Notes to and forming part of the financial statements
Overview
Objectives of the Department of Foreign Affairs and Trade
The Department of Foreign Affairs and Trade (DFAT) is an Australian Government controlled entity. It is a not-for-profit, non-corporate Commonwealth entity. The continued existence of DFAT in its present form and with its present outcomes and programs is dependent on Government policy and on continuing funding by Parliament for DFAT's administration and programs.
DFAT’s role is to advance the interests of Australia and Australians internationally, providing foreign, trade and investment, development and international security policy advice to the Government. DFAT works with other Government agencies to ensure that Australia’s pursuit of its global, regional and bilateral interests is coordinated effectively. DFAT’s role involves working to strengthen Australia’s security, enhancing Australia’s prosperity, delivering an effective and high quality aid program and helping Australian travellers and Australians overseas. The DFAT Portfolio Budget Statements are structured to meet three outcomes:
- Outcome 1: The advancement of Australia's international strategic, security and economic interests including through bilateral, regional and multilateral engagement on Australian Government foreign, trade and international development policy priorities,
- Outcome 2: The protection and welfare of Australians abroad and access to secure international travel documentation through timely and responsive travel advice and consular and passport services in Australia and overseas, and
- Outcome 3: A secure Australian Government presence overseas through the provision of security services and information and communications technology infrastructure, and the management of the Commonwealth's overseas property estate.
DFAT's activities that contribute towards these outcomes are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by DFAT in its own right. Administered activities involve the management or oversight by DFAT, on behalf of the Government, of items controlled or incurred by the Government.
DFAT conducts the following administered activities on behalf of the Government:
Official development assistance administered by DFAT includes international development assistance and multilateral replenishments. Appropriation funding is allocated through country, regional and global programs, and includes payments to international organisations, emergency and humanitarian programs, contributions to non-Government organisations (NGOs) and volunteer programs. The aid program promotes Australia’s national interest by contributing to sustainable economic growth and poverty reduction, particularly in the Indo-Pacific. |
Basis of Preparation
The financial statements and notes are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.
The financial statements and notes have been prepared in accordance with:
- the 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.
DFAT has applied the Reduced Disclosure Requirements issued by the AASB with the exception of disclosures prepared under the following accounting standards, as required under subsection 18(3) of the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR):
- AASB 7 Financial Instruments: Disclosure (administered only),
- AASB 12 Disclosure of Interests in Other Entities (administered only),
- AASB 13 Fair Value Measurement (administered and departmental), and
- AASB 116 Property, Plant and Equipment (administered and departmental).
The financial statements have been prepared on an accrual basis and are 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 otherwise specified. Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables are translated at the exchange rates current at the end of the reporting period. Exchange gains and losses are reported in the Statement of Comprehensive Income. DFAT does not enter into hedging arrangements for its foreign currency transactions and all foreign exchange gains or losses are considered non-speculative in nature.
Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes. Except where otherwise stated below, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards. |
Taxation
DFAT is exempt from all forms of Australian taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST). Overseas, DFAT may be subject to Value Added Tax (VAT) or similar on the purchase of goods and services. Revenues, expenses, assets and liabilities are recognised net of GST / VAT except:
- where the amount of GST or VAT incurred is not recoverable from the Australian Taxation Office or overseas taxation authority, and
- for receivables and payables.
Events After the Reporting Period
There have been no events after 30 June 2020 which will affect the financial position of DFAT materially at the reporting date.
New Accounting Standards
No accounting standard has been adopted earlier than the application date as stated in the standard.
Standard / Interpretation | Nature of change in accounting policy, transitional provisions1, and adjustment to 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. ASB 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 changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements. |
AASB 15 Revenue from Contracts with Customers ASB 2016-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities ASB 1058 Income of Not-For-Profit Entities | AASB 15, AASB 2016-8 and AASB 1058 became effective 1 July 2019. 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 does 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 are disclosed in the relevant notes to the financial statements. |
| |
Application of AASB 16 Leases
DFAT 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.
DFAT 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. DFAT 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;
- Measured the right-of-use asset at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to the specific lease; 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, DFAT 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, DFAT recognises right-of-use assets and lease liabilities for most leases. However, DFAT has elected not to recognise right-of-use assets and lease liabilities for low value assets (less than $10,000) based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.
On adoption of AASB 16, DFAT recognised right-of-use assets and lease liabilities in relation to leases of storage space, vehicles and property leases, which had previously been classified as operating leases.
The lease liabilities were measured at the present value of the remaining lease payments, discounted using the DFAT’s incremental borrowing rate as at 1 July 2019. DFAT’s incremental borrowing rate, which is based on zero coupon yields, is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 1.3%.
Impact on transition of AASB 16
On transition to AASB 16, DFAT recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:
Departmental | 1 July 2019 |
|---|---|
Non-financial assets - buildings (right-of-use assets) | 1,259,312,265 |
Non-financial assets - plant and equipment (right-of-use assets) | 3,791,896 |
Other non-financial assets - property prepayments | (37,133,901) |
Interest bearing liabilities - leases liabilities | (1,225,970,260) |
Payables - suppliers - operating lease rentals | (26,338,977) |
Payables - other payables - lease incentives | (8,896,798) |
Retained earnings | 35,235,775 |
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:
1 July 2019 | |
|---|---|
Minimum operating lease commitment at 30 June 2019 | 815,685,493 |
Less: recoverable taxes included in minimum operating lease commitment at 30 June 2019 | (45,230,998) |
Less: leases commencing after 30 June 2019 included in minimum operating lease commitment at 30 June 2019 | (26,595,359) |
Less: short-term leases not recognised in lease liability under AASB 16 | (1,772,253) |
Plus: effect of extension options reasonably certain to be exercised and other differences | 626,525,701 |
Undiscounted lease payments | 1,368,612,584 |
Less: effect of discounting using the incremental borrowing rate as at the date of initial application | (142,642,324) |
Lease liabilities recognised at 1 July 2019 | 1,225,970,260 |
Significant Accounting Judgements and Estimates
In the process of applying the accounting policies detailed in these statements, DFAT has made the following estimates and judgements that have a significant impact on the amounts recorded in the departmental financial statements:
- The fair value of land and buildings has been taken to be the market value of similar properties as determined by an independent valuer. In some instances, DFAT’s buildings are purpose built and may in fact realise more or less in the market.
- The fair value of plant and equipment has been taken to be the market value of similar assets or depreciated replacement value as determined by an independent valuer.
- The employee provisions have been determined by reference to advice from the Australian Government Actuary.
No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next reporting period.
Administered In the process of applying the accounting policies detailed in these statements, DFAT has made the following estimates and judgements that have a significant impact on the amounts recorded in the Administered financial statements:
No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next reporting period. |
Changes in accounting policy
Certain comparative amounts have been reclassified or adjusted to conform with current financial reporting guidelines. These are reflected as minor changes in the comparative figures in the statement of changes in equity and notes 1.2A: Revenue from contracts with customers, 3.1B: Trade and other receivables and 7.3A: Categories of financial instruments.
