ANNUAL REPORT 2004â05 - V/Line

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Basis of AccountingThis general purpose financial report of the Corporation has been prepared in accordance with the Financial Management Act 1994,Australian Accounting Standards, Statements of Accounting Concepts and other authoritative pronouncements of the AustralianAccounting Standards Board, and Urgent Issues Group Consensus Views. The financial report has been prepared using the historicalcost convention, except where stated otherwise.The financial report has been prepared on a going concern basis. Refer to note 1(c) for further discussion.The Corporation through V/Line Passenger Pty Ltd took over the train service operations of Hoys Roadlines Pty Ltd on July 1, 2004 andtook over the train service operations of The Victorian Railway Company Pty Ltd (trading as West Coast Railway) on September 1, 2004.(b) Not for profitThe Directors are of the view that the consolidated entity qualifies as a not for profit entity since the primary obligation is the delivery ofpublic transportation services to regional Victoria. The Franchise Agreement with the Director of Public Transport determines the servicesthat are run and the payments received for those services which are budgeted to achieve a break even EBITDA result or a small loss.Neither the Corporation mission nor corporate strategy includes the achievement of profit as one of the consolidated entity's goals. Assuch, it has been deemed to be a not for profit entity and accordingly complies with accounting standards set for not for profit entities.(c) Going ConcernThis financial report has been prepared on a going concern basis. The consolidated entity is subsidised by its ultimate parent entity, theState Government of Victoria, pursuant to the Franchise Agreement with the Director of Public Transport.The funding requirements for the year ending 30 June 2006 have been agreed under an approved budget allocation. The FranchiseAgreement contains provisions for the funding requirements to be met by the State Government of Victoria throughout the franchiseperiod.The Director of Public Transport has also agreed that, while the consolidated entity is under state ownership, the Department ofInfrastructure will meet all of the consolidated entity's employee entitlements as and when those amounts fall due in the event theconsolidated entity is not able to meet these financial obligations. The Director of Public Transport has further assured that any paymentsmade by the Department of Infrastructure in relation to employee entitlements will not require reimbursement by the consolidated entity.The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts, nor tothe amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern.Refer to Note 28 for further details of the consolidated entity's Economic Dependency on the State Government of Victoria.(d) Prior year comparativesThe Corporation came into inception on 15 July 2003. Furthermore, on 1 October 2003, it purchased V/Line Passenger Pty Ltd for $1and commenced operations. As a result the comparative numbers for 2004 are for 11.5 months rather than a full year.(e) Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliablymeasured.Government subsidies are recognised when they are controlled by the consolidated entity, which is generally upon receipt of the subsidy.Fare-box Revenue (or Ticket Sales) is recognised on an accrual basis. Sales of tickets that relate to passenger trips to be taken after thereporting date are not recognised as income but as Payables.(f) CashFor the purpose of the Statement of Cash Flows, cash includes cash on hand and in banks.(g) Trade receivablesTrade receivables represent passenger and inter-operator revenues receivable and are carried at nominal amounts due less any provisionfor doubtful debts. A provision for doubtful debts is recognised when collection of the full amount is no longer probable. For tradereceivables normal terms are 30 days and 7 days for agency accounts.(h) Receivables - related partiesReceivables from related parties are recognised and carried at the nominal amount due. There is no interest charged on related partyreceivables.48| V/LINE ANNUAL REPORT 2004-05
