City of Melbourne Annual Report 2015-16


Note 23. Investment property



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Note 23. Investment property

Item


Consolidated

2016

$’000

Consolidated

2015

$’000

Council

2016

$’000

Council

2015

$’000

Land

N/A

N/A

N/A

N/A

Balance at beginning of financial year

46,344

46,364

46,344

46,364

Additions

69,500

0

69,500

0

Disposals

0

(50)

0


(50)

Fair value adjustment

24,726

30

24,726

30

Balance at end of financial year

140,570

46,344

140,570

46,344

Buildings

N/A

N/A

N/A

N/A

Balance at beginning of financial year

67,725

67,425

67,725

67,425

Additions

7,602

1,386

7,602

1,386


Transfer

0

(1,420)

0

(1,420)

Fair value adjustment

(7,877)

334

(7,877)

334

Balance at end of financial year

67,450

67,725

67,450

67,725

Total investment properties

208,020

114,069

208,020

114,069

Valuation of investment property

Valuation of investment property has been determined in accordance with a valuation by a qualified valuer Pauline Lawson, Certified Practising Valuer, member of Australian Property Institute, member number 1138. The valuation is at fair value, based on the current market value for the property.

Note 24. Intangible assets


  1. Intangible assets

Item

Consolidated

2016


$'000

Consolidated

2015


$'000

Council

2016


$'000

Council

2015


$'000

Software

14,353

10,853

14,353

10,853

Goodwill

22,770

22,770

0

0

Customer relationships

675

974

0

0


Total

37,798

34,597

14,353

10,853

Consolidated

Consolidated

Consolidated

2016

$'000

Consolidated

2015

$'000

Council

2016

$'000

Council

2015

$'000

Gross carrying amount

N/A

N/A

N/A

N/A

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 1 July 2015

22,445

25,428

1,500

49,373

Additions from acquisition

6,803

0

0

6,803

Other

0

0

0

0

Balance at 30 June 2016


29,248

25,428

1,500

56,176

Accumulated amortisation and impairment

N/A

N/A

N/A

N/A

Balance at 1 July 2014

(23,621)

0

(226)

(23,847)

Amortisation expense

(3,378)

0

(300)

(3,678)

Impairment expense

0

(2,658)

0

(2,658)

Amortisation written back

15,407


0

0

15,407

Balance at 1 July 2015

(11,592)

(2,658)

(526)

(14,776)

Amortisation expense

(3,303)

0

(299)

(3,602)

Impairment expense

0

0

0

0

Amortisation written back

0

0

0

0

Balance at 30 June 2016

(14,895)

(2,658)

(825)

(18,378)

Net book value at 30 June 2015


10,853

22,770

974

34,597

Net book value at 30 June 2016

14,353

22,770

675

37,798

Council

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 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 1 July 2015

22,445

0

0

22,445

Additions from acquisition

6,803

0

0

6,803

Other

0

0

0


0

Balance at 30 June 2016

29,248

0

0

29,248

Accumulated amortisation and impairment

N/A

N/A

N/A

N/A

Balance at 1 July 2014

(23,621)

0

0

(23,621)

Amortisation expense

(3,378)

0

0

(3,378)

Amortisation written back

15,407

N/A

N/A

15,407

Balance at 1 July 2015

(11,592)

0

0


(11,592)

Amortisation expense

(3,303)

0

0

(3,303)

Amortisation written back

0

0

0

0

Balance at 30 June 2016

(14,895)

0

0

(14,895)

Net book value at 30 June 2015

10,853

0

0

10,853

Net book value at 30 June 2016

14,353

0

0

14,353
  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 2016.

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

$'000

$'000

Current

N/A

N/A

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

0

Open Space QLD

6,188

6,188

Total

22,770

22,770

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.

  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

2016

$'000

2015

$'000

Current

N/A


N/A

Discount Rate

9.30%

9.30%

EBITDA Growth Rate

1.50%

1.00%

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%.

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% reduction in base EBITDA in each CGU and a 1% 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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