Changes in accounting policy Certain comparative amounts have been reclassified or adjusted to conform with current financial reporting guidelines. These are reflected as minor changes in the comparative figures in the notes 2.1A: International development assistance, 4.1B: Trade and other receivables, and 6.1B: Employee provisions. |
1. Departmental Financial Performance
1.1 Expenses
2020 | 2019 | |
$'000 | $'000 | |
Wages and salaries | 594,935 | 561,590 |
Superannuation | ||
Defined contribution plans | 44,234 | 46,161 |
Defined benefit plans | 49,181 | 42,194 |
Leave and other entitlements | 71,692 | 74,837 |
Fringe benefits expense | 117,163 | 118,511 |
Separations and redundancies | 6,713 | 6,243 |
Other employee expenses | 4,616 | 3,922 |
Total employee benefits | 888,534 | 853,458 |
Accounting policy
Accounting policies for employee benefits are included in Section 6 People and Relationships.
Goods and services supplied or rendered | ||
|---|---|---|
Passport expenses | 106,317 | 125,804 |
Property related expenses (excluding rent) | 99,317 | 105,921 |
Security expenses | 86,965 | 80,822 |
Information and communication technology | 106,616 | 99,406 |
Travel expenses | 47,528 | 54,227 |
Staff related expenses | 35,560 | 40,785 |
Office expenses | 19,487 | 20,926 |
Legal and other professional services | 12,537 | 12,735 |
Contractors | 10,516 | 9,855 |
Consultants | 4,851 | 5,570 |
Remuneration of auditors | 611 | 630 |
Other expenses | 21,045 | 17,527 |
Total goods and services supplied or rendered | 551,350 | 574,208 |
Goods supplied | 73,788 | 73,346 |
Services supplied | 477,562 | 500,862 |
Total goods and services supplied or rendered | 551,350 | 574,208 |
Other suppliers | ||
Operating lease rentals1 | - | 150,217 |
Short-term leases | 3,281 | - |
Workers compensation expenses | 3,796 | 3,431 |
Total other suppliers | 7,077 | 153,648 |
Total suppliers | 558,427 | 727,856 |
DFAT has short-term lease commitments of $0.209m as at 30 June 2020. The above lease disclosures should be read in conjunction with the accompanying notes 1.1E, 1.2B, 3.2A and 3.4A. | ||
2020 | 2019 | |
$'000 | $'000 | |
Write-down of financial assets | 68 | 21 |
Movement in impairment loss allowance | 195 | (12) |
Total impairment loss on financial instruments | 263 | 9 |
2020 | 2019 | |
$'000 | $'000 | |
Write-down of leasehold improvements | 1,631 | 695 |
Write-down of plant and equipment | 1,727 | 2,031 |
Write-down of computer software | 170 | 555 |
Impairment of non-current assets held for sale and divestment | 756 | 1,676 |
Write-down of assets under construction | - | 5 |
Write-off of inventories | - | 138 |
Total write-down and impairment of other assets | 4,284 | 5,100 |
Accounting policy
Impairment Divestment
Some selling costs relate to divestments that have not yet settled, and are not considered held for sale per the AASB criteria. These assets may not be in use but are not held for sale either.
Unwinding of discount | 279 | 382 |
Interest on lease liabilities | 15,966 | - |
Other interest payments | 2 | 1 |
Total finance costs | 16,247 | 383 |
Act of grace payments | - | 3,903 |
Total other expenses | - | 3,903 |
1.2 Own-source revenue and gains
2020 | 2019 | |
$'000 | $'000 | |
Sale of goods | 290 | 585 |
Rendering of services | 102,313 | 110,844 |
Total revenue from contracts with customers | 102,603 | 111,429 |
Disaggregation of revenue from contracts with customers
DFAT generates revenue from agreements with customers. A significant portion of this revenue is derived from DFAT providing services for other Commonwealth agencies overseas $100.567m (2019: $108.708m). The remainder of the revenue are contributions by employees in relation to expenses that are incurred by DFAT $1.746m (2019: $2.136m).
DFAT can categorise services provided overseas into accommodation and general support $75.511m (2019: $85.223m) and information technology support $25.056m (2019: $23.485m). The risks and uncertainties in relation to timing of revenue and associate cash flows for both services are identical. Per unit costs are determined at the beginning of the revenue period. Revenue is recognised from customers in arrears based on the agreed unit values. At the end of the revenue period the unit costs are reviewed to determine appropriateness in terms of cost that have been incurred. Revenue recognised for each customer is then adjusted to reflect the actual costs that have been incurred in determining the unit value.
Accounting policy
Revenue from the sale of goods is recognised when control has been transferred to the buyer.
DFAT will classify a service based agreement as within the scope of AASB 15 and recognise revenue in relation to services rendered from that agreement when all the following conditions are satisfied:
- DFAT has an agreement that has been approved by all parties to the agreement;
- The obligations of each party under the agreement can be identified;
- A pattern of transfer of services can be identified;
- The agreement has commercial substance;
- It is highly probable that DFAT will collect the payments.
Service revenue is predominately generated from providing services to other Commonwealth agencies overseas. The agreements with customers typically involve multiple services. The services all relate to specific performance obligations, and as such the services are bundled for the purpose of revenue recognition. Revenue is recognised on a per unit basis and is not considered variable revenue. The transaction price is the total amount of consideration to which the department expects to be entitled in exchange for transferring the promised services to a customer. The transaction price is based on a service unit price for recovering costs and is initially determined applying judgement. The unit price is reviewed at the end of the revenue period to adjust revenues recognised for the actual unit cost. This process can result in the recognition of a customer contract liability or receivable.
The benefits to the customers under the agreements are provided and consumed simultaneously. The likelihood of re-performance of any aspects of the services are low and, as such, DFAT recognises the services revenue over time with proportionate recognition over the period of the agreement. The services are typically charged in arrears and as such, liabilities are not raised in relation to those obligations.
Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance amount. Collectability of debts are reviewed at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable.
2020 | 2019 | |
$'000 | $'000 | |
Operating lease: | ||
Lease income | 34,105 | 35,889 |
Subleasing right-of-use assets1 | 15,743 | - |
Total rental income | 49,848 | 35,889 |
| ||
DFAT has in place a number of lease arrangements for operating lease commitments for right-of-use assets and DFAT owned properties. Lease revenue expected to be received is $131.777m (2019: $150.987m).
Within 1 year | 45,658 |
One to two years | 35,560 |
Two to three years | 24,810 |
Three to four years | 15,187 |
Four to five years | 6,879 |
More than five years | 3,683 |
Total undiscounted lease payments receivable | 131,777 |
The above lease disclosures should be read in conjunction with the accompanying notes 1.1B, 1.1E, 3.2A and 3.4A.
