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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.1 Objective of the Agency The objective of the Office of the Official Secretary (the Office) is to assist the Governor-General in performing the constitutional, statutory, ceremonial and public duties associated with the appointment, ensuring that standards relating to the significance of the Office, and maintenance of the heritage value of the Governor-General's residences and grounds, are in keeping with the expectations of the Australian community. The Office
has one outcome: The three
outputs below contribute to that outcome: 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 accounting basis and are in accordance with the 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 the future economic benefits will flow and the amounts of the assets or liabilities can be reliably measured. Assets and liabilities arising under agreements equally proportionately unperformed are however not recognised unless required by an Accounting Standard. Liabilities and assets, which 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. The continued existence of the Office in its present form, and with its present programs, is dependant on Government policy and on continuing appropriations by Parliament for the Office's administration and programs. Administered revenues, expenses, assets and liabilities, and cash flows reported in the Schedule of Administered Items and related notes are accounted for on the same basis and using the same policies as for Agency items, except where otherwise stated at Note 1.16.
1.3 Changes in accounting policy The accounting policies used in the preparation of these financial statements are consistent with those used in 2002-03. Property plant and equipment assets are revalued progressively as explained in Note 1.11. Revaluations up to 30 June 2002 were done on a 'deprival' basis; since that date, revaluations have been done on a fair value basis. Revaluation increments and decrements in each year of transition to fair value that would otherwise be accounted for as revenue or expenses are taken directly to accumulated results in accordance with transitional provisions of AASB 1041 Revaluation of Non-current Assets. In 2002-03, the Finance Minister's Orders introduced an impairment test for non-current assets which were carried at cost and not subject to AAS10 Recoverable Amount of Non-current Assets. No assets were written down under this policy. In 2003-04, the impairment test provision of the FMOs has been extended to cover non-current assets carried at deprival values. There were no indications of impairments for these assets.
1.4 Revenue The revenues described in this note are revenues relating to the core operating activities of the Office. (a) Revenues from Government The full amount of the appropriations for departmental outputs (less any savings offered up at Additional Estimates and not subsequently released) are recognised as revenue. (b) 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. (c) Other Revenue Revenue from the sale of goods is recognised upon delivery of goods to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to financial assets. Revenue from disposal of non-current assets is recognised when control of the asset has passed to the buyer.
1.5 Transactions by the Government as Owner Equity Injections Amounts appropriated which are designated as 'equity injections' for a year (less any savings offered up in Portfolio Additional Estimates Statements) are recognised directly in Contributed Equity in that year. Other distributions to owners The FMOs require that distributions to owners be debited to contributed equity unless in the nature of a dividend. In 2002-03, by agreement with the department of Finance and Administration, the Office returned surplus output appropriation funding of $206,000 to the Official Public Account.
1.6 Employee Entitlements 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, sick leave are measured at their nominal amounts. Other employee benefits expected to be settled with 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 as 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 benefits 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 taken in future years by employees of the Office is estimated to be less than the annual entitlement for sick leave. The leave liabilities are calculated on the basis of employees' remuneration, including the Office'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 liability for long service leave is recognised and measured at the present value. The estimate has taken into account attrition rates and pay increases through promotion and inflation. Superannuation Staff of the Office contribute to the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) and employee nominated super funds. The liability for the CSS and PSS superannuation benefits is recognised in the financial statements of the Commonwealth and is settled by the Commonwealth in due course. The Office makes employer contributions to the Commonwealth at rates determined by an actuary to be sufficient to meet the cost to the Commonwealth of the superannuation entitlements of the Office's employees.
1.7 Leases The Office does not have any finance leases. Operating lease payments are expensed on the basis, which is representative of the pattern of benefits derived from the leased assets. The Office cancelled the only operating lease reported in the 2002-03 financial statement on December 1 2003. The lease was for office accommodation in Melbourne.
1.8 Cash Cash means notes and coins held and any deposit held at call with a bank or financial institution.
1.9 Financial Instruments Accounting policies for financial instruments are stated at Note 16
1.10 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.
1.11 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 $3,000, 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, infrastructure, plant and equipment are revalued progressively. Revaluations undertaken are at fair value. Australian Accounting Standard AASB 1041 Revaluation of Non-Current Assets require this change in accounting policy.
Under both deprival and fair value, assets that are surplus to requirements are measured at their net realisable value. The financial effect for 2002-03 and 2003-04 of this change in policy is not material given the total value of the asset group. The approach to land and buildings valuation remained unchanged under fair value due to the specialised and heritage nature of the two residences.
In relation to the official properties administered by the Office, the disposal of the land is restricted by government zoning under the National Capital Plan in relation to Government House and New South Wales government legislation (Governor-General's Residence (Grant) Act 1945) in respect of Admiralty House. Frequency Land, buildings, plant and equipment are revalued progressively in successive three year cycles.
Assets in each class acquired after the commencement of a progressive revaluation cycle are not captured by the progressive revaluation then in progress. All other property, plant and equipment is recognised at its depreciated replacement cost. Conduct An independent qualified valuer conducts all valuations. Depreciation and Amortisation Depreciable infrastructure, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Office using, in all cases, the straight-line method of depreciation. (Land, being an asset with an unlimited useful life, is not depreciated.) Depreciation and amortisation rates (useful lives) and methods are reviewed at each balance 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 price only when assets are revalued. Depreciation and amortisation rates applying to each class of depreciable asset are as follows:
The aggregate amount of depreciation allocated for each class of asset during the reporting period is disclosed in Note 5C.
