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Notes to and forming part of the Financial statements

Overview

Objectives of ASD

ASD is an Australian Government controlled entity. It is a not-for-profit entity. The objective of ASD is to defend Australia from global threats, and advance the national interest by providing foreign signals intelligence, cyber security and offensive cyber operations, as directed by Government.

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 (PGPA Act).

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

as amended by section 105D of the PGPA Act.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements are presented in Australian dollars and are rounded to the nearest thousand dollars unless otherwise specified.

Comparative figures have been adjusted, where required, to conform to changes in presentation of the financial statements in the current period.

New Australian Accounting Standards

All new, revised, amending standards and/or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect on ASD’s financial statements.

Significant Accounting Judgements and Estimates

Except where specifically identified and disclosed, ASD has determined that no accounting assumptions and estimates have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next accounting period.

Taxation

ASD is exempt from all forms of taxation except Fringe Benefits Tax (FBT), the Goods and Services Tax (GST) and certain excise and customs duties.

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 are no post balance date events with a material effect on the Departmental or Administered financial statements.

1. Financial Performance

This section analyses the financial performance of ASD for the year ended 30 June 2021.

1.1 Expenses

2021

2020

$'000

$'000

1.1A: Employee benefits

Wages and salaries

219,006

193,570

Superannuation

Defined contribution plans

27,087

21,614

Defined benefit plans

12,091

11,706

Leave and other entitlements

24,593

29,998

Separation and redundancies

394

285

Other employee expenses

4,496

5,623

Total employee benefits

287,667

262,796

Accounting Policy

Employee benefits are based on the relevant employment agreements and legislation. Liabilities for wages and salaries (including non-monetary benefits), annual leave and other entitlements expected to be wholly settled within 12 months of the reporting date are measured at their nominal amounts. All other employee benefits liabilities (including long service leave) are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.

(a) Leave

The liability for employee benefits includes provisions 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 ASD is estimated to be less than the annual entitlement for sick leave. The leave liabilities are calculated on the basis of employees’ remuneration, including ASD’s employer superannuation contribution, at the estimated rates that will be applied at the time the leave is taken, to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by reference to the work of the Australian Government Actuary in the current year. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

(b) Separation and Redundancy

Provision is made for separation and redundancy benefit payments. ASD recognises a provision for termination when it has a detailed formal plan for the terminations and has informed those employees affected that the terminations will be carried out.

(c) Superannuation

Employees of ASD are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS Accumulation Plan (PSSap) or other superannuation schemes held outside the Commonwealth. 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 by the Department of Finance as an administered item. ASD 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. ASD accounts for these contributions as if they were contributions to defined contribution plans.

Accounting Judgements and Estimates

As required by AASB 119 Employee Benefits, liabilities for short-term employee benefits expected to be paid within 12 months of the end of reporting period are measured at the one-year Commonwealth government bond rate of 0.00 per cent. Liabilities for long term employee benefits are discounted using the 10-year Commonwealth government bond rate of 1.5 per cent.

2021

2020

$'000

$'000

1.1B: Suppliers

Goods and services supplied or rendered

Goods supplied

23,244

24,065

Services rendered

510,444

413,671

Total goods and services supplied or rendered

533,688

437,736

Other suppliers

Short-term leases

83

52

Workers compensation expenses

414

589

Total other suppliers

497

641

Total suppliers

534,185

438,377

ASD has short-term lease commitments of $307,919 as at 30 June 2021.

The above lease disclosures should be read in conjunction with the accompanying notes 2.2A and 2.4A.

Financial statement audit services valued at $155,000 were provided free of charge to ASD by the Australian National Audit Office (ANAO) and are recorded at the fair value of resources received (2020: $155,000). No other services were provided by the ANAO.

Accounting Policy

Short-term leases and leases of low-value assets

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

Resources received free of charge

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as own-source revenue.

2021

2020

$'000

$'000

1.1C: Write-down and impairment of assets

Write-down and impairment of property, plant and equipment

32,643

22,928

Write-down and impairment of intangible assets

2,302

8,181

Total write-down and impairment of assets

34,945

31,109

2021

2020

$'000

$'000

1.1D: Net foreign exchange losses

Foreign exchange gains

Non-speculative

(969)

(765)

Foreign exchange losses

Non-speculative

2,121

793

Total net foreign exchange (gain)/loss

1,152

28

Accounting Policy

Transactions denominated in a foreign currency are converted at the exchange rate on the date of the transaction.