Foreign tax refunds | 4,815 | 5,767 |
Sponsorship revenue | 890 | 2,644 |
Resources received free of charge | 619 | 360 |
Other revenue | 226 | 373 |
Total other revenue | 6,550 | 9,414 |
Accounting policy Resources received free of charge, which relates to remuneration of auditors, are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Sponsorship revenue is recognised as revenue at the fair value of the sponsorship received or receivable when the probable economic benefits of the transaction will flow to DFAT. Foreign tax refunds are recognised as revenue at the fair value of the foreign tax refund when the probable economic benefits of the transaction will flow to DFAT. | ||
Gain on restoration obligation | 39 | 1,265 |
Assets previously expensed | 286 | 1,278 |
Total other gains | 325 | 2,543 |
2. Income and Expenses Administered on Behalf of Government
2.1 Administered expenses
2020 | 2019 | |
$'000 | $'000 | |
Delivery of Australian international development assistance | ||
International development assistance - suppliers | 3,114,351 | 3,168,562 |
Employee benefits supporting delivery | 39,100 | 36,902 |
Total international development assistance | 3,153,451 | 3,205,464 |
Accounting Policy Employee benefit expenses relate to both APS and locally engaged staff working on the direct delivery of the aid program. | ||
New multilateral replenishments | 230,726 | 72,506 |
Loss from measuring multilateral financial liabilities - at fair value through profit or loss | 341,228 | 137,056 |
Unwinding costs - multilateral grants and contributions | 17,865 | 45,271 |
Total multilateral replenishments and other loans | 589,818 | 254,833 |
Accounting Policy Accounting policies for other loans and multilateral replenishments are included in Note 4.1: Administered - Financial Assets and Note 4.3: Administered - Payables. | ||
Payments to international organisations | 384,447 | 373,118 |
New Colombo Plan | 48,998 | 49,379 |
Tourism Australia - Asia marketing fund | 14,000 | 14,000 |
Tourism Australia - Working holiday makers | 2,500 | 5,000 |
Tourism Australia - Bushfire response package | 41,500 | - |
Tourism Australia - Implementing Sport 2030 | 2,000 | - |
Other | 14,474 | 13,468 |
Total other grants and contributions | 507,919 | 454,965 |
Accounting Policy DFAT administers a number of agreements on behalf of the Australian Government with international organisations. Liabilities are recognised to the extent that: a) the services required to be performed by the recipient have been performed, or b) the eligibility criteria has been satisfied, but payments due have not been made. | ||
Write-down and impairment of financial asset | 427 | 242 |
Total impairment loss on financial instruments | 427 | 242 |
Defined benefit pension schemes | 7,423 | 6,691 |
Passport fee refunds | 933 | 811 |
Consular services refunds | 7 | 8 |
Other foreign exchange losses | 569 | 3,107 |
Total other expenses | 8,932 | 10,617 |
2.2 Administered - Income
Administered income relates to ordinary activities performed by DFAT on behalf of the Government. As such, administered appropriations are not revenues of the individual entity that oversees distribution or expenditure of the funds as directed.
2020 | 2019 | |
$'000 | $'000 | |
Passport fees | 449,328 | 542,826 |
Consular fees | 14,285 | 16,302 |
Nuclear safeguard charges | 875 | 864 |
Total fees and charges | 464,488 | 559,992 |
Accounting Policy Passport and consular income are based on a fee arrangement, collected both domestically and internationally, for the processing of new passport applications, registering lost or stolen passports, issuing emergency passports, and for other travel related documents and notarial endorsements. Fees are determined under the Australian Passports (Application Fees) Act 2005 and the income is recognised on receipt of the fees and all income collected is returned to consolidated revenue. The nuclear safeguard charge income is the Uranium Producers Charge, under the Nuclear Safeguards (Producers of Uranium Ore Concentrates) Act 1993, for each kilogram of uranium ore concentrate produced in Australia with the income recognised on receipt of the charge and is all income returned to consolidated revenue. | ||
2020 | 2019 | |
$'000 | $'000 | |
Australia-Indonesia Partnership for Reconstruction and Development (AIPRD) loan interest | 12,999 | 12,697 |
Total loan interest | 12,999 | 12,697 |
Accounting Policy Accounting policies for loans are included in Note 4.1B: Receivables and loans. | ||
2020 | 2019 | |
$'000 | $'000 | |
NIA premiums | 12,951 | 11,823 |
NIA repayments of interest subsidies and recoveries | 22,931 | 23,690 |
Total EFA - NIA | 35,882 | 35,513 |
Accounting Policy Accounting policies for EFA are included in Note 4.1B: Receivables and loans. On 1 July 2019, the Export Finance Investment Corporation (Efic) changed it’s trading name to Export Finance Australia (EFA). | ||
2020 | 2019 | |
$'000 | $'000 | |
EFA dividend | 13,425 | 6,941 |
Competitive neutrality | 13,934 | 8,082 |
Total EFA dividend and competitive neutrality | 27,359 | 15,023 |
Accounting Policy Under section 61A of the Export Finance and Insurance Corporation Act 1991 (the Efic Act) the Minister may apply to EFA a debt neutrality charge in respect of short term insurance contracts entered into by EFA. These arrangements ensure EFA does not, through its Commonwealth ownership, have an unfair advantage over private sector financiers. | ||
2020 | 2019 | |
$'000 | $'000 | |
Return of prior year administered expenses | 37,216 | 19,259 |
Total return of prior year administered expenses | 37,216 | 19,259 |
Accounting Policy Return of prior year administered expenses relates to funds returned after finalisation or acquittal of an agreement or funding arrangement which were originally paid from prior year appropriations. These funds are treated as administered revenue in the year the funds are returned and are transferred back to consolidated revenue. | ||
2020 | 2019 | |
$'000 | $'000 | |
Defined benefit pension schemes - contributions | 5,461 | 4,406 |
Other interest | 311 | 171 |
Other revenue | 10 | 28 |
Total other revenue and gains | 5,782 | 4,605 |
Accounting Policy Defined benefit schemes Accounting policies for the defined benefit pension schemes - contributions are included in Note 7.6: Administered - Defined Benefit Pension Schemes. | ||
3. Departmental Financial Position
3.1 Financial Assets
2020 | 2019 | |
$'000 | $'000 | |
Cash on hand or on deposit | 92,667 | 92,821 |
Overseas property special account cash held by the entity | 1,331 | 2,293 |
Overseas property special account cash held in the OPA | 334,029 | 335,529 |
Total cash and cash equivalents | 428,027 | 430,643 |
Accounting policy Cash is recognised at its nominal amount. Cash and cash equivalents includes cash on hand, deposits on hand in bank accounts and special account cash held (excluding trust balances) in the OPA. | ||
Goods and services receivables | ||
Goods and services | 96,898 | 75,450 |
Other | 24,853 | 17,967 |
Total goods and services receivables | 121,751 | 93,417 |
Goods and services are associated with providing services for other Commonwealth agencies and contributions by employees in relation to expenses that are incurred by the Department. Refer to Note 3.3B: Other payables for more information relating to contract liabilities. | ||
Appropriations receivables | ||
Departmental - operating | 166,336 | 273,818 |
Departmental - capital | 83,029 | 116,122 |
Total appropriations receivable | 249,365 | 389,940 |
Other receivables | ||
Advances | 15,375 | 15,412 |
Statutory receivables | 4,360 | 4,208 |
Cash held by outsiders | 168 | 159 |
Other | 1,119 | 1,505 |
Total other receivables | 21,022 | 21,284 |
Total trade and other receivables (gross) | 392,138 | 504,641 |
Less impairment loss allowance | (294) | (99) |
Total trade and other receivables (net) | 391,844 | 504,542 |
