Notes to and forming part of the financial statements
NoteNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the period ended 30 June 2020
Overview
Note 1: Financial performance
Note 2: Financial position
Note 3: People and relationships
Note 4: Managing uncertainties
Note 5: Regulatory charging summary
Note 6: Cash flow reconciliation
Note 7: Explanation of major budgetary variances
For the period ended 30 June 2020
Overview
Objective of the Civil Aviation Safety Authority (CASA)
The Civil Aviation Safety Authority (CASA) is an Australian Government controlled, not-for-profit entity. The objective of CASA is to establish a regulatory framework for maintaining, enhancing and promoting the safety of civil aviation, with particular emphasis on preventing aviation accidents and incidents.
CASA is structured to meet a sole outcome, ‘Maximise aviation safety through a regulatory regime, detailed technical material on safety standards, comprehensive aviation industry oversight, risk analysis, industry consultation, education and training’.
The continued existence of CASA, in its present form and with its present programs, is dependent on government policy and on continuing appropriations by Parliament for CASA’s administration and programs.
Basis of Preparation of the Financial Statements
The financial statements are required by section 42 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and are general purpose financial statements.
The financial statements have been prepared in accordance with:
- Public Governance, Performance and Accountability Act 2013 (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 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 have been presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.
New Accounting Standards
Except for AASB 16, all new/revised/amended 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 CASA’s financial statements. The impact of AASB 16 has been separately described opposite.
AASB 15, AASB 2016-8 and AASB 1058 became effective 1 July 2019.
AASB 15 Revenue from Contracts with Customers / AASB 2016-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities and AASB 1058 Income of Not-For-Profit Entities | AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. AASB 1058 is relevant in circumstances where AASB 15 doe not apply. AASB 1058 replaces most of the not-for-profit (NFP) provisions of AASB 1004 Contributions and applies to transactions where the consideration to acquire an asset is significantly less than fair value principally to enable the entity to further its objectives, and where volunteer services are received. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements. |
AASB 16 Leases | AASB 16 became effective on 1 July 2019. This new standard has replaced AASB 117 Leases, 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. AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements. |
Application of AASB 15 Revenue from Contracts with Customers / AASB 1058 Income of Not-For-Profit Entities
CASA provides regulatory services to the aviation industry. Aviation operators apply to CASA for licenses and permissions, CASA then assesses the applications and either approves or rejects them. Civil Aviation (Fees) Regulations 1995 enables fees to be prescribed in regulation. CASA charges customers at either a fixed fee or an hourly rate, that is the actual time spent by a proficient officer to complete the job. CASA must create an estimate for applications charged at hourly rates and send an estimate letter to the customer. The customer accepts the estimate and makes an up-front payment to CASA prior to the commencement of work. An enforceable contract is now in place between CASA and the customer. Although there may be no formal written agreement, the rights and obligations for both CASA and the customers are stipulated by legislation. CASA’s revenue from regulatory services fall within the scope of AASB 15 Revenue from Contracts with Customers. CASA applied AASB 15 from 1 July 2019.
Although CASA charges an upfront fee there is no transfer of a promised good or service to the customer at that time.
The upfront fee is considered an advance payment for future goods or services and revenue should only be recognised when future goods or services are provided. The customer would only gain control of the asset once CASA has completed its assessment of the application and informed the customer of the outcome. CASA’s performance obligation is satisfied when the asset is transferred to the customer. CASA has identified that the performance obligations for the majority of regulatory fees are satisfied when the assessment is completed, and the customer
is informed of the outcome.
CASA has in place systems and processes to track the progress of customer assessments, from initial application to finalisation. These systems and processes will be used to confirm the finalisation of an assessment or application thus passing of control to the customer. This allows CASA the right to recognise the revenue for that job. Further detail of revenue recognition policy and disaggregation of revenue from contracts with customers are disclosed in Note 1.2.
CASA adopted AASB 15 and AASB 1058 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under the various applicable AASBs and related interpretations.
Impact on transition
In relation to AASB 15, CASA elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The impact on 1 July 2019 is summarised below.
Departmental | 1 July 2019 $’000 |
Liabilities | |
Unearned revenue | 87 |
Total liabilities | 87 |
Total adjustment recognised in retained earnings | -87 |
For the year ended 30 June 2020, CASA’s revenue from regulatory fees was $12,847,206 with the adoption of AASB 15 and AASB 1058. This figure would have been $12,916,473 under the previous accounting standard. The impact on CASA’s revenue was a decrease of $69,266.
Application of AASB 16 Leases
CASA adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.
CASA elected to apply the practical expedient to not reassess whether a contract is or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.
AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. CASA applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:
- exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date; and
- applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.
As a lessee, CASA previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, CASA recognises right-of-use assets and lease liabilities for most leases. However, CASA has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new short-term leases with a lease term of 12 months or less or when the remaining lease term was less than 12 months upon application.
