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Notes to the financial statements

About the financial statements

This section outlines the basis on which the Group’s financial statements have been prepared, including discussion on any new accounting standards or government rules that directly impact financial report disclosure requirements. In this section, we also outline significant events and transactions that have occurred after balance date affecting the Group’s financial position and performance.

The Australian Postal Corporation (the Corporation) is incorporated under the provisions of the Australian Postal Corporation Act 1989 as amended, and is an Australian Government owned for-profit entity.

Australia Post headquarters:

111 Bourke Street
Melbourne VIC 3000 Australia

The consolidated general purpose financial report of the Group for the year ended 30 June 2019 was authorised for issue in accordance with a resolution of the directors on 21st August 2019.

The consolidated financial report is a general-purpose financial report which:

  • is required by clause 1(a) of Paragraph 42 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act);
  • has been prepared in accordance with the requirements of the PGPA Act, Australian Accounting Standards and Interpretations issued by the Australian Accounting
  • Standards Board (AASB) that apply for the reporting period and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB);
  • has been prepared on an accrual basis and in accordance with the historical cost convention, except for investment property, assets classified as held for sale and derivative financial instruments, which have been measured at fair value. The carrying values of recognised assets and liabilities that are designated as hedged items in fair value hedge relationships are adjusted to record changes in the fair values attributable to the risks that are being hedged;
  • is presented in Australian dollars with all values rounded to the nearest hundred thousand dollars unless otherwise stated;
  • presents reclassified comparative information where required for consistency with the current year’s presentation;
  • adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the Group and effective for reporting periods beginning on or after 1 July 2018, including AASB 15 Revenue from contracts with customers and AASB 9 Financial Instruments. Refer to note E6 for further details; and
  • does not early adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet effective. Refer to note E6 for further details.

As per the prior comparative period, the Executive Management Team contemplates business decisions on the basis of Group profitability, with the Group viewed as a single operating segment, comprising the provision of delivery and related services to customers across a shared network. Consistent with the manner in which the chief operating decision makers view performance information, total income and net profit or loss after tax are the relevant measures of performance.

In accordance with AASB 8 Operating Segments, segment information is not required as the Group’s equity and debt instruments are not traded in a public market, nor does the Group file the consolidated financial report with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market. It is noted that performance information within the single operating segment is available at a profit before tax level for reserved and non-reserved product lines. However, the business is not managed on this basis, and the information is made available only to satisfy regulatory requirements within the Australian Postal Corporation Act 1989. The directors will continue to monitor, in future periods, the need to present any additional Group profitability information.

Key judgements and estimates
In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimates and assumptions to future events. Judgements and estimates which are material to the financial report are found in the following notes:

A1

International mail revenue

Revenue and other income

B5

Impairment

Impairment

B6

Investment property

Investment property

B7

Unearned delivery revenue

Unearned delivery revenue

B8

Other provisions

Other provisions

C1

Employee provisions

Employee provisions

C3

Post employment benefits

Post employment benefits

Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities (subsidiaries) at year end is contained in note E1 Our subsidiaries.

A subsidiary is an entity that the Group controls. Control is deemed when the group is exposed to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

Subsidiaries are consolidated from the date on which control is obtained through to the date on which control ceases. The acquisition of subsidiaries is accounted for using the acquisition method of accounting.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to align any inconsistent accounting policies that may exist.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full.

Foreign currency translation
The functional currency of the Corporation and its Australian subsidiaries is Australian dollars.
The Group has six overseas subsidiaries, as discussed in note E1. On consolidation, those entities’:

  • assets and liabilities are translated into Australian dollars at the rate of exchange prevailing at the reporting date; and
  • the statement of comprehensive income is translated at exchange rates prevailing at the dates of the transactions.

The exchange rate differences arising are recognised in other comprehensive income. Transactions in foreign currencies are initially recorded by the Group at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are retranslated at the presentation currency spot rate of exchange at the reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in the fair value of the item.

Other accounting policies
Significant other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements.

The notes to the financial statements
The notes to the financial statements include information which is required to understand the financial statements and is material and relevant to the operations, financial position and performance of the Group. Information is considered material and relevant if, for example:

  • the amount in question is significant because of its size or nature;
  • it is important for understanding the results of the Group;
  • it helps explain the impact of significant changes in the Group, for example, acquisitions and restructuring activities; and
  • it relates to an aspect of the Group’s operations that is important to its future performance.

The notes have been grouped into sections to help readers understand how the Australia Post strategy, as outlined in the Annual Report, is reflected in the financial performance and position of the Group. These sections comprise:

  • Our business performance: Our Group strategy focuses on reforming our letter services, and extending and building on our parcel and other commercial service offerings. Our financial performance section provides the key financial performance measures of these business areas, as well as group level financial metrics incorporating revenue, taxation, cashflow and dividends.
  • Our asset platform: Delivery of our Group strategy requires optimising the use of our balance sheet including streamlining and integrating certain operations. Our asset platform section outlines the key operating assets owned and liabilities incurred by the Group.
  • Our people: To support the execution of our Group strategy we must embed culture and align and engage our workforce. This requires us to invest in our people so that we may achieve an inclusive and capable workforce. This investment includes remuneration activities outlined in this section of the financial report.
  • Our funding structure and managing our risks: The Group is exposed to a number of financial risks. Our funding structure and managing our financial risks section sets out the strategies and practices the Group utilises to minimise the exposure to these risks in order to execute our Group strategy in a safe way, as well as outlining the current Group funding structure.
  • Other information: This section includes mandatory disclosures required by Australian Accounting Standards and the Commonwealth Government’s Public Governance, Performance and Accountability (Financial Reporting) Rule 2015, all of which Australia Post must comply with.

Events after balance date
No matters or circumstances have arisen since balance date which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

Our business performance

This section analyses the financial performance of the Group for the year ended 30 June 2019. The focus is on Group revenue streams, expenses, taxation, cashflows and dividend performance.

A1 Revenue and other income


Revenue and other income for the year
The components of revenue and other income for the year ended 30 June are as follows:

Consolidated ($m)

2019

2018

Rendering of services to:

  • Related entities1

214.7

247.6

  • External entities2

6,404.2

6,220.4

Sale of goods to external entities2

6,618.9

6,468.0

259.5

262.8

Revenue from contracts with customers

6,878.4

6,730.8

Interest income from:

  • Cash and cash equivalents

7.0

7.6

  • Loans and receivables

0.1

0.9

  • Interest rate swaps

0.9

0.6

  • Other

0.2

9.5

Interest income

8.2

18.6

Rents from operating leases

28.0

30.2

Income from investment property

9.5

9.2

37.5

39.4

Net gain on disposal of land and buildings

17.0

12.7

Net gain on disposal of plant and equipment

0.6

1.5

Net gain on disposal of investment property

0

0.8

Gain on disposal of finance lease receivable

0

51.9

Gain on disposal of asset held for sale

10.7

0

Gain on acquisition of subsidiary3

15.4

0

Gain on disposal of subsidiary

2.2

0

Net revaluation gain on investment property

11.2

0

Dividend revenue

0

8.7

Other income

8.6

12.6

65.7

88.2

Total other income

103.2

127.6

Total income

6,989.8

6,877.0

1 Related entities – related to the Commonwealth Government.

2 External entities – not related to the Commonwealth Government.

3 Relates to the Group’s acquisition of the remaining 60 per cent interest in Australia Post Global eCommerce Solutions Pte Ltd on 20 December 2018, which required recognition of a gain remeasuring the Group’s existing 40 per cent interest to its acquisition date fair value.

Revenue from contracts with customers

Within the Group’s contracts with customers, the Group identifies its performance obligations for each of the distinct goods or services it has promised to provide to the customer. The expected consideration in the contract is allocated to each performance obligation identified based on their relative standalone selling prices, and is recognised as revenue when or as performance obligations are satisfied by transferring the promised goods or services to customers. Revenue is recognised on a commission basis where the Group acts as an than a principal. Estimates of variable consideration are constrained where it is not highly probable they would not be reversed when the cause of variability is resolved.

For the Group’s domestic mail products, parcels and express services and international letters and parcels, the Group’s collection, processing and distribution of articles is identified collectively as a single performance obligation to deliver the series of articles lodged to the specified destination in the manner requested by the customer. In respect of a single delivery, the Group has assessed that another entity would not need to re-perform previously completed collection, processing or distribution activities if it were to fulfil the remainder of a partially complete delivery. Accordingly, the delivery performance obligation is satisfied progressively over time and revenue is recognised on this basis. Time elapsed (delivery days) since lodgement is used to reflect progress towards satisfaction of each delivery performance obligation.

For the Group’s retail, agency and other products and services, the Group identifies the following performance obligations:

  • For services the Group provides consumers on behalf of the Group’s customers, including payment, banking, identity and insurance offerings, the Group identifies a single performance obligation to perform the agency services over the agreed duration of the customer contract. The performance obligation is satisfied over time as each individually distinct day of service elapses, with variable transactional revenue recognised on the day that the specific agency services are provided.
  • For retail services including post office box and mail redirection offerings, the Group identifies a single performance obligation to provide the service over the agreed contract duration. As the benefit of these services is simultaneously received and consumed by customers over time, revenue is recognised over time on a straight-line basis.
  • For sale of merchandise, the Group identifies a single performance obligation to supply the product (inclusive of delivery). Revenue is recognised at the point of completion of the delivery to the customer, when control of the product is deemed to have been transferred.

Disaggregation of revenue from contracts with customers

Revenue from contracts with customers is disaggregated by products and services, as well as the manner in which the Group satisfies its performance obligations and recognises revenue:

Consolidated ($m)

2019

Over time

Domestic mail products, parcels and express and International

5,909.7

Retail, agency and other

709.2

Point in time

Retail, agency and other

259.5

Revenue from contracts with customers

6,878.4

Remaining performance obligations
The Group’s contracts with customers for certain products and services include performance obligations which the Group has either not satisfied, or partially satisfied, at 30 June 2019. Excluding estimated amounts of variable consideration which are constrained, revenue from completing these performance obligations that is expected to be recognised in future periods commencing more than one year from reporting date is $150.0 million.

The Group has elected not to disclose the amount of revenue expected to be recognised from unsatisfied performance obligations with a remaining contract duration of less than one year from reporting date.

Other income

Interest income
Interest income is recognised in profit or loss as it accrues using the effective interest method and if not received at balance date, is reflected in the balance sheet as a receivable.

Rental income
Income received from leasing Group-owned investment properties to external parties under an operating lease arrangement is recorded on a straight-line basis over the lease term. Contingent rental income is recognised as income in the periods in which it is earned. Lease incentives granted are recognised as an integral part of the total rental income.

KEY ESTIMATES:
The Group recognises an accrual for revenue earned from international deliveries where statements have not been received. Revenue is determined based on a number of factors including the volume of articles delivered, the international postal organisation counterparty and with reference to the Universal Postal Union guidelines. At 30 June 2019, the international mail related accrual was $106.8 million (2018: $160.9 million).

A2 Expenses

Expenses for the year
The components of expenses for the year ended 30 June are as follows:

Consolidated ($m)

2019

2018

Salaries and wages

2,511.8

2,464.9

Leave and other entitlements

287.9

244.6

Superannuation expenses

249.0

255.0

Other employee expenses

123.2

86.5

Employee benefit expenses

3,171.9

3,051.0

Purchase of services from external entities

2,989.3

2,828.3

Purchase of goods from external entities

177.0

183.7

Operating lease rentals

209.3

205.2

Investment property expenditure

2.2

2.5

Supplier-related expenses

3,377.8

3,219.7

Depreciation

183.5

170.1

Amortisation

99.8

134.1

Depreciation and amortisation

283.3

304.2

Impairment of assets:

Receivables

1.6

0.1

Inventory

5.0

6.3

Property, plant and equipment

7.8

3.1

Computer software

5.8

0.4

Investments:

  • Held for sale

0

38.5

  • Equity-accounted

2.0

4.2

Intangibles:

  • Brand name intangibles

0

32.5

  • Goodwill and other intangibles

0

6.5

22.2

91.6

Net revaluation loss on investment property

0

11.9

Foreign exchange loss (net)

6.6

6.5

Sundry expenses

54.3

40.7

Other expenses

83.1

150.7

Total expenses

6,916.1

6,725.6

The components of finance costs for the year ended 30 June are as follows:

Consolidated ($m)

2019

2018

Bonds

32.6

32.0

Other interest

1.6

0

Total finance costs

34.2

32.0

Recognition and measurement

Employee benefit expenses
Refer to notes C1 and C3 for employee benefits accounting policies.

Operating lease rentals
Operating lease payments are recognised as an operating expense in the statement of comprehensive income on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expenditure and reduction of the liability. Refer to note E2 for further discussion on specific operating leases entered into by the Group.

Depreciation and amortisation
Refer to notes B3 and B4 for depreciation and amortisation policy discussions respectively.

