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Notes to the Financial Statements 2 | |
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Notes to the Financial Statements
For the year ended 30 June 2004
2. Significant accounting policies
The following accounting policies have been adopted in the preparation of the financial statements. Unless otherwise stated these policies are consistent with those applied in the previous year.
General statement
The financial statements constitute a general purpose financial report which has been prepared in accordance with Accounting Standards, Statements of Accounting Concepts and other authoritative pronouncements of the Australian Accounting Standards Board, and Urgent Issues Group (UIG) Consensus Views as applied by the Treasurer's Instructions. Several of these are modified by the Treasurer's Instructions to vary application, disclosure, format and wording. The Financial Administration and Audit Act and the Treasurer's Instructions are legislative provisions governing the preparation of financial statements and take precedence over Accounting Standards, Statements of Accounting Concepts and other authoritative pronouncements of the Australian Accounting Standards Board, and UIG Consensus Views. The modifications are intended to fulfil the requirements of general application to the public sector, together with the need for greater disclosure and also to satisfy accountability requirements.
If any such modification has a material or significant effect upon the reported results, details of that modification and where practicable, the resulting financial effect, are disclosed in individual notes to these financial statements.
Basis of accounting
The financial statements have been prepared in accordance with Accounting Standard AAS 29 Financial Reporting by Government Departments.
The statements have been prepared on the accrual basis of accounting using the historical cost convention, with the exception of land which, as noted, is measured at fair value.
Administered assets, liabilities, expenses and revenues are not integral to the Department in carrying out its functions and are disclosed in the notes to the financial statements, forming part of the general purpose financial report of the Department. The administered items are disclosed on the same basis as is described above for the financial statements of the Department. The administered assets, liabilities, expenses and revenues are those that the Government requires the Department to administer on its behalf. The assets do not render any service potential or future economic benefits to the Department, the liabilities do not require the future sacrifice of service potential or future economic benefits of the Department, and the expenses and revenues are not attributable to the Department.
As the administered assets, liabilities, expenses and revenues are not recognised in the principal financial statements of the Department, the disclosure requirements of Accounting Standard AAS 33 Presentation and Disclosure of Financial Instruments are not applied to administered transactions.
- Depreciation of non-current assets
All non-current assets having a limited useful life are systematically depreciated over their estimated useful lives in a manner that reflects the consumption of their future economic benefits.
Depreciation is calculated on the straight line basis, using rates which are reviewed annually. Expected useful lives for each class of depreciable assets are:
| Buildings |
40 years |
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| Buses |
18 years |
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| Computer hardware and software |
4 to 7 years |
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| Furniture and fittings |
11 years |
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| Maritime infrastructure |
5 to 100 years |
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| Plant and equipment |
5 to 20 years |
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| Public transport infrastructure |
20 to 40 years |
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| Refurbishments |
3 to 20 years |
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| Vehicles |
6 years |
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| Vessels |
10 years |
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Assets under construction are not depreciated until commissioned.
- Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the costs of assets under construction (qualifying assets) (refer note 30).
- Leases
The Department has entered into a number of operating lease arrangements for accommodation, plant, office equipment and motor vehicles where the lessor effectively retains all the risks and benefits incident to ownership of the items held under the operating leases. Equal instalments of the lease payments are charged to the Statement of Financial Performance over the lease term as this is representative of the pattern of benefits to be derived from the leased property.
- Revenue recognition
Revenues are received in the form of various registration, examination and licence fees. These revenues are received for services provided including undertaking inspections and/or issuing licences associated with the fees. As no part of these charges is refundable, revenues are recognised at the time they are received.
The revenue from other operating activities including rendering of services and the sale of assets are recognised when the Department has passed control of the goods or other assets or delivery of the service to the customer. Recoups of operating activities are recognised when invoiced.
Interest revenues are recognised as they are accrued.
- Net appropriation determination
Pursuant to section 23A of the Financial Administration and Audit Act, the net appropriation determination by the Treasurer provides for retention of the following moneys received by the Department:
boat registration fees, GST input credits, GST receipts on sales, Indian Ocean Territories Program, jetty licences, marine examinations, duplicate motor drivers license fees, motor vehicle transfer fees, motor vehicle plate fees, proof of age card, recoup for services provided, temporary permits, services provided to the Western Australian Planning Commission and other revenue In accordance with the determination, the Department retained $82.9m in 2004 (2003: $163.7m).
Retained revenues may only be applied to the outputs specified in the 2003-04 Budget Statements.
- Grants and other contributions revenue
Grants, donations, gifts and other non-reciprocal contributions are recognised as revenue when the Department obtains control over the assets comprising the contributions. Control is normally obtained upon their receipt.
Contributions are recognised at their fair value. Contributions of services are only recognised when a fair value can be reliably determined and the services would be purchased if they had not been donated.
- Special and other leases revenue (Administered)
Under Sections 116 and 117 of the Land Act 1933 and Section 79 of the Land Administration Act 1997, rents in regard to special and other leases are received in advance. The lessee often has the opportunity to purchase this land at fair value, as valued by the Valuer General. The prospective purchaser can purchase by instalments subject to Ministerial approval, but must continue to pay rent under the special lease Section 117AA of the Land Act 1933, and Section 80 of the Land Administration Act 1997.
These lease revenues are recognised in the Schedule of Administered items (see Note 42) in accordance with AAS 29 Financial Reporting for Government Departments.
- Output appropriations
Output appropriations are recognised as revenues in the period in which the Department gains control of the appropriated funds. The Department gains control of appropriated funds at the time those funds are deposited into the Department's bank account or credited to the holding account held at the Department of Treasury and Finance.
