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VicTrack in the State of Victoria in Australia began using fair value to value its assets in 2011. In doing this the company encountered the difficulties normally associated with valuing long-lived assets that are specific to their use. In this paper, a case study is presented centred on VicTrack in order to provide information on the basic difficulties of determining the fair value of assets that are long-lived, specific-to-use and in markets that are incomplete; and to better understand some of the implications of the switch from historical costs to fair value.

This paper traces the financial developments of the desalination plant in the State of Victoria in Australia. The desalination plant was built via a public–private partnership (PPP) vehicle, and commissioned at a time when water storage levels in the state were low. Subsequent rainfall has meant that no water has yet been ordered by the Victorian Government from the plant. In the paper an analysis is undertaken of the impact of the manner in which accounting treatment has been used in valuing this infrastructure asset. It is concluded that the applied accounting policy choices and treatments for this infrastructure asset are not consistent with conventional accounting theory, the Conceptual Framework for accounting or generally accepted accounting principles.