Impairment
Impairment expenses are recognised:

  • when the carrying amount of an asset or cash generating unit exceeds its recoverable value. Refer to note B5 for further discussion specifically around impairment of non-financial assets.
  • when the carrying value of an asset held for sale is lower than its fair value less cost to sell. Refer to note B2 for further discussion.

Finance costs
Finance costs are recognised as an expense as they are incurred, except for certain interest charges attributable to major projects, for which interest is capitalised into the cost of the asset. Interest expense is calculated using the effective interest method.

Provisions are discounted to their present value. The impact of unwinding of discounted provisions and any changes in discount rate adjustments are also recognised in finance costs. The impact of unwinding of discounted employee provisions and changes in discount rate adjustments are recognised as employee benefits expense.

A3 Taxation

Taxation for the year
The major components of tax expense are:

Consolidated ($m)

2019

2018

Statement of comprehensive income

  • current income tax charge

9.1

26.6

  • adjustments for current income tax of previous years

(9.0)

(5.6)

  • deferred income tax relating to origination and reversal of temporary differences

(7.9)

(30.4)

  • adjustments for deferred income tax of previous years

8.3

0.9

Income tax expense/(benefit) reported in the statement of comprehensive income

0.5

(8.5)

Other comprehensive income

Net remeasurement on defined benefit plans

(7.6)

74.0

Sundry items

(1.7)

5.4

Income tax expense/(benefit) reported in other comprehensive income

(9.3)

79.4

Tax reconciliation:

Profit/(loss) before income tax

41.1

125.7

At the Group’s statutory income tax rate of 30% (2018: 30%)

12.3

37.7

Adjustments relating to prior years

(0.7)

(4.8)

Investment disposals

(4.5)

0

Investment revaluation

(4.0)

0

Capital gains and losses

  • Property

(3.9)

(47.3)

Sundry items

1.3

5.9

Income tax expense/(benefit) on profit/(loss) before tax

0.5

(8.5)

Deferred income tax in the balance sheet relates to the following:

Consolidated ($m)

2019

2018

Accrued revenues

(44.5)

(61.2)

Intangibles

(12.2)

(9.9)

Research & Development

(34.2)

(32.7)

Net superannuation asset

(255.1)

(275.6)

Other

(11.9)

(13.8)

Deferred tax liabilities

(357.9)

(393.2)

Property, plant and equipment

32.2

22.2

Accrued expenses and other payables

23.3

27.2

Provisions

270.9

305.9

Make good

14.4

14.0

Other

15.5

17.2

Deferred tax assets

356.3

386.5

Net deferred tax liabilities

(1.6)

(6.7)

Deferred income tax in the statement of comprehensive income relates to the following:

Consolidated ($m)

2019

2018

Provisions

35.0

20.7

Research and development

1.5

2.4

Intangibles

(2.1)

(11.4)

Property, plant and equipment

(10.0)

(5.2)

Accrued expenses

3.9

(1.3)

Accrued revenue

(16.7)

(27.1)

Net superannuation asset

(12.9)

(8.5)

Make good

(0.4)

(0.8)

Other

2.1

1.7

Deferred income tax expense

0.4

(29.5)

Recognition and measurement

Income tax
Current income tax is calculated based on tax laws that are at least substantively enacted at reporting date. For deferred income tax, consideration is given to the tax laws expected to be in place when the related asset is realised or the liability is settled.

Current tax assets and liabilities reflect the amount expected to be recovered from or paid to taxation authorities. In some instances, income tax is recognised directly in other comprehensive income rather than through the income statement.

Deferred tax assets and liabilities
Deferred tax assets and liabilities are recognised for all assets and liabilities that have different carrying values for tax and accounting purposes, except for:

  • the initial recognition of goodwill; and
  • any undistributed profits of subsidiaries, associates or joint ventures where either the distribution of those profits would not give rise to a tax liability or the timing of reversal of the temporary differences can be controlled.


Deferred tax assets are:

  • recognised only to the extent it is probable that there is sufficient future taxable amounts to recover these assets. This assessment is reviewed at each reporting date.
  • offset against deferred tax liabilities only if a legally enforceable right exists to do so and the deferred tax assets and liabilities relate to the same taxation jurisdiction.
  • acquired as part of a business combination but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would be treated as a reduction to goodwill (as long as it does not exceed goodwill), if it was incurred during the measurement period, or reflected in profit or loss.


Tax consolidation
Australian Postal Corporation (the head entity) and its 100 per cent owned Australian resident subsidiaries (members) formed a tax consolidated group effective 1 July 2002.

Members of the tax consolidated group continue to account for their own current and deferred tax amounts and have entered into a tax sharing arrangement in order to allocate income tax expense to the subsidiaries on a pro-rata basis. This agreement allows the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.

Members have also entered into a tax funding agreement which provides for the allocation of current taxes to members of the tax consolidated group in accordance with their contribution to the actual tax payable by the head entity for the period, while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 Income Taxes and UIG 1052 Tax Consolidation Accounting.

A4 Cash flows

Consolidated ($m)

2019

2018

Cash on hand

628.0

592.2

Total cash and cash equivalents

628.0

592.2

The reconciliation of net profit after tax to net cash provided by operating activities for the year ending 30 June is as follows:

Consolidated ($m)

2019

2018

Net profit/(loss) for the year

40.6

134.2

Impairment of assets:

Property, plant and equipment

7.8

3.1

Brand name intangibles

0

32.5

Asset held for sale

0

38.5

Equity-accounted investment

2.0

4.2

Intangibles (including goodwill)

5.8

6.9

Receivables and inventory

6.6

6.4

22.2

91.6

Other non-cash/investing items:

Depreciation and amortisation

283.3

304.2

Net revaluation (gain)/loss on investment property

(11.2)

11.9

Net gain from sales of property, plant and equipment and finance lease receivable

(17.6)

(66.9)

Net gain from acquisitions and divestments

(28.3)

0

Sundry items

(1.9)

(15.2)

(Increase)/decrease in assets:

Receivables

18.1

(53.1)

Other current assets

(9.9)

(4.5)

Deferred income tax asset

30.1

13.8

Superannuation asset

43.1

28.3

Increase/(decrease) in liabilities:

Creditors, other payables and accruals

(15.9)

(72.0)

Employee entitlements

10.7

(63.5)

Income tax payable

(52.9)

(51.5)

Deferred income tax liability

(31.9)

(37.6)

Net cash from operating activities

278.5

219.7

Recognition and measurement
Cash and cash equivalents comprise cash at bank, on hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, is classified as part of operating cash flows.

A5 Dividends

The breakdown of dividends paid during the year ended 30 June is as follows:

Consolidated ($m)

2019

2018

Final ordinary dividend (from prior year results)

37.8

33.2

Interim ordinary dividend

4.4

45.3

Total dividends paid

42.2

78.5

Dividend not recognised as a liability

20.9

37.8

Our asset platform

This section analyses the primary elements of our asset platform used to generate the Group’s financial performance and operating liabilities incurred as a result.

B1 Receivables

The composition of trade and other receivables at 30 June is:

Consolidated ($m)

2019

2018

Trade receivables

620.5

568.2

Allowance for expected credit losses

(5.5)

(6.3)

615.9

561.9

Accrued revenue

131.4

181.6

Other receivables

35.1

3.7

Total current trade and other receivables

781.5

747.2

Total current trade and other receivables are aged as follows ($ millions):

Total current trade and other receivablesPie chart showing current trade and other receivables
Total current trade and other receivables

Recognition and measurement
Receivables for the sale of goods or performance of services (trade receivables) are recognised initially at the price on the invoice issued to the customer and subsequently at the amount considered receivable from the customer (amortised cost using the effective interest rate method) less any expected credit losses. Accrued revenues (contract assets) in relation to the sale of goods or performance of services are recognised when the right to consideration is conditional upon issue of the invoice, less any expected credit losses. Once an invoice is raised, the amount is reclassified to trade receivables. The level of accrued revenues at 30 June is influenced primarily by the timing of invoices being raised.

These receivables and other receivables are interest-free and for Australian customers, they normally have settlement terms of between 10 and 30 days. International customers are settled in accordance with Universal Postal Union arrangements that may be longer than 30 days.

Analysis of ageing and recoverability
At 30 June 2019, no material receivables or accrued revenues are individually determined to be impaired, with allowance for expected credit losses of $5.5 million (2018: $6.3 million).

Refer to note D2 for further discussion on how the Group manages its credit risk and note A2 for the total write down of receivables and accrued revenues.

B2 Assets held for sale

The amount recognised in the balance sheet at 30 June is represented by the following:

Consolidated ($m)

2019

2018

Investment in associate

0

211.4

Assets held for sale

0

211.4

Investment in Aramex PJSC
During the comparative year, the Group reviewed its international strategy. As a result of this review, the Group committed to a plan to sell its 10.1 per cent shareholding in Aramex PJSC, an individually material investment in associate.

The impairment loss recognised in the comparative year, as a result of measuring the investment at fair value, as represented by the observable market price of Aramex PJSC shares on the Dubai Financial Market, was $38.5 million. The Group categorised this as a level one measurement as per the fair value hierarchy described in note D4. The Group completed the sale of the shareholding on 17 March 2019. Refer to note A1 for the net gain recognised on disposal.

Recognition and measurement
Assets are classified as held for sale where their carrying amount will be recovered principally through a highly probable sale transaction rather than continuing use. Assets held for sale are measured at fair value less costs to sell.

B3 Property, plant and equipment

The reconciliation of the opening and closing balances of property, plant and equipment at 30 June is as follows:

Consolidated ($m)

Land

Buildings

Total land and buildings

Plant and equipment

Total

Gross book value

224.9

1,384.2

1,609.1

1,506.5

3,115.6

Accumulated depreciation

0

(784.0)

(784.0)

(771.8)

(1,555.8)

Net book value at 30 June 2017

224.9

600.2

825.1

734.7

1,559.8

Additions

2.1

100.1

102.2

136.9

239.1

Depreciation

0

(61.2)

(61.2)

(108.9)

(170.1)

Disposals

(0.7)

(0.8)

(1.5)

(3.8)

(5.3)

Sundry items1

(1.2)

3.1

1.9

(26.1)

(24.2)

Gross book value

225.1

1,483.9

1,709.0

1,558.4

3,267.4

Accumulated depreciation

0

(842.5)

(842.5)

(825.6)

(1,668.1)

Net book value at 30 June 2018

225.1

641.4

866.5

732.8

1,599.3

Additions

2.9

84.7

87.6

303.1

390.7

Depreciation

0

(63.6)

(63.6)

(119.9)

(183.5)

Disposals

(9.0)

(14.2)

(23.2)

(5.3)

(28.5)

Sundry items1

(0.4)

(9.4)

(9.8)

(9.3)

(19.1)

Gross book value

218.6

1,528.6

1,747.2

1,782.7

3,529.9

Accumulated depreciation

0

(889.7)

(889.7)

(881.3)

(1,771.0)

Net book value at 30 June 2019

218.6

638.9

857.5

901.4

1,758.9

Sundry items include $0.1 million additions from acquisition of subsidiary (2018: nil), $11.0 million of transfers to Intangible Assets (2018: $19.8 million), $0.3 million transfers to investment properties (2018: $1.3 million), $0.1 million of disposals from the divestment of subsidiary (2018: nil), and impairment losses of $7.8 million (2018: $3.1 million).

Recognition and measurement
Property, plant and equipment assets are measured at the cost of the asset, less depreciation and impairment. The cost of the asset also includes the cost of replacing parts that are eligible for capitalisation, and the cost of major inspections. Where the replacement of part of an asset is considered significant, the Group recognises these as separate assets with specific useful lives. All other repairs and maintenance are recognised in the statement of comprehensive income as incurred. The expected cost for decommissioning an asset after its use is included in the cost of the respective asset at its present value, if the recognition criteria for a provision are met.

Depreciation
Property, plant and equipment assets, excluding land and any assets under construction, are depreciated to their estimated residual values over their expected useful lives using the straight-line method of depreciation. Useful lives and methods are reviewed annually and necessary adjustments are recognised in the current or future reporting periods, as appropriate.


A summary of the useful lives of property, plant and equipment assets is as follows:

Asset

Useful Life

Buildings

General post offices: 70 years

Other facilities: 40 – 50 years

Plant & equipment

Motor vehicles: 3 – 10 years

Specialised plant and equipment: 7 – 20 years Leasehold improvements:

lower of lease term and 10 years

Other plant and equipment: 3 – 10 years

Derecognition
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no further future economic benefits are expected from its use.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the year the asset is derecognised.

Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:

Consolidated ($m)

2019

2018

Property, plant and equipment

36.7

117.5

B4 Intangible assets

The reconciliation of the opening and closing balances of intangible assets at 30 June is as follows:

Consolidated ($m)

Computer software

Goodwill

Brand names

& trademarks

Customer relationships

Other intangibles

Total intangibles

Gross book value

1,022.8

500.6

72.8

2.8

11.8

1,610.8

Accumulated amortisation

(735.7)

0

(9.0)

(2.3)

(4.8)

(751.8)

Net book value at 30 June 2017

287.1

500.6

63.8

0.5

7.0

859.0

Additions

36.5

0

0

0

0.1

36.6

Amortisation expense

(128.7)

0

(1.4)

(0.2)

(3.8)

(134.1)

Sundry items1

19.4

(6.5)

(32.5)

0

(0.4)

(20.0)

Gross book value

1,078.2

494.1

40.3

2.8

11.5

1,626.9

Accumulated amortisation

(863.9)

0

(10.4)

(2.5)

(8.6)

(885.4)

Net book value at 30 June 2018

214.3

494.1

29.9

0.3

2.9

741.5

Additions

46.3

0

0

0

0.1

46.4

Amortisation expense

(92.6)

0

(3.7)

(1.3)

(2.2)

(99.8)

Sundry items1

6.7

24.0

(0.3)

16.4

(0.8)

46.0

Gross book value

1,121.0

518.1

36.0

19.2

0

1,694.3

Accumulated amortisation

(946.3)

0

(10.1)

(3.8)

0

(960.2)

Net book value at 30 June 2019

174.7

518.1

25.9

15.4

0

734.1

.1.Sundry items includes $23.7 million goodwilll additions, $16.4 million customer relationships additions and $2.3 million computer software additions recognised as part of the Group’s acquisition of the remaining 60 per cent interest of Australia Post Global eCommerce Solutions (2018: 40 per cent interest). Other sundry items includes $11.0 million of transfers from property, plant and equipment (2018: $19.8 million), $0.2 million of disposals (2018:
$0.4 million), goodwill impairment of nil and other impairment losses of $5.8 million (2018: $6.5 million of goodwill impairment and $32.9 million of other impairment losses), disposals from divestment of subsidiary of $1.9 million (2018: nil), and foreign currency translation of $0.5 million (2018: nil).

Recognition and measurement

Goodwill
Goodwill is initially measured at the excess of the aggregate consideration transferred and the amount recognised for non- controlling interest over the net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Brand names, trademarks, computer software, customer relationships and other intangibles
Brand names, trademarks, computer software, customer relationships and other intangibles that are either acquired separately or in a business combination are initially measured at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. After initial recognition, intangible assets are measured at cost less amortisation and any impairment losses. Intangible assets with finite useful lives are tested for impairment whenever there is an indication of impairment while intangible assets with indefinite lives are tested for impairment in the same way as goodwill, as discussed in note B5 Impairment of non-financial assets.

Derecognition
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are
recognised in the statement of comprehensive income when the asset is derecognised.

Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:

Consolidated ($m)

2019

2018

Intangible assets

0.9

1.7

Amortisation
Intangible assets with finite lives are amortised over their useful life. Amortisation is calculated on a straight-line basis over the anticipated useful lives. The amortisation period and the amortisation method for each intangible asset with a finite useful life is reviewed annually.

A summary of useful lives of intangible assets is as follows:

Asset

Useful life

Computer software

Finite between 4 – 8 years

Brand names and trademarks

Finite not exceeding 10 years

Customer relationships

Finite up to 8 years

Other intangibles

Finite up to 3 years

Goodwill and brand names with indefinite useful lives acquired through business combinations have been allocated to individual cash generating units (CGU’s) as follows:

Consolidated ($m)

2019

2018

Goodwill – Parcels

492.9

492.9

Goodwill – Other CGUs

25.2

1.2

518.1

494.1

B5 Impairment of non-financial assets

Assessing for impairment
The Group tests property, plant and equipment, intangibles and goodwill for impairment:

  • at least annually for indefinite life intangibles and goodwill; and
  • where there is an indication that the asset may be impaired (which is assessed at least each reporting date); or
  • where there is an indication that previously recognised impairment (on an asset other than goodwill) may have changed.

If the asset does not generate independent cash inflows and its value in use cannot be estimated to be close to its fair value, the asset is tested for impairment as part of the CGU to which it belongs. Assets are impaired if their carrying value exceeds their recoverable amount. The recoverable amount of an asset or CGU is determined as the higher of its fair value less cost

of disposal or value in use. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGUs that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

CGUs containing goodwill
There was no material impairment recognised during the 2019 financial year.

Impairment testing for CGUs containing goodwill
The recoverable amount of each CGU is determined using a value in use calculation based on a discounted cash flow model. Cash flow forecasts are extracted from four year corporate plans approved by senior management and the Board. The corporate plans are developed annually with a four year outlook and, for the purpose of value in use calculations, are adjusted on the understanding that actual outcomes may differ from the assumptions used. The forecasts are extrapolated for a further one year and a terminal value applied based on Group estimates, taking into consideration historical performance and consensus forecasts of the long-term average growth rate for the industry of each CGU or asset.

A post-tax discount rate applicable to the specific cash generating unit or asset has been applied. Discount rates used are based on the weighted average cost of capital determined by prevailing or benchmarked market inputs, risk adjusted where necessary. Other assumptions are determined with reference to external sources of information and use consistent, conservative estimates for variables such as terminal revenue growth rates. Increases in discount rates or changes in other key assumptions, such as operating conditions or financial performance, may cause the recoverable amounts to fall below carrying values.

KEY ASSUMPTIONS FOR IMPAIRMENT TESTING FOR CGUs CONTAINING GOODWILL
The value in use calculations used to determine the recoverable amount of all CGUs includes management estimates to determine income, expenses, capital expenditure and cash flows for each CGU.

The revenue growth rate applied to the one year period outside the corporate plan, terminal growth rate and post-tax discount rate applicable to each CGU are as follows:

Consolidated

Revenue growth rate one year outside Corporate Plan (%)

Terminal growth rate (%)

Discount rate (%)

2019

2018

2019

2018

2019

2018

Parcels CGU

6.6

8.4

2.0

2.0

6.9

7.6

Other CGUs1

3.9 - 15.6

1.7 - 2.3

2 - 2.5

1.7 - 2.0

8.5 - 15.5

8.5 - 9.6

  1. In the 2019 financial year, Other CGUs include the POLi Payments and Austraila Post Global eCommerce Solutions CGUs. In the 2018 financial year, Other CGUs consisted of the POLi Payments and MailPlus CGUs.

Management believes that any reasonably possible change in the key assumptions would not cause the carrying amount of any CGUs containing goodwill to change materially.

B6 Investment property

Investment property as at 30 June is as follows:

Consolidated ($m)

2019

2018

Investment property

181.5

168.9

Investment property is held by the Group for leasing to third parties for rental return as well as capital appreciation. Direct operating expenses of the investment properties are disclosed in note A2. Approximately 58 per cent (2018: 64 per cent) of the Group’s investment properties generate rental return with the remainder being held for development and capital appreciation. Rental income is disclosed in note A1.

Recognition and measurement
Investment property is measured initially at cost, including transaction costs. The cost of the asset also includes the cost of replacing parts that are eligible for capitalisation, but excludes the costs of day-to-day servicing.
Subsequent to initial recognition, investment property is measured at fair value, with gains or losses arising from changes in the fair value recognised in the statement of comprehensive income.

Derecognition
When investment properties are disposed of or permanently withdrawn from use and no future economic benefit is expected, they are derecognised with the difference between the net disposal proceeds and the carrying amount of the investment property recorded in the statement of comprehensive income.

Transfers
Transfers are made to investment property when there is a change in use, evidenced by ending of owner-occupation or commencement of an operating lease to a third party. Where an owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. Where an investment property is reclassified to owner-occupied property, the deemed cost of the property for subsequent accounting is its fair value at the date of change in use.

KEY ESTIMATES: VALUATION
At each period end, the Group reassesses the fair value of its investment property portfolio. In the 2019 financial year, this assessment was conducted by CBRE Group Inc. (CBRE) (2018: CBRE), an accredited, external and independent valuer. CBRE is an industry specialist in valuing these types of investment properties in accordance with Australian Valuation Standards. The fair value for each property has been determined by reference to the highest and best use of the property taking into account the specific characteristics and location of the asset. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, information is considered from a variety of sources including:

  • current prices in an active market for properties of different nature or recent prices of similar properties in less active markets, adjusted to reflect those differences;
  • discounted cash flow projections based on reliable estimates of future cash flows; or
  • capitalised income projections based upon a property’s estimated net market income, and a capitalisation rate derived from an analysis of market evidence.

At 30 June 2019 investment properties comprise only level 2 properties. Refer to note D4 for fair value categories. In addition, the Group has no restrictions on the use of its investment property portfolio but is subject to an annual maintenance requirement on a number of properties subject to heritage requirements.


CLASSIFICATION
The classification of property as investment property requires management judgement, with the determination subject to change over time depending on how the property is being used by the Group. The Group has determined that these properties classified as investment property are held for the primary purposes of generating rental income or for capital appreciation. Where a property is also occupied by the Group, it is classified as an investment property where the floor space occupied for internal use is an insignificant portion of total floor space.

B7 Payables

The components of payables at 30 June are as follows:

Consolidated ($m)

2019

2018

Trade creditors

506.0

476.5

Agency creditors1

98.3

105.1

Salaries and wages

58.5

57.1

Unearned revenue

  • Unearned delivery revenue

84.2

65.6

  • Other advance receipts

159.8

124.8

Borrowing costs

3.6

3.8

Other payables

99.0

124.1

Total current trade and other payables

1,009.4

957.0

Non-interest bearing and normally settled on next business day terms

Unearned Revenue

Unearned revenue comprises both unearned delivery revenue ($84.2 million) and other advance receipts ($159.8 million), representing obligations to transfer goods or services to customers for which the Group has received consideration (contract liabilities). The reconciliation of the opening and closing balances of unearned revenue at 30 June is as follows:

Consolidated ($m)

Balance as at 1 July 20181

Additions (consideration received)

Utilised (recognised as revenue)

219.1

355.5

(330.6)

Balance as at 30 June 2019

244.0

  1. Includes adjustments to reflect the application of AASB 15 Revenue from Contracts with Customers. Because the Group has adopted the cumulative method of transition, prior year comparatives have not been restated in the financial statements. Refer to note E6

Recognition and measurement
Trade and other payables are carried at the amount owing to counterparties for goods and services provided, which is usually the invoice amount, and remains unpaid. Trade creditors includes both domestic and international non-interest bearing creditors. Domestic creditors are normally settled on 30-day terms, while international creditors are settled in accordance with Universal Postal Union arrangements, which may be longer than 30 days. Salaries and wages are accrued for in accordance with note C1.

Unearned delivery revenue arises where payment has been received from an external party, but the associated delivery performance obligation (refer to note A1) has yet to be fully satisfied.

Other advance receipts is comprised predominantly of consideration received from external parties for post office boxes and bags which are rented out to the public, where the performance obligation (refer to note A1) has yet to be fully satisfied.

Other payables includes amounts accrued for capital expenditure, GST obligations and other accruals of the Group.

KEY ESTIMATE: UNEARNED DELIVERY REVENUE
With respect to revenue generated from postage product sales, an allowance is made at balance date where products have not yet been used. An actuarial valuation is undertaken every three years incorporating updates to key input assumptions including changes to product mix and patterns of purchase and use. The actuarial valuation also makes certain assumptions including applying an average initial credit balance before each postage meter reset, constant postage meter usage between resets and that the timing of resets follows a reasonably random process for business customers. The unearned delivery revenue is reassessed every six months and where necessary, an update to the actuarial factors is made where a significant change in assumption is observed.

With respect to revenue generated from delivery related products and services, the Group performs a cut-off adjustment on balance day to allow revenue for partially completed delivery related services to be recognised over time. The adjustment is calculated using time elapsed since lodgement against delivery timeframes, as indicated by delivery survey performance data and published delivery timetables.

B8 Other provisions

The Group’s other provisions at 30 June are as follows:

Consolidated ($m)

Property make good provision

Other provision1

Total

Balance at 30 June 2017

51.6

20.6

72.2

  • current provision

11.3

16.7

28.0

  • non-current provision

40.3

3.9

44.2

Reassessments and additions

4.4

1.8

6.2

Unused amount reversed

(1.4)

(5.3)

(6.7)

Utilised

(0.9)

(7.8)

(8.7)

Discount rate adjustment

(0.1)

(0.1)

Balance at 30 June 2018

53.6

9.3

62.9

  • current provision

10.3

6.4

16.7

  • non-current provision

43.3

2.9

46.2

Reassessments and additions

1.3

(1.2)

0.1

Unused amount reversed

(0.2)

(0.8)

(1.0)

Utilised

(0.2)

(2.9)

(3.1)

Discount rate adjustment

0.7

0

0.7

Balance at 30 June 2019

55.2

4.4

59.6

  • current provision

8.5

3.6

12.1

  • non-current provision

46.7

0.8

47.5

  1. Includes legal provisions $3.0 million (2018: $4.4 million), surplus lease provisions $0.9 million (2018: $4.0 million) and onerous agreement provision $0.5 million (2018: $0.9 million).

Recognition and measurement
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are measured as the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a financing cost.

