NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
a. Basis of accounting
In addition, management reassessed certain critical
assumptions embedded in the valuation model and identified
This financial report is a general purpose financial report that
that these required adjustments reflect the business
has been prepared in accordance with Australian Accounting
environment and expected operations going forward that
Standards, Interpretations and other authoritative
were present at 30 June 2015. We identified that the
pronouncements of the Australian Accounting Standards
existing terminal growth rate used in the previous valuation
Board, the requirements of the Financial Management Act
assessment was too low. These operating conditions and
1994 and applicable Ministerial Directions.
business environment were prevalent as at 30 June 2015
and do not reflect a change in estimate.
The financial report of Yarra Valley Water Corporation
(the Corporation) for the year ended 30 June 2016 was
The restatement will decrease the depreciation expense
authorised for issue in accordance with a resolution of
as a result of the decrease in fair value.
the Directors on 26 August 2016.
Refer to note 12 for detailed disclosure on the valuation model
b. Basis of accounting preparation and measurement
adopted and the assumptions applied to determine the fair
value of the infrastructure assets. The below table reflects
The financial report has been prepared on an accruals
the differences in two key assumptions which the valuation
and going concern basis and is prepared on a historical
is highly sensitive to, highlighting a comparison between the
cost basis, except for infrastructure, property, plant and
valuation previously recognised and restate value.
equipment, and the defined superannuation asset which have
been measured at fair value. All amounts are presented in
These have been restated as a result of increased analysis of
Australian dollars, unless otherwise stated, and have been
the facts and circumstances that existed as at 30 June 2015.
rounded to the nearest thousand dollars or, in other cases,
to the nearest dollar.
2015
Restated
Assumption
Valuation
Valuation
The following is a summary of the material accounting
Weighted average cost
6% - 6.25%
5.8%
- 6.4%
policies adopted by the Corporation in the preparation of the
of capital (WACC)
financial report. Accounting policies are applied in a manner
which ensures that the resulting financial information
Terminal value growth rate
2.5%
3.5%
satisfies the concepts of relevance and reliability, thereby
ensuring that the substance of the underlying transactions
or other events is reported.
The accounting policies have been consistently applied,
unless otherwise stated.
c. Prior period adjustment
During the financial year, Yarra Valley Water reassessed
its valuation of the infrastructure assets. The modifications
provide more relevant information in light of the changes
in the tax treatment of the assets, specifically, their tax
depreciation rates as represented by the tax amortisation
benefit included in the valuation model.
46
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

The following table illustrates the impact on the balance sheet as at 30 June 2015. The valuation has not been restated
as at 30 June 2014 as it is not practicable to do so. A restatement as at 30 June 2014 requires significant estimation of
information and high level of difficulty in distinguishing objectively between circumstances that existed at such earlier date
and those that have eventuated since then. As such, due to the inherent risk in value of an asset from over 2 years ago,
management believe it is impractical to revalue the 30 June 2014 balance with an appropriate degree of precision.
Restatement increase
Amount disclosed in 2015
Financial statement
Restated amount
(decrease)
financial statements
account
($’000s)
($’000s)
($’000s)
Infrastructure assets
3,525,600
(116,574)
3,642,174
Total assets
4,353,923
(116,574)
4,470,497
Net deferred tax liabilities
645,507
(34,966)
680,473
Total liabilities
2,834,751
(34,966)
2,869,717
Net assets
1,519,172
(81,608)
1,600,780
Asset revaluation reserve
653,981
(81,608)
735,589
Total equity
1,519,172
(81,608)
1,600,780
d. Critical accounting judgements and estimates
e. Fair value measurement
The Corporation evaluates estimates and judgements
The Corporation measures some of its assets and
which are incorporated in the financial report based
liabilities at fair value either on a recurring or non-recurring
on historical knowledge and the best available current
basis, depending on the requirements of the applicable
information. Estimates assume a reasonable expectation
Accounting Standard.
of future events and are based on current trends and
economic data obtained both externally and within the
Fair value is the price that would be received to sell an
Corporation. Actual results may differ from these estimates.
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The most significant accounting estimates undertaken
in the preparation of this financial report relate to:
Fair value measurement is based on the following
assumptions:
asset residual values and useful lives
that the transaction to sell the asset or transfer the
asset impairment
liability takes place either in the principal market
(or the most advantageous market, in the absence
accrued revenue
of the principal market), either of which must be
accessible to the entity at the measurement date; and
provisions
that the entity uses the same valuation assumptions
deferred tax
that market participants would use when pricing the
asset or liability, assuming that market participants
fair value of infrastructure, property, plant and equipment
act in their economic best interest.
contingent assets and liabilities
Judgments about highest and best use must take into
account the characteristics of the assets concerned,
defined benefit superannuation fund.
including restrictions on the use and disposal of any
assets arising from their physical nature and any
applicable legislative / contractual arrangements.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
47

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
g. Revenue recognition
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, and
Water and sewerage
based on the lowest level inputs that are significant to
Revenue is brought to account when services have been
the fair value measurement as a whole:
provided or when a usage or service charge has been made.
Level 1 - Quoted (unadjusted) market prices in active
The payment in advance by customers of accounts which at
markets for identical assets or liabilities;
reporting date were unbilled is classified as unearned income.
Level 2 - Valuation techniques for which the lowest level
Water usage charges and sewage disposal charges are
input that is significant to the fair value measurement is
recognised as revenue when the service has been provided.
directly or indirectly observable; and
As meter reading is cyclical, an estimate is made at the
end of the accounting period for water usage and sewage
Level 3 - Valuation techniques for which the lowest level
disposal by customers. The estimate is made by multiplying
input that is significant to the fair value measurement is
the number of days since the last reading by daily average
unobservable.
water consumption for that period.
Developer contributed assets
f. Income tax
Developers are required to provide water supply and sewerage
The Corporation is subject to the National Tax Equivalent
facilities to new subdivisions which are subsequently gifted
Regime (NTER), which is administered by the Australian
to, and maintained by, the Corporation. These assets are
Taxation Office.
recognised as revenue at fair value upon the gaining of
The current income tax expense is based on the profit for
control of the asset and are recorded as ‘developer
the year adjusted for any non-accessable or disallowed items.
contributed assets’.
It is calculated using tax rates that have been enacted or
New customer contributions
are substantively enacted by the Balance Sheet date.
New customer contributions represent fees paid by
Deferred tax is accounted for using the Balance Sheet
developers so that they can connect new developments
liability method in respect of temporary differences arising
to the Corporation’s existing water supply and sewerage
between the tax bases of assets and liabilities and their
systems. Generally, these are recognised as revenue when
carrying amounts in the financial statements.
the contribution has been received; however, in respect of
No deferred income tax will be recognised from the
assets to service new urban growth, amounts are received
initial recognition of an asset or liability where there
in advance and recognised as unearned income initially,
is no effect on accounting or taxable profit or loss.
then recognised as revenue when the development lots
are released for sale.
Deferred tax is calculated at the tax rates that are expected
Other revenue
to apply to the period when the asset is realised or liability is
settled. Deferred tax is credited in net profit in the Statement
Other revenue includes fees for information statements,
of Comprehensive Income, except where it relates to items
new meter installation services, water trading, billing and
that may be credited directly to equity, in which case the
collection administration fees from both Melbourne Water
deferred tax is adjusted directly against equity. Deferred
and the Department of Environment, Land, Water and
income tax assets are recognised to the extent that it is
Planning and charges for the relocation of assets requested
probable that future tax profits will be available against
by third parties. Income from operating leases is recognised
which deductible temporary differences can be utilised.
in net profit in the Statement of Comprehensive Income on
The amount of benefits brought to account or which may
a straight line basis over the lease term.
be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and
the anticipation that the Corporation will derive sufficient
future assessable income to enable the benefit to be realised
and comply with the conditions of deductibility imposed
by the Law.
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h. Leases
k. Infrastructure, property, plant and equipment
Payments for operating leases, where substantially all
Financial Reporting Direction 103F Non-Current Physical
the risks and benefits remain with the lessor, are charged
Assets requires non-current physical assets to be measured
as expenses in the periods in which they are incurred.
at fair value. Accordingly, the Corporation uses the revaluation
The Corporation does not have any finance leases.
model in accordance with AASB 116 Property, Plant and
Equipment and measures fair value in accordance with
i. Cash and cash equivalents
AASB 13 Fair Value Measurement.
Cash and cash equivalents include cash on hand, deposits
Infrastructure, land and building assets are measured
held at call with banks, other short-term highly liquid
initially at cost and subsequently revalued at fair value
investments with original maturities of three months
less accumulated depreciation and impairment losses,
or less, and bank overdrafts.
where applicable. Plant and equipment assets are measured
at fair value less depreciation and impairment losses
j. Receivables and provision for impairment of receivables
where applicable.
Due to the specialised nature of the Corporation’s
Receivables consist of:
infrastructure assets, fair value is estimated using the income
Contractual receivables, such as debtors and accrued
approach (based on discounted cash flows). Refer Note 12.
revenue in relation to goods and services; and
Subsequent costs are included in the asset’s carrying amount
Statutory receivables, such as amounts owing from the
or recognised as a separate asset, as appropriate, only when it
Victorian Government and Goods and Services Tax (GST)
is probable that future economic benefits associated with the
input tax credit recoverable.
item will flow to the Corporation and the cost of the item can
be measured reliably. Repairs and maintenance are charged to
Contractual receivables are classified as financial
net profit in the Statement of Comprehensive Income during
instruments and categorised as loans and receivables.
the financial year in which they are incurred.
Statutory receivables, are recognised and measured similarly
The cost of fixed assets constructed within the Corporation
to contractual receivables (except for impairment), but are
includes the cost of materials, direct labour and an
not classified as financial instruments because they do not
appropriate proportion of fixed and variable overheads.
arise from a contract.
Revaluations
All contractual receivables are recognised at the amounts
receivable less any provision for impairment of receivables.
Revaluations are performed with sufficient regularity so
Credit is generally allowed for a period of 16 days. The
that the carrying amounts do not differ materially from
collectability of debt is assessed each accounting period
those that would be determined using fair values at the
for usage and other charges. A provision for impairment
end of the reporting period.
of receivables is raised where doubt as to its collection
exists. Bad debts are written off when the individual debt is
Any revaluation increase is recognised in other comprehensive
determined to be uncollectible, for reasons of hardship or for
income, except to the extent that it reverses a revaluation
disconnected customers’ accounts greater than 180 days.
decrease for the same asset previously recognised in net
profit in the Statement of Comprehensive Income, in which
case the increase is credited to profit to the extent of the
decrease previously expensed. A decrease in the carrying
amount arising on the revaluation is recognised in net profit
in the Statement of Comprehensive Income to the extent that
it exceeds the balance, if any, held in the asset revaluation
reserve relating to a previous revaluation of that asset.
In measuring the fair values of non-financial assets,
independent valuers are engaged for scheduled valuations
in a five-year cycle. Infrastructure assets are measured to
fair market value every year.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
49

