Annual Report 2004–05
Note 1: Summary of Significant Accounting Policies
1.1 Objectives of the Department of the Senate
The Department of the Senate (the department) 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 5 headings as follows:
Output Group 1:Clerk’s Office –provides advice in relation to the proceedings of the Senate and its committees, provides secretariat services to various committees and provides strategic direction for the department;
Output Group 2:Table Office –provides procedural advice and programming services, processes legislation, produces documents including the record of Senate proceedings, provides safe custody of Senate records, provides inquiry services to facilitate the operations of the Senate and the work of senators and provides secretariat services to various committees;
Output Group 3: Procedure Office –provides procedural advice and legislative drafting services to non-government senators, provides secretariat services to the legislative scrutiny committees, conducts parliamentary research, and promotes awareness and knowledge of the Senate and the Parliament in the community;
Output Group 4:Committee Office –provides Senate and certain joint committees with secretariat support for the conduct of and reporting on inquiries, and aims to increase the public’s awareness of the work of committees;
Output Group 5: Black Rod’s Office –provides office, information technology, printing, ceremonial support services; security advice; and corporate services to the Senate, senators and departmental staff.
1.2 Basis of accounting
The financial statements are required by section 49 of the Financial Management and Accountability Act 1997 and are a general-purpose financial report.
The statements have been prepared in accordance with:
- Finance Minister’s Orders (or FMO’s, being the Financial Management and Accountability (Financial Statements for reporting periods ending on or after 30 June 2005) Orders);
- Australian Accounting Standards and Accounting Interpretations issued by the Australian Accounting Standards Board; and
- Consensus Views of the Urgent Issues Group.
The Statements of Financial Performance and Position have been prepared on an accrual basis and are in accordance with historical cost convention, except for certain assets, which as noted, are at valuation. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.
Assets and liabilities are recognised in the Statement of Financial Position when and only when it is probable that future economic benefits will flow and the amounts of the assets or liabilities can be reliably measured. Assets and liabilities arising under agreements equally proportionately unperformed are however not recognised unless required by an Accounting Standard. Liabilities and assets which are unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies (other than remote contingencies, which are reported at Note 11: Contingent Liabilities and Assets).
Revenues and expenses are recognised in the Statement of Financial Performance when and only when the flow or consumption or loss of economic benefits has occurred and can be reliably measured.
The continued existence of the 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 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 1.15.
1.3 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 activities that are reciprocal in nature.
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 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 1.4).
Other Revenue
Revenue from the sale of goods and services is recognised upon the delivery of goods to customers.
Revenue from the rendering of a service is recognised by reference to the stage of completion of contracts or other agreements to provide services. The stage of completion is determined according to the proportion that costs incurred to date bear to the estimated total costs of the transaction.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
Revenue from the disposal of non-current assets is recognised when control of the asset has passed to the buyer.
1.4 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.
Restructuring of Administrative Arrangements
Net assets received from or relinquished to another Commonwealth 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’s require that distributions to owners be debited to contributed equity unless in the nature of a dividend.
1.5 Employee Benefits
Liabilities for services rendered by employees are recognised at the reporting date to the extents that they have not been settled.
Liabilities for wages and salaries (including non-monetary benefits), and annual leave are measured at their nominal amounts. Other employee benefits expected to be settled within 12 months of the reporting date are also measured at their nominal amounts. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.
All other employee liabilities are measured as the present value of estimated future cash out flows 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.
Leave liabilities are calculated on the basis of employee’s 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 2005. 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 2004-2005, the department has made no provision for future separation and redundancy benefit payments.
Superannuation
Staff of the department contribute to the Commonwealth Superannuation Scheme and the Public Sector Superannuation Scheme. The liability for their superannuation benefits is recognised in the financial statements of the Commonwealth and is settled by the Commonwealth in due course.
The department makes employer contributions to the Commonwealth at rates determined by an actuary to be sufficient to meet the cost to the Commonwealth of the superannuation entitlements of the department’s employees.
The liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.
1.6 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.
1.7 Cash
Cash means notes and coins held, deposits held at call with a bank or financial institutions. Cash is recognised at its nominal amount.
1.8 Financial instruments
Government loans are carried at the balance yet to be repaid. Interest is expensed as it accrues unless it is directly attributable to a qualifying asset.
Trade Creditors
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).
Term Deposits
Term deposits are recognised at cost.
Contingent Liabilities and Contingent Assets
Contingent Liabilities (assets) are not recognised in the Statement of Financial Position but are discussed in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability (asset), or represent an existing liability (asset) in respect of which settlement is not probable or the amount cannot be reliably measured. Remote contingencies are part of this disclosure. Where settlement becomes probable, a liability (asset) is recognised. A liability (asset) is recognised when its existence is confirmed by a future event, settlement becomes probable or reliable measurement becomes possible.
1.9 Acquisition of Assets
Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken.
Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and revenues at their fair value at the date of acquisition, unless acquired as a consequence of restructuring 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 prior to the restructuring.
1.10 Property, Plant and Equipment
Asset recognition threshold
Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $500 for furniture and fittings, computer equipment and office machines and 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).
Revaluations
(a) Basis
Plant and equipment are carried at valuation. Revaluations undertaken as at 30 June 2005 were at fair value. This change in accounting policy is required by Australian Accounting Standard AASB 1041 Revaluation of Non-current Assets.
All assets were revalued during the current period, pursuant to AASB 1041. Fair values for each class of asset are determined as shown below:
| Asset Class | Fair Value Measured at: | Deprival Value Measured at: |
|---|---|---|
| Plant & Equipment | Market selling price | Depreciated replacement cost |
Assets which are surplus to requirements are measured at their net realisable value. All valuations are conducted by an independent qualified valuer.
(b) Depreciation
Depreciable 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) 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:
| 2005 | 2004 | |
|---|---|---|
| Plant and 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 |
1.11 Impairment of Non-Current Assets
Non-current assets carried at up to date fair value at the reporting date are not subject to impairment testing.
The non-current assets carried at cost, which are not held to generate net cash inflows, have been assessed for indications of impairment. Where indications of impairment exist, the asset is written down to the higher of its net selling price and, if the entity would replace the asset’s service potential, its depreciated replacement cost.
1.12 Intangibles
The Department of the Senate’s intangibles comprise software for internal use. These assets are carried at cost.
All software assets were assessed for impairment as at 30 June 2005. None were found to be impaired.
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 (2004: 3 to 5 years).
1.13 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.
1.14 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 is not recoverable from the ATO; and
- 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.
1.15 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 to the greatest extent possible of Accounting Standards, Accounting Interpretations and UIG Consensus Views.
Administered appropriations received or receivable from the Official Public Account (OPA) are not reported as administered revenues or assets respectively. 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 19.