Public Transport Authority

Fair value measurements

2014 Assets measured at fair value:	Level 1 $000	Level 2 $000	Level 3 $000	Fair value at end of period $000
Land (Note 23)	0	0	397,769	397,769
Buildings (Note 23)	0	0	34,927	34,927
Freight network infrastructure (Note 23)	0	0	1,200,176	1,200,176
Rollingstock (Note 23)	0	533,661	47,259	580,920
Railway infrastructure (Note 23)	0	0	2,457,421	2,457,421
Bus infrastructure (Note 23)	0	0	133,668	133,668
Vessels (Note 23)	0	0	1,313	1,313
Buses (Note 23)	0	389,045	0	389,045
Non-current assets classified as held for sale (Note 25)	0	10,380	0	10,380
	0	933,086	4,272,533	5,205,619

There were no transfers between Levels 1, 2 or 3 during the period.

Valuation techniques to derive Level 2 fair values

Level 2 fair values of Rollingstock, Buses and Non-current assets classified as held for sale are derived using the market approach. Market evidence of sales prices of Rollingstock and Bus contracts held by the PTA are used to determine price per railcar and bus respectively. It should be noted that Rollingstock is classified as both level 2 and level 3 on the fair value hierarchy as market information is available for urban railcars, however, regional rollingstock has been valued by an independent third party as no observable inputs are available.

Non-current assets held for sale have been written down to fair value less costs to sell. Fair value has been determined by reference to market evidence of sales prices of comparable assets.

Fair value measurements using significant unobservable inputs (Level 3)

2014	Land $000	Buildings $000	Freight network infrastructure $000	Rollingstock $000	Railway infrastructure $000	Bus infrastructure $000	Vessels $000
Fair Value at start of period	360,833	107,841	1,190,509	50,453	2,050,640	125,317	1,269
Additions	0	0	0	0	0	4,443	0
Revaluation increments/(decrements) recognised in Profit or Loss	0	0	0	0	0	0	0
Revaluation increments/(decrements) recognised in Other Comprehensive Income	36,936	(2,685)	0	(1,881)	0	10,587	124
Transfers	0	(65,324)	109,180	0	489,867	2,152	0
Disposals	0	0	(15,257)	0	(208)	(1,928)	0
Depreciation Expense	0	(4,905)	(84,256)	(1,313)	(82,878)	(6,903)	(80)
Fair Value at end of period	397,769	34,927	1,200,176	47,259	2,457,421	133,668	1,313
Total gains or losses for the period included in profit or loss, under ‘Other Gains’	0	0	0	0	0	0	0
Change in unrealised gains or losses for the period included in profit or loss for assets held at the end of the reporting period	0	0	0	0	0	0	0

Valuation processes

There were no changes in valuation techniques during the period.

Transfers in and out of a fair value level are recognised on the date of the event or change in circumstances that caused the transfer. Transfers are generally limited to assets newly classified as non-current assets held for sale as Treasurer’s instructions require valuations of land, buildings and infrastructure to be categorised within Level 3 where the valuations will utilise significant Level 3 inputs on a recurring basis.

Fair value for existing use specialised buildings and infrastructure assets is determined by reference to the cost of replacing the remaining future economic benefits embodied in the asset, i.e. the depreciated replacement cost. Depreciated replacement cost is the current replacement cost of an asset less accumulated depreciation calculated on the basis of such cost to reflect the already consumed or expired economic benefit, or obsolescence, and optimisation (where applicable) of the asset. Current replacement cost is generally determined by reference to the market-observable replacement cost of a substitute asset of comparable utility and the gross project size specifications.

For some specialised buildings and infrastructure assets, the current replacement cost is determined by reference to the historical cost adjusted by relevant indices.

Fair value for restricted use land is based on market value, by either using market evidence of sales of comparable land that is unrestricted less restoration costs to return the site to a vacant and marketable condition (low restricted use land), or, comparison with market evidence for land with low level utility (high restricted use land).

Significant Level 3 inputs used by the PTA are derived and evaluated as follows:

Selection of land with restricted utility
Fair value for restricted use land is determined by comparison with market evidence for land with low level utility. Relevant comparators of land with low level utility are selected by Landgate (Valuation Services).

Consumed economic benefit/obsolescence of asset
These are calculated by internal asset management experts with opinions taken under advice from external agencies when received in conjunction with valuation reports.

Replacement cost per square metre floor area (m2)
The costs of constructing specialised buildings with similar utility are extracted from 2014 valuation reports supplied by independent valuation experts Ralph Beattie Bosworth.