On adoption of AASB 16, CASA recognised right-of-use assets and lease liabilities in relation to leases of office space and motor vehicles, which had previously been classified as operating leases.
The lease liabilities were measured at the present value of the remaining lease payments, discounted using CASA’s incremental borrowing rate as at 1 July 2019. As a government agency, CASA has adopted the zero-coupon yields for Australian Government bonds as its incremental borrowing rate. The average rate applied was 1%.
CASA generally would not include optional periods in the lease liability calculation model at initial measurement. A process must be undertaken prior to the lease expiry to assess the costs and benefits of exercising the optional periods. The lease liability calculation will be modified once the proposed extension or variation has been approved by CASA executives.
The right-of-use assets were measured as follows:
- office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments; and
- all other leases: the carrying value that would have resulted from AASB 16 being applied from the commencement date of the leases, subject to the practical expedients noted above.
Impact on transition
On transition to AASB 16, CASA recognised additional right-of-use assets and $21,134,719 additional lease liabilities. The balance of lease incentives and straight-lining provisions totalling $3,310,197 has been written off against retained earnings.
The following table reconciles the Departmental minimum lease commitments disclosed in the entity’s 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:
$’000 | |
Minimum operating lease commitment at 30 June 2019 | 44,661 |
Less: GST | -4,060 |
Less: lease contract committed but not commenced | -18,631 |
21,970 | |
Less: short-term leases not recognised under AASB 16 | -986 |
Less adjustments for monthly rent amounts | -17 |
Plus: prepayments 30 June 2019 | 540 |
Less: effect of extension options reasonably certain to be exercised | -8 |
Undiscounted lease payments | 21,499 |
Less: effect of discounting using the incremental borrowing rate as at the date | -364 |
Lease liabilities recognised at 1 July 2019 | 21,135 |
Significant Accounting Judgements and Estimates
In the process of applying the accounting policies listed in this note, CASA has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:
- the value of the long service leave component of the leave provision is an estimate based on expert actuarial assumptions on the likely tenure of existing staff, patterns of leave claims and payouts, future salary movements and discount rates (ten year government bond rate).
No other 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 accounting period.
Taxation
CASA is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).
Revenues, expenses and assets are recognised net of GST, except:
- where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
- for receivables and payables.
Events After the Reporting Period
There was no subsequent event that had the potential to significantly affect the ongoing structure and financial activities of CASA.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the period ended 30 June 2020
Note 1: Financial Performance | ||
2020 | 2019 | |
Note 1.1: Expenses | ||
Note 1.1A: Employee benefits | ||
Wages and salaries | 100,050 | 94,050 |
Superannuation: | ||
Defined contribution plans | 12,466 | 10,572 |
Defined benefit plans | 6,593 | 6,745 |
Leave and other entitlements | 13,323 | 12,480 |
Separation and redundancies | 1,283 | 609 |
Other employee benefits | 818 | 1,199 |
Total employee benefits | 134,533 | 125,655 |
Accounting Policy
Superannuation
The Public Sector Superannuation Accumulation Plan (PSSap) is the CASA nominated employee default fund for persons employed under the Civil Aviation Act 1988. Some CASA staff remain eligible to be members of closed Commonwealth defined benefits schemes. The schemes are the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) and the AvSuper defined benefits scheme.
The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme. AvSuper provides for both defined benefits and defined contributions.
The liability for the CSS, PSS and AvSuper defined benefits portion is recognised in the financial statements of the Australian Government and are settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes.
CASA makes employer contributions to the employees’ superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the government. CASA accounts for the contributions as if they were contributions to defined contribution plans.
Leave and other entitlements
Accounting policies for leave and other entitlements are contained at Note 2.5 - Provisions.
