Overview

The basis of preparation

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The Financial Statements have been prepared in accordance with:

• Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
• Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the operating result or the financial position.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

New accounting standards

A number of new and revised standards, interpretations and amending standards were issued by the Australian Accounting Standards Board prior to the sign-off date but are not applicable until future years.
New accounting standard AASB 16 Leases, will have a material effect on the APSC’s financial statements:

• ‘Right of use’ lease assets and lease liabilities of $10.1 million will be recognised on 1 July 2019.
• Existing operating lease rental payables of $0.4 million and operating lease prepayments of $0.1 million will be derecognised on 1 July 2019.
• During 2019-20, operating lease rental expense of $1.6 million will be derecognised, with right of use asset depreciation of $1.6 million and lease interest of $0.1 million to be recognised.

All other new and revised standards, interpretations and amending standards are not expected to have a material effect on the APSC’s financial statements.

Accounting Judgements and Estimates

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

Cash

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

• cash on hand and
• cash held by outsiders.

Taxation

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

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

• where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
• for receivables and payables.

Reporting of administered activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.

Except where otherwise stated, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.

Events After the Reporting Period

There were no subsequent events that had the potential to affect the ongoing structure and financial activities of the APSC for either departmental or administered activities.

NOTE 1: DEPARTMENTAL FINANCIAL PERFORMANCE

This section analyses the financial performance of the APSC for the year ended 2019.

Note 1.1: Expenses

Employees benefits exoense by category

	2019 $’000	2018 $’000
Note 1.1a: Employee benefits
Wages and salaries	19,874	19,236
Superannuation
Defined contribution plans	1,882	1,771
Defined benefit plans	1,920	1,939
Leave and other entitlements	2,536	2,359
Separation and redundancies	85	708
Total employee benefits	26,297	26,013

Accounting policy

The accounting policy for employee related expenses is contained in note 5.1 Employee provisions.

Suppliers expenses by category.

Note 1.1b: Suppliers
Goods and services supplied or rendered
Consultants	1,049	729
Contractors	8,179	8,233
Travel	903	748
Venue hire and catering	1,119	901
Training	300	300
Information and communications technology	2,759	2,759
Facilities expense	199	191
Other goods and services	748	828
Total goods and services supplied or rendered	15,256	14,689
Other suppliers
Operating lease rentals	1,622	2,023
Workers compensation expenses	460	438
Total other suppliers	2,082	2,461
Total suppliers	17,338	17,150

Leasing commitments

The APSC in its capacity as lessee has three leases for office accommodation and one vehicle lease. Each office accommodation lease has annual fixed percentage increases in the lease payments. For all three accommodation leases, the initial period of office accommodation is still current and these leases do not have purchase options. The lease for the head office has the option to renew for two five year periods, whilst the other two accommodation leases do not have renewal options.

The lease for the head office commenced in July 2017 and the commitment is approximately $11.3 million over a lease term of 9 years and 8 months.

This table shows commitments for minimum lease payments by ageing bands for current and prior year.

	2019 $’000	2018 $’000
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within 1 year	1,562	1,501
Between 1 to 5 years	5,528	5,840
More than 5 years	3,362	4,595
Total operating lease commitments	10,452	11,936

Commitments are disclosed net of GST.

Accounting policy

Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.

this tables shows Write-down and impairment of assets by category for the current and prior year

Note 1.1c: Impairment loss allowance on financial instruments
Impairment on goods and services receivable	4	-
Total write-down and impairment of assets	4	-

this tables shows Write-down and impairment of assets by category for the current and prior year

Note 1.1d: Write-down and impairment of other assets
Impairment of intangibles	860	-
Total write-down and impairment of other assets	860	-

Note 1.2: Own-source revenue

Income is shown by major categories for the current and prior years.

	2019 $’000	2018 $’000
Own-source revenue
Note 1.2a: Sale of goods and rendering of services
Sale of goods	2	3
Rendering of services	22,414	20,874
Total sale of goods and rendering of services	22,416	20,877

Accounting policy

Revenue from the sale of goods is recognised when:

• the risks and rewards of ownership have been transferred to the buyer
• the APSC retains no managerial involvement nor effective control over the goods.

The stage of completion of contracts at the reporting date is determined by reference to services performed to date as a percentage of total services to be performed.

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

tis table discloses Resources received free of charge by category for the current and prior year.

Note 1.2b: Resources received free of charge
Audit services	41	40

Accounting policy

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

Revenue from Government

Accounting policy

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the APSC gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts.

