Annual Report 2006–07
Note 1: Summary of significant accounting policies
1.1 Objectives of the Department of the Senate
The Department of the Senate is structured to meet the following outcome:
- Effective provision of services to support the functioning of the Senate as a House of the Commonwealth Parliament.
The department’s activities contributing towards this outcome are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, revenues 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 Commonwealth of items controlled or incurred by the Commonwealth.
Departmental activities are identified under five headings:
| Output Group 1: | Clerk’s Office – provides procedural and constitutional advice in relation to the proceedings of the Senate and its committees; strategic direction for the department; secretariat support for the Procedure Committee, the Committee of Privileges and the Committee of Senators’ Interests; and maintains the Register of Senators’ Interests. |
|---|---|
| Output Group 2: | Table Office – provides programming and procedural support to the Senate; processes legislation and documents, and archives records of the Senate; produces records of Senate business and proceedings, and disseminates information on the work of the Senate; provides document distribution and inquiries services; and provides secretariat support to a collection of domestic committees. |
| Output Group 3: | Procedure Office – provides advisory and drafting services to nongovernment senators; secretariat support to the legislative scrutiny committees and policy support for interparliamentary relations; conducts parliamentary research and training including for Parliaments overseas; and promotes community awareness and knowledge of the Senate and the Parliament. |
| Output Group 4: | Committee Office – provides secretariat support for most Senate and certain joint committees and strives to increase the public’s awareness of the work of committees. |
| Output Group 5: | Black Rod’s Office – provides office, chamber and committee room support; information technology and ceremonial services; security advice; and corporate services to the Senate, senators and departmental staff. |
1.2 Basis of preparation of the financial report
The financial statements 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 FMOs, being the Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2006)); 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 disclosure of the full amount is specifically required.
Unless alternative treatment is specifically required by an accounting standard or FMOs, assets and liabilities are recognised in the balance sheet when and only when it is probable that future economic benefits will flow 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 (other than unquantifiable or remote contingencies, which are reported at Note 9).
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 or consumption or loss of economic benefits has occurred and can be reliably measured.
The continued existence of the department in its present form, and with its present programs, is dependent on continuing appropriations by Parliament for the department’s administration and programs.
Administered revenues, expenses, assets, 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 1.20.
1.3 Significant accounting judgements and estimates
No accounting judgements, assumptions or estimates have been identified that have a significant risk of causing a material impact on the amounts recorded in the financial statements.
1.4 Statement of compliance
Australian Accounting Standards require a statement of compliance with International Financial Reporting Standards (IFRSs) to be made where the financial report complies with these standards. Some Australian equivalents to IFRSs and other Australian Accounting Standards contain requirements specific to not-for-profit entities that are inconsistent with IFRS requirements. The Department of the Senate is a not for profit entity and has applied these requirements, so while this financial report complies with Australian Accounting Standards including Australian Equivalents to International Financial Reporting Standards (AEIFRSs)it cannot make this statement.
Adoption of new Australian Accounting Standard requirements
No accounting standard has been adopted earlier than the effective date in the current period.
The following amendments or interpretations have become effective but have had no financial impact or do not apply to the operations of the department.
Amendments:
- 2005-1 Amendments to Australian Accounting Standards [AASBs 1, 101, 124]
- 2005-4 Amendments to Australian Accounting Standards [AASB 139, AASB 132, AASB 1, AASB 1023 and AASB 1038]
- 2005-5 Amendments to Australian Accounting Standards [AASB 1 & AASB 139]
- 2005-6 Amendments to Australian Accounting Standards [AASB 3]
- 2005-9 Amendments to Australian Accounting Standards [AASB 4, AASB 1023, AASB 139 & AASB 132]
- 2006-1 Amendments to Australian Accounting Standards [AASB 121]
- 2006-3 Amendments to Australian Accounting Standards [AASB 1045]
Interpretations:
- UIG 4 Determining whether an Arrangement contains a Lease
- UIG 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
- UIG 7 Applying the Restatement Approach under AASB 129 Financial Reporting in Hyperinflationary Economies
- UIG 8 Scope of AASB 2
- UIG 9 Reassessment of Embedded Derivatives
UIG 4 and UIG 9 might have impacts in future periods, subject to existing contracts being renegotiated.
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.
Financial instrument disclosure
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 presently. 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 effect the disclosure presented in future financial reports.
Other
The following standards (AASB) and interpretations (AASBI, formally UIG) have been issued but are not applicable to the operations of the department.
- AASB 1049 Financial Reporting of General Government Sectors by Governments
- UIG 4 Determining whether an Arrangement contains a Lease
- UIG 10 Interim Financial Reporting and Impairment
- UIG 11 AASB 2 Group and Treasury Share Transactions
- UIG 12 Service Concession Arrangements
- UIG 129 Service Concession Arrangements: Disclosures
1.5 Revenue
Revenues from government
Departmental outputs appropriations for the year (less any savings offered up in Portfolio Additional Estimates Statements) are recognised as revenue, except for certain amounts which relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. The department does not currently participate in any reciprocal activities.
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 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 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.
1.6 Gains
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.
Contributions of assets at no cost of acquisition or for nominal consideration are recognised as revenue at their fair value when the asset qualifies for recognition, unless received from another government agency as a consequence of a restructuring of administrative arrangements (refer to Note 1.7).
