Methodology for the valuation of Victorian cemeteries for financial reporting purposes

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In accordance with AASB 116 and Department and Treasury and Finance (DTF) guidelines 103B, the valuation of land for financial reporting purposes must have regard to its highest and best use (HBU). This means adopting a HBU that is legal and feasible.

Land needs to be valued at fair value and measured having regard to the HBU when and only where there exists possible and feasible alternative uses in the existing natural, legal, financial and socio-political environment and the alternative uses are feasible within the near future.

Where there are natural, legal, financial or socio-political restrictions on the use and disposal of land, and there is no feasible alternative use in the near future, the land should be valued at fair (market) value for its existing use. That is, opportunities that are not available to the entity are not taken into account.

Allowances need to be made in the valuation of the land for the restricted nature of the land. Once the restrictions in use are put in place the asset is said to provide a community service obligation (CSO).

The CSO is represented by the difference between the hypothetical value of the land as if it was to be used for its HBU compared to the value of the land in its current restricted use.