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Commonwealth of Australia - The Treasury

Annual Report 2014/15

Notes 2 – 10

Note 2: Events After the Reporting Period

Departmental

There are no known events occurring after the reporting period that could impact on the financial statements.

Administered

There are no known events occurring after the reporting period that could impact on the financial statements.

Note 3: Net Cash Appropriation Arrangements

  2015
$’000
2014
$’000
Surplus/(Deficit) less depreciation/amortisation expenses 4,630 275
Plus: changes in asset revaluation reserves 976
Total comprehensive income/(loss) less depreciation/amortisation expenses previously funded through revenue appropriations 5,606 275
Plus: depreciation/amortisation expenses previously funded through revenue appropriation (9,667) (9,297)
Total comprehensive income/(loss) — as per the Statement of Comprehensive Income (4,061) (9,022)

1. From 2010-11, the Government introduced net cash appropriation arrangements, where revenue appropriations for depreciation/amortisation expenses ceased. Entities now receive a separate capital budget provided through equity appropriations. Capital budgets are to be appropriated in the period when cash payment for capital expenditure is required.

Note 4: Operating Expenses

  2015
$’000
2014
$’000
Note 4A: Employee benefits    
Wages and salaries 89,253 95,418
Superannuation:    
Defined contribution plans 6,053 6,128
Defined benefit plans 9,511 10,766
Redundancies 1,945 7,188
Leave and other entitlements 12,757 10,474
Other 3,421 3,162
Total employee benefits 122,940 133,136
     
Note 4B: Suppliers    
Goods and services    
Information communication technology 7,325 5,191
Conferences and training1 10,272 9,273
Consultants, secondees and contractors2 14,104 6,442
Fees — Audit, Accounting, Bank and Other 2,062 1,700
Insurance 951 561
Legal 1,605 999
Printing 513 514
Property operating expenses 12,073 11,845
Publications and subscriptions 1,442 1,368
Travel 6,046 6,383
Other 2,177 2,145
Total goods and services 58,570 46,421
Goods and services are made up of:    
Provision of goods — related parties 52 135
Provision of goods — external parties 3,180 3,141
Rendering of services — related parties 11,294 7,153
Rendering of services — external parties 35,069 27,600
Total goods and services 49,595 38,029
Other suppliers    
Operating lease rentals in connection with:3    
Related parties 8,352 8,070
External parties 2 1
Workers compensation premiums 621 321
Total other suppliers 8,975 8,392
Total supplier expenses 58,570 46,421
     
Note 4C: Grants    
Public sector:    
Australian Government entities — other 231 71
Private sector:    
Non-profit organisations 2,340 1,243
Total grants 2,571 1,314

1. Conferences and training expenses include expenditure relating to the 2014 G20 Finance Ministers’ and Central Bank Governors’ meetings organised by the Treasury.

2. The increase in consultants, secondees and contractors expenses is mainly a result of an increase in the number of secondees from a range of government agencies ($2.0 million of which was received free of charge) and an increase in contractors for various ICT projects.

3. Operating lease rentals comprise minimum lease payments only.

Note 5: Income

Own-Source Revenue 2015
$’000
2014
$’000
Note 5A: Rendering of services    
Rendering of services — related parties 9,939 8,042
Rendering of services — external parties 369 1,638
Total rendering of services 10,308 9,680
     
Note 5B: Other revenue    
Legislative and Governance Forum on Consumer Affairs contributions received 334 404
ANAO audit services received free of charge 605 440
Other 348 135
Total other revenue 1,287 979
     
Note 5C: Gains from sale of assets    
Plant and equipment    
Proceeds from sale 21
Net book value of assets disposed (12)
Total gains from sale of assets 9
     
Note 5D: Other gains    
Resources received free of charge1 4,628 2,605
Other 14
Total other gains 4,642 2,605

1. The increase in resources received free of charge is driven by an increase in secondees. The corresponding expense is disclosed at Note 4B.

Note 6: Fair Value Measurements

The following tables provide an analysis of assets and liabilities that are measured at fair value.

The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Note 6A: Fair value measurements, valuation techniques and inputs used

  Fair value measurements at the end of the reporting period   For Levels 2 and 3 fair value measurements
  2015
$’000
2014
$’000
Category
(Level 1, 2 or 3)1
  Valuation technique(s)2 Inputs used
Non-financial assets:            
Property, plant and equipment 222 137 2   Market Approach Adjusted market transactions
Property, plant and equipment 5,933 8,713 3   Depreciated Replacement Cost Replacement Cost New (price per square metre)
Consumed economic benefit / Obsolescence of asset
Library 1,919 1,871 3   Depreciated Replacement Cost Replacement Cost New
Consumed economic benefit / Obsolescence of asset
Land and buildings 2,292 5,721 3   Depreciated Replacement Cost Replacement Cost New
Total non-financial assets 10,366 16,442        
Total fair value measurements of assets in the statement of financial position 10,366 16,442        

1. The Treasury did not measure any non-financial assets at fair value on a non-recurring basis as at 30 June 2015.

No change in valuation technique occurred during the period.

