Notes to the financial statements for the year ended 30 June 2019
Overview
Coal LSL is a not-for-profit corporate Commonwealth entity established under the Coal Mining Industry (Long Service Leave) Administration Act 1992 to regulate and manage long service leave entitlements on behalf of eligible employees of the black coal mining industry.
Basis of preparation
The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.
The financial statements have been prepared in accordance with:
- Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
- Australian Accounting Standards and Interpretations - Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.
Coal LSL is not a General Government Sector entity and is not required to report budgetary numbers to parliament. As such, the entity does not fall within the scope of AASB 1055.
The financial statements have been prepared on an accruals basis 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 values are rounded to the nearest thousand dollars unless disclosure of the full amount is specifically required.
New accounting standards
No accounting standard has been adopted earlier than the application date as stated in the standard. The impact on initial application of AASB 9 Financial Instruments is disclosed in note 2.1. All other accounting standards, amendments to standards and interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect and are not expected to have a future material effect on the entity’s financial statements.
The following new/revised accounting standards are applicable to future reporting periods:
- AASB 15 Revenue from Contracts with Customers: application date 1 July 2019;
- AASB 16 Leases: application date 1 July 2019; and
- AASB 1058 Income of Not-for-Profit Entities: application date 1 July 2019.
It is expected that the adoption of these standards will have no material impact on Coal LSL.
Funding
From 1 July 2018, levies payable by employers under the provisions of the Coal Mining Industry (Long Service Leave) Payroll Levy Collection Act 1992 were reduced from 2.7% to 2.0% of "eligible wages". An actuarial assessment of the fund was undertaken in October 2017 which indicated a significant surplus position of approximately 149.1%. Due to this strong financial position, the Board recommended a reduction in the levy from 2.7% to 2.0%. This recommendation was approved as a regulation in June 2018. Despite the 25.9% reduction in the levy, the projected long term returns from the investment portfolio indicate achievement of the corporate objectives of the fund.
Taxation
Coal LSL is exempt from all forms of income taxation.
Economic dependency
Coal LSL is economically dependent upon continued funding by appropriation of moneys out of the Consolidated Revenue Fund of the Commonwealth of Australia derived from levies made in accordance with the Coal Mining Industry (Long Service Leave) Payroll Levy Collection Act 1992 .
From 29 May 2019, the industrial relations functions, which include Coal LSL, transferred from the Department of Employment, Skills, Small and Family Business to the Attorney-General's Department. This change had no impact on the appropriation funding arrangements of Coal LSL. The accounting policy for revenue from government is disclosed in note 1.2(b).
Events after the reporting period
There were no specific events subsequent to 30 June 2019 that had the potential to significantly affect the ongoing structure and financial activities of the entity.
Comparative amounts
Where necessary, comparative information has been reclassified to enhance comparability in respect of changes in presentation adopted in the current year. This has resulted in a reclassification to separately present software and property, plant and equipment in the statement of financial position. These reclassifications had no effect on the reported results of operations.
Note 1 - Statement of comprehensive income
1.1 Expenses
(a) Employee benefits |
2019 $'000 |
2018 $'000 |
---|---|---|
Wages and salaries |
6,540 |
5,313 |
Superannuation |
620 |
492 |
Leave and other entitlements |
285 |
124 |
Total employee benefits |
7,445 |
5,929 |
Accounting policy |
---|
Accounting policies for employee related expenses are contained in the 'People and relationships' section at note 4. |
(b) Directors' remuneration and expenses
The remuneration of directors is by way of a daily fee for part-time holders of public office as
determined under Part 6 of the determination of the (Commonwealth) Remuneration Tribunal. Directors are also entitled to reimbursement for expenses incurred in travelling to/from meetings and in the conduct of business directly related to the affairs of Coal LSL.
2019 $'000 |
2018 $'000 |
|
---|---|---|
Remuneration paid or payable to directors |
113 |
74 |
Directors' expenses |
61 |
75 |
Total directors’ remuneration and expenses |
174 |
149 |
The total number of directors that are included in the above table is 6 (2018: 6).
