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:
a) Public Governance, Performance and Accountability (Financial Reporting Rule 2015) and
b) Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.
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 AIHW’s financial statements.
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 thousand dollars.
Unless an alternative treatment is specifically required by an accounting standard or the Financial Reporting Rule (FRR), 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 entity or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured.
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. Financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.
Significant accounting judgements and estimates
In the process of applying the accounting policies listed in this note, the AIHW has made the following judgments that have the most significant impact on the amounts recorded in the financial statements:
- the fair value of leasehold improvements and property, plant and equipment has been taken to be the depreciated replacement cost as determined by an independent valuer.
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.
Revenue from the sale of goods is recognised when:
- the risks and rewards of ownership have been transferred to the buyer
- the entity retains no managerial involvement nor effective control over the goods
- the revenue and transaction costs incurred can be reliably measured and
- it is probable that the economic benefits associated with the transaction will flow to the entity.
Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:
- the amount of revenue, stage of completion and transaction costs incurred can be reliably measured and
- the probable economic benefits with the transaction will flow to the AIHW.
The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.
Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any allowance for impairment. Collectability of debts is reviewed at balance date. Allowances are made when collectability of the debt is no longer probable.
Interest revenue is recognised using the effective interest method.
Revenues from Government
Amounts appropriated for departmental appropriations for the year are recognised as Revenue from Government when the entity 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. Funding received or receivable from non-corporate Commonwealth entities is recognised as Revenue from Government by the AIHW unless the funding is in the nature of an equity injection or a loan.
Sale of assets
Gains from disposal of assets are recognised when control of the asset passes to the buyer
Transactions with the government as owner
Amounts that are designated as equity injections for a year are recognised directly in contributed equity in that year.
Cash and cash equivalents include notes and coins held and any deposits in bank accounts 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.
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.
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.
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 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.
Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled.
Liabilities for 'short-term employee benefits' (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of balance date 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 the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.
The leave liabilities are calculated on the basis of employees’ remuneration, including the AIHW’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 is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at 30 June 2019. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.
Separation and redundancy
Provision is made for separation and redundancy benefit payments. AIHW recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.
AIHW staff are members of the Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme or the Public Sector Superannuation Scheme accumulation plan.
The first two are defined benefit schemes for the Australian Government. The third 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 by the Department of Finance as an administered item.
The AIHW makes employer contributions to the employee superannuation scheme at rates determined by an actuary to be sufficient to meet the cost to the government of the superannuation entitlements of the AIHW’s employees. The AIHW 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 for the final fortnight of the year.
Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.
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).
Contingent liabilities and contingent assets
Contingent liabilities and contingent assets are not recognised in the balance sheet but are reported in the relevant notes. They may arise from uncertainty as to the existence of a liability or asset, or represent a liability or asset 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.
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 revenues 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 transfer or authority’s accounts immediately prior to the restructuring.
Property, plant and equipment
Asset recognition threshold
Purchases of property, plant and equipment are recognised initially at cost in the balance sheet, except for purchases costing less than $3,000, 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 AIHW where there exists an obligation to restore the property to its original condition. These costs are included in the value of the AIHW’s leasehold improvements with a corresponding provision for the make good recognised.
Fair values for each class of asset are determined as shown below:
Fair value measured at:
Depreciated replacement cost
Property, plant and equipment
Market selling price
Following initial recognition at cost, property, plant and equipment are carried at fair value less accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not materially differ from the assets’ fair values as at the reporting date. The regularity of independent valuations depend 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 through surplus and deficit. Revaluation decrements for a class of assets are recognised directly through surplus and 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.
A formal revaluation of assets was completed by AllBids as at 30 June 2018.
Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the AIHW 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:
Property, plant and equipment
3 to 10 years
3 to 10 years
All assets were assessed for impairment at 30 June 2019. 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 AIHW were deprived of the asset, its value in use is taken to be its depreciated replacement cost.
The AIHW's intangibles comprise internally developed and purchased software for internal use. These assets are carried at cost less accumulated amortisation.
Intangibles are recognised initially at cost in the balance sheet, except for purchases costing less than $50,000, which are expensed in the year of acquisition.
Software is amortised on a straight-line basis over its anticipated useful life. The useful life of the AIHW's software is 3 to 5 years (2017–18: 3 to 5 years).
All software assets were assessed for indications of impairment as at 30 June 2019.
The AIHW is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).
Revenues, expenses, assets and liabilities are recognised net of GST except:
- where the amount of GST incurred is not recoverable from the Australian Taxation Office and
- for receivables and payables.
Events After the Reporting Period
There were no subsequent events that had the potential to significantly affect the ongoing structure and financial activities of the AIHW.