2020 | 2019 | |
Note 1.1B: Suppliers | ||
Goods and services | ||
Consultancies and service contracts | 18,315 | 15,315 |
Information technology and telephone charges | 9,936 | 8,194 |
Insurance | 816 | 827 |
Media, publications and subscriptions | 2,039 | 939 |
Office supplies, photocopying and printing | 480 | 757 |
Postage, freight and storage | 516 | 456 |
Property operating costs | 1,740 | 1,628 |
Recruitment | 38 | 140 |
Travel and transport | 6,479 | 8,138 |
Training costs | 1,851 | 2,675 |
Other goods and services | 1,706 | 2,288 |
Total goods and services | 43,916 | 41,357 |
Other suppliers | ||
Operating lease rentals¹ | 0 | 9,379 |
Short-term leases | 1,033 | 0 |
Lease outgoings | 1,186 | 0 |
Workers compensation expenses | 595 | 704 |
Total other suppliers | 2,814 | 10,083 |
Total Suppliers | 46,730 | 51,440 |
Note 1.1C: Finance Costs | ||
Interest on lease liabilities | 274 | 0 |
Unwinding of discount | 1 | 14 |
275 | 14 |
1 CASA has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.
Accounting Policy
Short-term leases and leases of low-value assets
CASA 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 or leases of low-value assets (less than $10,000). The entity recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
2020 | 2019 | |
Note 1.2: Own-Source Income | ||
Own-source revenue | ||
Note 1.2A: Revenue from contracts with customers | ||
Civil Aviation (Fees) Regulations Act 1995 | 12,270 | 14,052 |
Sales of forms and documents | 347 | 0 |
Other revenue with customers | 230 | 0 |
Total revenue from contracts with customers | 12,847 | 14,052 |
Disaggregation of revenue from contracts with customers | ||
Revenue by timing of revenue recognition | ||
Revenue recognised immediately | 10,790 | |
Revenue recognised at time of completion | 2,057 | |
Revenue recognised over time | 0 | |
12,847 |
Accounting Policy
Revenue from contracts with customers
CASA’s revenue from contracts with customers is recognised when CASA’s identified performance obligation is fulfilled. CASA has identified that the single performance obligation for the majority of regulatory services is to process an application and provide outcome or feedback. Revenue will be recognised when the assessment is completed, and the outcome informed to the customer. CASA’s regulatory fees are being paid upfront and chargeable regardless of the application outcome. Fees are still payable even if an applicant withdraws their application after work has commenced and not completed. CASA staff effort until the withdrawal is still charged.
CASA charges customers at either a fixed fee or an hourly rate, that is the actual time spent by a proficient officer to complete the job. CASA applies the input method to recognise revenue on the basis of efforts or inputs to the satisfaction of a performance obligation. This would almost always be labour hours expended.
Following a detailed analysis of the nature, performance obligations, timing of completion and job tracking systems of CASA’s regulatory fees, CASA adopted a threshold-based approach to recognising revenue from regulatory service fees which balances cost, accuracy and materiality. The new revenue recognition policy can be summarised as follows:
· apply low-value exemption for licensing and aircraft registration and recognise revenue upfront for items with a value below $8,000
· recognise revenue at time of completion for more complex jobs that require assessment over an extended period of time which have a single performance obligation satisfied at completion
· revenue over time for significant jobs that are major regulatory services as defined by CASA’s Cost Recovery Instructions, which may have single or multiple performance obligations completed over time. Multiple performance obligations will be identified and assessed for revenue recognition on a case by case basis.
2020 | 2019 | |
Note 1.2B: Interest | ||
Cash at bank and deposits at call | 109 | 125 |
Investments - term deposits | 885 | 1.709 |
Total interest | 994 | 1,834 |
Note 1.2C: Other income | ||
Sales of forms and documents | 0 | 277 |
Administrative fines | 86 | 94 |
Proceeds from sales of assets | 0 | 35 |
Other sundry revenue | 86 | 532 |
Total other income | 172 | 938 |
Sales of forms and documents have been categorised as revenue from contracts with customers under AASB 15 and included in 1.2A. Flight validations previously included in other sundry revenue have also been categorised as other revenue from customers and reported in 1.2A.
2020 | 2019 | |
Note 1.3: Revenue from Government | ||
Note 1.3A: Revenue from Government | ||
Department of Infrastructure, Transport, Regional Development and Communications: | ||
Administered payment to CASA as a PGPA Act corporate | 72,938 | 43,936 |
Indonesia Transport Safety Assistance Package | 36 | 200 |
72,974 | 44,136 | |
Aviation Fuel Revenues (Special Appropriation) Act 1988 | 101,280 | 122,209 |
Total revenue from Government | 174,254 | 166,345 |
Accounting Policy
Revenue from Government
Funding received or receivable from the Department of Infrastructure, Transport, Regional Development and Communications, including aviation fuel excise, (appropriated to the Department of Infrastructure, Transport, Regional Development and Communications for payment to CASA as a corporate Commonwealth entity under the PGPA Act 2013) is recognised as Revenue from Government unless the funding is in the nature of an equity injection or a loan.
Indonesia Transport Safety Assistance Package is funded by the Australian Government to assist Indonesia to regulate and promote transport safety in accordance with applicable international standards and contemporary safety management practices.
There is no change of accounting policy for revenue from Government.
COVID-19 impact on CASA’s revenue
CASA suffered loss of revenue from aviation fuel excise following the COVID-19 shut down, however the Government has granted CASA additional appropriation to compensate part of the loss.
Note 2: Financial Position | ||
2020 | 2019 | |
Note 2.1: Financial Assets | ||
Note 2.1A: Cash and cash equivalents | ||
Cash at bank and deposits at call | 4,785 | 4,235 |
Total cash and cash equivalents | 4,785 | 4,235 |
Note 2.1B: Investments | ||
Investments | 45,000 | 60,000 |
Total investments | 45,000 | 60,000 |
Total cash and investments | 49,785 | 64,235 |
Accounting Policy
Cash
Cash is recognised at nominal amounts. Cash and cash equivalents includes cash at bank and at-demand bank deposits. Temporary surplus funds, mainly from drawdowns of appropriation, weekly aviation fuel excise claims and any recouped maturities to aid cash flow, are placed on deposit at call with CASA’s banker. Interest is earned on the daily balance at the prevailing rate for money on call and is paid at the beginning of the following month.
