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

• 1.1 Objectives of the Department
• 1.2 Basis of preparation of the financial report
• 1.3 Significant accounting judgements and estimates
• 1.4 Changes in Australian Accounting Standards
• 1.5 Revenue
• 1.6 Gains
• 1.7 Transactions with the Government as owner
• 1.8 Grants
• 1.9 Employee benefits
• 1.10 Leases
• 1.11 Borrowing costs
• 1.12 Cash
• 1.13 Financial assets
• 1.14 Financial liabilities
• 1.15 Contingent liabilities and contingent assets
• 1.16 Financial guarantee contracts
• 1.17 Acquisition of assets
• 1.18 Property, plant and equipment
• 1.19 Intangibles
• 1.20 Taxation
• 1.21 Reporting of administered activities

Note 1: Summary of Significant Accounting Policies

1.1 Objectives of the Department

The Department is an Australian Government controlled entity.

The Department is structured to meet one outcome – sound and well coordinated government policies, programs and decision making processes, which is delivered through five 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, income 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;
• Output Group 1.4: Strategic policy; and
• Output Group 1.5: Support services for government operations.

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 (or FMO) for reporting periods ending on or after 1 July 2008; and
• Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial report has been prepared on an accrual basis and is in accordance with the 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 FMO, 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 unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies. Unless alternative treatment is specifically required by an accounting standard, income 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.

1.3 Significant accounting judgements 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 Changes in Australian Accounting Standards

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 standards and amendments to standards are applicable to the current reporting period:

• AASB 2007–2 Amendments to Australian Accounting Standards arising from AASB Interpretation 12 [AASB 1]
• AASB 1004 Contributions [Reissued Mar 2008]
• AASB 1049 Whole of Government and General Government Sector Financial Reporting
• AASB 1050 Administered Items
• AASB 1051 Land Under Roads
• AASB 1052 Disaggregated Disclosures
• AASB 2007–9 Amendments to Australian Accounting Standards arising from the Review of the Requirements in AAS 27, AAS 29 and AAS 31 [AASB 3, AASB 5, AASB 8, AASB 101, AASB 114, AASB 116, AASB 127 and AASB 137]
• ASSB 2008–10 Amendments to Australian Accounting Standards– Reclassification of Financial Assets [AASB 139 and AASB 7]
• AASB Interpretation 12 Service Concession Arrangements
• AASB Interpretation 14 AASB 119– The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
• AASB Interpretation 13 Customer Loyalty Programmes
• AASB Interpretation 4 Determining whether an Arrangement contains a Lease [reissued Feb 2007]
• AASB Interpretation 129 Service Concession Arrangements: Disclosures [renamed and reissued Feb 2007]
• AASB Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities [reissued Dec 2007]
• AASB 2009–3 Amendments to Australian Accounting Standards – Embedded Derivatives [AASB 139 & Interpretation 9]
• AASB 2008–12 Amendments to Australian Accounting Standards – Reclassification of Financial Assets – Effective Date and Transition [AASB 7, AASB 139 & AASB 2008–10]

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 8 Operating Segments [New]
• AASB 101 Presentation of Financial Statements [Reissued Sep 2007]
• AASB 123 Borrowing Costs [Reissued Jun 2007]
• AASB 1039 Concise Financial Reports [Reissued Aug 2008]
• AASB 2007–3 Amendments to Australian Accounting Standards arising from AASB 8 [AASB 5, 6, 102, 107, 119, 127, 134, 136, 1023, 1038]
• AASB 2007–6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, 101, 107, 111, 116, 138]
• AASB 2007–8 Amendments to Australian Accounting Standards arising from AASB 101 [Amends all Standards]
• AASB 2007–10 Further Amendments to Australian Accounting Standards arising from AASB 101
• AASB 2008–1 Amendments to Australian Accounting Standards– Share-based Payments: Vesting Conditions and Cancellations
• 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 2008–5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 7, 101, 102, 107, 108, 110, 116, 118, 119, 120, 123, 127, 128, 129, 131, 132, 134, 136, 138, 139, 140, 141, 1023 & 1038]
• AASB 2008–7 Amendments to Australian Accounting Standards– Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate [AASB 1, AASB 118, AASB 121, AASB 127 & AASB 136]
• AASB 3 Business Combinations [Reissued Mar 2008]
• AASB 127 Consolidated and Separate Financial Statements [Reissued Mar 2008]
• 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 2008–6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1 & AASB 5]
• AASB 2008–8 Amendments to Australian Accounting Standards– Eligible Hedged Items [AASB 139]
• AASB Interpretation 16 Hedges of a Net Investment in a Foreign Operation
• AASB Interpretation 15 Arrangements for the Construction of Real Estate
• AASB Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities [amended by AASB 2007–6 Amendments to Australian Accounting Standards arising from AASB 123 (Jun 2007)]
• AASB Interpretations 2 Member’s Shares in Co-operative Entities and Similar Instruments [amended by AASB 2008–2 Amendments to Australian Accounting Standards– Puttable Financial Instruments and Obligations arising on Liquidation (Mar 2008)]
• AASB Interpretation 12 Service Concession Arrangements [amended by AASB 2007–6– Amendments to Australian Accounting Standards arising from AASB 123 (Jun 2007)]
• AASB Interpretation All Interpretations amended [amended by AASB 2007–8 Amendments to Australian Accounting Standards arising from AASB 101 (Sep 2007) and AASB 2007–10 Further Amendments to Australian Accounting Standards arising from AASB 101 (Dec 2007)]
• AASB Interpretation 9 Reassessment of Embedded Derivatives [amended by AASB 2008–3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 (Mar 2008)]
• AASB Interpretation 107 Introduction of the Euro [amended by AASB 2008–3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 (Mar 2008)]
• AASB 2008–11 Amendments to Australian Accounting Standard – Business Combinations Among Not-for- Profit Entities [AASB 3]
• AASB 2008–13 Amendments to Australian Accounting Standards arising from AASB Interpretation 17– Distributions of Non-cash Assets to Owners [AASB 5 & AASB 110]
• AASB 2009–1 Amendments to Australian Accounting Standards – Borrowing Costs of Not-for-Profit Public Sector Entities [AASB 1, AASB 111 & AASB 123]
• AASB 2009–2 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments [AASB 4, AASB 7, AASB 1023 & AASB 1038]
• AASB 2009–4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 2 and AASB 138 and AASB Interpretations 9 & 16]
• AASB 2009–5 Further Amendments to Australian Accounting Standards arising from the Annual
  Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139]
• AASB Interpretation 17 Distributions of Non-cash Assets to Owners
• AASB Interpretation 18 Transfers of Assets from Customers
• AASB 2009–6 Amendments to Australian Accounting Standards
• AASB 2009–7 Amendments to Australian Accounting Standards [AASB 5, 7, 107, 112, 136 & 139 and
  Interpretation 17]

