial year that are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

AASB7(21) Borrowings AASB139(43),(47)

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Income Statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

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Accounting policy for payables and borrowings (continued)

AASB139(39),(41) Borrowings are removed from the Statement of Financial Position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or finance cost.

AASB101(60) Borrowings are classified as current liabilities unless Council has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

AASB117(20),(25) Finance leases

Leases of property, plant and equipment where Council, as lessee, has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased assets or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the Income Statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that Council will obtain ownership at the end of the lease term.

NSW Council



Commentary – Liabilities

AASB Definition Framework 1. 1

. A liability is a present obligation of the council arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.

2. 2.

Present obligation may be legally enforceable as a consequence of a binding contract or statutory requirement or a constructive obligation that results in a Council having no realistic alternative to settling that obligation

3. A A constructive obligation is an obligation that derives from a Council’s actions where:

a. by an established pattern of past practice, published policies or a sufficiently specific

current statement, the Council has indicated to other parties that it will accept certain

responsibilities; and

b. as a result, the Council has created a valid expectation on the part of those other parties

that it will discharge those responsibilities.

AASB137 Commitments 4. 3

. A decision by management to acquire assets in the future does not in itself give rise to a present obligation. A council may be committed to acquiring tangible or intangible assets in order to use Infrastructure, property, plant and equipment under operating lease agreements for a future period. Therefore, a commitment may not always be recognised.

AASB119 Employee benefits 5. 4

. Employee benefits are all forms of consideration given by a council in exchange for services rendered by its employees. These benefits include salary-related benefits (such as wages, salaries, and long-service leave), termination benefits (such as severance or redundancy pay), and post-employment benefits (such as retirement benefit plans).

Defined contribution plans 6. 6

. The cost of defined contribution plans is the contribution payable by the employer for that accounting period.

Defined benefit plans AASB119.34 7. 7

. Due to the nature of local government-defined benefit plans, it is not possible to account for these schemes as multi-employer-defined benefit plans. In accordance with AASB119 they are, therefore, accounted for as defined contribution plans.

Early termination obligation 8. 8

. Early termination obligations should be recognised as a liability when the council is ‘demonstrably committed’ to terminating the employment before the normal retirement date.

9. 9. A council is ‘demonstrably committed’ when, and only when, it has a detailed formal plan for the early termination without realistic possibility of withdrawal. Where such benefits are long-term, they should be discounted using the same rate as above for defined benefit obligations. ‘Normal’ termination obligations should be accrued as the obligation arises from past service.

AASB139 Financial liabilities 10. 1

0.

A financial liability is a contractual obligation to deliver cash or another financial asset, or to exchange financial instruments with another council.

Recognition and initial measurement 11. 1

1.

There are two categories of financial liabilities:

(i) At fair value through profit or loss. These are liabilities acquired for the purpose of generating a profit from short-term fluctuations in price or part of a portfolio with a pattern of short-term profit taking.

(ii) Other liabilities. I.e. the remainder (most council liabilities).

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Commentary – Liabilities (continued)

Subsequent measurement 12. 1

2.

The classification of financial liabilities drives their subsequent measurement, which is as follows:

at fair value through profit or loss; carried at fair value, with gains and losses reported in income

other liabilities; carried at amortised cost unless designated at fair value.

Fair value disclosure AASB7(29)(a) 13. 1

3.

For financial instruments such as short-term payables, no disclosure of fair value is required when the carrying amount is a reasonable approximation of fair value. Where the carrying amount is not a reasonable approximation of fair value, disclosure of the fair value is required by Paragraph 25 of AASB7 Financial Instruments: Disclosures.

Long-term borrowings AASB101(72) 14. 1

4.

A council classifies its financial liabilities as current when they are due to be settled within 12 months after the reporting date, even if:

(a) the original term was for a period longer than 12 months, and (b) an agreement to refinance, or to reschedule payments, on a long-term basis, is completed

after the reporting date and before the financial statement is authorised for issue.

AASB101(73) 15. 15.

If a council expects, and has the discretion to refinance or roll over an obligation for at least 12 months after the reporting date under an existing loan facility, it classifies the obligation as non-current, even if it would otherwise be due within a shorter period. However, when refinancing or rolling over the obligation is not at the discretion of the council (for example, if there is no agreement to refinance), the potential to refinance is not considered and the obligation is classified as current.

Breached undertakings AASB101(74) 16. 1

6.

When a council breaches an undertaking under a long-term loan agreement on or before the reporting date with the effect that the liability becomes payable on demand, the liability is classified as current, even if the lender has agreed, after the reporting date and before the authorisation of the financial statement for issue, not to demand payment as a consequence of the breach. The liability is classified as current because, at the reporting date, the council does not have an unconditional right to defer its settlement for at least 12 months after that date.

AASB101(65),(66) 17. 17.

When a breach has occurred during the period and the breach has not been remedied, or the terms of the loan payable have not been renegotiated by the reporting date, the effect of the breach on the classification of the liability as current or non-current is determined under AASB101 Presentation of Financial Statements.

18. The amount of the outstanding liability must be assessed each year on the basis of the measurement process set out in AASB137 Provisions, Contingent Liabilities and Contingent Assets. An actuarial assessment of the outstanding liability should be obtained if the liability cannot be ascertained from historical records. The amount of the outstanding liability shall be disclosed in the notes to the financial statements.

19. Cash or specific investments must be held for either: (a) the full amount of the provision or a banker’s guarantee arranged for that amount, or (b) an amount determined to be adequate by an independent actuarial assessment made in

the current financial year.

20. A provision shall not be created as a means of setting aside funds to meet commitments which may arise in the future from future events.

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Commentary – Liabilities (continued)

AASB107.44A Changes in liabilities arising from financing activities

21. Comparatives for this note are not required in the first year, i.e. no requirement to included information for 30 June 2017.

22. Information should be disclosed to enable users to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

23. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities.

24. In addition, this disclosure applies to changes in financial assets if cash flows from those financial assets were, or future cash flows will be, included in cash flows from financing activities

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Note 14 Provisions

Actual 2018

Actual 2017

Current $’000

Non-current $’000

Current $’000

Non-current $’000

Annual leave 2,102 - 2,090 - Sick leave 182 - 183 - Long service leave 2,618 504 2,776 610 Self-insurance – workers compensation 1,000 - 1,217 - – public liability - - - - – other - - - - Asset remediation - 609 - 700 Other (specify if material) - - - -

Total provisions 5,902 1,113 6,266 1,310

Current provisions not expected to be settled within the next 12 months 2,720 -

1,276 -

(a) Description of and movements in provisions

The movement in each class of provision (excluding those relating to employee benefits) is presented in the table below.

Self-insurance

$’000

Asset remediation

$’000

Other provision (1)

$’000

Other provision (2)

$’000 Total $’000

At beginning of year 1,217 700 - - 1,917 Changes to provision:

New disturbances to tip - - - - Revised costs - (106) - - (106) Revised life - - - - - Revised discount rate - - - - -

Amounts used (217) - - (217) Unwinding of discount - 15 - - 15 Unused amounts reversed - - - - - Other (specify) - - - - -

Total 1,000 609 - 15 1,609

Nature and purpose of non-employee benefit provisions

[insert a description of each class of provision shown in the table above as to its nature and purpose and related uncertainties.]

Asset remediation

Council has a legal/public obligation to make, restore, rehabilitate and reinstate the council tip and quarry. Self-insurance

To recognise liabilities for outstanding claims (uninsured losses) arising from Council’s decision to undertake self-insurance for certain risks faced.

Accounting policy for provisions AASB137(14) Provisions are recognised when Council has a present legal or constructive obligation as a result of past

events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated.

AASB137(24) Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

AASB137(36),(45), (47),(60)

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The

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increase in the provision due to the passage of time is recognised as interest expense.

Employee benefits

Short-term obligations AASB119(8),(11) Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave

expected to be wholly settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.

Other long-term employee benefit obligations AASB119(155) The liability for long service leave and annual leave that is not expected to be wholly settled within 12 months

after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

AASB101(69)(d) The obligations are presented as current liabilities in the Statement of Financial Position if the council does not have an unconditional right to defer settlement for at least 12 months after the reporting date, regardless of when the actual settlement is expected to occur.

AASB1 AASB123(29)(a)

Provisions for close-down and restoration, and environmental clean-up costs – tips and quarries

Restoration

Close-down and restoration costs include the dismantling and demolition of infrastructure, and the removal of residual materials and remediation of disturbed areas. Estimated close-down and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs, whether this occurs during the development or during the operation phase, based on the net present value of estimated future costs. Provisions for close-down and restoration costs do not include any additional obligations which are expected to arise from future disturbance. The costs are estimated on the basis of a closure plan. The cost estimates are calculated annually during the life of the operation to reflect known developments, e.g. updated cost estimates and revisions to the estimated lives of operations, and are subject to formal review at regular intervals.

Rehabilitation Where rehabilitation is conducted systematically over the life of the operation, rather than at the time of closure,

provision is made for the estimated outstanding continuous rehabilitation work at each reporting date, and the cost is charged to the Income Statement.

Provision is made for the estimated present value of the costs of environmental clean-up obligations outstanding at the reporting date. These costs are charged to the Income Statement. Movements in the environmental clean-up provisions are presented as an operating cost, except for the unwinding of the discount which is shown as a borrowing cost. Remediation procedures generally commence soon after the time the damage, remediation process, and estimated remediation costs become known, but may continue for many years depending on the nature of the disturbance and the remediation techniques.

As noted above, the ultimate cost of environmental remediation is uncertain and cost estimates can vary in response to many factors, including changes to the relevant legal requirements, the emergence of new restoration techniques, or experience at other locations. The expected timing of expenditure can also change, for example in response to changes in quarry reserves or production rates. As a result, there could be significant adjustments to the provision for close down and restoration and environmental clean-up, which would affect future financial results.

Other movements in the provisions for close-down and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations, and revisions to discount rates, are capitalised within property, plant and equipment. These costs are then depreciated over the lives of the assets to which they relate.

Close-down and restoration costs are a normal consequence of tip and quarry operations, and the majority of close-down and restoration expenditure is incurred at the end of the life of the operations. Although the ultimate cost to be incurred is uncertain, Council estimates the respective costs based on feasibility and engineering studies using current restoration standards and techniques.

Self-insurance Council has decided to self-insure for various risks, including public liability and professional indemnity.

A provision for self-insurance has been made to recognise outstanding claims... Council also maintains cash and investments to meet expected future claims; refer to Note 6(c).

NSW Council



Commentary – Provisions

AASB101(60) Classification of employee benefits provisions as non-current

1. Irrespective of how the amount is measured, an employee benefits provision can only be classified on the Statement of Financial Position as a non-current liability if there is no possibility the council could have to pay out the provision within the next 12 months. This means, for example, that where employees are entitled to take their long service leave or accrued annual leave during the next 12 months, the provision relating to them must be recorded as a current liability, even though the employees may not be expected to take the leave for an extended period.

The amount expected to be paid after 12 months is disclosed in Note 10(a).

AASB137 Provisions and contingencies Definition

2. A provision is a liability of uncertain timing or amount. Provisions can be distinguished from other liabilities such as trade payables and accruals because there is uncertainty about the timing or amount of the future expenditure required in settlement. Although it is sometimes necessary to estimate the amount or timing of accruals, the uncertainty is generally much less than for provisions.

3. AASB137 distinguishes between: (a) provisions, which are recognised as liabilities (assuming that a reliable estimate can be made)

because they are present obligations and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations, and

(b) contingent liabilities, which are not recognised as liabilities because they are either:

(i) possible obligations, as it has yet to be confirmed whether the council has a present obligation that could lead to an outflow of resources embodying economic benefits; or

(ii) present obligations that do not meet the recognition criteria in this standard (because either it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or a sufficiently reliable estimate of the amount of the obligation cannot be made).

4. A provision should be recognised only when: (a) the council has a present obligation to transfer economic benefits as a result of past events; it is probable (more likely than not) that such a transfer will be required to settle the obligation; and (b) a reliable estimate of the amount of the obligation can be made.

5. The amount recognised as a provision should be the best estimate of the unavoidable expenditure required to settle in full the present obligation, and should be discounted at a pre-tax rate that reflects current market assessment of the time value of money and those risks specific to the liability that have not been reflected in the best estimate of the expenditure.

6. A present obligation arises from an obligating event and may take the form of either a legal obligation or a constructive obligation. An obligating event leaves the council no realistic alternative to settling the obligation. If the council can avoid the future expenditure by its future actions, it has no present obligation, and no provision is required. For example, a council cannot recognise a provision based solely on the intent to incur expenditure at some future date.