Investments
Investments are recognised at fair value. Investments include deposits with original maturity up to six months or over. Interest is earned on the daily balance at the prevailing rate for investments and is paid at maturity.
Note 2.1C: Trade and other receivables | ||
Goods and services receivables: | ||
Goods and services receivables | 2,354 | 403 |
Total goods and services receivables | 2,354 | 403 |
Other receivables: | ||
Net GST receivable | 624 | 904 |
Total other receivables | 624 | 904 |
Total trade and other receivables | 2,978 | 1,307 |
All receivables are expected to be recovered in no more than |
Accounting Policy
Trade receivables and other receivables are recorded at face value less any impairment. 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 continually reviewed. Allowances are made on a lifetime expected loss basis.
Trade receivables are recognised where CASA becomes party to a contract and has a legal right to receive cash. Loans and receivables are assessed for impairment on initial recognition. Impairment allowances are made on a lifetime expected loss basis. Trade receivables are derecognised on payment.
The fair values of CASA’s financial assets and liabilities approximate their carrying amounts.
CASA has policies and procedures that guide employees’ debt recovery. CASA does not require collateral in respect of trade and other receivables.
COVID-19 temporary revision to the Cost Recovery Policies
The COVID-19 shut down impacted on the aviation industry. As the regulator, CASA issued a temporary revision to the cost recovery policies to support the aviation operators. Australian operators undertaking activities in support of efforts to address the impact of the COVID-19 pandemic are being offered with payment deferral for six months post the date of application. Repayment plans may be established to receive payment in instalments over a negotiated period. These policies are temporary and subject to ongoing monitoring and review. These policies will be in place until 30 September 2020 as a minimum. No operator has applied for this payment deferral as at 30 June 2020.
2020 | 2019 | |
Note 2.1D: Accrued revenue | ||
Accrued aviation fuel excise revenue | 200 | 2,052 |
Accrued interest | 113 | 446 |
Other income | 193 | 208 |
Total accrued revenue | 506 | 2,706 |
Note 2.2: Non-financial assets
Note 2.2A: Reconciliation of the opening and closing balances of property,
plant and equipment and intangibles
Buildings | Property, Plant | and Equipment | Computer Software | ||||||
In Use | In Use | Work In | Internally Developed | Purchased | Internally | Purchased | Total | ||
$’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | ||
As at 1 July 2019 | |||||||||
Gross book value | 0 | 11,657 | 983 | 35,928 | 17,764 | 3,327 | 4,669 | 74,328 | |
Accumulated depreciation/amortisation | 0 | -1,179 | 0 | -22,293 | -12,051 | 0 | 0 | -35,523 | |
Accumulated impairment | 0 | 0 | 0 | 0 | -20 | 0 | 0 | -20 | |
Total as at 1 July 2019 | 0 | 10,478 | 983 | 13,635 | 5,693 | 3,327 | 4,669 | 38,785 | |
Recognition of right of use asset on initial application of AASB 16 | 20,953 | 181 | 21,134 | ||||||
Adjusted Total of class including work in progress as at 1 July 2019 | 20,953 | 11,642 | 27,324 | 59,919 | |||||
Additions: | |||||||||
By purchase | 0 | 6 | 2,121 | 0 | 0 | 0 | 3,885 | 6,012 | |
Internally developed | 0 | 0 | 0 | 0 | 0 | 12,597 | 0 | 12,597 | |
Reclassification | 0 | 0 | 301 | 0 | 0 | -70 | -231 | 0 | |
Transfers | 0 | 2,321 | -2,321 | 3,044 | 6,323 | -3,044 | -6,323 | 0 | |
Right-of-use assets | 20,312 | 559 | 0 | 0 | 0 | 0 | 0 | 20,871 | |
Revaluations and impairments recognised in other comprehensive income: | |||||||||
Gross Value - revaluation | 0 | -3,921 | 0 | 0 | 0 | 0 | 0 | -3,921 | |
Accumulated depreciation | 0 | 3,850 | 0 | 0 | 0 | 0 | 0 | 3,850 | |
Disposals: | |||||||||
Gross value of disposals | 0 | -1,032 | 0 | -2,015 | -2,100 | 0 | 0 | -5,147 | |
Accumulated depreciation on disposals | 0 | 1,003 | 0 | 2,015 | 1,994 | 0 | 0 | 5,012 | |
Write-down of assets: | |||||||||
Gross Value | 0 | 0 | -35 | 0 | 0 | -68 | 0 | -103 | |
Other movements: | |||||||||
Gross Value | 0 | 0 | 0 | 0 | 0 | 0 | -16 | -16 | |
Depreciation expense | 0 | -4,374 | 0 | -3,580 | -2,859 | 0 | -10,813 | ||
Depreciation on right-of-use assets | -7,926 | -190 | -8,116 | ||||||
Total as at 30 June 2020 | 33,339 | 8,881 | 1,049 | 13,099 | 9,051 | 12,742 | 1,984 | 80,145 | |
Total as at 30 June 2020 represented by: | |||||||||
Gross book value | 41,265 | 9,771 | 1,049 | 36,957 | 21,987 | 12,742 | 1,984 | 125,755 | |
Accumulated impairment | 0 | 0 | 0 | 0 | -20 | 0 | 0 | -20 | |
Accumulated depreciation/amortisation | -7,926 | -890 | 0 | -23,858 | -12,916 | 0 | 0 | -45,590 | |
Total as at 30 June 2020 | 33,339 | 8,881 | 1,049 | 13,099 | 9,051 | 12,742 | 1,984 | 80,145 | |
Total of class including work in progress as at 30 June 2020 | 33,339 | 9,930 | 36,876 | 80,145 | |||||
Carrying amount of right-of-use assets | 33,339 | 550 | 0 | 0 | 0 | 0 | 0 | 33,889 |