Fair value measurements — highest and best use differs from current use for non-financial assets (NFAs)

The Treasury’s assets are held for operational purposes and are not held for the purposes of deriving a profit. The current use of all NFAs is considered their highest and best use.

Recurring and non-recurring Level 3 fair value measurements — valuation processes

During 2014-15, the Treasury appointed Preston Rowe Paterson to undertake a full revaluation of all tangible property, plant and equipment assets as at 1 July 2014. In addition, the Treasury appointed Australian Valuation Solutions Pty Ltd (AVS) to test for material differences between asset carrying amounts and fair value measurements for all tangible property, plant and equipment assets as at 30 June 2015. This fair value confirmation was performed in accordance with AASB 13.

The Treasury procures the valuation services from an independent valuer of the tangible non-financial asset classes once every three years. Asset carrying amounts are tested for materiality at least once every 12 months. If a particular asset class experiences significant and volatile changes in fair value (i.e. where indicators suggest that the value of the class has changed materially since the previous reporting period), that class is subject to specific valuation in the reporting period, where practicable, regardless of the timing of the last specific valuation.

There have been no transfers between level 1 and level 2 of the hierarchy during the year.

Significant Level 3 inputs utilised by the entity are derived and evaluated as follows:

All asset classes — consumed economic benefit/obsolescence of asset

Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the cost (depreciated replacement cost (DRC)) approach. Under the DRC approach the estimated cost to replace the asset is calculated and then adjusted to take into account its consumed economic benefit/asset obsolescence (accumulated depreciation). Consumed economic benefit/asset obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration.

Library — replacement cost

The value of the library was determined on the basis of the average cost for items within each collection. The replacement cost has considered purchases over recent years and these have been evaluated for reasonableness against current market prices.

Note 6B: Level 1 and Level 2 transfers for recurring fair value measurements

No assets were transferred between Level 1 and Level 2.

Note 6C: Reconciliation for recurring Level 3 fair value measurements

Recurring Level 3 fair value measurements — reconciliation for assets
  Non-financial assets
  Property, plant
and equipment
  Library   Land and Buildings   Total
  2015
$’000
2014
$’000
  2015
$’000
2014
$’000
  2015
$’000
2014
$’000
  2015
$’000
2014
$’000
Opening balance 8,713 9,885   1,871 1,871   5,721 6,815   16,305 18,571
Total gains/(losses) recognised in net cost of services1 (2,698) (2,847)     (4,279) (4,288)   (6,977) (7,135)
Total gains/(losses) recognised in other comprehensive income2 401   48   521   970
Purchases 418 2,226     243 2,975   661 5,201
Settlements (901) (551)     86 219   (815) (332)
Closing balance 5,933 8,713   1,919 1,871   2,292 5,721   10,144 16,305

1. These gains/(losses) are presented in the Statement of Comprehensive Income under depreciation and amortisation.

2. These gains/(losses) are presented in the Statement of Comprehensive Income under changes in asset revaluation reserves.

The entity’s policy for determining when transfers between levels are deemed to have occurred can be found at Note 1.

Note 7: Financial Assets

  2015
$’000
2014
$’000
Note 7A: Trade and other receivables    
Appropriations receivable 57,564 60,240
Goods and services receivables — related parties 953 920
Goods and services receivables — external parties 792 1,222
Net GST receivable from the ATO 832 666
Total trade and other receivables (net) 60,141 63,048
All receivables are current assets    
Receivables (net) are aged as follows:    
Not overdue 59,071 61,991
Overdue by:    
0 to 30 days 890 681
31 to 60 days 111 97
61 to 90 days 11 157
More than 90 days 58 122
Total receivables (net) 60,141 63,048

Credit terms for goods and services were within 30 days (2014: 30 days).

