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Notes to and forming part of the financial statements

Note 1: Overview and summary of significant accounting policies

1.1 Basis of preparation of the financial statements

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 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 and values are rounded to the nearest dollar unless otherwise specified.

Unless an alternative treatment is specifically required by an accounting standard or the FRRs, assets and liabilities are recognised in the Statement of Financial Position when and only when it is probable that future economic benefits will flow to the Institute or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under executory contracts are not recognised unless required by an accounting standard. Liabilities and assets that are unrecognised are reported in the schedule of commitments.

Unless alternative treatment is specifically required by an accounting standard, income and expenses are recognised in the Statement of Comprehensive Income when and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured.

1.2 Significant accounting judgements and estimates

Refer to Note 15 for explanation of assumptions used in estimating the fair value of assets.

The liability for long service leave has been estimated using present value techniques in accordance with the short hand method in accordance with section 24 of the FRR. This takes into account expected salary growth, attrition and future discounting using Commonwealth bond rates.

No other accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period.

1.3 New Australian Accounting Standards

Adoption of New Australian Accounting Standard Requirements

New standards, amendments to standards and interpretations that were issued by the Australian Accounting Standards Board prior to the signoff date and are applicable to future reporting periods are not expected to have a future material impact on the Institute's financial statements.

AASB 16 Leases issued February 2016

Application date for the Institute: 1 January 2019.

The Institute operates from leased premises and the application of AASB 16 in the future may have a impact on the amounts reported and disclosures made in the Institute’s financial statements. However, the Institute is currently in the process of detail review in order to implement AASB 16 from 1 July 2019.

1.4 Taxation

The Institute is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Revenues, expenses and assets are recognised net of GST except:

a) where the amount of GST incurred is not recoverable from the Australian Taxation Office; and

b) for receivables and payables.

Note 2: Events after the reporting period

There are no subsequent events that have been identified.

Note 3: Expenses

2019
$

2018
$

Note 3A: Employee benefits

Wages and salaries

6,969,087

6,136,802

Superannuation

Defined contribution plans

961,865

785,674

Defined benefit plans

469,403

317,345

Leave and other entitlements

1,323,112

954,449

Other employee benefits

100,172

188,887

Total employee benefits

9,823,638

8,383,158

Note 3B: Suppliers

Goods and services supplied or rendered

Consultants

1,265,564

332,981

Contractors

1,320,483

2,216,839

Travel

357,328

335,660

IT Services

253,036

313,794

Total goods and services supplied or rendered

3,196,411

3,199,274

Goods supplied

72,345

118,574

Services rendered

3,124,066

3,080,700

Total goods supplied

3,196,411

3,199,274

Other suppliers

Operating lease rentals

637,798

761,759

Workers compensation expenses

383,899

319,180

Total other suppliers

1,021,697

1,080,939

Total suppliers

4,218,110

4,280,212

Leasing commitments

The Institute in its capacity as lessee holds a lease, payable monthly, for the occupancy of Level 4, 40 City Road

Southbank for 10 years, due to end on 30 April 2028. The lease includes an option to extend for a further five years.

Commitments for operating lease rentals as follows:

Within 1 year

726,535

700,923

Between 1 to 5 years

3,179,458

3,068,340

More than 5 years

3,496,209

4,333,863

Total operating lease commitments

7,402,203

8,103,126

Accounting Policy: Employee benefits

Superannuation

The majority of the staff of the Institute are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the PSS accumulation plan (PSSap).

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 and Deregulations administered schedules and notes.

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

The liability for superannuation recognised as at 30 June each year represents pro-rata outstanding contributions for the final fortnight of the year.

Refer also to note 8 for accounting policy with respect to leave provisions.

Accounting Policy: Leases

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits. Operating lease payments are expensed on a straight-line basis which is representative of the pattern of the benefits derived from the leased assets.

The Institute has no finance leases.