Revaluations of non-financial assets
All revaluations are conducted in accordance with the revaluation policy stated later in this note and were conducted by independent valuers as at 30 June 2020.
Revaluation decrement of $294,308 for leasehold improvements (2019: decrement of $521,532), a revaluation increment of $222,741 for plant and equipment (2019: increment of $57,870 for office furniture and equipment, decrement of $67,988 for technical equipment) were credited to the asset revaluation reserve by asset class. These movements in reserves were also included in the equity section of the statement of financial position.
No indicators of impairment were found for property, plant and equipment, or for intangibles.
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 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, 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.
Property, Plant and Equipment
Asset Recognition Threshold
Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than $5,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).
The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to makegood provisions in property leases taken up by CASA where there exists an obligation to restore the property to its original condition. These costs are included in the value of CASA’s leasehold improvements with a corresponding provision for the makegood recognised.
Leased Right of Use (ROU) 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 CASA 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.
Following initial application, an impairment review is undertaken for any right of use leased asset that shows indicators of impairment and an impairment loss is recognised against any right of use leased asset that is impaired. Leased ROU assets continue to be measured at cost after initial recognition.
Revaluations
Fair values (excluding ROU assets) for each class of asset of the property, plant and equipment category are determined as shown below:
Asset Class | Fair value measured at: |
Office fitout | Depreciated replacement cost |
Plant and equipment | Market selling price |
Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment loss. The fair value of property, plant and equipment is reviewed annually and external valuations performed with sufficient frequency to ensure that the carrying amounts of assets do not differ materially 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/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 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 CASA, 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 of the property, plant and equipment category are based on the following useful lives.
Asset Class | 2020 | 2019 |
Buildings | Lease term | Lease term |
Office fitout | Lower of lease term or useful life up to | Lower of lease term or useful life up to |
Plant and equipment | 1 to 16 years | 1 to 16 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.
Impairment
All assets were assessed for impairment as at 30 June 2020. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment is made if the asset’s recoverable amount is less than the 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 CASA were deprived of the asset, its value in use is taken to be its depreciated replacement cost.
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
CASA’s intangibles comprise internally developed software and externally acquired software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.
Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of CASA’s software are 3 to 10 years (2018–19: 3 to 10 years).
All software assets were assessed for indications of impairment as at 30 June 2020.
2020 | 2019 | |
Contractual commitments for the acquisition of plant, | ||
Commitments are payable as follows: | ||
Within 1 year | 904 | 3,168 |
Total contractual commitments for the acquisition of | ||
plant, equipment and intangible assets | 904 | 3,168 |
The nature of capital commitments is primarily for the acquisition of intangible assets.
Amounts for capital commitments are GST inclusive.
Note 2.2B: Prepayments | ||
Prepayments | 2,511 | 3,437 |
Total other non-financial assets | 2,511 | 3,437 |
Note 2.3: Liabilities | ||
Note 2.3A: Suppliers | ||
Trade creditors and accruals | 5,089 | 7,730 |
Total suppliers | 5,089 | 7,730 |
Accounting Policy
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). Supplier and other payables are derecognised on payment. Supplier payables are settled within 20 days.
Note 2.3B: Other payables | ||
Wages and salaries | 1,531 | 739 |
Superannuation | 272 | 133 |
Unearned income | 1,023 | 744 |
Lease incentives 1 | 0 | 3,262 |
Other payables | 5 | 72 |
Total other payables | 2,831 | 4,950 |
Accounting Policy
Lease Incentives
1 CASA has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.
Superannuation
The liability for superannuation recognised as at 30 June 2020 represents outstanding contributions for the final pay days remaining in 2019–20.
