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Notes to the Financial statements:

Financial Performance

This section analyses the financial performance of the AAT for the year ended 30 June 2019.

Financial Performance

1.1 Expenses

2019

2018

$’000

$’000

1.1A: Employee benefits

Wages and salaries

90,640

83,728

Superannuation

Defined contribution plans

8,651

7,348

Defined benefit plans

6,352

6,809

Leave and other entitlements

9,119

7,459

Separation and redundancies

91

1,648

Total employee benefits

114,853

106,992

Accounting policy

Accounting policies for employee related expenses are contained in Note 6.1A of the People and relationships section.

1.1B: Suppliers

Goods and services supplied or rendered

Property operating

5,603

5,554

IT services

3,218

2,773

Hearing related

2,877

2,773

Contractors

6,932

2,355

Travel

1,756

1,890

Subscriptions

1,318

1,291

Outsourced services

1,518

1,444

Consultants

1,566

1,054

Office support

745

892

Training & development

708

746

Other

1,445

1,157

Total goods and services supplied or rendered

27,686

21,929

Goods supplied

1,030

787

Services rendered

26,656

21,142

Total goods and services supplied or rendered

27,686

21,929

Other suppliers

Operating lease rentals

11,946

12,995

Workers compensation expenses

197

156

Total other suppliers

12,143

13,151

Total suppliers

39,829

35,080

Leasing commitments

AAT in its capacity as lessee holds commercial office accommodation leases in Canberra, Sydney, Melbourne, Brisbane, Adelaide and Perth where lease payments are subject to fixed or market review increases as listed in the lease agreements. No commitment is recorded in relation to the AAT's occupancy of the Commonwealth-owned law courts in Hobart, which are occupied under a memorandum of understanding with the Department of Finance.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within 1 year

18,460

18,685

Between 1 to 5 years

73,528

72,027

More than 5 years

38,512

56,342

Total operating lease commitments

130,500

147,054

Accounting policy

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

1.1C: Write-down and impairment of assets

Impairment of property, plant and equipment

-

(490)

Total write-down and impairment of assets

-

(490)

1.1D: Other expenses

Onerous lease expense

-

2,373

Total other expenses

-

2,373

1.2 Own-source revenue and gains

2019

2018

$’000

$’000

Own-source revenue

1.2A: Sale of goods and rendering of services

Rendering of services

691

831

Total sale of goods and rendering of services

691

831

Accounting policy

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The stage of completion is determined by reference to services performed to date as a percentage of total services to be performed.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance. Collectability of debts is reviewed at the end of each reporting period. Allowances are made when collectability of the debt is no longer probable.

1.2B: Other revenue

Remuneration of auditors

82

80

Total other revenue

82

80

Gains

1.2C: Other gains

Resources received free of charge

88

173

Liabilities assumed by other departments

416

352

Total other gains

504

525

Accounting policy

Resources received free of charge

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

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 entity as a consequence of a restructuring of administrative arrangements.

1.2D: Revenue from government

Appropriations

Departmental appropriations

163,468

152,450

Total revenue from government

163,468

152,450

Accounting policy

Revenue from government

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as revenue from Government when the entity 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.

Income and Expenses Administered on Behalf of Government

This section analyses the activities that the AAT does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

2.1 Administered - expenses

2019

2018

$'000

$'000

2.1: Other expenses

Refund of application fees

6,772

5,020

Bad debts expense

4,092

4,288

Total other expenses

10,864

9,308

2.2 Administered - income

2019

2018

$'000

$'000

Revenue

2.2: Other revenue

Application fees

49,358

49,749

Total other revenue

49,358

49,749

Accounting policy

Application fees

Application fees are payable to the AAT at the time of lodgement of an application and recognised as revenue in the Administered Schedule of Comprehensive Income upon receipt of the fee. The adoption of AASB 15 from 1 July 2019 requires the AAT to recognise application fees as revenue only when a final decision has been made and the case is finalised (i.e. AAT has fulfilled its performance obligation).

Financial Position

This section analyses AAT's assets used to conduct its operations and the operating liabilities incurred as a result.
Employee related information is disclosed in the People and Relationships section.

3.1 Financial assets

2019

2018

$’000

$’000

3.1A: Cash and cash equivalents

Cash on hand or on deposit

1,144

363

Total cash and cash equivalents

1,144

363

3.1B: Trade and other receivables

Goods and services receivables

Goods and services

279

600

Total goods and services receivables

279

600

Appropriations receivables

Appropriation receivable

87,026

80,741

Total appropriations receivables

87,026

80,741

Other receivables

Statutory receivables

895

636

Total other receivables

895

636

Total trade and other receivables (gross)

88,200

81,977

Total trade and other receivables (net)

88,200

81,977

Credit terms for goods and services were within 30 days (2018: 30 days).