Foreign currency receivables and payables are translated at the exchange rate at the balance date.

Non-financial items that are measured at cost in a foreign currency are translated using the spot exchange rate at the date of the initial transaction.

Non-financial items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined.

All exchange gains and losses are reported in the Statement of Comprehensive Income.

1.2 Own-Source Revenue and Gains

2021

2020

Own-Source Revenue

$'000

$'000

1.2A: Revenue from contracts with customers

Rendering of services

3,336

3,031

Total revenue from contracts with customers

3,336

3,031

Type of customer:

Australian Government entities (related parties)

2,781

2,702

Non-government entities

555

329

3,336

3,031

Timing of transfer of goods and services:

Over time

3,336

3,031

Point in time

-

-

3,336

3,031

Accounting Policy

Revenue from contracts with customers is recognised when control has been transferred to the buyer. ASD determines a contract is in scope of AASB 15 when the performance obligations are required by an enforceable contract and the performance obligations within the enforceable contract are sufficiently specific to enable ASD to determine when they have been satisfied. ASD determines there to be an enforceable contract when the agreement creates enforceable rights and obligations. Performance obligations are sufficiently specific where the promises within the contract are specific to the nature, type, value and quantity of the services to be provided and the period over which the services must be transferred.

The following is a description of principal activities from which ASD generates its revenue:

- ICT services related to the provision of networks to the Department of Defence and other agencies, satisfied over the period of the contract which runs in line with the financial year.

The transaction price is the total amount of consideration to which ASD expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. All consideration promised in contracts with customers is included in the transaction price.

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

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

2021

2020

$'000

$'000

1.2B: Revenue from Government

Appropriations

Departmental appropriations

805,703

763,900

Total revenue from Government

805,703

763,900

Accounting Policy

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when ASD 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.

ASD draws down appropriations on a just-in-time basis. The undrawn appropriations as at 30 June 2021 are reflected as a receivable and are available to be drawn down to meet future obligations. Appropriations receivable are recognised at their nominal amounts.

2. Financial Position

This section analyses ASD’s assets used to conduct its operations and the operating liabilities incurred as a result

2.1 Financial Assets

2021

2020

$'000

$'000

2.1A: Cash and Cash Equivalents

Cash on hand or on deposit

13,398

35,630

Total cash and cash equivalents

13,398

35,630

Accounting Policy

Cash and cash equivalents includes notes and coins held, any deposits in bank accounts held at call with a bank, and cash held in special accounts. Cash is measured at its nominal amount. Cash and cash equivalents denominated in a foreign currency are converted at the exchange rate at the balance date.

2021

2020

$'000

$'000

2.1B: Trade and other receivables

Goods and services receivables

Goods and services

55,120

3,845

Total goods and services receivables

55,120

3,845

Appropriation receivables

Appropriation receivable

121,282

69,259

Total appropriation receivables

121,282

69,259

Other receivables

GST receivable from the Australian Taxation Office

7,130

5,611

Other

1,785

1,453

Total other receivables

8,915

7,064

Total trade and other receivables

185,317

80,168

Credit terms for goods and services were within 30 days (2020: 30 days).

Accounting Policy

Trade receivables and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less any loss allowance.

Trade and other receivable assets at amortised cost are assessed for impairment at the end of each reporting period. The simplified approach has been adopted in measuring the impairment loss allowance at an amount equal to lifetime 'expected credit loss' (ECL).

Financial assets

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

2.2 Non-Financial Assets

2.2A: Reconciliation of the Opening and Closing Balance of Property, Plant & Equipment and Intangibles

Buildings and Infrastructure

Plant and Equipment

Intangibles

Heritage Assets

Total

$'000

$'000

$'000

$'000

$'000

As at 1 July 2020

Gross book value

508,717

354,794

50,565

244

914,320

Accumulated depreciation, amortisation and impairment

(42,409)

(64,156)

(24,559)

-

(131,124)

Total as at 1 July 2020

466,308

290,638

26,006

244

783,196

Adjusted total as at 1 July 2020

466,308

290,638

26,006

244

783,196

Additions

Purchase

38,127

103,667

24,998

-

166,792

Revaluations and impairments recognised in other comprehensive income

478

(6,201)

-

-

(5,723)

Write-downs and impairments recognised in net cost of services

(5,873)

(26,485)

(2,302)

(34,660)

Depreciation and amortisation

(30,870)

(79,437)

(11,937)

-

(122,244)

Depreciation on right-of-use assets

(42,534)

-

-

-

(42,534)