KEY ESTIMATE: PROPERTY MAKE GOOD PROVISIONS
Property make good provisions represent the estimated cost to make good operating leases entered into by the Group. The estimated cost is based on management’s best estimate of the cost to restore a square metre of floor space and is dependant on the nature of the building being leased. The provision recognised is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs are recognised by adjusting both the expense or asset (if applicable) and provision. The expected timing of the make good cost is based on the expiry of each underlying individual lease agreement.

Our people

This section describes a range of employment and post employment benefits provided to our people.

C1 Employee provisions

The components of employee provisions at 30 June are as follows:

Consolidated ($m)

2019

2018

Current provisions

Employee provisions:

Annual leave

180.3

179.9

Long service leave

400.3

377.0

Separations and redundancy1

39.7

68.3

Incentives/bonuses

83.7

86.5

Other employee

2.2

2.1

706.2

713.8

Employee provisions:

Workers’ compensation

37.7

35.9

Balance at 30 June

743.9

749.7

Non-current provisions

Employee provisions:

Long service leave

59.8

54.1

Separations and redundancy 1

32.1

41.2

Incentives/bonuses

0

0

91.9

95.3

Employee related provisions:

Workers’ compensation

158.0

141.0

Balance at 30 June

249.9

236.3

1 The provision recognised comprises the expected severance payments, employee entitlements (including notice period), outplacement costs and payroll tax based on the location of the employee, staff level affected by the restructuring and their anticipated years of service. In estimating the expected severance payments, historical severance payments have also been considered.

Recognition and measurement
Employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

Annual leave
The liability for annual leave benefits expected to be settled within 12 months of reporting date is recognised in current provisions, measured as the present value of expected future payments for the services provided by employees up to the reporting date. Liabilities for benefits which are expected to be settled beyond 12 months are discounted to present value using market yields on corporate bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows, and are also recognised in current provisions.

Incentives/bonuses
The Group recognises a liability and expense for incentive/ bonus plan payments to be made to employees. The Group recognises a provision where past practice and current performance indicates that a probable constructive obligation exists.

Separation and redundancy
Separation and redundancy provisions are recognised when the recognition criteria for provisions is fulfilled, and steps have been taken to implement a detailed plan and discussions with affected personnel have created a valid expectation that the restructuring is being carried out or the implementation has been initiated already.

Long service leave
The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.

Consideration is given to key assumptions as below. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

KEY ESTIMATES:
The long service leave provision at balance date required management judgement and independent actuarial assessment of key assumptions including, but not limited to:

  • future salaries and wages increases;
  • future on-cost rates; and
  • period of service and experience of employee departures

Workers’ compensation
The Group self-insures the majority of its liability for workers’ compensation as a licence holder under the Safety, Rehabilitation and Compensation Act 1988 (SRC Act). A provision is recognised in the financial statements based on claims reported, and an estimate of claims incurred but not reported. The provision is measured using an independent
actuarial assessment at each balance date, with the estimate of present value taking into account key assumptions as below, as well as pay increases, attrition rates, interest rates and the time over which settlement is made.

The liability for workers’ compensation at balance date includes $40.4 million of claims made in the 2019 financial year (2018: $34.3 million).

KEY ESTIMATES:
The self-insured risk liability required management judgement and independent actuarial assessment of key assumptions including, but not limited to:

  • future inflation;
  • interest rates;
  • average claim size;
  • claim development; and
  • claim administration expenses.

C2 Key management personnel remuneration and retirement benefits

This note has been prepared in accordance with the requirements of the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 and AASB 124 Related Party Disclosures. Certain additional information has also been voluntarily disclosed.

For the purposes of this note, the Group has defined Key Management Personnel as Board directors, the Group Chief Executive Officer and Managing Director and senior executives who report directly to the Group Chief Executive Officer and Managing Director and who have authority and responsibility for planning, directing and controlling the activities of the organisation. These employees are the only employees considered to have the capacity and responsibility for decision making that can have a significant and direct impact on the strategic direction and financial performance of the Group. Executive directors are classified as senior executives and are disclosed in this note.

Key management personnel remuneration by category
Remuneration received directly or indirectly by key management personnel under an accrual basis for the year ended 30 June is as follows:

Corporation and consolidated ($)

Key management personnel

2019

2018

Short-term employee benefits1

11,928,041

11,548,374

Post employment benefits

285,709

299,178

Other long-term benefits2

694,140

885,990

Termination/retirement benefits

476,528

1,448,283

Total key management personnel remuneration

13,384,418

14,181,825

1 Short-term employee benefits comprises cash salary, accrued annual leave, bonuses (if payable within twelve months of the end of the period) and non- monetary benefits.

2 Other long-term benefits comprises accrued long service leave, deferred bonuses and the cost of a long-term incentive (LTI) program implemented for a number of senior executives, which required performance against Board approved hurdles over a number of years. The LTI program ceased at the end of the 2018 year.

Total number of key management personnel
The total number of key management personnel who held office at any time during the year is disclosed below:

Corporation and consolidated (number)

Key management personnel

2019

2018

Senior executives

13

9

Directors

9

9

22

18

Related party transactions
Transactions entered into directly by directors or director- related entities with the Australian Postal Corporation have been either domestic or trivial in nature.
A number of directors of the Australian Postal Corporation are also directors of or have interests in other entities which have transacted with the Australian Postal Corporation Group. These transactions have occurred on terms and conditions no more favourable than those which it is reasonable to expect the Group would have adopted if dealing with any third party on normal commercial terms.

Other key management personnel transactions with the Group
Andrew Parker was on secondment from PricewaterhouseCoopers (PwC) filling the role of Executive General Manager (EGM) International Services (Acting). Andrew Parker’s secondment (commenced 15 January 2018) concluded on 13 July 2018 following the appointment of the permanent incumbent, Annette Carey. The secondment fees were paid directly to PwC. PwC provide various accounting and consulting services to the Group.

Key management personnel remuneration by individual
The tables below reflect an extract from the Australia Post remuneration report contained in the annual report. These tables should be read in conjunction with the remuneration report. Remuneration received directly or indirectly by key management personnel under an accrual basis for the most recent financial year 2019 and previous financial year 2018 is as follows:

Board Directors’ remuneration

Directors

Year

Post Short-term employment benefits contributions

Director Super-

Fees5 annuation6

$ $

Total

$

John Stanhope AM (Chairman)

2019

189,910

18,041

207,951

2018

186,180

17,687

203,867

Holly Kramer (Deputy Chair)

2019

116,980

11,113

128,093

2018

114,680

10,895

125,575

Mario D’Orazio1

2019

27,594

2,621

30,215

2018

0

0

0

Bruce McIver AM

2019

105,990

10,069

116,059

2018

103,900

9,871

113,771

Tony Nutt AO2

2019

104,360

9,914

114,274

2018

33,130

3,147

36,277

The Hon Michael Ronaldson

2019

104,360

9,914

114,274

2018

102,300

9,719

112,019

Jan West AM

2019

116,980

11,113

128,093

2018

114,670

10,894

125,564

Deidre Willmott

2019

105,990

10,069

116,059

2018

103,103

9,795

112,898

Former Directors

Dominique Fisher3

2019

0

0

0

2018

41,761

3,967

45,728

Paul Scurrah4

2019

65,761

6,247

72,008

2018

101,621

9,654

111,275

Total (9 directors)

2019

937,925

89,101

1,027,026

Total (9 directors)

2018

901,345

85,629

986,974

1 Mario D’Orazio appointed to the Board 21 March 2019.

2 Tony Nutt AO appointed to the Board 2 March 2018.

3 Dominique Fisher retired from the Board 26 November 2017.

4 Paul Scurrah resigned from the Board 15 February 2019.

5 Board Director fees are set by the Remuneration Tribunal and paid in cash.

6 Minimum superannuation contributions are provided as prescribed under Superannuation Guarantee legislation.

Senior Executives Remuneration

Senior Executives

Short-term benefits

Post employment benefits

Other long-term benefits

Other

Year

Base

salary14

$

Bonuses15

$

Other

benefits and allowances16

$

Superannuation17

$

Long

service

leave18 $

Other long-term benefits19

$

Termination

and retirement

benefits20 $

Total

$

Christine Holgate1

2019

1,441,247

831,375

0

20,531

47,573

224,500

0

2,565,226

2018

971,452

515,625

32,868

20,049

20,894

85,938

0

1,646,826

Robert Black

2019

999,041

531,956

0

20,531

21,398

128,909

0

1,701,835

2018

1,216,870

885,500

0

20,049

44,568

73,719

0

2,240,706

Ingo Bohlken2

2019

702,457

418,950

41,885

20,531

19,662

69,825

0

1,273,310

2018

0

0

0

0

0

0

0

0

Rodney Boys3

2019

73,178

0

0

6,455

1,523

0

0

81,156

2018

0

0

0

0

0

0

0

0

Annette Carey4

2019

746,303

390,938

0

20,531

20,938

65,156

0

1,243,866

2018

0

0

0

0

0

0

0

0

Susan Davies5

2019

703,826

413,438

0

20,531

57,759

68,906

0

1,264,460

2018

0

0

0

0

0

0

0

0

Nicole Sheffield6

2019

686,308

400,313

0

20,531

12,012

66,719

0

1,185,883

2018

0

0

0

0

0

0

0

0

Gary Starr7

2019

684,717

413,438

9,019

20,531

30,923

85,712

0

1,244,340

2018

207,047

103,991

0

6,646

13,339

5,571

0

336,594

Former Senior Executives

Ahmed Fahour AO8

2019

0

0

0

0

0

0

0

0

2018

156,495

0

0

5,012

7,208

362,475

0

531,190

Chris Blake9

2019

566,043

0

0

20,531

(139,497)

0

476,528

923,605

2018

831,400

612,000

0

20,049

27,224

29,531

0

1,520,204

Christine Corbett10

2019

29,362

0

0

3,069

0

0

0

32,431

2018

959,716

669,375

0

101,646

38,372

32,484

875,000

2,676,593

Janelle Hopkins11

2019

847,326

0

0

20,531

(87,878)

0

0

779,979

2018

866,870

635,250

0

20,049

27,475

58,406

0

1,608,050

Andrew Walduck12

2019

20,272

0

7,784

2,305

0

0

0

30,361

2018

804,266

631,125

27,319

20,049

29,255

29,531

573,283

2,114,828

Senior Executive engaged under secondment arrangement payment13

Andrew Parker13

2019

30,940

0

0

0

0

0

0

30,940

2018

519,860

0

0

0

0

0

0

519,860

Total (13 executives)

2019

7,531,020

3,400,408

58,688

196,608

(15,587)

709,727

476,528

12,357,392

Total (9 executives)

2018

6,533,976

4,052,866

60,187

213,549

208,335

677,655

1,448,283

13,194,851

1 Christine Holgate was appointed Group Chief Executive Officer and Managing Director on 30 October 2017.

2 Ingo Bohlken was appointed Executive General Manager, Product & Innovation with effect from 30 July 2018.

3 Rodney Boys was appointed Group Chief Financial Officer with effect from 27 May 2019.

4 Annette Carey was appointed Executive General Manager, International Services with effect from 1 July 2018.

5 Susan Davies was appointed Executive General Manager, People & Culture with effect from 1 July 2018.

6 Nicole Sheffield was appointed Executive General Manager, Community & Consumer with effect from 6 August 2018.

7 Gary Starr was appointed Executive General Manager, Business & Government with effect from 1 March 2018.

8 Ahmed Fahour AO resigned from the position of Managing Director & Group Chief Executive Officer with Australia Post with effect from 28 July 2017.

9 Chris Blake retired from Australia Post with effect from 31 December 2018. An ex-gratia payment, disclosed under “termination and retirement benefits”, was made in accordance with the Deed of Separation.

10 Christine Corbett was appointed Acting Group Chief Executive Officer and Managing Director between 29 July 2017 to 29 October 2017 and ceased employment with Australia Post with effect from 13 July 2018.

11 Janelle Hopkins ceased employment with Australia Post with effect from 3 May 2019.

12 Andrew Walduck ceased employment with Australia Post with effect from 13 July 2018.

13 Andrew Parker was seconded from PricewaterhouseCoopers (PwC) on a consulting basis, which concluded on 13 July 2018, following appointment of permanent incumbent, Annette Carey. Andrew Parker is remunerated separately by PwC, with base salary comprising consulting fees paid to PwC for this secondment.

14 Base salary comprises cash salary, net of annual leave accrued and taken during the year.

15 Bonuses comprise accrued short-term incentives payable within 12 months of the end of the period.

16 Other benefits and allowances comprise the Reportable Fringe Benefits Amount included on the recipient’s payment summary. Amounts for Christine Holgate’s 2018 year benefits comprise short-term accommodation paid by the Corporation for the first six months of her tenure in accordance with the determination set by the Remuneration Tribunal.

