This section analyses the Attorney-General's Department'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.

6.1 Financial assets ¹

Accounting Policy

Cash and cash equivalents includes cash on hand, cash held with outsiders, demand 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.

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.

Credit terms for goods and services are 30 days (2019: 30 days).

The department is exposed to minimal credit risk as loans and receivables are cash and trade receivables. The maximum exposure to credit risk is the risk that arises from potential default of a debtor. This amount is equal to the total amount of trade receivables of $40,470,918 in 2020 (2019: $47,830,728). The department has assessed the risk of default on payment and has allocated $2,145,649 in 2020 (2019: $1,012,023) to an impairment allowance account. This amount has been determined following an assessment of invoices greater than 90 days past due.

6.2 Non-financial assets ¹

No indicators of impairment were found for land, buildings, property, plant and equipment and intangibles.

No land, buildings, other property, plant and equipment and intangibles are expected to be sold or disposed of within the next 12 months.

Revaluations of non-financial assets

Land and buildings

All revaluations were undertaken in accordance with the revaluation policy stated below. In 2020 there was a nil increment (2019: nil increment) for land; a nil increment (2019: nil increment) for buildings on freehold land; and a nil increment (2019: nil increment) for leasehold improvements that were credited to the asset revaluation surplus by asset class and included in the equity section of the statement of financial position.

Property, plant and equipment

All revaluations were undertaken in accordance with the revaluation policy stated below. In 2020 there was a nil increment (2019: nil increment) for heritage and cultural; and a nil increment (2019: nil increment) for property, plant and equipment that was credited against the asset revaluation surplus by asset class and included in the equity section of the statement of financial position.

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

Contractual commitments for the acquisition of property, plant, equipment and intangibles of $3.796m are payable within one year (2019: $1.320m) and nil are payable within one to five years (2019: $0.318m).

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 amount at which they were recognised in the transferor agency’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 'makegood' cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant in property leases taken up by the department where there exists an obligation to restore the property to its original condition. These costs are included in the value of leasehold improvements with a corresponding provision for the ‘makegood’ recognised.

Lease Right of Use (ROU) Assets

Lease ROU assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received. These assets are accounted for by Commonwealth lessees as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

On initial adoption of AASB 16 the department has adjusted the ROU assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any right of use lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition in the Whole of Government financial statements.

Revaluations

Following initial recognition at cost, property, plant and equipment (excluding ROU assets) 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 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 department using, in all cases, the straight-line method of depreciation. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease.

The library assets which have been recognised as heritage assets are not depreciated, and all other library acquisitions are expensed in the year of acquisition.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable departmental asset are based on the following useful lives:

Impairment

All assets were assessed for impairment at 30 June 2020. 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.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further economic benefits are expected from its use or disposal.

Heritage and cultural

Heritage and cultural items include items that are of national, historical or cultural significance.

Heritage and cultural asses are stored and managed in ways to preserve their heritage and cultural value over time. The department’s conservation and preservation policies include binding loose parts into bound volumes, secure storage of significant items thereby limiting distribution and restoration of items.

Intangibles

The department’s intangibles comprise internally developed software and purchased software for internal use which cost more than $20,000. 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 intangibles are 3 to 5 years (2018-19: 3 to 5 years).

All software assets were assessed for indications of impairment at 30 June 2020.

6.2B: Fair value measurement

Accounting policy

Each year the department retains the services of an independent valuer to undertake a review of non-financial assets to determine whether there is a material difference between the carrying amount in the financial statements and the fair value. A formal revaluation is undertaken once every three years. If a particular asset class experiences significant and volatile changes in fair value (i.e. where indicators suggest that the value of the class has changed materially since the previous reporting period), that class is subject to specific valuation in the reporting period, where practicable, regardless of the timing of the last specific valuation.

The department did not measure any non-financial assets at fair value on a non-recurring basis as at 30 June 2020 (2019: nil).

There have been no changes to valuation techniques from the previous reporting period.

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

6.3A Payables

Supplier payables are expected to be settled in no more than 12 months.

Settlement is usually made net 30 days.

6.4 Interest bearing liabilities

Total cash outflow for lease liabilities excluding low value and short term leases for the year ended 30 June 2020 was $26.080m.

Accounting Policy

Refer Overview section for accounting policy on leases.

6.5 Other provisions