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Depreciation
l. Intangible assets
The depreciable amount of all fixed assets, but excluding
Intangible assets acquired separately
freehold land and crown land, is depreciated on a straight
line basis over their useful lives, commencing from the
Intangible assets acquired separately are initially recognised
time the asset is held ready for use. The useful lives,
at cost. Subsequently, intangible assets with finite useful
which are consistent with the prior period, used for
lives are carried at cost less accumulated amortisation and
each class of depreciable assets are:
accumulated impairment losses. Intangible assets with
indefinite useful lives are carried at cost less impairment
losses, where applicable. Costs incurred subsequent to initial
Class of fixed asset
Useful life
acquisition are capitalised when it is expected that additional
Buildings
5 to 100 years
future economic benefits will flow to the Corporation.
Infrastructure
3 to 100 years
Internally generated intangible assets
Plant and equipment
2 to 25 years
Expenditure on research activities is recognised as an expense
in the period in which it is incurred. An internally generated
The assets’ residual values and useful lives are reviewed,
intangible asset arising from a development project is
and adjusted if appropriate, at each Balance Sheet date.
recognised only if all the following are demonstrated:
Following consultation with relevant internal subject matter
the technical feasibility of completing the intangible
experts there were no changes to asset category useful lives
asset so that it will be available for use or sale
as at 30 June 2016.
the intention to complete the intangible asset
Disposals
and use or sell it
Gains and losses on disposals are determined by comparing
the ability to use or sell the intangible asset
proceeds with the carrying amount. These gains or losses
are included in net profit in the Statement of Comprehensive
how the intangible asset will generate probable
Income. When revalued assets are sold, amounts included
future economic benefits
in the asset revaluation reserve relating to that asset are
transferred to retained earnings.
the availability of adequate technical, financial and
other resources to complete the development and
to use or sell the intangible asset
the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
Subsequent to initial recognition, internally generated
intangible assets are reported at cost less accumulated
amortisation and impairment losses on the same basis
as intangible assets that are acquired separately.
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Amortisation
n. Assets classified as held for sale
Intangible assets with finite useful lives are amortised on a
Assets classified as held for sale are measured at the lower
straight line basis over the asset’s useful life. Amortisation
of their carrying amount and fair value less costs to sell,
begins when the asset is available for use; that is, when it is
as their carrying amount will be recovered principally through
in the location and condition necessary for it to be capable
a sale transaction, rather than through continuing use.
of operating in the manner intended by management. The
The Corporation considers an asset to be held for sale
amortisation period and the amortisation method for an
where the sale is highly probable, the asset is available
intangible asset with a finite useful life are reviewed at least
for immediate sale in its present condition and the sale
at the end of each annual reporting period. The useful life
is expected to be completed within 12 months. Assets
used for the software asset class is between three and
classified as held for sale are required to be revalued
ten years. Water entitlements are classified as an intangible
immediately prior to the transfer with any increase in value
asset with an indefinite useful life. Intangible assets with
recorded through other comprehensive income via the Asset
indefinite useful lives are not amortised. There has been
revaluation reserve. This revalued amount becomes the
no change to useful lives during 2015-16 or 2014-15.
carrying value of the asset. Assets are not depreciated or
amortised while they are classified as held for sale. Assets
m. Impairment of non-financial assets
classified as held for sale are classified as current assets.
Infrastructure, property, plant and equipment and intangible
o. Payables and accruals
assets with finite useful lives are assessed annually for
indications of impairment. Whenever there is an indication of
Creditors and accruals are recognised for future amounts
impairment, the assets concerned are tested as to whether
to be paid in respect of goods and services received.
their carrying value exceeds their recoverable amount.
The amounts are unsecured and are usually paid 30 days
after invoice date.
Intangible assets that have an indefinite useful life and
intangible assets not yet available for use are tested annually
Payables consist of:
for impairment or more frequently if events or changes in
circumstances indicate that they might be impaired.
Contractual payables, represent liabilities for goods and
services provided to the Corporation prior to the end of
Where an asset’s carrying value exceeds its recoverable
the financial year that are unpaid, and arise when the
amount, an impairment loss is recognised in net profit in the
Corporation becomes obligated to make future payments
Statement of Comprehensive Income for the excess amount,
in respect of the purchase of those goods and services; and
except to the extent that the write-down reverses an asset
revaluation reserve amount applicable to that asset. The
Statutory payables, such as goods and services tax
recoverable amount of assets held primarily to generate net
and fringe benefits tax payables.
cash inflows is measured at the higher of the present value
Contractual payables are classified as financial instruments
of future cash flows expected to be obtained from the asset
and categorised as financial liabilities at amortised cost.
and fair value less costs to sell. The recoverable amount of
Statutory payables are recognised and measured similarly
assets that are not primarily held to generate net cash flows
to contractual payables, but are not classified as financial
is measured at the higher of depreciated replacement cost
instruments and not included in the category of financial
and fair value less costs to sell.
liabilities at amortised cost, because they do not arise
No material indicators of impairment were present at
from a contract.
the time financial statements were authorised for issue.
p. Employee benefits
A liability is recognised for benefits accruing to employees
in respect of wages and salaries, annual leave and long
service leave when it is probable that settlement will be
required and the liability is capable of being reliably measured.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
51

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Short-term and long-term employee benefits
q. Unearned income
Liabilities recognised in respect of short-term (wholly
Unearned developer contributions’ income is amounts
settled within twelve months) employee benefits are
received from developers for the reimbursement of costs
measured at their nominal values using the remuneration
that will be incurred by the Corporation for the construction
rate expected to apply at the time of settlement.
of assets to service new urban growth. The amounts paid
to the Corporation will be offset in future years by new
Liabilities recognised in respect of long-term employee
customer contributions that will be payable when the
benefits are measured as the present value of the estimated
development lots are released for sale.
future cash outflows to be made by the Corporation in respect
of services provided by employees up to the reporting date.
Customers paid in advance represents payments received
from customers in advance of the provision of goods or
Long service leave that an employee is not currently
services or any legal or constructive obligation required
entitled to is recognised as non-current until the employee
to be performed by Yarra Valley Water to settle the terms
reaches seven years of service, at which time the liability
of receipt of income.
is classified as current.
r. Provisions
Superannuation
Provisions are recognised when the Corporation has a present
Accumulation plans - Contributions to the accumulation
legal or constructive obligation as a result of past events
plans are expensed as the contributions are paid or
for which it is probable that an outflow of economic benefits
become payable.
will result and that outflow can be reliably measured.
Defined benefit superannuation plan - A liability or asset
s. Borrowings and finance costs
in respect of the defined benefit superannuation plan is
recognised in the Balance Sheet and is measured as the
Borrowings are recognised at fair value being the nominal
present value of the defined benefit obligation at the reporting
value of funds drawn at balance date. Where the Corporation
date plus unrecognised actuarial gains (less unrecognised
has both the intention and discretion to refinance loans
actuarial losses) less the fair value of the superannuation
maturing within 12 months from balance date under a
fund’s assets at that date. The present value of the defined
Government approved financing facility, such loans are
benefit obligation is based on expected future payments to the
classified as non-current. Interest is payable semi-annually
reporting date, calculated annually by independent actuaries
and is accrued over the period it becomes due. Accrued
using the projected unit credit method. Consideration is given
interest is recorded as part of accruals.
to the expected future wage and salary levels, experience of
employee departures and periods of service.
Finance costs are directly attributable to the acquisition,
construction or production of qualifying assets measured
Actuarial gains and losses are recognised immediately
at fair value and are therefore recognised as expenses in
in retained earnings in the Balance Sheet in the year
the Statement of Comprehensive Income in the period
in which they occur.
in which they are incurred.
Employee benefits on-costs
t. Commitments
Provisions for on-costs such as payroll tax, worker’s
compensation and superannuation are recognised
Commitments for future expenditure arising from contracts
separately from the provision for employee benefits.
are disclosed at their nominal value and inclusive of goods
and services tax.
u. Contingent assets and contingent liabilities
Contingent assets and contingent liabilities are not recognised
in the Balance Sheet, but are disclosed by way of a note and,
if quantifiable, are measured at nominal value. Contingent
assets and contingent liabilities are presented inclusive of
goods and services tax receivable or payable respectively.
Refer Note 24.
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v. Dividend
y. Goods and services tax (GST)
An obligation to pay a final dividend only arises after
Revenues, expenses and assets are recognised net of the
a formal determination is made by the Treasurer following
amount of GST, except where the amount of GST incurred is
consultation between the Board, the relevant portfolio
not recoverable from the Australian Taxation Office (ATO).
Minister and the Treasurer.
In these circumstances, the GST is recognised as part of the
cost of acquisition of the asset or as part of an item of the
w. Smart Water Fund
expense. Receivables and payables in the Balance Sheet are
shown inclusive of GST. The net amount of GST receivable
The Smart Water Fund was established by Melbourne’s
from or payable to the ATO is included in the Balance Sheet
four water businesses and the State Government of Victoria
as part of receivables or payables.
for the purpose of providing grant funding to support
the development of sustainable water use projects.
Cash flows are presented in the Cash Flow Statement
on a gross basis except for the GST component of investing
Contributions made to the Smart Water Fund are initially
and financing activities which are disclosed as operating
recognised as assets in the water businesses’ Balance
cash flows.
Sheets. Expenses are subsequently recognised by the water
businesses when incurred by the Fund. Refer Note 10.
z. Financial instruments
Financial instruments are initially measured at cost
x. Environmental contributions
on transaction date which includes transaction costs,
The Water Industry (Environmental Contributions) Act
when the related contractual rights or obligations exist.
2004 (the Act) amended the Water Industry Act 1994
Subsequent to initial recognition, these instruments
to make provision for environmental contributions to be
are measured as set out below.
paid by water authorities. The Act establishes an obligation
for authorities to pay into a consolidated fund annual
Loans and receivables
contributions for the first period, from 1 October 2004
Loans and receivables are non-derivative financial assets
to 30 June 2008 in accordance with the pre-established
with fixed or determinable payments that are not quoted
schedule of payments, which sets out the amounts payable
by each corporation. The contribution period has been
in an active market and are stated at amortised cost using
the effective interest rate method, less any impairment.
extended until 30 June 2020.
Financial liabilities
The purpose of the environmental contribution is set out
in the Act, and the funding may be used for the purpose of
Non-derivative financial liabilities are recognised at
financing initiatives that seek to promote the sustainable
amortised cost comprising original debt less principal
management of water or address water-related initiatives.
repayments and amortisation.
The Corporation has a statutory obligation to pay
an environmental contribution to the Department of
aa. Government grants
Environment, Land, Water and Planning. This contribution
Government grants are recognised once reasonable assurance
is recognised as an expense during the reporting period
has been reached that the Corporation will comply with
as incurred.
the conditions attaching to them and that the grants will
be received. Government grants of a revenue nature are
recognised as income over the periods necessary to match
them with the related costs. Government grants related to
assets are recognised in the Balance Sheet by deducting
the grant in arriving at the carrying amount of the asset,
thereby incurring a reduced depreciation charge.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
53