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 entity.

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 associated with the transaction will flow to the entity.

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 impairment allowance account. Collectability of debts is reviewed at balance date. Allowances are made when collectability of the debt is no longer probable.

Commission– Campaign Advertising Special Account

In 2007–08 commission revenue was derived through the imposition of a 1.5 per cent levy on all government campaign advertising (did not include party political campaigning). No commission revenue was received in 2008–09, as the aggregated media buying function was transferred to the Department of Finance and Deregulation as a result of the 3 December 2007 Administrative Arrangement Orders (AAO).

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).

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

Return of APEC Taskforce and Australia 2020 Summit funding

The Department was funded in prior years for the APEC Taskforce and the Australia 2020 Summit on a no win / no loss basis. No win / no loss funding represents funding provided to agencies for programs that are not intended to financially benefit or disadvantage an Agency. The funds can only be used for the specified purpose for which they are appropriated. Any surplus funds must be returned to the Budget and additional funding will be provided for any overspends incurred. In 2008–09, $23.50 million of surplus funding was returned to the budget, being $23.28 million from the APEC Taskforce and $0.22 million from the Australia 2020 Summit.

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 Employee Benefits) 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 FMO. 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. The Department recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

As at 30 June 2009 the provision for separation and redundancy was nil (nil in 2007–08).

Superannuation

Staff of the Department are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or another fund of their choice. 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 current 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.

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 2009 (nil in 2007–08).

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

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 through 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 that are recognised 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 Department 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 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 liabilities and contingent assets

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 Financial Instruments: Recognition and Measurement. They are not treated as a contingent liability as they are regarded as financial instruments outside the scope of AASB 137 Provisions, Contingent Liabilities and Contingent Assets.

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 income 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 taken up by the Department for
accommodation leases for the offices of the Prime Minister and the former Governors–General. These costs are
included in the value of the departmental and administered property, plant and equipment with a corresponding
provision for the ‘makegood’ recognised.

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
• Infrastructure, plant and equipment - Market selling price
• Heritage and cultural assets - Market selling price

Following initial recognition at cost, property plant and equipment are carried at fair value less subsequent 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 the operating result. Revaluation decrements for a class of assets are recognised directly through the operating result except to the extent that they reverse a previous revaluation increment for that class. 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.

The leasehold improvement assets representing fitout of the Department’s primary office at One National Circuit, Barton, ACT, was formally valued as at 30 June 2008 by the Australian Valuation Office. All other departmental assets were formally valued by Preston Rowe Paterson NSW Ltd as at 30 June 2007.

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:

	2009	2008
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
Leasehold improvements	lease term	lease term
Plant and equipment	4 to 50 years	4 to 50 years

Departmental 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

All assets were assessed for impairment at 30 June 2009. 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.

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 2009. These assets relate to desktop and laptop computers owned by the Department awaiting disposal as a result of the refresh of desktop and laptops computers. An impairment adjustment was required on the reclassification of assets held for sale as the carrying amounts of these assets exceeded their recoverable amounts.

1.19 Intangibles

The Department’s intangibles 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 (2007–08: 4 to 5 years).

All software assets were assessed for indications of impairment as at 30 June 2009.

1.20 Taxation

The Department 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.

• Next Page: Notes to and forming part of the Financial Statements - Notes 2 to 6
• Previous Page: Index to the Notes of the Financial Statements

Top