Note 4: Own-source income

2019
$

2018
$

Own-source revenue

Note 4A: Sale of goods and rendering of services

Sale of goods and rendering of services in connection with

Sale of goods

24,567

2,554

Rendering of services

9,577,152

8,199,796

Total sale of goods and rendering of services

9,601,719

8,202,350

Note 4B: Other revenue

Cost recovery

11,113

10,086

ANAO Audit services received free of charge

33,000

31,500

Other

9,617

Total other revenue

44,113

51,203

Note 4C: Revenue from Government

Departmental appropriations

4,412,000

4,683,000

Total revenue from Government

4,412,000

4,683,000

Accounting Policy: Revenue

Revenue from the sale of goods is recognised when:

a) the risks and rewards of ownership have been transferred to the buyer;

b) the Institute retains no managerial involvement nor effective control over the goods;

c) the revenue and transaction costs incurred can be reliably measured; and

d) it is probable that the economic benefits associated with the transaction will flow to the Institute.

The Institute receives contract revenue by conducting high-quality research relevant to policy and practice on a broad range of issues regarding families in Australia for various stakeholders. The key stakeholders comprise mainly other Commonwealth agencies, State Government agencies as well as non-government entities.

Revenue from rendering of contract services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

a) the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and

b) the probable economic benefits associated with the transaction will flow to the Institute.

The stage of completion of contracts at the reporting date is determined by reference to either:

a) services performed to date as a percentage of total services to be performed; or

b) the proportion that costs incurred to date bear to the estimated total costs of the transaction; or

c) milestones achieved against provision in the contract.

Unearned income are commissioned research revenue payments received but that cannot be recognised as revenue because the tasks or deliverables are not completed at the time payments were received.

Copyright royalty revenue for the use of the Institute’s publications and bibliographic databases is recognised on an accrual basis. The Institute has no control over the amount of royalties and a provisional amount is accrued based on historical receipts.

Cost recovery which relates mainly to Comcare receipts and sponsorships of travel expenses is recognised on an accrual basis.

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 end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

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 Institute 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.

Resources received free of charge

Resources received free of charge are recognised as gains 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.

Accounting Policy: Gains

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government entity as a consequence of a restructuring of administrative arrangements. The Institute did not receive any contribution of assets in 2018/19 or 2017/18.

Sale of assets

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

Note 5: Financial assets

2019
$

2018
$

Note 5A: Cash and cash equivalents

Cash on hand or on deposit

1,660,720

1,017,446

Total cash and cash equivalents

1,660,720

1,017,446

Note 5B: Trade and other receivables

Appropriation receivable (existing programs)

6,694,386

5,078,328

Goods and services receivables in connection with

Goods and services

1,813,868

2,177,295

Other receivables

26,481

23,694

Total goods and services receivables

1,840,349

2,200,989

Total trade and other receivables

8,534,735

7,279,317

Trade and other receivables (net) aged as follows

Not overdue

8,534,735

7,114,629

Overdue by:

0 to 30 days

31 to 60 days

7,056

61 to 90 days

108,682

More than 90 days

48,950

Total trade and other receivables (net)

8,534,735

7,279,317

Note: No indicators of impairment were found for receivables.

Accounting Policy: Cash

Cash is recognised at its nominal amount. Cash and cash equivalents includes:

a) cash on hand; and

b) 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.

Note 6: Non-financial assets

Note 6A: Reconciliation of the opening and closing balances of leasehold improvements, plant and equipment and intangibles

Reconciliation of the opening and closing balances of leasehold improvements, plant and equipment and intangibles for 2019

Leasehold improvements $

Plant and equipment
$

Computer software
$

Total
$

As at 1 July 2018

Gross book value

1,866,259

1,091,715

218,416

3,176,390

Accumulated depreciation and impairment

(83,518)

(277,719)

(214,024)

(575,261)

Total as at 1 July 2018

1,782,741

813,996

4,392

2,601,129

Additions

Purchase

1,160

383,793

42,000

426,953

Provision for make good

106,667

106,667

Revaluations recognised in other comprehensive income

150,379

(68,169)

82,210

Depreciation and amortisation

(206,380)

(237,763)

(4,392)

(448,535)

Other movements

Accumulated depreciation on disposals

106,098

106,098

Disposals

(117,875)

(117,875)

Total as at 30 June 2019

1,834,567

880,080

42,000

2,756,647

Total as at 30 June 2019 represented by

Gross book value

1,863,367

880,080

42,000

2,785,447

Accumulated depreciation and impairment

(28,800)

(28,800)

Total as at 30 June 2019

1,834,567

880,080

42,000

2,756,647

Note: No plant and equipment, leasehold improvements and computer software are expected to be sold within the next 12 months.