Onerous contracts

7. If a council has an onerous contract (the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it), the present obligation under the contract should be recognised as a provision.

Restructuring provisions

8. There are specific requirements as to when a provision for restructuring is recorded and what costs are included in the provision. The council should demonstrate a constructive obligation to restructure. The constructive obligation should be demonstrated by: (a) a detailed formal plan identifying the main features of the restructuring; and (b) raising a valid expectation to those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features to those affected.

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Commentary – Provisions (continued)

9. A restructuring plan does not create a present obligation at the reporting date if it is announced after that date, even if it is announced before the financial statements are approved. No obligation arises for the sale of an operation until the council is committed to the sale (i.e. there is a binding sale agreement).

10. The provision should only include incremental costs necessarily entailed by the restructuring and not those associated with the council’s on-going activities. Any expected gains on the sale of assets should not be taken into account in measuring a restructuring provision.

Recovery

11. Where the council expects to recover from a third party some or all of the amounts required to settle a provision and has no obligation for that part of the expenditure to be met by the third party, it should offset the anticipated recovery against the provision and disclose the net amount.

12. In all other cases, the provision and any anticipated recovery should be presented separately as a liability and an asset, respectively. However, an asset can only be recognised if it is virtually certain that settlement of the provision will result in a reimbursement, and the amount recognised for the reimbursement should not exceed the amount of the provision. Net presentation is permitted in the income statement.

Subsequent measurement

13. Management should perform an exercise at each reporting date to identify the best estimate of the unavoidable expenditure required to settle in full the present obligation, discounted at an appropriate rate. The increase in provision due to the passage of time is recognised as an interest expense.

Interpretation 1(48) Restoration, rehabilitation provision 14. Changes in the measurement of an existing decommissioning, restoration or similar liability that

results from changes in the estimated timing or amount of the outflow of resources embodying economic benefits required to settle the obligation, or a change in the discount rate, are accounted for as follows.

15. If the related asset is measured using the revaluation model: (a) Changes in the liability alter the revaluation increase or decrease previously recognised on

that asset, so that: (i) a decrease in the liability shall (subject to Paragraph 6(b)) be credited directly to the

revaluation reserve in equity, except that it shall be recognised in profit or loss to the extent that it reverses a revaluation decrease on the asset that was previously recognised in profit or loss; or

(ii) an increase in the liability shall be recognised in profit or loss, except that it shall be debited directly to the revaluation reserve in equity to the extent of any credit balance existing in the revaluation reserve in respect of that asset.

(b) In the event that a decrease in the liability exceeds the carrying amount that would have been recognised had the asset been carried under the cost model, the excess shall be recognised immediately in profit or loss;

(c) A change in the liability is an indication that the asset may have to be re-valued in order to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date. Any such revaluation shall be taken into account in determining the amounts to be taken to profit or loss and equity under Paragraph 6(a). If a revaluation is necessary, all assets of that class shall be re-valued; and

(d) AASB101 Presentation of Financial Statements requires disclosure on the face of the

statement of changes in equity of each item of income or expense that is recognised directly in equity. In complying with this requirement, the change in the revaluation reserve arising from a change in the liability shall be separately identified and disclosed as such.

In respect of a council, the requirements of Paragraph 6 shall be applied in relation to a class of assets, consistent with the revaluation model requirements of AASB116 for not-for-profit entities.

16. The adjusted depreciable amount of the asset is depreciated over its useful life. Therefore, once the related asset has reached the end of its useful life, all subsequent changes in the liability shall be recognised in profit or loss as they occur. This applies under both the cost model and the revaluation model.

17. The periodic unwinding of the discount is recognised in profit or loss as a finance cost as it occurs. The allowed alternative treatment of capitalisation under AASB123 Borrowing Costs is not permitted.

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Commentary – Provisions (continued)

18. The discount rate for unwinding the provision can be obtained from the Reserve Bank bond rates.1 The rate used should be the rate that most closely matches the expected utilisation of the provision.

19. When remediation works are underway, then the balance of the provision is reduced as the costs as incurred.

20. If the remediation provision is material, then consider including information in the estimates and judgements section of Note 1.

OLG commentary

21. From 1 September 2015, workers’ compensation responsibilities were transferred to Insurance & Care NSW (icare) from Workcover.

In regard to workers’ compensation self-insurance, self-insurers are required by icare, as a condition of a self-insurance licence, to meet certain requirements. Icare does not require the mandatory setting aside of funds to meet the outstanding claims liability. However, it does require that provision be recognised for an actuarially assessed figure for this outstanding claims liability. Additionally, self-insurers are required to lodge security in accordance with the actuarial assessment plus a contingency margin, which is calculated by icare. The security is either placed with Treasury in cash or met by the lodgement of a Banker’s Deed of Understanding with icare.

22. . Other types of self-insurance policies should have specific investments equal to the amount of outstanding claims, and supporting records will need to be maintained to identify the component risks and liabilities comprising the provision.

NSW Council



Note 15 Accumulated surplus, revaluation reserves, changes in accounting policies, accounting estimates and errors

AASB101(76)(b) (a) Nature and purpose of reserves (i) Revaluation reserve AASB116(77)(f) The infrastructure, property, plant and equipment revaluation reserve is

used to record increments and decrements in the revaluation of non-current assets.

(ii) Available-for-sale investments revaluation reserve Changes in fair value are taken to the available-for-sale investments

revaluation reserve, amounts are recognised in profit and loss when the associated assets are sold or impaired.

(iii) Other reserves (specify)

(b) Correction of errors in previous years

AASB108.41-49

[If a material error relating to a prior period has been retrospectively adjusted in the current year’s financial statements, then a description of the nature and impact of the error should be provided.

The errors identified above have been corrected by restating the balances at the beginning of the earliest period presented (1 July 2016) and taking the adjustment through to accumulated surplus at that date. Comparatives have been changed to reflect the correction of errors. The impact on each line item at 1 July 2016 is shown in the table below.

Changes to the opening balance sheet at 1 July 2016

Original balance at 1 July 2016 ($’000)

Increase / (decrease) ($’000)

Restated balance at 1 July 2016 ($’000)

ASSETS

Current assets

Cash and cash equivalents

Investments

Receivables

Inventories

Other

Non-current assets classified as held for sale

Total current assets

Non-current assets

Investments

Receivables

Infrastructure, property, plant and equipment

Investment property

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Intangible assets

Inventories

Investments accounted for using equity method

Other

Total non-current assets

Total assets

LIABILITIES

Current liabilities

Payables

Income received in advance

Borrowings

Provisions

Total current liabilities

Non-current liabilities

Payables

Borrowings

Provisions

Total non-current liabilities

Total liabilities

Net assets

EQUITY

Accumulated surplus

Revaluation reserves

Other reserves (specify)

Non-controlling equity interest

If the adjustment of the error had no impact or only an immaterial impact on the statement of financial position at 1 July 2016 then Councils should state that fact rather than including the table above]

Adjustment to the comparative figures for the year ended 30 June 2017

[insert details of each line item which was impacted by the correction of the errors]

Original balance ($’000)

Increase / (decrease) ($’000)

Restated balance at ($’000)

Statement of

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financial position

Income statement

(d) Changes in accounting policy

[provide details of any changes in accounting policies during the year, including the reason for the change and the impact on the financial statements, as well as a third Statement of Financial Position, if the impact is material – the disclosure shown above for errors can be used for accounting policy changes.

If the retrospective change had none or an immaterial impact on the statement of financial position at 1 July 2016 then Councils should state that fact.]

AASB108.32-40 (e) Changes in accounting estimates

[If any significant estimates have been amended during the year, e.g. useful life of IPPE, then include information about the impact of these changes in the current year, as well as any potential impact on future years.]

Commentary – Accumulated surplus, revaluation reserves, changes in accounting policies, changes in accounting estimates and errors

Nature and purpose of reserves AASB101(79)(b) 1. A description of the nature and purpose of each reserve within equity must be provided, either in the

Statement of Financial Position or in the notes.

2. In providing a description of the nature and purpose of the reserves, it would be appropriate to refer to any restrictions on their distribution, or any other important characteristics.

AASB101(10)(f) Third Statement of Financial Position 3. A third Statement of Financial Position (and associated notes) is required where a change in

accounting policy or correction of error has resulted in a material change to the Statement of Financial Position previously presented at the opening comparative date.

4. The changes to the Statement of Financial Position and associated notes should be presented in this note, rather than on the face of the primary statements.

Changes in accounting policies Initial application of an Australian Accounting Standard

AASB108(28) 5. When the initial application of an Australian Accounting Standard has an effect on the current period, or any prior period; would have such an effect except that it is impracticable to determine the amount of the adjustment; or might have an effect on future periods, a council shall disclose:

(a) the title of the Australian Accounting Standard (b) that the change in accounting policy is made in accordance with its transitional provisions,

where applicable (c) the nature of the change in accounting policy (d) a description of the transitional provisions, where applicable (e) the transitional provisions that might have an effect on future periods, where applicable (f) for the current period and each prior period presented, to the extent practicable, the

amount of the adjustment: (i) for each financial statement line item affected, and (ii) if AASB133 Earnings per Share applies to the council, for basic and diluted earnings per share.

(g) the amount of the adjustment relating to periods before those presented, to the extent practicable

(h) if retrospective application required by paragraph 19(a) or (b) of AASB108 Accounting Policies, Changes in Accounting Estimates and Errors is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the

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existence of that condition, and a description of how and from when the change in accounting policy has been applied.

Financial statements of subsequent periods need not repeat these disclosures.

Voluntary change in accounting policy

AASB108(29) 6. When a voluntary change in accounting policy has an effect on the current period, or any prior period; would have an effect on that period, except that it is impracticable to determine the amount of the adjustment; or might have an effect on future periods, a council shall disclose:

(a) the nature of the change in accounting policy (b) the reasons why applying the new accounting policy provides reliable and more relevant

information (c) for the current period and each prior period presented, to the extent practicable, the

amount of the adjustment for each financial statement line item affected (d) the amount of the adjustment relating to periods before those presented, to the extent

practicable (e) before those presented, the circumstances that led to the existence of that condition,

and a description of how and from when the change in accounting policy has been applied.


Commentary – Accumulated surplus, revaluation reserves, changes in accounting policies, changes in accounting estimates and errors (continued)

Prior-period errors AASB108(5) 7. Prior-period errors are omissions from, and misstatements in, a council’s financial statements for

one or more prior periods arising from a failure to use, or a misuse of, reliable information that (a) was available when financial statements for those periods were authorised for issue; and (b) could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements. Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud.

Correction AASB108(42) 8. Subject to Paragraph 43 of AASB108 Accounting Policies, Changes in Accounting Estimates and

Errors, a council shall correct material prior-period errors retrospectively in the first financial statements authorised for issue after their discovery by:

(a) restating the comparative amounts for the prior period(s) presented in which the error occurred; or

(b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.

AASB108(43) 9. A prior period error shall be corrected by retrospective restatement, except to the extent that it is impracticable to determine either the period-specific effects, or the cumulative effect of the error. Retrospective restatement is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred.

AASB108(44) 10. When it is impracticable to determine the period-specific effects of an error on comparative information for one or more prior periods presented, the council shall restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable (which may be the current period).

AASB108(45) 11. When it is impracticable to determine the cumulative effect, at the beginning of the current period, of an error on all prior periods, the council shall restate the comparative information to correct the error prospectively from the earliest date practicable.

Disclosure AASB108(49) 12. In relation to errors, a council shall disclose the following: (a) the nature of the prior period error (b) for each prior period presented, to the extent practicable, the amount of the correction for

each financial statement line item affected (c) the amount of the correction at the beginning of the earliest prior period presented (d) if retrospective restatement is impracticable for a particular prior period, the circumstances

that led to the existence of that condition, and a description of how and from when the error

NSW Council



has been corrected.


Changes in accounting estimates Recognition AASB108(36) 13. The effect of a change in an accounting estimate, other than a change to which Paragraph 37 of

AASB108 applies, shall be recognised prospectively by including it in profit or loss in: (a) the period of the change, if the change affects that period only; or (b) the period of the change and future periods, if the change affects both.

AASB108(37) 14. To the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, or relates to an item of equity, it shall be recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change.

15. A change in accounting estimate is adjusted in the current and future periods. There is no impact on accumulated surplus.

Disclosure AASB108(39) 16. Disclosure is required of the nature and amount of a change in an accounting estimate that has an

effect in the current period, or is expected to have an effect in future periods, except for the disclosure of the effect on future periods when it is impracticable to estimate that effect.