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
2. NEW ACCOUNTING STANDARDS AND
INTERPRETATIONS NOT YET ADOPTED
Applicable for annual
Standard /
reporting periods
Impact on Yarra Valley Water
Interpretation
Summary
beginning on or after
financial report
AASB 9
The key changes include the simplified
1 January 2018
The assessment has identified that the
Financial
requirements for the classification
financial impact of available for sale
Instruments
and measurement of financial assets,
assets will now be reported through
a new hedging accounting model and
other comprehensive income and no
a revised impairment loss model to
longer recycled to the profit and loss.
recognise impairment losses earlier,
While the preliminary assessment has
as opposed to the current approach
not identified any material impact
that recognises impairment only
arising from AASB 9, we will continue
when incurred.
to monitor and assess.
AASB 15
The core principle of AASB 15
1 January 2018
The changes in revenue recognition
Revenue from
requires an entity to recognise
requirements in AASB 15 may result
Contracts with
revenue when the entity satisfies
in changes to the timing and amount
Customers
a performance obligation by
of revenue recorded in the financial
transferring a promised good
statements. The Standard will also
or service to a customer.
require additional disclosures on services
revenue and contract modifications.
Our preliminary assessment is that we
do not expect that the way we account
for core revenue will change as a result
of the new standard.
AASB 16
The key changes introduced by
1 January 2019
The assessment has indicated that most
Leases
AASB 16 include the recognition
operating leases will be on the balance
of most operating leases (which
sheet, recognition of lease assets and
are currently not recognised)
lease liabilities will cause net debt to
on balance sheet.
increase.
Depreciation of lease assets and interest
on lease liabilities will be recognised in
income statement with marginal impact
on the operating surplus.
The amounts of cash paid for principal
portion of the lease liability will be
presented within financing activities and
the amounts paid for the interest portion
will be presented within operating
activities in the cash flow statement.
There are no other standards that are not yet effective
In addition to the new standards above, the Australian
that are expected to have a material impact on the entity
Accounting Standards Board has issued a list of amending
in the current or future reporting periods or on foreseeable
standards that are not effective for the 2015-16 year.
future transactions.
In general, these amending standards include editorial and
references changes that are expected to have insignificant
impacts on the Corporation’s financial report.
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3. FINANCIAL INSTRUMENTS
a. Capital risk management
These external capital requirements are incorporated into the
management of capital through the Board and Corporate Plan.
The Corporation controls its capital in order to maintain
a satisfactory debt to equity ratio to provide the State
The Corporation effectively manages its capital by assessing
Government of Victoria with adequate returns and to
its financial risks and adjusting its capital structure in
ensure that it can fund its operations as a going concern.
response to changes in these risks and the market. These
responses include the management of debt levels. There have
The capital structure of the Corporation consists of net
been no changes to the strategy adopted by the Corporation
debt (borrowings as detailed in table below and offset by
to control its capital during the year. The gearing ratios for the
cash and bank balances - see Note 8) and equity of the
years ended 30 June 2016 and 30 June 2015 were as follows:
Corporation (comprising contributed equity, asset revaluation
reserve and retained earnings detailed in Notes 18 to 20).
The only externally imposed capital requirements
of the Corporation are that:
••
financial accommodation does not exceed the approval
limits set by the Treasurer of Victoria pursuant to the
Borrowing and Investment Powers Act 1987; and
••
the Corporation, with the exception of an operating account
with overdraft facilities, is required to borrow exclusively
with the Treasury Corporation of Victoria.
2016
2015
$’000
$’000
Borrowings - Current
230,806
230,700
Borrowings - Non-current
1,940,100
1,778,300
Total borrowings
2,170,906
2,009,000
Total assets
4,539,137
4,353,923
Gearing ratio
48%
46%
b. Financial risks
Interest rate exposures are also recognised in terms
of the change in the market value of the debt portfolio
The main risks the Corporation is exposed to through
(and associated hedging instruments) which arise as
its financial instruments are interest rate risk, liquidity
a consequence of changes in market interest rates.
risk and credit risk. The Board reviews and approves
policies for managing these risks.
The Corporation effectively manages interest rate risk by
maintaining the debt portfolio within the strategic targets
i Interest rate risk
and policy bands that have been approved by the Board.
Strategic and tactical debt portfolio options are assessed
Interest rate risk is the risk to earnings or capital arising
in consultation with Treasury Corporation of Victoria
from movements in interest rates. Yarra Valley Water is
(TCV), with borrowing decisions based on future borrowing
exposed to interest rate risk through its borrowing activities
requirements, treasury management policy compliance
and changes in the market in comparison to the assumptions
and TCV’s market interest rate outlook.
in the Essential Services Commission regulatory pricing
determination in relation to the underlying cost of debt.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
55

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
3. FINANCIAL INSTRUMENTS
Interest rates sensitivity analysis
Financing arrangements
As at 30 June 2016, if interest rates had changed by +/-50
The Corporation had access to a total of $72.8 million
basis points from the year end rates with all other variables
(2015: $118.5 million) of unused approved borrowings
held constant, the post-tax profit impact for the year would
by the Treasurer of Victoria as at 30 June 2016. The
have been $1.2 million (2015: $1.3 million) higher / lower
Corporation has a formal bank overdraft facility with
as a result of higher / lower interest expense from variable
the Australia and New Zealand Banking Group Limited.
interest rate borrowings.
Maturities of financial liabilities
ii Liquidity risk
The following table allocates the Corporation’s financial
liabilities into relevant maturity groupings based on the
Liquidity risk is the risk of not being able to meet the
remaining period at the reporting date to the contractual
specific financial commitments including short-term
maturity date. The amounts disclosed are the contractual
working capital needs and the financing of new and
undiscounted cash flows.
maturing loans as they are required.
The Corporation manages liquidity risk by actively
maintaining efficient banking practices, regular monitoring
of forecast and actual cash flows and ensuring adequate
borrowing facilities are maintained.
Annual approval is received from the Treasurer of Victoria for
new borrowings, borrowings to refinance maturing and non-
maturing loans and temporary purpose borrowing facilities.
Interest rate details and maturities analysis on financial instruments: liabilities
Weighted
average
Less
effective
than 12
1 to 3
3 to 5
Over 5
interest
months
years
years
years
Total
rate %
$’000
$’000
$’000
$’000
$’000
2016
Refundable advances - non-interest bearing
-
1,105
-
-
-
1,105
Payables - non-interest bearing
-
90,190
-
-
-
90,190
Borrowings - fixed interest rate
4.95
123,200
285,500
211,400
1,243,200
1,863,300
Borrowings - floating interest rate
2.44
107,606
60,000
90,000
50,000
307,606
Total
322,101
345,500
301,400
1,293,200
2,262,201
2015
Refundable advances - non-interest bearing
-
2,091
-
-
-
2,091
Payables - non-interest bearing
-
96,758
-
-
-
96,758
Borrowings - fixed interest rate
5.29
113,200
276,400
235,500
1,036,400
1,661,500
Borrowings - floating interest rate
2.42
117,500
70,000
60,000
100,000
347,500
Total
329,549
346,400
295,500
1,136,400
2,107,849
56
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

