NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1. ABOUT THIS REPORT
Basis of accounting
This financial report is a general purpose financial report, that consists of Statement of Comprehensive Income, Balance Sheet,
Statement of Changes in Equity and Cash Flow Statement and notes accompanying these statements for the period ending 30 June
2017. The general purpose financial report has been prepared in accordance with Australian Accounting Standards, Interpretations
and other authoritative pronouncements of the Australian Accounting Standards Board, the requirements of the Financial
Management Act 1994 and applicable Ministerial Directions.
The financial report has been prepared on an accrual and going concern basis and is prepared on a historical cost convention, except
for infrastructure, property, plant and equipment, and the defined superannuation asset which have been measured at fair value.
The financial report of Yarra Valley Water Corporation (the Corporation) for the year ended 30 June 2017 was authorised for issue in
accordance with a resolution of the Directors on 25 August 2017.
Accounting policies
Accounting policies are applied in a manner which ensures that the resulting financial information 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.
Functional and presentation currency
All amounts are presented in Australian dollars, unless otherwise stated, and have been rounded to the nearest thousand dollars or,
in other cases, to the nearest dollar.
Classification between current and non-current
In the determination of whether an asset or liability is current or non-current, consideration is given to the time when each asset or
liability is expected to be realised or paid. The asset or liability is classified as current if it is expected to be turned over within the
next 12 months.
Accounting estimates
The Corporation evaluates estimates and judgements which are incorporated in the financial report based on historical knowledge
and the best available current information. Estimates assume a reasonable expectation of future events and are based on current
trends and economic data obtained both externally and within the Corporation. The significant judgments made in the preparation
of these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. Actual results
may differ from these estimates.
The most significant accounting estimates undertaken in the preparation of this financial report relate to:
asset residual values and useful lives - note 4.2
asset impairment - note 4.2
trade receivables - accrued revenue - note 5.1
employee benefit provisions and other provisions - note 3.2.2, 5.5
deferred tax - note 8.1
fair value of infrastructure, property, plant and equipment - note 7.4
contingent assets and liabilities - note 7.3
defined benefit superannuation fund - note 3.2.3
unearned income - note 5.4.
42
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

2. FUNDING DELIVERY OF OUR SERVICES
Introduction
This section provides additional information about how the Corporation is funded and the accounting policies that are relevant for an
understanding of the items recognised in the financial statements.
2.1. Summary of Income that funds the delivery of our services
2017
2016
Note
$’000
$’000
Rendering of Services
Fixed service charges
376,008
365,772
Water usage charges
376,402
393,830
Sewage disposal charges
177,568
191,389
Trade waste charges
24,411
23,959
Government Water Rebate provided to customers
(68,308)
(66,997)
Total rendering of services
886,081
907,953
Interest income
7
164
Other revenue
New customer contributions by developers
33,889
35,287
Other products and services
20,119
23,668
Developer contributed assets
15,887
14,956
Rent
1,574
2,044
Impairment writeback
4.2
-
290
Other
27,166
34,655
Total other revenue
98,635
110,900
Total revenue
984,723
1,019,017
YARRA VALLEY WATER ANNUAL REPORT 2016-17
43

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
Water and sewerage service and usage charges
Revenue is brought to account when services have been provided or when a usage or service charge has been made. The payment
in advance by customers of accounts which at reporting date were unbilled is classified as unearned income. Refer Note 5.4 -
Unearned Income.
Water usage charges and sewage disposal charges are recognised as revenue when the service has been provided. As meter reading
is cyclical, an estimate is made at the end of the accounting period for water usage and sewage disposal by customers. The estimate
is made by multiplying the number of days since the last reading by daily average water consumption for that period.
Water and Sewerage service charges are billed quarterly in advance and recognised evenly throughout the financial year to reflect
the pattern of revenue being earned. Service charges represent charges for access to water and sewerage charges.
Government Water Rebate
The Government Water Rebate is recognised as a rebate against revenue when the associated revenue is billed. It represents
a rebate back to customers provided by the Corporation on behalf of the state government on water bills of residential water
customers. It was first issued in 2014-15 on the first quarter bill (July, August, September) and is due to be provided each year
until 2017-18.
Developer contributed assets
Developer contributed assets arise where developers pay for the cost of construction of new assets and subsequently gift these
assets to the Corporation, which maintains them in perpetuity. In accordance with the requirements of AASB Interpretation 18 -
Transfers of Assets from Customers and AASB 118 - Revenue, recognition of income occurs when the risks and rewards
of ownership have been transferred to the Corporation. This non-cash revenue is recorded as developer contributed assets.
Where actual cost is not available, the Corporation recognises income by assessing the value of the works using a schedule of rates
determined by the corporation.
New customer contributions
New customer contributions represent charges applicable when a customer builds or develops a property and connects to the
Corporation’s water supply and sewerage infrastructure. The cash contributions collected contribute towards the cost of providing
shared infrastructure and are recognised as revenue when the contribution has been received.
Other Products and Services
Other products and services relate to various plumbing services revenue including new meter connections and recycled water
inspection fees. Revenue is recognised on receipt of payment and the acceptance of compliance to conditions of connections.
Other revenue
Other revenue items are recognised on an accrual basis. Other revenue includes fees for information statements, water trading,
billing and collection administration fees from Melbourne Water and DELWP and land development application fees.
Income from operating leases is recognised in net profit in the Statement of Comprehensive Income on a straight-line basis
over the lease term.
2.2. Commitments for lease receivables
The following table summarises the non-cancellable operating lease receivables contracted for at balance date but not provided
in the financial statements. Revenue for operating leases, where substantially all risks and benefits remaining with the lessor, are
recognised as revenue in the periods in which they are incurred. These commitments recorded below are at their nominal value and
are inclusive of GST.
2017
2016
Non-cancellable operating lease receivable
$’000
$’000
Not later than one year
1,145
832
Later than one year and not later than five years
1,464
1,005
Later than five years
1,992
1,478
Total (GST inclusive)
4,601
3,315
44
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

3. THE COST OF DELIVERING OUR SERVICES
Introduction
This section provides additional information about how the Corporation’s funding is applied and the accounting policies
that are relevant for an understanding of the items recognised in the financial statements.
Structure
3.1 Summary of expenses incurred in the delivery of our services
3.2 Our People
3.2.1 Employee benefits - Statement of Comprehensive Income
3.2.2 Employee benefits - Balance Sheet
3.2.3 Superannuation
3.3 Commitments for expenditure
3.4 Remuneration of auditor
3.1. Summary of expenses incurred in the delivery of our services
2017
2016
Note
$’000
$’000
Bulk water and sewerage charges
493,414
560,819
Government Water Rebate contribution received from Melbourne Water Corporation
-
(29,817)
Depreciation
4.2
76,536
76,780
Contract payments
58,996
55,035
Salary and employee benefits expense
3.2.1
45,839
43,456
Environmental contribution
8.2
29,880
29,880
Amortisation
4.3
20,336
20,710
Billing and revenue collection costs
9,317
10,273
Information technology costs
4,180
2,800
Electricity
3,956
3,829
Consulting services
3,760
2,736
Government taxes, fees and contributions
3,403
3,095
Impairment write down of assets to recoverable amount
4.2
3,181
8,695
Bad and doubtful debts
2,828
4,516
Write off / disposal of assets
4.2, 4.3
2,071
6,516
Superannuation defined benefit expense
3.2.3.c
887
782
Transport costs
555
511
Rental expenses relating to operating leases
189
310
Smart Water Fund contributions
165
190
Other expenses
13,644
12,148
Total expenses
773,137
813,264
Some accounting policies relating to items in the table above are in the relevant notes within other sections of the financial report. Please see note references.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
45