Accounting policy Aside from cash, financial assets are all classified as receivables. Terms for receivables for goods and services are 30 days (2019: 30 days). Receivables Receivables have fixed or determinable payments and are not quoted in an active market. Receivables are initially measured at fair value and subsequently at amortised cost using the effective interest method less impairment. Receivables that are held for the purpose of collecting the contractual cash flows where the cash flows are solely payments of principal and interest that are not provided at below-market interest rates are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance. Under AASB 9 Financial Instruments, DFAT can classify its financial assets in the following categories: a) financial assets at fair value through profit or loss; b) financial assets at fair value through other comprehensive income; and c) financial assets measured at amortised cost. The classification depends on both DFAT's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when DFAT becomes a party to the contract and, as a consequence, has a legal right to receive cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date. Therefore, DFAT’s financial assets are measured, and carried, at amortised costs. Financial Assets at Amortised Cost Financial assets included in this category need to meet two criteria:
Appropriations Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when DFAT gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts. Impairment Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses (ECL). The simplified approach has been adopted in measuring the impairment loss allowance for trade and other receivables at an amount equal to lifetime ECL. | ||
3.2 Non-Financial Assets
Reconciliation of the opening and closing balances for 2020 | |||||
Land | Buildings | Plant and equipment | Computer software1 | Total | |
$'000 | $'000 | $'000 | $'000 | $'000 | |
As at 1 July 2019 | |||||
Gross book value | 1,973,538 | 1,666,641 | 342,898 | 233,899 | 4,216,976 |
Accumulated depreciation, amortisation and impairment | - | (147,795) | (38,659) | (109,185) | (295,639) |
Total as at 1 July 2019 | 1,973,538 | 1,518,846 | 304,239 | 124,714 | 3,921,337 |
Recognition of right of use asset on initial application of AASB 16 | - | 1,259,312 | 3,792 | - | 1,263,104 |
Adjusted total as at 1 July 2019 | 1,973,538 | 2,778,158 | 308,031 | 124,714 | 5,184,441 |
Additions: | |||||
Purchase | 3 | 101,955 | 62,491 | 25,805 | 190,254 |
Internally developed | - | 880 | 1,719 | 21,108 | 23,707 |
Right-of-use assets | - | 87,855 | 134 | - | 87,989 |
Revaluations and impairments recognised in other comprehensive income | 25,310 | 105,852 | 913 | - | 132,075 |
Write-offs and impairments on right-of-use assets recognised in net cost of services | - | (1,213) | - | - | (1,213) |
Assets held for sale2 | (9,787) | (3,228) | - | - | (13,015) |
Depreciation and amortisation expense | - | (83,888) | (69,662) | (31,647) | (185,197) |
Depreciation on right-of-use assets | - | (166,073) | (2,013) | - | (168,086) |
Other movements | |||||
Asset reclassification | - | 14,897 | (20,776) | 5,879 | - |
Disposals | - | (418) | (2,321) | (170) | (2,909) |
Total as at 30 June 2020 | 1,989,064 | 2,834,777 | 278,516 | 145,689 | 5,248,046 |
Net book value as of 30 June 2020 represented by: | |||||
Gross book value | 1,989,064 | 3,005,010 | 385,534 | 281,255 | 5,660,863 |
Accumulated depreciation, amortisation and impairment | - | -170,233 | -107,018 | -135,566 | -412,817 |
Total | 1,989,064 | 2,834,777 | 278,516 | 145,689 | 5,248,046 |
Carrying amount of right-of-use assets | - | 1,179,881 | 1,913 | - | 1,181,794 |
No indicators of impairment were identified for property, plant and equipment, and computer software. No land and building assets are to be sold within the next 12 months, other than those identified as assets held for sale in the Statement of Financial Position. Contractual commitments for the acquisition of property, plant, equipment and computer software assets DFAT has a number of contractual commitments in place for the purchase and / or development of buildings, leasehold improvements and computer software assets, aged as follows: | |||||
2020 | 2019 | |
$’000 | $’000 | |
Within 1 year | 88,451 | 39,759 |
Between 1 to 5 years | 85,992 | 10,803 |
More than 5 years | - | - |
Total commitments | 174,443 | 50,562 |
The majority of these commitments relate to contracts in place for the development, refurbishment and upgrade of properties in DFAT’s diplomatic network, and are managed through the Overseas Property Office. Commitments are GST / VAT inclusive where relevant. | ||
Reconciliation of the opening and closing balances for 2019 | |||||
Land | Buildings | Plant and equipment | Computer | Total | |
software1 | |||||
$’000 | $’000 | $’000 | $’000 | $’000 | |
As at 1 July 2018 | |||||
Gross book value | 1,821,170 | 1,638,843 | 334,015 | 218,703 | 4,012,731 |
Accumulated depreciation, amortisation and impairment | - | (125,743) | (53,120) | (98,569) | (277,432) |
Net book value 1 July 2018 | 1,821,170 | 1,513,100 | 280,895 | 120,134 | 3,735,299 |
Additions: | |||||
Purchase | 5,682 | 86,912 | 55,498 | 8,113 | 156,205 |
Internally developed | - | - | - | 23,378 | 23,378 |
Other | - | - | 1,278 | - | 1,278 |
Revaluations and impairments recognised in other comprehensive income | 167,664 | 45,902 | 12,280 | - | 225,846 |
Assets held for sale2 | (20,806) | (488) | - | - | (21,294) |
Depreciation and amortisation expense | - | (106,460) | -61,301 | (27,778) | (195,539) |
Other movements | |||||
Asset transfers | - | (19,425) | 18,003 | 1,422 | - |
Disposals | (172) | (695) | (2,414) | (555) | (3,836) |
Net book value 30 June 2019 | 1,973,538 | 1,518,846 | 304,239 | 124,714 | 3,921,337 |
Net book value as of 30 June 2019 represented by: | |||||
Gross book value | 1,973,538 | 1,666,641 | 342,898 | 233,899 | 4,216,976 |
Accumulated depreciation, amortisation and impairment | - | (147,795) | (38,659) | (109,185) | (295,639) |
Total | 1,973,538 | 1,518,846 | 304,239 | 124,714 | 3,921,337 |
No indicators of impairment were identified for property, plant and equipment, and computer software. No land and building assets are to be sold within the next 12 months, other than those identified as assets held for sale in the Statement of Financial Position. Accounting Policy Non-financial 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. Non-financial 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. Lease Right of Use (ROU) Assets Lease 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 as separate asset classes to the corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned. On initial adoption of AASB 16 DFAT has adjusted the ROU assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any ROU lease asset that shows indicators of impairment and an impairment loss is recognised against any ROU lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition. 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 (2019: $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 'make good' provisions in property leases taken up by DFAT where there exists an obligation to restore the property to its original condition on termination of the lease. These costs are included in the value of DFAT's leasehold improvements with a corresponding provision for the 'make good' disclosed in Note 3.5A: Other provisions. Depreciation Depreciable property, plant and equipment assets are written-down to their estimated residual values over their estimated useful lives to DFAT using, in all cases, the straight-line method of depreciation. Depreciation and amortisation 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 typical useful lives: | |||||
Asset Class | 2020 | 2019 |
|---|---|---|
Buildings | Based on remaining useful life | Based on remaining useful life |