17 For employees who are members of the Australia Post Superannuation Scheme (APSS) defined benefit scheme, the superannuation benefit represents the contributions made by Australia Post into the APSS, which is determined using the employer contribution rate. If the employee is member of a defined contribution plan, the benefit is calculated at 9.5 per cent in accordance with the applicable legislation.

18 Long Service Leave (LSL) comprises the amount of leave accrued for the period. Where the LSL vesting requirements have not been met on separation, the reversal of the cumulative LSL accrual is reported as a non-cash adjustment to remuneration.

19 Other long-term benefits represents the accrued portion of short term incentives that are not payable within 12 months of the end of the period they relate to. This amount represents 50 per cent of the deferred component of the incentive awarded for the relevant year. The total deferred amount will be payable subject to certain performance conditions being met.

20 Termination and retirement benefits are payments made on separation of the senior executive role.

C3 Post employment benefits

Until 1 January 2012 for Contract employees and 1 July 2012 for Award employees, employees could choose to join either the Australia Post Superannuation Plan (APSS – the Scheme) or an accumulation fund. After these dates, the APSS closed to new employees and from that point all new employees have joined accumulation funds. All employees who are members of an accumulation fund receive Superannuation Guarantee employer contributions. Australia Post and StarTrack Award employees receive 12 per cent of their ordinary time earnings and all other employees receive 9.5 per cent of their ordinary time earnings.

Defined benefit post employee benefits

Amount recognised in the statement of comprehensive income and in the balance sheet
The amount recognised in the statement of comprehensive income for the year ended 30 June is as follows:

Consolidated ($m)

2019

2018

Current service cost

163.7

176.3

Past service cost

0

0

Interest cost on benefit obligation

123.3

123.8

Interest income on plan assets

(153.6)

(147.4)

Plan expenses

9.6

9.9

Contributions tax reserve

0

0

Defined benefit superannuation expense

143.0

162.6

The reconciliation of the changes in the present value of the amounts recognised in the balance sheet at 30 June is as follows:

Changes in the present value of defined obligation

Consolidated ($m)

2019

2018

Opening defined benefit obligation

at 1 July

3,279.4

3,350.6

Interest cost

123.3

123.8

Current service cost

163.7

176.3

Benefits paid and payable

(305.5)

(299.9)

Past service cost

0

0

Actuarial (gain)/loss due to changes in financial assumptions

167.1

(131.2)

Actuarial (gain)/loss due to changes in demographic assumptions

0

(9.6)

Other remeasurements

(19.5)

69.4

Closing defined benefit obligation at 30 June1

3,408.5

3,279.4

Excluded from the obligation and plan assets above is $3,653.3 million (2018: $3,563.2 million) relating to member financed accumulated benefits

Changes in the fair value of the plan assets

Consolidated ($m)

2019

2018

Opening fair value of plan assets at 1 July

4,198.1

4,051.0

Return on plan assets

135.9

127.1

Interest income on plan assets

153.6

147.4

Contributions by employer

99.9

134.3

Benefits paid and payable

(305.5)

(299.9)

Plan expenses

(9.6)

(9.9)

Contributions tax reserve

(13.6)

(18.7)

Other remeasurements

0

66.8

Fair value of plan assets at 30 June1

4,258.8

4,198.1

Excluded from the obligation and plan assets above is $3,653.3 million (2018: $3,563.2 million) relating to member financed accumulated benefits

Amount recognised in other comprehensive income

Consolidated ($m)

2019

2018

Remeasurements on liability

(147.6)

71.4

Return on plan assets excluding interest income

135.9

127.1

Remeasurements on asset

0

66.8

Contributions tax

(13.6)

(18.7)

Total amount to be recognised in other comprehensive income

(25.3)

246.6

Recognition and measurement
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using market yields of corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating the terms of the related obligation.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised in the statement of comprehensive income as past service costs at the earlier of the date on which the amendment or curtailment occurs or when associated restructuring costs are recognised. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.

Superannuation plan
The Corporation is an employer sponsor of the APSS. In addition, certain employees of Star Track Express Pty Ltd, Post Super Pty Ltd and Decipha Pty Ltd are associated employers of the scheme. The APSS provides employer-financed defined benefits to all employees who are members. The APSS also enables members to open an accumulation account for personal contributions only, as well as accounts for their spouse and maintain the account on leaving employment. Balances in the accumulation section at 30 June 2019 totalled $3,653.3 million (2018: $3,563.2 million) and have been excluded from the disclosures.

The APSS is governed by the rules as set out in the APSS Trust Deed. The current Trust Deed (including amendments contained in the Deed of Modifications 1 to 17) was consolidated in August 2016. APSS is a “regulated fund” under the provisions of the Superannuation Industry (Supervision) Act 1993 (SIS). The Scheme is treated as a complying defined benefit superannuation fund for taxation purposes.

The APSS is operated by the APSS Trustee. By law, the APSS Trustee is required to act in good faith and in the best interests of members, and operate in accordance with the APSS Trust Deed. The Board of the Trustee is comprised of three Union or Australian Council of Trade Unions appointed directors, three employer-appointed directors, and an independent director.

Funding arrangement and requirements
The APSS is funded by the Corporation and its associated employers, with the funding requirements being based on the recommendations of the APSS Actuary. The current funding recommendations are based on a methodology that calculates a long-term normal cost to provide the APSS benefits, plus additional contributions being required in the event that the assets are not sufficient to meet members’ vested benefits.

The Group is expected to make employer contributions (excluding any employee salary sacrifice contributions) of $93.8 million for the year ended 30 June 2020.

As under the current arrangements, the Corporation can cease making contributions at any time to the APSS, the Corporation has no legal requirement to contribute to the APSS. As such, the Corporation does not currently have any minimum funding requirements in respect of the APSS.

Categories of plan assets ($m)1
The fair value of total plan assets is as follows:

Consolidated ($m)

2019

2018

Active market

Cash

243.6

442.6

Australian public equities

311.3

359.9

International public equities

1,005.6

1,179.2

Emerging markets public equities

210.7

258.0

Australian public debt

941.8

674.6

International public debt

236.8

167.9

Inactive market

Equities and debt

724.6

870.9

Real estate

72.0

104.8

Alternative credit

309.2

140.2

Real assets

203.2

0

4,258.8

4,198.1

  1. There are no in-house assets included in the fair value of the APSS assets, however there may be an immaterial amount of indirect investments in shopping centres where the Corporation has leased certain areas for retail outlets.

Amount recognised in the balance sheet
The amount recognised in the balance sheet as at 30 June is as follows:

Consolidated ($m)

2019

2018

2017

2016

2015

Present value of benefit obligation (wholly funded)

(3,408.5)

(3,279.4)

(3,350.6)

(3,506.8)

(3,310.7)

Fair value of plan assets

4,258.8

4,198.1

4,051.0

3,910.4

3,923.6

Contributions tax reserve

0

0

0

0

0

Net superannuation asset/(liability) 1

850.3

918.7

700.4

403.6

612.9

1.The Corporation’s entitlement to any surplus in the Scheme is limited by the terms of the relevant Trust Deed and applicable superannuation laws. On termination, any money and other assets remaining in the Scheme after the payment of benefits and expenses of the Scheme would ultimately be realised and the proceeds distributed to the employers (including the Corporation) in such shares as determined by the Corporation. Outside termination, there is scope for the Corporation to request a return of surplus, which may be no more than the amount (as determined by the Scheme’s actuary) by which the total fund value exceeds the total accrued benefit value. In addition, the Corporation benefits from the surplus through reduction in future superannuation expense and contributions.

Management of the plan risks

The funding of the plan is dependent upon future experience. Material adverse risks in respect of funding include market risk, salary inflation risk, liquidity risk, and the risk of higher than expected death and disability benefits.

KEY ASSUMPTIONS AND SENSITIVITIES
The significant actuarial assumptions used in determining superannuation obligations for the Group’s plan are shown below (expressed as weighted averages), as well as the sensitivity for each significant assumption:

Consolidated

Actuarial assumption (%)

Sensitivity ($m)

Rate increase of 1%

Rate decrease of 1%

2019

2018

2019

2018

2019

2018

Discount rate

2.8

3.8

(231.7)

(220.5)

266.8

253.0

Future inflationary salary increases*

2.0

2.0

216.1

206.2

(186.6)

(178.2)

  • Excludes promotional salary increases.

The determination of the defined benefit obligation requires a number of other assumptions to be made regarding the future including the demographic profile of membership and level of benefits to be provided by the fund.

Maturity profile
The duration of the liabilities is approximately 8 years (2018: 8.5 years), calculated using expected benefit payments on an accrual basis.

Accumulation post employment benefits
Australia Post pays the Superannuation Guarantee contribution (9.5 per cent, except Australia Post and StarTrack Award level employees who receive 12 per cent of ordinary time earnings) to the nominated superannuation funds of employees who have employer contributions paid to an accumulation fund on their behalf.

Accumulation post-employment benefits are expensed by the Group as service is rendered by the Group’s employees. The accumulation superannuation expense recognised in respect of post employee benefits is as follows:

Consolidated ($m)

2019

2018

Accumulation superannuation expense

106.0

92.4

Superannuation Act 1976
Some of the Corporation’s current and past employees are also entitled to benefits under the Superannuation Act 1976, but the Group has no contribution obligation in respect of these benefits. The superannuation asset or liability relating to the Commonwealth Superannuation Scheme (CSS) under the Superannuation Act 1976 is recognised in the financial statements of the Commonwealth and is settled by the Commonwealth in due course. The Commonwealth takes full responsibility for the CSS liabilities for any Australia Post employees (past and present) remaining in the CSS.

Disclosures regarding the CSS Scheme are located in the Department of Finance Annual Financial Report.

Our funding structure and managmeent of our financial risks

As a result of its operations, the Group is exposed to multiple forms of risk. This note sets out the nature of the financial risks and their quantification and management. This section also sets out the strategies and practices the Group utilises to minimise the exposure to these risks in order to execute our Group strategy as well as outlining the current Group funding structure.

D1 Capital management

The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern while maximising the return to the Commonwealth Government. The Group recognises the impact on shareholder returns on the level of equity capital employed and seeks to maintain a prudent balance between the advantages and flexibility afforded by a strong capital position and the higher returns on equity possible with some leverage. A further consideration when managing capital is maintenance of an investment grade rating. The Group holds a AA-rating (2018: AA-) from the independent ratings agency Standard & Poor’s.

The capital structure of the Group (which has not changed from prior year) consists of debt, which comprises bonds payable and syndicated revolving committed facilities, a bank overdraft facility, cash and cash equivalents and equity attributable to equity holders of the Corporation, comprising contributed equity, reserves and retained profits. The capital structure is reviewed annually as part of the Corporate Plan, which includes analysis of the return on equity, return on average operating assets and debt to debt plus equity ratios implicit in the Corporate Plan.

D2 Managing our financial risks

Financial risk management objectives
The Board reviews and agrees policies for managing the Group’s financial risks. The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, interest rate risk and foreign currency risk. Exposure to commodity risk in relation to the bulk purchase of fuel and third party contract pricing mechanisms, managed through the use of hedging derivatives, is considered not significant.

Credit risk
The Group makes sales on credit terms and therefore it is exposed to the risk that a customer may not repay their entire obligations in full as required. In addition to the above, the Group provides financial guarantees to third parties, which commit the group to make payments on behalf of these parties upon their failure to perform under the terms of the relevant contract. At 30 June, the maximum credit risk in respect to guarantees is $246.7 million (2018: $256.4 million) which relates to bank guarantees over projected workers’ compensation liabilities provided by the Group.

Credit risk management: trade and other receivables
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures, including an assessment of their independent credit rating, financial position, past experience and industry reputation. In addition, individual receivable and accrued revenue balances are monitored on an ongoing basis for increases in credit risk based on repayment history and collection status, with the result that the exposure to credit loss is historically not significant.

The Group also recognises lifetime expected credit loss allowances on initial recognition of receivables and accrued revenue using the simplified approach with a provision matrix based on the historical credit loss experience within invoice ageing categories, adjusted for the Group’s forward-looking estimate of recovery conditions based on macroeconomic data specific to receivable and accrued revenue profiles. Expected credit loss allowances are not recognised on receivables or accrued revenue from entities related to the Commonwealth Government for which the probability of default is negligible.

Credit risk management: financial instruments
Counterparty limits are reviewed regularly by the treasury group with recommended limits endorsed by the Board. Investment of surplus funds are made only with approved investment grade counterparties as rated by either Standard & Poor’s or Moody’s. Surplus funds are invested with bank counterparties and other Australian deposit-taking Institutions that have an investment grade rating of BBB or above.

The Group’s 12-month expected credit loss allowances for financial assets other than those measured at fair value through profit and loss are calculated as the product of the assessed probability of counterparty default, the size of the credit loss given default (taking into account collateral arrangements & guarantees), and the exposure to default at reporting date.
Probability of default is assessed using historical and forward looking internal information about the counterparty, as well as available external information including credit ratings. For financial assets that are considered to have increased in credit risk since original recognition, lifetime expected credit loss allowances are recognised.

