f) Depreciation of non-current assets

All non-current assets having a limited useful life are systematically depreciated over their estimated useful lives in a manner which reflects the consumption of their future economic benefits. Depreciation is calculated on the straight line basis, using rates which are reviewed annually. Expected useful lives for each class of depreciable asset are:

Assets under construction are not depreciated until commissioned.

g) Revaluation of non-current assets

Infrastructure, property, plant, equipment and vehicles are valued at fair value, being the amounts for which the assets could be exchanged between willing parties in an arm’s length transaction.

Fair value was determined for all assets as at 1 July 2003, based on valuation methods to suit specific asset types. Additions since 1 July 2003 have been added to the fair value based on actual cost.

Land controlled by PTA including metropolitan and regional corridor land, not subject to commercial lease was valued by the Valuer General’s Office.

Land and buildings which are commercially leased were independently valued based on the capitalised value of current leases.

Rollingstock, permanent way, plant, equipment and vehicles were valued by PTA’s engineering and management professionals based on the written down value of the current cost to replace the asset with a modern equivalent asset capable of delivering the same service potential. The written down value was determined by calculating the unexpired component of each asset’s total useful life.

The Freight Network Infrastructure, subject to a 49 year prepaid lease was valued by an independent expert based on the net present value of the unearned lease income.

Significant changes in the fair value of public transport assets do not occur over a short time frame. Fair value will be reviewed every three years, the next review being for the year ending 30 June 2006, or annually if there are circumstances that indicate that there has been a material increase or decrease in fair value that should be brought to account.

There have been no circumstances to indicate material increases or decreases in the fair value in the current financial year.

h) Leases

PTA’s rights and obligations under finance leases, which are leases that effectively transfer to PTA substantially the entire risks and benefits incident to ownership of the leased items, are initially recognised as assets and liabilities equal in amount to the present value of the minimum lease payments. The assets are disclosed as plant, equipment and vehicles under lease, and are depreciated to the Statement of Financial Performance over the period during which PTA is expected to benefit from use of the leased assets. Minimum lease payments are allocated between interest expense and reduction of the lease liability, according to the interest rate implicit in the lease.

Finance lease liabilities are allocated between current and non-current components.The principal component of lease payments due on or before the end of the succeeding year is disclosed as a current liability, and the remainder of the lease liability is disclosed as a non-current liability.

PTA has entered into a number of operating lease arrangements where the lessor effectively retains the entire risks and benefits incident to ownership of the items held under the operating leases. Equal instalments of the lease payments are charged to the Statement of Financial Performance over the lease term as this is representative of the pattern of benefits to be derived from the leased assets.