The Australian Competition and Consumer Commission (ACCC) is an Australian Government controlled not-for-profit entity whose role is to enforce the Competition and Consumer Act 2010 and a range of additional legislation, promoting competition, fair trading and regulating national infrastructure for the benefit of all Australians.
The Basis of Preparation
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 have been prepared in accordance with:
Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); 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 in accordance with the historical cost convention, except for certain assets and liabilities 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.
Significant Accounting Judgements and Estimates
In the process of applying the accounting policies listed in these statements the Commission has made assumptions or estimates in the following areas that have the most significant impact on the amounts recorded in the financial statements:
With the exception of right-of-use assets that are carried at cost, the fair value of property, plant and equipment (PP&E) is assessed at market or depreciated replacement cost as determined by an independent valuer and is subject to ongoing assessment by the valuer and management between formal valuations. The real estate market continues to be impacted by uncertainty surrounding the outbreak of COVID-19. A desktop valuation conducted by an independent valuer was used at 30 June 2020 to confirm the fair value of the Commission’s PP&E at reporting date. Due to higher levels of market uncertainty the fair value of PP&E after reporting date may be subject to change over a relatively short period of time, depending on further impacts of COVID-19 on the Australian economy and real estate sector.
Lease liabilities are discounted using the interest rate implicit in the lease. Where the implicit rate cannot be readily determined the discount rate is based on zero coupon bond yields. The discount rate is established on lease commencement and is not changed during the lease term unless there has been a modification to the lease that impacts the remaining lease payments.
Leave provisions involve assumptions based on the expected tenure of existing staff, patterns of leave claims and payout, future salary movements and future discount rates. Leave liabilities have been determined by reference to the work of an actuary as at 30 June 2018 and are subject to ongoing assessment by management.
Litigation provisions have been determined by management based on its best estimate of the expenditure required to settle obligations at reporting date. In determining this amount management uses a combination of available information and past experience to identify a range of possible outcomes. Provisions are established at the highest potential cost outcome where there is a considerable chance that option could eventuate. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate.
Other than those matters discussed above, 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 reporting period.
The Commission is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).
Reporting of Administered activities
Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.
Administered revenue is generated from fines and costs applied by the courts, or by agreement between the Commission and the defendant. It is recognised when awarded by the courts, or when agreement has been executed. The court costs awarded against the Commission are recorded as a departmental expense.
Authorisation and notification fees are applied when required under the relevant legislation, and are recognised upon receipt. Administered fee revenue is recognised at its nominal amount due less any allowance for bad or doubtful debts. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collection of the debt is judged to be less rather than more likely.
Except where otherwise stated, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.
New Accounting Standards
AASB 16 Leases became effective on 1 July 2019 which has resulted in a material impact on the Commission's financial statements.
AASB 16 represents a fundamental shift in the way lessees account for leasing transactions, replacing the existing requirements under AASB 117 Leases. AASB 16 introduces a single accounting model for lessees, requiring the recognition of assets and liabilities for all leases, unless the lease term is less than 12 months or the underlying assets are of low value (e.g. less than $10,000). AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained.
The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.
Application of AASB 16 Leases
The Commission has adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated.
The Commission has elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.
AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Commission applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:
The Commission has relied on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of Assets as at the date of initial application; and
The Commission has applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application. Where this has been applied the remaining lease payments have been recognised and disclosed as a short-term lease.
As a lessee, the Commission previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, the Commission recognises right-of-use assets and lease liabilities for most leases. However, the Commission has elected not to recognise right-of-use assets and lease liabilities where the value of the underlying asset is less than $10,000 or the lease has a term of 12 months or less.
On adoption of AASB 16, the Commission recognised right-of-use assets and lease liabilities in relation to leases of office and data centre space that had previously been classified as operating leases.
The lease liabilities were measured at the present value of the remaining lease payments, discounted using the Commission’s incremental borrowing rate as at 1 July 2019. The Commission’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 1.1%.
The right-of-use assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid rent.
Impact on transition
On transition to AASB 16, the Commission recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:
1 July 2019
Initial recognition - Right-of-use assets
Initial recognition - Lease liabilities
Initial recognition - Net investment in sublease
Reversal of 30 June 2019 lease balances recognised under AASB 117
The following table reconciles the Departmental minimum lease commitments disclosed in the 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:
1 July 2019
Minimum operating lease commitment at 30 June 2019
Less: GST included in reported lease commitments
Less: short-term leases not recognised under AASB 16
Less: leases included in commitments that did not commence until 2019-20
Less: other adjustments on transition
Undiscounted lease payments
Less: effect of discounting using the incremental borrowing rate as at the date of initial application
Lease liabilities recognised at 1 July 2019
Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as revenue when the Commission 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.
The Commission manages a Services for Other Entities and Trust Moneys Special Account established by Financial Management and Accountability (Establishment of Special Account for Australian Competition and Consumer Commission) Determination 2011/02, issued under section 78 of the Public Governance, Performance and Accountability Act 2013.
For both the current and comparative periods the Special Account had a balance of $54,377 and there were no transactions debited or credited to it during either period. Cash and cash equivalents presented in the financial statements do not include amounts held within the Special Account.
The purpose of the Special Account is for:
(a) amounts to be held on trust or otherwise for the benefit of a person other than the Commonwealth;
(b) amounts received in the course of the performance of functions that relate to the purpose of the Services for Other Entities and Trust Moneys - Australian Competition and Consumer Commission Special Account;
(c) amounts received from any person for the purposes of the Services for Other Entities and Trust Moneys - Australian Competition and Consumer Commission Special Account; and
(d) amounts to be held on trust or otherwise for the benefit of a person other than the Commonwealth.
The Commissions financial assets consist of cash and goods and services receivable. Financial assets are recognised when the Commission becomes party to the contract and has a legal right to receive cash. Financial assets are derecognised when the contractual rights to cash flows expire or are transferred. The Commission classifies its financial assets as 'financial assets at amortised cost' with income recognised using the effective interest rate method.
Financial liabilities, consisting of trade payables, are initially measured at fair value net of transaction costs. Trade payables are recognised to the extent the goods and services have been received. Financial liabilities are derecognised upon payment.
The Commission is an Australian Government controlled entity. Related parties to this entity are Key Management Personnel including the Portfolio Minister and other Australian Government entities.
Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the Commission, it has been determined that there are no related party transactions to be separately disclosed.
Annual carrier licence charges are imposed under the Telecommunications (Carrier Licence Charges) Act 1997 on participating telecommunication carriers under cost recovery arrangements to recover the costs incurred by the Commission, the Australian Communications and Media Authority (ACMA) and the Australian Government in regulating the telecommunications industry. ACMA undertakes the regulatory charging activity, recovering the Commission's costs on behalf of the Commonwealth. The Commission does not receive any monies direct from external parties.
The departmental costs incurred by the Commission are met out of appropriation funding. The Commission's costs being recovered by ACMA in 2019-20, subject to finalisation of the Telecommunications (Carrier Licence Charges) Act 1997 Determination, totals $11,878,541 (2019: $13,295,863). This cost includes components for the Measuring Broadband Australia program of $1,702,406 (2019: $1,531,854) and depreciation expense of $0.3m (2019: $0.4m), the latter of which is not appropriation funded.
The Cost Recovery Impact Statement for the above activity is available at: https://www.acma.gov.au/cost-recovery-implementation-statement-cris