HORSHAM RURAL CITY COUNCIL
NOTES TO THE FINANCIAL STATEMENTS (Cont.) FOR THE YEAR ENDED 30th JUNE, 2014
1 SIGNIFICANT ACCOUNTING POLICIES (continued)
(u) Investment property Investment property, comprising freehold rental properties, is held to generate long-term rental yields. Investment property is measured initially at cost, including transaction costs. Costs incurred subsequent to initial acquisition are capitalised when it is probable that future economic benefits in excess of originally assessed performance of the asset will flow to the Council. Subsequent to initial recognition at cost, investment property is carried at fair value, determined annually by independent valuers. Changes to fair value are recorded in the comprehensive income statement in the period that they arise. Rental income from the leasing of investment properties is recognised in the comprehensive income statement on a straight line basis over the lease term.
(v) Tender deposits Amounts received as tender deposits and retention amounts controlled by Council are recognised as Trust funds until they are returned or forfeited (refer to note 24).
(w) Rounding Unless otherwise stated, amounts in the financial report have been rounded to the nearest thousand dollars. Figures in the financial statement may not equate due to rounding.
(x) Pending Accounting Standards The following Australian Accounting Standards have been issued or amended and are applicable to the Council but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date.
Pronouncement
AASB 9 Financial Instruments
Summary
AASB 9 standard is one of a series of amendments that are expected to eventually completely replace AASB 139. During 2010-11, the standard will be expanded to include new rules on measurement of financial liabilities and hedge accounting. Currently the existing provisions of AASB 139 will continue to apply in these areas. AASB 9 simplifies the classifications of financial assets into those to be carried at amortised cost and those to be carried at fair value- the 'available for sale' and 'held- to maturity' categories no longer exists. AASB 9 also simplified requirements for embedded derivatives embedded derivatives and removes the tainting rules associated with held-to- maturity assets.
The new categories of financial assets are: · Amortised cost – those assets with ‘basic’ loan features’. ·
Application date 1 July 2015
Annual Report 2013-2014 q Page 15
96
Impact on Council
The impact is not likely to be extensive in the local government sector. Although it will vary considerably between entities. While the rules are less complex than those of AASB 139, the option to show equity instruments at cost has been largely removed, which is likely to lead to greater volatility within the income statement. However it may also lead to an improved financial position for some entities. This will also create a requirement to measure some instruments annually that has not previously existed.
Fair value through other comprehensive
income - this treatment is optional for equity instruments not held for trading (this choice is made at initial recognition and is irrevocable).
· Fair Value through profit and Loss - everything that does not fall into the above two categories.
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