(c) Operating leases
Coal LSL signed an operating lease for its head office premises in Newcastle which commenced 1 March 2019 for an initial lease period of ten (10) years with a five (5) year plus five (5) year renewal option. Included in this lease is an annual fixed increase of 3.5% over the initial lease period, with a market review should the option be exercised. Given it is uncertain if Coal LSL will exercise the option periods, these have been excluded from the commitment calculation.
The lease of the previous head office premises, also located in Newcastle, was surrendered on 6 May 2019 releasing Coal LSL of all future commitments in relation to that agreement.
2019 $'000 |
2018 $'000 |
|
---|---|---|
Operating lease costs |
518 |
431 |
Minimum lease commitments |
2019 $'000 |
2018 $'000 |
Not later than one year |
608 |
421 |
Later than one year and not later than five (5) years |
2,625 |
1,667 |
Greater than five (5) years |
3,545 |
310 |
Total minimum lease commitments |
6,778 |
2,398 |
Accounting policy |
---|
A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease. |
Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets. Coal LSL has no finance leases. |
(d) Other expenses
2019 $'000 |
2018 $'000 |
|
---|---|---|
Technology costs |
951 |
759 |
Business transition costs |
- |
75 |
Employment-related costs |
781 |
516 |
Operating expenses |
775 |
732 |
Total other expenses |
2,507 |
2,082 |
1.2 Revenue
(a) Investment revenue |
2019 $'000 |
2018 $'000 |
---|---|---|
Unit trust distributions |
63,444 |
70,063 |
Deposit interest |
2,202 |
682 |
Investment manager fee rebates |
2,012 |
2,055 |
Changes in fair value of investments held at balance date |
59,572 |
54,300 |
Net realised gains on sale of investments |
- |
3,192 |
Total investment revenue |
127,230 |
130,292 |
Accounting policy Dividend and distribution income is recognised when the right to receive a dividend/distribution has been established. Interest income is recognised as it accrues using the effective interest method. Investment manager fee rebates are received through the issue of additional units and are recognised as income when the right to receive the additional units has been established. Fair value gains and losses are recognised as unrealised when the investment is still held at balance date or as realised when the investment has been disposed of during the financial year. |
---|
(b) Revenue from government |
2019 $'000 |
2018 $'000 |
---|---|---|
Levy collections from employers |
134,531 |
149,081 |
Total revenue from government |
134,531 |
149,081 |
Accounting policy Revenues from government are recognised to the extent they have been received into Coal LSL’s bank account. Coal LSL collects a levy paid by employers in a levy collection account. The levy is transferred to the Department of Employment, Skills, Small and Family Business via Consolidated Revenue and is appropriated back from Consolidated Revenue on a monthly basis. This levy account is not recognised as revenue until it is appropriated back from Consolidated Revenue and paid to Coal LSL as it is not controlled by Coal LSL until this appropriation occurs. At 30 June 2019 the balance in this levy account was $11,734,572 (2018: $13,338,305). This amount was remitted to Consolidated Revenue on 1 July 2019. Despite the transfer of Coal LSL from the Department of Employment, Skills, Small and Family Business to the Attorney-General's Department from 29 May 2019, the payment arrangements noted above remained unchanged to 30 June 2019. |
---|
Note 2 - Financial assets and liabilities
2. Financial assets and liabilities
2.1 Categories of financial instruments
Financial assets |
2019 $'000 |
2018 $'000 |
---|---|---|
Amortised cost |
||
Cash and cash equivalents |
179,568 |
24,219 |
Trade and other receivables |
4,116 |
- |
Total at amortised cost |
183,684 |
24,219 |
Fair value through profit or loss |
||
Unit trusts |
1,649,635 |
1,684,804 |
Loans and receivables |
||
Trade and other receivables |
- |
2,709 |
Total financial assets |
1,833,319 |
1,711,732 |
Financial liabilities |
||
Amortised cost |
||
Trade and other payables |
2,197 |
1,019 |
Total financial liabilities |
2,197 |
1,019 |
The initial application of AASB 9 Financial Instruments on 1 July 2018 resulted in the reclassification of $2.7m of trade and other receivables from loans and receivables to amortised cost bringing the total financial assets held at amortised cost to $26.9m as at 1 July 2018. No remeasurements or other reclassifications were required on initial application of the standard.
