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4: Non-Financial Assets

Note 4A: Current Year - Reconciliation of the Opening and Closing Balances of Property, Plant, Equipment, Intangibles and Assets Held Under Finance Lease 2019

Buildings - Leasehold Improvements

Plant & Equipment

Plant & Equipment - Finance Lease

Total Plant and Equipment

Computer Software Purchased

Computer Software - Internally Developed

Total Intangibles Computer Software

Total

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

As at 1 July 2018

Gross book value

255,095

94,851

21,646

116,497

149,953

1,448,751

1,598,704

1,970,296

Accumulated depreciation, amortisation and impairment

(59,920)

(32,204)

(11,276)

(43,480)

(116,900)

(961,058)

(1,077,958)

(1,181,358)

Total as at 1 July 2018

195,175

62,647

10,370

73,017

33,053

487,693

520,746

788,938

Additions

Purchase

674

7,403

-

7,403

554

-

554

8,631

Finance lease

-

-

2,166

2,166

-

-

-

2,166

Internally developed

-

-

-

-

-

134,069

134,069

134,069

Revaluations recognised in other comprehensive income

7,053

-

375

375

-

-

-

7,428

Revaluations recognised in net cost of services

-

(1,725)

-

(1,725)

-

-

-

(1,725)

Change in billing rates by the lessor

-

-

-

-

-

-

-

-

Impairment write-offs recognised in net cost of services

-

(35)

-

(35)

(103)

(7,269)

(7,372)

(7,407)

Transfers between asset classes in/(out)

(128)

128

-

128

6,927

(6,927)

-

-

Disposals

-

(5)

(162)

(167)

-

-

-

(167)

Other movements

-

-

644

644

-

-

-

644

Depreciation / amortisation expense

(29,456)

(16,586)

(6,247)

(22,833)

(11,555)

(134,164)

(145,719)

(198,008)

Total as at 30 June 2019

173,318

51,827

7,146

58,973

28,876

473,402

502,278

734,569

Total as at 30 June 2019 represented by

Gross book value

180,504

56,492

21,126

77,618

149,821

1,463,939

1,613,760

1,871,882

Work in progress

852

64

-

64

-

104,683

104,683

105,599

Accumulated amortisation and impairment

(8,038)

(4,729)

(13,980)

(18,709)

(120,945)

(1,095,220)

(1,216,165)

(1,242,912)

Total as at 30 June 2019

173,318

51,827

7,146

58,973

28,876

473,402

502,278

734,569

Buildings - Leasehold improvement assets were assessed for impairment in accordance with the impairment policy stated below. No indicators of impairment were found in 2019 (2018: nil).

Plant and equipment assets were assessed for impairment in accordance with the impairment policy stated below. No indicators of impairment were found in 2019 (2018: nil).

Intangibles were assessed for impairment in accordance with the impairment policy stated below. No indicators of impairment were found in 2019 (2018: nil).

The valuation of finance leases are based on the present value of their minimum lease payments.

Revaluations of tangible assets

All revaluations are conducted in accordance with the ATO revaluation policy stated below. The ATO engaged the service of accredited valuer, Jones Lang LaSalle (JLL), to conduct a comprehensive review of carrying amounts for all tangible assets as at 30 June 2019.

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

There are no contractual commitments for the acquisition of property, plant, equipment and intangible assets for 2019 (2018: nil).

Accounting Policy

Assets are recorded at cost on acquisition except as stated below. Assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition.

Tangible Assets

Asset recognition thresholds

Purchases of leasehold improvements and plant and equipment are recognised initially at cost in the Statement of Financial Position, except for assets costing less than the relevant asset recognition threshold. Asset recognition thresholds can be found in the table below, except for ACNC and TPB assets, which have an asset recognition threshold of $3,000.

Revaluations

Following initial recognition at cost, leasehold improvements and plant and equipment assets are carried at fair value less accumulated depreciation and accumulated impairment losses. The ATO conducts a materiality review of carrying amounts annually, and a comprehensive valuation every three years for all tangible assets. Valuation reviews ensure that the carrying amounts of assets do not materially differ from the fair value as at the reporting date. Any accumulated depreciation and accumulated impairment as at the revaluation date are eliminated against the gross carrying amount of the asset and the asset is restated to the revalued amount.

Depreciation

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

If an asset is not fully constructed at the reporting date, its cost to date is reported as an asset under construction. Depreciation does not commence until the asset is available for use.

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

Asset type

Threshold

2019

2018

Leasehold improvements

$1,000,000

Lesser of lease term or a maximum 20 year useful life (Straight-line method)

Lesser of lease term or a maximum 20 year useful life (Straight-line method)

Plant and equipment

Other than desktop computers, laptops, monitors and printers

Bulk purchases furniture and fittings $200,000

Individual purchases plant and equipment $3,000

5 – 25 years (Straight-line method)

5 – 25 years (Straight-line method)

Desktop computers, laptops, monitors and printers

Bulk purchases $200,000

Individual purchases
$3,000

4 – 5 years (Reducing balance method)

4 – 5 years (Reducing balance method)

Impairment

Impairment testing is conducted during the annual review of leasehold improvements and bulk furniture and fittings, as well as during the annual stocktake.

All leasehold improvements, plant and equipment and computer assets were assessed for indicators of impairment as at 30 June 2019.

Derecognition

Leasehold improvement and plant and equipment assets are derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Intangible Assets

Asset recognition thresholds

The ATO’s intangible assets comprise internally developed and purchased software. All intangible assets are carried at cost less accumulated amortisation and accumulated impairment and are not subject to revaluation.

Asset recognition thresholds can be found in the table below, except for ACNC and TPB assets. ACNC and TPB have an asset recognition threshold of $100,000 for new internally developed software and $50,000 for enhancements. ACNC and TPB purchased software have an asset recognition threshold of $3,000.

Amortisation

Amortisation rates (useful lives) are reviewed at each reporting date and necessary adjustments are recognised in the current reporting period, or current and future reporting periods, as appropriate. In determining useful life, all known legislative changes are taken into account.

If an asset is not fully constructed at the reporting date, its cost to date is reported as an asset under construction. Amortisation does not commence until the asset is available for use.

Computer software assets are amortised based on the following useful lives.

Asset type

Threshold

2019

2018

Purchased software

$200,000

3 - 20 years
(Straight-line method)

3 - 20 years
(Straight-line method)

Internally developed software

$2,500,000

Enhancements to previously
capitalised software
$1,000,000

5 - 26 years
(Straight-line method)

5 - 26 years

(Straight-line method)

Impairment

Impairment testing is conducted through annual reviews of internally developed and purchased software. Where indicators of impairment are evident, the recoverable amount of the intangible asset is estimated and an impairment loss is recognised where the recoverable amount is less than the carrying amount.

The recoverable amount for purchased software and internally developed software in use is taken to be the depreciated replacement cost.

The recoverable amount for internally developed software assets under construction is the current replacement cost. In circumstances where the asset would be replaced if the ATO were deprived of it, the recoverable amount is taken to be the original budgeted cost as amended for additional functionality requirements. In circumstances where the asset would not be replaced if the ATO were deprived of the asset, the recoverable amount is assessed to be nil.

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

2019

2018

$'000

$'000

Note 4B: Other Non-Financial Assets

Prepayments

88,939

72,833

Lease incentives

9,543

16,711

Total other non-financial assets

98,482

89,544