Notes to and forming part of the Financial Statements - Note 1

Note 1. Summary of Significant Accounting Policies

Page index

1.1 Objectives of the department

The department is an Australian Public Service organisation.

The department is structured to meet one outcome - sound and well coordinated government policies, programmes and decision making processes, which is delivered through four output groups.

The department’s activities contributing to this outcome are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, revenue and expenses controlled or incurred by the department in its own right. Administered activities involve the management or oversight by the department, on behalf of the Government, of items controlled or incurred by the Government.

The department’s activities are identified under the following output groups:

  • Output Group 1.1: Economic and industry policy;
  • Output Group 1.2: Social policy;
  • Output Group 1.3: International and national security policy; and
  • Output Group 1.4: Support services for government operations.

The department conducts the following administered activities:

  • National Counter-Terrorism Committee (NCTC);
  • Australian Government’s grant of funding to the National Australia Day Council (NADC);
  • maintenance of the Prime Minister’s official residences of The Lodge and Kirribilli House in consultation with the Official Establishments Trust and heritage agencies;
  • provision of allowances and support to designated and former Governors-General; and
  • state occasions and official visits program

The continued existence of the department in its present form and with its present programs is dependent on government policy and on continuing appropriations by the Parliament for the department’s administration and programs.

1.2 Basis of preparation of the financial report

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

The financial statements and notes have been prepared in accordance with:

  • Finance Minister’s Orders for Financial Reporting (FMOs) for reporting periods ending on or after 1 July 2007; and
  • Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board that apply for the reporting period

The financial report has been prepared on an accrual basis and is in accordance with historical cost convention, except for certain assets at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The financial report is presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

Unless an alternative treatment is specifically required by an accounting standard or the FMOs, assets and liabilities are recognised in the balance sheet when and only when it is probable that future economic benefits will flow to the department or a future sacrifice of economic benefits will be required 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 unrealised are reported in the Schedule of Commitments and Contingencies.

Unless alternative treatment is specifically required by an accounting standard, revenues and expenses are recognised in the income statement when and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured.

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 departmental items, except where otherwise stated at Note 1.21.

1.3 Significant accounting judgments and estimates

In the process of applying the accounting policies listed in this note, the department has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:

  • The fair value of land and buildings has been taken to be the market value of similar properties as determined by an independent valuer. The department’s administered buildings are unique and may in fact realise more or less in the market.

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next accounting period.

1.4 Statement of compliance

Adoption of new Australian Accounting Standard requirements

No accounting standard has been adopted earlier than the application date as stated in the standard.

The following new standard is applicable to the current reporting period:

AASB 7 Financial Instruments: Disclosures is effective for reporting periods beginning on or after 1 January 2007 (the 2007–08 financial year) and amends the disclosure requirements for financial instruments.
In general, AASB 7 requires greater disclosure than that previously required. Associated with the introduction of AASB 7 a number of accounting standards were amended to reference the new standard or remove the present disclosure requirements through 2005-10 Amendments to Australian Accounting Standards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]. These changes have no financial impact but will affect the disclosure presented in future financial reports.

The following new standards, amendments to standards or interpretations for the current financial year have no material financial impact on the department.

  • 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments and Erratum: Proportionate Consolidation
  • 2007-5 Amendments to Australian Accounting Standard – Inventories Held for Distribution by Not-for-Profit Entities [AASB 102]
  • 2007-7 Amendments to Australian Accounting Standards
  • UIG Interpretation 10 Interim Financial Reporting and Impairment
    UIG Interpretation 11 AASB 2 – Group and Treasury Share Transactions and 2007-1 Amendments to Australian Accounting Standards arising from AASB Interpretation 11
  • UIG Interpretation 1003 Australian Petroleum Resource Rent Tax
  • AASB 101 Presentation of Financial Statements (issued October 2006)
  • AASB 1048 Interpretation and Application of Standards
  • ERR Erratum Proportionate Consolidation [AASB 101, AASB 107, AASB 121, AASB 127, Interpretation 113]

Future Australian Accounting Standard requirements

The following new standards, amendments to standards or interpretations have been issued by the Australian Accounting Standards Board but are effective for future reporting periods. It is estimated that the impact of adopting these pronouncements when effective will have no material financial impact on future reporting periods.

