Page 60

Forest NSW Annual Report 2012

Forests NSW Consolidated Annual Financial Reports Year ended 30 June 2012 ABN 43 141 857 613 Notes to and forming part of the financial statements For the year ended 30 June 2012 Changes in the WACC rate used in the an industry-standard forest estate modelling determine whether there is any indication that discounted cash flow calculation. system which simulates growth, harvesting those assets are impaired. If any such indication and replanting of forests over an extended exists, the recoverable amount of the asset is Assumptions underpinning the NPV calculation are: time period. Timber yield estimates are made estimated in order to determine the extent Forest valuations are based on the by the application of growth and yield models of the impairment loss (if any). Where the expected volumes of merchantable timber to forest inventory measurements and the asset does not generate cash flows that are that will be realised from existing stands, aggregate wood flow from regional forests is independent from other assets, Forests NSW given current management strategies and constrained by the requirement to fill contracts estimates the recoverable amount of the cash- timber recovery rates; to supply logs to existing customers. generating unit to which the asset belongs. Only the current crop is valued. The cash The total standing volume of trees expected flow analysis is based on the anticipated at the date of harvest is converted to an (iv) Impairment of intangible timing of the harvest of existing stands, assortment of log products by the application assets. of models which simulate the manufacture which has been developed in the context Intangible assets with indefinite useful lives of saleable log products. The estimates of of sustained yield management; future log product yields are estimated by past and intangible assets not yet available for Volume increments/decrements are experience of actual yields in similar crops. use are tested for impairment annually and determined both by periodic re- whenever there is an indication that the measurement of forest samples and by Native Forests asset maybe impaired. Where an indicator of modelling growth from the date of the The gross area of native forests from which down to the recoverable amount. Recoverableimpairment exists, the asset will be writtenthe log supply is drawn is reduced by the most recent measurement to date of amount is the greater of fair value less costs toextent by which logging is excluded in certain harvest; areas. In the north and south coast regions sell and value in use. Prices used in the NPV calculation are an additional “net harvest modifier” is then based on the average prices achieved applied to reflect the impact of other logging (j) Carbon Credits over the previous year, current year, and exclusions prescribed by licences that are not next year’s budget. The use of prior year area specific. A further “strike rate reduction Forests NSW participated in an inaugural sale averages reduces the impact of significant factor” is used to reduce the harvest area to Credits (GGAS), in 2004/2005. This scheme hasof New South Wales Greenhouse Abatementaccount for the effect of excluding areas with annual pricing variations; since ceased and for financial year ending 30significant floral and faunal values. Ancillary income earned from activities June 2012, unsold carbon credit certificates are such as the leasing of land for grazing and The cash flow analysis is underpinned by written off at costs, due to the cessation of the other occupancy rights is added to the net projections of future wood volume flows GGAS as at 30/06/2012. over a 100 year period for each of the major harvest revenues; native forest estates.  The wood flows are (k) Maintenance and Repairs Costs used in the NPV calculation are determined using the FRAMES (Forest Resource based on current operating costs, Area Management Evaluation System) toolkit Forests NSW policy is to maintain property, unadjusted for any increases in operational initialised with the most recent resource plant and equipment in good order and efficiency which might occur in the future; inventory information.  It is the intention of condition requiring ongoing maintenance The discount rate used is based on Forests NSW to update the inventory on an and repair. The costs of maintenance and the Weighted Average Cost of Capital annual basis to replace plots that have been repairs are generally charged as expenses disturbed due to harvesting or plots that were when incurred, except where they relate to the formula in conjunction with the Capital replacement of a significant component of anestablished in excess of 10 years from the Asset Pricing Model. The discount rate previous measurement date. asset or a major upgrade of an asset, in which is expressed in real terms, before income case the costs are capitalised and depreciated. tax, and has been set with reference After adjusting the volume projections for Other routine operating maintenance, repair to benchmarked forestry industry risk and minor renewal costs are also expensed asthe area modifiers, “calibration factors” are margins relative to overall market risk available from each regional resource.  These incurred.then applied to the volumes of log products margins. The use of a ‘real’ discount rate calibration factors reflect the differences (l) Derecognition of Assets effectively allows for all prices and costs between the visual features recorded for to be expressed in current dollar terms. standing trees (as recorded in the inventory) Assets are derecognised upon disposal where The discount rate used for the current year and those found when trees are felled there is no future economic benefits expected valuation is 8.36% (2011: 9.59%). and logs are manufactured, when internal to arise from the continued use. Sources of valuation of biological assets impact of internal defects in the timber to be upon disposal is included in the Statement ofAny gain or loss from derecognition of assetsdefects become visible.  This enables the Plantations incorporated into the estimates of future log Comprehensive Income in the year the item is The fair value (based on NPV) of the biological product volume availability. derecognised. assets has been determined by appropriately qualified staff employed by Forests NSW using (iii) Impairment of other tangible (m) Other Financial Assets advanced modelling techniques/methods. assets. Investments are initially recognised at fair The flows of logs available from the regional At each reporting date, Forests NSW reviews value, less in the case of investments not at fair plantation forest estates are estimated using the carrying amounts of its tangible assets to value through profit and loss, transaction costs. 60 Forests NSW Annual Report 2011–12 Social, Environmental and Economic Performance


Forest NSW Annual Report 2012
To see the actual publication please follow the link above