Note 6B: Prepayments

2019
$

2018
$

Prepayments

No more than 12 months

299,493

233,565

More than 12 months

Total prepayments

299,493

233,565

Accounting Policy: Acquisition of assets

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.

Accounting Policy: Leasehold improvements, plant and equipment

Asset recognition threshold

Purchases of leasehold improvements, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than $1,000 and for leasehold improvements and computer software for purchases costing less than $10,000 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 ‘make good’ provisions in property leases taken up by AIFS where there exists an obligation to restore property to it’s original condition. These costs are included in the value of leasehold improvements with a corresponding provision for 'make good' recognised.

Revaluations

Fair values for each class of asset are determined as shown below:

Asset Class

Fair value measurement

Leashold improvements

Depreciated replacement cost

Plant and equipment

Market selling price

Following initial recognition at cost, leasehold improvements, plant and equipment were carried at fair value. Valuations were 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 depended upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment was 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 leasehold improvements, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Institute using, 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:

Leasehold improvements

10 years

Plant and equipment

3 to 15 years

Impairment

All assets were assessed for impairment at 30 June 2019. As no indicators of impairment were identified. It was determined that there was no impairment.

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

Derecognition

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

Accounting Policy: Intangibles

The Institute’s intangibles comprise commercially purchased software and are recognised initially at cost in the statement of financial position, except for purchases costing less than $10,000 which are expensed on acquisition. Intangibles 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 Institute’s software are 3 to 5 years (2017/18: 3 to 5 years).

All software assets were assessed for indications of impairment as at 30 June 2019.

Note 7: Payables

2019
$

2018
$

Note 7A: Unearned income

Unearned income advanced

7,327,257

5,215,200

Total unearned income

7,327,257

5,215,200

Note 7B: Suppliers

Suppliers in connection with

Trade creditors and accruals

207,069

170,742

Total suppliers

207,069

170,742

Suppliers are expected to be settled in no more than 12 months. Settlement was usually made within 30 days.

Note 7C: Other payables

Wages and salaries

70,543

57,075

Superannuation

10,732

9,282

Lease incentive

530,000

600,000

GST payable

267,577

315,832

Other

(1,548)

(4,876)

Total other payables

877,304

977,313

Other payables to be settled

No more than 12 months

407,304

437,313

More than 12 months

470,000

540,000

Total other payables

877,304

977,313

Accounting Policy: Financial liabilities

Unearned income are commissioned research revenue payments received but that cannot be recognised as revenue because the tasks or deliverables are not completed at the time payments were received.

The Institute classifies its financial liabilities as ‘other financial liabilities’. This comprises suppliers and other payables that are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

Financial liabilities are recognised and derecognised upon ‘trade date’.

Note 8: Provisions

2019
$

2018
$

Note 8A: Employee provisions

Leave

2,234,732

1,999,094

Separations and redundancies

139,993

Total employee provisions

2,234,732

2,139,087

Employee leave provisions expected to be settled

No more than 12 months

726,804

734,778

More than 12 months

1,507,928

1,404,309

Total employee provisions

2,234,732

2,139,087

No liability existed for separation and redundancy in 2019. (2018: three redundancies totalling $139,993)

$

$

Note 8B: Other provisions

Provision for make good

As at 1 July

240,000

Additional provision made

106,667

240,000

Unwinding of discount or change in discount rate

3,628

Total other provisions

350,295

240,000

The Institute currently has an agreement for leasing of premises which has provisions requiring the Institute to restore the premises to their original condition at the conclusion of the lease. The Institute has made a provision to reflect present value of this obligation.