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
Bulk Water and Sewerage charges
Bulk water and Sewage charges are levied by Melbourne Water for the cost of water the Corporation purchases, and for sewage
treated at Melbourne Water’s treatment plants. Variable charges are levied in arrears and are payable on a weekly basis. Fixed
charges are levied once a month and are payable on the fifteeth of the month to which they refer. Any variable charges that remain
outstanding at period end are accrued.
Government Water Rebate
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. The amount above represents the amount received
from Melbourne Water Corporation 2015-16. From 1 July 2016 the rebate was no longer received as a payment from Melbourne
Water but was instead factored into reduced bulk water charges.
Contract payments
Contract payments includes costs such as maintenance contract, software licences and various other contracts which are expensed
in the reporting period in which they are incurred.
Billing and collection costs
Billing and collection costs include printing, postage and collection fees which are expensed in the reporting period in which they
are incurred.
3.2. Our People
3.2.1. Employee benefits - Statement of Comprehensive Income
Employee expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements,
termination payments and WorkCover premiums.
3.2.2. Employee benefits - Balance Sheet
A provision recognised for benefits accruing to employees in respect of annual leave and long service leave when it is probable that
settlement will be required and the liability is capable of being reliably measured.
Wages and salaries, annual leave and sick leave:
Liabilities for wages and salaries (including non-monetary benefits, annual leave and on-costs) are recognised as part of the
employee benefit provision as current liabilities, because the Corporation does not have an unconditional right to defer settlements
of these liabilities. The liability for salaries and wages are recognised in the balance sheet at remuneration rates which are current
at the reporting date. As the Corporation expects the liabilities to be wholly settled within 12 months of reporting date, they are
measured at an undiscounted amount.
The annual leave liability is classified as a current liability and measured at an undiscounted amount for those entitlements
expected to be wholly settled within 12 months. Annual leave that is expected to be settled after 12 months are measured as the
present value of estimated further cash flows.
No provision has been made for sick leave as all sick leave is non-vesting and it is not considered probable that the average sick leave
taken in the future will be greater than the benefits accrued in the future. As sick leave is non-vesting, an expense is recognised in
the Statement of Comprehensive Income as it is taken.
Employment on-costs such as payroll tax, workers’ compensation and superannuation are not employee benefits. They are disclosed
separately as a component of the provision for employee benefits when the employment to which they relate has occurred.
46
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

Unconditional long service leave
Unconditional long service leave (LSL) is disclosed as a current liability, even where the Corporation does not expect to settle the
liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an
employee take leave within 12 months.
The components of this current LSL liability are measured at:
undiscounted value - if the Corporation expects to wholly settle within 12 months; or
present value - if the Corporation does not expect to wholly settle within 12 months.
Conditional long service leave
Conditional LSL is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until
the employee has completed seven years of service. This non-current long service leave is measured at present value.
2017
2016
$’000
$’000
Current liabilities - provisions
Annual leave:
Unconditional and expected to settle within 12 months
1,510
1,355
Unconditional and expected to settle after 12 months
2,771
2,707
Long service leave
Unconditional and expected to settle within 12 months
370
2
Unconditional and expected to settle after 12 months
9,602
9,928
Provisions for on-costs
Unconditional and expected to settle within 12 months
270
196
Unconditional and expected to settle after 12 months
1,791
1,738
Total current liabilities - provisions
16,314
15,926
Non-current liabilities - provisions
Employee benefits - long service leave
1,530
1,857
On-costs
222
252
Total non-current liabilities - provisions
1,752
2,109
Reconciliation of movement in on-cost provision
Opening balance
2,186
Additional provision
770
Amounts utilised during year
(709)
Effect of changes in discount rate and remeasurement
36
Carrying amount at year end
2,283
Reconciliation of on-cost provision relates to the sum of current $2,061,000 and non-current $222,000 on-costs.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
47
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
3.2.3. Superannuation
Accumulation plans
Contributions to the accumulation plans are expensed as the contributions are paid or become payable.
Defined benefit superannuation asset
Defined benefit superannuation plan - a liability or asset in respect of the defined benefit superannuation plan is recognised in
the Balance Sheet and is measured as the present value of the defined benefit obligation at the reporting date plus unrecognised
actuarial gains (less unrecognised actuarial losses) less the fair value of the superannuation fund’s assets at that date. The
present value of the defined benefit obligation is based on expected future payments to the reporting date, calculated annually by
independent actuaries using the projected unit credit method. Consideration is given to the expected future wage and salary levels,
experience of employee departures and periods of service.
Actuarial gains and losses are recognised immediately in retained earnings in the Balance Sheet in the year in which they occur.
a. Superannuation plan information
For employees who are members of the Equipsuper Superannuation Fund defined benefits plan, an agreed percentage of salaries is
contributed to the fund by the Corporation as recommended by an actuary.
Defined benefit members receive lump sum retirement benefits on retirement, death, disablement and withdrawal. The defined
benefit plan is closed to new members. All new members of the fund receive accumulation only benefits.
The Superannuation Industry (Supervision) Act 1993 (SIS) governs the superannuation industry and provides the framework within
which superannuation plans operate. The SIS Regulations require an actuarial valuation to be performed for each defined benefit
superannuation plan every three years, or every year if the plan pays defined benefit pensions.
The plan’s Trustee is responsible for the governance of the plan. The Trustee has a legal obligation to act solely in the best interest
of plan beneficiaries. The Trustee has the following roles:
administration of the plan and payment to the beneficiaries from plan assets when required in accordance with the plan rules
management and investment of the plan assets
compliance with superannuation law and other applicable regulations.
The prudential regulator, the Australian Prudential Regulation Authority, licences and supervises regulated superannuation plans.
There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year.
b. Description of risks
There are a number of risks to which the plan exposes the Corporation. The more significant risks related to the defined benefits are:
Investment risk - The risk that investment returns will be lower than assumed and the Corporation will need to increase
contributions to offset this shortfall.
Salary growth risk - The risk that wages or salaries (on which future benefit amounts will be based) will rise more rapidly than
assumed, increasing defined benefit amounts and thereby requiring additional employer contributions.
Legislative risk - The risk that legislative changes could be made which increase the cost of providing the defined benefits.
The plan assets are invested by the Trustee in a pool of assets with plans providing defined benefits for other employers. The assets
have a benchmark weighting to equities of 50% and therefore the plan has significant concentration of equity market risk. However,
within the equity investments, the allocation both globally and across sectors is diversified.
48
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

2017
2016
$’000
$’000
c. Reconciliation of the net defined benefit asset
Net defined benefit asset at start of year
1,755
4,426
Current service cost
(920)
(889)
Net interest
33
107
Actual return on plan assets less interest income
3,504
(480)
Actuarial gains arising from changes in demographic assumptions
48
-
Actuarial gains/(losses) arising from changes in financial assumptions
502
(1,933)
Actuarial gains arising from liability experience
1,870
188
Employer contributions
-
336
Defined benefit superannuation asset
6,792
1,755
Superannuation defined benefit expense (note 3.1) is represented by the sum of Net interest and Current service cost $887,000 (2016: $782,000).
d. Reconciliation of the fair value of plan assets
Fair value of plan assets at beginning of the year
33,147
32,355
Interest income
662
884
Actual return on plan assets less interest income
3,504
(480)
Employer contributions
-
336
Member contributions
233
227
Benefits paid
(1,251)
-
Taxes and premiums paid
(170)
(175)
Fair value of plan assets at year end
36,125
33,147
e. Reconciliation of the defined benefit obligation
Present value of defined benefit obligations at beginning of the year
31,392
27,929
Current service cost
920
889
Interest cost
629
777
Contributions by plan participants
233
227
Actuarial gains arising from changes in demographic assumptions
(48)
-
Actuarial (gains)/losses arising from changes in financial assumptions
(502)
1,933
Actuarial gains arising from liability experience
(1,870)
(188)
Benefits paid
(1,251)
-
Taxes and premiums paid
(170)
(175)
Superannuation liability
29,333
31,392
YARRA VALLEY WATER ANNUAL REPORT 2016-17
49

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
f. Fair value plan assets as at 30 June 2017
Quoted prices
in active
markets
Significant
for identical
observable
Unobservable
assets
inputs
inputs
Total
- Level 1
- Level 2
- Level 3
Asset category
$’000
$’000
$’000
$’000
Investment funds
36,125
-
36,125
-
Total
36,125
-
36,125
-
2017
2016
%
%
g. Plan assets
Australian equity
24
31
International equity
19
22
Fixed income
11
13
Defensive alternatives
9
9
Property
15
9
Growth alternatives
11
11
Cash
11
5
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.
2017
2016
%
%
i. Actuarial assumptions to determine defined benefit cost
Discount rate
2.1
2.8
Expected salary increase rate
4.6
4.6
j. Actuarial assumption to determine defined benefit obligation
Discount rate
2.3
2.1
Expected salary increase rate
4.6
4.6
50
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

k. Sensitivity analysis
The defined benefit obligation as at 30 June 2017 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
2.3%
1.8%
2.8%
2.3%
2.3%
Salary increase rate - per annum
4.6%
4.6%
4.6%
4.1%
5.1%
Defined benefit obligation ($'000)
29,333
30,611
28,129
28,134
30,591
The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions.
l. Funding arrangements
The Equipsuper Contribution and Funding Policy provides for a review of the financial position of the plan each six months, as at 30
June and 31 December, with the Corporation contribution rate comprising a long-term contribution rate and an adjustment to meet
the financing objective of a Funding Ratio of 105%.
The Funding Ratio is the ratio of assets to accrued liabilities, being the greater of vested benefits and the present value of past
membership benefits. Where the Funding Ratio is greater than 100%, the financing objective is to achieve a Funding Ratio of 105%
over five years. Where the Funding Ratio is less than 100%, the primary financing objective is to achieve 100% over three years and
105% over five years.
In the most recent review of the financial position as at 31 December 2016, 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 31 December 2017.
m. Expected contributions
Expected employer contributions for the financial year ending 30 June 2018 is expected to be nil.
n. Maturity profile of defined benefit obligation
The weighted average duration of the defined benefit obligation as at 30 June 2017 is seven years.
$’000
30 June 2018
2,183
30 June 2019
2,184
30 June 2020
2,271
30 June 2021
2,560
30 June 2022
2,835
Following five years
13,308
YARRA VALLEY WATER ANNUAL REPORT 2016-17
51