Net gains on financial assets and financial liabilities are disclosed in note 1.2(a) while net losses are disclosed in the statement of comprehensive income.
Accounting policy |
---|
Financial assets are recognised when Coal LSL 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. |
The classification depends on Coal LSL’s business model for managing the financial assets and the contractual cash flow characteristics at the time of initial recognition. |
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. |
2.2 Cash and cash equivalents
2019 $'000 |
2018 $'000 |
|
---|---|---|
Cash at bank |
172,974 |
24,177 |
Deposits at custodian |
6,594 |
42 |
Total cash and cash equivalents shown in statement of cash flows |
179,568 |
24,219 |
Accounting policy Cash and cash equivalents includes cash on hand and demand deposits in bank accounts with an original maturity of three months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash is recognised at its nominal amount. |
---|
2.3 Trade and other receivables
2019 $'000 |
2018 $'000 |
|
---|---|---|
Accrued income from investments |
3,444 |
2,376 |
Accrued bank interest |
135 |
52 |
GST paid and claimable |
97 |
34 |
Prepayments |
439 |
237 |
Other assets |
1 |
10 |
Total trade and other receivables |
4,116 |
2,709 |
At 30 June 2019, no trade or other receivables were overdue or impaired (2018: nil).
Accounting policy Trade and other receivables that are held for the purpose of collecting contractual cash flows which are solely payments of principal and interest and are not provided at below-market interest rates are measured at amortised cost using the effective interest method adjusted for any loss allowance. |
---|
2.4 Financial instruments at fair value through profit or loss
(a) Investments |
2019 $'000 |
2018 $'000 |
---|---|---|
As at 1 July |
1,684,804 |
1,545,255 |
Purchases |
59,801 |
180,721 |
Sales |
(154,474) |
(98,664) |
Realised and unrealised gains |
59,504 |
57,492 |
Total as at 30 June |
1,649,635 |
1,684,804 |
(b) As at 30 June 2019, a total of $1,649.6m (2018: $1,684.8m) from the assets of the Coal Mining Industry Long Service Leave Fund were invested by Coal LSL with the appointed fund managers in accordance with the approved investment policy as follows:
2019 $'000 |
2018 $'000 |
|
---|---|---|
AMP Capital Shopping Centre Fund |
33,818 |
35,453 |
AMP Capital Wholesale Office Fund |
55,329 |
51,150 |
Bridgewater |
82,775 |
78,278 |
Brigade |
0 |
73,366 |
Hyperion |
87,691 |
82,478 |
K2 Advisors |
0 |
73,021 |
Lazard |
63,907 |
59,149 |
Macquarie |
72,075 |
64,815 |
MFS |
78,934 |
74,792 |
Palisade |
79,097 |
75,035 |
Pimco |
68,643 |
64,422 |
QIC Fixed Interest |
240,987 |
219,960 |
QIC Inflation Plus |
133,843 |
134,084 |
Resolution Capital |
103,490 |
94,342 |
Schroder |
67,869 |
62,951 |
State Street Global Advisors |
136,440 |
121,639 |
Stone Harbor |
63,592 |
57,387 |
Vanguard International Shares Hedged |
95,958 |
90,055 |
Vanguard International Shares Unhedged |
185,187 |
172,427 |
Total unit trusts |
1,649,635 |
1,684,804 |
JPMorgan Chase Bank N.A. Cash Account |
6,594 |
42 |
Cash held directly by Coal LSL |
172,974 |
24,177 |
Total investments |
1,829,203 |
1,709,023 |
All investments in unit trusts were held on behalf of Coal LSL by the Master Custodian, JPMorgan Chase Bank N.A. For the year ended 30 June 2019, the return on the investment of funds was 7.4% (2018: 8.3%).