AASB108(40) 17. If the amount of the effect in future periods is not disclosed because estimating it is impracticable, that fact shall be disclosed.

NSW Council



Note 16 Statement of Cash Flows information

Notes

Actual 2018

$’000

Actual 2017 $’000

(a) Reconciliation of cash assets Total cash and cash equivalents 6a 12,797 13,488 Less: bank overdraft 13 - -

Balances as per statement of cash flows 12,797 13,488

(b) Reconciliation of net operating result to cash

provided from operating activities

Net operating result from Income Statement 45,853 24,467 Depreciation and impairment

Share of (profit) / loss in joint venture 15,048

(7) 12,052

12 Decrements / (reversal of previous revaluation decrements)

from revaluations

- - Loss / (gain) on sale of assets (1,156) (814) Loss on boundary adjustment - - Amortisation of discounts and premiums recognised - - Non-cash contributions and dedications (5,506) (3,674) Fair value (gains) / losses on investment property - - Fair value (gains ) / losses on financial assets at fair value

through profit and loss

(811) (1,375) Increase / (decrease) in provision for doubtful debts (35) 16 Increase / (decrease) in provision for employee leave

entitlements

(470) 983 Increase / (decrease) in other provisions (106) 437 (Increase) / decrease in receivables (1,981) 706 (Increase) / decrease in inventories (5) 22 (Increase) / decrease in other current assets 817 (738) Increase / (decrease) in payables 1,910 783 Increase / (decrease) in accrued interest payable (46) 68 Increase / (decrease) in other liabilities 173 258 Other (8) 214

Net cash provided from (or used in) operating activities from statement of cash flows

53,670 33,415

35. (c) Non-cash financing and investing activities

Acquisition of plant and equipment by means of finance leases - - Bushfire grants - - S.94 contributions in kind 5,506 3,674 Dedications - - Other (specify if material) - - 5,506 3,674

NSW Council



Commentary – Statement of Cash Flows Information

Non-cash financing and investing activities AASB107(43) 1. Investing and financing transactions that do not require the use of cash or cash equivalents are

excluded from the statement of cash flows. Although these transactions do not have a direct impact on current cash flows they do affect the capital and asset structure of a Council.

2. An example of a non-cash transaction is the acquisition of assets either by assuming directly related liabilities or by means of a finance lease.

NSW Council



Note 17 Interests in other entities

AASB 10 Interests in Interests in subsidiaries

(a) (a) Composition of the group

Principal place of business

Percentage owned (%) 2018

Percentage owned (%) 2017

Subsidiaries

Sub 1 36.

Sub 2 37.

The percentage ownership interest held is equivalent to the percentage voting rights for all subsidiaries.

38. Controlled entities with ownership interest of 50% or less

39. The council holds 42% of the ordinary shares of Goreng Ltd under a management agreement between Council, Goreng and the other shareholder. Council has the power to make all the financial and operating policy decisions of Goreng, and to ensure that those policies are consistent with the policies of the group, and therefore has control.

(b) Significant restrictions relating to subsidiaries

40. Provide details of significant restrictions, for example statutory, contractual and regulatory restrictions, on the subsidiary’s ability to access or use the assets and settle the liabilities of the group, i.e.: those that restrict the ability of a parent or its subsidiaries to transfer cash or other assets to (or from) other entities within the group.

Guarantees or other requirements that may restrict dividends and other capital distributions being paid, or loans and advance being made or repaid to (or from), other entities within the group.

(c) Subsidiaries with material non-controlling interests

(Name of subsidiary 1)

(Name of subsidiary 2)

2018 2017 2018 2017

% ownership held by non-controlling interest (NCI) 41. 42.

$’000 $’000 $’000 $’000

Profit (/loss) allocated to NCI

Accumulated NCI of subsidiary

Dividends paid to NCI

Summarised Statement of Financial Position

Current assets

Non-current assets

Current liabilities


Net assets

Summarised statement of profit and loss and other comprehensive income

Revenue

Profit (/loss)

Total comprehensive income

Summarised statement of cash flows

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Net increase (/decrease) in cash and cash equivalents

NSW Council



Accounting policy for subsidiaries

Subsidiaries are all entities (including structured entities) over which the council has control. Control is

established when the council is exposed to, or has rights to variable returns from, its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity.

These consolidated financial statements include the financial position and performance of controlled entities from the date on which control is obtained until the date that control is lost. Intragroup assets, liabilities, equity, income, expenses and cash flows relating to transactions between entities in the consolidated entity have been eliminated in full for the purpose of these financial statements. Appropriate adjustments have been made to a controlled entity’s financial position, performance and cash flows where the accounting policies used by that entity were different from those adopted by the consolidated entity. All controlled entities have a June financial year end.

(d) Consolidated structured entities Where Council has consolidated structured entities, provide details of circumstances where Council or an

entity within the group may be required to provide financial support to that consolidated structured entity, as well as details as to where support has been provided during the financial reporting period.

AASB 11 / AASB 128

Interests in joint arrangements

Type of joint arrangement


Percentage owned (%)

2018


2017

Joint arrangements:

Joint arrangement 1 43. 44.

Joint arrangement 2 45. 46.

The percentage ownership interest held is equivalent to the percentage voting rights for all joint arrangements.

Joint Arrangements 1

Provide details of the nature of the council’s relationship with the joint arrangement; for example, describe the nature of the activities of the joint arrangement, and whether they are strategic to the entity’s activities.

Joint Arrangements 2

Provide details of the nature of the council’s relationship with the joint arrangement; for example, describe the nature of the activities of the joint arrangement and whether they are strategic to the entity’s activities.

All joint ventures have the same year end date as the council.

There are no significant restrictions on the ability of joint ventures to transfer funds to the group in the form of cash dividends, or to repay loans or advances made by the council.

47. Material joint ventures

48. The following information is provided for joint ventures that are individually material to the council. Included are the total amounts as per the joint venture financial statements, adjusted for fair value adjustments at acquisition date and differences in accounting policies, rather than the council’s share.

(Name of Joint venture 1)

(Name of Joint venture 2)

49. 2016

50. 2014

51. 2016

52. 2014

Measurement basis (equity method / fair value)

$’000 $’000 $’000 $’000

Dividends received from the joint venture

NSW Council





Current assets

Non-current assets

Current liabilities

Current financial liabilities (excluding trade and other payables and provisions)


Non-current financial liabilities (excluding trade and other payables and provisions)

Net assets


Revenue

Interest income


Interest expense

Income tax expense (income)

Profit (/loss) from continuing operations

Post-tax profit or loss from discontinued operations

Other comprehensive income







Reconciliation of carrying amount of interest in joint venture to summarised financial information for joint ventures accounted for using the equity method.

[Name of joint venture] Current year end $’000 Prior year end $’000

Share of xx% of net assets

[insert reconciling items]

Carrying amount

Fair value of investment (if there is a quoted price)

Aggregate information for joint ventures that are not individually material

Council has interests in a number of joint ventures, none of which is considered individually material. The table below summarises, in aggregate, the financial information of all individually immaterial joint ventures.

Current year end $’000 Prior year end $’000

Carrying amount of investments in joint ventures that are not individually material

Council’s share of those joint ventures:

Profit or loss from continuing operations




Unrecognised share of losses

The unrecognised share of losses of joint ventures due to Council’s interest being reduced to zero under the equity methods are $xx for the reporting period, and $xx on a cumulative basis.

NSW Council



Risk associated with the interests in joint ventures

Commitments relating to joint ventures held $

Contingent liabilities incurred jointly with other investments over joint ventures held

$

Accounting policy for joint arrangements.

The council has determined that it has [both joint ventures and joint operations / only joint ventures / only joint operations] (councils to delete as appropriate).

Joint operations

In relation to its joint operations, where the venturer has the rights to the individual assets and obligations arising from the arrangement, the council has recognised:

its assets, including its share of any assets held jointly

its liabilities, including its share of any liabilities incurred jointly

its share of the revenue from the sale of the output by the joint operation

its expenses, including its share of any expenses incurred jointly.

These figures are incorporated into the relevant line item in the primary statements.

`AASB 128

Joint ventures/associates:

Interests in joint ventures are accounted for using the equity method in accordance with AASB128 Associates and Joint Ventures. Under this method, the investment is initially recognised as a cost and the carrying amount is increased or decreased to recognise the council’s share of the profit or loss and other comprehensive income of the joint venture after the date of acquisition.

If the council’s share of losses of a joint venture equals or exceeds its interest in the joint venture, the council discontinues recognising its share of further losses.

The council’s share in the joint venture’s gains or losses arising from transactions between itself and its joint venture are eliminated.

Adjustments are made to the joint venture’s accounting policies where they are different from those of the council for the purposes of the consolidated financial statements.

Interests in Associates



2018


2017

53. Associates:

Associate 1 Australia 25% 25%

The percentage ownership interest held is equivalent to the percentage voting rights for all associates.

Associate 1

Provide details of the nature of the council’s relationship with the associate; for example, describe the nature of the activities of the associate, and whether they are strategic to the entity’s activities – e.g. Associate 1 is an entity set up by a number of councils for waste disposal to try to save costs.

Associates

All associates have the same year end date as the council. There are no significant restrictions on the ability of associates to transfer funds to the group in the form of cash dividends, or to repay loans or advances made by the council.

NSW Council



Material associates

The following information is provided for associates that are individually material to the group. Included are the amounts as per the individual associates’ financial statements, adjusted for fair value adjustments at acquisition date and differences in accounting policies, rather than the group’s share.

(Name of Associate 1) (Name of Associate 2)

2018 2017 2018 2017

Measurement basis (equity method / fair value)

$’000 $’000 $’000 $’000

Dividends received from the associate



Current assets

Non-current assets

Current liabilities

Current financial liabilities (excluding trade and other payables and provisions)


Non-current financial liabilities (excluding trade and other payables and provisions)

Net assets


Revenue

Interest income


Interest expense

Income tax expense (income)

Profit (/loss) from continuing operations









Reconciliation of carrying amount of interest in associate to summarised financial information for associates accounted for using the equity method.

Associate 1 Current year end $’000 Prior year end $’000

Council’s share of 25% of net assets 362 333

[insert reconciling items]

Carrying amount 362 333

Fair value of investment (if there is a quoted price) - -

NSW Council



Aggregate information for associates that are not individually material

Council has interests in a number of associates, none of which is considered individually material. The table below summarises, in aggregate, the financial information of all individually immaterial associates.

Current year end $’000 Prior year end $’000

Carrying amount of investments in associates that are not individually material

362 333

Council’s share of those associates: 25% 25%

Profit or loss from continuing operations 7 (12)

Post-tax profit or loss from discontinued operations - -

Other comprehensive income - -

Total comprehensive income 7 (12)

Unrecognised share of losses

The unrecognised share of losses of associates due to the council’s interest being reduced to zero under the equity methods are $xx for the reporting period, and $xx on a cumulative basis.

Risks associated with the interest in associates

Contingent liabilities incurred jointly with other investments over associates held

$

Accounting policy for associates

Interests in associates are accounted for using the equity method in accordance with AASB128 Investments in Associates and Joint Ventures. Under this method, the investment is initially recognised as a cost and the carrying amount is increased or decreased to recognise the council’s share of the profit or loss and other comprehensive income of the investee after the date of acquisition.

If the council’s share of losses of an associate equals or exceeds its interest in the associate, the council discontinues recognising its share of further losses.

The council’s share in the associates gains or losses arising from transactions between itself and its associate are eliminated.

Adjustments are made to the associates accounting policies where they are different from those of the council for the purposes of the consolidated financial statements.

NSW Council



Commentary – Interests in other entities

Appendix H contains guidance on AASB10-12.

Interests in subsidiaries

1. If the percentage ownership interest is not equivalent to the percentage voting rights, then provide details.

2. Where significant restrictions exist in relation to subsidiaries, the financial statements should disclose: (a) details of the restrictions (b) the nature and extent to which protective rights of non-controlling interests can significantly

restrict the entity’s ability to access or use the assets and settle the liabilities of the group (such as when a parent is obliged to settle liabilities of a subsidiary before settling its own liabilities; or approval of non-controlling interests is required, either to access the assets or to settle the liabilities of a subsidiary).

54. AASB12.13 (c) the carrying amount in the consolidated financial statements of the assets and liabilities to which those restrictions apply.

Disposal of a subsidiary that results in loss of control

3. If a council has disposed of a subsidiary which has resulted in a loss of control, the information below should be included.

On [insert date], the council disposed of xx% of its interest in [enter name of entity].

A [profit / loss] of $xx after income tax was attributable to Council from the disposal, and is recorded in the other [income/expenses] line in the Income Statement.