Replacement cost per individual items
The costs of significant specialised items for PTA buildings are extracted from 2014 valuation reports supplied by independent valuation experts Ralph Beattie Bosworth.

Replacement cost per kilometre of network
The costs of kilometres of rail track are extracted from 2010 valuation reports supplied by independent valuation experts Mitchell Munn Valuations.

Replacement cost per railcar components
The costs of railcar components are extracted from 2014 valuation reports supplied by independent valuation experts Interfeet Technologies.

Tunnel Replacement cost per metre
The costs of tunnel replacement are extracted from 2012 valuation reports prepared by the PTA's Senior Rail Project Engineer.

Station Replacement cost per square metre floor area (m2)
The costs of station structures are extracted from 2012 valuation reports supplied by independent valuation experts Turner & Townsend.

Movements in relevant CPI percentages over 4 financial years
The movements in relevant CPI percentages over the last 4 financial years are derived from taking the average movement in the Perth CPI and National Transport CPI from June Quarter 2010 to the March Quarter 2014.

Information about significant unobservable inputs (Level 3) in fair value measurements

Description and fair value as at 30 June 2014 $000		Valuation technique(s)	Unobservable inputs	Range of unobservable inputs (weighted average)	Relationship of unobservable inputs to fair value
Land	397,769	Market approach	Selection of land with similar approximate utility	$0.35 - $587.56 per m2 ($1.30 per m2)	Higher value of similar land increases estimated fair value
Buildings	34,927	Depreciated Replacement Cost	Consumed economic benefit/ obsolescence of asset	2% - 11.3% per year (2.08% per year)	Greater consumption of economic benefit or increased obsolescence lowers fair value
			Replacement cost per square metre floor area (m2)	$10 - $3,500 per m2 ($824.94 per m2)	Higher replacement cost per square metre increases fair value
			Replacement cost per individual items	$3,000 - $350,000 per item ($80,866.67 per item)	Higher replacement cost per item increases fair value
Freight network infrastructure	1,200,176	Depreciated Replacement Cost	Consumed economic benefit/ obsolescence of asset	1% - 10% per year (1.66% per year)	Greater consumption of economic benefit or increased obsolescence lowers fair value
			Replacement cost per kilometre of network	$921,000 per kilometre	Higher replacement cost per kilometre increases fair value
Rollingstock	47,259	Depreciated Replacement Cost	Consumed economic benefit/ obsolescence of asset	4% - 10.6% per year (4.17% per year)	Greater consumption of economic benefit or increased obsolescence lowers fair value
			Replacement cost per railcar components	$13,000 - $5,150,000 ($990,894 per component)	Higher replacement cost per component increases fair value
Railway infrastructure	2,457,421	Depreciated Replacement Cost	Consumed economic benefit/ obsolescence of asset	1% - 100% per year (2.84% per year)	Greater consumption of economic benefit or increased obsolescence lowers fair value
			Tunnel Replacement cost per metre	$10,330 per metre	Higher replacement cost per metre increases fair value
			Station Replacement cost per square metre floor area (m2)	$2,078.15 - $3,023 per m2 ($2,310.76 per m2)	Higher replacement cost per square metre increases fair value

Description and fair value as at 30 June 2014 $000		Valuation technique(s)	Unobservable inputs	Range of unobservable inputs (weighted average)	Relationship of unobservable inputs to fair value
Bus infrastructure	133,668	Depreciated Replacement Cost	Consumed economic benefit/ obsolescence of asset	1¼% - 2% per year (1.67% per year)	Greater consumption of economic benefit or increased obsolescence lowers fair value
			Replacement cost per square metre floor area (m2)	$5 - $3,080 per m2 ($199.75 per m2)	Higher replacement cost per square metre increases fair value
			Replacement cost per individual items	$5,000 - $360,000 per item ($70,967.05 per item)	Higher replacement cost per item increases fair value
Vessels	1,313	Depreciated Replacement Cost	Consumed economic benefit/ obsolescence of asset	5% - 25% per year (15% per year)	Greater consumption of economic benefit or increased obsolescence lowers fair value
			Movements in relevant CPI percentages over 4 financial years	9.92% - 10.92% over 4 years (10.42% over 4 years)	Higher replacement cost per CPI increases fair value

Reconciliations of the opening and closing balances are provided in Note 23.

Basis of Valuation

In the absence of market-based evidence, due to the specialised nature of some non-financial assets, these assets are valued at Level 3 of the fair value hierarchy on an existing use basis. The existing use basis recognises that restrictions or limitations have been placed on their use and disposal when they are not determined to be surplus to requirements. These restrictions are imposed by virtue of the assets being held to deliver a specific community service.