Accounting Policy: Provisions

Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of the end of reporting period are measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

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. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the Institute is estimated to be less than the annual entitlement for sick 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 Institute’s employer 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 the use of the Department of Finance’s shorthand method using the Standard Commonwealth sector probability profile. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Note 9: Appropriations

Note 9A: Annual appropriations (‘recoverable GST exclusive’)

Annual appropriations for 2019

Annual appropriation1

$

Adjustments to appropriation2

$

Total appropriation
$

Appropriation applied in 2019 (current and
prior years)
$

Variance3

$

Departmental

Ordinary annual services

4,412,000

12,566,560

16,978,560

15,125,709

1,852,851

Capital budget4

189,000

189,000

425,792

(236,792)

Total departmental

4,601,000

12,566,560

17,167,560

15,551,501

1,616,059

Notes:

  1. In 2018/19, there were no appropriations which have been withheld (Section 51 of PGPA Act) and quarantined for administration purposes.
  2. In 2018/19, adjustments to appropriation were mostly PGPA Act Section 74 receipts.
  3. The variance is attributable to the change in the balance of unspent Annual Appropriation between 30 June 2018 and 30 June 2019 (see note 9B). This is due to delays in revenue being recognised on contracted research and timing of capital expenditure.
  4. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.

Annual appropriations for 2018

Annual appropriation1

$

Adjustments to appropriation2

$

Total appropriation
$

Appropriation applied in 2018 (current and
prior years)
$

Variance3

$

Departmental

Ordinary annual services

4,683,000

12,454,507

17,137,507

14,502,406

2,635,101

Capital budget4,5

190,000

190,000

403,953

(213,953)

Equity injections6

907,000

907,000

907,000

Total departmental

5,780,000

12,454,507

18,234,507

15,813,359

2,421,148

Notes:

  1. In 2017/18, there were no appropriations which have been withheld (Section 51 of PGPA Act) and quarantined for administration purposes.
  2. In 2017/18, adjustments to appropriation were mostly PGPA Act Section 74 receipts.
  3. The variance is attributable to the change in the balance of Unspent Annual Appropriation between 30 June 2017 and 30 June 2018 (see note 9B).
  4. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.
  5. The allocation of amounts between operating and capital is set out in the 2017-18 Portfolio Budget Statement as there is no itemisation in Appropriation Acts. A re-allocation of $251,000 from departmental operating to departmental capital was approved by the Minister for Finance on 15/09/2017. As re-desigation between operating and capital are not permitted under accounting standards, they have not been reflected in this appropriation note.
  6. Equity injections are appropriated through Appropriation Act (No. 2) via the modernisation fund.

Note 9B: Unspent annual appropriations (‘recoverable GST exclusive’)

2019
$

2018
$

Departmental

Appropriation Act 1 2017-18

5,078,328

Appropriation Act 1 2017-18 Cash at bank

1,017,446

Appropriation Act 1 2018-19

6,694,386

Appropriation Act 1 2018-19 Cash at bank

1,660,720

Total departmental

8,355,107

6,095,774

Accounting Policy: Transactions with the Government as owner

Equity injections

Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year.

Other distributions to owners

The FRR require that distributions to owners be debited to contributed equity unless in the nature of a dividend. There was no distribution to owners in 2018/19 or 2017/18.

Note 10: Net cash appropriation arrangements

2019
$

2018
$

Total comprehensive income (loss) less depreciation/amortisation expenses previously funded through revenue appropriations

125,358

279,991

Plus: depreciation/amortisation expenses previously funded through revenue appropriations

(448,535)

(623,453)

Total comprehensive income (loss) – as per Statement of Comprehensive Income

(323,176)

(343,462)

Note 11: Key Management Personnel remuneration

During the reporting period ended 30 June 2019, the Institute had three executives who meet the definition of Key Management Personnel (KMP). KMP are those persons having authority and responsibility for planning, directing and controlling the activities of AIFS directly or indirectly. AIFS determined the KMP to be the Director, Deputy Director Corporate, and Deputy Director Research. Their names and length of terms as KMP are summarised below:

Name

Position

Term as KMP

Anne Hollands

Director

Full year

Michael Alexander

Deputy Director

Full year

Kelly Hand

Deputy Director

Full year

2019
$

2018
$

Short-term employee benefits

Salary

671,059

654,505

Other benefits and allowances

40,534

57,494

Total short-term employee benefits

711,593

711,999

Post-employment benefits

Superannuation

105,559

98,692

Total post-employment benefits

105,559

98,692

Other long-term employee benefits

Long service leave

18,987

19,531

Total other long-term employee benefits

18,987

19,531

Total Key Management Personnel remuneration expenses

836,139

830,222

KMP remuneration was prepared on an accrual basis. The total number of KMP that are included in the above table is three (2018: Three).