Sector exposure |
2019 $'000 |
2018 $'000 |
---|---|---|
Australian fixed interest |
374,830 |
354,044 |
Overseas fixed interest |
136,512 |
127,373 |
Australian equities |
223,673 |
206,442 |
Overseas equities |
496,519 |
458,913 |
Alternatives |
225,464 |
357,087 |
Property |
192,637 |
180,945 |
Cash and cash equivalents |
179,568 |
24,219 |
Total investments |
1,829,203 |
1,709,023 |
Accounting policy |
---|
Financial assets are classified at fair value through profit or loss (FVTPL) where the financial assets either do not meet the criteria of financial assets held at amortised cost or at fair value through other comprehensive income (i.e. mandatorily held at FVTPL) or may be designated. |
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset. |
Fair value measurement principles |
The fair value of financial instruments is based on their quoted market prices at balance date without any deduction for estimated future selling costs. Financial assets are priced at current bid prices, while financial liabilities are priced at current asking prices. |
If a quoted market price is not available on a recognised stock exchange or from a broker/dealer for non- exchange-traded financial instruments, the fair value of the instrument is estimated using valuation techniques, including use of recent arm’s length market transactions, references to the current fair value of other instruments that has substantially the same characteristics, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions. |
Coal LSL may have derivative financial instruments in place from time to time by virtue of an active mandate with an investment manager. Active investment managers may utilise derivatives to ensure they comply with the mandated strategy approved by Coal LSL. Coal LSL itself does not invest in derivatives directly and expects that investment managers utilise derivatives in the short term only. |
The fair value of derivatives that are not exchange-traded is estimated at the amount that Coal LSL would receive or pay to transfer a liability of the contract at the balance date before taking into account current market conditions and the creditworthiness of the counterparties. |
Investments in unlisted unit trusts are recorded at the exit price as reported by the managers of such trusts. |
It is a requirement of all managers that if derivatives are utilised, any such derivatives are fully cash backed. |
2.5 Trade and other payables
2019 $'000 |
2018 $'000 |
|
---|---|---|
Trade creditors and accruals |
749 |
610 |
Other payables |
1,448 |
409 |
Total trade and other payables |
2,197 |
1,019 |
Amounts are unsecured and are usually paid within 30 days of recognition.
Accounting policy |
---|
Trade and other payables are recognised at amortised cost. Liabilities are recognised to the extent that goods and services have been received (and irrespective of having been invoiced). |
Note 3 - Non-financial assets
3.1 Property, plant and equipment and software
Reconciliation of opening and closing balances |
Leasehold improvements |
Plant and equipment |
Software |
Total |
---|---|---|---|---|
At 1 July 2018 |
$’000 |
$’000 |
$’000 |
$’000 |
Gross book value |
746 |
547 |
69 |
1,362 |
Accumulated depreciation, amortisation and impairment |
(71) |
(184) |
(18) |
(273) |
Total as at 1 July 2018 |
675 |
363 |
51 |
1,089 |
Purchases |
1,758 |
638 |
1,133 |
3,529 |
Depreciation and amortisation |
(89) |
(142) |
(81) |
(312) |
Disposals |
(623) |
(151) |
0 |
(774) |
Total as at 30 June 2019 |
1,721 |
708 |
1,103 |
3,532 |
Total as at 30 June represented by |
||||
Gross book value |
1,881 |
1,034 |
1,202 |
4,117 |
Accumulated depreciation, amortisation and impairment |
(160) |
(326) |
(99) |
(585) |
Total as at 30 June 2019 |
1,721 |
708 |
1,103 |
3,532 |
Accounting policy Assets are recorded at cost on acquisition. The cost of acquisition includes the fair value of assets transferred in exchange of liabilities undertaken. Asset recognition threshold Purchases of property, plant and equipment are recognised at cost in the statement of financial position except for purchases costing less than $1,000 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 ‘make good’ provisions taken up by the entity where there exists an obligation to restore leased premises. As at 30 June 2019, it was the opinion of the directors that Coal LSL did have a future obligation for the make good of leased premises as it is uncertain if Coal LSL will exercise the option periods and therefore the ability to waive the obligation to make good the site under the lease contract. Revaluations Following initial recognition at cost, material property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depended upon the volatility of movements in market values for the relevant assets. Immaterial property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. 