NOTE 2: EXPENSES ADMINISTERED ON BEHALF OF GOVERNMENT

This section analyses the activities that the APSC does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

Note 2.1: Administered - expenses

Note 2.1a: Employee Benefits

NOTE 3: DEPARTMENTAL FINANCIAL POSITION

This section analyses the APSC’s assets used to conduct its operations and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section, Note 5.

Note 3.1: Financial assets

Note 3.1a: Trade and other receivables

This notes discloses receivables. Receivables include GST where applicable. All amounts are expected to be received within 12 months. An impairment allowance is recognised for Goods and services receivable.

	2019 $’000	2018 $’000
Trade and other receivables
Goods and services	1,983	1,576
Appropriation receivable	14,458	15,359
GST receivable from the Australian Taxation Office	523	525
Total trade and other receivables (gross)	16,964	17,460
Less impairment loss allowance - Goods and services	(4)	-
Total trade and other receivables (net)	16,960	17,460

Credit terms for goods and services are within 30 days (2018: 30 days).

Accounting policy

Trade receivables that are held for the purpose of collecting the contractual cash flows, where the cash flows are solely payments of principal and interest, that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

Note 3.2: Non-financial assets

Note 3.2a: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles

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

This table reconciles the opening and closing balances of property, plant, equipment and intangibles for the current reporting year.

	Buildings - Leasehold improvements	Plant and equipment	Computer software	Other intangibles - Intellectual property	Total
2019	$’000	$’000	$’000	$’000	$’000
As at 1 July 2018
Gross book value	6,340	2,063	4,678	97	13,178
Accumulated depreciation, amortisation and impairment	(582)	(537)	(2,982)	(97)	(4,198)
Total as at 1 July 2018	5,758	1,526	1,696	-	8,980
Additions – by purchase	125	1,202	299	-	1,626
Revaluations and impairments recognised in other comprehensive income	-	(203)	-	-	(203)
Impairments recognised in net cost of services	-	-	(860)	-	(860)
Depreciation and amortisation	(764)	(360)	(459)	-	(1,583)
Disposals	-	(10)	(41)	-	(51)
Total as at 30 June 2019	5,119	2,155	635	-	7,909
Total as at 30 June 2019 represented by
Gross book value	6,465	2,155	3,264	64	11,948
Accumulated depreciation, amortisation and impairment	(1,346)	-	(2,629)	(64)	(4,039)
Total as at 30 June 2019	5,119	2,155	635	-	7,909

Property, plant and equipment and intangibles were assessed for impairment as at 30 June 2019. Software with a value of $860,000 was assessed as impaired (2018: nil). Property, plant and equipment and intangibles with a net value of $88,000 are expected to be disposed of within the next 12 months (2018: nil).

Revaluation of non-financial assets

Revaluations are conducted in accordance with the revaluation policy contained in this note. Plant and equipment was revalued by an independent valuer during 2019 (2018: nil). There was a revaluation decrement of $203,000 (2018: nil). All increments and decrements, to the extent that they reverse a previous increment, are transferred to the asset revaluation reserve by asset class and included in the equity section of the statement of financial position. No decrements due to revaluation were expensed in 2019 (2018: nil).

Contractual commitments for the acquisition of property, plant, equipment and intangible assets

There are no significant contractual commitments for the acquisition of property, plant and equipment and intangible assets (2018: nil).

Accounting policy

Acquisition of assets

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases of property, plant and equipment costing less than $2,000, or leasehold improvements costing less than $60,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to the provision for restoration in property leases taken up by the APSC where there exists an obligation to restore the property to its original condition. These costs are included in the value of the APSC’s leasehold improvements with a corresponding provision for restoration recognised.

Revaluations

Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not materially differ from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus or deficit. Revaluation decrements for a class of assets are recognised directly in the surplus or deficit except to the extent that they reverse a previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Depreciation

Depreciable property, plant and equipment assets are written off to their estimated residual values over their estimated useful lives to the APSC using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

Asset class 2019 2018

Leasehold improvements Expected lease term Expected lease term

Property, plant and equipment 1 to 13 years 1 to 13 years

Impairment

All assets were assessed for impairment at 30 June 2019. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

Derecognition

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

Intangibles

The APSC’s intangibles comprise intellectual property, purchased software and internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses where the value of the asset exceeds $2,000 for purchased software and $60,000 for internally developed software and intellectual property.

Intangibles are amortised on a straight-line basis over their anticipated useful life. The useful lives of the APSC’s intangibles are between 2 to 10 years (2018: 2 to 10 years).