1.12 Inventories Inventories are not held for resale and are measured at cost.
1.13 Taxation The Office's activities are exempt from all forms of taxation except for fringe benefits tax, and the goods and services tax.
1.14 Insurance The office has insured for high risks through the Government's insurable risk managed fund, called 'Comcover'. Workers' compensation is insured through Comcare Australia.
1.15 Comparative figures Comparative figures have been adjusted to conform to changes in presentation in these financial statements where required.
1.16 Special Accounts Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the Schedule of Administered Items and related Notes. Except where otherwise stated below, administered items are accounted for on the same basis and using the same policies as for Office items, including the application to the greatest extent possible of Accounting Standards, Accounting Interpretations and UIG Consensus Views. Administered appropriations received or receivable from the Official Public Account (OPA) are not reported as administered revenue or assets respectively. Similarly, administered receipts transferred or transferable to the OPA are not reported as administered expenses or payables. These transfers of cash are reported as administered (operating) cash flows and in the administered reconciliation table in Note 21. Accounting policies that are relevant to administered activities only of the Office are disclosed below. (a) Revenue All administered revenues are revenues relating to the core operating activities performed by the Agency on behalf of the Commonwealth. (b) Assets For accounting purposes, when an administered asset purchase in funded by the equity injection, it is recorded as an Agency expense. Upon transfer to Administered it is treated as revenue in the administered statements in order for it to be capitalised. When an administered asset is to be sold it is first transferred to the Agency Statement, and then sold so that the sale may be properly recorded as Agency revenue.
NOTE 2. ADOPTION OF AASB 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 AASB Equivalents to International Financial Reporting Standards (IFRSs) 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 AASB Equivalents to IFRSs 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 more widely used overseas. For-profit entities complying fully with the AASB Equivalents will be able to make an explicit and unreserved statement of compliance with IFRSs as well as with the AASB Equivalents. It is expected that the Finance Minister will continue to require compliance with the Accounting Standards issued by the AASB, including the AASB Equivalents to IFRSs, in his Orders for the Preparation of Agency financial statements for 2005-06 and beyond. The AASB Equivalents contain certain additional provisions which will apply to not-for-profit entities, including Australian Governments agencies. Some of these provisions are in conflict with the IFRSs and therefore the Office will only be able to assert compliance with AASB Equivalents to the IFRS. Existing AASB standards that have no IFRS equivalent will continue to apply, including in particular AAS 29 Financial Reporting by Government Departments. Accounting Standard AASB 1047 Disclosing the impact of Adopting Australian Equivalents to IFRS requires that the financial statements for 2003-4 disclose: - An explanation of how the transition to the AASB Equivalents is being managed, and - A narrative explanation of the key differences in accounting policies arising from the transition. The purpose of this note is to make these disclosures. Management of the transition to AASB Equivalents to IFRSs The Office has taken the following steps for the preparation towards the implementation of AASB Equivalents: - Progressive identification of all major accounting policy differences between current AASB standards and the AASB Equivalents to IFRSs. - Office progress on implementation reported to Audit Committee. Major changes in accounting policy 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 AASB Equivalents be made as at 1 July 2004, except as permitted in particular circumstances by AASB First-time Adoption of Australian Equivalents to International Financial Reporting Standards. This will enable the 2006-06 financial statements to report comparatives under the AASB Equivalents also. Changes to major accounting policies are discussed in the following paragraphs. Property plant and equipment It is expected that the Finance Minister's Orders will require property plant and equipment assets carried at valuation in 2003-04 to be measured at up-to-date fair value from 2005-06. This differs from the accounting policies currently in place for these assets which, up to and including 2003-04, have been revalued progressively over a 3 year cycle and which currently include assets at cost (for purchases since commencement of the cycle and low value items) and deprival value (which will differ from their fair value to the extent that they have been measured at depreciated replacement cost when a relevant market selling price is available). However, it is important to note that the Finance Minister requires these assets to be measured at up-to-date fair values as at 30 June 2005. Further, the transitional provisions in AASB 1 will mean that the values at which assets are carried as at 30 June 2004 under existing standards will stand in the transitional balance sheet as at 1 July 2004. Intangible Assets The introduction of AASB Equivalent on Intangibles will have no impact on the Office as no internally developed software is currently recognised in the accounts. Impairment of Non-current Assets The AASB Equivalent Standard on impairment of non-current assets is not expected to have an impact on the Office. Inventory The Office recognises inventory not held for sale at cost, except where no longer required, in which case net realisable value is applied. The new AASB Equivalent standard will require inventory held for distribution for no consideration or at a nominal amount to be carried at the lower of cost or current replacement cost. Employee Benefits The provision for long service leave is measured at the present value of estimated cash flows using market yields as at reporting date on national government bonds. Under the new AASB Equivalent standard, the same discount rate will be used unless there is a deep market in high corporate bonds, in which case the market yield on such bonds must be used.
NOTE 3. EVENTS OCCURRING AFTER BALANCE DATE The Office is not aware of any events occurring after balance date that would impact on these financial statements materially.
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