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 reversed 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 reversed a previous revaluation increment for that class. It is the opinion of Coal LSL that all property, plant and equipment are immaterial and as such, are measured at cost less accumulated depreciation and accumulated impairment losses. No assets were revalued as at 30 June 2019. Depreciation Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the entity using the straight-line method of depreciation. Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate. Depreciation rates applying to each class of depreciable asset are based on the following useful lives:
Impairment All assets were assessed for impairment at 30 June 2019. Where indications of impairment exist, the asset's recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount. The recoverable amount of an asset is the higher of its fair value less costs of disposal 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 the entity 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. Net realised gains or losses on sale of assets Gains and losses arising from the sale of assets during the year are recognised in the statement of comprehensive income when the asset has been disposed. Intangibles Coal LSL’s intangibles comprise software that has been purchased, internally developed or significantly modified 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 range from 3 to 5 years (depending on assessment of the individual asset’s useful life). All software assets were assessed for indications of impairment at 30 June 2019. |
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Note 4 - People and relationships
4.1 Employee provisions
2019 $'000 |
2018 $'000 |
|
---|---|---|
Leave |
763 |
534 |
Superannuation |
- |
78 |
Total employee provisions |
763 |
612 |
Accounting policy Leave Liabilities for annual leave and accumulating sick leave 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 the entity's employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination. The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting dates. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Superannuation The liability for superannuation recognised as at 30 June represents outstanding contributions. |
---|
4.2 Key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The entity has determined the key management personnel to be the Chief Executive Officer, Chief Investment Officer and Board of Directors. As a result of Coal LSL's annual reassessment of key management personnel, in the context of the entity's structure and key decision making, there has been a reduction in the number of executives disclosed as key management personnel. Remuneration of key management personnel (excluding the Board of Directors which is disclosed in note 1.1(b)) is reported in the table below:
2019 $'000 |
2018 $'000 |
|
---|---|---|
Short-term employee benefits |
629 |
1,485 |
Post-employment benefits |
61 |
145 |
Other long-term employee benefits |
13 |
31 |
Termination benefits |
- |
- |
Total key management personnel remuneration expenses1 |
703 |
1,661 |
The total number of key management personnel that are included in the above table is 2 (2018: 9).
1 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 the entity.
4.3 Related party disclosures
(a) Related party relationships
Coal LSL is a corporate Commonwealth entity. Related parties to this entity are the directors, key management personnel and the Portfolio Minister. Directors have associations with entities that are involved in the coal mining industry pursuant to their appointment to the Board under the Coal Mining Industry (Long Service Leave) Administration Act 1992 .
The directors of Coal LSL during the year were:
- Mr Bradley Neven, Chair
- Mr Grahame Kelly, Deputy Chair (appointed as Deputy Chair from 20 June 2019)
- Mr Mark Klasen (resigned as Deputy Chair from 20 June 2019)
- Ms Anne Donnellan
- Ms Christina Langby
- Ms Jennifer Short
Directors held their positions to the end of the financial year.
Key management personnel employed by Coal LSL during the year were:
- Ms Darlene Perks, Chief Executive Officer
- Ms Lisbeth Rasmussen, Chief Investment Officer
(b) Transactions with related parties
Given the breadth of government activities, related parties transact with the government sector in the same capacity as ordinary citizens. In addition, Coal LSL may transact with related parties through the collection of levies, payment of reimbursements and recognition of eligible employment service in the same manner as other registered employers and eligible employees. These transactions have not been disclosed in this note.