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
3.3. Commitments for expenditure
The following table summarises the non-cancellable operating leases contracted for at balance date but not provided in the
financial statements. Payments for operating leases, where substantially all the risks and benefits remaining with the lessor; are
charged as expenses in the periods in which they are incurred. Refer to note 4.5 and note 8.2 for details on capital and environmental
commitments, respectively. Lease commitments recorded below are at their nominal value and inclusive of GST.
2017
2016
Payable:
$’000
$’000
Not later than one year
61
188
Later than one year and not later than five years
88
81
Later than five years
4
4
Total (GST inclusive)
153
273
3.4.
Remuneration of Auditors
2017
2016
Payable:
$’000
$’000
Financial Statements - Victorian Auditor-General’s Office
139
136
Internal Audit - Pitcher Partners
203
151
Total remuneration of auditors
342
287
4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY
Introduction
The Corporation controls infrastructure and other assets that are utilised in fulfilling its objectives and conducting its activities.
They represent the key resources that have been entrusted to the Corporation to be utilised for delivery of those outputs.
Structure
4.1 Total Infrastructure, property, plant and equipment: carrying amount
4.2 Reconciliation of movements in carrying values of infrastructure, property, plant and equipment
4.3 Intangible assets
4.4 Net loss on disposal of non-current physical assets
4.5 Commitments
52
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

4.1. Total Infrastructure, property, plant and equipment: carrying amount
Gross carrying amount
Accumulated depreciation
Net carrying amount
2017
2016
2017
2016
2017
2016
$’000
$’000
$’000
$’000
$’000
$’000
Infrastructure at fair value
3,771,700
3,515,800
-
-
3,771,700
3,515,800
Freehold land at fair value
347,856
346,209
-
-
347,856
346,209
Crown land at fair value
218
218
-
-
218
218
Buildings at fair value
34,914
34,866
(1,063)
-
33,851
34,866
Plant and equipment at fair value
44,019
45,248
(23,087)
(21,863)
20,932
23,385
Capital works in progress at cost
178,541
236,896
-
-
178,541
236,896
Total
4,377,248
4,179,237
(24,150)
(21,863)
4,353,098
4,157,374
4.2. Reconciliation of movements in carrying values of infrastructure property,
plant and equipment
Capital
works in
Freehold
Crown
Plant and
progress
land
land
Buildings
equipment Infrastructure
Total
$’000
$’000
$’000
$’000
$’000
$’000
$’000
2017
Balance at 1 July 2016
236,896
346,209
218
34,866
23,385
3,515,800
4,157,374
Additions
236,483
-
-
-
-
-
236,483
Transfers
(294,838)
4,828
-
48
3,475
286,487
-
Disposal / write off
-
-
-
-
(845)
(1,151)
(1,996)
Depreciation expense
-
-
-
(1,063)
(5,083)
(70,390)
(76,536)
Revaluation increase
-
-
-
-
-
40,954
40,954
recognised in equity
Impairment write-down
-
(3,181)
-
-
-
-
(3,181)
Carrying amount
178,541
347,856
218
33,851
20,932
3,771,700
4,353,098
at 30 June 2017
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 write-down
-
(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
YARRA VALLEY WATER ANNUAL REPORT 2016-17
53

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
Infrastructure, property, plant and equipment
Financial Reporting Direction 103F Non-Current Physical Assets requires non-current physical assets to be measured at fair value.
Accordingly, the Corporation uses the revaluation model in accordance with AASB 116 Property, Plant and Equipment and measures
fair value in accordance with AASB 13 Fair Value Measurement.
Initial recognition
Infrastructure, property, plant and equipment are measured initially at cost and subsequently revalued at fair value less
accumulated depreciation and impairment losses, where applicable. Where an asset is acquired for no or nominal cost, the cost is its
fair value at the date of acquisition. The cost of constructed non-financial physical assets includes the cost of all materials used in
construction, direct labour on the project and appropriate proportion of variable and fixed overheads.
Subsequent measurement
Infrastructure, property, plant and equipment are subsequently measured at fair value less accumulated depreciation and
impairment. Fair value is determined with regard to the asset’s highest and best use (considering legal or physical restrictions
imposed on the asset, public announcements or commitments made in relation to the intended use of the asset) and is summarised
below by asset category. Refer to note 7.4 for Fair Value disclosures.
Revaluations
Revaluations are performed with sufficient regularity so that the carrying amounts do not differ materially from those that would be
determined using fair values at the end of the reporting period.
Any revaluation increase is recognised in other comprehensive income, except to the extent that it reverses a revaluation 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 every five years or
earlier if interim indices suggest there has been a material movement. Infrastructure assets are measured at fair value every year.
Depreciation
The depreciable amount of all non-current physical assets, excluding freehold land and Crown land, is depreciated on a straight-line
basis over their useful lives, commencing from the time the asset is held ready for use. The useful lives, which are consistent with
the prior period, used for each class of depreciable assets are:
Class of fixed asset
Useful life
Buildings
5 to 100 years
Infrastructure
3 to 100 years
Plant and equipment
2 to 25 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each Balance Sheet date. Following
consultation with relevant internal subject matter experts there have been no changes to asset category useful lives as at
30 June 2017.
Disposals
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included
in net profit in the Statement of Comprehensive Income. When significant revalued assets are sold, amounts included in the asset
revaluation reserve relating to that asset are transferred to retained earnings.
Impairment of non-financial assets
Infrastructure, property, plant and equipment and intangible assets with finite useful lives are assessed annually for indications
of impairment. Whenever there is an indication of impairment, the assets concerned are tested as to whether their carrying value
exceeds their recoverable amount.
54
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

Where an asset’s carrying value exceeds its recoverable amount, an impairment loss is recognised in net profit in the Statement
of Comprehensive Income for the excess amount, except to the extent that the write-down reverses an asset revaluation reserve
amount applicable to that asset. The recoverable amount of assets held primarily to generate net cash inflows is measured at the
higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell.
Several newly acquired parcels of land were impaired as the assets carrying value exceeded the recoverable amount. No further
material indicators of impairment were present at the time financial statements were authorised for issue.
4.3. Intangible assets
Movements in carrying amounts
Intangible
Water
works in
entitlements
Software
progress
Total
$’000
$’000
$’000
$’000
2017
Balance at 1 July 2016
96,917
82,725
10,378
190,020
Additions
-
-
14,540
14,540
Transfers
-
15,846
(15,846)
-
Disposals
-
-
(75)
(75)
Amortisation expense
-
(20,336)
-
(20,336)
Carrying amount at 30 June 2017
96,917
78,235
8,997
184,149
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
Water entitlements
Yarra Valley Water contributed $100 million towards the cost of the Goulburn-Murray Water Connections Project. In exchange for
this contribution, Yarra Valley Water is entitled to one-ninth share of the progressive 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 2020) 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.
Intangible assets acquired separately (software and intangible works in progress)
Intangible assets acquired separately are initially recognised at cost. Subsequently, intangible assets with finite useful lives are
carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are
carried at cost less impairment losses, where applicable. Costs incurred subsequent to initial acquisition are capitalised when it is
expected that additional future economic benefits will flow to the Corporation.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
55

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
Internally generated intangible assets (software and intangible works in progress)
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible
asset arising from a development project is recognised only if all the following are demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale
the intention to complete the intangible asset and use or sell it
the ability to use or sell the intangible asset
how the intangible asset will generate probable future economic benefits
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.
Amortisation
Intangible assets with finite useful lives are amortised on a straight-line basis over the asset’s useful life. Amortisation begins when
the asset is available for use. That is, when it is in the location and condition necessary for it to be capable of operating in the manner
intended by management. The amortisation period and the amortisation method for an intangible asset with a finite useful life are
reviewed at least at the end of each annual reporting period. The useful life used for the software asset class is between three and
ten years. Water entitlements are classified as an intangible asset with an indefinite useful life. Intangible assets with indefinite
useful lives are not amortised. There has been no change to useful lives during 2016-17 or 2015-16.
Impairment
Intangible assets that have an indefinite useful life and intangible assets not yet available for use are tested annually for impairment
or more frequently if events or changes in circumstances indicate that they might be impaired.
4.4. Net gain/loss on disposal of non-current physical assets
The surplus/deficit from ordinary activities includes the following specific net gains and expenses.
2017
2016
$’000
$’000
Infrastructure, property, plant and equipment
144
(296)
Total net (gain) / loss on disposal
144
(296)
4.5. Commitments
Commitments for future expenditure arising from contracts are disclosed at their nominal value and inclusive of goods and services
tax. The Corporation’s commitments include growth works and mains renewals for both water and sewer. Total expenditure
contracted for at balance date but not provided for in the financial statements:
2017
2016
Payable:
$’000
$’000
Not later than one year
194,988
102,196
Later than one year and not later than five years
52,599
21,450
Greater than five years
-
-
Total (GST inclusive)
247,587
123,646
56
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