iii Credit risk
The credit risk attributable to the Corporation’s deposits
with the TCV and other financial institutions is considered
Credit risk is the risk that a counterparty or customer will fail
to be very low due to the minor amounts involved and the
to meet contractual obligations. For the Corporation credit
contractual arrangements in place for its counter parties.
risk arises mainly from customer outstanding receivables
as it is legally obliged to service all customers in its district
The maximum exposure to credit risk at the reporting date
without regard to their credit quality. The Corporation has
is the carrying amount of the items in the Balance Sheet.
in place extensive debt collection strategies to minimise
For receivables, the maximum exposure is the gross amount
customer credit risk and recover outstanding receivables.
of receivables before allowing for doubtful debts.
The credit quality of financial assets that are neither past
The Corporation uses ageing analysis to measure receivables
due nor impaired can be assessed by reference to historical
credit risk as follows:
information about counterparty default rates. Receivables
that are neither past due nor impaired had an average rate of
default to revenue in the three years 2013-14 to 2015-16 of
0.62 per cent. For the 2015-16 financial year, the Corporation
had $4.0 million (2015: $4.1 million) of bad debts and revenue
of $968.2 million (2015: $891.4 million), being a default rate
of 0.41 per cent.
Ageing analysis and impairment detail of receivables
1 to 16
17 to 60
61 to 90
91 to 180
Over 180
days
days
days
days
days
Total
Not aged
$’000
$’000
$’000
$’000
$’000
$’000
2016
Trade debtors
Not past due and not impaired
-
32,743
-
-
-
-
32,743
Past due but not impaired
-
-
30,989
3,388
5,549
7,496
47,422
Impaired
-
(92)
(397)
(86)
(426)
(864)
(1,865)
Net trade debtors
-
32,651
30,592
3,302
5,123
6,632
78,300
Accrued revenue
88,600
-
-
-
-
-
88,600
Other receivables
17,503
-
-
-
-
-
17,503
Total receivables
106,103
32,651
30,592
3,302
5,123
6,632
184,403
2015
Trade debtors
Not past due and not impaired
-
31,877
-
-
-
-
31,877
Past due but not impaired
-
-
30,038
3,627
4,945
8,922
47,532
Impaired
-
(106)
(374)
(92)
(413)
(946)
(1,931)
Net trade debtors
-
31,771
29,664
3,535
4,532
7,976
77,478
Accrued revenue
80,096
-
-
-
-
-
80,096
Other receivables
9,024
-
-
-
-
-
9,024
Total receivables
89,120
31,771
29,664
3,535
4,532
7,976
166,598
The Corporation’s policy on the provision for impairment of trade receivables is described in Note 1(j).
YARRA VALLEY WATER ANNUAL REPORT 2015-16
57

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
3. FINANCIAL INSTRUMENTS
c. Fair value
All financial assets and liabilities with the exception of
leases are recognised in the Balance Sheet. Cash, cash
equivalents and non-interest bearing financial assets and
financial liabilities are carried at a cost which approximates
the fair value. The carrying value less impairment provision
of trade receivables and payables are assumed to
approximate their fair values due to their short term
nature. The fair value of the interest bearing financial
liabilities is determined by discounting the expected
future cash flows at current interest rates.
The carrying amounts and fair values of interest-bearing
financial liabilities at balance date are as follows:
2016
2016
2015
2015
Carrying amount
Net fair value
Carrying amount
Net fair value
$’000
$’000
$’000
$’000
Interest-bearing financial liabilities
Borrowings
2,170,906
2,468,297
2,009,000
2,212,106
Total
2,170,906
2,468,297
2,009,000
2,212,106
58
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

4. REVENUE
2016
2015
Note
$’000
$’000
Rendering of services
Fixed service charges
365,772
351,696
Water usage charges
393,830
356,892
Sewage disposal charges
191,389
179,306
Trade waste charges
23,959
22,104
Government Water Rebate provided to customers *
(66,997)
(65,652)
Total rendering of services
907,953
844,346
Interest income
164
12
Other revenue
New customer contributions by developers
35,287
25,986
Other products and services
22,125
17,613
Developer contributed assets
14,956
15,105
Rent
2,044
1,350
Impairment writeback
12(b)
290
-
Other
36,198
28,076
Total other revenue
110,900
88,130
Total revenue
1,019,017
932,488
* The Government Water Rebate is an initiative to identify productivity savings across the water sector to take pressure off
customer bills. The $100 rebate will be applied for a period of four years from 2014-15.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
59

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
5. EXPENSES
2016
2015
Note
$’000
$’000
Bulk water and sewerage charges
21(b)
560,819
523,348
Government Water Rebate contribution received from
(29,817)
(49,070)
Melbourne Water Corporation *
Depreciation
12(b)
76,780
74,442
Contract payments
55,035
51,229
Salary and employee benefits expense
43,456
41,630
Environmental contribution
29,880
29,880
Amortisation
11(b)
20,710
19,852
Billing and revenue collection costs
10,273
10,228
Impairment write down of assets to recoverable amount
12(b)
8,695
17
Write off / disposal of assets
12(b)
6,516
4,182
Bad and doubtful debts
4,516
4,091
Electricity
3,829
3,388
Government taxes, fees and contributions
3,095
2,581
Information technology costs
2,800
3,356
Consulting services
2,736
4,311
Superannuation defined benefit expense
13(c)
782
725
Transport costs
511
546
Rental expenses relating to operating leases
310
272
Smart Water Fund contributions
190
342
Other expenses
12,148
12,724
Total expenses
813,264
738,074
Net (gain) / loss on disposal of infrastructure, property, plant and equipment
296
(294)
* The Government Water Rebate is an initiative to identify productivity savings across the water sector to take pressure off
customer bills. The $100 rebate will be applied for a period of four years from 2014-15.
60
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

6. INCOME TAX
2016
2015
$’000
$’000
a. The components of income tax expense comprise:
Current income tax - current income tax charge
26,081
21,720
Deferred income tax - reversal of temporary difference
(1,510)
625
Adjustments for current tax of prior periods
671
(96)
Income tax expense reported in net profit
25,242
22,249
b. Deferred income tax recognised in other comprehensive income
Defined benefit superannuation plan actuarial gain / (loss)
(617)
249
Gain / (loss) on revaluation of infrastructure assets
(21,392)
(15,496)
Gain on revaluation of land
11,133
-
Gain on revaluation of building
588
-
Total deferred income tax recognised in other comprehensive income
(10,288)
(15,247)
c. Reconciliation of income tax expense to prima facie tax payable
Accounting profit before income tax expense
81,811
73,041
At the statutory income tax rate of 30% (2015: 30%)
24,543
21,912
Adjustments for current tax of prior periods
673
(96)
Non-deductible expenses
13
(138)
Non-deductible depreciation
13
14
Assessable income
-
557
Income tax expense reported in net profit
25,242
22,249
d. Income tax payable
Current tax payable
10,150
4,912
e. Deferred tax assets / (liabilities)
Non-current liabilities - deferred tax
Accelerated depreciation for tax purposes
(366,129)
(365,221)
Revaluation of infrastructure to fair value
(258,889)
(280,286)
Revaluation of land to fair value
(46,385)
(36,684)
Revaluation of buildings to fair value
(588)
(61)
Defined benefit superannuation asset
(527)
(1,328)
Total non-current liabilities - deferred tax
(672,518)
(683,580)
Recognised directly in equity
(307,352)
(318,356)
Recognised in net profit
(365,166)
(365,224)
Total non-current liabilities - deferred tax
(672,518)
(683,580)
Deferred tax assets
Provisions
6,455
6,008
Buildings future deductible amounts
1,898
969
Unearned Government grant income
381
1,665
Total deferred tax assets
8,734
8,642
Net deferred tax liabilities
(663,784)
(674,938)
YARRA VALLEY WATER ANNUAL REPORT 2015-16
61

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
7. DIVIDENDS PAID
2016
2015
$’000
$’000
Dividends paid by the Corporation to the State Government of Victoria were:
Unfranked interim dividend paid
-
12,500
Unfranked final dividend paid for prior year
24,300
19,200
Total dividends paid
24,300
31,700
The Corporation, under the National Tax Equivalent Regime, is not required to maintain a franking account.
8. CURRENT ASSETS - CASH
2016
2015
$’000
$’000
Cash at bank
1,135
358
Cash on hand
1
2
Total current assets - cash
1,136
360
62
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

9. CURRENT ASSETS AND NON CURRENT - RECEIVABLES
2016
2015
$’000
$’000
Contractual Receivables
Trade receivables - debtors
80,165
79,409
Trade receivables - accrued revenue
88,600
80,096
Other receivables
3,766
3,876
Less: Provision for impairment of receivables
(1,865)
(1,931)
Statutory Receivables
GST receivables
12,365
4,238
Total current assets - receivables
183,031
165,688
Non-current assets - receivables
Trade receivables - debtors
1,888
910
Less: Provision for impairment of receivables
(516)
-
Total non-current assets - receivables
1,372
910
Movements in the provision for impairment of receivables
Balance at beginning of the year
(1,931)
(1,998)
Reversal of provision and write offs recognised as an expense
4,516
4,091
Increase in provision
(4,966)
(4,024)
Total provision for impairment of receivables
(2,381)
(1,931)
Non-current trade receivables relate to property owner customers that have outstanding fees that will be recovered when their
property is sold or when the customers’ circumstances permit payment. Loans and receivables are measured at amortised cost
using the effective interest rate method less any impairment.
Refer Note 3 Financial instruments for ageing analysis and assessment of risks associated with receivables.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
63

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
10. CURRENT ASSETS - OTHER
2016
2015
$’000
$’000
Water Efficiency Program for Schools - advance
963
1,927
Other Water Efficiency Programs - advance
131
141
Prepayments
3,355
2,866
Total current assets - other
4,449
4,934
The Water Efficiency Program for Schools - advance represents amounts advanced from the Department of Environment,
Land, Water and Planning and from the Department of Education and Training for the audit and delivery of the works required
to improve the water efficiency of schools. The amount is recognised as both an asset and a liability in the Balance Sheet.
The Other Water Efficiency Programs - advance includes amounts advanced from the Department of Environment, Land, Water
and Planning with the objective to find a more sustainable way to service remote unsewered communities such as backlog areas.
Prepayments include $112,375 (2015: $51,964 ) which relate to amounts paid to the Smart Water Fund but not yet distributed.
Yarra Valley Water’s share of the Fund disbursements for the year is $189,589 (2015: $342,175) and is included in the Statement
of Comprehensive Income.
11. (A) NON-CURRENT ASSETS - INTANGIBLE ASSETS
2016
2015
$’000
$’000
Software
Cost
176,142
164,602
Less accumulated amortisation
(93,417)
(74,573)
Works in progress
10,378
12,676
Total software
93,103
102,705
Water entitlements
96,917
96,917
Total intangible assets
190,020
199,622
64
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