The carrying amount of the net assets of [enter name of entity] at the date of disposal were:

$


Receivables

Inventory

Enter description

Total current assets

Property, plant and equipment

Intangible assets

Enter description

Total non-current assets

Trade payables

Provisions

Enter description

Total current liabilities

Net assets

Total consideration

- Received in cash

- Cash and cash equivalents disposed of

Net cash received

Net profit(/loss) on disposal

NSW Council



(e)

55.

56.

57.

58.

59.

Commentary – Interests in other entities (continued)

60. Consequences of changes in a council’s ownership interest in a subsidiary that do not result in a loss of control

Disposal of ownership interest

During the year Council disposed of xx% of its investment in [name of subsidiary]. Control was, however, maintained and therefore the group structure did not change, although the non-controlling interest increased.

The effect of this transaction on the equity attributable to Council is shown below:

[year end date] $

Consideration received

Less: increase in net assets attributable to Non-Controlling Interest

Increase (/decrease) in Council interest

Note: the increase/decrease to Council interest is recorded in the transactions with non-controlling interest reserve.

Acquisition of ownership interest

During the year Council acquired xx% additional interest in [name of subsidiary]. Control was maintained, and therefore the group structure did not change, although the non-controlling interest decreased. The effect of this transaction on Council interest is shown below:

[year end date] $

NCI interest acquired

Less: consideration paid

Increase (/decrease) in Council interest

Note: the increase/decrease to Council interest is recorded in the transactions with non-controlling interest revenue.

Interests in joint ventures

If the percentage ownership interest is not equivalent to the percentage voting rights, then provide details.

Interests in associates

For each associate that is material to the council, the financial statements should include a description of the nature of the council’s relationship with the associate; for example, the nature of the activities of the associate, and whether they are strategic to the council’s activities.

If the percentage ownership interest is not equivalent to the percentage voting rights, then provide details.

Interest in unconsolidated structured entities

If the council has any unconsolidated structured entities, such as involvement with a community organisation, then the note below needs to be included.

Nature of interests

Provide details, including but not limited to the nature, purpose, size and activities of the structured entity, as well as to how it is financed.

Sponsored unconsolidated structured entities Provide details regarding how Council has determined which structured entities it has sponsored.

Structured entity type

Total income Assets transferred to structured entities

[income categories]

Carrying amount

Fair value

NSW Council



Commentary – Interests in other entities (continued)

For example:

Council considers itself the sponsor of a structured entity where it is primarily involved in the design and establishment of the structured entity. Council also transfers assets to the sponsored structured entity, it markets products associated with the structured entity in its own name, and provides guarantees regarding the structured entity’s performance.

For some sponsored entities, Council has no interest at the reporting date. However, it has sold assets to those entities with no continuing involvement during the reporting period, and has earned fees for selling those assets, and for other transactions carried out for the entity.

Nature of risk Carrying amount of assets and liabilities.

The following table shows the carrying amounts of the assets and liabilities recognised in the council financial statements relating to its interests in unconsolidated structured entities.

Financial statement line item

Loans Invest-ments

Commitments /guarantees

Deriva -tive instru-ments

Total Assets

Total liabil-ities

Total

Maximum exposure to loss

The maximum exposure to loss shown in the table below is contingent in nature, and may arise as a result of the provision of liquidity facilities and other funding commitments provided by the [entity type] to unconsolidated structured entities in which it has an interest at [year-end date]. Provide details of how the maximum exposure to loss was determined.

Structured entity type

Maximum exposure to loss Carrying amount of assets/liabilities that relates to unconsolidated structured entities

Loans Invest-ments

Commitments /guarantees

Total Assets Lia-bilities

Financial support provided without a contractual obligation

Provide details of financial support which was provided by the council without having a contractual obligation to do so, including the type and amount of support provided (including situations in which the council assisted the structured entity in obtaining financial support), and the reasons for the support. Current intentions to provide financial or other support

Provide details of any current intentions to provide financial or other support to an unconsolidated structured entity or entities, including intentions to assist the structured entity in obtaining financial support.

NSW Council



Note 18 Commitments

Actual 2018

$’000

Actual 2017 $’000

(a) Capital commitments (exclusive of GST)

Capital expenditure committed for at the reporting date but not recognised in the financial statements as liabilities:

– Buildings 5,608 2,601 – Plant and equipment - -

Total 5,608 2,601

[Provide a description of the commitment in place] – E.g. The Council has committed to a renovation of the library and recreation facilities which will take place over the next 2 years.

(b) Finance lease commitments

Commitments under finance leases at the reporting date are payable as

follows: – Not later than one year - - – Later than one year and not later than five years - - – Later than five years - -

Total - -

Minimum lease payments - - Less: future finance charges - -

Lease liability Representing lease liabilities: – Current - - – Non-current - -

Total - -

[Provide a description of leases] (c) Non-cancellable operating lease commitments

Commitments under non-cancellable operating leases at the reporting

date but not recognised in the financial statements are payable as follows:

– Not later than one year 695 606 – Later than one year and not later than five years 1,311 1,495 – Later than five years - 48

Total 2,006 2,149

[Provide a description of leases] – E.g. The operating leases in place are for office equipment and heavy

plant and equipment. All operating lease agreements are secured only against the leased asset and are for terms ranging from two to five years. The leases generally have a CPI increase each year. No lease agreements impose any financial restrictions on Council regarding future debt etc.

(d) Repairs and maintenance: investment property

Contractual obligations for future repairs and maintenance - -

Total - -

NSW Council



Commentary – Commitments

1. Councils provide information about commitments as required under specific standards. This includes

contractual commitments: AASB116(74)(c) (a) for the acquisition of property, plant and equipment AASB138(122)(e) (b) for the acquisition of intangible assets AASB140(75)(h) (c) to purchase, construct or develop investment property or for repairs, maintenance or

enhancements AASB117(31)(b), (35)(a)

(d) in relation to finance leases and non-cancellable operating leases.

2. An analysis of the commitments into time bands is only required for lease commitments.

Leasing arrangements

Arrangements involving the legal form of a lease Interpretation 127(4)(10)

3. The accounting for an arrangement in the legal form of a lease must reflect the substance of the arrangement. All aspects and implications of the arrangement must be evaluated to determine its substance, with weight given to those aspects and implications that have an economic effect. All aspects of an arrangement that do not, in substance, involve a lease under AASB 117 Leases must be considered in determining the appropriate disclosures that are necessary to understand the arrangement and the accounting treatment adopted.

Interpretation 127(10)

4. The following must be disclosed for each period for which an arrangement exists:

(a) a description of the arrangement including: (i) the underlying asset and any restrictions on its use (ii) the life and other significant terms of the arrangement (iii) the transactions that are linked together, including any options, and (b) the accounting treatment applied to any fee received, the amount recognised as revenue in

the period, and the line item of the Income Statement in which it is included.


5. The disclosures required above must be provided individually for each arrangement or in aggregate for each class of arrangement. A class is a grouping of arrangements with underlying assets of a similar nature (e.g. power plants).

Lease incentives Interpretation 115(3)

6. All incentives for the agreement of a new or renewed operating lease shall be recognised as an integral part of the net consideration agreed for the use of the leased asset, irrespective of the incentive’s nature or form or the timing of payments.


7. If Council is the lessor then it shall recognise the aggregate cost of incentives as a reduction in rental income over the lease term on a straight-line basis, unless another systematic basis is representative of the time pattern over which the benefit of the leased asset is diminished.


8. If Council is the lessee then it shall recognise the aggregate benefit of incentives as a reduction of rental expense over the lease term on a straight-line basis, unless another systematic basis is representative of the time pattern of the lessee’s benefit from the use of the leased asset.


9. Costs incurred by the lessee, including those in connection with a pre-existing lease (e.g. costs for termination, relocation or leasehold improvements), shall be accounted for by the lessee in accordance with Australian Accounting Standards applicable to those costs, including costs that are effectively reimbursed through an incentive arrangement.

Leasing arrangements AASB117(31)(e), (35)(d)

10. For both finance and operating leases, disclosure is required of a general description of the lessee’s significant leasing arrangements including, but not limited to, the following:

(a) the basis on which contingent rent payable is determined (b) the existence and terms of renewal or purchase options and escalation clauses (c) restrictions imposed by lease arrangements, such as those concerning additional debt

and further leasing.

Finance leases in the financial statements of lessees: sublease payments AASB117(31)(d) 11. Where applicable, disclosure is required of the total of future minimum sublease payments expected

to be received under non-cancellable subleases at the end of the reporting period.

NSW Council



Commentary – Commitments (continued)

Arrangements containing a lease – payments cannot be separated

Interpretation 4(15)(b)

12. Where an arrangement contains an operating lease but Council, as the lessee cannot reliably separate the payments, all payments under the arrangement must be treated as lease payments for the purpose of complying with the disclosure requirements in AASB117. In addition, the lessee must:

(a) disclose those payments separately from other lease payments that do not include non-lease elements

(b) state that the payments include payments for non-lease elements.

Rental income from investment properties

13. Where Councils have material rental income earned from investment properties then the following information should be disclosed:

The future minimum lease payments under non-cancellable operating leases due to Council is:

$’000

Not later than one year

Greater than one year and less than five years

Greater than five years

Total

[Councils should provide a general description of the lessor leasing arrangements]. If Councils have rental income from finance leases then the relevant disclosures are included in paragraph 47 of AASB 117, we believe that finance leases would be rare.

OLG 14. Description of leases should include information to explain:

(a) the type of assets which are leased (b) the terms of the lease, including renewal options (c) specific terms and conditions, e.g. contingent rentals, sale and leaseback arrangements.

NSW Council



Note 19 Contingencies

Contingent liabilities

Council has been named as a defendant in a number of actions for undisclosed damages arising from the flooding of residential properties adjacent to a public road. It is not possible to estimate the potential financial impact of these claims and Council is vigorously defending these actions.

Council provides bank guarantees to the value of $4.5 million to secure its self-insurance license for workers’ compensation. The guarantee is provided to icare NSW.

Defined benefit plan

Council is party to an Industry Defined Benefit Plan under the Local Government Superannuation Scheme, named The Local Government Superannuation Scheme – Pool B (the Scheme) which is a defined benefit plan that has been deemed to be a “multi-employer fund” for purposes of AASB119 Employee Benefits. Sufficient information is not available to account for the Scheme as a defined benefit plan in accordance with AASB119 because the assets to the Scheme are pooled together for all councils.

The amount of employer contributions to the defined benefit section of the Scheme and recognised as an expense for the year ending 30 June 2018 was $XX. The last valuation of the Scheme was performed by [insert name and qualifications] on [insert date], and covers the year ended 30 June 2018.

However, the position is monitored annually and the actuary has estimated that, as at 30 June 2018, a deficit still exists. Effective from 1 July 2009, employers are required to make additional contributions to assist in extinguishing this deficit. The amount of additional contributions included in the total employer contribution advised above is $XX. Council’s expected contribution to the plan for the next annual reporting period is $XX.

The share of this deficit that is broadly attributed to Council is estimated to be in the order of $ XX as at 30 June 2018.

Council’s share of that deficiency cannot be accurately calculated as the Scheme is a mutual arrangement where assets and liabilities are pooled together for all member councils. For this reason, no liability for the deficiency has been recognised in Council’s accounts. Council has a possible obligation that may arise should the Scheme require immediate payment to correct the deficiency.

Contingent assets

Council has been advised that the state government proposes to transfer a significant heritage building and associated land to Council in the near future. Documentation is currently being completed to effect the transfer.

NSW Council



Commentary – Contingencies

Disclosure Contingent liabilities AASB137(86) 1. Unless the possibility of any outflow in settlement is remote, a council shall disclose for each class of

contingent liability at the end of the reporting period, a brief description of the nature of the contingent liability and, where practicable:

(a) an estimate of its financial effect, measured under paragraphs 36-52 of AASB137 (b) an indication of the uncertainties relating to the amount or timing of any outflow (c) the possibility of any reimbursement.

Retirement benefit obligations AASB119(56) 2. Councils receive a standard letter from LG Super each year providing information to include in their

financial statements in respect of the defined benefit funds that councils and employees contribute to. Councils should therefore ensure that the words included in the note are consistent with the specific letter received.

Contingent assets AASB137(89) 3. Where an inflow of economic benefits is probable, a council shall disclose a brief description of the

nature of the contingent assets at the end of the reporting period and, where practicable, an estimate of their financial effect, measured using the principles set out for provisions in paragraphs 36-52 of AASB137.

AASB137(90) 4. It is important that disclosures for contingent assets avoid giving misleading indications of the likelihood of income arising.