NOTES TO THE FINANCIAL STATEMENTS(i) InventoriesInventory consists of fuel used in rolling stock. It is valued at the monthly average cost.(j) Revaluations of non-current assetsRolling stock is measured at fair value and all other non-current assets are measured at cost.Revaluations are made with sufficient regularity to ensure that the carrying amount of each asset does not differ materially from its fairvalue at the reporting date.Revaluations are assessed annually and supplemented by independent assessments, at least every three-years. Revaluations areconducted in accordance with the Victorian Government Policy - FRD 6A Application of Victorian Government Policy “Revaluation ofNon-Current Physical Assets”.(k) Investment in SubsidiariesInvestment in subsidiaries are carried at fair value. Where these investments exceed the net asset position of the subsidiary, the carryingvalue is written down to the net asset position.(l) Cost and valuation of property, plant and equipmentValuation of Rolling StockIn the prior year, V/Line Passenger Pty. Ltd revised its accounting policy in relation to the valuation of rolling stock. The prior yearvaluation was performed by rolling stock specialists and reviewed by a qualified valuer. Although valuation of assets is typically based onthe net recoverable value as per AASB 1010, the company has used depreciable replacement cost as a valuation basis. This valuation isin keeping with FRD 6A, which clarifies that a net recoverable test does not apply to a not-for-profit entity, since there is no dependenceon its assets abilities to generate net cash inflows, consequently the carrying amount should reflect the remaining ability to provideservices.(m) Depreciation of property, plant and equipmentDepreciation is provided on a straight-line basis on all plant and equipment, including rolling stock. It is calculated at rates to allocate thecost less estimated residual value at the end of the useful lives of the assets against revenue over the shorter of the estimated usefullives, or alternatively the remaining lives of the relevant asset to the consolidated entity.Rolling stock comprises locomotives, carriages, diesel multiple units (known as Sprinters) and vans. Any refurbishments or conversionsare depreciated over the remaining life of the original asset.Major depreciation periods are (unchanged from 2004):Leasehold improvementsPlant and equipmentRolling Stock(including components)(n) Leasehold improvements3 to 10 years3 to 10 years2 to 40 yearsThe cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated useful life ofthe improvement to the consolidated entity whichever is the shorter. Leasehold improvements held at the reporting date are beingamortised over 3 to 10 years (2004 - 3 to 10 years).(o) Leased non-current assetsLeases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as toreflect the risks and benefits incidental to ownership where appropriate.Operating LeasesThe minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits ofownership of the leased item, are recognised as an expense on a straight-line basis.Operating lease payments are charged to the statement of financial performance in the periods in which they are incurred, as thisrepresents the pattern of benefits derived from the leased assets.V/LINE ANNUAL REPORT 2004-05|49
Page 1 and 2: ANNUAL REPORT 2004-05
Page 3 and 4: REPORT 04-05 CONTENTSLETTER TO THE
Page 5 and 6: LETTER TO THE MINISTEROctober 2005T
Page 7 and 8: CHAIRMAN’S REPORTWhile we know th
Page 9 and 10: CEO’S REPORTDespite this focus on
Page 11 and 12: AN OVERVIEWTHE V/LINE RAIL AND COAC
Page 13 and 14: AN OVERVIEW (CONTINUED)THE YEAR IN
Page 15 and 16: MAJOR PROJECTSVLOCITY TRAINSThe int
Page 17 and 18: OUR CUSTOMERS“GRENVILLE DAWSONOUR
Page 19 and 20: OUR CUSTOMERS (CONTINUED)The redeve
Page 21 and 22: OUR CUSTOMERS (CONTINUED)V/LINE IN
Page 23 and 24: OUR OPERATIONS“GRAEME CLEAKTHE NE
Page 25 and 26: OUR OPERATIONS (CONTINUED)THE PERCE
Page 27 and 28: OUR OPERATIONS (CONTINUED)THE MAJOR
Page 29 and 30: OUR OPERATIONS (CONTINUED)Since 200
Page 31 and 32: OUR OPERATIONS (CONTINUED)SAFETY CH
Page 33 and 34: OUR EMPLOYEES“JOHN MITCHELLOUR MA
Page 35 and 36: OUR EMPLOYEES (CONTINUED)Early resu
Page 37 and 38: OUR EMPLOYEES (CONTINUED)New traini
Page 39 and 40: CORPORATE GOVERNANCEFROM LEFT: MERE
Page 41 and 42: CORPORATE GOVERNANCE (CONTINUED)COL
Page 43 and 44: FINANCIAL AND STATUTORY STATEMENTSS
Page 45 and 46: STATEMENT OF FINANCIAL PERFORMANCEF
Page 47 and 48: STATEMENT OF CASH FLOWSFOR THE YEAR
Page 49: TABLE OF CONTENTS NOTES TO THE FINA
Page 53 and 54: NOTES TO THE FINANCIAL STATEMENTSTh
Page 55 and 56: NOTES TO THE FINANCIAL STATEMENTSCO
Page 61 and 62: NOTES TO THE FINANCIAL STATEMENTSNO
Page 71 and 72: NOTES TO THE FINANCIAL STATEMENTS1.
Page 73 and 74: AUDITOR GENERAL’S STATEMENTV/LINE
Page 75: CONTACT DETAILSV/LINE PASSENGER PTY

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ANNUAL REPORT 2004â05 - V/Line