11. (B) MOVEMENTS IN CARRYING AMOUNTS
Water
Intangible works
entitlements
Software
in progress
Total
$’000
$’000
$’000
$’000
2016
Balance at 1 July 2015
96,917
90,029
12,676
199,622
Additions
-
-
11,108
11,108
Transfers
-
13,406
(13,406)
-
Disposals
-
-
-
-
Amortisation expense
-
(20,710)
-
(20,710)
Carrying amount at 30 June 2016
96,917
82,725
10,378
190,020
2015
Balance at 1 July 2014
96,917
74,692
30,954
202,563
Additions
-
-
18,727
18,727
Transfers
-
35,910
(35,910)
-
Disposals
-
(721)
(1,095)
(1,816)
Amortisation expense
-
(19,852)
-
(19,852)
Carrying amount at 30 June 2015
96,917
90,029
12,676
199,622
The amortisation expense has been included in the line item ‘Amortisation’. Refer to Note 5.
Yarra Valley Water made a contribution of $100 million towards the cost of the Goulburn-Murray Water Connections Project
(Connections Project), formerly known as the Northern Victorian Irrigation Renewal Project. In exchange for this contribution,
Yarra Valley Water is entitled to one-ninth share of the water savings generated by Stage 1 of the Connections Project
(estimated to be 225 gigalitres of long-term water savings in total when complete in 2018) on an ongoing basis.
In exchange for access to the three Melbourne metropolitan water retailers’ water entitlements from the Melbourne water
supply system, four regional urban water businesses (Barwon Water, South Gippsland Water, Western Water and Westernport
Water) made contributions of $9.3 million to the retailers, with Yarra Valley Water’s share being $3.1 million. The investment
has therefore been recognised at its net value ($100 million less $3.1 million).
Water entitlements are recognised at cost.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
65

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
12. (A) NON-CURRENT ASSETS - INFRASTRUCTURE,
PROPERTY, PLANT AND EQUIPMENT
2016
2015
$’000
$’000
Infrastructure
At fair value
3,515,800
3,525,600
Total infrastructure
3,515,800
3,525,600
Freehold land
At fair value
346,209
276,636
Total freehold land
346,209
276,636
Crown land
At fair value
218
408
Total crown land
218
408
Buildings
At fair value
34,866
38,994
Less accumulated depreciation
-
(2,490)
Total buildings
34,866
36,504
Capital works in progress at cost
236,896
106,452
Plant and equipment
At fair value
45,248
56,179
Less accumulated depreciation
(21,863)
(23,796)
Total plant and equipment
23,385
32,383
Total infrastructure, property, plant and equipment
4,157,374
3,977,983
66
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

12. (B) NON-CURRENT ASSETS - INFRASTRUCTURE, PROPERTY,
PLANT AND EQUIPMENT - MOVEMENTS IN CARRYING AMOUNTS
Capital
Land
works in
Crown
held
Plant and
progress
Land
land
for sale
Buildings
equipment
Infrastructure
Total
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
2016
Balance at 1 July 2015
106,451
276,636
408
-
36,504
32,384
3,525,600
3,977,983
Additions
266,181
-
-
-
-
-
-
266,181
Transfers
(135,441)
-
-
-
934
4,185
130,322
-
Disposal / write off
(295)
-
-
-
-
(5,939)
(282)
(6,516)
Depreciation expense
-
-
-
-
(1,000)
(7,245)
(68,535)
(76,780)
Revaluation increase /
-
74,445
(190)
-
1,961
-
(71,305)
4,911
(decrease) recognised in equity
Impairment writeback
-
290
-
-
-
-
-
290
Impairment writedown
-
(5,162)
-
-
(3,533)
-
-
(8,695)
Carrying amount
236,896
346,209
218
-
34,866
23,385
3,515,800
4,157,374
at 30 June 2016
2015
Balance at 1 July 2014
123,744
277,128
408
-
33,464
36,146
3,464,273
3,935,163
Additions
171,184
-
-
-
-
-
-
171,184
Transfers
(188,477)
-
-
-
3,975
5,481
179,021
-
Disposal / write off
-
-
-
(610)
-
(1,390)
(366)
(2,366)
Depreciation expense
-
-
-
-
(935)
(7,853)
(65,654)
(74,442)
Revaluation increase /
-
135
-
-
-
-
(51,674)
(51,539)
(decrease) recognised in equity
Transfer to land held for sale
-
(627)
-
627
-
-
-
-
Impairment writedown
-
-
-
(17)
-
-
-
(17)
Carrying amount
106,451
276,636
408
-
36,504
32,384
3,525,600
3,977,983
at 30 June 2015
Infrastructure
Calculated a terminal value at the end of the forecast
period adopting the Gordon Growth methodology by
The 30 June 2016 valuation of infrastructure assets has been
applying the mid-point of the WACC, terminal growth
independently provided by KPMG, using a discounted cash
rate and terminal cash flows. A single terminal value
flow methodology. This involved discounting the forecast
has been adopted due to the sensitive nature of the
stream of cash flows to both debt and equity investors at a
terminal value in the model;
weighted average cost of capital (WACC), which represents
an estimate of a hypothetical market participant’s discount
Discounted the cash flows to the valuation date using
rate. In this regard, KPMG have:
the selected high and low WACC estimates;
Calculated forecast cash flows to debt and equity investors
Deducted non-infrastructure related assets and liabilities
over the 10 year forecast period. Cash flows to debt and
to derive the implied water infrastructure asset valuation;
equity investors are those cash flows available after all
operating expenses (including taxes) have been paid and
necessary investments in working and fixed capital have
been made;
YARRA VALLEY WATER ANNUAL REPORT 2015-16
67

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
12. (B) NON-CURRENT ASSETS - INFRASTRUCTURE, PROPERTY,
PLANT AND EQUIPMENT - MOVEMENTS IN CARRYING AMOUNTS
••
Calculated the tax amortisation benefit (TAB) on the
revaluation reserve. The asset was subsequently sold on
water infrastructure assets, being an estimate of the
15 April 2015 for $690,000 (including GST), incurring selling
present value of future tax amortisation benefits that
costs of $17,226. The asset was settled on 15 June 2015.
may be received. In addition it was deemed reasonable
At the time of the sale the fair value less costs to sell was
to judgementally overlay a delay of five years to reflect
valued at $610,047 (excluding GST). The selling costs are
the likely timing of secondary infrastructure assets
recognised as impairments and recorded through the profit
sales, the impact being to reduce the calculated TAB
and loss. The increase in the asset value was transferred
by approximately 25 percent; and
out of the Asset revaluation reserve to Retained earnings
at 30 June 2015.
••
Added the TAB to the implied water infrastructure
assets valuation (pre-TAB) to arrive at the total value
Buildings
of water infrastructure assets.
The 30 June 2016 valuation of buildings was independently
In order to assess the reasonableness of the valuation,
determined by the Victorian Valuer-General’s Office using
the following cross-check approaches were used:
fair market value based on highest and best use at 30 June
2016 for buildings.
••
Calculate the implied earnings and regulatory asset
base (RAB) multiples of the valuation; and
If buildings were measured at historical cost, the carrying
amount would be $39.9 million (2015: $45.3 million).
••
Compare the implied multiples with those of comparable
companies and transactions.
Plant and equipment
If infrastructure assets were measured at historical cost, the
Plant and equipment is held at carrying value (depreciated
carrying amount would be $2.75 billion(2015: $2.67 billion)
cost) which approximates fair value. Unless there is market
evidence that current replacement costs are significantly
Land - specialised / non-specialised
different from the original acquisition cost, it is considered
unlikely that depreciated replacement cost will be materially
The 30 June 2016 valuation of freehold land was independently
different from the existing carrying value. As at 30 June 2016
determined by the Victorian Valuer-General’s Office using
no material movements have occured.
fair market value as at 30 June 2016. In undertaking the
valuation of land, the Victorian Valuer-General’s Office adopted
Crown land
the market based direct comparison approach, whereby the
properties were valued by analysing land sales in comparable
The 30 June 2016 valuation of Crown land was independently
proximity to the subject sites and allowing for shape, size,
determined by the Victorian Valuer-General’s Office using
topography, location and other relevant factors specific to
fair market value as at 30 June 2016. In undertaking the
the land being valued. Where applicable specalised land is
valuation of Crown land, the Victorian Valuer-General’s
adjusted for the community service obligation to reflect the
Office adopted the market based direct comparison method
specialised nature of the land being valued.
whereby the properties were valued by analysing land
sales in comparable proximity to the subject sites and
If land was measured at historical cost, the carrying
allowing for shape, size, topography, location and other
amount would be $53.6 million (2015: $53.6 million).
relevant factors specific to the land being valued. From
the sales analysed an appropriate rate per square metre
Land held for sale
was applied. Where applicable, Crown land is adjusted
In 2015 a parcel of excess land (the asset) was reclassified
for the community service obligation to reflect the
as held for sale after approval was granted for the sale.
specialised nature of the land being valued. As at
The asset was subsequently listed for sale with an agent
30 June 2016 Crown land was revalued at $218,000
on 23 January 2015. The carrying amount of the asset prior
(2015: $408,000).
to revaluation was $492,150. At the time the asset was
reclassified as held for sale, a valuation was provided by the
Victorian Valuer-General’s Office in September 2014, valuing
the property at $627,273 (excluding GST). The increase in
the asset of $135,123 was recognised through the Asset
68
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

12. (C) FAIR VALUE MEASUREMENT - INFRASTRUCTURE,
PROPERTY, PLANT AND EQUIPMENT
The Corporation’s land, buildings, plant and equipment
In accordance with AASB 13 Fair Value Measurement, the
and infrastructure are stated at their revalued amounts,
Corporation’s non-financial assets have been categorised
being the fair value at the date of revaluation, less any
into the three levels of the fair value hierarchy depending
subsequent accumulated depreciation and impairment
on the degree to which inputs into the fair value
losses. This Note explains the judgements and estimates
measurements are observable, and the significance
made in determining the fair values of non-financial assets.
of the inputs to the fair value measurement.
Fair Value as
Level 1 (i)
Level 2 (ii)
Level 3 (iii)
at 30 June
$’000
$’000
$’000
$’000
Infrastructure
-
-
3,515,800
3,515,800
Land (Specialised)
-
-
195,975
195,975
Land (Non-specialised)
-
150,234
-
150,234
Buildings (Market approach)
-
2,363
-
2,363
Buildings (Depreciated replacement cost)
-
-
32,503
32,503
Plant and equipment
-
-
23,385
23,385
Crown land (Specialised)
-
-
218
218
Total 30 June 2016
-
152,597
3,767,881
3,920,478
Infrastructure
-
-
3,525,600
3,525,600
Land (Specialised)
-
-
109,794
109,794
Land (Non-specialised)
-
166,843
-
166,843
Buildings (Market approach)
-
36,504
-
36,504
Plant and equipment
-
-
32,384
32,384
Crown land (Specialised)
-
-
408
408
Total 30 June 2015
-
203,347
3,668,186
3,871,533
(i) Quoted prices (unadjusted) in active markets for identical assets or liabilities.
(ii) Inputs based on observable market data (either directly using prices or indirectly derived from prices).
(iii) Input not based on observable market data.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
69