5. OTHER ASSETS AND LIABILITIES
Introduction
This section sets out any other assets and liabilities that arose from the Corporation’s controlled operations.
Structure
5.1 Receivables
5.1.1 Ageing analysis and impairment detail of contractual receivables
5.1.2 Movements in the provision of impairment of receivables
5.2 Other non-financial assets
5.3 Payables
5.3.1 Ageing analysis of contractual payables
5.4 Unearned income
5.5 Other provisions
5.1. Receivables
2017
2016
$’000
$’000
Contractual receivables
Trade receivables - debtors
88,701
80,165
Trade receivables - accrued revenue
81,052
88,600
Other receivables
5,214
3,766
Less: provision for impairment of receivables
(1,693)
(1,865)
Statutory receivables
GST receivables
5,744
12,365
Total current assets - receivables
179,018
183,031
Non current assets - receivables
Trade receivables - debtors
2,991
1,888
Less: provision for impairment of receivables
(821)
(516)
Total non current assets - receivables
2,170
1,372
YARRA VALLEY WATER ANNUAL REPORT 2016-17
57

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
Receivables consist of:
Contractual receivables such as debtors and accrued revenue in relation to goods and services, are classified as financial
instruments and categorised as ‘loans and receivables’. They are initially recognised at fair value plus any directly attributable
transaction costs. Subsequent to initial measurement they are measured at amortised cost using the effective interest method,
less any impairment.
Provision for doubtful debts is recognised to the extent that recovery of the outstanding receivable balance is considered no longer
probable. The provision represents an estimate of bad debts to be written off and is made when there is objective evidence that the
Corporation will not be able to collect the debt. Bad debts are written off when determined uncollectable, subject to approval by the
board or delegated officer.
Statutory receivables, such as amounts owing from the Victorian Government and Goods and Services Tax (GST) input tax credit
recoverable are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as
financial instruments because they do not arise from a contract.
Accrued revenue is recognised for water and sewage usage as well as other works and services that have been rendered to balance
date but not yet invoiced. Water usage charges, sewage disposal charges, trade waste charges, recycled water charges and water
trading revenue are all recognised as income when the service has been provided. An accrual is done to account for water and
sewage services not billed at the end of the period. This is calculated using the volume of water purchased from Melbourne Water
to the end of the period less the estimated non-revenue water.
5.1.1. Ageing analysis and impairment of contractual 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
2017
Trade debtors
Not past due and not impaired
-
40,131
-
-
-
-
40,131
Past due but not impaired
-
-
33,337
3,309
5,532
6,392
48,570
Impaired
-
(95)
(377)
(60)
(370)
(791)
(1,693)
Net trade receivables - debtors
-
40,036
32,960
3,249
5,162
5,601
87,008
Accrued revenue
81,052
-
-
-
-
-
81,052
Other receivables
13,128
-
-
-
-
-
13,128
Total receivables
94,180
40,036
32,960
3,249
5,162
5,601
181,188
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 receivables - 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
58
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

All contractual receivables are recognised at the amounts receivable less any provision for impairment of receivables. Credit is
generally allowed for a period of 16 days. The collectability of debt is assessed each accounting period for usage and other charges.
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.
5.1.2. Movements in the provision of impairment of receivables
2017
2016
$’000
$’000
Balance at beginning of year
(2,381)
(1,931)
Reversal of provision and write offs recognised as an expense
2,828
4,516
Increase in provision
(2,961)
(4,966)
Total provision for impairment of receivables
(2,514)
(2,381)
5.2. Other non-financial assets
2017
2016
$’000
$’000
Current assets - other
Water Efficiency Program for Schools - advance
664
963
Other water efficiency programs - advance
134
131
Prepayments
3,365
3,355
Total current assets - other
4,163
4,449
Water Efficiency Programs for Schools - advance
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.
Other Water Efficiency Programs - advance
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
Prepayments represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting
period covering a term extending beyond that period.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
59

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
5.3. Payables
2017
2016
$’000
$’000
Current liabilities - payables
Contractual payables
Trade payables
25,027
8,279
Accruals
77,579
78,028
Security deposits
5,062
3,864
Statutory payables
Fringe benefits tax payable
77
19
Total current liabilities - payables
107,745
90,190
Payables and accruals
Trade payables and accruals are recognised for future amounts to be paid in respect of goods and services received. The amounts
are unsecured and are usually paid 30 days after invoice date.
Payables consist of:
Contractual payables, represent liabilities for goods and services provided to the Corporation prior to the end of the financial
year that are unpaid, and arise when the Corporation becomes obligated to make future payments in respect of the purchase of
those goods and services. Contractual payables are classified as financial instruments and categorised as financial liabilities at
amortised cost.
Statutory payables, such as goods and services tax and fringe benefits tax payables. Statutory payables are recognised and
measured similarly to contractual payables, but are not classified as financial instruments and not included in the category of
financial liabilities at amortised cost, because they do not arise from a contract.
5.3.1. Ageing analysis of contractual payables
Less than
1 to 3
3 to 12
Over 12
1 month
months
months
months
Total
Not aged
$’000
$’000
$’000
$’000
$’000
2017
Trade payables
-
24,768
242
17
-
25,027
Accruals
77,579
-
-
-
-
77,579
Other payables
5,062
-
-
-
-
5,062
Total payables
82,641
24,768
242
17
-
107,668
2016
Trade payables
-
8,279
-
-
-
8,279
Accruals
78,028
-
-
-
-
78,028
Other payables
3,864
-
-
-
-
3,864
Total payables
81,892
8,279
-
-
-
90,171
60
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

5.4.
Unearned income
2017
2016
Unearned income
$’000
$’000
Grant income - current
808
1,105
Customers paid in advance
21,877
19,160
Other
1,870
926
Total current liabilities - unearned income
24,555
21,191
Developer contributions - non-current
7,617
7,986
Total current and non-current liabilities - unearned income
32,172
29,177
Government grants
Government grants are recognised once reasonable assurance has been reached that the Corporation will comply with 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.
Developer contributions
Unearned developer contributions’ income represents amounts received from developers for the reimbursement of costs that will be
incurred by the Corporation for the construction of assets to service new urban growth. The amounts paid to the Corporation will be
offset in future years by new customer contributions that will be payable when the development lots are released for sale.
Customers paid in advance
Customers paid in advance represents payments received from customers in advance of the provision of goods or services or any
legal or constructive obligation required to be performed by Yarra Valley Water to settle the terms of receipt of income.
5.5.
Other provisions
2017
2016
Current liabilities - other provisions
$’000
$’000
Carrying amount at beginning
1,080
1,032
Additional provision
1,384
140
Amounts utilised during year
(175)
(92)
Carrying amount at year end
2,289
1,080
Provisions are recognised when the Corporation has a present legal or constructive obligation because of past events for which
it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those cash flows, using a discount rate that
reflects the time value of money and the risks specific to the provision.
When some or all the economic benefits required to settle, a provision are expected to be received from a third party, the receivable
is recognised if it is virtually certain that economic benefits will be received and their amount can be measured reliably.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
61

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
6. FINANCING OUR OPERATIONS
Introduction
The section provides information on the sources of finance utilised by the Corporation during its operations, along with interest
expenses (the cost of borrowings and other information related to financing activities of the Corporation).
This section includes disclosures of balances that are financial instruments (such as borrowings and cash balances).
Structure
6.1 Borrowings and finance costs
6.1.1 Maturities of financial liabilities
6.1.2 Finance costs
6.2 Cash flow information and balances
6.2.1 Reconciliation of net result for the period to cash flow from operating activities
6.1. Borrowings and finance costs
Carrying amount
Net fair value
Interest-bearing
2017
2016
2017
2016
financial liabilities
$’000
$’000
$’000
$’000
Borrowings - current liabilities
266,317
230,806
271,756
236,021
Borrowings - non current liabilities
1,996,900
1,940,100
2,177,118
2,232,276
Total
2,263,217
2,170,906
2,448,874
2,468,297
Borrowings are classified as financial instruments. All interest-bearing borrowings are initially recognised at the fair value of the
consideration received less directly attributable transaction costs. The measurement basis subsequent to initial recognition is
based on the classification of interest bearing liabilities as financial liabilities at ‘amortised cost’. This classification is determined
at initial recognition.
Interest is payable semi-annually and is accrued over the period it becomes due. Accrued interest is recorded as part of accruals.
The fair value of the interest bearing financial liabilities is determined by discounting the expected future cash flows at current
interest rates.
62
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