- Resources received free of charge or for nominal value
Resources received free of charge or for nominal value which can be reliably measured are recognised as revenues and as assets or expenses as appropriate at fair value.
- Cash
For the purpose of the Statement of Cash Flows, cash includes cash assets and restricted cash assets.
- Inventories
Inventories are valued at the lower of cost and net realisable value. Costs are assigned on a first in first out basis. Provision is made for obsolete stocks where considered necessary.
- Receivables
Receivables are recognised at the amounts receivable as they are due for settlement no more than 30 days from the date of recognition.
Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised where some doubt as to collection exists.
- Acquisitions of assets
The cost method of accounting is used for all acquisitions of assets. Cost is measured as the fair value of the assets given up or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Cost includes borrowing costs incurred during construction.
Assets acquired at no cost or for nominal consideration, are initially recognised at their fair value at the date of acquisition.
Assets costing less than $2000 are expensed in the year of acquisition.
- Land
Controlled
Land, pastoral leases and Crown land under leases controlled by the Department are reported at fair value. The valuation of the Department's land undertaken by the Valuer General's Office for the Government Property Register is recognised in the financial statements.
Administered
Crown land, including land under leases, is administered by the Department under the Land Administration Act and is reported at fair value (Valuer General's valuation).
Cost of sales for land is reported as administered, on the following basis:
| Developed land - |
at its fair value of undeveloped land plus the development cost for subdividing into lots available for sale; and |
| Undeveloped land - |
this includes Crown grants and closed roads which are costed at sale proceeds which reflects fair value. |
- Payables
Payables, including accruals not yet billed, are recognised when the Department becomes obliged to make future payments as a result of a purchase of assets or services. Payables are generally settled within 30 days.
- Interest-bearing liabilities
Loans are recorded at an amount equal to the net proceeds received. Borrowing costs expense is recognised on an accrual basis.
- Employee benefits
Annual leave
This benefit is recognised at the reporting date in respect to employees' services up to that date and is measured at the nominal amounts expected to be paid when the liabilities are settled.
Long service leave
The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provisions for employee benefits and is measured at the nominal amounts expected to be paid when the liability is settled. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the provisions for employee benefits and is measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given, when assessing expected future payments, to expected future wage and salary levels including relevant on costs, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Superannuation
Staff may contribute to the Pension Scheme, a defined benefits pension scheme now closed to new members, or to the Gold Sate Superannuation Scheme, a defined benefit lump sum scheme now also closed to new members. All staff who do not contribute to either of these schemes become noncontributory members of the West State Superannuation Scheme, an accumulation fund complying with the Commonwealth Government's Superannuation Guarantee (Administration) Act 1992. All of these schemes are administered by the Government Employees Superannuation Board (GESB). The superannuation expense comprises:
- change in the unfunded employer's liability in respect of current employees who are members of the Pension Scheme and current employees who accrued a benefit on transfer from that Scheme to the Gold State Superannuation Scheme; and
- employer contributions paid to the Gold State Superannuation Scheme and West State Superannuation Scheme.
The superannuation expense does not include payment of pensions to retirees, as this does not constitute part of the cost of services provided by the Department in the current year.
A revenue 'Liabilities assumed by the Treasurer' equivalent to (i) is recognised under Revenues from State Government in the Statement of Financial Performance as the unfunded liability is assumed by the Treasurer. The GESB makes the benefit payments and is recouped by the Treasurer.
The Department is funded for employer contributions in respect of the Gold State Superannuation Scheme and the West State Superannuation Scheme. These contributions were paid to the GESB during the year. The GESB subsequently paid the employer contributions in respect of the Gold State Superannuation Scheme to the Consolidated Fund.
Employee benefit on-costs
Employee benefit on-costs are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities and expenses (see notes 4 and 28).
- Accrued salaries
The accrued salaries suspense account (refer note 18) consists of amounts paid into a suspense account over a period of 10 financial years to largely meet the additional cash outflow in each eleventh year when 27 pay days occur in that year instead of the normal 26. No interest is received on this account.
Accrued salaries (refer note 29) represent the amount due to staff, but unpaid, at the end of the financial year, as the end of the last pay day period for that financial year does not coincide with the end of the financial year. Accrued salaries are settled within a few days of the financial year end. The Department considers the carrying amount of accrued salaries to be equivalent to the net fair value.
- Contributed equity
Under UIG 38 Contributions by Owners Made to Wholly-Owned Public Sector Entities transfers in the nature of equity contributions must be designated by the Government (owners) as contributions by owners (at the time of, or prior to transfer) before such transfers can be recognised as equity contributions in the financial statements. Capital contributions (appropriations) have been designated as contributions by owners and have been credited directly to Contributed Equity in the Statement of Financial Position.
- Foreign currency translation and hedges
Transactions denominated in a foreign currency are translated at the rates in existence at the dates of the transactions. Foreign currency receivables and payables at reporting date are translated at exchange rates current at reporting date. Exchange gains and losses are brought to account in determining the result for the year.
Forward foreign exchange contracts and options are entered into as hedges to avoid or minimise possible adverse financial effects of movements in exchange rates. Exchange gains and losses arising from these contracts are deferred and included in the determination of the amounts at which the transactions are brought to account.
- Joint venture operations - Administered
The Department administers a joint venture operation on behalf of the Minister. Interests in joint ventures have been reported in the Schedule of Administered Items (notes 42 and 43), including the Minister's share of revenue earned, expenses incurred, assets employed and liabilities incurred.
- Comparative figures
Comparative figures are, where appropriate, reclassified so as to be comparable with the figures presented in the current financial year.
- Rounding of amounts
Amounts in the financial statements have been rounded to the nearest thousand dollars, or in certain cases, to the nearest dollar.
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