Notes to and forming part of the financial statements

Note 1: Summary of significant accounting policies

The Department of the Senate is a not-for-profit entity. Its activities are classified as departmental. Departmental activities involve the use of assets, liabilities, revenues and expenses controlled or incurred by the department in its own right within its one outcome. Further details are contained in the statement of comprehensive income and the statement of financial position, and in the resource statement on page X.

1.1 Basis of preparation of the financial report

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance Performance and Accountability Act 2013.

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

  • the Public Governance Performance and Accountability (Financial Reporting Rule) 2015 (FRR) for reporting periods ending on or after 1 July 2015, and
  • Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and are 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 statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

1.2 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:

  • leave provisions involve assumptions based on the expected tenure of existing staff, patterns of leave claims and payouts, future salary movements and future discount rates.

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.

1.3 New Australian accounting standards

Adoption of new Australian Accounting Standard requirements

All new or revised standards and interpretations issued prior to the signing of the Statement by the Clerk and Chief Finance Officer that were applicable to the current reporting period had no material financial impact on the department, and are not expected to have a future financial impact.

Future Australian Accounting Standard requirements

No new or revised pronouncements were issued by the Australian Accounting Standards Board prior to the finalisation of the financial statements which are expected to have a material financial impact on the department in future reporting periods.

1.4 Revenue

The department receives revenue from appropriations and the rendering of services. 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.

Revenue from government

Amounts appropriated for departmental appropriation for the financial year (adjusted for any formal additions and reductions) are recognised as revenue from government when the department gains control of the appropriation. Appropriations receivable are recognised at their nominal amounts.

Resources received free of charge

Resources received free of charge are recognised in the statement of comprehensive income as revenue where the amounts can be reliably measured and the services would have been purchased if they had not been provided free of charge. Use of those resources is recognised as an expense.

The department's resources received free of charge relate to audit services from the Australian National Audit Office and accommodation at Parliament House from the Department of Parliamentary Services.

1.5 Transactions with the government as owner

Equity injections

Amounts appropriated which are designated as equity injections for a year (less any formal reductions) and Departmental Capital Budgets (DCB) are recognised directly in contributed equity in that year.

1.6 Employee benefits

Liabilities for 'short-term employee benefits' (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of end of reporting period are measured at their nominal amounts.

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 at the estimated salary rates that will apply at the time the leave is taken, plus the department's employer superannuation contribution rates, and applicable on-costs, 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 FRR 24.1(a) using the shorthand method. The estimate of the present value of the liability takes into account attrition rates and pay increases though promotion and inflation.

Superannuation

Employees of the department are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), PSS accumulation plan (PSSap) or other elected defined contribution schemes.

The CSS and PSS are defined benefit schemes for the Commonwealth. 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 as an administered item.

The department makes employer contributions to the relevant employee superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the government and accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June 2017 represents outstanding contributions for the final pay fortnight of the year.

1.7 Leases

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

The department has two operating leases; non-cancellable three year motor vehicle leases of $38,749 (2016: $22,000, one operating lease). There is no renewal or purchase option available.

1.8 Financial assets

Cash is recognised at its nominal amount. Cash and cash equivalents include:

  • cash on hand, and
  • demand deposits in bank accounts.

Receivables

Trade receivables are classified as 'loans and receivables' and recorded at face value less any impairment. Trade receivables are recognised where the department becomes party to a contract and has a legal right to receive cash. Loans and receivables are assessed for impairment at the end of each reporting period. Allowances are made when collectability of the debt is no longer probable. Trade receivables are derecognised on payment.

1.9 Financial liabilities

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). Supplier and other payables are derecognised on payment. Supplier payables are settled within 30 days.

1.10 Contingent liabilities and contingent assets

The department had no quantifiable or unquantifiable contingent assets or liabilities as at 30 June 2017 (2016: nil).

1.11 Acquisition of assets

Purchases of non-financial assets are initially recognised at cost in the statement of financial position, 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 cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value.

1.12 Property, plant and equipment

Revaluations

Following initial recognition at cost, plant and equipment are carried at fair value. Carrying amounts are reviewed every year to determine if an independent valuation is required. 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 operating result. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reverse a previous revaluation increment for that class. Upon revaluation, any accumulated depreciation is eliminated against the gross carrying amount of the asset. A revaluation of the department's assets was last undertaken as at 30 June 2015.

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. Heritage and cultural assets are not depreciated.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date.

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

Asset class 2017 2016
Plant and equipment 5 to 15 years 5 to 15 years
Furniture and fittings 5 to 100 years 5 to 100 years

Impairment

All assets, including software, were assessed for indications of impairment at 30 June 2017. Where indications of impairment exist, the asset's recoverable amount is estimated and an impairment loss recognised if the asset's recoverable amount is less than its carrying amount.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Gains or losses from disposal of plant and equipment are recognised when control of the asset has passed to the buyer.

1.13 Fair value measurement

All property, plant and equipment is measured at fair value in the statement of financial position. When estimating fair value, market prices (with adjustments) were used where available. Where market prices were not available, depreciated replacement cost was used. A reconciliation of movements in property, plant and equipment has been included in Note 4.