6.1.1. Maturities of financial liabilities
The following table allocates the Corporation’s financial liabilities into relevant maturity groupings based on the remaining period at
the reporting date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.
Weighted
Less
average
effective
than 12
interest rate
months
1 to 3 years
3 to 5 years
Over 5 years
Total
%
$’000
$’000
$’000
$’000
$’000
2017
Borrowings - fixed interest rate
4.61
153,200
235,500
202,300
1,399,100
1,990,100
Borrowings - floating interest rate
2.15
113,117
60,000
100,000
-
273,117
Total
266,317
295,500
302,300
1,399,100
2,263,217
2016
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
230,806
345,500
301,400
1,293,200
2,170,906
6.1.2. Finance costs
2017
2016
$’000
$’000
Interest on borrowings
98,176
98,082
Financial accomodation levy
29,156
25,743
Other interest expense
108
117
Total finance costs
127,440
123,942
Finance costs are recognised as expenses in the period in which they are incurred. All qualifying assets (being assets that
necessarily take a substantial period of time to get ready for their intended use or sale) are measured at fair value. Therefore,
any finance costs directly attributable to the acquisition, construction or production of these qualifying assets are not required
to be capitalised and will continue to be expensed in the period in which they are incurred.
The financial accommodation levy is paid by the Corporation into the Consolidated Fund in accordance with section
40N of the Financial Management Act 1994 in respect of financial accommodation provided to the Corporation by
the State Government of Victoria.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
63

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
6.2.Cash flow information and balances
Cash and cash equivalents include cash at bank and cash on hand with original maturities of three months or less,
and bank overdrafts.
2017
2016
$’000
$’000
Cash at bank
1,110
1,135
Cash on hand
1
1
Total current assets - cash
1,111
1,136
6.2.1. Reconciliation of net result for the period to cash flow from operating activities
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.
2017
2016
Reconciliation of net profit to net cash from operating activities
Note
$’000
$’000
Net profit after tax
58,330
56,569
Adjustments for non-cash items
Depreciation / amortisation
3.1
96,872
97,490
Bad and doubtful debts
3.1
2,828
4,516
Write off / disposal of assets
3.1
2,071
6,516
Defined benefit superannuation plan expense
3.1
887
782
Net gain / (loss) on disposal of non-current physical assets
4.4
(144)
296
Impairment writeback
4.2
-
(290)
Impairment write-down
3.1
3,181
8,695
Value of works taken over from developers
2.1
(15,887)
(14,956)
Changes in operating assets and liabilities
Increase in net deferred tax liabilities
25,590
25,243
Decrease in other current assets
286
484
Increase in accrued interest
524
1,818
Increase in provisions and unearned income
4,333
401
Decrease in payables
(22,483)
(45,743)
Decrease in trade receivables
(3,538)
(10,128)
(Increase) / decrease in GST receivable
6,621
(8,126)
Decrease in unfunded defined benefit superannuation plan asset
-
446
Net cash inflow from operating activities
159,471
124,013
64
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENT
Introduction
The Corporation is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements
and estimates associated with recognition and measurement of items in the financial statements. This section sets out financial
instrument specific information, (including exposures to financial risks) as well as those items that are contingent in nature or
require a higher level of judgement to be applied, which for the Corporation related mainly to fair value determination.
Structure
7.1 Financial instruments specific disclosures
7.2 Financial risk management objectives and policies
7.3 Contingent assets and liabilities
7.4 Fair Value
7.4.1 Fair value - Determination Non-financial physical assets
7.4.2 Fair value - Reconciliation of changes in level three items
7.4.3 Fair value - Valuation techniques and significant unobservable inputs in level 3 items
7.1.
Financial instruments specific disclosures
Introduction
Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or
equity instrument of another entity. Due to the nature of the Corporation’s activities, certain financial assets and financial liabilities
arise under statute rather than a contract (for example taxes, fines and penalties). Such assets and liabilities do not meet the
definition of financial instruments in AASB 132 Financial Instruments: Presentation.
Categories of financial instruments
Loans, receivables and cash are financial instrument assets with fixed and determinable payments that are not quoted on an active
market. These assets and liabilities are initially recognised at fair value plus any directly attributable transaction costs. Subsequent
to initial measurement, loans and receivables (net of impairment) are measured at amortised cost using the effective interest
method. The Corporation recognised the following assets in this category:
Cash and deposits - refer to note 6.2
Receivables (excluding statutory receivables) - refer to note 5.1
Financial liabilities at amortised cost are initially recognised on the date they are originated. They are initially measured at fair
value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial instruments are measured
at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in the
Statement of Comprehensive Income over the period of the interest-bearing liability, using the effective interest rate method. The
corporation recognised the following liabilities in this category:
Payables (excluding statutory payables) - refer to note 5.3
Borrowings - refer to note 6.1
YARRA VALLEY WATER ANNUAL REPORT 2016-17
65

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
7.2.
Financial risk management objectives and policies
Capital risk management
The Corporation controls its capital in order to maintain a satisfactory debt to equity ratio to provide the State Government of
Victoria with adequate returns and to ensure that it can fund its operations as a going concern.
The capital structure of the Corporation consists of net debt (borrowings as detailed in table below and offset by cash and bank
balances - see note 6.2) and equity of the Corporation (comprising contributed equity, asset revaluation reserve and retained
earnings detailed in notes 9.1 to 9.3).
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
the Corporation, with the exception of an operating account with overdraft facilities, is required to borrow exclusively with the
Treasury Corporation of Victoria (TCV).
These external capital requirements are incorporated into the management of capital through the Board approved Corporate Plan.
The Corporation effectively manages its capital by assessing its financial risks and adjusting its capital structure in response to
changes in these risks and the market. These responses include the management of debt levels. There have been no changes to the
strategy adopted by the Corporation to control its capital during the year. The gearing ratios for the years ended 30 June 2017 and
30 June 2016 were as follows:
2017
2016
$’000
$’000
Borrowings - current
266,317
230,806
Borrowings - non-current
1,996,900
1,940,100
Total borrowings
2,263,217
2,170,906
Total assets
4,730,501
4,539,137
Gearing ratio
48%
48%
Financial risks
The main risks the Corporation is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk. The
Board reviews and approves policies for managing these risks.
i. Interest rate risk
Interest rate risk is the risk to earnings or capital arising from movements in interest rates. The Corporation is exposed to interest
rate risk through its borrowing activities and changes in the market in comparison to the assumptions in the Essential Services
Commission regulatory pricing determination in relation to the underlying cost of debt.
Interest rate exposures are also recognised in terms of the change in the market value of the debt portfolio which arise as a
consequence of changes in market interest rates.
The Corporation effectively manages interest rate risk by maintaining the debt portfolio within the strategic targets and policy bands
that have been approved by the Board. Strategic and tactical debt portfolio options are assessed in consultation with TCV, with
borrowing decisions based on future borrowing requirements, treasury management policy compliance and TCV’s market interest
rate outlook.
Interest rates sensitivity analysis
As at 30 June 2017, if interest rates had changed by +/ 50 basis points from the year end rates with all other variables held constant,
the post-tax profit impact for the year would have been $1.1 million (2016: $1.2 million) higher / lower as a result of higher / lower
interest expense from variable interest rate borrowings. Refer to section 6.1.1 for maturity analysis of contractual financial liabilities.
66
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

