Contents of Part 2
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| 7.4 Asset valuation |
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The valuation of assets is undertaken for a number of purposes. For example, the valuation of an asset may be used to:
Choice of an appropriate valuation method depends firstly on the purpose of the valuation, and secondly on the nature of the asset involved. The initial valuation is applied at the time of acquisition, and generally corresponds to the cost of acquisition. Subsequent revaluations are undertaken at periodic intervals with a frequency chosen to reflect the nature of the class of assets concerned.
Valuation methods used should be in accordance with the guidelines issued by the Department of Finance publication, Recognition and Valuation of Non-current Physical Assets.
A description of the approach to be taken to depreciation is provided in Section 2 of that publication.
Valuation of core and non-core assets
It is necessary to distinguish between core and non-core assets in determining valuations.
A non-core asset is to be valued at its net realisable value, which is the current market value net of all costs involved with disposing or redeploying the asset.
A core asset should, in general, be valued at the cost of replacing the service potential remaining in the asset. If a viable market exists for the asset, a core asset is to be valued at its current market price. If a market for the asset does not exist, a core asset is to be valued at its written-down replacement cost.
Valuation of heritage/cultural assets
True valuation may be difficult to obtain for assets retained for heritage or conservation purposes.
Heritage assets have two components of value: a market-related value and an aesthetic or social value. The aesthetic or social component will probably not be reflected, in part or in full, in the asset's current market value.
Entities should refer to Section 9.8 of the Accrual Accounting Manual issued by the Department of Treasury and Finance for guidelines on how to value heritage or cultural assets. A note to the entity’s annual financial statements should mention that the asset’s true worth to the State is probably only partly reflected in its reported value.
If an entity has difficulty in establishing a reliable measure of a heritage or cultural asset's value, it must notify the Department of Treasury and Finance. Insurance and risk management issues must be considered. Entities must also provide narrative information in the notes to their financial statements on heritage assets.
| Department of Treasury and Finance, Accounting and Financial Reporting Division Telephone 61 3) 9651 2187 |
Asset revaluation
Entities must establish a program to revalue assets every five years and to review these annually. The review should include consideration of the asset's current condition, required maintenance and estimated remaining useful life.
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| Australian Accounting Standard 10 – Accounting for Revaluation of Non-current Assets Australian Accounting Research Foundation
Recognition and Valuation
Department of Treasury and Finance, |
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