Apart from items disclosed at notes 1.1(b) Directors' remuneration and expenses, 1.2(b) Revenue from government and 4.2 Key management personnel remuneration, there were no further related party transactions.
Note 5 - Provisions
5. Provisions
5.1 Provision for reimbursements
2019 $'000 |
2018 $'000 |
|
---|---|---|
Current |
1,195,459 |
991,197 |
Non-current |
330,490 |
309,576 |
Total provision for reimbursements |
1,525,949 |
1,300,773 |
As at 1 July |
1,300,773 |
1,244,585 |
Reimbursements paid |
(124,889) |
(139,034) |
Additional provisions recognised |
229,238 |
195,410 |
Increase (decrease) in provision due to change in discount rate |
120,827 |
(188) |
As at 30 June |
1,525,949 |
1,300,773 |
The current portion of the provision includes unconditional entitlements where employees have met the eligibility requirements for long service leave. However, based on past experience, current leave obligations expected to be reimbursed to employers in the next 12 months is $136.6m (2018: $151.3m).
Accounting policy This provision represents the expected liability for the reimbursement of employers for the long service leave entitlements of eligible employees under the Coal Mining Industry (Long Service Leave) Administration Act 1992 as at 30 June. The provision for reimbursement is recalculated annually by multiplying the individual employee’s total number of hours of long service leave accrued by their average hourly rate of pay. The liability for each eligible employee is reviewed in terms of probability factors of the employee reaching the qualifying service period, estimates of future salary growth and then discounted to its present value using market yields at the reporting date on government bonds with terms to maturity and currency that match, as closely as possible, the average, estimated duration of the liability. |
---|
Coal LSL recognises that the present value of the provision for reimbursements is sensitive to changes in assumptions used in determining its value.
Salary growth
At 30 June 2019 the actuarial salary growth rate assumptions were 2.25% for long service leave balances with an expected payment date of within 2 years (2018: 2.0%), 2.5% for 3 years (2018: 2.75%), 3.0% for 4 years (2018: 3.5%) and 3.5% for all other payments periods (2018: 3.5%). With all other variables held constant a 1.0% increase in salary growth rates used in the calculation would increase the present value of the provision for reimbursements by $80.2m (2018: $69.4m). A 1.0% decrease would decrease the present value by $76.5m (2018: $66.2m).
Probability factors
At 30 June 2019 the probability factors utilised ranges from 47.2% to 100.0% depending on the type and category of long service leave (2018: 48.4% to 100.0%). An increase in the probability factors used in the calculation would increase the present value of the provision for reimbursements. A decrease in probability factors would decrease the present value.
Change in estimate
Coal LSL changed an accounting estimate for the provision for reimbursements at 30 June 2019. The revised estimate is based on a review of the duration of the liability. The estimated duration of the liability decreased from 10 years to 5 years and resulted in a change in the discount rate applied. The change in estimate has been applied prospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors . As a result of the change in estimate, the provision increased by $22.9m and the reimbursement expense increased by the same amount at 30 June 2019. It is impracticable to estimate the effect of this change in estimate on future periods.
Discount rates
At 30 June 2019 the discount rate utilised was 1.03% for all categories of long service leave (2018: 2.63%). With all other variables held constant, a 1.0% increase in discount rates used in the calculation would decrease the present value of the provision for reimbursements by $77.0m (2018: $65.7m). A 1.0% decrease would increase the present value by $82.4m (2018: $70.2m).
Note 6 - Contingencies and commitments
6.1 Contingent assets and liabilities
Quantifiable contingencies
In accordance with the Coal Mining Industry (Long Service Leave) Legislation Amendment Act 2011 , “Eligible Employees” can make application to Coal LSL for recognition of periods of eligible employment service that may not be presently recognised and recorded by Coal LSL. A contingent liability will arise at reporting date where applications have been received but not yet approved by the Board of Directors. At 30 June 2019 Coal LSL has an estimated contingent liability of $2.6m (2018: $2.2m).
