FRD 118B
Land Under Declared Roads
Purpose
1.1
Application
2.1
2.2
Scope
3.1
3.2
To prescribe requirements for the recognition and measurement of land under
declared roads.
Applies to any entity that holds land under declared roads and which is
controlled by the State, whose financial position and result are thus
included in the Annual Financial Report for the State of Victoria.
The scope exclusion, referred to in paragraph 3.2 below, is applicable to
all public bodies and departments under Section 3 of the Financial
Management Act 1994.
This FRD relates to the recognition and measurement of land under
declared roads as defined under the Road Management Act 2004 and
property acquired in relation to the development of such a road.
Any ‘land under roads’ in the following instances should not be separated
or distinguished from other land on the title or parcel and thus are outside
the scope of this FRD and should be recognised and measured in
accordance with the current version of FRD 103 Non-current physical
assets:
Land under roads in the following areas:
a) National/State Parks and Forests;
b) Schools (including TAFE) and Hospital grounds;
c) other properties associated with infrastructure controlled by
entities where the road is not the principle asset on the property
(e.g. water treatment plants); and
d) ‘unused roads’ on Crown land.
Operative Date
4.1
Requirement
5.1
Reporting periods commencing on, or after, 1 July 2009, superseding
FRD 118 Land Under Roads and FRD 118A Land Under Roads.
Recognition and Measurement – Entity and Whole of Government
(AASB 1049) reporting
1) ‘Land under declared roads’
a) Land under declared roads should be recognised as an asset and
accounted for consistent with the requirements of the current
version of FRD 103, as follows:
i)
acquired prior to 1 July 2008: measured at fair value,
ii) acquired on, or after, 1 July 2008: measured initially at cost of
acquisition, and subsequently at fair value.
2) ‘Property acquired for roads’
a) Land acquired prior to, on, or after 1 July 2008 in relation to the
construction of a future public road in any reporting period
should be recognised as an asset and accounted for as follows:
i)
measured initially at cost of acquisition, and subsequently at
fair value; and
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Land Under Declared Roads
ii) sub classified as ‘Property acquired for roads’ until such time
as the road is constructed and declared under Section 14 of the
Road Management Act 2004, at which point it will be
reclassified as ‘land under declared roads’. When such land is
reclassified, it is transferred at its carrying amount at that
time.
5.2
Classification of land
‘Property acquired for roads’ and ‘Land under declared roads’ form part
of the general nature-based sub class of ‘land’.
Entity Transition
6.1
As a consequence of the transition from FRD 118 to FRD 118B, an entity
will be required to apply AASB 108 Accounting Policies, Changes in
Accounting Estimates and Errors.
Consequential
Amendments
7.1
Withdraw clause 2.3 of FRD 103D Non-current physical assets. Insert within
FRD 103D Appendix A, part 4, developed land sub-classes:
 ‘Property acquired for roads’; and
 ‘Land under declared roads’.
Public road, for the purposes of this FRD:
Definitions

includes roads declared under:
o
Section 14 of the Road Management Act 2004; and/or
o
Section 205 of the Local Government Act 1989.

includes public toll roads; and

excludes roads controlled by Local Councils under Section 17 of the
Road Management Act 2004.
Land under declared roads, encompasses land under the road, road reserves,
including land under footpaths, nature strips and median strips.
Property acquired for roads, property which has been acquired, directly or
indirectly as a result of an intention to construct a road within the vicinity of
the property, and which has not been transferred for an alternate use.
Unused road, land reserved for a Government road which is declared under
Section 400 of the Land Act 1958 as not required for public traffic.
Guidance
8.1
Depreciation
Land under a declared road is not depreciated.
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8.2
Valuation
In 2009, all State Valuers-General concluded that a ‘Statutory Land Value’ is
the most feasible and efficient base for valuing land under declared roads.
They agreed that the following resolution ‘jurisdictions may apply different
discounts to best estimate a reasonable englobo value for particular road
localities for financial reporting purposes’ would be the most appropriate way
to value land under declared roads to reflect differences in the reported
statutory values and would assist in consistent reporting across all jurisdictions.
Statutory land value, in Victoria, is the ‘site value’ for council rating purposes
as defined in the Valuation of Land Act 1960.
8.3
Disclosure
For the purposes of disclosure in to the notes of an entity’s financial
statements, land under declared roads should be disclosed as a separate
sub-class of land. Separate note disclosure is appropriate because of the
different valuation methodology and significant value of land under declared
roads.
8.4
Transition application
When an entity applies this FRD for the first time, the change in accounting
policy will require the application of AASB 108.14.
The extent to which AASB 108 is applied is subject to the ‘limitations of
retrospective application’ (AASB 108: paragraphs 23-27) which outline the
impracticality limitations for retrospective application of a change in
accounting policy. In the event that an entity can demonstrate that there are
limitations on retrospective application, then an entity shall apply the
accounting policy change at the beginning of the earliest period for which
retrospective application is practicable (AASB 108.24).
Generally, limitations on retrospective application arise when it is
impracticable to determine the period specific effects or the cumulative effects
of the change. Given the nature and complexity in the valuation methodology
for determining the fair value of the asset 'land under declared roads', it may be
possible that data or information would not have been collected in the prior
period(s) in a way that would allow retrospective application, making it
impractical for an entity to recreate the information.
Entities should consider the guidance in AASB 108.50-53 to determine
whether there are limitations on retrospective application and the relevant and
appropriate evidence required to demonstrate impracticality specific to their
circumstances.
Regardless of whether the entity applies the change in accounting policy
retrospectively, or prospectively (if the entity can demonstrate impracticality),
the adjustment should be made to the opening balance of each affected
component of equity of the earliest prior period presented. Usually the
adjustment is made to retained earnings or some other appropriate component
of equity, such as the asset revaluation surplus (AASB 108.26).
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Land under declared roads acquired prior to 1 July 2008, recognised for the
first time, should be measured at fair value.
8.5
Property acquired for roads
The methodology applied for the valuation of assets classified as ‘property
acquired for roads’ is not the same as that applied to ‘land under declared
roads’. ‘Property acquired for roads’ is instead valued consistent with other
non-current physical assets.
Relevant
Pronouncements