The above KMP remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister's remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the Institute.

Note 12: related party disclosures

Related party relationships

The Institute is an Australian Government controlled entity. Related parties of the Institute include but are not limited to:

  • KMP as outlined in Note 11;
  • Close family members of KMP outlined in Note 11; and
  • Organisations controlled by these KMP and their close family members.

Related parties to the Institute also included the Portfolio Minister, Cabinet Ministers and other Australian Government entities.

Transaction with related parties

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. These transactions have not been separately disclosed in this note.

Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the entity, it has been determined that there are no related party transactions to be separately disclosed.

Note 13: Contingent assets and liabilities

The Institute had no quantifiable or unquantifiable contingent assets or liabilities as at 30 June 2019 (2018: nil).

Note 14: Financial instruments

Note 14A: Categories of Financial Instruments

2019
$

2018
$

Financial assets under AASB 139

Receivables

Cash on hand or on deposit

1,017,446

Goods and services

2,177,295

Other receivables

23,694

Total receivables

3,218,435

Total financial asset at fair value through profit or loss

3,218,435

Financial Assets under AASB 9

Financial assets at amortised cost

Cash on hand or on deposit

1,660,720

Goods and services

1,813,868

Other receivables

26,481

Total financial assets at amortised cost

3,501,069

Total financial assets

3,501,069

3,218,435

Financial liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

207,069

170,742

Total financial liabilities measured at amortised cost

207,069

170,742

Total financial liabilities

207,069

170,742

Classification of financial assets on the date of initial application of AASB 9

Notes

AASB 139 original classification

AASB 9 new classification

AASB 139 carrying amount at
1 July 2018
$'000

AASB 9 carrying amount at
1 July 2018
$'000

Financial assets class

Cash on hand or on deposit

5A

Amortised Cost

Amortised Cost

1,017,446

1,017,446

Goods and services

5B

Amortised Cost

Amortised Cost

2,177,295

2,177,295

Other receivables

5B

Amortised Cost

Amortised Cost

23,694

23,694

Total financial assets

3,218,435

3,218,435

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB 9

AASB 139 carrying amount at 30 June 2018
$'000

Reclassification
$'000

Remeasure-ment
$'000

AASB 9 carrying amount at
1 July 2018
$'000

Financial assets at amortised cost

Receivables

Cash on hand or on deposit

1,017,446

1,017,446

Goods and services

2,177,295

2,177,295

Other receivables

23,694

23,694

Total amortised cost

3,218,435

3,218,435

Note 14B: Net gain or losses on financial assets/financial liabilities

There was no gain or losses from financial assets – loans and receivables – at amortised cost in the financial year ended 30 June 2019 (2018: nil).

Accounting Policy: Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the entity classifies its financial assets in the following categories:

a) financial assets at fair value through profit or loss;

b) financial assets at fair value through other comprehensive income; and

c) financial assets measured at amortised cost.

The classification depends on both the entity's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the entity becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

Comparatives have not been restated on initial application.

Financial Assets at Amortised Cost

Financial assets included in this category need to meet two criteria:

  1. the financial asset is held in order to collect the contractual cash flows; and
  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.

Financial Assets at Fair Value Through Other Comprehensive Income (FVOCI)

Financial assets measured at fair value through other comprehensive income are held with the objective of both collecting contractual cash flows and selling the financial assets and the cash flows meet the SPPI test.

Any gains or losses as a result of fair value measurement or the recognition of an impairment loss allowance is recognised in other comprehensive income.

Financial Assets at Fair Value Through Profit or Loss (FVTPL)

Financial assets are classified as financial assets at fair value through profit or loss where the financial assets either doesn't meet the criteria of financial assets held at amortised cost or at FVOCI (i.e. mandatorily held at FVTPL) or may be designated.

