Operational controls impacted by new working arrangements
Most entities have recently made changes to their internal controls in response to COVID-19, including expanding work from home arrangements to sup
This article considers some of the issues arising from the current COVID-19 (coronavirus) pandemic in determining fair value for financial reporting. Fair value is used for valuing many public sector assets, primarily property, plant and equipment.
Queensland Treasury has issued Non-Current Asset Policies for the Queensland Public Sector (NCAPs). Individual local governments often have similar policies to the NCAPs.
The general understanding is that comprehensive revaluations are required every five years. However, the policy also requires a specific appraisal to occur more frequently if indicators exist that the asset class has experienced a significant and volatile change in value. Significant changes are where values have changed by 20 per cent or more. They also need to be highly volatile, meaning the changes are over a short period.
Each entity’s situation needs to be considered individually. However, here are our general thoughts on whether we think asset classes are likely to move by more than 20 per cent over a short period:
Materiality should also be considered when assessing valuations. Rolling valuations may mean that only one or two asset classes are due for a comprehensive valuation this year. If the most material classes are still within their cycle, and it is only one of the smaller classes due this year, it may be possible to defer the specific appraisal of the smaller classes of assets and perform an alternative overall assessment.
We understand that you may have trouble completing your valuation in accordance with your planned timetables.
Please continue to discuss your specific circumstances and timetables with your engagement leader.
For more information on the opportunities and challenges for entities and auditors, where physical inspections by expert valuers are restricted from fair valuing physical assets, please see our fact sheet What to do when government restrictions prevent site visits by external valuers.