Annual Report 2014–15


Note 23: Investment property



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Note 23: Investment property

Item


Consolidated

2015


$’000

Consolidated

2014


$’000

Council

2015


$’000

Council

2014


$’000

Land

N/A

N/A

N/A

N/A

Balance at beginning of financial year

46,364

41,174

46,364

41,174

Additions

0

0

0

0

Disposals

(50)

0

(50)

0

Fair value adjustment

30


5,190

30

5,190

Balance at end of financial year

46,344

46,364

46,344

46,364

Buildings

N/A

N/A

N/A

N/A

Balance at beginning of financial year

67,425

66,975

67,425

66,975

Additions

1,385

0

1,385

0

Disposals

0

0

0

0

Transfer

(1,420)


0

(1,420)

0

Fair value adjustment

335

450

335

450

Balance at end of financial year

67,725

67,425

67,725

67,425

Total investment properties

114,069

113,789

114,069

113,789

Valuation of investment property

Valuation of investment property has been determined in accordance with a valuation by a qualified valuer Beau Jarvis, Certified Practising Valuer, member of Australian Property Institute, member number 77334. The valuation is at fair value, based on the current market value for the property.

Note 24: Intangible assets

  1. Intangible assets


Item

Consolidated

2015


$'000

Consolidated

2014


$'000

Council

2015


$'000

Council

2014


$'000

Software

10,853

11,004

10,853

11,004

Goodwill

22,770

25,928

0

0

Customer relationships

974

1,275

0

0


Total

34,597

38,207

10,853

11,004



Consolidated

Software

$'000


Goodwill

$'000


Customer

relationships

$'000


Total

$'000


Gross carrying amount

N/A

N/A

N/A

N/A

Balance at 1 July 2013

29,033

20,240

0

49,273

Additions from acquisition


5,592

6,188

1,500

13,280

Other

0

(500)

0

(500)

Balance at 1 July 2014

34,625

25,928

1,500

62,053

Additions from acquisition

3,227

0

0

3,227

Other

(15,407)

(500)

0

(15,907)

Balance at 30 June 2015

22,445

25,428


1,500

49,373

Accumulated amortisation and impairment

N/A

N/A

N/A

N/A

Balance at 1 July 2013

(20,295)

0

0

(20,295)

Amortisation expense

(3,326)

0

(225)

(3,551)

Balance at 1 July 2014

(23,621)

0

(225)

(23,846)

Amortisation expense

(3,378)

0

(301)


(3,679)

Impairment expense

0

(2,658)

0

(2,658)

Amortisation written back

15,407

0

0

15,407

Balance at 30 June 2015

(11,592)

(2,658)

(526)

(14,776)

Net book value at 30 June 2014

11,004

25,928

1,275

38,207

Net book value at 30 June 2015

10,853

22,770

974


34,597




Council

Software

$'000

Goodwill

$'000

Customer

relationships



$'000

Total

$'000

Gross carrying amount

N/A

N/A

N/A

N/A

Balance at 1 July 2013

29,033

0

0

29,033

Additions from acquisition

5,592

0

0

5,592

Other

0

0


0

0

Balance at 1 July 2014

34,625

0

0

34,625

Additions from acquisition

3,227

0

0

3,227

Other

(15,407)

0

0

(15,407)

Balance at 30 June 2015

22,445

0

0

22,445

Accumulated amortisation and impairment

N/A

N/A

N/A

N/A

Balance at 1 July 2013

(20,295)

0


0

(20,295)

Amortisation expense

(3,326)

0

0

(3,326)

Balance at 1 July 2014

(23,621)

0

0

(23,621)

Amortisation expense

(3,378)

0

0

(3,378)

Amortisation written back

15,407

0

0

15,407

Balance at 30 June 2015

(11,592)

0

0

(11,592)

Net book value at 30 June 2014


11,004

0

0

11,004

Net book value at 30 June 2015

10,853

0

0

10,853
  1. Impairment testing for cash generating units containing goodwill


Goodwill is related with Council’s subsidiary Citywide Service Solutions Pty Ltd. Goodwill has been reviewed for impairment for the year ending 30 June 2015.

For the purposes of impairment testing, goodwill is allocated to the consolidated entity's operating divisions. The aggregate carrying amounts allocated to each Cash Generating Unit (CGU) are as follows:



Item

2015

$’000


2014

$’000


Arboriculture VIC

194


194

Horticulture VIC

5,224

5,224

Street Cleaning VIC

3,296

3,296

Open Space NSW

7,868

7,868

Infrastructure Services

0

3,158

Open Space QLD

6,188

6,188

Total

22,770

25,928

The recoverable amount of each CGU has been determined based on its value in use, determined by discounting the future cash flows to be generated from the continuing use of the CGU. The recoverable amount of each unit was determined to be in excess of the carrying value for each CGU, and therefore no impairments/adjustments have been recognised other than detailed below.

Deferred purchase consideration adjustment - goodwill in the current year and prior year

In the current year, the goodwill in AWD Earthmoving has been adjusted by $0.500 million as the earnings before income tax target for the current financial year was not met and the portion of the contingent consideration has not been paid as was structured in the purchase of the business.

Impairment losses recognised in the current year


In the current year, the marketplace where the Infrastructure Services CGU operates has continued to deteriorate. This has led to the recognition of an impairment loss of $2.658 million which has been recognised in the Statement of Profit or Loss and Other Comprehensive Income. Other areas of Infrastructure Services operations continue to perform.
  1. Key assumptions used in the discounted cash flow projections


The key assumptions used in the calculation of recoverable amounts are discount rates and earnings before income tax, depreciation and amortisation growth (EBITDA). These assumptions are as follows:

Item

2015

2014

Discount Rate

9.30%

3.54%

EBITDA Growth Rate

1.00%


2.50%

The discount rate used is a post-tax measure based on the Citywide's weighted average cost of capital. Previously the discount rate used was based on the risk-free rate for 10-year bonds issued by the Australian government. Impairment testing in the prior year was completed using a discount rate of 10.0 per cent.

Each CGU has five years of cash flows included in its discounted cash flow models. The long-term compound annual growth rate in EBITDA is estimated by management using past experience and expectations for the future.

Budgeted EBITDA growth is expressed as the compound annual growth rates in the initial five years of the plans used for impairment testing and has been based on past experience and expectations for the future.

  1. Sensitivity to change in assumptions


Citywide has modelled a 10 per cent reduction in base EBITDA in each CGU and a 1 per cent increase in the discount rate. In each case, the value in use would not be lower than the carrying amount and therefore no impairment charge would arise.


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