Leasehold Improvements | Lesser of lease term or up to 15 years | Lesser of lease term or up to 15 years |
Plant and Equipment (other than Works of Art) | 3 to 25 years | 3 to 25 years |
Plant and Equipment (Works of Art) | 100 years | 100 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. Revaluations Following initial recognition at cost, property, plant and equipment (excluding ROU assets) are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure the carrying amount of assets did not differ materially from the assets' fair value as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets. The Commonwealth owned, non-Defence overseas property estate, comprising both land and buildings, and managed by OPO, is subject to a three-year rolling revaluation cycle in which each property is subject to a full revaluation once in the cycle. A desktop report is required where there has been material movement in the market in excess of 10% over the past 12 months, or when substantial works have been undertaken on an asset. The top 20 by value property assets receive a desktop update as a minimum each year, with remaining properties subject to a market review. The other tangible assets are subject to revaluation every three years by class based on the following cycle: | ||
Asset Class to be Revalued | |
Year 1 | Vehicles / Plant and Equipment / Furniture and Fittings / Office Equipment |
Year 2 | Works of Art / Leasehold Improvement |
Year 3 | IT Equipment / Special Assets |
DFAT has engaged CIVAS to undertake the revaluation of land and buildings and JLL to undertake the revaluation of other tangible 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 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. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the re-valued amount. Assets held overseas are valued in local currencies and translated into Australian dollars at the exchange rates current at revaluation date. 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. Impairment All assets were assessed for impairment at 30 June 2020. Where indications of impairment existed, the asset's recoverable amount was estimated and an impairment adjustment made if the asset's recoverable amount was less than its carrying amount. The recoverable amount of any 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 DFAT were deprived of the asset, its value in use is taken to be its depreciated replacement cost. Computer software DFAT's computer software comprises purchased and internally developed 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 life of DFAT’s software is 5 to 10 years (2019: 5 to 10 years). All software assets were assessed for indications of impairment as at 30 June 2020. Assets held for sale Non-current assets are classified as held for sale if the carrying amount is to be recovered principally through a sale transaction rather than through continuing use. On classification as held for sale, the asset is measured at the lower of its carrying amount and fair value less costs to sell. Any write down to fair value less costs to sell is recognised as an impairment loss. Assets which have been classified as held for sale are no longer subject to depreciation or amortisation. Accounting Judgements and Estimates Restrictions on Title Due to the diplomatic nature of the overseas property portfolio, some properties have restrictions on title. Restrictions on title vary depending on local Government rules and regulations, such as long term title that prohibits the Commonwealth of Australia from profiting from sale of land. Whilst the effect of restrictions on some titles can be quantified, there are others that cannot, such as those titles held in limited or unsophisticated markets. As part of the valuation process, consideration is given to the restrictions on title. Assets Under Construction Assets under construction (AUC) are recorded at acquisition cost. They include expenditure to date on various capital projects carried as AUC. AUC projects are reviewed annually for indicators of impairment and all tangible AUC older than 12 months prior to the reporting date are externally revalued to fair value. Computer software AUC is reviewed through an internal monthly process. Prior to rollout into service, the accumulated AUC balance is reviewed to ensure accurate capitalisation of built or purchased assets. | |
2020 | 2019 | |
$'000 | $'000 | |
Inventories held for sale | ||
Finished goods | 42,430 | 40,228 |
Total inventories | 42,430 | 40,228 |
During 2020, $40.608m of inventory held for sale was recognised as an expense (2019: $48.415m) and nil inventory was written off in the current financial year (2019: $0.138m). Accounting policy Inventories held for sale are valued at cost. Costs incurred in bringing each item of inventory to its present location and condition include the cost of direct materials and labour plus attributable costs that can be allocated on a reasonable basis. | ||
3.3 Payables
2020 | 2019 | |
$'000 | $'000 | |
Trade creditors and accruals | 79,152 | 97,346 |
Operating lease rentals1 | - | 26,339 |
Other | 10,691 | 5,156 |
Total suppliers | 89,843 | 128,841 |
Settlement terms for trade creditors were within 20 days (2019: 30 days).
| ||
2020 | 2019 | |
$'000 | $'000 | |
Wages and salaries | 11,831 | 7,896 |
Superannuation | 12,238 | 6,743 |
Separations and redundancies | 121 | 151 |
Prepayments received / unearned income | 37,657 | 35,401 |
Lease incentive1 | - | 8,897 |
Other | 596 | 659 |
Total other payables | 62,443 | 59,747 |
Accounting policy Payables are classified as other financial liabilities and are recognised and measured at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced). The liability for wages and salaries and superannuation recognised as at 30 June 2020 represents outstanding amounts and contributions for the final payroll fortnight of the financial year. Prepayments received relate to revenue recognised when control has been transferred to the buyer. Prepayments received are $6.6m (2019: $4.4m). | ||
3.4 Leases
2020 | 2019 | |
$'000 | $'000 | |
Lease Liabilities1 | ||
Buildings | 1,166,047 | - |
Total leases | 1,166,047 | - |
| ||
3.5 Provisions
Provision for restoration obligations | 29,528 | 25,385 |
Total other provisions | 29,528 | 25,385 |
Provision for restoration | ||
As at 1 July 2019 | 25,385 | 17,810 |
Additional provisions made | 3,052 | 2,726 |
Amounts used | - | (25) |
Amounts reversed | (39) | (1,265) |
Revaluation of Provision | 766 | 5,329 |
Changes in Foreign Exchange Rates | 85 | 428 |
Unwinding of discount | 279 | 382 |
Total as at 30 June 2020 | 29,528 | 25,385 |
DFAT currently has 69 agreements (2019: 63) for the leasing of premises where DFAT has raised a provision to restore the premises to their original condition at the conclusion of the lease. The provision reflects the present value of these obligations. Accounting Policy For a number of property leases, DFAT has obligations to restore to their original condition or makegood leasehold improvements. These are assessed on a site-by-site basis in line with the relevant clauses of the underlying lease, with fair value calculated based on estimated costs per square metre at the time the makegood obligation falls due, discounted to present value. DFAT engages an independent expert to assist in the valuation of the estimated costs to makegood. The total provision is reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the adjustment relates to the revaluation of the provision and there is sufficient related asset revaluation surplus for the associated leasehold improvement assets, the adjustment is recorded against the asset revaluation reserve. All other adjustments are recognised in the Statement of Comprehensive Income. | ||
4. Assets and Liabilities Administered on Behalf of Government
4.1 Administered - Financial Assets
2020 | 2019 | |
$'000 | $'000 | |
Cash on hand or on deposit | 5,001 | 5,012 |