All intangible assets were assessed for impairment as at 30 June 2019.

Note 3.2b: Prepayments paid

this taboles shows prepayments paid by category for the current and prior year. Prepayments paid are for services paid in advance of the service being utilised either partly or in whole.

	2019 $’000	2018 $’000
Prepayments paid
Suppliers	477	561
Total prepayments paid	477	561

No indicators of impairment were found for prepayments paid.

Note 3.3: Payables

This tables shows payables by category for the current and prior period. Trade creditors and accruals includes GST payable. All other payables are net of GST. Prepayments received are also known as unearned imcome.

	2019 $’000	2018 $’000
Note 3.3a: Suppliers
Trade creditors and accruals	3,769	3,101
Operating lease rentals	371	275
Total suppliers	4,140	3,376
Note 3.3b: Prepayments received
Rendering of services	5,899	5,795
Total prepayments received	5,899	5,795
Note 3.3c: Other payables
Wages and salaries	166	152
Superannuation	28	26
Separations and redundancies	47	536
Other	71	73
Total other payables	312	787

Accounting policy

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

Operating lease rentals are expensed on a straight-line basis, which is representative of the pattern of benefits derived from the leased assets.

Prepayments received are recognised for payments received for services that are not yet fully performed. This is measured in accordance with the accounting policy in note 1.2a for own-source revenue.

The wages and salaries payable and superannuation payable represent outstanding contributions for a portion of the final fortnight of the financial year.

The APSC recognises a payable for separation and redundancy benefit payments when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Note 3.4: Other provisions

Note 3.4a: Provision for restoration

A provision is recognised when all of the following conditions are met: ● an entity 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 recognised for restoration obligations to remove fitout from leased premises. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

	2019 $’000	2018 $’000
As at 1 July	245	285
Additional provisions made	-	95
Amounts used	-	(139)
Unwinding of discount or change in discount rate	5	4
Total as at 30 June	250	245

The APSC currently has two (2018: two) leasing agreements which have provisions requiring the APSC to restore the premises to their original condition at the conclusion of the lease. The APSC has made provisions to reflect the present value of these obligations.

There was no revaluation of the provision for restoration (2018: no revaluation).

NOTE 4: FUNDING

This section identifies the APSC’s funding structure.

Note 4.1: Appropriations

Note 4.1a: Annual Appropriations ('Recoverable GST exclusive')

This table dislcoses the amount, source and payment from appropriations for both the current and prior financial year.

Departmental	2019 $'000	2018 $'000
Annual Appropriation
Ordinary annual services	21,299	22,811
Capital Budget 1	411	414
Total Annual Appropriation	21,710	23,225
Adjustments to appropriation
PGPA Act section 74 receipts	24,447	23,004
Total adjustments to appropriation	24,447	23,004
Total Appropriation	46,157	46,229
Appropriation applied (current and prior years)	(46,771)	(51,473)
Variance 2	(614)	(5,244)

1. Departmental Capital Budgets are appropriated through Appropriation Acts (No. 1, 3, 5). They form part of ordinary annual services and are not separately identified in the Appropriation Acts.

2. The variance in 2019 occurred due to the payment of accrued separation and redundancies.

The variance in 2018 occurred due to payments for major fit-out works, which resulted in higher cash outflows for the year.

Note 4.1b: Unspent Departmental Annual Appropriations (‘Recoverable GST exclusive’)

This table discloses unspent Departmental Annual Appropriations by appropriation source by financial year

	2019 $’000	2018 $’000
Departmental
Appropriation Act (No. 1) 2015-16 1	-	9
Appropriation Act (No. 1) 2016-17 2	7	7
Appropriation Act (No. 1) 2017-18	-	16,320
Appropriation Act (No. 1) 2018-19	15,707	-
Total departmental	15,714	16,336

1. In 2016, as announced in the 2015-16 Mid-year and Fiscal Economic Outlook, by agreement with the Department of Finance, the APSC relinquished control of surplus departmental appropriation funding of $9,000. This unused appropriation was permanently withheld by direction of a delegate for the Minister for Finance under section 51 of the PGPA Act during June 2016. This appropriation lapsed on 1 July 2018.

2. In 2017, by agreement with the Department of Finance, the APSC relinquished control of surplus departmental appropriation funding of $7,131. This unused appropriation was permanently withheld by direction of a delegate for the Minister for Finance under section 51 of the PGPA Act during June 2017. This appropriation lapsed on 1 July 2019.