ii. Liquidity risk
Liquidity risk is the risk of not being able to meet the specific financial commitments including short term working capital needs and
the financing of new and maturing loans as they are required.
The Corporation manages liquidity risk by actively maintaining efficient banking practices, regularly monitoring 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.
Financing arrangements
The Corporation had access to a total of $137.6 million (2016: $72.8 million) of unused borrowings approved by the Treasurer of
Victoria as at 30 June 2017. The Corporation has a formal bank overdraft facility with the Australia and New Zealand Banking Group
Limited and Westpac Banking Corporation.
iii. Credit risk
Credit risk is the risk that a counterparty or customer will fail to meet contractual obligations. For the Corporation credit risk
arises mainly from customer outstanding receivables as it is legally obliged to service all customers in its district without regard to
their credit quality. The Corporation has in place extensive debt collection strategies to minimise customer credit risk and recover
outstanding receivables.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical 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 2014-15 to 2016-17 of 0.41 per cent. For the 2016-17 financial year, the Corporation had $2.8 million (2016: $4 million)
of bad debts and revenue (excluding developer contributed assets and new customer contributions by developers) of $934.9 million
(2016: $968.2 million), being a default rate of 0.30 per cent.
The credit risk attributable to the Corporation’s deposits with the TCV and other financial institutions is considered to be very low due
to the minor amounts involved and the contractual arrangements in place for its counter parties.
The maximum exposure to credit risk at the reporting date is the carrying amount of the items in the Balance Sheet. For receivables,
the maximum exposure is the gross amount of receivables before allowing for doubtful debts.
7.3. 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.
a. Contingent assets
The Corporation enters into agreements with land developers whereby assets are transferred to the Corporation at no cost. These
assets are brought to account as revenue and capitalised.
At the reporting date, land developers had commenced construction of assets. Currently there is approximately $13.5 million
(2016: $6 million) of water supply assets under construction and a further $8.1 million (2016: $8.5 million) of water supply assets
committed to for which construction is yet to begin. The value of sewerage assets under construction is approximately $15.5 million
(2016: $11 million) with a further $5.4 million (2016: $4.7 million) committed to for which construction is yet to begin.
The Corporation is unaware of any other material contingent assets.
b. Contingent liabilities
Contingent on the completion of the contingent assets transferred from developers, Yarra Valley Water has a liability to reimburse
developers an estimated $6.2 million (2016: $5 million) for water supply assets and $4.3 million (2016: $2.7 million) for sewerage
assets for additional works constructed at Yarra Valley Water’s request. These reimbursements will occur upon request by the
developer following the issuing of the certificate of completion as agreed in accordance with the conditions of the agreement
between Yarra Valley Water and the developer.
The Corporation is unaware of any other material contingent liability. Claims to which the Corporation is aware and which may result
in a liability being incurred have been provided for as other provisions. Refer to note 5.5.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
67

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
7.4.
Fair value
Fair value determination requires judgement and the use of assumptions. This section discloses the most significant assumptions
used in determining fair values. Changes to assumptions could have a material impact on the results and financial position of
the Corporation.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
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 based on the lowest level inputs that are significant to the fair value measurement as a whole:
Level 1 - quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable
Level 3 - valuation techniques for which the lowest level input that is significant to the fair value measurement
is unobservable.
7.4.1.
Fair value determination non-financial physical assets
The Corporation’s land, buildings, plant and equipment and infrastructure are stated at their revalued amounts, being the fair value
at the date of revaluation, less any subsequent accumulated depreciation and impairment losses. This note explains the judgements
and estimates made in determining the fair values of non-financial assets.
In accordance with AASB 13 Fair Value Measurement, the Corporation’s non-financial assets have been categorised into the three
levels of the fair value hierarchy depending on the degree to which inputs into the fair value measurements are observable, and the
significance of the inputs to the fair value measurement.
Fair value as at
Level 1 (i)
Level 2 (ii)
Level 3 (iii)
30 June
$’000
$’000
$’000
$’000
Infrastructure
-
-
3,771,700
3,771,700
Land (specialised)
-
-
197,622
197,622
Land (non-specialised)
-
150,234
-
150,234
Buildings (market approach)
-
2,340
-
2,340
Buildings (depreciated replacement cost)
-
-
31,511
31,511
Plant and equipment
-
-
20,932
20,932
Crown land (specialised)
-
-
218
218
Total 30 June 2017
152,574
4,021,983
4,174,557
-
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
68
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

Infrastructure
The 30 June 2017 valuation of infrastructure assets has been independently provided by KPMG, using a discounted cash flow
methodology. This involved discounting the forecast stream of cash flows to both debt and equity investors at a weighted average
cost of capital (WACC), which represents an estimate of a hypothetical market participant’s discount rate. The valuation model:
Calculates forecast cash flows to debt and equity investors over a 10-year forecast period. Cash flows to debt and 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.
Calculates a terminal value at the end of the forecast period adopting the Gordon Growth methodology by applying the mid-point
of the WACC, terminal growth rate and terminal cash flows. A single terminal value has been adopted due to the sensitive nature
of the terminal value in the model.
Arrives at an enterprise valuation by discounting the cash flows to the valuation date using the selected high ($3.9 billion) and low
($3.6 billion) WACC estimates and adopts a mid-point ($3.8 billion).
Deducts non-infrastructure related assets and liabilities to derive the implied water infrastructure asset valuation.
Includes a tax amortisation benefit (TAB) on the water infrastructure assets, being an estimate of the present value
of future tax amortisation benefits that may be received. In including a TAB a delay of five years is overlayed to reflect
the likely timing of secondary infrastructure assets sales, the impact being to reduce the calculated TAB by approximately
25%. The calculated TAB is added to the implied water infrastructure assets valuation to arrive at the total value of water
infrastructure assets.
Infrastructure assets are classified as level 3 fair value as the lowest level input, the absence of an active market, has a significant
impact on the fair value which is unobservable.
Land - specialised / non-specialised
The most recent valuation of freehold land was independently determined by the Victorian Valuer-General’s Office using fair market
value as at 30 June 2016. In undertaking the valuation of land, the Victorian Valuer-General’s Office adopted the market based
direct comparison approach, whereby the properties were valued by analysing land sales in comparable proximity to the subject
sites and allowing for shape, size, topography, location and other relevant factors specific to the land being valued. Where applicable
specialised land is adjusted for the community service obligation (CSO) to reflect the specialised nature of the land being valued. As
adjustments to CSO are considered as significant unobservable inputs, specialised land would be classified as level 3 assets.
To the extent that non-specialised land does not contain significant, unobservable adjustments, the assets are classified as level 2
under the market approach
As at 30 June 2017 the fair value assessment for land was done against indices provided by the Victorian Valuer-General’s Office to
determine any material or exceptionally material movements. No material movements have occurred.
If land was measured at historical cost, the carrying amount would be $55.2 million (2016: $53.6 million).
Buildings - specialised / non-specialised
The most recent valuation was performed on 30 June 2016 and valuation was independently determined by the Victorian Valuer-
General’s Office using market value or depreciated replacement cost method. The depreciated replacement cost method is based
on the replacement of buildings to a ‘modern equivalent’ standard after applying an appropriate depreciation rate, useful life and
adjusting for condition. As depreciation adjustments are considered as significant, unobservable inputs in nature, buildings are
classified as level 3 fair value.
To the extent that non-specialised buildings do not contain significant, unobservable adjustments, these asset are classified as level
2 under the market approach.
As at 30 June 2017, buildings were checked against indices provided by the Victorian Valuer-General’s Office to determine any
material or exceptionally material movements. No material movements have occurred.
If buildings were measured at historical cost, the carrying amount would be $38.6 million (2016: $39.9 million).
YARRA VALLEY WATER ANNUAL REPORT 2016-17
69

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
Plant and equipment
Plant and equipment is held at carrying value (depreciated cost) which approximates fair value. Unless there is market evidence that
current replacement costs are significantly different from the original acquisition cost, it is considered unlikely that depreciated cost
will be materially different from the existing carrying value. As at 30 June 2017 no material movements have occurred.
Crown land
The most recent valuation Crown land was independently determined by the Victorian Valuer-General’s Office using fair market
value as at 30 June 2016. In undertaking the valuation of Crown land, the Victorian Valuer-General’s Office adopted the market
based direct comparison method whereby the properties were valued by analysing land sales in comparable proximity to the subject
sites and allowing for shape, size, topography, location and other relevant factors specific to the land being valued. From the sales
analysed an appropriate rate per square metre was applied. Where applicable, Crown land is adjusted for the community service
obligation to reflect the specialised nature of the land being valued. As at 30 June 2016 Crown land was revalued at $218,000.
As adjustments to CSO are considered as significant unobservable inputs, specialised Crown land would be classified as level 3
assets.
As at 30 June 2017, Crown land was checked against indices provided by the Victorian Valuer-General’s Office to determine any
material movements. No material movements have occurred.
7.4.2.
Fair Value - reconciliation of changes in level 3 items
Plant and
Land
equipment
Crown Land
(specialised)
Buildings
Infrastructure
Total
$’000
$’000
$’000
$’000
$’000
$’000
Opening Balance 1 July 2016
23,385
218
195,975
32,503
3,515,800
3,767,881
Acquisitions
3,475
-
1,647
48
286,487
291,657
Disposals / write off
(845)
-
-
-
(1,151)
(1,996)
Depreciation
(5,083)
-
-
(1,040)
(70,390)
(76,513)
Revaluation gains recognised in other
-
-
-
-
40,954
40,954
comprehensive income
Closing balance 30 June 2017
20,932
218
197,622
31,511
3,771,700
4,021,983
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
-
89,018
Revaluation gains (loss) recognised
-
(190)
29,667
-
(71,305)
(41,828)
in other comprehensive income
Closing balance 30 June 2016
23,385
218
195,975
32,503
3,515,800
3,767,881
70
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