Special account cash held by the entity | - | 5 |
Cash in special accounts held in the OPA | 18,137 | 36,779 |
Total cash and cash equivalents | 23,138 | 41,796 |
The closing balance of cash in special accounts does not include amounts held in trust of $4.981m (2019: $3.439m). See Note 5.2A: Special accounts and Note 5.2B: Assets held in trust for more information. | ||
2020 | 2019 | |
$'000 | $'000 | |
Receivables | ||
Goods and services receivable | 28 | 29 |
Scholarship debts | 1,966 | 1,748 |
Statutory receivables | 17,291 | 13,438 |
Net position of EFA - NIA | 12,749 | 15,120 |
Other | 10,241 | 1,951 |
Total receivables | 42,275 | 32,286 |
Loans | ||
Concessional loan receivable - AIPRD | 162,337 | 159,088 |
Other - travellers emergency loans | 2,495 | 1,194 |
Total loans | 164,832 | 160,282 |
Total receivables and loans (gross) | 207,107 | 192,568 |
Less impairment allowance | ||
Advances and loans - travellers emergency loans | (712) | (651) |
Other receivables - external parties | (1,990) | (1,771) |
Total impairment allowance | (2,702) | (2,422) |
Total receivables (net) | 204,405 | 190,146 |
Receivables and loans (net) are expected to be recovered | ||
No more than 12 months | 42,039 | 30,412 |
More than 12 months | 162,366 | 159,734 |
Total receivables and loans (net) | 204,405 | 190,146 |
The impairment loss allowance is based on an assessment of debts outstanding and is predominantly aged more than 90 days. | ||
Reconciliation of the impairment loss allowance | |||
Movements in relation to 2020 | |||
Advances | Receivables - external parties | Total | |
and loans | |||
$'000 | $'000 | $'000 | |
Opening balance | 651 | 1,771 | 2,422 |
Amounts impaired | 61 | 220 | 281 |
Amounts recovered and reversed | - | (1) | (1) |
Closing balance | 712 | 1,990 | 2,702 |
Movements in relation to 2019 | |||
Advances | Receivables - external parties | Total | |
and loans | |||
$'000 | $'000 | $'000 | |
Opening balance | 729 | 1,592 | 2,321 |
Amounts impaired | - | 182 | 182 |
Amounts recovered and reversed | (78) | (3) | (81) |
Closing balance | 651 | 1,771 | 2,422 |
Accounting Policy Receivables and loans Consistent with DFAT’s outcomes, long-term loans are provided to other entities at concessional rates. On DFAT providing the loan funds, differences between the nominal value of the loan subscription and the fair value of the associated assets are recorded in the administered schedule of comprehensive income as an expense administered on behalf of Government. Where loans and receivables are not subject to concessional treatment, they are carried at amortised cost using the effective interest method. Gains and losses due to impairment, de-recognition and amortisation are recognised through profit or loss. EFA – NIA Part 5 of the Efic Act provides for the Minister for Trade, Tourism and Investment to give an approval or direction to EFA to undertake any transaction that the Minister considers is in the national interest. Such transactions may relate to a class of business which EFA is not authorised to undertake, or involve terms and conditions EFA would not accept in the normal course of business on its Commercial Account. EFA manages these transactions on the NIA. For these transactions, the credit risk is borne by the Government and the funding risk is borne by EFA on the Commercial Account. Accordingly, premium or other income arising from these transactions are paid by EFA to the Government. EFA recovers from the Government the costs of administration and any losses incurred in respect of such business. Loans on the NIA are funded from the EFA Commercial Account at fair value. The amount disclosed above reflects the Commonwealth’s exposure on business undertaken on the NIA. It reflects the net amount of: a) Assets in the form of loans to and rescheduled credit insurance debts owing by foreign governments, commitment fees on loans received by EFA but not yet paid to the Commonwealth and bond premiums receivable from exports; and, b) Liabilities relating to the reimbursement to EFA for debt forgiveness on loans, provisions for unearned income on loan premiums, accrued expenses including EFA administration fees and other creditors. | |||
2020 | 2019 | |
$'000 | $'000 | |
Non-monetary IDA and ADF Subscriptions - fair value through OCI | 2,556,415 | 2,445,947 |
EFA - Commercial Account | 537,045 | 539,300 |
Tourism Australia | 62,247 | 20,991 |
Total investments | 3,155,707 | 3,006,238 |
Accounting Policy Administered investments are measured at their fair value through other comprehensive income as at 30 June 2020. Administered investments in subsidiaries, joint ventures and associates are not consolidated because their consolidation is relevant only at the whole-of-Government level. Financial instruments are recognised on a trade date basis. Non-monetary International Development Association (IDA) and Asian Development Fund (ADF) Subscriptions The Australian Government holds these investments long-term for policy reasons, with the issuers being partner foreign governments and multilateral aid organisations including the IDA and the ADF. The investment represents subscription-based membership rights held by the Australian Government in accordance with the articles of association for the IDA and the ADF. The subscriptions to the IDA and the ADF are classified as equity investments and have been reclassified at fair value through other comprehensive income under AASB 9: Financial Instruments. There is no intention to trade these investments, as there is no observable market value for them. DFAT, based on independent expert valuation advice, values the investment on a discounted cash flow basis. The basis assumes the redemption of the Commonwealth’s pro-rata share of the outstanding loan principal for each fund. The redemption basis is consistent with the withdrawal provisions of the articles of association with the IDA and the ADF. The discount rate used to equate the future cash flows to a present value reflects the risk adjusted rate of return demanded by a hypothetical investor. The discount rate range uses the “build up method” based on the following components: risk free rate (20 year US Government bond rate), currency risk premium, sovereign risk premium and liquidity risk premium. Changes in fair value are recognised directly in the administered reconciliation schedule. Foreign currency movements and impairment losses and reversals are recorded in the administered schedule of comprehensive income. EFA – Commercial Account EFA's principal activity is the provision of competitive finance and insurance services to Australian exporters and Australian companies investing in new projects overseas. The Australian Government guarantees to EFA’s creditors the payment of monies payable by EFA on the Commercial Account. The Minister for Trade, Tourism and Investment has the powers to determine and instruct EFA to pay a dividend in accordance with section 55(1) of the Efic Act. Fair value has been taken to be the Australian Government's proportional interest in the net assets of EFA as at the end of the reporting period. Tourism Australia Tourism Australia is the Australian Government agency responsible for attracting international visitors to Australia, both for leisure and business events. DFAT administers Tourism Australia on behalf of the Government for oversight and management purposes and to improve linkages internationally. Funding appropriated to DFAT for Tourism Australia is disclosed as Payments to corporate Commonwealth entities in the Administered Schedule of Comprehensive Income. Fair value has been taken to be the Australian Government's proportional interest in the net assets of Tourism Australia as at the end of the reporting period. | ||
4.2 Administered - Non Financial Assets
2020 | 2019 | |
$’000 | $’000 | |
As at 1 July | ||
Gross book value | 12,675 | 12,218 |