Provision and contingent liability arise from the same set of circumstances AASB137(88) 5. Where a provision and a contingent liability arise from the same set of circumstances, a council

makes the disclosures required by paragraphs 84-86 of AASB137 in a way that shows the link between the provision and the contingent liability.

Not practicable to make required disclosures AASB137(91) 6. Where any of the information required to be disclosed by paragraphs 86 and 89 of AASB137 is not

disclosed because it is not practicable to do so, that fact shall be stated.

Disclosure that might seriously prejudice the position of the council AASB137(92) 7. In extremely rare cases, disclosure of some or all of the information required to be disclosed by

paragraphs 84-89 of AASB137 can be expected to prejudice seriously the position of the council in a dispute with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, a council need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed. An example of such disclosure is contained in Appendix D of AASB137.

NSW Council Notes to the financial statements

30 June 2018


Revised Note 20 Financial risk management

Risk management

Council’s activities expose it to a variety of financial risks, including price risk, credit risk, liquidity risk, and interest rate risk. Council’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the council.

Council does not engage in transactions expressed in foreign currencies and is therefore not subject to foreign currency risk.

Financial risk management is carried out by the Finance Section under policies approved by the council.

Council held the following financial instruments at reporting date:

Carrying value Fair value

2018

$’000 2017 $’000

2018 $’000

2017 $’000

Financial assets Cash and cash equivalents 12,797 13,488 12,797 13,488 Receivables 11,776 9,997 11,776 9,997 Investments

- Financial assets at fair value through profit or loss – held for trading 20,728 18,555

20,728 18,555 - Available-for-sale financial assets - - - - - Held-to-maturity 80,250 73,917 80,250 73,917 125,551 115,957 125,551 115,957 Financial liabilities Payables 8,407 6,538 8,407 6,538

Borrowings 18,757 22,133 18,757 22,133 27,164 28,671 27,164 28,671

ALTERNATIVE DISCLOSURE

Remove the table above and add the following disclosure: The fair value of [Receivables, loans, held-to-maturity assets and financial liabilities – amend as relevant] approximates the carrying amount.

Council’s objective is to maximise its return on cash and investments whilst maintaining an adequate level of liquidity and preserving capital. The Finance Section manages the cash and investments portfolio with the assistance of independent advisers. Council has an investment policy which complies with the Local Government Act and Ministerial Investment Order 625. The policy is regularly reviewed by Council and a monthly Investment Report is provided to Council setting out the make-up and performance of the portfolio as required by Local Government regulations.

The risks associated with the investments held are:

price risk – the risk that the capital value of investments may fluctuate due to changes in market prices, whether these changes are caused by factors specific to individual financial instruments or their issuers, or factors affecting similar instruments traded in a market

interest rate risk – the risk that movements in interest rates could affect returns

credit risk – the risk that a contracting entity will not complete its obligations under a financial instrument resulting in a financial loss to Council.

Council manages these risks by diversifying its portfolio and only purchasing investments with high credit ratings or capital guarantees. Council also seeks advice from its independent advisers before placing any cash and investments.

(a) Market risk – price risk and interest rate risk

The impact on result for the year and equity of a reasonably possible movement in the price of investments held and interest rates is shown below. The reasonably possible movements were determined based on historical movements and economic conditions in place at the reporting date.


Code of Accounting Practice and Financial Reporting (Update 26) General Purpose Financial Statements A- 99

Note 20 Financial risk management (continued)

2018 $’000

2017 $’000

AASB131(Aus57.2)(b) Impact of a xx% movement in price of investments: - Equity 2,073 1,800

- Income Statement 2,073 1,800

Impact of a xx% movement in interest rates:

- Equity 207 180

- Income statement 207 180

(b) Credit risk

Council’s major receivables comprise rates, annual charges, user charges and fees. Council manages the credit risk associated with these receivables by monitoring outstanding debt and employing stringent debt recovery policies. Council also encourages ratepayers to pay rates by the due date through incentives.

Credit risk on rates and annual charges is minimised by the ability of Council to recover these debts as a secured charge over the land; that is, the land can be sold to recover the debt. Council is also able to charge interest on overdue rates and annual charges at higher than market rates, which further encourages payment.

There are no significant concentrations of credit risk. The level of outstanding receivables is reported to Council monthly and benchmarks are set and monitored for acceptable collection performance.

Council makes suitable provision for doubtful receivables as required and carries out credit checks on most non-rate debtors.

There are no material receivables that have been subject to a re-negotiation of repayment terms. The profile of Council’s credit risk at reporting date was:

Not yet due Overdue debts Total

< 1 year 1 – 2 years 2 – 5 years > 5 years

$’000 $’000 $’000 $’000 $’000 $’000

Rates and Annual Charges

2018 1,399 579 455 257 108 2,798

2017 1,475 486 245 153 100 2,459

Receivables- - other than rates and annual charges

2018 8,766 162 107 54 26 9,115

2017 6,954 455 196 62 43 7,710



Note 20 Financial risk management (continued)

(c) (d) Liquidity risk

Payables and borrowings are both subject to liquidity risk; that is, the risk that insufficient funds may be on hand to meet payment obligations as and when they fall due. Council manages this risk by monitoring its cash flow requirements and liquidity levels, and by maintaining an adequate cash buffer. Payment terms can be extended and overdraft facilities drawn upon in extenuating circumstances.

Borrowings are also subject to interest rate risk: the risk that movements in interest rates could adversely affect funding costs. Council manages this risk by borrowing long term and fixing the interest rate on a 4-year renewal basis. The Finance Section regularly reviews interest rate movements to determine if it would be advantageous to refinance or renegotiate part or all of the loan portfolio.

The contractual undiscounted cash flows of Council’s payables and borrowings and related interest rates are set out in the maturity table below.

2018

Weighted average Interest rate %

Due within 1 year

Due between 1 & 5 years

Due after 5 years

Total contractual cash flows

Carrying values

$’000 $’000 $’000 $’000 $’000

Payables - 8,407 - - 8,407 8,407

Borrowings 6.2 3,523 7,659 7,575 18,757 18,757

11,930 7,659 7,575 27,164 27,164

2017

Payables - 6,538 - - 6,538 6,538

Borrowings 6.4 3,382 9,753 8,998 22,133 22,133

9,920 9,753 8,998 28,671 28,671

[Describe any breaches to any loan agreements which have occurred during the reporting period.]



Commentary – Financial risk management

Financial instruments AASB7(21),(B5) 1. Disclosure of the measurement bases of financial instruments may include:

(a) the criteria for designating financial assets as available-for-sale (b) whether regular purchases and sales of financial assets are accounted for at trade

date or at settlement date (c) how net gains or net losses on each category of financial instruments are

determined (e.g. whether the net gains or losses on items at fair value through profit or loss include interest or dividend income)

(d) the criteria the council uses to determine that there is objective evidence that an impairment loss has occurred

(e) when the terms of financial assets that would otherwise be past due or impaired have been renegotiated, the accounting policy for financial assets that are subject to renegotiated terms.

Financial assets and liabilities at fair value through profit or loss AASB139(9) 2. A financial asset or financial liability is classified as at fair value through profit or loss if it is either: (a) classified as held-for-trading (acquired or incurred principally for the purpose of selling or

repurchasing in the near future, part of a portfolio of identified financial instruments that are managed together and for which there is evidence of recent actual pattern of short-term profit-taking, or a derivative that is not a designated hedging instrument), or

(b) upon initial recognition designated as at fair value through profit or loss.

AASB7(B5)(a) 3. A council that has such instruments will need to provide disclosure of the related accounting policy in accordance with AASB 101. AASB 7 Financial Instruments: Disclosure states that this policy disclosure may include:

(a) the nature of the financial assets or financial liabilities the council has designated as at fair value through profit or loss

(b) the criteria for so designating such financial assets or financial liabilities on initial recognition (c) how the council has satisfied the conditions for such designation (d) a narrative description of: (i) the circumstances underlying the measurement and recognition inconsistency that

would otherwise arise, and/or (ii) how designation as at fair value through profit or loss is consistent with the council’s

documented risk management or investment strategies.

Nature and extent of risks arising from financial instruments AASB7(31),(32) 4. . The financial statements shall include qualitative and quantitative disclosures that enable users to

evaluate the nature and extent of risks arising from financial instruments to which the council is exposed at the end of the reporting period. These risks typically include, but are not limited to, credit risk, liquidity risk and market risk.

Qualitative disclosures AASB7(33) 5. The qualitative disclosures shall discuss, for each type of risk: (a) the exposures to the risk and how they arise (b) the council’s objectives, policies and processes for managing the risk, and the methods

used to measure the risk (c) any changes in (a) or (b) from the previous period. Quantitative disclosures AASB7(34)(a),(c) 6. A council shall provide, for each type of risk, summary quantitative data on risk exposure at the

end of the reporting period based on information provided internally to key management personnel and any concentrations of risk. This information should be presented in narrative form.

Credit risk AASB7(35),(36) 7. For each class of financial instrument, the council shall disclose: (a) the maximum exposure to credit risk and any related collateral held (b) information about the credit quality of financial assets that are neither past due nor

impaired (c) the carrying amount of financial assets that would otherwise be past due or impaired

whose terms have been renegotiated (d) an analysis of the age of financial assets that are past due but not impaired



Commentary – Financial risk management (continued)

(e) an analysis of individual financial assets that are determined to be impaired.

AASB7(34)(c), (B8) AASB7(IG18)

8. Entities should also explain any concentrations of credit risk if they are not apparent from the other information provided. Concentrations of credit risk could arise from exposure to particular industry sectors or geographical regions, from specific credit ratings or other measure of credit quality, and from a limited number of individual counterparties or groups of closely related counterparties.

AASB7(37)(b) 9. Entities must provide an analysis of financial assets that are individually determined to be

impaired. However, there is no specific requirement to disclose the ageing of those financial assets. Other forms of analyses will be equally acceptable.

AASB7 Appendix A AASB7(37)(a)

10. A financial asset is past due when a counterparty has failed to make a payment when contractually due. AASB7 requires disclosure of an analysis of the age of financial assets that are past due but for which there is no evidence at the reporting date that the assets are impaired.

Market risk

11. Councils should determine a reasonably possible movement in the relevant index e.g. interest rates for the next 12 months. If the reasonable possible movement would not cause a material impact on Council’s financial statements, then this fact may be stated rather than the sensitivity analysis being performed.

Allowance account AASB139(63) AASB7(B5)(d)

12. Financial assets that are carried at amortised cost, such as loans and receivables, must be written down for impairment if there is objective evidence that an impairment loss has been incurred. The standard provides a choice to recognise the loss as a direct reduction from the carrying amount or through use of an allowance account. Where an allowance account is used, additional explanations must be included in the accounting policy note, being:

(a) the criteria for determining when the carrying amount of impaired financial assets is reduced directly and when the allowance account is used, and

(b) the criteria for writing off amounts charged to the allowance account against the carrying amount of impaired financial assets.

61. Collateral accepted AASB7(15) 13. Where a council holds collateral (of financial or non-financial assets) that it is permitted to sell or

re-pledge in the absence of default by the owner of the collateral, it shall disclose: (a) the fair value of the collateral held (b) the fair value of any such collateral sold or re-pledged, and whether the council has an

obligation to return it; and (c) any terms and conditions associated with its use of this collateral.

AASB7(38) 14. When a council has obtained financial or non-financial assets during the period by taking possession of collateral held (i.e. property), it shall disclose the nature and carrying amount of the assets obtained and, if the assets are not readily convertible into cash, its policies for disposing of such assets or for using them in its operations.

62. Impairment of financial assets AASB7(20)(d) 15. In addition to the nature and amount of any impairment loss recognised in profit and loss, entities

shall also disclose the amount of interest income accrued on impaired financial assets in accordance with paragraph AG93 of AASB139, where applicable.

63. Renegotiated financial assets that would otherwise be past due or impaired AASB7(36)(d),(B5)(g)

16. If the council has any financial assets that would otherwise be past due or impaired but that have been renegotiated, it must disclose their carrying amount and should also consider disclosing its accounting policy for financial assets that are the subject of renegotiated terms.




Liquidity risk AASB7(34),(a),(39) 17. Information about liquidity risk shall be provided by way of: (a) a maturity analysis for non-derivative financial liabilities (including issued financial

guarantee contracts) that shows the remaining contractual maturities (b) a maturity analysis for derivative financial liabilities, and (c) a description of how the council manages the liquidity risk inherent in (a) and (b).