Accounting policy

Financial assets

Trade receivables, loans and other receivables that are held for the purpose of collecting the contractual cash flows where the cash flows are solely payments of principal and interest, that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

3.2 Non-financial assets

3.2A: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles

Buildings

Plant and equipment

Computer Software

Total

$’000

$’000

$’000

$’000

As at 1 July 2018

Gross book value

50,854

4,641

22,594

78,089

Accumulated depreciation, amortisation and impairment

-

-

(17,826)

(17,826)

Total as at 1 July 2018

50,854

4,641

4,768

60,263

Additions

Purchases

4,496

1,383

2,000

7,879

Revaluations and impairments recognised in other comprehensive income

(1,194)

243

-

(951)

Reversal of impairments recognised in net cost of services

-

-

-

-

Depreciation and amortisation

(6,270)

(2,154)

(2,042)

(10,466)

Disposals

Other

-

(9)

(9)

Total as at 30 June 2019

47,886

4,104

4,726

56,716

Total as at 30 June 2019 represented by

Gross book value

55,350

6,267

24,594

86,211

Accumulated depreciation, amortisation and impairment

(7,464)

(2,163)

(19,868)

(29,495)

Total as at 30 June 2019

47,886

4,104

4,726

56,716

As the AAT does not own any buildings, the building category consists of leasehold improvements.

Revaluations of non-financial assets

All revaluations were conducted in accordance with the revaluation policy. On 30 June 2019, an independent valuer conducted the revaluations. Total revaluation decrease recognised in other comprehensive loss is $0.951m. (2018: revaluation increase recognised in other comprehensive income is $0.087m).

Contractual commitments for the acquisition of property, plant, equipment and intangible assets

As at the reporting date, the AAT has no contractual commitments for the acquisition of leasehold improvements, property, plant and equipment.

Accounting policy

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’s accounts immediately prior to the restructuring.

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 $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 ‘make good’ provisions taken up by the entity where there exists an obligation to restore the property to its original condition. These costs are included in the value of the entity's leasehold improvement with a corresponding provision for the ‘make good’ recognised.

Revaluations
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 did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depended 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 reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. 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.

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 property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the entity 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:

2019

2018

Leasehold improvements

Lessor or

estimated useful

life and lease term

Lessor or

estimated useful

life and lease term

Plant and

equipment

3 to 20 years

3 to 20 years

Impairment

All assets were assessed for impairment at 30 June 2019. 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 of disposal 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 entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

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.

Intangibles

The entity's intangibles comprise internally developed 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 entity's software are 3 to 20 years (2018: 3 to 20 years).

All software assets were assessed for indications of impairment as at 30 June 2019.

Accounting judgements and estimates

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

- the fair value of property, plant and equipment has been taken to be fair value of similar assets as determined by an independent valuer.

2019

2018

$’000

$’000

3.2B: Other non-financial assets

Prepayments

4,789

2,108

Total other non-financial assets

4,789

2,108

No indicators of impairment were found for other non-financial assets.

3.3 Payables

2019

2018

$’000

$’000

3.3A: Suppliers

Trade creditors and accruals

2,401

1,775

Total suppliers

2,401

1,775

Settlement was usually made within 30 days.

3.3B: Other payables

Salaries and wages

736

1,112

Lease incentives

35,671

29,622

Total other payables

36,407

30,734

Accounting judgements and estimates

The AAT received incentives in the form of rent free periods and contributions on entering operating leases. Lease incentives are amortised on a straight line basis which is representative of the pattern of benefits derived.

3.4 Other provisions

3.4A: Other provisions

Onerous contract provision

Provision for restoration

Total

$'000

$'000

$'000

As at 1 July 2018

2,734

588

3,322

Additional provisions made

-

-

-

Amounts used

(2,182)

15

(2,167)

Unwinding of discount or change in discount rate

-

-

-

Total as at 30 June 2019

552

603

1,155

Accounting judgements and estimates

Provision for restoration

The AAT is required to restore two (2018: 2) of its leased commercial office accommodation to their original condition at the conclusion of the leases. The AAT has made a provision to reflect the present value of the anticipated future costs. The calculation of this provision requires assumptions in determining the costs required to restore the premises to their original condition, which, because of the long-term nature of the liability, is the most significant uncertainty. This uncertainty may result in future actual expenditure differing from amounts currently provided. The provision recognised is reviewed annually and updated based on the facts and circumstances known at the time.

Onerous contract provision

Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the AAT has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, it is probable that the AAT will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the obligation as at the end of the reporting period, taking into account the risks and uncertainties.