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.

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 losses if risk has not increased.

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.

Accounting Policy: Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial Liabilities at Fair Value Through Profit or Loss

Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Financial Liabilities at Amortised Cost

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

Accounting Policy: Financial liabilities and financial assets

Financial liabilities and financial assets that are not contractual (such as GST, created as a result of statutory requirements imposed by governments) are not financial instruments.

Receivables

Receivables consist of contractual receivables, such as accounts payable and accruals.

Payables

Payables consist of contractual payables, such as accounts payable and accruals.

Note 15: Fair value measurements

The following tables provide an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the statement of financial position do not apply the fair value hierarchy.

The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

15A: Fair value measurement

Fair value measurements at the end of the reporting period

2019
$

2018
$

Valuation technique(s) and inputs used

Non-financial assets2

Plant and equipment1

Market approach: This approach seeks to estimate the current value of an asset with reference to recent market transactions involving identical or comparable assets.

Inputs: Prices and other relevant information generated by market transactions involving plant and equipment assets were considered.

Plant and equipment1

880,080

813,996

Depreciated replacement cost: The amount a market participant would be prepared to pay to acquire or construct a substitute asset of comparable utility, adjusted for physical depreciation and obsolescence.

Inputs: Current prices for substitute assets. Physical depreciation and obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the assets under consideration.

Leasehold improvements1

1,834,567

1,782,741

Depreciated replacement cost: The amount a market participant would be prepared to pay to acquire or construct a substitute asset of comparable utility, adjusted for physical depreciation and obsolescence.

Inputs: Current costs per square metre of floor area relevant to the location of the asset. Physical depreciation and obsolescence has been determined based on the term of the associated lease.

Total non-financial assets

2,714,647

2,596,737

Notes:

  1. No non-financial assets were measured at fair value on a non-recurring basis as at 30 June 2019 (2018: nil).
  2. AIFS’ assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all non-financial asset’s is considered their highest and best use.
  3. There were no transfers between Levels 1 and 2 for recurring fair value measurements during the year.

15B: Reconciliation for recurring Level 3 fair value measurements

Non-financial assets

Leasehold improvements

Plant and equipment

Total

2019
$

2018
$

2019
$

2018
$

2019
$

2018
$

As at 1 July

1,782,741

233,207

813,995

683,541

2,596,736

916,748

Total gains/(losses) recognised in net cost of services1

(206,380)

84,095

(131,665)

(53,199)

(338,045)

30,896

Total gains/(losses) recognised in other comprehensive income2

150,379

(68,169)

82,210

Addition to make good

106,667

240,000

106,667

240,000

Purchases

1,160

1,575,249

383,794

502,081

384,954

2,077,330

Disposals

(349,810)

(117,875)

(318,428)

(117,875)

(668,238)

Transfers into Level 33

Transfers out of Level 3

Total as at 30 June

1,834,567

1,782,741

880,080

813,995

2,714,647

2,596,736

Notes:

  1. These gains/(losses) are presented in the Statement of Comprehensive Income under Depreciation and Amortisation and Write Down and Impairment of Assets.
  2. These gains/(losses) are presented in the Statement of Comprehensive Income under Other Changes in Asset Revaluation Reserves.
  3. There have been no transfers into or out of Level 3 during the year (2018: nil).

Accounting Policy

AIFS engaged the service of the Jones, Lang, La Salle (JLL) to conduct a detailed external valuation of all non-financial assets at 30 June 2019 and has relied upon those outcomes to establish carrying amounts. An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from the fair value. Comprehensive valuations carried out at least once every three years. JLL has provided written assurance to AIFS that the models developed are in compliance with AASB 13.

The methods utilised to determine and substantiate the unobservable inputs are derived and evaluated as follows:

Physical Depreciation and Obsolescence – Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the Depreciated Replacement Cost approach. Under the Depreciated Replacement Cost approach the estimated cost to replace the asset is calculated and then adjusted to take in physical depreciation and obsolescence. Physical depreciation and obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration. For all Leasehold Improvement assets, the consumed economic benefit/asset obsolescence deduction is determined based on the term of the associated lease.

AIFS's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.