AASB7(B11F) 18. In describing how liquidity risk is being managed, a council should consider discussing whether it:

(a) has committed borrowing facilities or other lines of credit that it can access to meet liquidity needs

(b) holds deposits at central banks to meet liquidity needs (c) has very diverse funding sources (d) has significant concentrations of liquidity risk in either its assets or its funding sources (e) has internal control processes and contingency plans for managing liquidity risk (f) has instruments that include accelerated repayment terms (e.g. on the downgrade of the

council’s credit rating) (g) has instruments that could require the posting of collateral (e.g. margin calls for

derivatives) (h) has instruments that allow the council to choose whether it settles its financial liabilities

by delivering cash (or another financial asset) or by delivering its own shares, or (i) has instruments that are subject to master netting agreements.

Maturity analysis AASB7(3),(B11D) 19. The amounts disclosed should be the amounts expected to be paid in future periods, determined

by reference to the conditions existing at the end of the reporting period.

AASB7(B11C)(c) 20. The specific time buckets presented are not mandated by the standard but are based on what is reported internally to the key management personnel.

21. As the amounts included in the maturity tables are the contractual undiscounted cash flows, these amounts will not necessarily reconcile to the amounts disclosed in the Statement of Financial Position, in particular as far as borrowings are concerned. Councils can choose to add a column with the carrying amounts which ties into the Statement of Financial Position and a reconciling column if they wish, but this is not mandatory.

AASB7(B10A) 22. If an outflow of cash could occur either significantly earlier than indicated, or be for significantly different amounts from those indicated in the council’s disclosures about its exposure to liquidity risk, the council shall state that fact and provide quantitative information that enables users of its financial statements to evaluate the extent of this risk. This disclosure is not necessary if that information is included in the contractual maturity analysis.

Financing arrangements AASB107(50)(a) AASB7(39)(b)

23. Committed borrowing facilities are a major element of liquidity management. Councils disclose undrawn borrowing facilities that may be available for future operating activities and to settle capital commitments, indicating any restrictions on the use of these facilities – refer to Note 16.

Market risk AASB7(40)(a),(b) 24. Entities shall disclose a sensitivity analysis for each type of market risk (interest rate and other

price risk) to which a council is exposed at the end of the reporting period, showing how profit or loss and equity would have been affected by ‘reasonably possible’ changes in the relevant risk variable, as well as the methods and assumptions used in preparing such an analysis.

AASB7(40)(c) 25. . If there have been any changes in methods and assumptions from the previous period, this must be disclosed, together with the reasons for such a change.

OLG 26. . 64. Councils should ensure that the reasonably possible movements used are realistic for the current economic climate. The percentage figures included in the Code are for illustrative purposes only.

Note: reasonably possible increases do not have to be the same as reasonably possible decreases. For example, a reasonably possible movement in interest rates could be a 1% decrease and 0.25% increase.

Interest rate risk 2

6 65. Sensitivity to changes in interest rates is normally only relevant to financial assets or financial

liabilities bearing floating interest rates. However, such sensitivity will also be relevant to fixed-rate financial assets and financial liabilities which are re-measured to fair value.




Fair value disclosures Financial instruments carried at other than fair value AASB7(25),(29) 27. A council shall disclose the fair value for each class of financial assets and financial liabilities in a

way that permits it to be compared with its carrying amount. Fair values do not need to be disclosed for the following:

(a) where the carrying amount is a reasonable approximation of fair value (b) investments in equity instruments (and derivatives linked to such equity instruments) that

do not have a quoted market price and that are measured at cost in accordance with AASB139 because their fair value cannot be measured reliably

(c) a contract containing a discretionary participation feature (as described in AASB4 Insurance Contracts) where the fair value of that feature cannot be measured reliably.

Carrying amounts are a reasonable approximation of fair value 28. If all of the financial assets and liabilities of a council are held at fair value or have fair value which

approximates carrying value (e.g. receivables and payables), then the table in Note 20 does not need to be included. Instead, include a statement that the fair value of receivables, loans, held-to-maturity assets and financial liabilities (as relevant) approximate their carrying amounts.

29. The appropriate level is determined on the basis of the lowest level input that is significant to the fair value measurement.

Additional information where quantitative data about risk exposure is unrepresentative AASB7(35),(42) 30. If the quantitative data disclosed is unrepresentative of the council’s exposure to risk during the

period, the council shall provide further information that is representative. If the sensitivity analyses are unrepresentative of a risk inherent in a financial instrument (e.g. where the year-end exposure does not reflect the exposure during the year), the council shall disclose that fact and the reason why the sensitivity analyses are unrepresentative.



Note 21 Material budget variations

Council’s original budget was adopted by Council on 23 June 2017 and is unaudited. The original projections

on which the budget was based have been affected by a number of factors. These include state and federal government decisions, including new grant programs, changing economic activity, the weather, and by decisions made by the council. Material variations of more than 10% are explained below.

Revenues

1. Interest and investment revenue

Revenue was up $2.3 million on budget (70%). Council has been successful in obtaining large capital grants to fund major projects. The timing of payments has provided Council with some opportunity to invest some of these funds until they are required by the project.

2. Operating grants and contributions

Operating grants and contributions were down $3.4 million on budget (24%). This is due to Financial Assistance Grants (FAGs) not being received within the year.

3. Capital grants and contributions

Capital grants and contributions were down $10.6 million on budget (30%). This is due to expected grants not received within the year.

4. Other revenues

The increase of $1.8 million on budget (70%) arises due to other revenues in previous years shown as user charges instead of other revenue.

Expenses

1. Borrowing costs

Actual borrowing expense was $0.35 million under budget (22%). Council has been able to renegotiate a loan for a better than initially anticipated interest rate, together with timing differences that may occur due to the time of the year that the loan is drawn initially, as all loans are budgeted to be fully drawn in the early part of the financial year.

2. Materials and contracts

An increase on budget of $3.6 million (14%) is mainly due to a shift in expenditure to asset maintenance. The original budget has been revised throughout the year to reflect this shift in the quarterly review process.

3. Depreciation and amortisation

An increase on budget of $2.8 million (23%). The main cause of this variation is the impact of the building revaluation that occurred.



Commentary – Material budget variations

OLG 1. Where the variance from budget is greater than 10% for the Income Statement, Note 2(a), or the statement of cash flows, councils should provide sufficient explanations to explain such variances.



Note 22 Discontinued operation

(a) Description

(Provide a description of the discontinued operation)

Financial information relating to the discontinued operation for the period to the date of transfer is set out below.

(b) Income statement and cash flow information

The Income Statement and cash flow information presented are for the X months ended XX/XX/2018 (2018 column) and the year ended 30 June 2017.

Actual 2018

Actual 2017

$'000 $'000

Revenue - - Expenses - -

Operating result of discontinued operations - - Operating result from discontinued operations - -

Net cash inflow (/outflow) from ordinary activities - - Net cash inflow (/outflow) from investing activities - - Net cash inflow (/outflow) from financing activities - -

Net increase (/decrease) in cash generated by the discontinued operations - -

(c) Carrying amounts of assets and liabilities

The carrying amounts of assets and liabilities transferred as at XX/XX/2018 (2018 column) and 30 June 2017 are:

Infrastructure, property, plant and equipment - - Receivables - - Inventories - -

Total assets - - Payables - - Provision for employee benefits - -

Total liabilities - - Net assets - -

Carrying amount of net assets transferred - -



Commentary – Discontinued operation

Definitions Discontinued operation AASB5(32),(Appendix A) 1. A discontinued operation is a component of a council that either has been disposed of or is

classified as held for sale, and: (a) represents a separate major line of business or geographical area of operations; (b) is part of a single, co-ordinated plan to dispose of a separate major line of business or

geographical area of operations; or (c) is a subsidiary acquired exclusively with a view to resale.

AASB5(Appendix A) 2. A component of a council comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the council.

General requirement AASB5(30) 3. A council shall present and disclose information that enables users of the financial statement to

evaluate the financial effects of discontinued operations.

In the Income Statement AASB5(33)(a) 4. A council shall disclose a single amount, comprising the total of: (a) the profit or loss of discontinued operations; and (b) the gain or loss recognised on the measurement to fair value less costs to sell, or on the

disposal of the assets or disposal group(s) constituting the discontinued operation.

In the Income Statement or in the notes Analysis AASB5(33)(b) 5. An analysis of the single amount described above must be made into: (a) the revenue, expenses and profit or loss of discontinued operations (b) the gain or loss recognised on the measurement to fair value less costs to sell, or on the

disposal of the assets or disposal group(s) constituting the discontinued operation.

This analysis may be presented in the notes or on the face of the Income Statement. If it is presented on the face of the Income Statement, it must be presented in a section identified as relating to discontinued operations; that is, separately from continuing operations.

Net cash flows AASB5(33)(c) 6. Disclosure is required of the net cash flows attributable to the operating, investing and financing

activities of discontinued operations. These disclosures may be presented either in the notes or on the face of the financial statements.

Prior periods AASB5(34) 7. A council must re-present the disclosures for prior periods presented in the financial statement

such that the disclosures relate to all operations that have been discontinued by the reporting date for the latest period presented.



Note 23 Fair value measurement

The council measures the following assets and liabilities at fair value on a recurring basis:

infrastructure, property, plant and equipment

investment property

financial assets

[add details of other recurring assets]. During the reporting period the council has also measured the following assets at fair value on a non-recurring basis:

non-current assets classified as held for sale.

[Provide reasons for the non-recurring measurement. For example, the carrying amount of the non-current assets held for sale was higher than its fair value and therefore the assets were written down to fair value.] Fair value hierarchy

AASB13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a

level in the fair value hierarchy as follows:

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities that the council can access at the measurement date.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 Unobservable inputs for the asset or liability.

The table below shows the assigned level for each asset and liability held at fair value by the Council:

2018 Note Level 2 ($’000) significant observable inputs

Level 3 ($’000) significant unobservable inputs

Total ($’000)

2018 2017 2018 2017 2018 2017

Recurring fair value measurements

Financial assets

Investments 6b

- At fair value through profit or loss

19,287 17,341 1,441 1,214 20,728 18,555

- Available for sale - - - - -

- Other - -

Total financial assets 19,287 17,341 1,441 1,214 20,728 18,555

Financial liabilities

- - - - - - -

Total financial liabilities

- - -

Investment properties 11 - - - - - -

Infrastructure, property, plant and equipment

10

-Plant and equipment - - 7,198 6,606 7,198 6,606

- Office equipment - - 635 686 635 686

- Furniture and fittings - - 512 534 512 534

- Leased plant and equipment

- - - - - -

- Land – operational land

68,476 68,017 - - 68,476 68,017

- Land – community - - 34,559 34,351 34,559 34,351

Land under roads - - 1,984 2,922 1,984 2,922

- Land improvements - - 2,503 899 2,503 899

- Buildings 76,993 73,030 - - 76,993 73,030

- Other structures - - 31,457 23,350 31,457 23,350

- Roads, bridges and footpaths

- - 256,807 253,011 256,807 253,011

- Bulk earthworks - - - - - -

- Water and Sewerage 307,892 300,488 - - 307,892 300,448



– networks

- Stormwater drainage - - 76,677 76,726 76,677 76,726

- Swimming pools and recreational assets

- - - - - -

- Other infrastructure - - - - - -

- Work in progress - - 49,092 29,013 49,092 29,013

- Other assets - - 3,262 3,268 3,262 3,268

- Tip asset - - 478 584 478 584

- Quarry assets - - 17 17 17 17

- Other remediation assets

- - - - - -

Total infrastructure, property, plant and equipment 453,361 458,876 465,181 414,626 918,542 873,502

Non-recurring fair value measurements

Non-current assets held for sale

9

- Enter details - - - - - -

[describe any other assets held at non-recurring fair value]

- - - - - -

Valuation techniques Level 2 measurements

[Describe the valuation techniques and the inputs used in the fair value measurement. If there has been a change in the technique, then this change and the reason for making it should be disclosed.] Level 3 measurements Valuation techniques The following information should be provided for all Level 3 recurring and non-recurring fair value measurements:

the valuation techniques and the inputs used in the fair value measurement

any change in the technique, and the reason for the change

how the council decides its valuation policies and procedures and analyses changes in fair value measurements from period to period

Unobservable inputs

The following table summarises the quantitative information relating to the significant unobservable inputs used in deriving the various Level 3 asset class fair values.