7.4.3.
Fair value - valuation techniques and significant unobservable inputs in level 3 items
Significant
Range
Sensitivity of the input
Valuation technique
unobservable inputs
(average)
to fair value
Land (specialised and
Market approach
Community service
7% to 60%
A significant increase or decrease
Crown)
obligation (CSO)
(21%)
in the CSO adjustment would
adjustment
result in a higher or lower land
$1000 to
valuation.
$17,568,000
($291,889)
Infastructure
Income approach using
Weighted average cost
5.3% to 5.9%
If the WACC had changed by +/-
a discounted cash flow
of capital (WACC)
0.25% from the year end valuation,
model
the impact to the valuation would
have been a decrease of $518.3
million and increase by $1,003.9
million.
Terminal value
3.5%
If the terminal growth rate had
growth rate
changed by +/- 0.25% from the
(inclusive of inflation)
year end valuation, the impact to
the valuation would have been a
decrease of $528.3 million and
increase by $671 million.
Terminal value capex
$185 million
If the terminal value capex
increased by +/- 10% the impact
would be $448.3 million.
Plant and equipment
Depreciated cost
Original useful life
2 to 25 years
A significant increase or decrease
(deemed fair value)
(4.7)
in useful life impacts the fair value
of plant and equipment.
Cost per unit
$100 to
A significant increase or decrease
$1,409,766
in cost per unit impacts the fair
($9,912)
value of plant and equipment.
Buildings
Depreciated
Cost per square metre
$100 to $4,200
A significant increase or decrease
replacement
($2,165)
in cost per square metre impacts
cost approach
the fair value of buildings.
Useful life (remaining)
7 to 35 years
A significant increase or decrease
(18)
in useful life impacts the fair value
of buildings.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
71

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
8. STATUTORY OBLIGATIONS
Introduction
This section includes disclosures in relation to the Corporation’s statutory obligations.
Structure
8.1 Income tax
8.2 Environmental contributions
8.3 Goods and Services Tax
8.1. Income tax
The Corporation is subject to the National Tax Equivalent Regime (NTER), which is administered by the Australian Taxation Office.
The current income tax expense is based on the profit for the year adjusted for any non assessable or disallowed items. It is
calculated using tax rates that have been enacted or are substantively enacted by the Balance Sheet date.
Deferred tax is accounted for using the Balance Sheet liability method in respect of temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements.
No deferred income tax will be recognised from the initial recognition of an asset or liability where there is no effect on accounting or
taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled.
Deferred tax is credited in net profit in the Statement of Comprehensive Income, except where it relates to items that may be
credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are
recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences
can be utilised.
The amount of benefits brought to account or which may 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.
2017
2016
Income tax
$’000
$’000
a. The components of income tax expense comprise:
Current income tax - current income tax charge
24,960
26,081
Deferred income tax - reversal of temporary difference
475
(1,510)
Adjustments for current tax of prior periods
381
671
Income tax expense reported in net profit
25,816
25,242
b. Deferred income tax recognised in other comprehensive income
Defined benefit superannuation plan actuarial gain / (loss)
1,777
(617)
Gain / (loss) on revaluation of infrastructure assets
12,286
(21,392)
Gain on revaluation of land
-
11,133
Gain on revaluation of building
-
588
Total deferred income tax recognised in other comprehensive income
14,063
(10,288)
72
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

2017
2016
Income tax
$’000
$’000
c. Reconciliation of income tax expense to prima facie tax payable
Accounting profit before income tax expense
84,146
81,811
At the statutory income tax rate of 30% (2016: 30%)
25,244
24,543
Adjustments for current tax of prior periods
381
673
Non-deductible expenses
13
13
Non-deductible depreciation
13
13
Assessable income
165
-
Income tax expense reported in net profit
25,816
25,242
d. Income tax payable
Current tax payable
4,416
10,150
e. Deferred tax assets / (liabilities)
Non-current liabilities - deferred tax
Accelerated depreciation for tax purposes
(368,596)
(366,129)
Revaluation of infrastructure to fair value
(271,175)
(258,889)
Revaluation of land to fair value
(45,516)
(46,385)
Revaluation of buildings to fair value
(588)
(588)
Defined benefit superannuation asset
(2,038)
(527)
Total non-current liabilities - deferred tax
(687,913)
(672,518)
Recognised directly in equity
(321,941)
(307,352)
Recognised in net profit
(365,972)
(365,166)
Total non-current liabilities - deferred tax
(687,913)
(672,518)
Deferred tax assets
Provisions
6,884
6,455
Buildings future deductible amounts
2,361
1,898
Unearned income
232
381
Total deferred tax assets
9,477
8,734
Net deferred tax liabilities
(678,436)
(663,784)
YARRA VALLEY WATER ANNUAL REPORT 2016-17
73

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
8.2. Environmental contributions
The Water Industry (Environmental Contributions) Act 2004 (the Act) amended the Water Industry Act 1994 to make provision
for environmental contributions to be paid by water authorities. The Act establishes an obligation for authorities to pay into
a consolidated fund annual contributions for the first period, from 1 October 2004 to 30 June 2008 in accordance with the
pre-established schedule of payments, which sets out the amounts payable by each corporation. The contribution period has
been extended until 30 June 2020.
The purpose of the environmental contribution is set out in the Act, and the funding may be used for financing initiatives that seek to
promote the sustainable management of water or address water-related initiatives.
The Corporation has a statutory obligation to pay an environmental contribution to the Department of Environment, Land, Water and
Planning. This contribution is recognised as an expense during the reporting period as incurred.
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 for the year ended 30
June 2018. The Corporation will pay $42.86 million each year after until 30 June 2020.
Environmental contribution commitments at balance
2017
2016
date not provided for in the financial statements:
$’000
$’000
Payable
Not later than one year
29,880
34,933
Later than one year but not later than five years
85,710
116,070
Total (GST inclusive)
115,590
151,003
8.3. Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Taxation Office (ATO). 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 expense. Receivables and payables in the Balance Sheet are shown inclusive
of GST. The net amount of GST receivable from or payable to the ATO is included in the Balance Sheet as part of receivables
or payables.
Cash flows are presented in the Cash Flow Statement on a gross basis except for the GST component of investing and financing
activities which are disclosed as operating cash flows.
74
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

9. OTHER DISCLOSURES
Introduction
This section includes additional material disclosure required by accounting standards or otherwise, for the understanding of this
financial report.
Structure
9.1 contributed equity
9.2 Retained earnings
9.3 Asset revaluation surplus
9.4 Responsible persons
9.4.1 Remuneration of responsible persons
9.5 Remuneration of executive officers
9.6 Related party
9.6.1 Significant transactions with government-related entities
9.6.2 Key management personnel
9.6.3 Transactions with key management personnel and other related parties
9.7 Ex-gratia expenditure
9.8 Economic dependency
9.9 Events subsequent to balance sheet date
9.10 Australian accounting standards issues that are not yet effective
9.1. Contributed equity
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.
2017
2016
$’000
$’000
Contributed equity
468,697
477,297
Less capital repatriation
-
(8,600)
Total contributed equity
468,697
468,697
9.2. Retained earnings
Opening balance
230,171
199,510
Net profit after tax
58,330
56,569
Defined benefit superannuation plan actuarial gain / (loss)*
5,924
(2,225)
Net deferred tax assets recognised through retained earnings*
(1,777)
617
Dividend paid
(22,800)
(24,300)
Closing balance
269,848
230,171
*Defined benefit superannuation plan actuarial gain net of tax effect $4,147,000 (2016: $1,608,000 loss).
YARRA VALLEY WATER ANNUAL REPORT 2016-17
75

