“The way in which depreciation is allocated over the life of the asset must reflect the pattern in which the assets’ future economic benefits are expected to be consumed by the entity.” (NZIAS16). In recognition of the above straight line depreciation is considered appropriate for the assets included in this valuation. The Depreciated Replacement Cost has therefore been calculated by: • Depreciated Replacement Cost = Replacement Cost x (Remaining Life/Life Expectancy). • The Annual Depreciation (Decline in Service Potential) spreads the current value of the asset across the remaining life of the asset. Depreciated Replacement Cost /Remaining Life. Depreciation is fully funded. The Annual Decline in Service Potential is used for determination of Council’s general and targeted rates for the funding of future infrastructure renewal. The valuation provides fundamental information for the Long Term Plan as required by Schedule 10 of the Local Government Act 2002. It has been prepared in accordance with “New Zealand International Accounting Standard 16 - Property Plant and Equipment” and follows the guidance provided by the National Asset Management Steering Group (NAMS) in the New Zealand Infrastructure Asset Valuation and Depreciation Guidelines, Version 2 (2006). An annual report is compiled by the asset management engineer in collaboration with the engineering managers. It is peer reviewed by an independent external valuer and scrutinised by auditors from Audit NZ. Valuation Replacement Optimised Annual Decline Cost Depreciated in Service Replacement Potential Cost 2001 $44,232,026 $27,650,356 $713,930 2005 $81,400,598 $58,582,474 $1,137,242 2008 $155,202,356 $97,876,059 $2,211,837 2009 $131,925,205 $85,693,284 $1,918,194 2010 $156,226,295 $104,993,608 $2,176,377 2011 $162,813,271 $106,532,663 $2,346,820 2012 $183,765,748 $121,191,161 $2,807,162 2013 $189,339,360 $122,490,486 $2,828,780 2014 $200,721,145 $127,568,353 $3,068,051 Table 14 Summary of Water Re-valuations 2001-14 A sharp increase in the valuation occurred in 2008 when the unit rates were re-assessed. Prices had increased as a result of high global demand and an economic boom in many international markets. Since then prices have stabilised substantially although there is evidence that the current rates are again under pressure. The rates have not been increased in response to the latest data as it is not clear if the prices are a transient spike or long term trend. 5.4 Valuation Forecasts In recent years the re-valuation rates have been have been increased by the application of an index derived from the Capital Goods Price Index as published by Statistics New Zealand. Page 77