Plant, equipment
vehiclesand Work in
progress Total
Cost $000 $000 $000 $000 $000
Balance at 1 July 2017 44,476 595,971 220,136 8,228 868,811
Additions - - - 28,905 28,905
Transfers - 6,906 17,108 (24,014) -
Disposals - - (5,386) - (5,386)
Revaluation - - - - -
Balance at 30 June 2018 44,476 602,877 231,858 13,119 892,330
Balance at 1 July 2018 44,476 602,877 231,858 13,119 892,330
Additions - - - 39,577 39,577
Transfers - 6,018 15,611 (21,629) -
Disposals - - (20,588) - (20,588)
Disposal reversal - 98 - - 98
Revaluation 5,563 23,893 - - 29,456
Balance at 30 June 2019 50,039 632,886 226,881 31,067 940,873
Accumulated depreciation and impairment losses
Balance at 1 July 2017 - - 159,816 - 159,816
Depreciation charge and impairment losses for the year - 30,977 15,422 - 46,399
Disposals - - (5,256) - (5,256)
Revaluation - - - - -
Balance at 30 June 2018 - 30,977 169,982 - 200,959
Balance at 1 July 2018 - 30,977 169,982 - 200,959
Depreciation charge and impairment losses for the year - 29,918 16,627 - 46,545
Disposals - - (19,676) - (19,676)
Revaluation - (60,895) - - (60,895)
Balance at 30 June 2019 - - 166,933 - 166,933
Carrying amounts
At 1 July 2017 44,476 595,971 60,320 8,228 708,995
At 30 June 2018 44,476 571,900 61,876 13,119 691,371
At 1 July 2018 44,476 571,900 61,876 13,119 691,371
At 30 June 2019 50,039 632,886 59,948 31,067 773,940
Financial statements
106
6. Property, plant and equipment (continued) Parent Actual
Freeholdland buildingsFreeholdPlant, equipment
vehiclesand Work in
progress Total
Cost $000 $000 $000 $000 $000
Balance at 1 July 2017 44,476 595,971 220,136 8,228 868,811
Additions - - - 28,905 28,905
Transfers - 6,906 17,108 (24,014) -
Disposals - - (5,386) - (5,386)
Revaluation - - - - -
Balance at 30 June 2018 44,476 602,877 231,858 13,119 892,330
Balance at 1 July 2018 44,476 602,877 231,858 13,119 892,330
Additions - - - 39,577 39,577
Transfers - 6,018 15,611 (21,629) -
Disposals - - (20,588) - (20,588)
Disposal reversal - 98 - - 98
Revaluation 5,563 23,893 - - 29,456
Balance at 30 June 2019 50,039 632,886 226,881 31,067 940,873
Accumulated depreciation and impairment losses
Balance at 1 July 2017 - - 159,816 - 159,816
Depreciation charge and impairment losses for the year - 30,977 15,422 - 46,399
Disposals - - (5,256) - (5,256)
Revaluation - - - - -
Balance at 30 June 2018 - 30,977 169,982 - 200,959
Balance at 1 July 2018 - 30,977 169,982 - 200,959
Depreciation charge and impairment losses for the year - 29,918 16,627 - 46,545
Disposals - - (19,676) - (19,676)
Revaluation - (60,895) - - (60,895)
Balance at 30 June 2019 - - 166,933 - 166,933
Carrying amounts
At 1 July 2017 44,476 595,971 60,320 8,228 708,995
At 30 June 2018 44,476 571,900 61,876 13,119 691,371
At 1 July 2018 44,476 571,900 61,876 13,119 691,371
At 30 June 2019 50,039 632,886 59,948 31,067 773,940
Valuation
The most recent valuation of land and buildings was carried out by P.D. Todd, an independent
registered valuer and a member of the New Zealand Institute of Valuers. The valuation was carried out at 30 June 2019.
Land
Land is valued at fair value using market-based evidence based on its highest and best use with
reference to comparable land values. Adjustments have been made to the unencumbered land value for land where there is a designation against the land or the use of the land is restricted. These adjustments are intended to reflect the negative effect on the value of the land where an owner is unable to use the land more intensively.
Restrictions on Waikato DHBs ability to sell land would normally not impair the value of land because it has operational use of the land for the foreseeable future and will receive substantially the full benefits of outright ownership.
Financial statements
107
Notes to the financial statements
continued
6. Property, plant and equipment (continued)
Buildings
Specialised hospital buildings are valued at fair value using depreciated replacement cost because no reliable market data is available for such buildings. Depreciated replacement cost is determined using a number of significant assumptions including:
• The replacement asset is based on the replacement with modern equivalent assets with adjustments where appropriate for optimisation due to over-design or surplus capacity.