Class

Fair value (30/6/18) $'000

Valuation technique(s)

Unobservable inputs

Financial assets

Fair value on initial recognition

1,441 Advisor report Unit price

Held-to-maturity 80,250 Bank confirmations Interest rate

Financial liabilities

IPPE

Plant, equipment, furniture, fittings and office equipment

8,347 Cost approach used to approximate fair value

Gross replacement cost, useful life and residual value

Community land 34,559 Land values obtained from the NSW Valuer-General

Land value, land area

Land under roads 1,984 Adjoining blocks averaged m2 rate

Land value, land area

Land improvements 2,503 Cost approach used to approximate fair value

Asset condition, remaining lives, residual value



Other structures 32,207 Cost approach used to approximate fair value


Roads 256,806 Unit rates per m2 or length


Library books 285 Cost approach used to approximate fair value

Asset condition, remaining lives

Other – art works 2,977 Cost approach used to approximate fair value

The level of appreciation of the asset

Stormwater drainage 76,677 Unit rates per m2 or length


Reconciliation of movements

A reconciliation of the movements in recurring fair value measurements allocated to Level 3 of the hierarchy is provided below:

2018 ($’000) 2017 ($’000)

Balance at 1 July 66.

Total gains or losses for the period

Recognised in profit or loss – realised (refer to Note 5)

Recognised in other comprehensive income – revaluation surplus

Other movements

Purchases

Sales

Transfers into Level 3

Transfers out of Level 3

Other movements

Balance at 30 June

[Provide details of the reasons for any transfers identified in the table above] Transfers between levels of the hierarchy

The following assets/liabilities that are measured at fair value on a recurring basis have been subject to a transfer between levels of the hierarchy. Council’s policy for determining when transfers into different levels of the hierarchy have occurred at [the date of the event or change in circumstances that caused the transfer / the beginning of the reporting period / the end of the reporting period] (delete as applicable). Transfers from Level 2 to Level 3

Asset/liability $’000

[insert relevant information]

[Provide details of the reasons for the transfers] Transfers from Level 3 to Level 2

Asset/liability $’000

[insert relevant information]

[Provide details of the reasons for the transfers] Highest and best use

[If applicable, provide details of the assets that have a different highest and best use from the current use, and why the non-financial asset is being used in a manner that differs from its highest and best use. Otherwise, include a sentence stating that all assets valued at fair value in this note are being used for their highest and best use.]



Commentary – Fair value measurement

1. In order for an asset/liability to be disclosed as Level 1 of the fair value hierarchy, there needs to be a

quoted market for an identical asset; i.e. shares in listed entities. Councils are not expected to have any Level 1 assets or liabilities. Level 1 references in the Code have been removed since it is not expected that councils have any assets at Level 1.

2. This note should include only assets and liabilities carried or disclosed at fair value. Cash, term deposits, payables, borrowings etc. are not included in Note 23.

3. The asset classes included in Note 23 may be more detailed than those disclosed in Note 9. Councils will need to determine the asset classes appropriate under AASB13 based on the level of uncertainty and subjectivity in the valuations.

4. For Level 2 and 3, councils need to provide a description of the valuation technique(s) and the inputs used in the fair value measurement. If there has been a change in valuation technique (for example, changing from a market approach to an income approach), this change should be disclosed along with the reason for it.

5. A council shall determine appropriate classes of assets and liabilities for these fair value disclosures on the basis of the following:

(a) the nature, characteristics and risks of the asset or liability; and (b) the level of the fair value hierarchy within which the fair value measurement is categorised.

The number of classes may need to be greater for fair value measurements categorised within Level 3 of the fair value hierarchy because those measurements have a greater degree of uncertainty and subjectivity. Determining appropriate classes of assets and liabilities for which disclosures about fair value measurements should be provided requires judgement.

A council needs to provide sufficient information to permit reconciliation to the line items presented in the Statement of Financial Position.

6. Example disclosures for basis for valuation for investment property:

The council obtains independent valuations of its investment property portfolio on an annual basis, and at the end of each reporting period the financial statements reflect the most up-to-date valuation.

The best evidence of fair value is the current price in an active market for similar assets. The following information is used where necessary:

(a) current prices in an active market for different types of properties, or similar properties in a less active market

(b) discounted cash flow projections based on management’s best estimates of future cash inflows and outflows.

All investment property valuations are included in Level 3 of the hierarchy. The key unobservable input to the valuation is the price per square metre.

The fair value of investment properties is determined on an annual basis by independent, qualified valuers who have experience in the location of the property. The council reviews the valuation reports and discusses significant movements with the valuers.

As at [year end date] the valuation of the investment property portfolio was performed by FGH Valuers. There has been no change to the valuation process during the reporting period.

7. Example unobservable inputs for investment property

Asset/liability category

Carrying amount (at fair value)

Key unobservable inputs

Expected range of inputs

Investment property

$1m Estimated rental value (/m2)

Rental growth (per annum)

Long-term vacancy rates

Discount rate

$700 - $1,000 /m2

2.5% - 3.5%

9% - 10.5%

8% - 9%



Note 24 Related Party Disclosures

Key management personnel

Key management personnel (KMP) of the council are those persons having the authority and responsibility for

planning, directing and controlling the activities of the council, directly or indirectly.

The aggregate amount of KMP compensation included in the Income Statement is:

Compensation 2018 ($’000) 2017($’000)

Short-term benefits 1,314 1,299

Post-employment benefits - -

Other long-term benefits - -

Termination benefits - 42

Total 1,314 1,341

Other transactions with KMP and their related parties

Council has determined that transactions at arm’s length between KMP and Council as part of Council

delivering a public service objective (e.g. access to library or Council swimming pool by KMP) will not be

disclosed.

Nature of the transaction

Amount of the transactions during the year ($)

Outstanding balances, including commitments at year end

Terms and conditions

Provisions for doubtful debts related to the amount of outstanding balances

The expense recognised during the period relating to bad or doubtful debts due from related parties

Cleaning services1

$100,000 Council owes $5,000

30-day terms on invoices

- -

Supply of building materials2

$2,000,000 Council owes $60,000

30-day terms on invoices

- -

67. 1 Council entered into a 3-year contract in 2016 with CleanMyOffice Limited, a company which is controlled by

a member of the KMP of the council. The total contract value is $350,000 and the contract was awarded

through a preferred supplier arrangement based on market rates for these services. Amounts are payable on

a quarterly basis for the duration of the contract.

2 Council purchased aggregate concrete during the year from ABJ Pty Ltd, a company which has a member of

Council’s KMP as a director. Amounts were billed based on normal rates for such supplies and were due and

payable under normal payment terms following the council’s procurement processes.

Other related parties

Type of related party: subsidiary /associate/ joint ventures /other (please describe)

Nature of the transactions

Amount of the transactions during the year

Outstanding balances, including commitments at year end

Terms and conditions

Provisions for doubtful debts related to the amount of outstanding balances

The expense recognised during the period relating to bad or doubtful debts due from related parties



Associate Payments for waste disposal

$30,000 -

Payments are shared between the parties in the Associate based on volume

- -

Subsidiary Grants and free use of space

$41,000 -

Grant provided as part of funding agreement to subsidiary. Subsidiary staff use two offices free of charge in Council’s corporate offices

- -



Commentary – Related Party Transactions

1. Refer to Appendix I for specific implementation guidance for AASB 124 Related Party Disclosures.

2. The fact that a transaction occurred at arm’s length does not provide exemption from disclosure.

3. Transactions of a similar nature may be aggregated for the purpose of the disclosures.

4. Transactions with related parties include those transactions which were undertaken for nil consideration.

5. Comparatives are not required in this note for the first year of adoption. However, they will be disclosed on an ongoing basis.

6. Ensure that materiality is considered as part of the disclosure and whether the disclosures will affect the

decisions of the users – refer Appendix H.



Note 25 Events occurring after reporting date

(a) On 10 July 2018 Council’s administration building was destroyed by fire. Council is insured for the

building but it is presently not known whether the insurance is adequate to cover the full cost of reconstruction and business interruption.

(b) On 1 September 2018 NSW Council entered into a waste disposal contract with ABC Waste Limited.

Under this contract ABC Waste Ltd will take responsibility for management of the Council's waste disposal

facility and collection and disposal of all domestic and trade waste in the Council area for a period of ten

years. The fee payable to ABC Waste Limited depends on the amount of waste generated, and is

estimated to be in the region of $80 million over the ten year period. Forty-seven employees ceased to be

employed by the Council and became employees of ABC Waste Limited as a result of the arrangement.

The financial effects of the above events have not been brought to account at 30 June 2018.



Commentary – Events occurring after reporting date

Definitions AASB110(3) 1. Events after reporting date are those events, favourable and unfavourable, that occur between the

reporting date and the date when the financial statement is authorised for issue. Two types of events can be identified:

(a) those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and

(b) those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).

AASB110(8) 2. A council shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting date. For example:

(a) the settlement of a court case confirming the council had a liability at the reporting date (b) the discovery of fraud or errors that show the financial statements are incorrect.

AASB110(10) 3. A council shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting date. For example:

(a) the decline in the market value of an investment between reporting date and the date when the financial statements are authorised for issue.

AASB110(21) 4. If non-adjusting events are material and could influence economic decisions taken on the basis of the financial statements, then the council should disclose:

(a) the nature of the event; and (b) an estimate of its financial effect, or a statement that the estimate cannot be made.

For example: (a) the destruction of the council’s administration building by fire (b) commencement of major litigation arising from events occurring after balance date (c) announcement of proposed amalgamations or boundary changes.

AASB101(76) 5. In respect of loans classified as current liabilities, if the following events occur between the end of the reporting period and the date that the financial statements are authorised for issue, those events qualify for disclosure as non-adjusting events in accordance with AASB110 Events after the Reporting Period:

(a) refinancing on a long-term basis (b) rectification of a breach of a long-term loan agreement (c) the receipt from the lender of a period of grace to rectify a breach of a long-term loan

agreement ending at least 12 months after the reporting period.

Updating disclosure about conditions at the end of the reporting period

AASB110(19),(20) 6. If a council receives information after the reporting period about conditions that existed at the end of the reporting period, it shall update disclosures that relate to these conditions in light of the new information. An example is where evidence becomes available, after the reporting period, about a contingent liability that existed at the end of the reporting period. In addition to considering whether it should recognise or change a provision under AASB137 Provisions, Contingent Liabilities and Contingent Assets, a council updates its disclosures about the contingent liability in the light of that evidence.

NSW Council Notes to the financial statements

30 June 2018


Note 26 Statement of developer contributions as at 30 June 2018

(a) Summary of developer contributions

Purpose

Opening balance

$’000

Contributions received during

year

Interest & investment

income earned

during year $’000

Expended during year $’000

Internal borrowings during the

year $’000

Held as restricted

asset $’000

Cash $’000

Non-cash $’000

Drainage 1,685 170 649 104 - - 1,959 Roads 1,532 733 1,371 95 (603) - 1,757 Traffic facilities - - - - - - - Parking 513 162 - 30 (10) - 695 Open space 2,500 298 198 148 (415) - 2,531 Community facilities 4,799 767 - 294 (7) - 5,853 Other (specify if material) 1,981 376 - 33 (124) - 2266

S94 under plans 13,010 2,506 2,218 704 (1,159) - 15,061 S94 not under plans 73 - - 4 - - 77 S94A levies - - - - - - - Planning agreements - 2,468 - - (62) - 2,406 Section 64 23,993 4,047 3,288 1,170 (855) - 28,355

Total contributions 37,076 9,021 5,506 1,878 (2,076) - 45,899

Council has significant obligations to provide Section 94 infrastructure in new release areas. It is possible that the funds contributed may be less than the cost of this infrastructure, requiring Council to borrow or use general revenue to fund the difference (refer to Note 26).

[Repeat where there are multiple plans].

(b) Contribution plan no. 1

Purpose

Opening balance

$’000


year


income earned

during year $’000



year $’000

Held as restricted

asset $’000

Cash $’000

Non-cash $’000

Drainage 1,685 170 649 104 - - 1,959 Roads 1,532 733 1,371 95 (603) - 1,757 Traffic facilities - - - - - - - Parking 513 162 - 30 (10) - 695 Open space 2,500 298 198 148 (415) - 2,531 Community facilities 4,799 767 - 294 (7) - 5,853 Other (specify if material) 1,981 376 - 33 (124) - 2266 Total 13,010 2,506 2,218 704 (1,159) - 15,061



Note 26 Statement of developer contributions as at 30 June 2018 (continued)

(c) Contributions not under plans

Purpose

Opening balance

$’000


year


income earned

during year $’000



year $’000

Held as restricted

asset $’000

Cash $’000

Non-cash $’000

Drainage - - - - - - - Roads - - - - - - - Traffic facilities 73 - - 4 - - 77 Parking - - - - - - - Open space - - - - - - - Community facilities - - - - - - - Other (specify if material) - - - - - - - Total 73 - - 4 - - 77

NSW Council



Commentary – Statement of developer contributions

OLG 1. A council must disclose the following information for each contributions plan in the notes to its annual financial report:

(a) the opening and closing balances of money held by the council for the accounting period covered by the report

(b) the total amounts received by way of monetary Section 94 contributions or Section 94A levies during that period, by reference to the various kinds of public amenities or services for which they have been received

(c) the total amounts spent in accordance with the contributions plan during that period, by reference to the various kinds of public amenities or services for which they have been spent

(d) the outstanding obligations of the council to provide public amenities or services by reference to the various kinds of public amenities or services for which monetary Section 94 contributions or Section 94A levies have been received during that or any previous accounting period.