Other gains
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
Appropriations designated as equity injections (less any savings offered up in Portfolio Additional Estimates Statements) 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 Employee benefits
Liabilities for service 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 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 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 is recognised and measured at the estimated present value of future cash flows to be made in respect of all employees at 30 June 2007. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.
Separation and redundancy
In 2006–07, the department has made no provision for future separation and redundancy benefit payments.
Superannuation
Staff of the department are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) and PSS accumulation plan (PSSap).
The CSS and PSS are defined benefit schemes for the Commonwealth. The PSSap is a defined contribution scheme.
The liability for superannuation benefits is recognised in the financial statements of the Australian government and is settled by the Australian government in due course.
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.
New employees (from 1 July 2005) are eligible to join the new PSSap scheme.
The liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.
1.9 Leases
No finance leases were in existence at any time during the year or at balance date.
Operating lease payments are expensed on the basis of the benefits derived from the leased assets. The department’s operating leases relate to vehicles leased from LeasePlan.
1.10 Cash
Cash means notes and coins held, and deposits held at call with a bank or financial institution. Cash is recognised at its nominal amount.
1.11 Financial risk management
The Department of the Senate’s activities expose it to normal commercial financial risk. As a result of the nature of the department’s business and internal and Australian government policies, dealing with the management of financial risk, the department’s exposure to market, credit, liquidity and cash flow and fair value interest rate risk is considered to be low.
1.12 Impairment of financial assets
Financial assets held at amortised cost
If there is objective evidence that an impairment loss has been incurred for receivables, 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 income statement.
Financial assets held at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because it cannot be reliably measured, or a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, 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.
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.
1.13 Supplier and other payables
Trade creditors and accruals are recognised at their nominal amounts, being the amounts at which the liabilities will be settled. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).
1.14 Contingent liabilities and contingent assets
Contingent liabilities and assets are not recognised in the balance sheet but are discussed in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset, or represent an existing liability or asset in respect of which settlement is not probable or for which the amount cannot be reliably measured. Contingent assets are reported when settlement is probable, and contingent liabilities are recognised when settlement is greater than remote.
1.15 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 restructured administrative arrangements. In the latter case, assets are initially recognised at the amounts at which they were recognised in the transferor agency’s accounts immediately before the restructuring.
1.16 Property, plant and equipment (PP&E)
Asset recognition threshold
Purchases of property, plant and equipment are recognised initially at cost in the balance sheet, except for purchases costing less than $500 for furniture and fittings and office machines and equipment, $1,000 for computer equipment, and $2,000 for plant and equipment, intangibles and all other assets, 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).
Basis of revaluations
Plant and equipment are carried at fair value, being revalued with sufficient frequency such that the carrying amount of each asset is not materially different, at reporting date, from its fair value. Valuations are undertaken in each year are as at 30 June.
Fair values for each class of asset are determined as shown below:
| Asset class | Fair value measured at: |
|---|---|
| Plant and equipment | Market selling price |
Following initial recognition at cost, valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not materially with 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 profit and loss. Revaluation decrements for a class of assets are recognised directly through profit and loss 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.
Depreciation
Depreciable plant and equipment assets are written off to their estimated residual values over their estimated useful lives to the department, using the straight-line method of depreciation in all cases.
Depreciation rates (useful lives) and methods are reviewed at each reporting 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 prices only when assets are revalued.
Depreciation rates applying to each class of depreciable asset are based on the following useful lives:
| 2007 | 2006 | |
|---|---|---|
| Plant equipment | 5 to 15 years | 5 to 15 years |
| Computer equipment | 3 to 10 years | 3 to 10 years |
| Furniture and fittings | 5 to 50 years | 5 to 50 years |
| Office machines and equipment | 4 to 30 years | 4 to 30 years |
| Intangibles (software) | 3 to 5 years | 3 to 5 years |
Impairment
All assets were assessed for impairment at 30 June 2007. 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 of the Senate were deprived of the asset, its value in use is taken to be its depreciated replacement cost.
No indicators of impairment were found for assets at fair value.
1.17 Intangibles
The Department of the Senate’s intangibles comprise software for internal use. These assets are carried at cost.
Software is amortised on a straight-line basis over its anticipated useful life. The useful life of the department’s software is 3 to 5 years (2005-06: 3 to 5 years).
All software assets were assessed for impairment as at 30 June 2007. None were found to be impaired.
1.18 Inventories
Inventories held for resale are valued at the lower of cost and net realisable value.
Inventories not held for resale are valued at cost, unless they are no longer required, in which case they are valued at net realisable value.
1.19 Taxation
The department is exempt from all forms of taxation except fringe benefits tax and 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.
The fringe benefits tax for Members of Parliament is paid by the Department of Finance and Administration. The Department of the Senate pays fringe benefits tax on benefits it provides to office-holders of the Senate.
1.20 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 appropriations received or receivable from the Official Public Account (OPA) are not reported as administered revenues or assets. Similarly, administered receipts transferred or transferable to the OPA are not reported as administered expenses or payables. These transactions or balances are internal to the administered entity.
These transfers of cash are reported as administered (operating) cash flows and in the administered reconciliation table in Note 17.