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Appendixes

Australian Public Service Commission
Notes to and forming part of the financial statements

for the year ended 30 June 2005

Note 1. Summary of significant accounting policies

1.1 Objective of the Commission

The Commission’s mission is to promote, review and evaluate a values-based APS and to foster its capability.

The Commission is structured to meet one outcome, to foster a confident, high quality, values-based and sustainable Australian Public Service.

The continued existence of the Commission in its present form and with its present programmes is dependant on Government policy and on continuing appropriations by Parliament for the Commission’s administration and programs.

1.2 Basis of accounting

The financial statements are required by Section 49 of the Financial Management and Accountability Act 1997 and are a general purpose financial report.

The statements have been prepared in accordance with:

The Statements of Financial Performance and Financial Position have been prepared on an accrual basis and are in accordance with historical cost convention, except for certain assets, which, as noted, are at valuation. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

Assets and liabilities are recognised in the Statement of Financial Position when and only when it is probable that future economic benefits will flow and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under agreements equally proportionately unperformed are not recognised unless required by an Accounting Standard. Liabilities and assets that are unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies.

Revenues and expenses are recognised in the Statement of Financial Performance when and only when the flow or consumption or loss of economic benefits has occurred and can be reliably measured.

1.3 Changes in accounting policy

The accounting policies used in the preparation of these financial statements are consistent with those used in 2003-04.

1.4 Revenue

Revenues from Government

Departmental outputs appropriations for the year (less any savings offered up in Portfolio Additional Estimates Statements) are recognised as revenue, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned.

Resources received free of charge

Services received free of charge are recognised as revenue when and only when a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised at their fair value when the asset qualifies for recognition, unless received from another government agency as a consequence of a restructuring of administrative arrangements (Refer to Note 1.5).

Other revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Revenue from the rendering of a service is recognised by reference to the stage of completion of contracts or other agreements to provide services. The stage of completion is determined according to the proportion that costs incurred to date bear to the estimated total costs of the transaction.

Receivables for goods and services are recognised at the nominal amounts due less any provision for bad and doubtful debts. Collectibility of debts is reviewed at balance date. Provisions are made when collection of the debt is judged to be less rather than more likely.

Revenue from disposal of non-current assets is recognised when control of the asset has passed to the buyer.

1.5 Transactions with the Government as owner

Equity injections

Appropriations designated as ‘equity injections’ (less any savings offered up in Portfolio Additional Estimates Statements) are recognised directly in contributed equity in that year.

Restructuring of Administrative Arrangements

Net assets received from or relinquished to another Australian Government agency or authority under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.

Other distributions to owners

The FMOs require that distributions to owners be debited to contributed equity unless in the nature of a dividend.

In 2003-04, by agreement with Finance, the Commission returned $3,025,000 to the Official Public Account.  The Government reappropriated this amount back to the Commission to fund two Strategic Priorities – Australian Public Service Indigenous Employment Strategy and Integrated Leadership Strategy.  The majority of the funding will be received during 2003-04 to 2005-06.

1.6 Employee benefits

Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled.

Liabilities for wages and salaries (including non-monetary benefits), annual leave and sick leave are measured at their nominal amounts. Other employee benefits expected to be settled within 12 months of the reporting date are also measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

All other employee benefit liabilities are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.

Leave

The liability for employee entitlements includes provision for annual leave and long service leave.  No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave likely to be taken in future years by employees of the Commission is estimated to be less than the annual entitlement for sick leave.

The liability for annual leave reflects the value of total annual leave entitlements of all employees at 30 June 2005 and is recognised at the nominal amount.

The leave liabilities are calculated on the basis of employees’ remuneration, including the Commission’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The non-current portion of the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at 30 June 2005.  In determining the present value of the liability, the Commission has used the Australian Government shorthand method.

Separation and redundancy

Provision is only made for separation and redundancy benefit payments when the Commission has developed a detailed formal plan and has informed those employees affected.

Superannuation

Staff of the Commission are members of the Commonwealth Superannuation Scheme and the Public Sector Superannuation Scheme.  The liability for their superannuation benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course.

The Commission makes employer contributions to the Australian Government at rates determined by an actuary to be sufficient to meet the cost to the Government of the superannuation entitlements of the Commission’s employees.

The liability for superannuation recognised as at 30 June represents the estimated superannuation payable on the provision for annual leave and long service leave.

1.7 Leases

A distinction is made between finance leases and operating leases.  Finance leases effectively transfer from the lessor to the lessee substantially all risks and benefits incidental to ownership of leased non-current assets.  In operating leases, the lessor effectively retains substantially all such risks and benefits.

Where a non-current asset is acquired by means of a finance lease, the asset is capitalised at the present value of minimum lease payments at the inception of the lease and a liability recognised for the same amount.  Leased assets are amortised over the period of the lease.  Lease payments are allocated between the principal component and the interest expense.