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
Dividend
An obligation to pay a final dividend only arises after a formal determination is made by the Treasurer following consultation
between the Board, the relevant portfolio Minister and the Treasurer.
9.3.
Asset revaluation surplus
The asset revaluation surplus is used to record changes in the carrying amount of fixed assets arising on revaluation. Any revaluation
increment is credited to the asset revaluation surplus. 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.
Infrastructure
Crown land
Land
Buildings
Total
$’000
$’000
$’000
$’000
$’000
2017
Balance at 1 July 2016
604,068
218
251,100
1,561
856,947
Revaluation, net of tax effect
28,668
-
-
-
28,668
Balance at 30 June 2017
632,736
218
251,100
1,561
885,615
2016
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
9.4.
Responsible persons
The relevant Minister and Directors of Yarra Valley are deemed to be responsible persons by Ministerial Direction pursuant to the
provisions of the Financial Management Act 1994.
The responsible persons of Yarra Valley Water at any time during the financial year ended 30 June 2017 were:
Hon Lisa Neville MP
Minister for Water
Sue Therese O’Connor
Chair of the Board
Robert Clive Skinner
Deputy Chair of the Board
Patrick John McCafferty
Managing Director
Gregory Joseph Camm
Director
Susan Elizabeth Friend
Director
Victor John Perton
Director
Anita Michele Roper
Director
Eric Sjerp
Director
Helen Lynette Thornton
Director
76
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

9.4.1. Remuneration of responsible persons
The remuneration paid to the Minister for Water is reported in the Annual Report of the Department of the Premier and Cabinet,
Other relevant interests are declared in the Register of Members’ Interest 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:
2017
2016
No.
No.
$10,000 - $19,999
-
4
$20,000 - $29,999
-
1
$30,000 - $39,999
-
4
$40,000 - $49,999
5
3
$50,000 - $59,999
2
-
$70,000 - $79,999
-
1
$90,000 - $99,999
1
-
$390,000 - $399,999
-
1
$410,000 - $419,999
1
-
Total numbers
9
14*
Total amount ($’000)
865
832
*A new Yarra Valley Water board was appointed on 1 October 2015, which has resulted in a greater number of responsible persons identified for 2016.
9.5. Remuneration of executive officers
The number of executive officers, other than the Minister and Accountable Officer, and their total remuneration during the period are
shown in the table below. Total annualised employee equivalents provide a measure of full time equivalent executive officers over
the report period.
Remuneration comprises employee benefits in all forms of consideration paid, payable or provided by the entity, or on behalf of the
entity in exchange for services rendered, and is disclosed in the following categories.
Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or
payable on a regular basis, as well as allowances.
Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment
has ceased.
Other long-term benefits include long service leave, other long service benefit or deferred compensation.
Termination benefits include termination of employment payments, such as a severance packages.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
77

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
Remuneration of executive officers
2017
Short-term employee benefits
2,175
Post-employment benefits
203
Other long-term employment benefits
53
Termination benefits
-
Total amount ($'000)
2,431
Total numbers
13
Total annualised employee equivalent (AEE)
8
(a) No comparatives have been reported because remuneration in the prior year was determined in line with the basis and definition under the FRD 21C. Remuneration
previously excluded non-monetary benefits and comprised any money, consideration or benefit received or receivable, excluding reimbursement of out-of-pocket
expenses, including any amount received or receivable from a related party transaction. Refer to the prior year’s financial statements for executive remuneration for the
2015-16 reporting period.
(b) Annual employee equivalent is based on the time fraction worked over the reporting period.
9.6. Related party
Related parties of the Corporation Include:
All key management personnel and their close family members and personal business interest (controlled entities, joint ventures
and entities they have significant influence over)
All cabinet ministers and their close family members
All department and public sector entities that are controlled and consolidated into the whole of state consolidated financial
statements.
9.6.1. Significant transactions with government-related entities
i. Department of Environment, Land, Water and Planning
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. The
Corporation is required to pay an environmental contribution to the department.
2017
2016
Amounts recognised as revenue in the Statement of Comprehensive Income
$’000
$’000
Administration fees for billing and collecting rates and reimbursement of costs of
2,824
2,594
supplementary council valuations
Water efficiency program funding
550
-
Transfer of water entitlement
1,140
-
Amounts recognised as an expense in the Statement of Comprehensive Income
Environmental contribution
29,880
29,880
Cash amounts paid during the year
Parks Victoria levy billed to customers
61,270
55,701
78
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

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.
2017
2016
Amounts recognised as an expense in the Statement of Comprehensive Income
$’000
$’000
Bulk water and sewerage wholesaler charges expense (note 3.1)
493,414
560,819
Government water rebate provided to customers
-
(29,817)
Amounts recognised as revenue in Statement of Comprehensive Income
Administration fees for billing and collecting drainage rates
4,607
4,399
and reimbursement of the costs of supplementary council valuations
Cash amounts paid during the year
Drainage billed to customers
82,380
82,236
iii. 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:
2017
2016
$’000
$’000
Aggregate amount of borrowings
2,263,217
2,170,906
Interest expense
98,176
98,082
iv. Department of Treasury and Finance
The Corporation pays amounts to the State Government of Victoria, via the Department of Treasury and Finance. Amounts incurred
were as follows:
Dividend paid
22,800
24,300
Capital repatriation
-
8,600
Financial accommodation levy
29,156
25,743
Income tax equivalent
25,816
25,242
YARRA VALLEY WATER ANNUAL REPORT 2016-17
79

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
v. 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.
2017
2016
$’000
$’000
Concession amounts billed during the year
49,131
48,184
vi. 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 and have not been considered material for disclosure.
9.6.2. Key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Corporation, directly or indirectly, this comprises independent Directors and the Managing Director. Key management
personnel (as defined in AASB 124 Related Party Disclosures) includes the Portfolio Minister and all Directors listed under
responsible persons in note 9.1 who have the authority and responsibility for planning, directing and controlling the activities of the
Corporation directly or indirectly, during the financial year.
The compensation detailed below excludes the salaries and benefits the Portfolio Minister receives. The Minister’s remuneration
and allowances is set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within the Department of
Parliamentary Services’ financial report.
Short-term employee benefits
783
753
Post-employment benefits
73
71
Other long-term employment benefits
9
8
Termination benefits
-
-
Total amount
865
832
80
YARRA VALLEY WATER ANNUAL REPORT 2016-17

 

9.6.3. Transactions with key management personnel and other related parties.
All key management personnel related party transactions have been not considered material for disclosure. In this context,
transactions are only disclosed when they are considered necessary to draw attention to the possibility that the Corporation’s
Balance Sheet and Statement of Comprehensive Income may have been affected by the existence of related parties, and by
transactions and outstanding balances, including commitment, with such parties.
9.7. Ex-gratia expenses
2017
2016
$’000
$’000
Hardship write offs for customers in the Arrange and Save Program
930
827
Write offs for disconnected customer accounts greater than 180 days
2,130
3,243
Bankruptcies and liquidations
78
40
Minimum account write offs
139
124
Total (GST inclusive)
3,277
4,234
All ex-gratia expenses above form part of bad and doubtful debts expense at note 3.1.
9.8.
Economic dependency
The normal trading activities of the Corporation are significantly dependent on the provision of finance from the Treasury Corporation
of Victoria.
9.9.
Events subsequent to balance sheet date
Since 30 June 2017 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.
YARRA VALLEY WATER ANNUAL REPORT 2016-17
81

 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
CONTINUED
9.10. Australian accounting standards issued that are not yet effective
Applicable for annual
reporting periods
Impact on Yarra Valley
Standard / Interpretation
Summary
beginning on or after
Water financial report
AASB 15 Revenue from
The core principle of AASB 15
1 January 2018
The changes in revenue
Contracts with Customers
requires an entity to recognise
recognition requirements in
revenue when the entity satisfies
AASB 15 may result in
a performance obligation by
changes to the timing and
transferring a promised good or
amount of revenue recorded
service to a customer.
in the financial statements.
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 Leases
The key changes introduced by
1 January 2019
The assessment has
AASB 16 include the recognition
indicated that most operating
of most operating leases (which
leases will be recorded on the
are currently not recognised) on
balance sheet. The
balance sheet.
recognition of lease assets
and lease liabilities will cause
net debt to increase.
Rather than expensing the
lease payments, depreciation
of right-of-use assets and
interest on lease liabilities will
be recognised in the income
statement. The impact will
be immaterial.
AASB 9 Financial Instruments
The key changes include the
1 January 2018
The assessment has
simplified requirements for the
identified that the
classification and measurement
amendments are likely to
of financial assets, a new hedging
result in earlier recognition
accounting model and a revised
of impairment losses and at
impairment loss model which
more regular intervals.
recognises impairment losses earlier,
as opposed to the current approach
While there will be no
that recognises impairment only
significant impact to the
when incurred.
measurement arising from
AASB 9 there will be a
change to the way financial
instruments are disclosed.
In addition to the new standards above, the Australian Accounting Standards Board has issued a list of amending standards that
are not yet effective for the 2016-17 year. In general, these amending standards include editorial and references changes that are
expected to have insignificant impacts on the Corporation’s financial report
There are no other standards that are not yet effective that are expected to have a material impact on the entity in the current or
future reporting periods or on foreseeable future transactions.
82
YARRA VALLEY WATER ANNUAL REPORT 2016-17