The maximum exposure to credit loss for the Group’s financial assets is considered equivalent to their carrying amount.

Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its obligations, such as the provisions and payables outlined in notes B8 and B7 respectively, when they fall due. The Group’s liquidity risk management seeks to ensure that there are sufficient funds available to meet financial commitments in a timely manner and plan for unforeseen events which may cause pressure on liquidity. The Group measures and manages liquidity risk by forecasting liquidity and funding requirements for the next three years as a minimum, which is reviewed annually by the Board as part of the Treasury Strategy Paper.

The treasury group also prepares and reviews a rolling daily cash forecast for the quarter to manage short-term liquidity requirements.

Financing facilities
The Group has a three year and one month revolving credit facility of $150 million expiring 20 July 2022 which is available for draw down for a minimum of 30 days. (2018: five year revolving credit facility of $200 million expiring 25 June 2020, but was expired early, on 20 June 2019). This facility is used to manage short-term liquidity requirements.

Maturity of financial liabilities
The tables below detail the Group’s remaining contractual maturity for its material non-derivative financial liabilities, as well as cash outflows arising from derivative financial instruments.

The table presents undiscounted cash flows based on the earliest date on which the Group can be required to pay comparing against the carrying amount of the relevant financial liabilities. The tables include both interest and principal cash flows. Where interest flows are floating rate, the undiscounted amount is derived from the interest rate curves at the end of the reporting period.

The table also includes cash outflows arising from derivative financial instruments, based on the undiscounted net cash outflows on derivative instruments that settle on a net basis and the undiscounted gross cash outflows on those derivatives that require gross settlement. The amount disclosed has been determined by reference to the projected cash outflows illustrated by the yield or forward curves existing at reporting date.

Consolidated ($m)

Contractual maturity (nominal cash flows)

Carrying amount (assets)/ liabilities

Less than

1 year

1 to 2 years

2 to 5 years

Over 5 years

Total nominal cash flows

As at 30 June 2019

Trade and other payables

640.4

0

0

0

640.4

640.4

Bonds payable

31.5

275.0

321.7

198.0

826.2

713.5

Hedge foreign exchange contracts (net settled)

2.6

(0.3)

0

0

2.3

2.3

674.5

274.7

321.7

198.0

1,468.9

1,356.2

As at 30 June 2018

Trade and other payables

629.8

0

0

0

629.8

629.8

Bonds payable

32.3

32.4

411.7

385.0

861.4

703.0

Hedge foreign exchange contracts (net settled)

8.5

0.3

0

0

8.8

8.8

670.6

32.7

411.7

385.0

1,500.0

1,341.6

Interest rate risk management
The Group’s objective in managing interest rate risk is to minimise interest rate exposure by matching asset and liability positions to achieve a natural hedge, whilst ensuring that an appropriate level of flexibility exists to accommodate potential changes in funding requirements. Interest rate risk is measured by regularly reviewing the net exposure from interest-bearing assets and liabilities. The risk can be managed by the use of interest rate swap contracts wherein the Group agrees to exchange the difference between the fixed and floating rate interest amounts calculated on agreed notional principal amounts.

Exposure
The Group’s primary exposure to interest rate risks of interest- bearing financial assets and financial liabilities is set out below. Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. Interest on financial instruments classified as fixed rate is fixed until maturity of the instrument.

Consolidated ($m)

Carrying amount

2019

2018

Financial assets

Cash and cash equivalents (floating rate)

487.2

425.0

Financial liabilities

Bonds payable (fixed rate)

613.5

603.0

Bonds payable (floating rate)

100.0

100.0

Interest rate swaps (fixed rate)

(140.1)

(140.1)

Interest rate swaps (floating rate)

129.8

140.0

Interest rate risk sensitivity
An interest rate sensitivity analysis of the Group at the reporting date has been performed, using a 20 basis point (2018: 20) change to quantify the possible risk based on Australian Government Department of Finance guidance and holding all other variables constant. Using the exposure to interest rates from financial instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and being held constant throughout the period, the sensitivity analysis indicated that the impact on profit after tax at reporting date would be $0.7 million (2018: $0.6 million) increase/decrease in profit after tax.

Interest bearing liabilities
The consolidated borrowing position of the Group at 30 June comprises the following fixed-rate unsecured bonds, which are repayable in full with $250.0 million maturing on 13 November 2020, $175.0 million maturing on 13 November 2023, $180.0 million maturing on 1 December 2026 and a floating rate bond of $100.0 million maturing on 1 December 2021.

On this basis, the weighted average duration of debt is 3.8 years (2018: 4.8 years).

Consolidated ($m)

2019

2018

Payable in 1 – 5 years 1,2

Payable in over 5 years1

536.4

177.1

349.7

353.3

Non-current loan liabilities

713.5

703.0

Total

713.5

703.0

1 Designated in fair value hedge relationships at amortised cost and adjusted by the gain/loss attributable to interest rate risk.

2 Measured at amortised cost.

Foreign currency risk management
The Group has obligations with overseas postal administrations which are invoiced in Special Drawing Rights (SDR) and settled in Euros (EUR) and United States Dollars (USD). The SDR is a basket currency composed of fixed quantities of the five major traded currencies (USD, Japanese Yen, EUR, British Pound Sterling and Chinese Renminbi). The composition of the basket is set by the International Monetary Fund. International mail receipts and payments are highly variable in amount and timing as well as being ongoing in nature. For the Group, the requirement to settle in a foreign currency exposes it to the risk that future cash payment amounts may fluctuate due to changes in the foreign exchange rates. The Group undertakes hedging strategies with respect to the SDR exposure using forward exchange contracts, options and collars. These aim to mitigate the volatility experienced in the income statement caused by movements in the SDR/AUD exchange rate. Each foreign currency exposure, other than SDR, is measured and managed on an item by item basis and individual exposures over $0.5 million are hedged through the use of forward currency contracts.

Exposure
The carrying amount of monetary assets and monetary liabilities as at balance date is shown in the following table.

Other major sources of foreign exchange transaction risk are as a result of foreign sourced and priced capital equipment, purchases or sales in foreign currencies (including fuel purchases) and foreign currency bank accounts.

Foreign currency sensitivity
The following table also details the effect on profit after tax as at 30 June from a 8.7 per cent (2018: 9.2 per cent) favourable/unfavourable change in the Australian dollar based on Australian Government Department of Finance guidance with all other variables held constant. The sensitivity analyses below have been determined based on the exposure to foreign currencies from financial instruments at the reporting date.

Of the total $122.9 million of foreign currency denominated exposures, $112.4 million is SDR, $3.6 million in USD, $3.3 million in GBP and $3.6 million made up of HKD, EUR, JPY, NZD and CNH. (2018: Total of $167.4 million of foreign currency denominated exposures is $167.3 million in SDR, $0.1 million made up of USD, HKD and EUR).

The receivables and payables denominated in SDR, on which the sensitivity is shown in the table below, are not necessarily representative of the Group’s exposure to currency risk for the years ended 30 June 2019 and 30 June 2018. The receivables and payables denominated in SDR are highly variable in amount and timing, in particular due to the timing of receipts and settlements with overseas postal administrations.

Consolidated AUD ($m)

Exposure

Exchange +8.7%

Exchange -8.7%

Impact on

profit

Impact on

equity

Impact on

profit

Impact on

equity

2019

Financial assets

Cash on hand

7.4

(0.4)

0

0.4

0

Trade and other receivables

204.8

(12.4)

0

12.4

0

Other assets

3.0

(1.0)

6.8

1.0

(6.8)

Financial liabilities

Trade and other payables

(87.0)

5.3

0

(5.3)

0

Other liabilities

(5.3)

1.1

0.9

(1.1)

(0.9)

Net exposure

122.9

(7.4)

7.7

7.4

(7.7)

Consolidated AUD ($m)

Exposure

Exchange +9.2%

Exchange -9.2%

Impact on

profit

Impact on

equity

Impact on

profit

Impact on

equity

2018

Financial assets

Cash on hand

2.7

(0.2)

0

0.2

0

Trade and other receivables

262.7

(16.9)

0

16.9

0

Other assets

3.3

2.8

11.5

(2.8)

(11.5)

Financial liabilities

Trade and other payables

(89.2)

5.7

0

(5.7)

0

Other liabilities

(12.1)

4.9

3.8

(4.9)

(3.8)

Net exposure

167.4

(3.7)

15.3

3.7

(15.3)

Commodity price risk management
Commodity price risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in commodity prices. The Group’s objective on commodity price risk management is to ensure that movements in commodity prices do not adversely affect operating costs. The hedging strategy is set annually as part of the planning process and the hedging activities are evaluated monthly.

Exposure
The Group is exposed to commodity prices directly through the bulk purchase of fuel, and indirectly arising from contractual pricing mechanisms with third party providers. The risk is measured by reviewing forecast commodity exposures monthly and managed by entering into long-term supply contracts, the use of fuel surcharges, and through the use of commodity swap and commodity option contracts.

For the year, the Group has elected to adopt hedge accounting in respect of some of its fuel hedging exposures. The fair value of contracts designated as hedging instruments is a net asset of $0.8 million (2018: net asset of $8.2 million) for the Group.

Commodity sensitivity
Based on a change in the most significant input, such as commodity prices, by an increase of 8.7 per cent using Australian Government Department of Finance guidance, with all other variables held constant, would decrease profit after tax by $0.1 million and increase equity by $0.4 million (2018: decrease profit after tax by $0.1 million and increase equity by $2.8 million).

D3 Using derivatives to hedge risks

Types of hedging instruments
The Group uses the following types of derivative financial instruments as part of its risk management strategy:

Foreign currency derivatives
All foreign currency contracts are entered into on the basis of known or projected exposures. For the year, the Group has elected to adopt hedge accounting in respect of some of its foreign currency hedging exposures. The fair value of foreign currency contracts designated as hedging instruments is a net liability of $2.3 million (2018: net liability of $8.8 million) for the Group.

The portion of the gain or loss on the designated forward currency contracts that are determined to be effective hedges is deferred in other comprehensive income and will be recognised in the measurement of the underlying transaction.

As at balance date, the aggregate amount of unrealised gains/ losses under foreign forward currency contracts deferred in the hedging reserve related to contracted future payments for inventory, capital expenditure and exposures for SDR revenue receipts. It is anticipated that the payments will mostly take place within 24 months after reporting date at which stage the amount deferred in equity will be included in the initial cost of the inventory and capital equipment.

It is anticipated that the hedged amounts in relation to inventory will impact the statement of comprehensive income over the next one year and amounts in relation to equipment capital expenditure will impact the statement of comprehensive income over the next 5 to 20 years after the assets are available for use.

The Group hedges its expected SDR revenue flows and the hedged exposures are in a hedge accounting relationship with monthly revaluations recorded in the cashflow hedge reserve.

The following tables detail the foreign currency contracts outstanding as at balance date:

Consolidated

Notional amount (foreign currency) ($m)

USD

EUR

JPY

GBP

CNH

SDR

2019

BUY1

0 – 12 months

19.9

15.5

259.3

1.9

22.2

12.5

over 12 months

0

0

0

0

0

12.0

19.9

15.5

259.3

1.9

22.2

24.5

SELL2

0 – 12 months

12.7

8.4

259.3

1.9

22.2

43.6

over 12 months

0

0

0

0

0

24.0

12.7

8.4

259.3

1.9

22.2

67.6

1 Average buy exchange rates to the Group’s functional currency AUD are: USD 0.734, EUR 0.614, JPY 78.540, GBP 0.550, CNH 5.015 and SDR 1.970.

2 Average sell exchange rates to the Group’s functional currency AUD are: USD 0.734, EUR 0.602, JPY 76.171, GBP 0.535, CNH 4.905 and SDR 1.997.

Consolidated

Notional amount (foreign currency) ($m)

USD

EUR

JPY

GBP

CNH

SDR

2018

BUY1

0 – 12 months

31.7

17.8

537.3

4.3

46.0

21.6

over 12 months

6.1

4.0

123.7

0.8

10.6

0

37.8

21.8

661.0

5.1

56.6

21.6

SELL2

0 – 12 months

117.3

17.5

537.3

3.9

46.0

74.1

over 12 months

6.1

4.0

123.7

0.8

10.6

19.8

123.4

21.5

661.0

4.7

56.6

93.9

1 Average buy exchange rates to the Group’s functional currency AUD are: USD 0.782, EUR 0.625, JPY 81.164, GBP 0.564, CNH 5.113 and SDR 1.866.

2 Average sell exchange rates to the Group’s functional currency AUD are: USD 0.768, EUR 0.609, JPY 79.868, GBP 0.549, CNH 4.982 and SDR 1.910

Interest rate swaps
Interest rate swaps are used to manage the exposure to interest rate movements arising from the Group’s borrowings. Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held.

During the year, the Group had several interest rate swap contracts which all settled on a quarterly basis, totalling $140.0 million, hedging debt maturing in 2023 and 2026.

