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Note 6: Financial Position

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

6.1A: Cash and cash equivalents

2021

2020

6.1A: Cash and cash equivalents

Notes

$'000

$'000

Cash on hand or on deposit

10,463

16,271

Total cash and cash equivalents

10,463

16,271

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.

6.1B: Trade and other receivables

6.1B: Trade and other receivables

Goods and services receivables

Goods and services

43,407

40,470

Appropriations receivable

Existing programs

164,944

132,725

Other receivables

Statutory receivables

1,555

1,519

Other

142

114

Total other receivables

1,697

1,633

Total trade and other receivables (gross)

210,048

174,828

Less impairment allowance

Goods and services

(1,591)

(2,146)

Total trade and other receivables (net)

208,457

172,682

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 (2020: 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 $43,407,447 in 2021 (2020: $40,470,918). The department has assessed the risk of default on payment and has allocated $1,591,282 in 2021 (2020: $2,145,649) 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

6.2A: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles

Land

Buildings

Leasehold improvements

Heritage and cultural 1

Plant & equipment

Intangibles - computer software 2

Total

$'000

$'000

$'000

$'000

$'000

$'000

$'000

As at 1 July 2020

Gross book value

1,600

420

393,569

3,774

46,307

75,518

521,188

Accumulated depreciation, amortisation and impairment

(40)

(40,204)

(24,526)

(56,969)

(121,739)

Total as at 1 July 2020

1,600

380

353,365

3,774

21,781

18,549

399,449

Additions

By purchase

5,098

4,586

76

9,760

Internally developed

13,904

13,904

Right-of-use assets

1,754

1,754

Revaluations and impairments recognised in other comprehensive income

900

(360)

(1,752)

(934)

176

(1,970)

Revaluation decrements recognised in net cost of services

(39)

(39)

Depreciation and amortisation

(20)

(9,768)

(4,424)

(6,015)

(20,227)

Depreciation on right-of-use assets

(27,854)

(694)

(28,548)

Other movements 3

(13,532)

(65)

(13,597)

Disposals

Other

(43)

(43)

Total as at 30 June 2021

2,500

307,311

2,840

21,278

26,515

360,444

Total as at 30 June 2021 represented by

Gross book value

2,500

354,606

2,840

40,157

87,655

487,758

Accumulated depreciation, amortisation and impairment

(47,295)

(18,879)

(61,140)

(127,314)

Total as at 30 June 2021

2,500

307,311

2,840

21,278

26,515

360,444

Carrying amount of right-of-use assets

275,410

7,796

283,206

1. Land, buildings and plant and equipment that meet the definition of a heritage and cultural item are disclosed in the heritage and cultural asset class.

2. The carrying amount of computer software included $1.063m (2020: $0.693m) for purchased software and $25.452m (2020: $17.856m) for internally developed software.

3. Other movements reflect the transfer of fitout and right-of-use assets at the National Operations Centre, Symonston, ACT to another Government agency at no cost.

No indicators of impairment were found for land, buildings, leasehold improvements, plant and equipment, heritage and cultural and intangibles.

No land, buildings, leasehold improvements, plant and equipment, heritage and cultural and intangibles are expected to be sold or disposed of within the next 12 months.

Revaluations of non-financial assets
Land and buildings (including leasehold improvements)
All revaluations were undertaken in accordance with the revaluation policy stated below. In 2021, there was a $0.900m increment (2020: nil increment) for land; a $0.360m decrement (2020: nil increment) for buildings on freehold land; and a $1.752m decrement (2020: nil increment) for leasehold improvements that were credited to the asset revaluation reserve by asset class and included in the equity section of the statement of financial position.

Heritage and cultural
All revaluations were undertaken in accordance with the revaluation policy stated below. In 2021, there was a $0.934m decrement (2020: nil increment) for heritage and cultural.

Plant and equipment
All revaluations were undertaken in accordance with the revaluation policy stated below. In 2021, a $0.137m increment (2020: nil increment) for plant and equipment that was credited against the asset revaluation reserve by asset class and included in the equity section of the statement of financial position.

On 30 June 2021, Public Private Property Pty Ltd conducted the revaluations.

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

Contractual commitments for the acquisition of property, plant, equipment and intangibles of $2.122m are payable within one year (2020: $3.796m) and nil are payable within one to five years (2020: nil).

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
Leased ROU assets are capitalised at the commencement date of the lease and comprise 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. Leased ROU assets continue to be measured at cost after initial recognition in the department’s financial statements.

Revaluations
Following initial recognition at cost, property, plant and equipment and heritage and cultural (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:

2021

2020

Buildings on freehold land

2550 years

25–50 years

Leasehold improvements

Lease term

Lease term

Plant and equipment

310 years

3–10 years

Impairment

All assets were assessed for impairment at 30 June 2021. 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 assets 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 (2019–20: 3 to 5 years).

All software assets were assessed for indications of impairment at 30 June 2021.

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 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.

Fair value measurements at the end of the reporting period

2021

2020

$'000

$'000

Non-financial assets

Land

2,500

1,600

Buildings on freehold land

380

Leasehold improvements

31,901

39,323

Plant and equipment

13,480

13,290

Heritage and cultural (Library)

2,840

3,774

Total non-financial assets

50,721

58,367

Total fair value measurements

50,721

58,367

The department did not measure any non-financial assets at fair value on a non-recurring basis as at 30 June 2021 (2020: nil).

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

6.2C: Other non-financial assets

2021

2020

$'000

$'000

6.2C: Other non-financial assets

Prepayments

6,004

5,376

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

6.3 Payables

6.3A: Suppliers

2021

2020

$'000

$'000

6.3A: Suppliers

Trade creditors and accruals

5,302

3,370

Accrued payables

9,517

12,432

Total suppliers

14,819

15,802

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

Settlement is usually made net 30 days.

6.3B: Other payables

2021

2020

$'000

$'000

6.3B: Other payables

Wages and salaries

8,585

7,647

Other employee payables

1,131

687

Unearned income

11,752

12,736

Total other payables

21,468

21,070

6.4 Interest bearing liabilities

6.4A: Leases

6.4A: Leases

Lease liabilities

295,812

329,265

Total leases

295,812

329,265

Maturity analysis - contractual undiscounted cash flows

Within 1 year

24,140

26,450

Between 1 to 5 years

104,973

100,750

More than 5 years

188,990

226,624

Total leases

318,103

353,824

Total cash outflow for lease liabilities excluding low value and short term leases for the year ended 30 June 2021 was $27.109m (2020: $26.080m).

Accounting Policy
For all new contracts entered into, the department considers whether the contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.

Once it has been determined that a contract is, or contains a lease, the lease liability is initially measured at the present value of the lease payments unpaid at the commencement date, discounted using the interest rate implicit in the lease, if that rate is readily determinable, or the department’s incremental borrowing rate.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification to the lease. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset or profit and loss depending on the nature of the reassessment or modification.

6.5 Other provisions

6.5A: Makegood provisions

2021

2020

$'000

$'000

6.5A: Makegood provisions

Provision for restoration obligations

720

722

Provision for restoration

Total

$'000

$'000

As at 1 July 2020

722

722

Unwinding of discount or change in discount rate

(2)

(2)

Total as at 30 June 2021

720

720