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
12. (C) FAIR VALUE MEASUREMENT - INFRASTRUCTURE,
PROPERTY, PLANT AND EQUIPMENT
The following table presents a reconciliation of changes in Level 3 items for the period ending 30 June 2016:
Plant and
Land
equipment Crown Land
(Specialised)
Buildings Infrastructure
Total
$’000
$’000
$’000
$’000
$’000
$’000
Opening Balance 1 July 2015
32,384
408
109,793
-
3,525,600
3,668,185
Acquisitions
4,185
-
-
-
130,322
134,507
Disposals / write off
(5,939)
-
-
-
(282)
(6,221)
Depreciation
(7,245)
-
-
-
(68,535)
(75,780)
Transfer in/(out) of level 3 - net
-
-
56,515
32,503
-
98,877
Revaluation gains /
(loss) recognised in other
-
(190)
29,667
-
(71,305)
(51,687)
comprehensive income
Closing Balance 30 June 2016
23,385
218
195,975
32,503
3,515,800
3,767,881
Opening Balance 1 July 2014
36,146
408
109,793
-
3,464,273
3,610,620
Acquisitions
5,481
-
-
-
179,021
184,502
Disposals / write off
(1,390)
-
-
-
(366)
(1,756)
Depreciation
(7,853)
-
-
-
(65,654)
(73,507)
Revaluation loss recognised in
-
-
-
-
(51,674)
(51,674)
other comprehensive income
Closing Balance 30 June 2015
32,384
408
109,793
-
3,525,600
3,668,185
70
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The following table summarises the valuation techniques used and significant unobservable inputs of recurring Level 3 fair value
measurements. There have been no changes in valuation technique.
Significant
Valuation
unobservable
technique
inputs
Range (average)
Sensitivity of the input to fair value
Land
Market
Community
7% to 60% (21%)
A significant increase or decrease in the
(Specialised
approach
service obligation
CSO adjustment would result in a higher
$1000 to
and Crown)
(CSO) adjustment
or lower land valuation.
$17,568,000
($300,895)
Infrastructure
Income
Weighted average
5.6% to 6.2%
If the WACC had changed by +/-.25% from
approach using
cost of capital
the year end valuation, the impact to the
a discounted
(WACC)
valuation would have been a decrease of
cash flow
$542.7 million and increase by $677.8 million.
model
Inflation
2.5%
A significant increase or decrease in
inflation rates would result in a higher
or lower valuation.
Terminal value
3.5%
If the terminal growth rate had changed
growth rate
by +/-.25% from the year end valuation,
the impact to the valuation would have
been a decrease of $441.1 million and
increase by $543.8 million.
Plant and
Depreciated cost
Original life
2 to 25 years (4.8)
A significant increase or decrease in
equipment
(deemed fair
useful life impacts the fair value of plant
value)
and equipment.
Cost per unit
$100 to $1,409,766
A significant increase or decrease in
($11,124)
cost per unit impacts the fair value
of plant and equipment.
Buildings
Depreciated
Cost per square
$100 to $4,200
A significant increase or decrease in cost
Replacement
metre
($2,165)
per square metre impacts the fair value
Cost Approach
of the buildings.
Useful life
8 to 36 years (19)
A significant increase or decrease in useful
(remaining)
life impacts the fair value of buildings.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
71

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
13. DEFINED BENEFIT SUPERANNUATION ASSET
a. Superannuation plan information
The prudential regulator, the Australian Prudential
Regulation Authority, licences and supervises regulated
For employees who are members of the Equipsuper
superannuation plans.
Superannuation Fund defined benefits plan, an agreed
percentage of salaries is contributed to the fund by
There were no plan amendments affecting the defined
the Corporation as recommended by an actuary.
benefits payable, curtailments or settlements during the year.
Defined benefit members receive lump sum retirement
b. Description of risks
benefits on retirement, death, disablement and withdrawal.
The defined benefit plan is closed to new members. All new
There are a number of risks to which the plan exposes
members of the fund receive accumulation only benefits.
the Corporation. The more significant risks related to the
defined benefits are:
The Superannuation Industry (Supervision) Act 1993
(SIS) governs the superannuation industry and provides
••
Investment risk - The risk that investment returns will
the framework within which superannuation plans operate.
be lower than assumed and the Corporation will need
The SIS Regulations require an actuarial valuation to be
to increase contributions to offset this shortfall.
performed for each defined benefit superannuation plan
every three years, or every year if the Plan pays defined
••
Salary growth risk - The risk that wages or salaries (on
benefit pensions.
which future benefit amounts will be based) will rise more
rapidly than assumed, increasing defined benefit amounts
The Plan’s Trustee is responsible for the governance of
and thereby requiring additional employer contributions.
the plan. The Trustee has a legal obligation to act solely
in the best interest of plan beneficiaries. The Trustee
••
Legislative risk - The risk that legislative changes
has the following roles:
could be made which increase the cost of providing
the defined benefits.
••
administration of the plan and payment to the
beneficiaries from Plan assets when required
The Plan assets are invested by the Trustee in a pool of assets
in accordance with the plan rules;
with plans providing defined benefits for other employers.
The assets have a benchmark weighting to equities of 50%
••
management and investment of the plan assets; and
and therefore the plan has significant concentration of equity
market risk. However, within the equity investments, the
••
compliance with superannuation law and other
allocation both globally and across sectors is diversified.
applicable regulations.
72
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

2016
2015
$’000
$’000
c. Reconciliation of the net defined benefit asset
Net defined benefit asset at start of year
4,426
4,104
Current service cost
(889)
(856)
Net interest
107
131
Actual return on plan assets less interest income
(480)
2,223
Actuarial losses arising from changes in financial assumptions
(1,933)
(2,335)
Actuarial gains arising from liability experience
188
728
Employer contributions
336
431
Defined benefit superannuation asset
1,755
4,426
Superannuation defined benefit expense (Note 5) is represented by the sum of Net interest ($889,000) and Past service
cost $107,000.
d. Reconciliation of the fair value of plan assets
Fair value of plan assets at beginning of the year
32,355
31,471
Interest income
884
1,133
Actual return on plan assets less interest income
(480)
2,223
Employer contributions
336
431
Contributions by plan participants
227
249
Benefits paid
-
(2,919)
Taxes and premiums paid
(175)
(233)
Fair value of plan assets at year end
33,147
32,355
e. Reconciliation of the defined benefit obligation
Present value of defined benefit obligations at beginning of the year
27,929
27,367
Current service cost
889
856
Interest cost
777
1,002
Contributions by plan participants
227
249
Actuarial losses arising from changes in financial assumptions
1,933
2,335
Actuarial gains arising from liability experience
(188)
(728)
Benefits paid
-
(2,919)
Taxes and premiums paid
(175)
(233)
Superannuation liability
31,392
27,929
YARRA VALLEY WATER ANNUAL REPORT 2015-16
73

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
13. DEFINED BENEFIT SUPERANNUATION ASSET
f. Fair value plan assets as at 30 June 2016
Quoted prices in
Significant
active markets for
observable
Unobservable
identical assets -
inputs -
inputs -
Total
Level 1
Level 2
Level 3
Asset category
$’000
$’000
$’000
$’000
Investment funds
33,147
-
33,147
-
Total
33,147
-
33,147
-
2016
2015
%
%
g. Plan assets
Australian equity
31
29
International equity
22
25
Fixed income
13
11
Defensive alternatives
9
9
Property
9
9
Growth alternatives
11
9
Cash
5
8
Total
100
100
h. Fair value of Corporation’s own financial instruments
The fair value of plan assets includes no amounts relating to:
••
any of the Corporation’s own financial instruments
••
any property occupied by, or other assets used by, the Corporation.
2016
2015
%
%
i. Actuarial assumptions to determine defined benefit cost
Discount rate
2.80
3.70
Expected salary increase rate
4.60
4.60
j. Actuarial assumptions to determine defined benefit obligation
Discount rate
2.10
2.80
Expected salary increase rate
4.60
4.60
74
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

k. Sensitivity analysis
The defined benefit obligation as at 30 June 2016 under several scenarios is presented below.
Scenario A:
0.5% per annum lower discount rate assumption
Scenario B:
0.5% per annum higher discount rate assumption
Scenario C:
0.5% per annum lower salary increase rate assumption
Scenario D:
0.5% per annum higher salary increase rate assumption
Base Case Scenario A Scenario B Scenario C Scenario D
Discount rate - Per annum
2.10%
1.60%
2.60%
2.10%
2.10%
Salary increase rate - Per annum
4.60%
4.60%
4.60%
4.10%
5.10%
Defined benefit obligation ($’000)
31,392
32,875
29,996
30,009
32,846
The defined benefit obligation has been recalculated by changing the assumptions as outlined above,
whilst retaining all other assumptions.
l. Funding arrangements
m. Expected contributions
The Equipsuper Contribution and Funding Policy provides
Expected employer contributions for the financial year
for a review of the financial position of the plan each six
ending 30 June 2017 is expected to be nil.
months, as at 30 June and 31 December, with the Corporation
contribution rate comprising a long-term contribution rate
n. Maturity profile of defined benefit obligation
and an adjustment to meet the financing objective of
a Funding Ratio of 105%.
The weighted average duration of the defined benefit
obligation as at 30 June 2016 is eight years.
The Funding Ratio is the ratio of assets to accrued liabilities,
being the greater of vested benefits and the present value of
$’000
past membership benefits. Where the Funding Ratio is greater
30 June 2017
1,686
than 100%, the financing objective is to achieve a Funding
30 June 2018
1,874
Ratio of 105% over five years. Where the Funding Ratio is
30 June 2019
2,074
less than 100%, the primary financing objective is to achieve
30 June 2020
2,208
100% over three years and 105% over five years.
30 June 2021
2,400
In the most recent review of the financial position as at
Following 5 years
13,763
31 December 2015, the actuary recommended a Corporation
contribution rate of nil. The Corporation continues to
contribute salary sacrifice contributions and at the required
rates for accumulation members. The next review of the
financial position and Corporation contribution rate is due
at 30 June 2016.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
75