The following table details the notional principal amounts and remaining terms of fixed for floating interest rate swap contracts as at balance date.

Consolidated ($m)

Fixed interest rate %

Notional principal amount ($m)

2019

From 1 – 5 years

5.5

70.0

Over 5 years

4.0

70.0

2018

Over 5 years

5.5

70.0

Over 5 years

4.0

70.0

Interest rate swap contracts are designated as fair value hedges in respect of interest rates. The gain or loss from remeasuring the hedging instrument at fair value is recorded in profit or loss and to the extent that the hedge is effective, the carrying amount of the borrowing is adjusted by the gain or loss attributable to the hedged risk through profit or loss.

Recognition and measurement of derivatives
Derivative financial instruments are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured to fair value.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to the statement of comprehensive income, except for derivatives designated
in a cash flow hedge arrangement with the effective portion recognised in other comprehensive income.

The fair value of non-optional derivatives is determined based on discounted cash flow analysis using the applicable yield curve or forward curve (commodity) for the duration of the instrument. The fair value of optional derivatives is determined based upon valuation techniques consistent with accepted industry practice.

Derivative instruments are classified as current or non-current based on an assessment of the facts and circumstances pertaining to the derivative (i.e. the underlying contracted cash flows) and whether it is designated in a hedge relationship.

Hedge accounting
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedged item’s fair value or cash flows attributable to the hedged risk.

Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine their effectiveness.

Hedge accounting designations

Cash flow hedges

Used by the Group to hedge exposure to variability in cash flows that is attributable either to a particular risk associated with a recognised asset or liability or to a highly probable forecast transaction.

For cash flow hedges, the portion of the gain or loss on the hedging instrument that is effective is recognised directly in equity, while the ineffective portion is recognised in profit or loss.

Amounts recognised in equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when hedged income or expenses are recognised or when a forecast sale occurs or the asset is consumed. When the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or roll over, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs.

The Group uses cash flow hedges to mitigate the risk of variability of future cash flows attributable to foreign currency fluctuations over the hedging period associated with foreign exchange business activities. The maturity profile of cashflow hedges is shown in note D2.

Fair value hedges

Used by the Group to hedge the exposure to changes in the fair value of a recognised asset or liability or unrecognised firm commitment.

The carrying value of the hedged item is adjusted for gains and losses attributable to the risk being hedged. The derivative is also remeasured to fair value, with the net gain or loss recognised in the statement of comprehensive income.

If the hedged item is a firm commitment (and therefore not recognised), the subsequent cumulative change in the fair value of the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit or loss. The changes in the fair value of the hedging instrument are also recognised in the statement of comprehensive income.

The Group discontinues fair value hedge accounting if the hedge instrument expires or is sold, is terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation.

If the hedged item is a financial instrument for which the effective interest method is used, the accumulated changes in its carrying value are amortised to profit or loss over the remaining life of the instrument from the point at which hedge accounting is discontinued.

The Group uses fair value hedges to mitigate the risk of changes in the fair value of borrowings from interest rate fluctuations over the hedge period. The Group has used interest rate swap contracts to convert fixed-rate interest exposures to floating rate exposures.

The maturity profile of fair value hedges is shown in note D2.

D4 Fair value measurement

Valuation of financial instruments

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows:

  • Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
  • Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; or
  • Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re- assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The methods and assumptions used to estimate the fair value of financial instruments are as follows:

Cash
The carrying amount is fair value due to the asset’s liquid nature.

Receivables / payables
Due to the short-term nature of these financial rights and obligations, carrying amounts are estimated to represent fair values.

Derivatives
The fair values are calculated as the present value of estimated future cash flows using a market based yield curve sourced from available market data quoted for all major currencies.
Accordingly, these financial instruments are classified as Level 2.
The fair value of forward contracts is calculated by reference to forward exchange market rates at reporting date for contracts with similar maturity profiles. As market rates are observable they are classified as Level 2.

Interest-bearing loans and borrowings
Quoted market prices or dealer quotes for similar instruments are used to value long-term debt instruments except corporate bonds based on discounting expected future cash flows at market rates.

Fair value measurements recognised in the balance sheet
Except as detailed in the table below, the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated balance sheet approximates their fair value.

Consolidated ($m)

Carrying amount

Fair value

2019

Financial assets

Finance lease receivable

0

0

Financial liabilities

Bonds payable

713.5

766.9

2018

Financial assets

Finance lease receivable

0

0

Financial liabilities

Bonds payable

703.0

743.1

The financial assets and liabilities not measured at fair value in the consolidated balance sheet disclosed above are categorised as Level 2 with the fair value of each financial asset and liability determined by discounting the expected future cash flows using the applicable yield curve for assets and liabilities with similar risk and maturity profiles.

All of the Group’s derivatives are measured at fair value and are categorised as Level 2.

There were no transfers between levels during the year.

Other information

This section includes additional financial information that is required by either accounting standards or the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015.

E1 Our subsidiaries

The below is a list of the Group’s controlled entities, all of which are incorporated in Australia unless otherwise noted:

2019

%

2018

%

AlphaCommerceHub Pty Ltd 1

0

50.01

AP Innovation Ventures Pty Ltd 2

100

100

AP International Holdings Pty Ltd 13

100

100

APost Accelerator Pty Ltd 2

100

100

APost Innovation Pty Ltd 2

100

100

Australia Post Digital ID Pty Ltd 2

100

100

Australia Post Digital MailBox Pty Ltd 2

100

100

Australia Post Licensee Advisory Council Limited 4

50

50

Australia Post Services Pty Ltd 5

100

100

Australia Post Transaction Services Pty Ltd 6

100

100

Australia Post Global eCommerce Solutions Private Limited 7, 19

100

40

Australia Post Global eCommerce Solutions (HK) Pte Limited 8, 20

100

40

Australia Post Global eCommerce Solutions (Sing) Pte. Ltd. 7, 21

100

40

Australia Post Global eCommerce Solutions (UK) Limited 9, 22

100

40

Australia Post Global eCommerce Solutions (USA) Inc. 10

100

0

Australian Express Transport Pty. Limited 2, 11

100

100

Australian Express Freight Pty. Limited 2, 12

100

100

AUX Investments Pty Ltd 13

100

100

corProcure Pty Ltd 14

0

100

Decipha Pty Ltd 13

100

100

Discount Freight Express Pty Limited 14

0

100

DFE Pty Limited 15

0

75

Geospend Pty. Ltd. 14

0

100

Mail Call Bikes Pty Ltd 14

0

100

Mail Call Commercial Pty Ltd 14

0

100

Mail Call Couriers Pty Limited 2

100

100

Mail Call Couriers Melbourne Pty Ltd 14

0

100

Mail Call Motor Bikes Pty Ltd 14

0

100

Mail Call Non Commercial Pty Ltd 14

0

100

Mail Call Queensland Pty Ltd 14

0

100

Mail Call Services Pty Limited 14

0

100

Mail Call South Australia Pty Limited 14

0

100

Mail Call Western Australia Pty Ltd 14

0

100

Mail Plus Pty Ltd 15

0

75

Mardarne Pty. Ltd. 2, 16

100

100

MP Rights Pty Ltd 15

0

75

Multigroup Distribution Services Pty Limited 14

0

100

Our Neighbourhood Pty. Ltd. 14

0

100

POLi Payments Pty Ltd 2

100

100

Post Fulfilment Online Pty Ltd 14

0

100

Postcorp Developments Pty Ltd 2

100

100

POSTlogistics (Hong Kong) Pte Limited 17

100

100

SecurePay Holdings Pty Ltd 3

100

100

SecurePay Pty. Ltd. 3

100

100

Sprintpak Pty. Ltd. 14

0

100

ST Couriers Holdings Pty Ltd 2

100

100

Star Track Couriers Pty Limited 14

0

100

Star Track Express Holdings Pty Limited 13

100

100

Star Track Express Investments Pty Limited 13

100

100

Star Track Express Pty Limited 13

100

100

Star Track Pty Limited 14

0

100

Star Track Special Services Pty Limited 14

0

100

StarTrack Retail Pty Ltd 13

100

100

STI Co (Aust) Pty Ltd 18

100

40

Wantitnow Australia Pty Ltd 14

0

100

1 Entity disposed of on 20 December 2018.

2 Small proprietary entity not required to prepare and lodge audited financial statements with Australian Securities and Investments Commission (ASIC).

3 Small proprietary entity not required to prepare and lodge audited financial statements with ASIC. Entity has entered into a deed of cross guarantee with Australia Post Transaction Services Pty Ltd as the holding entity.

4 Entity limited by guarantee required to prepare audited financial statements in accordance with the company’s constitution. Australia Post controls the voting rights and has exposure to variability in returns and therefore consolidates this entity.

5 Small proprietary entity which holds an Australian Financial Services Licence and is required to prepare and lodge audited financial statements with ASIC.

6 Large proprietary company required to prepare and lodge audited financial statements with ASIC.

7 Entity incorporated in Singapore and not audited by the Australian National Audit Office (ANAO). Remaining share acquired on 20 December 2018.

8 Entity incorporated in Hong Kong and not audited by the ANAO. Remaining share acquired on 20 December 2018.

9 Entity incorporated in UK and not audited by the ANAO. Remaining share acquired on 20 December 2018.

10 Entity was incorporated on 22 April 2019 in the USA and not audited by the ANAO.

11 Trustee of Darra No 1 Trust and Minchinbury No 1 Trust.

12 Trustee of Darra No 2 Trust and Minchinbury No 2 Trust.

13 Large proprietary company and has entered into a deed of cross guarantee with Australia Post Transaction Services Pty Ltd as the holding entity. Therefore, this entity is not required to prepare and lodge audited financial statements with ASIC in accordance with the relief provisions set out in ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.

14 Entity was deregistered during the 2019 financial year.

15 Entity disposed of on 31 January 2019.

16 Trustee of Mardarne No 1 Trust.

17 Entity incorporated in Hong Kong and not audited by the ANAO.

18 Remaining share acquired on 20 December 2018.

19 Entity formerly known as Aramex Global Solutions Private Limited.

20 Entity formerly known as Aramex Global Solutions (Hong Kong) Pte Limited.

21 Entity formerly known as Global Solutions Logistics Pte. Ltd.

22 Entity formerly known as Aramex Global Solutions (UK) Limited.

E2 Leases

Recognition and measurement
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at the date of inception. It also requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. A finance lease transfers substantially all the risks and benefits incidental to ownership of the leased item, whereas an operating lease does not transfer substantially all these risks and rewards. During the year, the Group was party to operating leases.

The following table outlines the leases that the Group is party to where the underlying leased assets are not on the consolidated balance sheet.

Operating leases for assets the Group leases to external parties
The Group leases or sub-leases a total of 141 sites to external parties. These are under operating leases with various occupancy terms that are due to expire in the next one to twenty years. The leased property portfolio comprises 5 commercial, 25 industrial and 111 retail sites.

Lease payments receivable generally comprise a base amount plus an incremental contingent rental based on movements in the Consumer Price Index and reviews to market-based levels.

The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

Consolidated ($m)

2019

2018

  • within 1 year

33.2

39.4

  • from 1 year to 5 years

81.9

79.2

  • over 5 years

30.4

35.2

Total

145.5

153.8

Operating leases for assets the Group leases from external parties
The Group leases a total of 1,029 sites. These are under operating leases with various occupancy terms that are due to expire in the next one to fifteen years. The leased property portfolio comprises 19 commercial, 305 industrial, 8 residential, 499 retail and 198 parcel locker sites.

Leases generally provide the Group with a right of renewal, at which time the commercial terms are renegotiated. Lease payments generally comprise a base amount plus an incremental contingent rental based on movements in the Consumer Price Index and reviews to market-based levels.

Consolidated ($m)

2019

2018

Minimum lease payments

209.1

204.8

Contingent rentals

0.2

0.4

Operating lease rentals

209.3

205.2

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Consolidated ($m)

2019

2018

  • within 1 year

170.5

162.8

  • from 1 year to 5 years

513.1

463.9

  • over 5 years

296.4

267.4

Total

980.0

894.1

E3 Australian Postal Corporation

Corporation ($m)

2019

2018

Current assets

1,629.8

1,539.4

Total assets

5,816.3

5,694.7

Current liabilities

2,019.6

1,850.0

Total liabilities

3,410.2

3,255.2

Net assets

2,406.1

2,439.5

Contributed equity

400.0

400.0

Retained profits

1,982.5

2,011.8

Asset revaluation reserve

17.7

17.7

Common control reserve

7.0

7.0

Hedging reserve

(1.1)

3.0

Total equity

2,406.1

2,439.5

Net profit/(loss) of the parent entity

55.8

220.0

Total comprehensive income/ (losses) of the parent entity

(17.7)

172.6

Dividends paid

(42.2)

(78.5)

Australian Postal Corporation, which is the Group’s ultimate parent and controlling entity of the Australian Postal Corporation Group, also has:

  • contingent liabilities which relate to legal liability claims that have been lodged against the corporation, including motor vehicle accident and personal injury claims in the amount of $1.6 million (2018: $2.1 million);
  • issued bank guarantees amounting to $179.6 million (2018: $179.6 million) which represent guarantees supporting workers compensation self insurance licences in various jurisdictions;
  • contractual obligations which relate to sub-lease rent receivables and operating lease receivables in the amount of $145.5 million (2018: $153.7 million). Capital commitments of the parent entity in relation to land and buildings and plant and equipment amount to $37.5 million (2018: $110.5 million); and
  • operating lease commitments of $865.9 million (2018: $779.7 million).

