1. Funding

This section identifies the AEC's funding structure and the funds available to the AEC.

1.1 Revenue from Government

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 AEC 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.

1.2 Own-Source Revenue and Gains

Accounting Policy

AEC classifies goods and service based agreements as within the scope of AASB 15 when all the following conditions are satisfied:

• There is an agreement that has been approved by all parties to the agreement;
• The obligations of each party under the agreement can be identified;
• A pattern of transfer of services can be identified;
• The agreement has commercial substance;
• It is highly probable that AEC will collect the payments.

AEC recognises goods and services revenue within the scope of AASB 15 either at a point in time when the performance obligation has been completed or over time with proportionate recognition over the period of the agreement. Consideration can be received in advance of the performance obligation being fufilled in which case an unearned revenue liability is raised in relation to those performance obligations (refer note 2.4A).

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

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.

1.3 Special Accounts

1.4 Net Cash Appropriation Arrangements

From 2010-11, the Government introduced net cash appropriation arrangements where revenue appropriations for depreciation/amortisation expenses of non-corporate Commonwealth entities and selected corporate Commonwealth entities were replaced with a separate capital budget provided through equity injections. Capital budgets are to be appropriated in the period when cash payment for capital expenditure is required.

The AEC's ongoing annual funding model presumes a federal election is conducted solely within a financial year and does not consider the variable nature of the timing of an event e.g. the 2019 Federal Election was held in May 2019 where election expenses were incurred both in the 2018-19 and 2019-20 financial year. As a result the AEC may report an operating loss due to the timing of expenditure relating to electoral events.

The inclusion of depreciation/amortisation expenses related to ROU leased assets and the lease liability principal repayment amount reflects the impact of AASB 16 Leases, which does not directly reflect a change in appropriation arrangements.

Departmental financial position

This section analyses the AEC's assets used to conduct its operations and the operating liabilities incurred as a result and how the AEC manages financial risks related to these, and its operating environment. Employee related information is disclosed in the People and Relationships section.

2.1 Cash and cash equivalent

Accounting Policy

Cash is recognised at its nominal amount.

2.2 Trade and other receivables

Credit terms for goods and services were within 30 days (2020: 30 days). Refer to note 5.1 for accounting policy. Impairment allowance for the period has increased to $0.031 million (2020: $0.011 million) has been recognised in relation to loans and receivables and included in the net cost of service. $0.097 million (2020: $0.012 million) has been written off.

Accounting Policy

Financial assets

Financial Assets at Amortised Cost

Financial assets included in this category need to meet

1. The financial asset is held in order to collect the
2. The cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest method.

Effective Interest Method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12-month expected credit

The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write - off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

2.3A: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles

Revaluations of non-financial assets

All revaluations were conducted in accordance with the revaluation policy stated in this note. On 30 June 2021, an independent valuer conducted the revaluations.

A revaluation increment of $0.663m for leasehold improvements (2020: $0.543m increment) and $1.187m for plant and equipment (2020: $0.340m increment) was credited to 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

At 30 June 2021 there were no significant contractual commitments for the acquisition of property, plant, equipment and intangible assets.

Fair Value Measurement

At 30 June 2021, Leasehold Improvement and Property, Plant and Equipment Assets were measured at fair value. All Right Of Use Lease Assets and Intangibles are measured at cost.

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

Lease Right of Use (ROU) Assets

Leased 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 AEC 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 AEC's financial statements.

Revaluations

Following initial recognition at cost, 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 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 reversed 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 plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the AEC, 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:

The depreciation rates for ROU assets are based on the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term.

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 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 AEC were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

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

Intangibles

The AEC's intangibles comprise internally developed software and purchased software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets are amortised on a straight-line basis over its anticipated useful life. The useful lives of the AEC's software are 1 to 10 years (2020: 1 to 10 years)

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

2.4A: Other Payables

Accounting Policy

Unearned revenue

AEC expects to recognise as income any liability for unsatisfied obligations associated with revenue from contracts with customers within the next 12 months.

Parental Leave Payments Scheme

Amounts received under the Parental Leave Payments Scheme by the AEC not yet paid to employees were presented as cash and a liability (payable). The total amount received under this scheme was $0.140 million (2020: $0.082 million).

Employee Benefits

Refer to Note 3.1.

2.4B: Provision for restoration

Accounting judgements and estimates

For the property leases where the AEC has an obligation to restore the premises to their original condition, AEC assesses the value of the provision for restoration in line with the relevant clauses of the lease, based on estimated costs per square metre provided by the Australian Government property manager. The AEC revalues the provision at the end of each financial year to reflect the present value of this obligation.

2.5 Interest Bearing Liabilities

Total cash outflow for leases for the year ended 30 June 2021 was $15.503m (2020: $12.693 million)

Accounting Policy

For all new contracts entered into, the AEC 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.

2.6 Contingent Assets and Liabilities

Quantifiable Contingencies

At 30 June 2021, the AEC had no contingent assets (2020: $0.170m) and no contingent liabilities (2020: nil).

Unquantifiable Contingencies

At 30 June 2021, the AEC had no unquantifiable contingencies (2020: nil).

Significant Remote Contingencies

The AEC has no significant remote contingencies (2020: nil).

2.6B Administered - Contingent Assets and Liabilities

There are no administered contingencies, remote or quantifiable, for the AEC (2020: nil).

Accounting Policy

Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

People and relationships

This section describes a range of employment and post employment benefits provided to our people and our relationships with other key people.

3.1 Employee Benefits

Accounting policy

Liabilities for short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts.

Other long-term employee benefits are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. The leave liabilities are calculated on the basis of employees' remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the entity's superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by reference to the shorthand method as at 30 June 2021. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Superannuation

The AEC's staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes.

The AEC makes employer contributions to the employees' defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The AEC accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

3.2 Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the AEC, directly or indirectly, including any director (whether executive or otherwise) of the AEC. The AEC has determined the key management personnel to be the Electoral Commissioner, Deputy Electoral Commissioner and the three First Assistant Commissioners. Key management personnel remuneration is reported in the table below:

3.3 Related Party Disclosures

Related party relationships

The AEC is an Australian Government controlled entity. Related parties to the AEC are Key Management Personnel, the Portfolio Minister and Executive, and other Australian Government entities.

Transactions with related parties

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.

Expenses

This section includes additional financial information that is either required by AAS or the PGPA FRR or is relevant to assist users in understanding the financial statements

4.1A Expenses

This section includes additional financial information that is either required by AAS or the PGPA FRR or is relevant to assist users in understanding the financial statements

4.1A: Suppliers

Accounting Policy

Short-term leases and leases of low-value assets
AEC has elected not to recognise right-of-use assets and lease liabilities for short-term leases of assets that have a lease term of 12 months or less and leases of low-value assets (less than $10,000). The entity recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

4.1B: Impairment Loss Allowance on Financial instruments

4.1C: Finance Costs

5: Financial Instruments

This section analyses how the AEC manages financial risks related to these and its operating environment.

5: Categories of Financial Instruments

Credit terms for goods and services were within 30 days (2020: 30 days). Settlement of suppliers payable is usually made within 20 days.

6. Current/non-current distinction for assets and liabilities