Disposals

-

(318)

-

-

(318)

Other movements

Reversal of previous asset write-downs

166

2,105

(1,547)

-

724

Other movements - Transfers

(23,116)

(6,488)

29,604

-

-

Total as at 30 June 2021

402,686

277,481

64,822

244

745,233

Total as at 30 June 2021 represented by

Gross book value

466,279

332,753

102,234

244

901,510

Accumulated depreciation, amortisation and impairment

(63,593)

(55,272)

(37,412)

-

(156,277)

Total as at 30 June 2021

402,686

277,481

64,822

244

745,233

Carrying amount of right-of-use assets

369,009

-

-

-

369,009

All revaluations were conducted in accordance with the revaluation policy stated at Note 2.2A (c). ASD’s shared service provider, the Department of Defence, engaged JLL Valuation & Advisory to undertake a valuation of ASD’s assets. The date of this valuation was 1 June 2021.

All assets were assessed for impairment during 2020-21. Appropriate adjustments to carrying amounts were recognised for impaired assets.

At 30 June 2021, ASD have contractual commitments for the acquisition of property, plant and equipment and intangible assets of $97,387,000. The Commitments include outstanding contractual payments for items under construction.

Accounting Policy

Accounting Policy

(a) Individual Asset Recognition Threshold

Purchases of property, plant and equipment including buildings and infrastructure are recognised initially at cost in the statement of financial position. Individual items are capitalised where the individual value is equal to or exceeds $5,000 for buildings, infrastructure and other assets; and $2,000 for other plant and equipment assets. Assets costing below these thresholds are capitalised to the relevant Low Value Asset account in the year of acquisition.

(b) Assets under construction

Assets under construction (AUC) includes expenditure to date on major capability and facilities projects. AUC projects are reviewed annually for indicators of impairment. Prior to rollout into service, the accumulated AUC balance is reviewed to ensure accurate capitalisation.

(c) Revaluations

All property, plant and equipment (excluding ROU assets) is measured and disclosed at fair value, less any accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets did not differ materially from the assets’ fair values as at the reporting date.

The basis for determining fair value is by reference to the highest and best use that is physically possible, legally permissible and financially feasible. Where an active and liquid market exists, fair value is determined by reference to market values, noting the highest and best use criteria and any specific factors that have been noted by the valuer.

Valuation for buildings, infrastructure and other plant and equipment assets are performed by independent external valuers using inputs such as sales prices of comparable assets, replacement cost, expected useful life and adjustments for obsolescence.

Revaluation adjustments are made on a class basis. Any revaluation increment is recognised as Other Comprehensive Income under the heading of Changes in Asset Revaluation Reserves except to the extent that it reverses a previous revaluation decrement of the same class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they 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 is restated to the revalued amount.

(d) Depreciation

Property, plant and equipment items having limited useful lives are systematically depreciated over their estimated useful lives on a straight-line basis.

Depreciation rates (useful lives) are determined upon acquisition and are reviewed at each subsequent reporting date, and necessary adjustments are made in the current, or current and future reporting periods, as appropriate. Residual values are re-estimated only when assets are revalued.

The following are minimum and maximum useful lives for the different asset classes. These are not necessarily indicative of typical useful lives for these asset classes:

2021

2020

Buildings and Infrastructure

9 to 40 years

9 to 40 years

Plant and Equipment

2 to 40 years

2 to 40 years

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

(e) Intangible Assets

ASD’s intangibles comprise externally acquired and internally developed computer software for internal use and other externally acquired and internally developed intangibles. Intangibles with gross values greater than $150,000 are capitalised when they meet the recognition criteria in AASB 138.

All intangibles are amortised on a straight–line basis over their anticipated useful lives. The useful lives of ASD’s software are 2 to 22 years (2020: 2 to 22 years) and the useful lives of ASD's other intangibles are 1 to 6 years (2020: 1 to 6 years). All intangible assets are assessed annually for indications of impairment.

ASD recognises its intangible assets initially at cost. If an intangible asset is acquired at no cost or for nominal consideration, other than those acquired through restructuring, it is recognised initially at fair value as at the date of acquisition.

All ASD intangible assets are currently stated at cost less any subsequent accumulated amortisation and accumulated impairment losses.

Acquired intellectual property may form part of the acquisition of particular tangible assets. Where the acquired intellectual property is inseparable from the underlying tangible asset it is reflected in the value of the tangible asset in the statement of financial position.