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
14. CURRENT LIABILITIES - PAYABLES
2016
2015
$’000
$’000
Contractual payables
Trade payables
8,279
19,304
Accruals
78,028
73,644
Security deposits
3,864
3,784
Statutory payables
Fringe benefits tax payable
19
26
Total current liabilities - payables
90,190
96,758
Refer Note 3 financial instruments for interest rate details and maturities analysis on financial instruments: liabilities.
15. CURRENT LIABILITIES - PROVISIONS
2016
2015
$’000
$’000
Employee benefits - annual leave
4,648
4,712
Employee benefits - long service leave
11,279
10,326
Other provisions
1,079
1,032
Total current liabilities - provisions
17,006
16,070
Employee benefits expected to be wholly settled within 12 months: $1,550,597 (2015:$1,545,750).
16. CURRENT AND NON-CURRENT LIABILITIES - UNEARNED INCOME
2016
2015
$’000
$’000
Grant income - current
1,105
2,091
Customers paid in advance
19,160
19,878
Other
926
1,153
Total current liabilities - unearned income
21,191
23,122
Developer contributions - non-current
7,986
7,953
Total current and non-current liabilities - unearned income
29,177
31,075
76
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

17. NON-CURRENT LIABILITIES - PROVISIONS
2016
2015
$’000
$’000
Employee benefits - long service leave
2,109
1,998
Total non-current liabilities - provisions
2,109
1,998
Movements in provisions (current and non-current)
Employee benefits
Carrying amount at beginning
17,037
16,935
Additional provision
6,011
5,806
Amounts utilised during year
(5,011)
(5,704)
Carrying amount at year end
18,037
17,037
Other provisions
Carrying amount at beginning
1,032
2,057
Additional provision
140
157
Amounts utilised during year
(92)
(1,182)
Carrying amount at year end
1,080
1,032
18. CONTRIBUTED EQUITY
2016
2015
$’000
$’000
Contributed equity
477,297
477,297
Less capital repatriation
(8,600)
-
Total contributed equity
468,697
477,297
Additions to net assets which have been designated as contributions by owners are recognised as contributed equity. Other
transfers that are in the nature of contributions or distributions (Capital repatriation) have been recognised in contributed equity.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
77

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
19. ASSET REVALUATION RESERVE
2016
2015
$’000
$’000
Asset revaluation reserve
856,947
842,365
Total asset revaluation
856,947
842,365
Movements in asset revaluation reserve
Infrastructure Crown land
Land Buildings
Total
2016
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2015
653,981
408
187,788
188
842,365
Revaluation, net of tax effect
(49,913)
(190)
63,312
1,373
14,582
Balance at 30 June 2016
604,068
218
251,100
1,561
856,947
2015
Balance at 1 July 2014
690,159
408
188,256
188
879,011
Revaluation, net of tax effect
(36,178)
-
135
-
(36,043)
Transfer to retained earnings on disposal
-
-
(603)
-
(603)
of land held for sale
Balance at 30 June 2015
653,981
408
187,788
188
842,365
The Asset revaluation reserve is used to record changes in the carrying amount of fixed assets arising on revaluation. Any
revaluation increment is credited to the asset revaluation reserve. A decrement would be debited to the surplus to the extent
of the balance of prior increments. Any further decrements would be taken to the Statement of Comprehensive Income.
20. RETAINED EARNINGS
2016
2015
$’000
$’000
Opening balance
199,510
179,448
Net profit
56,569
50,792
Defined benefit superannuation plan gain / (loss)
(2,225)
616
Transfer from Asset revaluation reserve on disposal of land held for sale
-
603
Net deferred tax assets recognised through retained earnings
617
(249)
Dividend paid
(24,300)
(31,700)
Closing balance
230,171
199,510
78
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

21. RELATED PARTY DISCLOSURES
a. Parent entity
The Corporation is owned by the State Government of Victoria.
b. Relationship with the State Government of Victoria related parties
i. Minister for Environment, Climate Change and Water
The Corporation, under a normal commercial agency arrangement, bills and collects rates on behalf of the Minister for Water
relating to Parks Victoria services. The Corporation charges the Department of Environment, Land, Water and Planning for the
services it provides in billing and collecting rates and on charges costs incurred regarding supplementary council valuations.
2016
2015
$’000
$’000
Amounts recognised as revenue in the Statement of Comprehensive Income
Administration fees for billing and collecting rates and reimbursement of costs of
supplementary council valuations
2,661
2,594
Cash amounts paid during the year
Parks Victoria levy billed to customers
58,499
55,701
ii. Melbourne Water Corporation
The Corporation transacts solely with the Melbourne Water Corporation for the purchase of potable water and disposal of
sewage. The Corporation, under a normal commercial agency arrangement, bills and collects drainage rates and charges on
behalf of the Melbourne Water Corporation. The Corporation charges the Melbourne Water Corporation for the services it
provides in billing and collecting drainage fees on behalf of the Melbourne Water Corporation and on charges costs incurred
regarding supplementary council valuations.
Amounts recognised as an expense in the Statement of Comprehensive Income
Bulk water and sewerage wholesaler charges expense (Note 5)
560,819
523,348
Government Water Rebate provided to customers
(29,817)
(49,070)
Amounts recognised as revenue in the Statement of Comprehensive Income
Administration fees for billing and collecting drainage rates and reimbursement of the costs
of supplementary council valuations
4,399
4,480
Cash amounts paid during the year
Drainage billed to customers
84,795
82,236
YARRA VALLEY WATER ANNUAL REPORT 2015-16
79

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
21. RELATED PARTY DISCLOSURES
iii. Department of Environment, Land, Water and Planning
The Corporation is required to make payments to the Department of Environment, Land, Water and Planning.
2016
2015
$’000
$’000
Amounts recognised as an expense in the Statement of Comprehensive Income
Environmental contribution
29,880
29,880
iv. Treasury Corporation of Victoria
The Corporation borrows from and invests with the Treasury Corporation of Victoria. The aggregate amount of borrowings
payable at reporting date and the amounts of interest expense included in the determination of profit before income tax is:
Aggregate amount of borrowings
2,170,906
2,009,000
Interest expense
98,082
97,318
v. Department of Treasury and Finance
The Corporation pays amounts to the State Government of Victoria, via the Department of Treasury and Finance.
Amounts were paid as follows:
Dividend paid
24,300
31,700
Capital repatriation
8,600
-
Financial accommodation levy
25,743
23,810
vi. Department of Health and Human Services
Customers of the Corporation who hold either a Pension Concession Card, a Gold Repatriation Health Care Card for All Conditions
or a Health Care Card are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts.
When a customer pays this lesser amount, the difference is billed to and paid by the Department of Health and Human Services.
Concession amounts billed during the year
48,184
46,749
vii. State Revenue Office
In addition to Payroll Tax and Land Tax, which are payable on normal commercial terms and conditions, customers of the
Corporation who are not for profit entities are entitled to pay a concessionary amount instead of the full balance outstanding
on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the State Revenue Office.
Concession amounts billed during the year
1,300
1,280
viii. Lower Murray Water
Yarra Valley Water has entered into an agreement with Lower Murray Water whereby Yarra Valley Water are to provide
consulting services to assist in developing and implementing a strategic human resources strategy.
Consulting Services
45
-
80
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

ix. Other State Government of Victoria related parties
Water and sewerage services were provided to wholly owned State Government of Victoria entities for properties
within Yarra Valley Water’s district under normal commercial terms and conditions.
All other transactions with State Government of Victoria related party entities were made on normal commercial
terms and conditions.
22. RESPONSIBLE PERSONS, EXECUTIVE OFFICERS AND OTHER PERSONNEL
a. Responsible Persons
The relevant Minister and Directors of Yarra Valley Water are deemed to be responsible persons by Ministerial Direction
pursuant to the provisions of the Financial Management Act 1994.
The relevant Minister of Yarra Valley Water during the reporting period, from 1 July 2015 to 30 June 2016 was:
- the Hon Lisa Neville MP, Minister for Environment, Climate Change and Water for the period from 1 July 2015 to 22 May 2016
- the Hon Lisa Neville MP, Minister for Water for the period 23 May 2016 to 30 June 2016.
The Directors of Yarra Valley Water at any time during the financial year ended 30 June 2016 were:
Sue Therese O’Connor - Chair
Appointed 1 October 2015
Robert Clive Skinner - Deputy Chair
Appointed 1 October 2015
Patrick John McCafferty - Managing Director
Gregory Joseph Camm
Susan Elizabeth Friend
Victor John Perton
Appointed 1 October 2015
Anita Michelle Roper
Appointed 1 October 2015
Eric Sjerp
Appointed 1 October 2015
Helen Lynette Thornton
Appointed 1 October 2015
Peter Snowden Wilson
1 July 2015 to 30 September 2015
Dean Matthew Comrie
1 July 2015 to 30 September 2015
Stephen James McArthur
1 July 2015 to 30 September 2015
David Anthony Middleton
1 July 2015 to 30 September 2015
Therese Anne Ryan
1 July 2015 to 30 September 2015
YARRA VALLEY WATER ANNUAL REPORT 2015-16
81