Note 4.1c: Special Appropriations Applied ('Recoverable GST exclusive')

This table discloses expenditure by each source of Special Appropriation legislation.

	Appropriation applied
Authority	2019 $’000	2018 $’000
Administered
Remuneration Tribunal Act 1973 – section 7(13) 1	4,140	33,342
Remuneration and Allowances Act 1990 – section 8 2	-	-
Judicial and Statutory Officers (Remuneration and Allowances) Act 1984 – section 7(2) 3	-	-
Total special appropriations applied	4,140	33,342

1. The Attorney-General’s Department drew from the Remuneration Tribunal Act 1973 - section 7(13) for the purpose of making payments of Judicial Office Holders' remuneration and entitlements.

The Department of the House of Representatives and the Department of the Senate drew from the Remuneration Tribunal Act 1973 - section 7(13) for the purpose of making payments of Parliamentarians' remuneration and entitlements.

From 1 January 2018, the payment of Parliamentarians’ remuneration and entitlements by the Department of the House of Representatives and the Department of the Senate is funded by the Parliamentary Business Resources Act 2017, which is reported by the Department of Finance.

2. Due to amendments made in 2011 to the Remuneration Tribunal Act 1973, from 15 March 2012 payments are no longer made under this special appropriation.

3. No payment has been made under this special appropriation since it was transferred to the APSC in September 2010.

Note 4.2: Net cash appropriation arrangements

This note discloses the amount of depreciation and amortisation expenses for which entities no longer receive revenue appropriations. Entities receive funding for the purchase of replacement assets through a Departmental Capital Budget.

	2019 $’000	2018 $’000
Total comprehensive income less depreciation and amortisation expenses previously funded through revenue appropriations	(1,048)	298
Plus: depreciation and amortisation expenses previously funded through revenue appropriations	(1,512)	(1,457)
Total comprehensive income/(loss) - as per the Statement of Comprehensive Income	(2,560)	(1,159)

NOTE 5: PEOPLE AND RELATIONSHIPS

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

Note 5.1: Employee provisions

A provision is recognised when all of the following conditions are met: ● an entity 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 recognised for Employee leave (annual and long service) for service provided up to the reporting date Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

Note 5.1a: Employee provisions
	2019 $’000	2018 $’000
Employee provisions
Leave	7,622	7,164
Total employee provisions	7,622	7,164

Accounting policy

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

Leave

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the APSC is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time that the leave is taken, including the APSC’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by using the Australian Government shorthand method for all employees as at 30 June 2019. The estimate of the present value of the liability takes into account attrition rates and pay rises through promotion and inflation.

Superannuation

APSC employees are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or other superannuation funds held outside the Australian Government.

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

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

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

Note 5.2: Key management personnel remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the APSC, directly or indirectly. The APSC has determined the key management personnel to be the Minister Assisting the Prime Minister for the Public Service and Cabinet and personnel within the APSC holding the following positions:

Australian Public Service Commissioner	Deputy Australian Public Service Commissioner
Merit Protection Commissioner	First Assistant Public Service Commissioner

Remuneration of key management personnel within the APSC is reported in the table below:

Remuneration expenses for all Key Management Personnel are disclosed for the current and prior year.

	2019	2018
	$’000	$’000
Short-term employee benefits	1,531	1,590
Post-employment benefits	205	169
Other long-term benefits	34	74
Termination benefits	-	-
Total key management personnel remuneration expenses 1	1,770	1,833

The total number of key management personnel that are included in the above table are seven (2018: six) due to changes in staff during the year. The KMP expense is lower in 2019 due to one position being unfilled for a portion of the year.

1. The above key management personnel remuneration excludes the remuneration and other benefits of the Minister Assisting the Prime Minister for the Public Service and Cabinet. The Minister's remuneration and other benefits are set by the Remuneration Tribunal and is paid through administered special appropriations of the Department of Finance.

Note 5.3: Related party disclosures

Related party relationships

The APSC is an Australian Government controlled entity. Related parties to the APSC are key management personnel including the Minister Assisting the Prime Minister for the Public Service and Executive, and other Australian Government entities.

Transactions with related parties

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

Other than the remuneration disclosed in note 5.2, there were no significant transactions with key management personnel (2018: nil).

The APSC undertakes a number of functions on behalf of the Australian Government. In performing these functions, the APSC transacts with other Australian Government controlled entities for normal day-to-day business operations provided either under normal terms and conditions or on a cost recovery basis.