Unearned Income
CASA’s regulatory fees are payable before the commencement of work. Based on the revenue recognition policy disclosed in Note 1.2, prepayment of fees for regulatory jobs over $8,000 are recognised as unearned revenue if the performance obligations are not fulfilled as at 30 June 2020.
Note 2.4: Interest Bearing Liabilities | ||
Note 2.4A: Lease Liabilities | ||
Lease Liabilities - Building leases | 33,117 | 0 |
Lease Liabilities - Motor Vehicles | 552 | 0 |
Total leases | 33,669 | 0 |
CASA has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.
Total cash outflow for leases for the year ended 30 June 2020 was $8,611,140.
Accounting Policy
Refer Overview section for accounting policy on leases.
Note 2.5: Provisions | ||
Note 2.5A: Employee provisions | ||
Separations and redundancies | 1,042 | 483 |
Leave | 34,201 | 30,066 |
Ancillary costs on leave provisions | 5,632 | 3,962 |
Total employee provisions | 40,875 | 34,511 |
Note 2.5B: Other provisions | ||
Provision for makegood | 290 | 828 |
Total other provisions | 290 | 828 |
Provision for makegood $’000 | ||
As at 1 July 2019 | 828 | |
Additional provisions made | 0 | |
Amounts used | -572 | |
Revaluations | 33 | |
Unwinding of discounted amount | 1 | |
Total as at 30 June 2020 | 290 |
CASA currently has two (2019: five) agreements for the leasing of premises which have provisions requiring CASA to restore the premises to their original condition at the conclusion
of the lease. CASA has made a provision to reflect the present value of these obligations.
Accounting Policy
Other Provisions
CASA recognises a provision where there is a present obligation 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.
Employee Benefits
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. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.
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 CASA 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 the leave is taken, including CASA’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination. An ancillary on-cost liability, based on actuarial assessment, has been recognised in the statement of financial position for employer superannuation contributions payable on accrued annual leave and long service leave as at the end of the financial year.
The liability for long service leave as at 30 June 2020 has been determined by reference to the work of an actuary. The estimate of the present value of the liability considers attrition rates and pay increases through promotion and inflation.
Separation and Redundancy
Provision is made for separation and redundancy benefit payments. CASA recognises a provision when a detailed formal plan has been offered and accepted by employees affected.
Note 3: People and Relationships
Note 3.1: Key Management Personnel Remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of CASA, directly or indirectly, including Board Directors. CASA has determined the key management personnel to be the Portfolio Minister, the Board Directors, the Director of Aviation Safety and his/her direct reports. Key management personnel remuneration is reported in the table below:
2020 | 2019 | |
Short-term employee benefits: | ||
Salary | 2,643 | 2,384 |
Annual leave accrued | 165 | 152 |
Allowances | 29 | 110 |
Total short-term employee benefits | 2,837 | 2,646 |
Post-employment benefits: | ||
Superannuation | 364 | 340 |
Total post-employment benefits | 364 | 340 |
Other long-term employee benefits: | ||
Long-service leave accrued | 53 | 49 |
Total other long-term employee benefits | 53 | 49 |
Total key management personnel remuneration | 3,254 | 3,035 |
The total number of key management personnel that are included in the above table are
13 (2019: 14) individuals.
The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister’s remuneration and other benefits are set by the Remuneration Tribunal and are not paid by CASA.
Note 3.2: Related Party Disclosures
Related party relationships
CASA is an Australian Government controlled entity. Related parties to CASA are Key Management Personnel including the Portfolio Minister, the CASA Board of Directors, the Director of Aviation Safety and his/her direct reports, as well as 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.
Significant transactions with related parties can include:
- CASA transacts with other Australian Government controlled entities consistent with normal day-to-day business operations provided under normal terms and conditions, including the payment of workers compensation, insurance premiums, and some services charges. There are no other significant transactions with related parties that require disclosure.
- CASA makes employer contributions to Australian government superannuation plans and schemes as disclosed in note 1.1A Employee Benefits.
Note 4: Managing Uncertainties
Note 4.1: Contingent Assets and Liabilities
Claims for damages | ||
2020 | 2019 | |
Contingent assets | ||
Balance from previous period | 4,094 | 3,344 |
New contingent assets recognised | 6 | 750 |
Obligations expired | -1,500 | 0 |
Total contingent assets | 2,600 | 4,094 |
Contingent liabilities | ||
Balance from previous period | 4,149 | 3,384 |
New contingent liabilities recognised | 245 | 889 |
Liabilities realised | -1,586 | -66 |
Obligations expired | -57 | -58 |
Total contingent liabilities | 2,751 | 4,149 |
Net contingent liabilities | -151 | -55 |
Quantifiable contingencies
CASA is a defendant in five actions for damages relating to personal injury and destruction of property resulting from accidents involving a helicopter, other aircraft and pilot training costs of $2,599,747 (2019: $4,093,953). CASA is defending all five claims, however, if unsuccessful, CASA reasonably expects the full amount would be covered by CASA’s insurance provider.
