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Overview

Objectives of the Australian Electoral Commission
The Australian Electoral Commission (AEC) is an Australian Government controlled entity. It is a not-for-profit entity. The objective of the AEC is to maintain an impartial and independent electoral system for eligible voters through active electoral roll management, efficient delivery of polling services and targeted education and public awareness programs.

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:
(a) Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
(b) 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 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.

New accounting standards

All new/revised/amending standards and/or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect on the AEC’s financial statements . The following new standards were adopted by the AEC:

Standard/ Interpretation

Nature of change in accounting policy, transitional provisions, and adjustment

to financial statements

AASB 15 Revenue from

Contracts with Customers /

AASB 2016-8 Amendments

to Australian Accounting

Standards – Australian

Implementation Guidance

for Not-for-Profit Entities

and AASB 1058 Income of

Not-For-Profit Entities

AASB 15, AASB 2016-8 and AASB 1058 became effective 1 July 2019.

AASB 15 establishes a comprehensive framework for determining whether, how

much and when revenue is recognised. It replaces existing revenue recognition

guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and

Interpretation 13 Customer Loyalty Programmes. The core principle of AASB 15

is that an entity recognises revenue to depict the transfer of promised goods or

services to customers in an amount that reflects the consideration to which the

entity expects to be entitled in exchange for those goods or services.

AASB 1058 is relevant in circumstances where AASB 15 does not apply. AASB

1058 replaces most of the not-for-profit (NFP) provisions of AASB 1004

Contributions and applies to transactions where the consideration to acquire an

asset is significantly less than fair value principally to enable the entity to further

its objectives, and where volunteer services are received.

The details of the changes in accounting policies, transitional provisions and

adjustments are disclosed below and in the relevant notes to the financial

statements.

AASB 16 Leases

AASB 16 became effective on 1 July 2019.

This new standard has replaced AASB 117 Leases, Interpretation 4 Determining

whether an Arrangement contains a Lease, Interpretation 115 Operating

Leases—Incentives and Interpretation 127 Evaluating the Substance of

Transactions Involving the Legal Form of a Lease.

AASB 16 provides a single lessee accounting model, requiring the recognition of

assets and liabilities for all leases, together with options to exclude leases where

the lease term is 12 months or less, or where the underlying asset is of low

value. 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 15 Revenue from Contracts with Customers / AASB 1058 Income of Not-For-Profit Entities

The AEC adopted AASB 15 and AASB 1058 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, that is, it is presented as previously reported under the various applicable AASBs and related interpretations. No opening balance adjustments have been made as a result of the application of AASB 15 as no material difference was identified in the prior year.

Under the new income recognition model the AEC shall first determine whether an enforceable agreement exists and whether the promises to transfer goods or services to the customer are ‘sufficiently specific’. If an enforceable agreement exists and the promises are ‘sufficiently specific’ (to a transaction or part of a transaction), the AEC applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, the AEC shall consider whether AASB 1058 applies.

In relation to AASB 15, the AEC elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The AEC is required to aggregate the effect of all of the contract modifications that occur before the date of initial application. No opening balance adjustments have been made as a result of the application of AASB 15.

In terms of AASB 1058, the AEC is required to recognise volunteer services at fair value if those services would have been purchased if not provided voluntarily, and the fair value of those services can be measured reliably.

On transition the amounts prepared under AASB 15 and AASB 1058 are materially similar had AASB 15 and AASB 1058 not been adopted and as a consequence no transitional adjustment has been made.

Set out below are the amounts by which each financial statement line item is affected as at and for the year ended 30 June 2020 as a result of the adoption of AASB 15 and AASB 1058. The first column shows amounts prepared under AASB 15 and AASB 1058 and the second column shows what the amounts would have been had AASB 15 and AASB 1058 not been adopted:

Transitional disclosure

AASB 15 / AASB 1058

Previous AAS

Increase / (decrease)

$'000

$'000

$'000

Revenue

Rendering of services

-

4,033

(4,033)

Total Revenue

-

4,033

(4,033)

Net (cost of) / contribution by services

-

4,033

(4,033)

Liabilities

Other Liabilities

4,033

-

4,033

Total Liabilities

4,033

-

4,033

Retained earnings

(4,033)

-

(4,033)

The reason for the significant changes identified above is due to the timing differences in recording of revenue received from Department of Foreign Affairs and Trade under AASB 15 compared to previous AAS. Under AASB 15 a performance obligation must be completed before the recording of contract revenue. No opening balance adjustments have been made as a result of the application of AASB 15 as no material difference was identified in the prior year.

Application of AASB 16 Leases
The AEC 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, that is, it is presented as previously reported under AASB 117 and related interpretations.

The AEC 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 AEC applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases

  • Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
  • Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date;
  • Reliance 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
  • 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.

As a lessee, the AEC 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 AEC recognises right-of-use assets and lease liabilities for most leases. However, the AEC has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.
On adoption of AASB 16, the AEC recognised right-of-use assets and lease liabilities in relation to leases of office space, heavy equipment and automobiles, which had previously been classified as operating leases.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using the AEC’s incremental borrowing rate as at 1 July 2019. The AEC’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 as follows:
a) Office space: measured at an amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments.
b) All other leases: the carrying value that would have resulted from AASB 16 being applied from the commencement date of the leases, subject to the practical expedients noted above.

Impact on transition

On transition to AASB 16, the AEC recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:

Departmental

1 July 2019

Right-of-use assets - property, plant and equipment

$75,412

Lease liabilities

$75,412

Retained earnings

0

The following table reconciles the Departmental minimum lease commitments disclosed in the AEC's 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

$36,486

Less: short-term leases not recognised under AASB 16

$4,619

Less: low value leases not recognised under AASB 16

-

Plus: effect of extension options reasonable certain to be exercised

$79,571

Undiscounted lease payments

$111,439

Less: effect of discounting using the incremental borrowing rate as at the date of initial application (1.1%)

$36,027

Lease liabilities recognised at 1 July 2019

$75,412

Taxation

The AEC 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.

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.
The implementation of AASB 16 has had no impact on administered activities.

Events after the reporting period

Departmental

There are no events after the reporting date that will materially affect the financial statements.

Administered

There are no events after the reporting date that will materially affect the financial statements.