  • AASB Interpretation 12 Service Concession Arrangements and 2007-2 Amendments to Australian Accounting Standards arising from AASB Interpretation 12
  • AASB 8 Operating Segments and 2007-3 Amendments to Australian Accounting Standards arising from AASB 8
  • 2007-6 Amendments to Australian Accounting Standards arising from AASB 123
  • AASB Interpretation 13 Customer Loyalty Programmes
  • AASB Interpretation 14 AASB 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
  • AASB 3 Business Combinations
  • AASB 101 Presentation of Financial Statements (issued September 2007)
  • AASB 123 Borrowing Costs
  • AASB 127 Consolidated and Separate Financial Statements
  • AASB 1004 Contributions
  • AASB 1050 Administered Items
  • AASB 1051 Land Under Roads
  • AASB 1052 Disaggregated Disclosures
  • AASB 2007-2 Amendments to Australian Accounting Standards arising from AASB Interpretation 12 [AASB 1, AASB 117, AASB 118, AASB 120, AASB 121, AASB 127, AASB 131 & AASB 139]
  • AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101
  • AASB 2007-9 Amendments to Australian Accounting Standards arising from the Review of AASs 27, 29 and 31 [AASB 3, AASB 5, AASB 8, AASB 101, AASB 114, AASB 116, AASB 127 & AASB 137]
  • AASB 2008-1 Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations [AASB 2]
  • AASB 2008-2 Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations arising on Liquidation [AASB 7, AASB 101, AASB 132, AASB 139 & Interpretation 2]
  • AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 [AASBs 1, 2, 4, 5, 7, 101, 107, 112, 114, 116, 121, 128, 131, 132, 133, 134, 136, 137, 138 & 139 and Interpretations 9 & 107]
  • AASB 2008-4 Amendments to Australian Accounting Standard – Key Management Personnel Disclosures by Disclosing Entities [AASB 124]
  • UIG Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities
  • UIG Interpretation 4 Determining Whether an Arrangement Contains a Lease
  • UIG Interpretation 129 Service Concession Arrangements Disclosures
  • UIG Interpretation 1038 Contributions by Owners Made To Wholly‑Owned Public Sector Entities

Other

The following standards and interpretations have been issued but are not applicable to the operations of the department.

AASB 1049 Financial Reporting of General Government Sectors by Governments

AASB 1049 specifies the reporting requirements for the General Government Sector, and therefore has no effect on the department’s financial statements.

1.5 Revenue

Revenue from government

Amounts appropriated for departmental output appropriations for the year (adjusted for any formal additions and reductions) are recognised as revenue when the department gains control of the appropriation, 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.

Appropriations receivable are recognised at their nominal amounts.

Other types of revenue

Revenue from the sale of goods is recognised when:

  • The risks and rewards of ownership have been transferred to the buyer;
  • The seller retains no managerial involvement nor effective control over the goods;
  • The revenue and transaction costs incurred can be reliably measured; and
  • It is probable that the economic benefits associated with the transaction will flow to the department.

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

  • The amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and
  • The probable economic benefits with the transaction will flow to the department.

The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any provision for bad and doubtful debts. Collectability of debts is reviewed at balance date. Provisions are made when collectability of the debt is no longer probable.

Commission – Campaign Advertising Special Account

Revenue is derived through the imposition of a 1.5 per cent levy on all government campaign advertising (does not include party political campaigning). The government communication unit was abolished and the aggregated media buying function was transferred to the Department of Finance and Deregulation in 2007. Details of the restructuring of administrative arrangements are provided at note 1.7 and note 8B.

1.6 Gains

Resources received free of charge

Resources received free of charge are recognised as gains 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 as gains at their fair value when the asset qualifies for recognition, unless received from another government agency or authority as a consequence of a restructuring of administrative arrangements (refer to note 1.7).

Resources received free of charge are recorded as either revenue or gains depending on their nature.

Sale of assets

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

1.7 Transactions with the government as owner

Equity injections

Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) 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.

1.8 Grants

The department applies a uniform policy for all grants. Grant liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed or (ii) the grant eligibility criteria have been satisfied, but payments due have not been made. A commitment is recorded when the Government enters into an agreement to make these grants but services have not been performed or criteria satisfied. Where grants moneys are paid in advance of performance or eligibility, a prepayment is recognised.

1.9 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 ‘short-term employee benefits’ (as defined in AASB 119) and termination benefits due within twelve months of balance date are 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 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 department 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 department’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 has been determined by reference to the previous work of the Australian Government Actuary and the short hand method defined in the Finance Minister’s Orders. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and redundancy

Provision is made for separation and redundancy benefit payments at the time that a detailed formal plan for the terminations has been developed and the employees affected have been informed of the redundancies.