The schedule of contingencies also contains ‘other’ liabilities of $150,858 (2019: $54,570).
This amount represents an estimate of CASA’s liability in respect of studies assistance.
Unquantifiable and remote contingencies
As at 30 June 2020, CASA is named as defendant in four actions (2019: 2) for damages relating to personal injury resulting from loss of life. It is deemed not possible to estimate the amount of any eventual payment that may be required in relation to these claims. CASA has denied liability and is defending the claims, however, if unsuccessful, CASA reasonably expects the full amount would be covered by CASA’s insurance provider.
Accounting Policy
Contingent Liabilities and Contingent Assets
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 4.2: Fair Value Measurements
2020 | 2019 | |
ASSETS | ||
Assets at fair value | ||
Non-Financial Assets | ||
Property, plant and equipment | 9,380 | 11,461 |
Total non-financial assets at fair value | 9,380 | 11,461 |
Total assets at fair value | 9,380 | 11,461 |
Assets where carrying amount approximates fair value | ||
Financial assets | ||
Cash, cash equivalents and investments | 49,785 | 64,235 |
Trade and other receivables | 2,978 | 1,307 |
Accrued revenue | 506 | 2,706 |
Total financial assets where carrying value approximates fair value | 53,269 | 68,248 |
Assets carried at cost | ||
Non-Financial Assets | ||
Buildings - right-of-use assets | 33,339 | 0 |
Property, plant and equipment - right-of-use assets | 550 | 0 |
Intangibles | 36,876 | 27,324 |
Prepayments | 2,511 | 3,437 |
Total non-financial assets carried at cost | 73,276 | 30,761 |
Total assets in the statement of financial position | 135,925 | 110,470 |
Assets expected to be recovered in: | ||
No more than 12 months | 55,191 | 71,107 |
More than 12 months | 80,734 | 39,363 |
Total assets | 135,925 | 110,470 |
LIABILITIES | ||
Liabilities where carrying value approximates fair value | ||
Payables | ||
Suppliers | 5,089 | 7,730 |
Lease Liabilities | 33,669 | 0 |
Other payables | 2,831 | 4,950 |
Total payables | 41,589 | 12,680 |
Provisions | ||
Employee provisions | 40,875 | 34,511 |
Other provisions | 290 | 828 |
Total provisions | 41,165 | 35,339 |
Total liabilities where carrying value approximates fair value | 82,754 | 48,019 |
Total liabilities in the statement of financial position | 82,754 | 48,019 |
Liabilities expected to be settled in: | ||
No more than 12 months | 28,851 | 21,607 |
More than 12 months | 53,903 | 26,412 |
Total liabilities | 82,754 | 48,019 |
The highest and best use of all non-financial assets are the same as their current use.
· No change in valuation technique occurred during the period.
· Significant observable inputs only. Not applicable for assets in the Level 2 category.
Recurring and non-recurring Level 3 fair value measurements - valuation processes
CASA procured valuation services from Pickles Valuation Services (PVS) and relied on valuation models provided by PVS. CASA tests the procedures of the valuation model at least once every 12 months. PVS provided written assurance to CASA that the model developed is in compliance with AASB 13.
Recurring Level 3 fair value measurements - sensitivity of inputs
The significant unobservable inputs used in the fair value measurement of CASA’s property, plant and equipment assets are the expected useful lives and any adjustment for obsolescence. Significant increases (decreases) in expected useful lives would result in significant higher (lower) fair value measurement and significant increases (decreases) in adjustments for obsolescence would result in significant higher (lower) fair value measurement.
Accounting Policy
Fair Value measurement
CASA deems transfers between levels of the fair value hierarchy to have occurred at balance date.
Note 4.3: Financial Instruments
2020 | 2019 | |
Note 4.3A: Categories of financial instruments | ||
Financial assets under AASB 9 | ||
Financial assets at amortised cost | ||
Cash at bank and deposits at call | 4,785 | 4,235 |
Trade and other receivables | 2,354 | 403 |
Accrued interest | 113 | 446 |
Investments | 45,000 | 60,000 |
Total financial assets at amortised cost | 52,252 | 65,084 |
Total financial instruments classified as financial assets | 52,252 | 65,084 |
CASA’s only financial liabilities are supplier payables. These are measured at amortised cost.
Note 4.3B: Net gains or losses on financial assets | ||
Financial assets at amortised cost | ||
Interest revenue | 109 | 125 |
Investments | 885 | 1.709 |
Net gains on financial assets at amortised cost | 994 | 1,834 |
Net gains on financial assets | 994 | 1,834 |
Accounting Policy
Financial Assets
Under AASB 9 Financial Instruments, CASA classifies its financial assets into the following categories:
· financial assets at fair value through profit or loss;
· financial assets at fair value through other comprehensive income; and
· financial assets measured at amortised cost.