The following significant transactions with related parties occurred during the financial year:

• About 99% of the APSC’s sale of goods and rendering of services revenue was earned from other Australian Government controlled entities (2018: 99%).
• The APSC leases its head office accommodation from the Department of Finance
  (2018: the APSC entered an office lease commitment with the Department of Finance of approximately $11.3 million over 9 years and 8 months, with lease payments commencing in July 2017).
• Information and communications technology services were provided by the Department of Employment, Skills, Small and Family Business and the Department of Prime Minister and Cabinet (2018: the Department of Jobs and Small Business provided information and communications technology services).

NOTE 6: MANAGING UNCERTAINTIES­­

This section analyses how the APSC manages financial risks within its operating environment.

Note 6.1: Contingent assets and liabilities

Departmental

This table discloses the value of contingent assets and liabilities of Departmental activities for the current and prior year.

	Restoration obligations
	2019 $'000	2018 $'000
Contingent liabilities
Balance from previous period	561	-
New contingent liabilities recognised	-	561
Re-measurement	14	-
Total contingent liabilities	575	561

The above table contains $575,000 of quantifiable contingent liabilities in respect of obligations to restore office premises to their original condition at the conclusion of the lease (2018: $561,000). The amount represents an estimate of the APSC’s liability based on the estimated per square metre restoration cost for the office. In accordance with the terms of the lease agreement, the restoration obligation only arises if requested by the landlord.

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

The APSC had no unquantifiable contingent liabilities as at 30 June 2019 (2018: nil).

Administered

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

Accounting Policy

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

Note 6.2: Financial instruments

Note 6.2a: Categories of financial instruments

This table lists the categories of financial instruments for the current and prior period.

	Notes	2019 $’000	2018 $’000
Financial Assets under AASB 9
Financial assets at amortised cost
Cash and cash equivalents		933	571
Goods and services receivables (net)	3.1a	1,979	1,576
Total financial assets at amortised cost		2,912	2,147
Total financial assets		2,912	2,147
Financial Liabilities
Financial liabilities measured at amortised cost
Trade creditors and accruals	3.3a	3,769	3,101
Other payables	3.3c	71	73
Total financial liabilities measured at amortised cost		3,840	3,174
Total financial liabilities		3,840	3,174

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

This table discloses the changes to the classification of financial assets on the date of initial application of AASB 9 (1 July 2018).

Financial assets class	Note	AASB 139 original classification	AASB 9 new classification	AASB 139 carrying amount at 1 July 2018 $'000	AASB 9 carrying amount at 1 July 2018 $'000
Cash		Loans and receivables	Amortised Cost	571	571
Trade and other receivables	3.1a	Loans and receivables	Amortised Cost	1,576	1,576
Total financial assets				2,147	2,147

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

The table reconciles the carrying amounts of financial assets on the date of initial application of AASB 9 (1 July 2018).

	AASB 139 carrying amount at 1 July 2018 $'000	Reclassifi-cation $'000	Remeasure-ment $'000	AASB 9 carrying amount at 1 July 2018
Financial assets at amortised cost
Loans and receivables
Cash	571	-	-	571
Trade and other receivables	1,576	-	-	1,576
Total financial assets	2,147			2,147

Accounting Policy

Financial Assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the APSC classified its financial assets as ‘financial assets measured at amortised cost’. This classification was based on the APSC’s business model for managing the financial assets and contractual cash flows at the time of initial recognition.

Financial assets are recognised when the APSC becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

Comparatives have not been restated on initial application.

‘Financial Assets at Amortised Cost’ need to meet two criteria:

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

2. the cash flows are solely payments of principal and interest on the principal outstanding amount.

Amortised cost is determined using the effective interest method. Income is recognised on an effective interest rate basis for financial assets that are recognised at cost.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12-‑month expected credit losses if risk has not increased.

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

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

Financial liabilities

The accounting policy for financial liabilities is contained in note 3.3 Payables.

Note 6.3: Fair value measurement

Note 6.3a: Fair value measurement

This table discloses the value measurements for assets for the current and prior year.

	Fair value
	2019 $'000	2018 $'000
Non-financial assets
Leasehold improvements	5,119	5,758
Plant and equipment	2,155	1,526

Accounting Policy

All property, plant and equipment is measured at fair value, in accordance with the accounting policy.

The APSC’s assets are held for operational purposes and not held for the purposes of deriving a profit.

Fair value is estimated using replacement cost, which is depreciated based upon the expended and remaining useful life of each asset.