Operating lease payments are expensed on a basis which is representative of the pattern of benefits derived from the leased assets.

Lease incentives taking the form of “free” leasehold improvements and rent holidays are recognised as liabilities.  These liabilities are reduced by allocating lease payments between rental expense and reduction of the liability.

1.8 Borrowing costs

All borrowing costs are expensed as incurred except to the extent that they are directly attributable to qualifying assets, in which case they are capitalised. The amount capitalised in a reporting period does not exceed the amounts of costs incurred in that period.

1.9 Cash

Cash means notes and coins held and deposits held at call with a bank or financial institution.  Cash is recognised at its nominal amount.

1.10 Other financial instruments

Trade creditors

Trade creditors and accruals are recognised at their nominal amounts, being the amounts at which the liabilities will be settled. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

Contingent liabilities and contingent assets

Contingent liabilities (assets) are not recognised in the Statement of Financial Position but are discussed in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability (asset), or represent an existing liability (asset) in respect of which settlement is not probable or the amount cannot be reliably measured. Remote contingencies are part of this disclosure. Where settlement becomes probable, a liability (asset) is recognised. A liability (asset) is recognised when its existence is confirmed by a future event, settlement becomes probable or reliable measurement is possible.

1.11 Acquisition of assets

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and revenues at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements.  In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor agency’s accounts immediately prior to the restructuring.

1.12 Property, plant and equipment

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $2,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

Revaluations

Basis

Land, buildings, plant and equipment are carried at valuation. Australian Accounting Standard AASB 1041 Revaluation of Non-Current Assets requires that all land, buildings, plant are valued on a fair value basis.

Fair values for each class of asset are determined as shown below:

Asset class Fair value measured at:
Leasehold improvements Depreciated replacement cost
Infrastructure, plant and equipment Market selling price

Under fair value, assets, which are surplus to requirements, are measured at their net realisable value. As at 30 June 2005 the Commission reported no assets in this situation (30 June 2004: nil assets).

Frequency

The FMOs require that all property plant and equipment assets be measured at up-to-date fair values from 30 June 2005 onwards, with formal valuations to be undertaken at least every five years. All property plant and equipment was formally valued at fair value as at 1 July 2003 and 30 June 2004.

Conduct

Formal valuations are conducted by an independent qualified valuer.

Depreciation

Depreciable property, plant and equipment assets are written off to their estimated residual value over their estimated useful life to the Commission using, in all cases, the straight-line method of depreciation.  Leasehold improvements are amortised on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease.

Depreciation rates (useful lives) and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.  Residual values are re-estimated for a change in prices only when assets are revalued.

Depreciation and amortisation rates applying to each class of depreciable asset are based on the following useful lives:

  2005 2004
Leasehold improvements Lease term Lease term
Plant and equipment 1 to 7 years 1 to 7 years
Assets held under finance lease Lease term Lease term

The aggregate amount of depreciation and amortisation allocated for each class of asset during the reporting period is disclosed in Note 5c.

Impairment of Non-Current Assets

Non-current assets carried at up to date fair value at the reporting period are not subject to impairment testing.

Non-current assets at cost have been assessed for indications of impairment. Where indications of impairment existed, the carrying amount of the asset is compared to the higher of its net selling price and depreciated replacement cost. No impairment write-down was required (2004: nil).

1.13 Intangibles

Intangibles, incorporating intellectual property and internally developed software for internal use, have been included in these statements where the value of the asset exceeds $10,000.  Intangibles are depreciated over their useful lives, to a maximum of 10 years.  All intangibles are shown at cost.

All software assets were assessed for impairment as at 30 June 2005.  None were found to be impaired.

Software is amortised on a straight-line basis over its anticipated useful life.

The useful lives of the Commission’s software is 2 to 10 years (2003-04: 2 to 10 years).

1.14 Inventories

Inventories not held for resale are valued at cost, unless they are no longer required, in which case they are valued at net realisable value.

Costs incurred in bringing each item of inventory to its present location and condition are assigned as follows:

From 1 July 2000 the Commission’s publications have been available free of charge.

1.15 Taxation

The Commission is exempt from all forms of taxation except fringe benefits tax and the goods and services tax (GST).

Revenues, expenses, assets and liabilities are recognised net of GST:

1.16 Foreign currency

Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables are translated at the exchange rates current as at balance date. Associated currency gains and losses are not material.

1.17 Insurance

The Commission has insured for risks through the Government’s insurable risk managed fund, called ‘Comcover’. Workers compensation is insured through the Government’s Comcare.

1.18 Comparative figures

Comparative figures have been adjusted to conform to changes in presentation in these financial statements where required.

1.19 Rounding

Amounts have been rounded to the nearest $1,000 except in relation to the following items:

1.20 Administered activities

The Commission does not have any administered activities.

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