FRD 103D Non-current physical assets

AASB 1049 Whole of Government and General Government Sector
Financial Reporting
AASB 1051 Land Under Roads
AASB 116 Property, Plant and Equipment
AASB 108 Accounting Policies, Changes in Accounting Estimates and
Errors



Background
Land under declared roads had been exempt from valuation since the
inception of accounting Standards AAS 27, 29 and 31. This exemption has
been extended on a number of occasions.
The underlying reasons for not recognising land under declared roads included:

the impracticality of valuing such land;

any developed valuation framework would be at best very subjective;

opinion by some AASB members that land under declared roads cannot
be reliably measured or recognised by AASB 116 as an asset;

the land provides access to adjacent properties and as a consequence:
o
contributes to the value of these properties rather than its own
value; and
o
is unlikely to be sold and thus realise monetary value;

subject to general laws and regulations controlling road use and access,
the roads are accessible and useable by any member of public;

there are no definitive national standards on measuring land under
declared roads; and
it is considered that methodologies proposed to date to attribute a value to
land under declared roads do not generate a value that provides
meaningful or relevant information to users.

Consequently, the policy adopted for the State of Victoria had been not to
recognise land under declared roads.
The transitional provisions of AAS 27, AAS 29 and AAS 31 previously
permitted entities to not recognise land under roads as an asset. This election
being applicable to Local Governments entities, Government Departments
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and State Governments. The Minister for Finance, at that time, had mandated
this election for all Victorian public sector entities to ensure consistent
application of accounting policies in preparing and presenting the State of
Victoria’s consolidated financial report.
AAS 27A, AAS 29A and AAS 31A further extended the time frame for this
election from reporting periods ending on 30 June 2000 to the first reporting
periods ending on, or after, 31 December 2002. AASB 1045 then further
amended this time frame to the first reporting periods ending on, or after,
31 December 2006. As a consequence, former FRD 16A Land under roads
was revised in 2005 to fully reflect these accounting standard changes.
In October 2006, the AASB again extended the exemption for a further year.
However, the AASB made it clear that they did not intend to make further
extensions and that entities should either conclude that they could not reliably
measure the asset or that they should establish a policy to reliably measure
land under declared roads.
In December 2007, the AASB issued AASB 1051 Land Under Roads which
provides for entities:
a) to elect to recognise (including continue to recognise or to recognise for
the first time), subject to satisfaction of the asset recognition criteria, or
not to recognise (including continue not to recognise or to derecognise)
as an asset, land under roads acquired before the end of the first reporting
period ending on, or after, 31 December 2007; and
b) to make an election regarding (a) above, effective as at the first day of the
next reporting period following the end of the first reporting period
ending on, or after, 31 December 2007.
Initially the pre June 2008 land under declared roads was not recognised for
the reasons outlined above. However, land under declared roads acquired on,
or after, 1 July 2008, was recognised at cost. FRD 118 was issued to reflect
this policy.
This policy was reviewed as a consequence of implementing AASB 1049. In
preparing the 2008-09 Annual Financial Report for the State of Victoria, land
under declared roads was recognised and measured at fair value in the
whole-of-government and GGS.
As an interim measure, FRD 118A was issued to exclude the application of
FRD 118 to the consolidated financial statements of the whole-ofgovernment and general government sector. However, consistent with
FRD 118, land under declared roads acquired before 1 July 2008 was not
recognised in the 2008-09 financial statements of VicRoads.
FRD 118B was issued in 2010 to clarify the position from an entity-level and
whole-of-government basis, on a longer term basis.
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