2017-11-02
Ms DUNN (Eastern Metropolitan) (12:33) — My question is for the Minister for Agriculture. Minister, in the VicForests Annual Report 2016–17 it is noted that the discount rate applied to the biological asset has been decreased from 7.715 per cent, applied in previous accounting years, to 4.99 per cent in this year’s report. Over a multi-decadal — so multiple years — valuation horizon, that 2.7 per cent reduction in the discount rate significantly increases the value of the biological asset. Could the minister explain the dollar value change — the net present value — this has had on the biological asset?
Ms PULFORD (Minister for Agriculture) (12:34) — I will take the opportunity to provide Ms Dunn with a written response to this very, very technical question that she is seeking information on that so that I can be absolutely confident that I am providing accurate information about the methodology.
Supplementary question
Ms DUNN (Eastern Metropolitan) (12:35) — Thank you, Minister, for that commitment. In terms of my supplementary question, as with the dubious use we saw last year of the depreciated optimised replacement cost in the valuation of forest access roads in the 2015–16 VicForests annual report, is it not the case that VicForests is again using dodgy accounting practices to prop up its balance sheet and hide its losses?
Ms PULFORD (Minister for Agriculture) (12:35) — I can assure Ms Dunn that VicForests is not using dodgy accounting practices.
RESPONSE TO SUBSTANTIVE QUESTION:
Ms PULFORD — Ms Dunn is incorrect in her assertion and I am happy to clear up her confusion.
VicForests revalues its biological assets each year. Prior to 2016-17, VicForests used pre-tax cashflows discounted by a pre-tax discount rate. On advice from the Victoria Auditor General's Office, VicForests refined its valuation technique for 2016-17, changing to post-tax cashflows discounted by a post-tax discount rate. The real, post-tax discount rate for 2016-17 was 4.99%. The equivalent rate for 2015-16 was 4.77%. The change in methodology did not have a material impact on the valuation, The reduction on the value of the biological assets reported by VicForests in 2016-17 reflects the reduction in timber available for harvest.