E4 Auditor's remuneration


The Corporation’s auditor is the Australian National Audit Office who has retained Ernst & Young (Australia) to assist with the assignment.

Amounts received or due and receivable by the Corporation’s auditors for the following:

Consolidated ($)

2019

2018

An audit or review of the financial report of the entity and any other entity in the consolidated entity

1,705,000

2,044,000

  • assurance related

271,000

206,000

  • other non-audit related1

198,000

501,000

Total auditor’s remuneration

2,174,000

2,751,000

1. These services are performed by Ernst & Young (Australia) directly and include governance and compliance services.

E5 Contingencies

The Group has the following contingent assets and liabilities as at 30 June 2019. Due to the nature of the Group’s contingent liabilities, the Group is not able to ascertain with any certainty the expected timing of any cash outflow that may arise, or the probability of reimbursement.

Consolidated ($m)

Guarantees

Claims for damages or other costs

Total

2019

2018

2019

2018

2019

2018

Balance from previous period

257.0

244.2

3.4

5.8

260.4

250.0

New contingent liabilities recognised

46.1

0

1.0

1.4

47.1

1.4

Re-measurement

(3.9)

26.5

(1.2)

2.4

(5.1)

28.9

Liabilities realised

0

0

(0.5)

(1.6)

(0.5)

(1.6)

Obligations expired

(51.9)

(13.7)

(1.1)

(4.6)

(53.0)

(18.3)

Total contingent liabilities

247.3

257.0

1.6

3.4

248.9

260.4

Balance from previous period

23.6

21.5

0

0

23.6

21.5

New contingent assets recognised

31.9

6.0

0

0

31.9

6.0

Re-measurement

0.1

0.1

0

0

0.1

0.1

Assets realised

(0.9)

0

0

0

(0.9)

0

Obligations expired

(10.7)

(4.0)

0

0

(10.7)

(4.0)

Total contingent assets

44.0

23.6

0

0

44.0

23.6

Net contingent liabilities

203.3

233.4

1.6

3.4

204.9

236.8

Recognition and measurement
Contingent liabilities and contingent assets arise when:

  • there is sufficient uncertainty as to the existence of a liability or asset; or
  • an existing liability or asset where settlement is not probable; or
  • the amount of a liability or asset cannot be reliably measured.

They are not recognised in the balance sheet but are reported in the relevant schedules and notes. Contingent assets are disclosed when settlement is probable, and contingent liabilities are disclosed when settlement is considered not remote.

Guarantees
Relate to non-financial guarantees, including bank guarantees over projected workers’ compensation claims liabilities arising from the Group’s self insurance of its liability for workers’ compensation as a licence holder under the Safety, Rehabilitation and Compensation Act 1988.

Claims for damages or other costs
Arise from legal liability claims that have been lodged against the Corporation and subsidiaries, including motor vehicle accident and personal injury claims.

Insurance
Generally, the Corporation self-insures its own risks. However, with respect to catastrophic losses, appropriate insurance coverage for both the Corporation and its subsidiaries has been arranged with general insurers. Payments received on account of losses in any year are recognised in other income or as an offset against cost incurred, as is appropriate. Insurance premiums are recognised in other expenses as incurred. Where appropriate, the subsidiaries insure their other risks with general insurers. At 30 June 2019, there is no material contingent liability with respect to the Group’s self insurance activities.

E6 Other accounting policies

a) Accounting for goods and services taxes
Revenues, expenditures and assets are recognised net of the amount of Goods and Services Tax (GST) except:

  • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
  • receivables and payables, which are stated with the amount of GST included.

b) Inventories

Inventories including raw materials, work in progress and finished goods are valued at the lower of cost and net realisable value. Initial cost of inventories also includes the transfer of gains and losses on qualifying cash flow hedges, recognised in other comprehensive income. Costs incurred in bringing each product to its present location and condition are accounted for as follows:

  • raw materials on a first-in, first-out basis. The cost of purchase comprises the purchase price including import duties and other taxes (other than those subsequently recoverable by the Group from the taxation authorities), transport, handling and other costs directly attributable to the acquisition of raw materials. Volume discounts and rebates are included in determining the cost of purchase; and
  • finished goods and work-in-progress – cost of direct materials and labour and a proportion of variable and fixed overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Where this is lower than cost, inventory impairment is recognised.

c) Current/non-current classification
Assets are disclosed as current when they are expected to be converted to cash or receivable within 12 months of 30 June 2019. Liabilities are disclosed as current when they are due within 12 months of 30 June 2019 or when there is no unconditional right to defer settlement of the liability for at least 12 months after 30 June 2019.

d) New and amended Australian Accounting Standards adopted by the Group
The Group has adopted the following standards and amendments for the first time in the annual reporting period commencing 1 July 2018 :

AASB 15 – Revenue from contracts with customers
AASB 15 replaces all existing revenue recognition requirements in Australian Accounting Standards (AASB 118 Revenue, AASB 111 Construction Contracts and related Interpretations) and applies to all revenue arising from contracts with customers, unless the contracts are in the scope of other standards, such as AASB 117 (or AASB 16 Leases, once applied).

The standard establishes a principles based five-step model which, when applied, ensures that revenue is recognised in a manner that depicts the transfer of control of goods and services to the customer, at an amount reflecting the consideration to which an entity expects to be entitled in exchange for the goods and services.

The following tables summarise the impacts of adopting AASB 15 on the Group’s consolidated statement of financial position as at 30 June 2019 and its consolidated statement of comprehensive income for the year ended 30 June 2019 for each of the line items affected. There was no impact on the Group’s statement of cash flows for the year ended 30 June 2019.

Transition and financial impact
The Group has adopted the standard on a modified retrospective basis. Under this transition method:

  • the standard has been applied to contracts in progress, but not completed at the date of initial application (1 July 2018);
  • prior year comparatives have not been restated for the effect of application of AASB 15; rather opening retained earnings has been restated ($28.7 million) for the full cumulative impact of adopting the standard and remeasurement of the opening unearned revenue balance.

As disclosed in the 2018 Annual Report, the application of AASB 15 has resulted in a change to the timing of revenue recognition in relation the Group’s delivery related products and services. Previously, revenue earned on delivery services was considered earned at the point of delivery. Under the new requirements, revenue is recognised as deliveries progress over time. This change has had an immaterial impact on the financial statements for the year ended 30 June 2019.

Consolidated statement of comprehensive income for the year ended 30 June 2019

Consolidated ($m)

As reported (AASB 15)

Adjustments

Without adoption of AASB 15

(AASB 118)

Revenue

Goods and services

6,878.4

2.4

6,880.8

Revenue from contracts with customers

0

2.4

2.4

Total income

6,989.8

2.4

6,992.2

Expenses (excluding finance costs)

Suppliers

3,377.8

0

3,377.8

Total expenses (excluding finance costs)

6,916.1

0

6,916.1

Profit/(loss) before income tax

41.1

2.4

43.5

Net profit/(loss) for the year attributable to equity holders of Australian Postal Corporation

40.6

2.4

43.0

Consolidated balance sheet as at 30 June 2019

Consolidated ($m)

As reported

(AASB 15)

Adjustments

Without adoption of AASB 15 (AASB 118)

Assets

Total assets

5,535.6

0

5,535.6

Liabilities

Trade and other payables

1,009.4

(31.1)

978.3

Total liabilities

3,222.5

(31.1)

3,191.4

AASB 9 – Financial Instruments
AASB 9 replaces the requirements of AASB 139 Financial Instruments: Recognition and Measurement and its related interpretations, with three primary areas of impact.

AASB 9 introduces new classifications for financial assets: being fair value through profit and loss (FVTPL), fair value through other comprehensive income (FVOCI), and amortised cost.
These replace the AASB 139 categories of fair value through profit and loss, available-for-sale, loans and receivables, and held-to-maturity. On application the Group has reclassified its financial instruments based on the revised categories, with no resulting measurement impacts.

On application of AASB 9, the AASB 139 “incurred loss” impairment requirements are replaced by a forward looking “expected credit loss” model. The new model requires either 12-month expected credit losses (“ECLs”), or lifetime ECLs to be recognised for all financial assets at initial recognition. The Group has applied the revised impairment requirements during the period, as outlined in note D2.

The Group has elected to continue to apply the existing hedge accounting requirements under AASB 139, and has not applied the revised hedge accounting requirements under AASB 9.

Transition and financial impact
The Group has elected not to restate comparative information for prior periods with respect to the revised classification and measurement requirements of the standard. Accordingly, prior period comparatives have not been restated to reflect the adoption of AASB 9. Overall, the application of AASB 9 has had an immaterial impact ($1.0 million) on the financial statements for the year ended 30 June 2019.

AASB Interpretation 22 – Foreign Currency Transactions and Advance Consideration
This interpretation clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. There were no material changes to the Group’s financial statements from the application of this interpretation.

e) New and amended Australian Accounting Standards not yet adopted by the Group
The following standards, amendments to standards and interpretations are relevant to current operations but have not been applied by the Group in these financial statements.

Reference

Title

Nature of change to accounting policy

Application date of standard

Application date for Group

AASB 16,

and relevant

amending

standards

Leases

AASB 16 Leases (AASB 16) will replace AASB 117 Leases (AASB 117),

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. The Standard provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements.

The standard introduces a new lease accounting model for lessees that requires lessees to recognise all leases on balance sheet, except short-term leases and leases of low value assets. Under AASB 16, the present value of operating lease commitments would be shown as a liability on the balance sheet together with an asset representing the right-of-use. In addition, the current operating lease expense recognised in profit or loss in the statement of comprehensive income will be replaced with amortisation and interest expense. The approach to lessor accounting remains largely unchanged. AASB 16 also requires lessees and lessors to make more extensive disclosures than under AASB 117.

The Group will adopt AASB 16 for the first time for the financial

year beginning 1 July 2019, with the project to assess the impact of

adopting the new standard nearing completion at the reporting date.

The standard will be initially applied using a modified retrospective

approach, meaning that any cumulative impacts of initial application

will be recognised against retained earnings, and there will be no

restatement of comparatives. At the end of the reporting period

ended 30 June 2019, the Group has non-discounted operating lease

commitments of $980.0 million. At transition date, the Group expects to recognise a discounted lease liability containing these non-cancellable commitments and option periods that are reasonably certain to be exercised. Lease arrangements embedded in supply agreements will also be recognised where the definition of a lease per the standard has been met.

1 January

2019

1 July

2019

AASB

Interpretation

23

Uncertainty over

Income

Tax Treatments

AASB Interpretation 23 clarifies the application of the recognition and measurement criteria in IAS 12 Income Taxes when there is uncertainty over income tax treatments, and is not anticipated to have a material impact on the Group’s financial statements.

1 January

2019

1 July

2019

AASB 2018-1

Amendments to

Australian Accounting

Standards – Annual

Improvements 2015-

2017 Cycle

Amendments to:

  • AASB 3 Business Combinations to clarify that an entity remeasures its previously held interest in a joint operation when it obtains control of the business;
  • AASB 11 Joint Arrangements to clarify that an entity does not remeasure its previously held interest in a joint operation when it obtains joint control of the business;
  • AASB 112 Income Taxes to clarify that an entity accounts for all income tax consequences of dividend payments according to where the entity originally recognised the past transactions or events that generated the distributable profits i.e. in profit or loss, other comprehensive income or equity; and
  • AASB 123 Borrowing Costs to clarify that an entity treats any borrowing originally made to develop a qualifying asset as part of general borrowings when the asset is ready for its intended use or sale.

These changes are not anticipated to have a material impact on the

Group’s financial statements.

1 January

2019

1 July

2019

AASB 2018-2

Amendments to

Australian Accounting

Standards – Plan

Amendment,

Curtailment or

Settlement

This Standard amendment provides clarification on the calculation of

current service cost and net interest when an entity remeasures the net defined benefit liability (asset) when a plan amendment, curtailment or settlement occurs. These changes are not anticipated to have a material impact on the Group’s financial statements.

1 January

2019

1 July

2019

AASB 2014-

10

Amendments to

Australian Accounting

Standards – Sale or

Contribution of Assets

between an Investor

and its Associate or

Joint Venture

The amendments require: (a) a full gain or loss to be recognised when a transaction involves a business (whether it is housed in a subsidiary or not); and (b) a partial gain or loss to be recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. Management is yet to complete its assessment of the likely impact on the Group’s financial statements.

1 January

2022

1 July

2022