Coal LSL has an estimated contingent asset of $6.1m at 30 June 2019 (2018: $1.6m) arising in respect of levies attributable to those employers of “Eligible Employees” and “Former Eligible Employees” in relation to applications received.
Unquantifiable contingencies
Coal LSL has not raised a liability for unknown claims by employees for recognition of period(s) of employment service as, at balance date, these amounts are unknown and are not reliably measurable. A contingent asset will also arise in respect of levies attributable to those employers of “Eligible Employees” and “Former Eligible Employees” that previously did not contribute to the fund for unrecognised service. No asset will be raised for unknown claims as these amounts are unknown and are not reliably measurable.
Accounting policy Contingent liabilities and 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. |
---|
6.2 Commitments
Coal LSL has the following commitments at 30 June:
Investment commitments |
2019 $'000 |
2018 $'000 |
---|---|---|
Not later than one year |
7,593 |
9,510 |
Later than one year and not later than five (5) years |
0 |
0 |
Total investment commitments |
7,593 |
9,510 |
Commitments in relation to operating lease costs are disclosed in note 1.1(c).
Note 7 - Aggregate assets and liabilities
Assets expected to be recovered in |
2019 $'000 |
2018 $'000 |
---|---|---|
No more than 12 months |
103,684 |
68,928 |
More than 12 months |
1,733,167 |
1,643,893 |
Total assets |
1,836,851 |
1,712,821 |
Liabilities expected to be settled in |
||
No more than 12 months |
137,858 |
152,651 |
More than 12 months |
1,391,051 |
1,149,753 |
Total liabilities |
1,528,909 |
1,302,404 |
Independent auditor’s report
To the Minister for Industrial Relations
Opinion
In my opinion, the financial statements of the Coal Mining Industry (Long Service Leave Funding) Corporation (‘the Entity’) for the year ended 30 June 2019:
(a) comply with Australian Accounting Standards – Reduced Disclosure Requirements and the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015; and
(b) present fairly the financial position of the Entity as at 30 June 2019 and its financial performance and cash flows for the year then ended.
The financial statements of the Entity, which I have audited, comprise the following statements as at 30 June 2019 and for the year then ended:
- Statement by Directors, Chief Executive Officer and General Manager Finance;
- Statement of Comprehensive Income;
- Statement of Financial Position;
- Statement of Changes in Equity; Statement of Cash Flows; and
- Notes to the financial statements, comprising a Summary of Significant Accounting Policies and other explanatory information.
Basis for opinion
I conducted my audit in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Entity in accordance with the relevant ethical requirements for financial statement audits conducted by the Auditor‐General and his delegates. These include the relevant independence requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) to the extent that they are not in conflict with the Auditor‐General Act 1997. I have also fulfilled my other responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Accountable Authority’s responsibility for the financial statements
As the Accountable Authority of the Entity, the Directors are responsible under the Public Governance, Performance and Accountability Act 2013 (the Act) for the preparation and fair presentation of annual financial statements that comply with Australian Accounting Standards – Reduced Disclosure Requirements and the rules made under the Act. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the ability of the Entity to continue as a going concern, taking into account whether the Entity’s operations will cease as a result of an administrative restructure or for any other reason. The Directors are also responsible for disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the assessment indicates that it is not appropriate.
Auditor’s responsibilities for the audit of the financial statements
My objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian National Audit Office Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of the financial statements.
As part of an audit in accordance with the Australian National Audit Office Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:
- identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
- obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control;
- evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Accountable Authority;
- conclude on the appropriateness of the Accountable Authority’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern; and
- evaluate the overall presentation, structure and content of the financial statements, including the
- disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
I communicate with the Accountable Authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.
Australian National Audit Office
Peter Kerr
Executive Director
Delegate of the Auditor‐General
Canberra
17 September 2019
Visit
https://www.transparency.gov.au/annual-reports/coal-mining-industry-long-service-leave-funding-corporation/reporting-year/2018-2019-35