Note 8: Non-Financial Assets

Note 8A: Reconciliation of the opening and closing balances of property, plant and equipment and computer software (2014-15)

Reconciliation of the opening and closing balances of property, plant and equipment and computer software for 2015
  Buildings — leasehold improvements Plant and equipment Computer software internally developed Computer software purchased Total
  $’000 $’000 $’000 $’000 $’000
As at 1 July 2014          
Gross book value 15,042 17,431 11,153 6,666 50,292
Accumulated depreciation / amortisation and impairment (9,321) (6,710) (4,885) (3,620) (24,536)
Total value as at 1 July 2014 5,721 10,721 6,268 3,046 25,756
Additions:          
By purchase 451 1,135 4,738 6,324
Internally developed 281 281
Revaluations recognised in other comprehensive income 521 455 976
Depreciation / amortisation expense (4,273) (2,626) (1,765) (1,003) (9,667)
Impairments recognised in net cost of services (6) (112) (47) (112) (277)
Disposals:          
From asset sales (12) (12)
Transfers 86 (901) 815
Total as at 30 June 2015 2,500 8,660 4,737 7,484 23,381
Total as at 30 June 2015 represented by:          
Under construction 208 602 197 4,394 5,401
Fair value 6,902 10,619 17,521
Internally developed — in use 10,879 10,879
Purchased 7,237 7,237
Accumulated depreciation / amortisation and impairment (4,610) (2,561) (6,339) (4,147) (17,657)
Total as at 30 June 2015 represented by: 2,500 8,660 4,737 7,484 23,381

No indicators of impairment were found for land and buildings, plant and equipment or intangibles (comprising both internally developed and purchased computer software).

No significant non-financial assets are expected to be sold or disposed within the next 12 months.

All revaluations are independent and are conducted in accordance with the revaluation policy stated at Note 1.19.

Note 8A: Reconciliation of the opening and closing balances of property, plant and equipment and computer software (2013-14)

Reconciliation of the opening and closing balances of property, plant and equipment and computer software for 2014
  Buildings — leasehold improvements Plant and equipment Computer software internally developed Computer software purchased Total
  $’000 $’000 $’000 $’000 $’000
As at 1 July 2013          
Gross book value 12,219 16,038 7,748 4,788 40,793
Accumulated depreciation and impairment (5,404) (4,132) (3,374) (2,902) (15,812)
Total as at 1 July 2013 6,815 11,906 4,374 1,886 24,981
Additions:          
By purchase 3,194 1,667 2,539 7,400
Internally developed 2,809 2,809
By transfer from other agencies (restructuring)1 7 7
Depreciation / amortisation expense (4,241) (2,798) (1,511) (747) (9,297)
Disposals:          
From disposal of operations (restructuring)
From asset sales
Other disposals (47) (61) (36) (144)
Total as at 30 June 2014 5,721 10,721 5,672 3,642 25,756
Total as at 30 June 2014 represented by:          
Under construction 263 1,225 2,068 1,148 4,704
Fair value 14,779 16,206 30,985
Internally developed — in use 8,489 8,489
Purchased 6,114 6,114
Accumulated depreciation / amortisation and impairment (9,321) (6,710) (4,885) (3,620) (24,536)
Total as at 30 June 2014 represented by: 5,721 10,721 5,672 3,642 25,756

1. The Small Business function was gained from Department of Industry during 2014 due to restructuring of administrative arrangements on 18 September 2013. Further details are provided at Note 11.

  2015
$’000
2014
$’000
Note 8B: Prepayments    
No more than 12 months 2,642 2,328
More than 12 months 724 286
Total prepayments 3,366 2,614

No indicators of impairment were found for other non-financial assets.

Note 9: Payables

  2015
$’000
2014
$’000
Note 9A: Suppliers    
Suppliers in connection with    
Related parties 393 545
External parties 896 1,851
Total suppliers 1,289 2,396
Suppliers are expected to be settled in no more than 12 months.    
Note: Settlement was usually made within 30 days.    
     
Note 9B: Other payables    
Salaries and wages 3,014 3,160
Superannuation 539 534
Separations and redundancies 2,625
Other creditors 3,890 3,113
Unearned income 4,041 3,213
Total other payables 11,484 12,645
Other payables are expected to be settled in no more than 12 months.

Note 10: Provisions

  2015
$’000
2014
$’000
Note 10A: Employee provisions    
Leave 43,345 42,367
Other employee entitlements 221 287
Total employee provisions 43,566 42,654
Employee provisions expected to be settled    
No more than 12 months 13,050 12,384
More than 12 months 30,516 30,270
Total employee provisions 43,566 42,654
     
Note 10B: Provision for restoration    
No more than 12 months 859 14
More than 12 months 105 939
Total provisions for restoration 964 953
  Provision for restoration Total
  $’000 $’000
Carrying amount 1 July 2014 953 953
Additional provisions made
Amounts reversed (14) (14)
Amounts used
Unwinding of discount or change in discount rate 25 25
Closing balance 30 June 2015 964 964