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
22. RESPONSIBLE PERSONS, EXECUTIVE OFFICERS AND OTHER PERSONNEL
Remuneration of Responsible Persons
The remuneration paid to the Minister for Water and the
former Minister for Environment Climate Change and Water
is reported in the Annual Report of the Department of Premier
and Cabinet. Other relevant interests are declared in the
Register of Members’ Interests which each member of the
Parliament completes.
The number of responsible persons whose remuneration
from the Corporation was within the specified bands were
as follows:
2016
2015
No.
No.
$10,000 - $19,999
4
-
$20,000 - $29,999
1
-
$30,000 - $39,999
4
-
$40,000 - $49,999
3
6
$50,000 - $59,999
-
-
$70,000 - $79,999
1
-
$90,000 - $99,999
-
1
$360,000 - $369,999
-
1
$390,000 - $399,999
1
-
$680,000 - $689,999*
-
1*
Total numbers
14
9
Total amount ($’000)
824
1,437
*The disclosure relates to the retirement of a long serving
responsible person in September 2014. Upon termination, long
service leave and annual leave payments were made and have
been disclosed in the total amount.
82
YARRA VALLEY WATER ANNUAL REPORT 2015-16

 

b. Transactions with director related entities
Mr Wilson is a Director of Vision Super Pty Ltd. Vision Super
Pty Ltd provides superannuation services to the Corporation’s
Water and sewerage services were provided to Directors
employees for which an amount of $367,503 (2015:
or director related entities for properties within Yarra
$334,902) in employee superannuation contributions was
Valley Water’s district under normal commercial terms
paid or payable on normal commercial terms and conditions.
and conditions.
No amounts remained payable at 30 June 2016 (2015: Nil).
Mr McCafferty is the Deputy Chair of the Water Services
Mr Comrie is a Project Director with AusNet Services.
Association of Australia. Water Services Association of
AusNet Services has provided services to the Corporation
Australia has provided services to the Corporation for which
for which an amount of $105,946 (2015: $1,100) in fees
an amount of $345,664 (2015: $325,657) in fees was paid
was paid or payable on normal commercial terms and
or payable on normal commercial terms and conditions. No
conditions. No amounts remained payable at 30 June 2016
amounts remained payable at 30 June 2016 (2015: $29,729).
(2015: Nil). Select Solutions, a division of AusNet Services,
has provided services to the Corporation for which an amount
Mr McCafferty is an Executive Council Member of the
of $19,751,546 (2015: 20,512,487) in fees was paid or
Institute of Water Administration. Institute of Water
payable on normal commercial terms and conditions.
Administration has provided services to the Corporation
The amount of $1,703,463 remained payable at
for which an amount of $10,702 (2015: $5,587) in fees was
30 June 2016. (2015: $1,767,607).
paid or payable on normal commercial terms and conditions.
The amount of $150 remained payable at 30 June 2016.
There were no other transactions with director
(2015: $135).
related entities.
Ms O’Connor is a Director of Mercer Superannuation.
Mercer Superannuation provides superannuation services
to the Corporation’s employees for which an amount of
$22,032 in employee superannuation contributions was
paid or payable on normal commercial terms and conditions.
No amounts remained payable at 30 June 2016.
Mr Skinner is Chair of WaterAid Australia. WaterAid Australia
has provided services to the Corporation for which an amount
of $46,484 in fees was paid or payable on normal commercial
terms and conditions. No amounts remained payable at
30 June 2016.
Mr Middleton is Executive Director, Water Markets for
CH2M Hill Australia Pty Ltd. CH2M Hill Australia Pty Ltd
has provided services to the Corporation for which an amount
of $24,860 (2015: Nil) in fees was paid or payable on normal
commercial terms and conditions. The amount of $2,360
remained payable at 30 June 2016. (2015: Nil).
YARRA VALLEY WATER ANNUAL REPORT 2015-16
83

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
22. RESPONSIBLE PERSONS, EXECUTIVE OFFICERS AND OTHER PERSONNEL
c. Remuneration of Executive Officers
The number of Executive Officers, excluding the Responsible Persons, whose total annualised remuneration
from the Corporation was within the specified bands were as follows:
Total remuneration
Base remuneration
2016
2015
2016
2015
No.
No.
No.
No.
$200,000 - $209,999
-
-
-
1
$220,000 - $229,999
-
1
1
2
$230,000 - $239,999
-
-
3
3
$240,000 - $249,999
-
-
3
1
$250,000 - $259,999
-
-
-
-
$260,000 - $269,999
1
2
-
-
$270,000 - $279,999
3
3
-
-
$280,000 - $289,999
2
1
-
-
$300,000 - $309,999
1
-
-
-
Total numbers
7
7
7
7
Total annualised employee equivalent (AEE)
7
7
7
7
Total amount ($’000)
1,946
1,859
1,662
1,616
Total remuneration is inclusive of base remuneration, bonus payments, redundancy payments, retirement benefits
and payments of annual leave and long service leave upon termination.
Annualised employee equivalent (AEE) is based on working 38 hours per week over the reporting period.
d. Key management personnel compensation
2016
2015
Short-term employee benefits
2,553
2,505
Post-employment benefits
218
791
Other employment benefits*
50
49
Total amount ($’000)
2,821
3,345
Total numbers
21
16
Key management personnel includes Responsible Persons and Executive Officers. Where applicable, the table
above includes performance bonuses paid during the year, based on performance in the previous year.
*Other employment benefits represents long service leave.
e. Other personnel (contractors with significant management responsibilities)
During the year, Yarra Valley Water had no other personnel, by way of contractors, charged with significant
management responsibilities.
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23. REMUNERATION OF AUDITOR
2016
2015
$’000
$’000
Amount received, or due and receivable, by the Victorian Auditor-General’s Office
for auditing the financial statements of the Corporation
136
132
24. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
a. Contingent liabilities
b. Contingent assets
The Corporation is unaware of any material contingent
The Corporation enters into agreements with land developers
liability. Claims to which the Corporation is aware and
whereby assets are transferred to the Corporation at no
which may result in a liability being incurred have been
cost. These assets are brought to account as revenue and
provided for as other provisions. Refer Notes 15 and 17.
capitalised. At the reporting date, land developers had
commenced construction of assets that are transferred to
the Corporation after the maintenance period contingent upon
the release of Statements of Compliance by the Corporation.
25. COMMITMENTS
a. Capital commitments
Total capital expenditure contracted for at balance date but not provided for in the financial statements
2016
2015
$’000
$’000
Payable:
Not later than one year
102,196
154,463
Later than one year but not later than five years
21,450
33,688
Greater than five years
-
-
Total (GST inclusive)
123,646
188,151
The Corporation’s capital commitments include growth works and mains renewals for both water and sewer.
b. Lease commitments
Non-cancellable operating leases contracted for at balance date but not provided for in the financial statements
Payable:
Not later than one year
188
254
Later than one year but not later than five years
81
258
Later than five years
4
2
Total (GST inclusive)
273
514
YARRA VALLEY WATER ANNUAL REPORT 2015-16
85

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
25. COMMITMENTS
b. Lease commitments
Non-cancellable operating leases contracted for at balance date but not provided for in the financial statements
2016
2015
$’000
$’000
Non-cancellable operating lease receivable:
Not later than one year
832
535
Later than one year and not later than five years
1,005
892
Later than five years
1,478
1,722
Total (GST inclusive)
3,315
3,149
There are no commitments in relation to finance leases as the Corporation does not have any finance leases.
c. Other commitments
Other expenditure commitments at balance date not provided for in the financial statements:
Payable:
Not later than one year
34,933
29,880
Later than one year but not later than five years
116,070
-
Total (GST inclusive)
151,003
29,880
Other commitments are represented mainly by environmental commitments. The Corporation has a commitment to pay
an environmental contribution to the Department of Environment, Land, Water and Planning of $29.9 million per annum
until 30 June 2018. The Corporation will pay $42.86 million each year after until 30 June 2020.
26. EX-GRATIA EXPENSES
Hardship write offs for customers in the Arrange and Save Program
827
822
Write offs for disconnected customer accounts greater than 180 days
3,243
9,547
Bankruptcies and liquidations
40
53
Minimum account write offs
124
71
Total (GST inclusive)
4,234
10,493
All ex-gratia expenses above form part of Bad and doubtful debts expense at Note 5.
27. ECONOMIC DEPENDENCY
The normal trading activities of the Corporation depend to a significant extent on the provision of finance from the Treasury
Corporation of Victoria.
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28. EVENTS SUBSEQUENT TO BALANCE SHEET DATE
Since 30 June 2016 to the date of this report, no matter or circumstance has arisen that, in the opinion of the Directors,
has significantly affected or may significantly affect the operations of the Corporation, the results of those operations,
or the state of affairs of the Corporation in future financial years.
29. CASH FLOW INFORMATION
For the purpose of the Cash Flow Statement, cash includes cash at bank and on hand, which are used in the cash management
function on a daily basis.
a. Reconciliation of net profit to net cash from operating activities
2016
2015
Note
$’000
$’000
Net profit
56,569
50,792
Adjustments for non-cash items
Depreciation / amortisation
5
97,490
94,294
Bad and doubtful debts
5
4,516
4,091
Write off / disposal of assets
5
6,516
4,182
Defined benefit superannuation plan expense
5
782
725
Net (gain) / loss on disposal of non-current assets
5
296
(294)
Impairment writeback
4
(290)
-
Impairment writedown
5
8,695
17
Value of works taken over from developers
4
(14,956)
(15,105)
Changes in operating assets and liabilities
Increase in net deferred tax liabilities
25,243
22,249
(Increase) / decrease in other current assets
484
(326)
Increase / (decrease) in interest creditors
1,818
(269)
Increase in provisions and unearned income
401
1,645
Decrease in payables
(45,743)
(17,416)
(Increase) / decrease in trade receivables
(10,128)
5,409
(Increase) / decrease in GST receivable
(8,126)
682
Decrease in unfunded defined benefit superannuation plan asset
446
(431)
Net cash inflow from operating activities
124,013
150,245
b. Reconciliation of cash
Cash and cash equivalents
8
1,136
360
Closing cash balance
1,136
360
c. Financing arrangements
The Corporation’s borrowings are made exclusively with the Treasury Corporation of Victoria in accordance with approvals from
the Treasurer of Victoria. Refer Note 3.
YARRA VALLEY WATER ANNUAL REPORT 2015-16
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