ASD reviews the useful life of intangible assets annually based on the service potential of the assets. All ASD intangible assets have finite useful lives and are amortised over their anticipated useful lives. Where there is an indication that the service potential of an intangible asset is impaired, the recoverable amount of that asset is determined based on the remaining service potential. Where the recoverable amount is lower than the carrying amount, the asset is written down to its recoverable amount.

(f) Acquisition of Assets

Assets are initially recorded at cost on acquisition which includes the fair value of assets exchanged and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration are initially recognised as assets and revenue 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 at the amounts at which they were recognised in the transferor agency’s accounts immediately prior to the restructuring.

(g) Impairment of Assets

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

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if ASD was deprived of the asset, its value in use is taken to be its depreciated replacement cost.

(h) Derecognition of Assets

Assets are derecognised upon disposal or when no further economic benefits or capability are expected from their use or disposal.

(i) Heritage Assets

Heritage items include artefacts and memorabilia that are or may be of national historical significance.

(j) Lease Right of Use Assets

Leased ROU assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received. These assets are accounted for by Commonwealth lessees as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

An impairment review is undertaken for any right of use lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition in Commonwealth agency, General Government Sector (GGS) and Whole of Government financial statements.

(k) Significant Accounting Judgements and Estimates

ASD assesses non-financial assets for impairment by monitoring impairment indicators specific to an asset’s use in the ASD context. Where these indicators signify that an asset is impaired, management has made an estimate of the recoverable amount of those assets to determine any impairment loss.

Property, plant and equipment is measured at fair value using revaluation techniques that require significant judgements and estimates to be made.

2.3 Payables

2021

2020

$'000

$'000

2.3A: Employee payables

Salaries and wages

12,928

9,245

Superannuation

746

530

Total employee payables

13,674

9,775

Accounting Policy

Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled. The liability for superannuation recognised as at 30 June represents outstanding contributions yet to be paid.

2.4 Interest Bearing Liabilities

2021

2020

$'000

$'000

2.4A: Leases

Lease liabilities

385,382

379,619

Total leases

385,382

379,619

Total cash outflow for leases for the year ended 30 June 2021 was $6,729,017

2021

2020

$'000

$'000

Maturity analysis - contractual undiscounted cash flows

Within 1 year

42,434

4,247

Between 1 to 5 years

212,354

212,009

More than 5 years

147,922

190,701

Total leases

402,710

406,957

The above lease disclosures should be read in conjunction with the accompanying notes 1.1B and 2.2A.

Accounting Policy

For all new contracts entered into, ASD considers whether the contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.

Once it has been determined that a contract is, or contains a lease, the lease liability is initially measured at the present value of the lease payments unpaid at the commencement date, discounted using the interest rate implicit in the lease, if that rate is readily determinable, or the agency’s incremental borrowing rate.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification to the lease. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset or operating result depending on the nature of the reassessment or modification.

3. Funding

This section identifies ASD’s funding structure.

3.1 Appropriations

3.1A: Annual appropriations ('recoverable GST exclusive')

Annual Appropriations for 2020-21

Annual Appropriation1

Adjustments to appropriation2

Total appropriation

Appropriation applied in 2021 (current and prior years)

Variance3

$'000

$'000

$'000

$'000

$'000

DEPARTMENTAL

Ordinary annual services

808,592

32,719

841,311

(864,634)

(23,323)

Capital budget4

30,000

-

30,000

(24,161)

5,839

Other services

Equity Injections

195,459

-

195,459

(72,446)

123,013

Total departmental

1,034,051

32,719

1,066,770

(961,241)

105,529

Notes

1.In 2021 departmental ordinary annual services appropriations totalling $18,462,000 of Appropriation Act (No.3) 2018-19, Appropriation Act (No.1) 2019-20, Appropriation Act (No.3) 2019-20 and Appropriation Act (No.1) 2020-21 have been withheld under Section 51 of the PGPA Act. In 2021 departmental other services appropriations totalling $57,203,000 of Appropriation Act (No.4) 2018-19, Appropriation Act (No.2) 2019-20 and Appropriation Act (No.2) 2020-21 have been withheld under Section 51 of the PGPA Act.

2.Adjustments to appropriations comprise of PGPA Act Section 74 receipts. There were no transfers of current year appropriations under Section 75 of the PGPA Act.

3.The variance for departmental ordinary annual services primarily represents the timing difference of payments to suppliers and employees.

