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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 2. Adoption of Australian equivalents to international financial reporting standards from 2005-2006

The Australian Accounting Standards Board has issued replacement Australian Accounting Standards to apply from 2005-06. The new standards are the Australian Equivalent to International Financial Reporting Standards (AEIFRS) which are issued by the International Accounting Standards Board. The new standards cannot be adopted early. The standards being replaced are to be withdrawn with effect from 2005-06 but continue to apply in the meantime.

The purpose of issuing AEIFRS is to enable Australian entities reporting under the Corporations Act 2001 to be able to more readily access overseas capital markets by preparing their financial reports according to accounting standards widely used overseas.

AEIFRS contain certain additional provisions which will apply to not-for-profit entities, including Australian Government agencies. Some of these provisions are in conflict with the International Financial Reporting Standards (IFRS) and therefore the Commission will only be able to assert compliance with Australian Accounting Standards.

AAS 29 Financial Reporting by Government Departments will continue to apply under AEIFRS.

Accounting Standard AASB 1047 Disclosing the Impacts of Adopting Australian Equivalents to International Financial Reporting Standards requires that the financial statements for 2004-05 disclose:

The purpose of this Note is to make these disclosures.

Management of the transition to AASB Equivalents to AEIFRS

The Chief Finance Officer is formally responsible for the transition to and implementation of the AASB Equivalents to IFRS and reports regularly to the Commission’s Audit Committee.

The Commission has reviewed AEIRFS literature and attended information sessions on the transition to IFRS.  It is expected that the impact of the adoption of IFRS on the Commission will be minimal, especially given that Australian accounting standards have been progressively harmonised with existing International accounting standards over the last few years.

During 2004-05 financial statements the Commission:

Major changes in accounting policies

Changes in accounting policies under AASB Equivalents are applied retrospectively i.e. as if the new policy had always applied. This rule means that a balance sheet prepared under the AEIFRS must be made as at 1 July 2004, except as permitted in particular circumstances by AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards. This will enable the 2005-06 financial statements to report comparatives under AEIFRS.

Changes to major accounting policies are discussed in the following paragraphs.

Management’s review of the quantitative impacts of AEIFRS represents the best estimates of the impacts of the changes as at reporting date.

Property plant and equipment

It is expected that the Finance Minister’s Orders will require property plant and equipment assets carried at valuation in 2004-05 to be measured at up-to-date fair value from 2005-06. This is consistent with the Commission’s current asset valuation basis, as all assets were formally revalued to fair value at 1 July 2003 and 30 June 2004 and are carried at up-to-date fair values at 30 June 2005.

Accounting for decommissioning costs

AASB 116 Property, Plant and Equipment requires that the initial cost of an item of property, plant and equipment includes the estimated costs of dismantling and removing the item and restoring the site on which it is located, to the extent it is recognised as a provision.

This will apply to the make good of leasehold fit out.  Currently the Commission does not include restoration costs in the value of leasehold fit out assets.  Only a provision or contingent liability is currently recognised for these costs, depending on the probability that the make good will occur and whether this can be reliably measured.

Intangible assets

Intangible assets are currently measured on the cost basis under AASB 1041 Revaluation of Non-Current Assets.  However, the carrying amounts of some of these assets arise from revaluations carried out in the years before the cost basis was adopted.  As the original cost of some of these assets cannot be determined, all amounts arising from the valuation of intangible assets at deprival will be reversed against equity at the date of transition to AEIFRS.

The cost of internally developed intangible assets must only include the cost of development of these assets and exclude any research costs.  As the status of the costs included in some of these assets cannot be determined, the value of these intangible assets will be reversed against equity at the date of transition to AEIFRS.

The impact of this change on these financial statements would be to:

Inventory

Inventories not held for sale are currently valued at cost, unless they are no longer required, in which case they are valued at net realisable value.  Under AASB 102 Inventories, inventories not held for sale will be measured at the lower of cost and current replacement cost.  The replacement cost of the Commission’s inventory is higher than or equal to cost.

Employee benefits

AEIFRS require that annual leave that is not expected to be taken within 12 months of balance date is to be discounted. Currently these amounts are measured at their nominal (undiscounted) amount.

The impact of this change on these financial statements would be to:

Proceeds from the disposal of non-current assets

Proceeds from the disposal of non-current assets are currently recognised as revenue and the carrying amounts of the assets disposed of are recognised as an expense.  Under Australian equivalents to IFRSs, the net of these amounts will be recognised as a gain or loss in the Income Statement.

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Reconciliation of impacts - AGAAP1 to AEIFRS2

  2005
$’000		 2004
$’000
   Total equity under AGAAP 2,939 2,182
   Adjustments to accumulated results (294) (383)
   Adjustments to other reserves (277) (277)
   Adjustments to contributed equity - -
Total equity under AEIFRS 2,368 1,522
Reconciliation of accumulated results  
   Total accumulated results under AGAAP 3,543 2,760
   Adjustments:
      Land and Buildings 151 139
      Intangibles (285) (436)
      Asset revaluation reserve 277 277
      Employee provisions 32 35
      Provision for make good (469) (398)
Total equity under AEIFRS 3,249 2,377
Reconciliation of reserves  
   Total reserves under AGAAP 1,290 1,290
   Adjustments:  
      Asset revaluation reserve (277) (277)
Total reserves under AEIFRS 1,013 1,013
Reconciliation of contributed equity  
   Total contributed equity under AGAAP (1,894) (1,868)
   Adjustments: - -
Total contributed equity under AEIFRS (1,894) (1,868)
Reconciliation of net surplus / (deficit) from ordinary activities for year ended 30 June
   Net surplus / (deficit) from ordinary activities under AGAAP 783  
   Adjustments:  
      Employees expense (3)  
      Depreciation 106  
      Borrowing costs expense (14)  
Net surplus / (deficit) from ordinary activities
 under AEIFRS		 872  

1 AGAAP - Australian generally accepted accounting principles - accounting framework that applies for reporting up to and including 30 June 2005.

2 AEIFRS - Australian equivalents to International Financial Reporting Standards - accounting framework to apply to reporting from 1 July 2005.

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