1.14 Intangibles

The department's intangibles comprise of internally developed software and purchased 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 life of the department's software is 3 to 7 years (2016: 3 to 7 years).

1.15 Taxation

The department is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

1.16 Events occurring after the reporting period

No events have occurred after balance date that should be brought to account or noted in the 2016–17 financial statements.

Note 2: Expenses
2017
$'000
2016
$'000
Note 2A: Employee benefits
Wages and salaries 13,799 14,388
Superannuation
Defined benefit plans 1,472 1,482
Defined contribution plans 1,278 1,152
Leave and other entitlements 3,516 3,347
Total employee benefits 20,065 20,369
Note 2B: Suppliers
Goods and services
Professional and financial fees 391 481
Facilities and infrastructure 666 285
Recruitment and staff development 89 71
Hire charges and hospitality 191 184
Travel 667 848
Media and communications 166 231
General office 446 425
Printing 260 236
Resources received free of charge 2,043 2,016
Total goods and services 4,919 4,777
Other supplier expenses
Workers compensation 183 186
Total other supplier expenses 183 186
Total supplier expenses 5,102 4,963
Note 3: Financial assets
  2017
$'000
2016
$'000
Appropriation receivable 10,062 9,923
Trade and other receivables 16 48
GST receivable (from ATO) 53 14
Total trade and other receivables 10,131 9,985

Receivables have terms of 30 days (2016: 30 days) and are not overdue.

Note 4: Non-financial assets
Reconciliation of opening and closing balances of property, plant and equipment and intangibles
  2017
  $'000 $'000 $'000
  PP&E Intangibles Total
As at 1 July 2016
Gross book value 1,688 4,497 6,185
Accumulated depreciation, amortisation and impairment (69) (1,710) (1,779)
Total as at 1 July 2016 1,619 2,787 4,406
Additions by purchase 573 10 583
Depreciation/amortisation expense (101) (604) (705)
Impairment (12) - (12)
Disposals (15) (3) (18)
Total as at 30 June 2017 2,064 2,190 4,254
Total as at 30 June 2017 represented by:
Gross book value 2,224 4,495 6,719
Accumulated depreciation, amortisation and impairment (160) (2,305) (2,465)
Total as at 30 June 2017 2,064 2,190 4,254

Note 5: Key management personnel compensation and related parties

Note 5A: Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the department, directly or indirectly, including any director (whether executive or otherwise) of the department.

The department has determined the key management personnel to be the Clerk, Deputy Clerk, Clerk Assistants and the Usher of the Black Rod. Key management personnel compensation is reported in the table below.

Key management personnel compensation
  2017
$'000
Short-term employee benefits 1,420
Post-employment benefits 688
Other long-term employee benefits 88
Total key management personnel compensation 2,196

Note 5B: Related party transactions

Related parties to this department are defined as key management personnel and close family members of key management personnel. A related party transaction is a transfer of resources, services or obligations between the department and a related party, regardless of whether a price is charged.

During 2016–17, there were no related party transactions.

Note 6: Appropriations
  2017
$'000
2016
$'000
Note 6A: Annual appropriations (recoverable GST exclusive)
Annual appropriation 22,864 21,136
PGPA Act – section 74 receipts 708 820
Departmental capital budget (DCB)1 894 367
Total appropriation 24,466 22,323
Appropriation applied (current and prior years) 25,265 23,252
Variance (799) (928)
Note 6B: Unspent annual appropriations (recoverable GST exclusive)
Departmental
Appropriation (Parliamentary Departments) Act (No. 1) 2015–16 276 10,083
Supply (Parliamentary Departments) Act (No. 1) 2016–17 - -
Appropriation (Parliamentary Departments) Act (No. 1) 2016–17 9,944 -
Total 10,220 10,083
Note 6C: Special appropriations (recoverable GST exclusive)
Authority2
Department of Finance – Parliamentary Entitlements Act 1990 (s. 11) 112 155
Department of Finance – Parliamentary Superannuation Act 2004 (s. 18) 2,371 2,122
Department of Finance – Commonwealth of Australia Constitution (s. 66) 1,858 1,668
Australian Public Service Commission – Remuneration Tribunal Act 1973 (s. 7) 19,672 18,998
Total 24,013 22,943
  1. The DCB is appropriated through the Appropriation (Parliamentary Departments) Act (No. 1). It is not separately identified in the Appropriation Act.
  2. The legislation establishing these special appropriations is administered by the Department of Finance and the Australian Public Service Commission. Arrangements have been entered into with these entities to allow the department to draw upon these appropriations.

Note 7: Budget variances

The comparison of the unaudited original budget as presented in the 2016–17 Portfolio Budget Statements to the 2016–17 final outcome as presented in accordance with Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements is included in the statement of comprehensive income, the statement of financial position, the statement of changes in equity and the cash flow statement. Explanations of major variances are those within the control of the department.

Major variances

An adjustment of $0.5 million was made to employee benefits and provisions reflecting a change to the calculation of long-service leave liabilities to ensure consistency with other Commonwealth agencies. This adjustment was offset by $0.7 million due to a number of long-serving employees retiring and bond rate movements.

The higher balance for property, plant and equipment reflects the commencement of the replacement of departmental office furniture.

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