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

Annual Appropriations for 2019-20

Annual Appropriation1

Adjustment to appropriation2

Total appropriation

Appropriation applied in 2020 (current and prior years)

Variance3

$'000

$'000

$'000

$'000

$'000

DEPARTMENTAL

Ordinary annual services

763,900

13,418

777,318

(711,247)

66,071

Capital budget

-

-

-

-

-

Other services

Equity Injections

176,836

-

176,836

(144,601)

32,235

Total departmental

940,736

13,418

954,154

(855,848)

98,306

Notes

1.No amounts of appropriation have been withheld under Section 51 of the PGPA Act. In 2020 departmental ordinary annual services appropriations totalling $0.621m of Appropriation Act (No.3) 2019-20 have been temporarily quarantined. In 2020 departmental other services appropriations totalling $0.360m of Appropriation Act (No.4) 2019-20 have been temporarily quarantined.

2.Adjustment to appropriations comprise of PGPA Act Section 74 receipts. There were no transfers of current year appropriations under Section 75 of the PGPA Act.

3.The variance for departmental ordinary annual services primarily represents the timing difference of payments to suppliers and employees. The variance for departmental equity relates to the use of prior year unspent appropriations.

3.1B: Unspent annual appropriations ('recoverable GST exclusive')

2021

2020

$'000

$'000

DEPARTMENTAL

Operating

Act 3 2018-19

7,089

-

Act 1 2019-20

5,200

37,372

Act 3 2019-20

3,905

30,877

Act 1 2020-21

48,384

-

Act 3 2020-21

3,157

-

Total Operating

67,735

68,249

Equity

Act 4 2018-19

2,247

-

Act 2 2019-20

34,244

-

Act 4 2019-20

360

360

Supply Bill 2 2020-21

14,189

-

Act 2 2020-21

72,332

-

Act 1 DCB 2020-21

5,839

-

Total Equity

129,211

360

Total

196,946

68,609

Cash and cash equivalents

13,398

35,630

Total unspent annual appropriations

210,344

104,239

3.2 Net Cash Appropriation Arrangements

The Government funds ASD on a net cash appropriation basis, where appropriation revenue is not provided for depreciation and amortisation expenses.

ASD's accountability for its operating result is at its result net of unfunded depreciation and amortisation.

2021

2020

$'000

$'000

Total comprehensive income/(loss) - as per the Statement of Comprehensive Income

(223,358)

(81,098)

Plus: Depreciation/amortisation expenses not funded through revenue appropriation1

122,244

89,747

Plus: Depreciation of right-of-use assets2

42,534

41,727

Less: Principal repayments - leased assets2

(6,561)

(31,037)

Net Cash Operating Surplus/(Deficit)

(65,141)

19,339

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

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

4. People and Relationships

4.1 Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of ASD, directly or indirectly. ASD has determined the key management personnel to be the:
i) Minister for Defence;
ii) Director-General Australian Signals Directorate;
iii) Deputy Director-General Signals Intelligence & Network Operations
iv) Head of Australian Cyber Security Centre; and
v) Deputy Director-General Corporate & Capability.
Key management personnel remuneration is reported in the table below.

2021

2020

$'000

$'000

Short-term employee benefits

1,898

2,062

Post-employment benefits

321

368

Other long-term employee benefits

51

42

Total key management personnel remuneration expenses2

2,270

2,472

The total number of key management personnel that are included in the above table are 6 (2020:10).

Notes

1.Note 4.1 is prepared on an accrual basis

2.The above key management personnel remuneration excludes the remuneration and other benefits of the Minister for Defence. The remuneration and other benefits of the Minister for Defence is set by the Remuneration Tribunal and is not paid by ASD.

4.2 Related Party Disclosures

Related party relationships:

ASD is an Australian Government controlled entity. Related parties to ASD are:

i) Key Management Personnel (as detailed in Note 4.1);

ii) Spouse or domestic partners of (i);

iii) Children or dependents of (i);

iv) Entities, individually or jointly, controlled by the above individuals; and

v) 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. These transactions have not been separately disclosed in this note.

Significant transactions with related parties can include:

i) the payments of grants or loans;

ii) purchases of goods and services;

iii) asset purchases, sales transfers or leases;

iv) debts forgiven; and

v) guarantees.

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

5. Managing Uncertainties

5.1 Contingent Liabilities and Assets

Quantifiable Contingencies

As at 30 June 2021 there were no quantifiable contingent assets or liabilities (2020: nil).

Unquantifiable Contingencies

As at 30 June 2021 there were no unquantifiable contingent assets or liabilities (2020: nil).