Accumulated depreciation, amortisation & impairment | (10,000) | (9,172) |
Net book value 1 July | 2,675 | 3,046 |
Additions | ||
Internally developed | 469 | 457 |
Depreciation & amortisation expenses | (914) | (828) |
Net book value 30 June | 2,230 | 2,675 |
Net book value as of 30 June represented by | ||
Gross book value | 13,144 | 12,675 |
Accumulated depreciation, amortisation & impairment | (10,914) | (10,000) |
Net book value 30 June | 2,230 | 2,675 |
No indicators of impairment were identified for computer software in 2020. In 2019, plant and equipment was fully depreciated, no further purchases have been made. Accounting Policy Accounting policies are included in Note 3.2: Non-Financial Assets. | ||
4.3 Administered - Payables
2020 | 2019 | |
$'000 | $'000 | |
Multilateral grants payable - fair value through profit or loss | 1,058,130 | 930,179 |
Total grants | 1,058,130 | 930,179 |
2020 | 2019 | |
$'000 | $'000 | |
Multilateral contributions - fair value through profit or loss | 664,311 | 494,521 |
International development assistance | 144,402 | 136,599 |
Total other payables | 808,713 | 631,120 |
Accounting Policy Financial liabilities are classified either at fair value through profit or loss, or as other financial liabilities. Financial liabilities are recognised and derecognised upon ‘Trade Date’. Financial liabilities at fair value through profit or loss include multilateral grants payable and multilateral contributions payable. Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. Other financial liabilities include trade creditors and accruals and 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 yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. | ||
5. Funding
5.1 Appropriations
Annual Appropriations for 2020 | |||||
Annual | Section 74 | Total | Appropriation applied in 2020 (current | Variance1 | |
Appropriation | PGPA Act | appropriation | and prior years) | ||
$'000 | $'000 | $'000 | $'000 | $'000 | |
Departmental2 | |||||
Ordinary annual services | 1,510,017 | 129,978 | 1,639,995 | (1,710,618) | (70,623) |
Capital budget3 | 60,170 | - | 60,170 | (60,170) | - |
Equity | 43,546 | - | 43,546 | (76,640) | (33,094) |
Total departmental | 1,613,733 | 129,978 | 1,743,711 | (1,847,428) | (103,717) |
Administered | |||||
Ordinary annual services | |||||
Capital budget3 | 528 | - | 528 | (457) | 71 |
Administered items4 | 3,971,208 | - | 3,971,208 | (3,970,677) | 531 |
Payments to corporate Commonwealth entities | 139,534 | - | 139,534 | (139,534) | - |
Other services | |||||
Administered assets and liabilities | 605,072 | - | 605,072 | - | 605,072 |
Total administered | 4,716,342 | - | 4,716,342 | (4,110,668) | 605,674 |
| |||||
Annual Appropriations for 2019 | |||||
Annual | Section 74 | Total | Appropriation applied in 2019 (current and prior years) | Variance2 | |
Appropriation1 | PGPA Act | appropriation | |||
$'000 | $'000 | $'000 | $'000 | $'000 | |
Departmental | |||||
Ordinary annual services | 1,416,142 | 114,931 | 1,531,073 | (1,598,742) | (67,669) |
Capital budget3 | 69,765 | - | 69,765 | (60,127) | 9,638 |
Equity | 104,137 | - | 104,137 | (43,998) | 60,139 |
Total departmental | 1,590,044 | 114,931 | 1,704,975 | (1,702,867) | 2,108 |
Administered | |||||
Ordinary annual services | |||||
Capital budget3 | 504 | - | 504 | (43) | 461 |
Administered items4 | 3,844,822 | - | 3,844,822 | (4,277,711) | (432,889) |
Payments to corporate Commonwealth entities | 135,141 | - | 135,141 | (135,141) | - |
Other services | |||||
Administered assets and liabilities | - | - | - | - | - |
Total administered | 3,980,467 | - | 3,980,467 | (4,412,895) | (432,428) |
| |||||
2020 | 2019 | |
$'000 | $'000 | |
Departmental | ||
Appropriation Act (No. 1) 2016-171 | - | 28,170 |
Appropriation Act (No. 1) 2016-171 | 4,384 | 4,384 |
Appropriation Act (No. 2) 2017-183 | 5,829 | 20,830 |
Appropriation Act (No. 1) 2018-19 | - | 250,701 |
Appropriation Act (No. 1) 2018-19 - DCB4 | 9,638 | 9,638 |
Appropriation Act (No. 2) 2018-195 | 3,016 | 22,182 |
Appropriation Act (No. 4) 2018-19 | 39,483 | 81,955 |
Appropriation Act (No. 1) 2018-19 - Cash at bank and on hand | - | 92,821 |
Appropriation Act (No. 1) 2019-206 | 180,079 | - |
Appropriation Act (No. 2) 2019-20 | 25,401 | - |
Supply Act (No. 2) 2019-20 | 18,145 | - |
Appropriation Act (No. 1) 2019-20 - Cash at bank and on hand | 92,667 | - |
Total departmental | 378,642 | 510,681 |
DFAT has in place a number of no-win / no-loss funding agreements due to the complex and variable environment the department operates in overseas. The difference between the balance of departmental appropriation receivable disclosed in Note 3.1B: Trade and other receivables and the above balance on unspent annual appropriations is due to these agreements and cash at bank and on hand. Adjustments relating to the no-win / no-loss agreements are recognised as formal additions or reductions in DFAT's accounts. | ||
2020 | 2019 | |
$'000 | $'000 | |
Administered | ||
Supply Act (No. 1) 2016-171 | - | 155,860 |
Appropriation Act (No. 1) 2016-171 | - | 104,775 |
Appropriation Act (No. 1) 2016-17 - ACB1 | - | 89 |
Appropriation Act (No. 2) 2016-171 | - | 581,531 |
Appropriation Act (No. 1) 2017-182 | 125,108 | 151,563 |
Appropriation Act (No. 1) 2017-18 - ACB | 95 | 95 |
Appropriation Act (No. 1) 2018-19 | 73,156 | 224,200 |
Appropriation Act (No. 1) 2018-19 - ACB | 461 | 461 |
Appropriation Act (No. 3) 2018-19 | - | 472 |
Appropriation Act (No. 1) 2018-19 - Cash at Bank and on hand | - | 5,012 |
Supply Act (No. 1) 2019-20 | 202 | - |
Appropriation Act (No. 1) 2019-2020 | 167,529 | - |
Appropriation Act (No. 1) 2019-2020 - ACB | 71 | - |
Appropriation Act (No. 1) 2019-20 - Cash at Bank and on hand | 5,001 | - |
Supply Act (No. 2) 2019-20 | 252,114 | - |
Appropriation Act (No. 2) 2019-20 | 352,958 | - |
Total administered | 976,695 | 1,224,058 |
| ||
Appropriation applied | ||||
2020 | 2019 | |||
Authority | Type | Purpose | $'000 | $'000 |
Export Finance and Insurance Corporation (Efic) Act 1991 s.54(10), Administered | Unlimited Amount | For the payment by the Commonwealth to EFA of amounts equal to the amount of capital determined by the EFA Board as necessary to overcome the inadequacies, in the moneys or other assets of EFA to meet the expected liabilities, losses or claims against EFA. | - | - |
Public Governance, Performance and Accountability Act 2013 s77, Administered1 | Refund | To provide an appropriation where an Act or other law requires or permits the repayment of an amount received by the Commonwealth and apart from this section there is no specific appropriation for the repayment. | 1,861 | 1,054 |
Total special appropriation applied | 1,861 | 1,054 | ||
Compliance with statutory conditions for payments from the consolidated revenue fund Section 83 of the Constitution provides that no amount may be paid out of the consolidated revenue fund except under an appropriation made by law. An internal reconciliation process identified 36 drawdowns totalling $914,315.87 from the special appropriation in error, which breached section 83 of the Constitution in the 2019-20 financial year. A valid appropriation did exist at the time of payment and these funds should have been paid from the Administered Appropriation Act (No. 1) 2019-2020 and will be returned to consolidated revenue during the 2020-2021 financial year. | ||||
5.2 Special Accounts
Overseas property special account1 (Departmental) | Services for other entities and trust moneys - DFAT special account2 (Administered) | DFAT SOETM Special Account 20193 (Administered) | ||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
$'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
Balance brought forward from previous period | 337,822 | 357,325 | 5,202 | 9,403 | - | - |
Increases | 185,807 | 129,085 | 18,163 | 18,918 | 23,554 | - |
Total increases | 185,807 | 129,085 | 18,163 | 18,918 | 23,554 | - |
Available for payments | 523,629 | 486,410 | 23,365 | 28,321 | 23,554 | - |
