Issued 1 July 2013, reviewed 1 July 2016

This page provides advice about accounting treatment for ambulance stations constructed on land controlled by another reporting entity.

Ambulance stations are sometimes built on land under the control of a public hospital, either in conjunction with the redevelopment of the hospital or as a standalone project. Funding for the construction is provided by the Department of Health and Human Services and paid to the builder(s) progressively.

Form of lease

Leases offered to Ambulance Victoria by the department, public hospitals or public health services take a commercial form in terms of content but generally the rent is nominal.

For department properties the rent is generally $104.00 per annum for both Crown and freehold sites. Department leases with Ambulance Victoria are for a term of 50 years (facility economic life) for freehold land but limited to 21 years for Crown land which is constrained by the maximum term permissible under the Crown Land (Reserves) Act 1978

Issues

Upon completion, the station and the land upon which the station is constructed should be handed over to Ambulance Victoria, which becomes solely responsible for the operation of the station. As such, the station and the land are effectively under the control of Ambulance Victoria, which will also receive the benefits through use of the assets, and they should be recognised on their balance sheet. This represents a transfer of public assets from the reporting entity concerned to Ambulance Victoria.

Leases for the ambulance station will be entered into upon completion of the station. While the tenancy leases take a commercial form, the lease rentals are generally not at market rates.

The health service should recognise the construction in progress (CIP) until the asset components are transferred.

Application of accounting framework and FRD 119A

According to paragraphs 49 to 59 of the Framework for the preparation and presentation of financial statements, an asset exists if an entity has control of the resource from which future economic benefits are expected to flow to the entity - in this case, Ambulance Victoria. The lease rental is nominal and not at a commercial rate for an arm’s length type of operating lease. As such, the control and enjoyment of the economic benefits on the buildings are substantively similar to Ambulance Victoria having outright ownership.

In order to comply with the requirements of the framework and FRD 119A Transfers through contributed capital, Ambulance Victoria needs to recognise the assets over which it has acquired control and from which it will receive future benefits. This represents a transfer of public assets from the health service concerned to Ambulance Victoria. Table 1 outlines the accounting entries required in the books of Ambulance Victoria and the health service concerned.

Both Ambulance Victoria and the health service concerned must undertake a process to determine / measure the value of the assets involved in order to give effect to this. As the above matters have a bearing on the annual report of Ambulance Victoria and the health service concerned, it is necessary to discuss these issues and the recommendations with their auditors.

Table 1: Accounting treatment for ambulance stations constructed on land controlled by another reporting entity - required accounting entries

Health service  Amounts 
 DR Assets provided free of charge $xxx (income statement)
 CR PPE - CIP (of the XYZ AV station) $xxx (balance sheet)
 Being assets under control of AV transferred accordingly  
 Note: assets must be listed and componentised by type
 
 Ambulance Victoria
Amounts

 DR PPE:

  • Land (XYZ AV station)
  • Building (XYZ AV station)
  • Other assets (XYZ AV station)
$xxx (balance sheet)
 CR Assets received free of charge $xxx (income statement)
 Being assets under the control of AV and transferred to AV by XYZ health service