Accounting Policy

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

ASD applies Accounting Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets in determining disclosure of contingent assets and liabilities.

5.2 Financial Instruments

2021

2020

Notes

$'000

$'000

5.2A: Categories of financial instruments

Financial assets at amortised cost

Cash and cash equivalents

2.1A

13,398

35,630

Trade and other receivables

2.1B

56,905

5,298

Total financial assets at amortised cost

70,303

40,928

Total financial assets

70,303

40,928

Financial Liabilities

Financial liabilities measured at amortised cost

Suppliers

136,319

90,848

Other payables

815

860

Total financial liabilities measured at amortised cost

137,134

91,708

Total financial liabilities

137,134

91,708

Accounting Policy

Financial Assets

In accordance with AASB 9 Financial Instruments, ASD classifies its financial assets in the following categories:

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

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

c) financial assets measured at amortised cost.

The classification depends on both ASD's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when ASD 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.

(a) Financial Assets at Amortised Cost

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

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

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

Amortised cost is determined using the effective interest method.

(b) Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a financial asset and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

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

(c) 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

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’. Financial liabilities are derecognised when the obligation under the contract is discharged, cancelled or has expired.

(a) Financial Liabilities at Amortised Cost

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

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

2021

2020

$'000

$'000

5.2B: Net gains or losses on financial assets

Financial assets at amortised cost

Exchange gains/(losses)

969

765

Net gains/(losses) on financial assets at amortised cost

969

765

Net gains on financial assets

969

765

There was no interest income from financial assets not at fair value through profit or loss.

2021

2020

$'000

$'000

5.2C: Net gains or losses on financial liabilities

Financial liabilities measured at amortised cost

Exchange gains/(losses)

(2,121)

(793)

Net gains/(losses) on financial liabilities measured at amortised cost

(2,121)

(793)

Net losses from financial liabilities

(2,121)

(793)

There was no interest expense from financial liabilities not at fair value through profit or loss.

5.3 Fair Value Measurements

5.3A: Fair value measurement

Fair value measurements at the end of the reporting period

2021

2020

Notes

$000

$000

Non-financial assets

Buildings and Infrastructure

2.2A

33,677

63,919

Heritage Assets

2.2A

244

244

Plant and Equipment

2.2A

277,481

290,638

Total non-financial assets fair value measurement

311,402

354,801

Accounting Policy

ASD's assets are held for national security and operational purposes, not for the purposes of deriving a profit.

The different levels of fair value are detailed below:

  • Level 1: Quoted prices (unadjusted) in an active market for identical assets or liabilities that ASD can access at measurement date.
  • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
  • Level 3: Unobservable inputs for an asset or liability.

In estimating the fair value of an asset or a liability, ASD uses market-observable data to the extent it is available. For level 2 and 3 inputs, ASD engages third party qualified valuers and internal experts to establish the appropriate valuation techniques and inputs to the models, to ensure the valuations are in line with AASB 13.

ASD reviews all reports received from third party valuers and internal experts to ensure unobservable inputs used align with ASD's own assumptions and understanding of the market. This review includes investigation of significant fluctuations in the fair value of the assets and liabilities and that the report includes sufficient information to ensure compliance with AASB 13.

ASD deems transfers between levels of fair value hierarchy to have occurred when there has been a change to the inputs to the fair value measurement (for instance from observable to unobservable and vice versa) and the changed inputs are significant in determining fair value.

6. Other information

6.1 Current/non-current distinction for assets and liabilities

2021

2020

$'000

$'000

6.1A: Current/non-current distinction for assets and liabilities

Assets expected to be recovered in:

No more than 12 months

Cash and cash equivalents

13,398

35,630

Trade and other receivables

185,317

80,168

Prepayment

31,648

77,041

Total no more than 12 months

230,363

192,839

More than 12 months

Buildings and infrastructure

402,686

466,308

Plant and equipment

277,481

290,638

Intangibles

64,822

26,006

Heritage assets

244

244

Prepayments

16,726

18,235

Total more than 12 months

761,959

801,431

Total assets

992,322

994,270

Liabilities expected to be settled in:

No more than 12 months

Suppliers

136,319

90,848

Employee payables

13,674

9,775

Other payables

815

860

Leases

37,438

(48)

Employee provisions

27,627

28,589

Total no more than 12 months

215,873

130,024

More than 12 months

Leases

347,944

379,667

Employee provisions

72,683

64,634

Total more than 12 months

420,627

444,301

Total liabilities

636,500

574,325