As at 30 June 2008 the provision for separation and redundancy was nil (nil in 2006–07).

Superannuation

Staff of the department are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the PSS accumulation plan (PSSap).

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported by the Department of Finance and Deregulation as an administered item.

The department makes employer contributions to the Employee Superannuation Scheme at rates determined by an actuary to be sufficient to meet the cost to the Government of the superannuation entitlements of the department’s employees. The department accounts for the contributions as if they were contributions to defined contribution plans.

From 1 July 2005, new employees are eligible to join the PSSap scheme.

The liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.

1.10 Leases

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased non-current assets. An operating lease is a lease that is not a finance lease. 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 either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability is recognised at the same time and for the same amount.

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense. The department had no finance leases as at 30 June 2008 (nil in 2006–07).

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

1.11 Borrowing costs

All borrowing costs are expensed as incurred.

1.12 Cash and cash equivalents

Cash and cash equivalents includes notes and coins held and any deposits in bank accounts with an original maturity of three months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash is recognised at its nominal amount.

1.13 Financial assets

The department classifies its financial assets in the following categories:

  • financial assets ‘at fair value through profit or loss’;
  • ‘held-to-maturity investments’;
  • ‘available-for-sale’ financial assets; and
  • 'loans and receivables’.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets are recognised and derecognised upon ‘trade date’.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts over the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis except for financial assets ‘at fair value through profit or loss’.

Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss where the financial assets:

  • have been acquired principally for the purpose of selling in the near future;
  • are a part of an identified portfolio of financial instruments that the agency manages together and has a recent actual pattern of short-term profit-taking; or
  • are derivatives that are not designated and effective as a hedging instrument.

Assets in this category are classified as current assets.

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the asset within 12 months of the balance sheet date.

Available-for-sale financial assets are recorded at fair value. Gains and losses arising from changes in fair value are recognised directly in the reserves (equity) with the exception of impairment losses. Interest is calculated using the effective interest method and foreign exchange gains and losses on monetary assets are recognised directly in profit or loss. Where the asset is disposed of or is determined to be impaired, part (or all) of the cumulative gain or loss previously recognised in the reserve is included in profit for the period.

Where a reliable fair value cannot be established for unlisted investments in equity instruments, cost is used. The department has no such instruments.

Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Impairment of financial assets

Financial assets are assessed for impairment at each balance date.

  • Financial assets held at amortised cost - If there is objective evidence that an impairment loss has been incurred for loans and receivables or held to maturity investments held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the income statement.
  • Available-for-sale financial assets - If there is objective evidence that an impairment loss on an available-for-sale financial asset has been incurred, the amount of the difference between its cost, less principal repayments and amortisation, and its current fair value, less any impairment loss previously recognised in expenses, is transferred from equity to the income statement.
  • Available-for-sale financial assets (held at cost) - If there is objective evidence that an impairment loss has been incurred the amount of the impairment loss is the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate for similar assets.

1.14 Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.

Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Supplier and other payables

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

1.15 Contingent assets and liabilities

Contingent liabilities and contingent assets are not recognised in the balance sheet but are reported in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

1.16 Financial guarantee contracts

Financial guarantee contracts are accounted for in accordance with AASB 139. They are not treated as a contingent liability, as they are regarded as financial instruments outside the scope of AASB 137.

1.17 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. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

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.

1.18 Property, plant and equipment

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the balance sheet, 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).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘makegood’ provisions in accommodation leases for former Governors-General taken up by the department. These costs are included in the value of the departmental and administered property, plant and equipment with a corresponding provision for the ‘makegood’.

Revaluations

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

Asset class Fair value measured at:
Land Market selling price
Buildings exc. Leasehold improvements Market selling price
Leasehold improvements Depreciated replacement cost
Plant & equipment Market selling price
Heritage and cultural assets Market selling price

Note that the only land and buildings held by the department relate to administered assets.

Following initial recognition at cost, property plant and equipment are carried at fair value less accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised through surplus and deficit. Revaluation decrements for a class of assets are recognised directly through surplus and deficit except to the extent that they reverse a previous revaluation increment for that class.