2. Some councils previously disclosed general fund expenditure incurred in lieu of future developer contributions as ‘expended in advance’. As Note 26 is a reconciliation of developer contributions received to date, the money ‘expended in advance’ by general fund is not included in the statement.

NSW Council



Note 27 Results by Fund

Income Statement by Fund

Actual 2018

$’000

Actual 2018

$’000

Actual 2018

$’000

General Water Sewer

Income from continuing operations Revenue: Rates and annual charges 31,559 3,748 - User charges and fees 9,974 7,440 7,174 Interest and investment revenue 3,027 1,034 1,530 Other revenues 4,146 269 7 Grants and contributions provided for operating purposes 10,618 129 128 Grants and contributions provided for capital purposes 11,804 29,980 3,652 Other income: Net gain from the disposal of assets 979 (75) 252 Net share of interests in joint ventures and associates using the equity method 7 - -

Total income from continuing operations 72,114 42,525 12,743

Expenses from continuing operations Employee benefits and on-costs 25,175 1,803 1,268 Borrowing costs 1,132 135 - Materials and contracts 26,015 2,197 1,689 Depreciation and amortisation 9,164 3,001 2,883 Impairment - - - Other expenses 377 4,215 2,475 Interest and investment losses - - - Net loss from the disposal of assets - Net share of interests in joint ventures and associates using the equity method - - -

Total expenses from continuing operations 61,863 11,351 8,315

Operating result from continuing operations 10,251 31,174 4,428

Operating result from discontinued operations - - -

Net operating result for the year 10,251 31,174 4,428

Attributable to: – Council 10,251 31,174 4,428 – non-controlling interests - - -

Net operating result for the year before grants and contributions provided for capital purposes (1,553) 1,194 776

NSW Council



Note 27 Results by fund (continued)

Statement of financial position by fund

Actual 2018

$’000

Actual 2018

$’000

Actual 2018

$’000

General Water Sewer

ASSETS

Current assets

Cash and cash equivalents 8,418 3,224 1,155

Investments 36,491 2,050 22,700

Receivables 9,196 1,883 616

Inventories 1,542 416 59

Other 29 - -

Non-current assets classified as held for sale - - -

Total current assets 55,676 7,573 24,530

Non-current assets

Investments 5,237 21,400 13,100

Receivables 81 - -

Inventories 5,746 - -

Infrastructure, property, plant and equipment 556,567 207,844 154,131

Investments accounted for using equity method 362 - -

Investment property - - -

Intangible assets - - -

Other - - -

Total non-current assets 567,993 229,244 167,231

Total assets 623,669 236,817 191,761

LIABILITIES

Current liabilities

Payables 7,680 1,535 -

Income received in advance - - -

Borrowings 3,443 - -

Provisions 5,212 471 219

Total current liabilities 16,335 2,006 219


Payables - - -

Borrowings 13,343 1,971 -

Provisions 1,113 - -

Total non-current liabilities 14,456 1,971 -

Total liabilities 30,791 3,977 219

Net assets 592,878 232,840 191,542

EQUITY

Accumulated surplus 351,873 126,686 120,009

Revaluation reserves 241,005 106,154 71,533

Other reserves (specify)

Council interest 592,878 232,840 191,542

Non-controlling interest - - -

Total equity 592,878 232,840 191,542

NSW Council



Commentary – Results by fund

OLG 1. The Statement of Financial Position and Income Statement are to be disclosed by fund in order to ascertain the financial position of each fund.

2. No comparatives are required for this note.

3. Results are to be shown as gross numbers, i.e. before any consolidation adjustments. This means that adding the numbers across the funds may not necessarily equal the consolidated totals.

4. General fund refers to all Council activities except water and sewer.

5. The relevant operating result used for water and sewer is the ‘Operating result less grants for acquisition of assets’ as reported in Special Schedule 3. This result, based on the figures in NSW Council, is: $’000 Water 1,194 Sewer 776

NSW Council



Note 28(a) Statement of Performance Measures – consolidated results

Amounts2018 $’000

2018 indicators

2017 indicators

Benchmarks

68. 1. Operating performance >0

69. Total continuing operating revenue1 excluding capital grants and contributions less operating expenses 1,421

1.7% 9.1%

70. Total continuing operating revenue1 excluding capital grants and contributions

82,972

71. 2. Own source operating revenue >60%

72. Total continuing operating revenue1 excluding all grants and contributions 69,097 55.1% 69.9%

73. Total continuing operating revenue1 inclusive of all grants and contributions

125,408

74. 3. Unrestricted current ratio >1.5x

75. Current assets less all external restrictions 37,182 2.7x 3.4x

76. Current liabilities less specific purpose liabilities 13,615

77. 4. Debt service cover ratio >2x

78. Operating results1 before capital excluding interest and depreciation/impairment/ amortisation 14,736

317.4x 489.4x

79. Principal repayments (from the statement of cash flows) + borrowing costs (from the Income Statement)

4,643

5. Rates and annual charges outstanding percentage

<5% Metro <10% Regional & Rural

Rates and annual charges outstanding

Rates and annual charges collectible 3,130

38,453 8.1%

7.4%

80. 6. Cash expense cover ratio

>3 months

81. Current year’s cash and cash equivalents + term deposits *12 93,047

14.8 months

15.5 months

82. Payments from cash flow of operating and financing activities

75,685

__________________________

1Excludes fair value adjustments, reversal of revaluation decrements, net gain/loss on sale of assets, and net share/loss of interests in joint ventures

NSW Council



Note 28(b) Statement of Performance Measures by Fund

General Indicators

Water Indicators

Sewer Indicators

Benchmarks

2018 2017 2018 2017 2018 2017

1. Operating performance >0

83. Total continuing operating revenue1 excluding capital grants and contributions less operating expenses

9.5% % 8.6% %

6.1%

%

84. Total continuing operating revenue1 excluding capital grants and contributions

85. 2. Own source operating revenue >60%

86. Total continuing operating revenue1 excluding all grants and contributions

28.7%

% 70.4% % 68.3% %

87. Total continuing operating revenue1 inclusive of all grants and contributions

88. 3. Unrestricted current ratio 0 >1.5x

89. Current assets less all external restrictions 4.1x x 116.1 x 2.7 x

90. Current liabilities less specific purpose liabilities

91. 4. Debt service cover ratio >2x

92. Operating results1 before capital excluding interest and depreciation/impairment/ amortisation

458.7x x 0.00x x 182.4x x

93. Principal repayments (from the statement of cash flows) + borrowing costs (from the Income Statement)

5. Rates and annual charges outstanding percentage

<5% Metro <10%

Regional & Rural


Rates and annual charges collectible 16.9% %

0.00%

%

7.2%

%

94. 6. Cash expense cover ratio >3 months

95. Current year’s cash and cash equivalents + term deposits *12

0.00 months months

0.00 months months

14.1 months

months

96. Payments from cash flow of operating and financing activities

___________________________ 1Excludes fair value adjustments, reversal of revaluation decrements, net gain/loss on sale of assets, and net share/loss of interests in joint ventures.



Commentary – Performance indicators

1. The consolidated performance indicators should include all results from the Council including controlled entities.

2. Councils are required to include at least one year of comparatives, Councils may choose to include more comparative periods however the same number of comparative periods should be shown for each ratio presented.

3. Operating performance

Purpose This ratio measures the extent to which a council has succeeded in containing operating

expenditure within operating revenue. It is important to emphasise that this ratio is focussing on operating performance, and hence capital grants and contributions, fair value adjustments, and

reversal of revaluation decrements are excluded. The benchmark is greater than 0%.

Total continuing operations revenue1 excluding capital grants and contributions less operating expenses

Total continuing operations revenue1 excluding capital grants and contributions

4. Own source operating revenue

Purpose This ratio measures fiscal flexibility. It is the degree of reliance on external funding sources such

as operating grants and contributions. A council’s financial flexibility improves as its own source revenue increases. The benchmark is greater than 60%.

Total continuing operations revenue1 less all grants and contributions

Total continuing operations revenue1 inclusive of capital grants and contributions

5. Unrestricted current ratio

Purpose

The ‘unrestricted current ratio’ is specific to local government and is designed to represent a council’s ability to meet short-term obligations as they fall due. Restrictions placed on various funding sources (e.g. Section 94 developer contributions, RMS contributions) complicate the traditional current ratio used to assess liquidity of businesses, as cash allocated to specific projects is restricted and cannot be used to meet a council’s other operating and borrowing costs. The benchmark is greater than 1.5 times.

Current assets less all external restrictions____ Current liabilities less specific purpose liabilities

Calculation of unrestricted current ratio

Current assets less externally restricted assets Current Assets less All External Restrictions* [per Notes 6-8]. Less Inventories shown in Current but not expected to be realised in next 12 months.

Current liabilities less specific purpose liabilities

Total current liabilities as shown in the Statement of Financial Position less Specific Purpose Liabilities [per Note 10(a)]

Specific Purpose Liabilities [per Note 10(a)] Less ELE and Deposits/Retentions shown in current but not expected to be paid in next 12 months.

* External restriction shown in current cash and cash equivalents, investments, receivables and other assets (Notes 6-8 inclusive).

Current assets less all external restrictions

specific purpose unexpended loans

RMS advances

self-insurance claims

other (incl. in liabilities)

developer contributions

RMS contributions

specific purpose unexpended grants

water

sewerage

DWM

other (incl. in revenue).



Commentary – Performance indicators (continued)

Note 7 Restricted receivables (current)

specific purpose unexpended loans

RMS advances

self-insurance claims

other (included in liabilities)

developer contributions

RMS contributions

specific purpose unexpended grants

water

sewerage

DWM

other (included in revenue)

Note 8 Restricted other assets (current)

stores and materials (water, sewerage, DWM, other)

trading stock (water, sewerage, DWM, other)

prepayments (water, sewerage, DWM, other).

Current liabilities less all specific purpose liabilities (Note 10(a))

payables (water, sewerage, DWM, Other)

interest bearing liabilities (water, sewerage, DWM, other)

provisions (water, sewerage, DWM, other).

6. Debt service cover ratio

Purpose This ratio measures the availability of operating cash to service debt including interest, principal and lease payments. The benchmark is greater than two times.

Operating results before capital excluding interest and depreciation Principal repayments (from the statement of cash flows) + borrowing costs (from the Income Statement)

7. Rates and annual charges outstanding

Purpose To assess the impact of uncollected rates and annual charges on liquidity and the adequacy of recovery efforts.

The benchmark is <5% metro; <10% regional and rural.

Rates and annual charges outstanding Rates and annual charges collectible

Rates and annual charges outstanding percentage


Outstanding rates and annual charges (current and non-current) [Note 7] and interest and extra charges (current and non-current) [Note 7]. less Provision for doubtful debts rates and annual charges (current and non-current) [Note 7] and provision for doubtful debts interest and extra charges (current and non-current) [Note 7].

Rates and annual charges collectible

Rates and annual charges levied for the year [Income Statement]; and interest and extra charges levied during the year [Note 3]; and rates and annual charges outstanding for the previous year(s) (current and non-current) [Note 7]; and interest and extra charges (current and non-current) [Note 7]. less Provision for doubtful rates and annual charges (current and non-current) [Note 7]; and provision for doubtful debts interest and extra charges (current and non-current) [Note 7]; provision for doubtful debts rates and annual charges (current and non-current) [Note 7]; and provision for doubtful debts interest and extra charges (current and non-current) [Note 7].



Commentary – Performance indicators (continued)

8. Cash expense cover ratio Purpose

This liquidity ratio indicates the number of months a council can continue paying for its immediate expenses without additional cash inflow. The benchmark is greater than three months.

Current year's cash equivalents + term deposits Payments from cash flow of operating and financing activities *12

OLG

9. Where there has been a change in Council policy which affects the calculation of an indicator, then the change in policy must be disclosed in the note and the current and previous periods recalculated in accordance with the revised policy.

1 Excludes fair value adjustments, reversal of revaluation decrements, net gain/loss on sale of assets, and net share/loss of interests in

joint ventures.

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