The classification depends on both the business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when CASA 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.
Financial Assets at Amortised Cost
Financial assets included in this category need to meet two criteria:
· the financial asset is held in order to collect the contractual cash flows; and
· 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.
Effective Interest Method
Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.
Impairment of Financial Assets
Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12-month expected credit losses if risk has not increased.
The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.
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 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).
2020 | 2019 | |
Note 5: Regulatory Charging Summary | ||
Expenses | ||
Departmental | 200,705 | 187,020 |
Total expenses | 200,705 | 187,020 |
Revenue | ||
Departmental | 14,052 | 17.201 |
Total revenue | 14,052 | 17,201 |
Cost recovered activities:
Charging for regulatory services as per the Civil Aviation (Fees) Regulations Act 1995.
2020 | 2019 | |
Note 6: Cash Flow Reconciliation | ||
Reconciliation of cash and cash equivalents as per the statement of financial position to the cash flow statement | ||
Reconciliation of net cost of services to net cash from operating activities: | ||
Net cost of services | -186,653 | -169,819 |
Add: Revenue from government | 72,974 | 44,136 |
Add: Aviation fuel excise | 101,280 | 122,209 |
Adjustments for non-cash items: | ||
Depreciation and amortisation | 18,929 | 9,731 |
Non-cash supplier and other expenses | -17 | -21 |
Finance costs | 0 | 14 |
Net write down of non-financial assets | 103 | 180 |
(Gains) / losses on disposal of assets | 135 | -35 |
Changes in assets / liabilities | ||
(Increase) / Decrease in net receivables | -1,67 | -262 |
(Increase) / Decrease in accrued revenue | 2,200 | -77 |
(Increase) / Decrease in prepayments | 926 | -470 |
Increase / (Decrease) in employee provisions | 6,364 | 4,173 |
Increase / (Decrease) in supplier payables | -2,641 | 4,473 |
Increase / (Decrease) in other provisions | -538 | -248 |
Increase / (Decrease) in other payables | 1,104 | -1,718 |
Net cash from operating activities | 12,495 | 12,266 |
Note 7: Explanation of Major Budgetary Variances
Explanations of major variances | Variance to budget ($’000) | Affected statements and line items |
The original budget for aviation fuel excise is generated by forecasts from the Department of Treasury. Actual sales of aviation fuel during the year led to a lower figure than budgeted mainly due to COVID-19 restrictions. | -29,220 | Statement of Comprehensive Income: |
-27,369 | Statement of Cash Flow - Operating activities: | |
Revenue generated from fees was lower than anticipated due to low demand for regulatory services, as a result of the COVID-19 restrictions and anticipated drone registration fees not implemented. | -10,319 | Statement of Comprehensive Income: |
-12,258 | Statement of Cash Flow - Operating activities: | |
Revenue received from government appropriation was higher than budgeted due | 26,802 | Statement of Comprehensive Income: |
Statement of Cash Flow - Operating activities: | ||
The treatment of leases under AASB16 was not included in the original budget. The right of use assets for buildings and motor vehicles have been included on the Statement of Financial Position as non-financial assets. The corresponding lease liabilities are included on the Statement of Financial Position as interest bearing liabilities. | 33,339 | Statement of Financial Position: |
33,669 | Statement of Financial Position: | |
-10,589 | Statement of Cash Flow - Operating Activities: | |
-12,095 | Statement of Comprehensive Income: | |
8,336 | Statement of Cash Flow - Financing Activities: | |
The inclusion of right of use assets due to the adoption of AASB16 has increased depreciation expense that was not included in the original budget. | 5,380 | Statement of Comprehensive Income: |
A change in the parameters used to calculate employee leave provisions and super on-costs following a recent actuarial review resulted in higher than budgeted employee provisions, combined with less leave being taken as an indirect result of the COVID-19 pandemic. In addition CASA provided $1m for employee redundancies which had not been budgeted for. | 9,745 | Statement of Financial Position: |
Timing differences at year end resulted in variances against receivable and payable balances compared to original budget. | 1,265 | Statement of Financial Position: |
-1,441 | Statement of Financial Position: | |
The adoption of AASB16 required the balance for lease incentives be transferred to CASA’s equity balances. This adjustment was not budgeted. | -3,306 | Statement of Financial Position: |
New fitouts for two offices were included in | -4,230 | Statement of Financial Position: |
Intangible assets are higher than budget due to additional spending on a major digital platform. | 3,618 | Statement of Financial Position: |
Variance explanations are included for significant variances over one million dollars and also exceeding 10% of the original budget.
Visit
https://www.transparency.gov.au/annual-reports/civil-aviation-safety-authority/reporting-year/2019-20-70