Revaluations are undertaken annually and are conducted by an independent qualified valuer. Formal valuations for all assets are undertaken every three years (most recent being 2006–07) and a desk top valuation for all assets in the other years. In 2007–08, the Australian Valution Office was engaged to provide a formal valuation of the leasehold improvements at the Department’s main office at One National Circuit, Barton, Canberra. All other assets were subject to a desk top valuation.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Heritage assets

The formal revaluation of “Kirribilli House” Kirribilli NSW and “The Lodge” Canberra ACT undertaken by Preston Rowe Paterson NSW Pty Ltd in May 2007 resulted in the reclassification of the properties as heritage assets and the useful life of the assets revised to 100 years.

Kirribilli House and (Kirribilli House) Garden and Grounds are listed on Local, State, National and Commonwealth Heritage Listings.

The Lodge, including garden and grounds, are listed on National and Commonwealth Heritage Listings.

Depreciation

Depreciable property plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the department using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

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

2007–08 2006–07
Departmental assets
Leasehold improvements lease term lease term
Plant and Equipment 4 to 10 years 4 to 10 years
Administered assets
Buildings on freehold land 100 years 100 years
Plant and equipment 4 to 50 years 4 to 50 years

Leasehold improvements were revalued to fair value at 30 June 2008. The components making up the asset have been separately identified and depreciation rates revised for future reporting periods to reflect the remaining useful lives.

Impairment

Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount. All assets were assessed for impairment at 30 June 2008.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the department were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Assets held for sale

Two groups of assets were classified as held for sale at 30 June 2008. The first group related to residual APEC assets awaiting sale which were adjusted to reflect recoverable amounts. The second group of assets related to desktop computers owned by the department awaiting disposal as a result of the refresh of desktop computers. No impairment adjustments were required on reclassification of desktop computers as held for sale as the carrying amounts of these assets did not exceed their recoverable amounts.

1.19 Intangibles

The department’s intangible assets comprise internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the department’s software are 4 to 5 years (2006–07: 4 to 5 years).

All software assets were assessed for indications of impairment as at 30 June 2008.

1.20 Taxation

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

Revenues, expenses and assets are recognised net of GST:

  • except where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
  • except for receivables and payables.

1.21 Reporting of Administered Activities

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 departmental items, including the application of Australian Accounting Standards.

Administered cash transfers to and from the official public account

Revenue collected by the department for use by the government rather than the department is classified as administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance and Deregulation. Conversely, cash is drawn from the OPA to make payments under parliamentary appropriation on behalf of government. These transfers to and from the OPA are adjustments to the administered cash held by the department on behalf of the government and reported as such in the statement of cash flows, in the schedule of administered items and in the administered reconciliation table. The schedule of administered items largely reflects the government’s transactions, through the department with parties outside the government.

Revenue

All administered revenues are revenues relating to the course of ordinary activities performed by the department on behalf of the Australian Government.

Commission - Media Commissions Special Account

Administered revenue is derived from a four per cent levy on all government campaign advertising (excluding party political advertising) and 1.5 per cent on government non-campaign advertising. Funds are used to transfer media commissions through the central advertising system to advertising agencies. Revenue is recognised on receipt of confirmation of placement of advertisements with advertising agencies. It is recognised at its nominal amount due less any provision for bad or doubtful debts. Collectability of debts is reviewed at balance date. Allowances are made when collection of the debt is judged to be less rather than more likely. The government communication unit was abolished and the aggregated media buying function was transferred to the Department of Finance and Deregulation in 2007. Details of the restructuring of administrative arrangements are provided at note 1.7 and note 8B.

Former Governors-General allowances

The department has administrative responsibility for the payment of allowances (pensions) to former Governors-General. The liability in relation to these allowances is based on actuarial assessments. The allowance was adjusted in 2007–08 as a result of an actuarial review by the Australian Government Actuary. Disclosures relating to the allowances are made at Note 17D.

Administered Investments - National Australia Day Council

An administered investment is recognised for the first time in 2007–08 in relation to the National Australia Day Council. The National Australia Day Council’s primary activities are the promotion of national pride, active citizenship and the observance and celebration of Australia Day; administration of the Australian of the Year awards, which include awards for the Young Australian of the Year, the Senior Australian of the Year and Australia’s Local Hero; distribution of grants to State/Territory Australia Day Councils and provision of recommendations and advice to the Australian Government on all matters relating to year-round national pride activities.

The administered investment in the National Australia Day Council is measured at fair value as at 30 June 2008. Fair value has been taken to be the net assets of the National Australia Day Council as at balance date.

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Last Updated: 6 November, 2008