• The replacement cost is derived from recent construction contracts of similar assets and Property Institute of New Zealand cost information.
• For Waikato DHBs earthquake prone buildings that are expected to be strengthened, the estimated earthquake strengthening costs have been deducted off the depreciated replacement cost in estimating fair value.
• The remaining useful life of assets is estimated.
• Straight-line depreciation has been applied in determining the depreciated replacement cost value of the asset.
Non-specialised buildings (for example, residential buildings) are valued at fair value using market-based evidence. Market rents and capitalisation rates were applied to reflect market value. These valuations included adjustments for estimated building strengthening costs for earthquake prone buildings and the associated lost rental during the time to undertake the strengthening work.
Restrictions
Waikato DHB does not have full title to the Crown land it occupies but transfer is arranged if and when land is sold. Some of the land is subject to Waitangi Tribunal claims. The disposal of certain properties may be subject to the provision of section 40 of the Public Works Act 1981.
Titles to land transferred from the Crown to Waikato DHB are subject to a memorial in terms of the Treaty of Waitangi Act 1975 (as amended by the Treaty of Waitangi (State Enterprises) Act 1988). The effect on the value of assets resulting from potential Waitangi Tribunal claims under the Treaty of Waitangi Act 1975 cannot be quantified and it is therefore not reflected in the value of the land.
Finance leases
The net carrying amount of plant, equipment and vehicles held under finance lease is $0.3 million (2018:
$0.5 million). Note 18 provides further information about finance leases.
Property, plant and equipment under construction
Buildings work in progress at 30 June 2019 is $12.7million (2018: $5.2million) and capital commitments is $3.4 million (2018: $3.4 million). Plant, equipment and vehicles work in progress at 30 June 2019 is
$18.4 million (2018: $8.3million) and capital commitments is $6.6million (2018: $4.9 million).
7. Intangible assets
Accounting policy
Software acquisition and development
Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs that are directly associated with the development of software for internal use are recognised as an intangible asset. Direct costs include the software development employee costs and an appropriate portion of relevant overheads. Staff training costs are recognised as an expense when incurred. Costs associated with maintaining computer software are recognised as an expense when incurred. Costs of software updates or upgrades are capitalised only when they increase the usefulness or value of the asset. Costs associated with developing and maintaining the Waikato DHBs website are recognised as an expense when incurred.
Information technology shared services rights
The Waikato DHB has provided funding for the development of information technology (IT) shared services across the DHB sector (FPIM Programme Asset) and the rights to the shared services is recognised as an intangible asset at the cost of the Waikato DHBs capital investment.
Financial statements
108
7. Intangible assets (continued)
Impairment of FPIM Programme Asset
Intangible assets include the FPIM Programme asset which is deemed to be a non-cash-generating asset. This is on the basis that there are no cash flows directly linked to the asset. Therefore, the applicable accounting standard is PBE IPSAS 21 Impairment of Non-Cash-Generating Assets. PBE IPSAS 21 requires an annual test for impairment by comparing the asset carrying value with its recoverable service amount.
The national FPIM Business Case approved by Cabinet 24 June 2019 materially changed from the FPIM Programme paused by the Cabinet decision of 28 June 2018 and the judgements that were assumed in assessing the national FPIM Programme carrying value at 30 June 2018. Key changes being:
• the Business Case has crystallised that only 10 DHBs are committing to a single system in the short to medium term;
• the Business Case conservatively reduced the benefits to only identifiable procurement spend. This impacts on Net Present Value calculations which formed part of the assessment of carrying value of the asset and the requirement for any impairment;
• NZ Health Partnerships now have visibility of a working system, which has been operational since July 2018 at four DHBs, on which user feedback is available in evaluating the broader initial scope and activities capitalised under Health Benefits Limited ownership prior to June 2014. It has considered how much of that work still holds value for the pared back system that was finally deployed.
NZ Health Partnerships tested the FPIM asset for impairment by determining the asset’s value in use based on its depreciated replacement cost (DRC).
Based on the information provided by NZ Health Partnerships to Waikato DHB, an additional $3.0m impairment of the FPIM asset has been included in the Statement of Comprehensive Income for the year ended 30 June 2019
Amortisation
The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each financial year is recognised in the surplus or deficit.
The estimated useful lives and associated amortisation rates of the major classes of intangible assets are:
Type of asset Computer software
Estimated life 2-15 years
Amortisation rate 6.6-50%
Impairment of intangible assets
Refer to the policy for impairment of property, plant and equipment in Note 6. The same approach applies to the impairment of intangible assets, except for intangible assets that are still under development. Intangible assets that are under development and not yet ready for use are tested for impairment annually, irrespective of whether there is any indication of impairment.