Decreases | ||||||
Administered | - | - | (23,365) | (23,119) | (17,935) | - |
Departmental | (188,269) | (148,588) | - | - | - | - |
Total decreases | (188,269) | (148,588) | (23,365) | (23,119) | (17,935) | - |
Total balance carried to the next period | 335,360 | 337,822 | - | 5,202 | 5,619 | - |
Balance represented by: | ||||||
Cash held in entity bank accounts | 1,331 | 2,293 | - | - | - | - |
Cash held in the Official Public Account | 334,029 | 335,529 | - | 5,202 | 5,619 | - |
Total balance carried to the next period | 335,360 | 337,822 | - | 5,202 | 5,619 | - |
Consular services special account4 (Administered) | EXPO 2020 Dubai5 (Administered) | |||
2020 | 2019 | 2020 | 2019 | |
$'000 | $'000 | $'000 | $'000 | |
Balance brought forward from previous period | 47 | 50 | 34,974 | - |
Increases | 240 | 99 | 1,044 | 41,756 |
Total increases | 240 | 99 | 1,044 | 41,756 |
Available for payments | 287 | 149 | 36,018 | 41,756 |
Decreases | ||||
Administered | (250) | (102) | (18,504) | (6,782) |
Departmental | - | - | - | - |
Total decreases | (250) | (102) | (18,504) | (6,782) |
Total balance carried to the next period | 37 | 47 | 17,514 | 34,974 |
Balance represented by: | ||||
Cash held in entity bank accounts | - | - | - | 5 |
Cash held in the Official Public Account | 37 | 47 | 17,514 | 34,969 |
Total balance carried to the next period | 37 | 47 | 17,514 | 34,974 |
1. Appropriation: Public Governance, Performance and Accountability Act 2013 section 78 Establishing Instrument: PGPA Act Determination (Establishment of Overseas Property Special Account 2017) Purpose: a) acquire, lease, construct, manage, operate, repair, maintain, divest, finance, identify or advise on, and undertake any other activities in relation to, the real property of the Commonwealth outside Australia b) repay to an original payer amounts credited to the special account or to the former special account, after any necessary payments made for the purposes mentioned in paragraph (a) c) carry out activities that are incidental to a purpose mentioned in paragraph (a) d) reduce the balance of the Special Account (and, therefore, the available appropriation for the Account) without making a real or notional payment, including to give effect to the remittance of amounts to the Official Public Account as agreed between the Finance Minister and the responsible minister e) repay amounts where an Act or other law requires or permits the repayment of an amount received. 2. Appropriation: Public Governance, Performance and Accountability Act 2013 section 78 Establishing Instrument: Financial Management and Accountability (Special Accounts) Determination 2009/25 Purpose: a) disburse amounts held in trust or otherwise for the benefit of a person other than the Commonwealth b) disburse amounts in connection with services performed on behalf of other governments and bodies that are corporate Commonwealth entities under the PGPA Act c) repay amounts where an Act or other law requires or permits the repayment of an amount received d) reduce the balance of the Special Account (and, therefore, the available appropriation for the Account) without making a real or notional payment. This special account was sunsetted on 18 September 2019 and replaced with the below special account from this date. 3. Appropriation: Public Governance, Performance and Accountability Act 2013 section 78 Establishing Instrument: PGPA Act Determination (DFAT SOETM Special Account 2019) Purpose: a) to disburse an amount held on trust or otherwise for the benefit of a person other than the Commonwealth; b) to disburse an amount in connection with services performed for or on behalf of other governments and bodies, including Commonwealth entities; c) to disburse an amount in connection with joint activities performed for, on behalf of, or together with, another Commonwealth entity, Commonwealth company, another government, organisation or person; d) to disburse an amount in connection with an agreement between the Commonwealth and another government; e) to repay an amount where a court order, Act or other law requires or permits the repayment of an amount received; and f) to reduce the balance of the special account (and, therefore, the available appropriation for the special account) without making a real or notional payment. The SOETM Special Account includes the balance of funds held in trust for overseas governments via delegated co-operation agreements and for private individuals for amounts being transferred back to Australia in accordance with established policy. These amounts are $4,942,286.42 and $2,430.78 respectively and have, therefore, been excluded from presentation in the Administered Financial Statements. 4. Appropriation: Public Governance, Performance and Accountability Act 2013 section 78 Establishing Instrument: PGPA Act (Consular Services Special Account 2015 – Establishment) Determination 2015/05 Purpose: a) providing assistance to Australian citizens and permanent residents overseas: i. in circumstances of urgency ii. when commercial money transfer services are unavailable or inappropriate b) to repay to an original payer amounts credited to the Special Account and residual after any necessary payments have been made under paragraph (a) c) activities that are incidental to a purpose mentioned in paragraphs (a) or (b) d) to reduce the balance of the Special Account (and, therefore, the available appropriation for that Account) without making a real or notional payment e) to repay amounts where an Act or other law requires or permits the repayment of an amount received. The entire balance of the Consular Special Account is held in trust. 5. Appropriation: Public Governance, Performance and Accountability Act 2013 section 78 Establishing Instrument: PGPA Act Determination (Expo 2020 Dubai Special Account). Purpose: a) to undertake activities in relation to the Commonwealth’s participation at Expo 2020, including, but not limited to: i. acquiring, leasing, hiring, constructing, managing, operating, repairing, maintaining, identifying or advising on assets; ii. costs related to staff and contractors to carry out activities listed in clause (a)i above, and; iii. activities that are incidental to those listed in clause (a)i above. b) to disburse an amount in connection with an agreement between the Commonwealth and another government in relation to the Expo 2020; c) to repay an amount where an Act, other law, or court order requires or permits the repayment of an amount credited to the special account; d) to reduce the balance of the special account (and, therefore, the available appropriation for the special account) without making a real or notional payment. | ||||
2020 | 2019 | |
$'000 | $'000 | |
As at 1 July | 3,439 | 7,866 |
Receipts | 24,436 | 14,403 |
Payments | (22,894) | (18,830) |
Total as at 30 June | 4,981 | 3,439 |
Total assets held in trust | 4,981 | 3,439 |
Accounting policy All trust funds are held as cash within special accounts in OPA for the benefit of third parties. The SOETM Special Account includes the balance of funds held in trust for overseas governments via delegated co-operation agreements and for private individuals for amounts being transferred back to Australia in accordance with established policy. Consular trust funds are held to provide assistance to Australian citizens and permanent residents overseas in circumstances of urgency, or when commercial money transfer services are unavailable or inappropriate. | ||
6. People and Relationships
6.1 Employee Provisions
2020 | 2019 | |
$'000 | $'000 | |
Leave | 204,795 | 184,169 |
Separations and redundancies | 22,511 | 21,687 |
Superannuation | 17,716 | 16,060 |
Other employee provisions | 33,719 | 52,165 |
Total employee provisions | 278,741 | 274,081 |
Accounting policy Liabilities for short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts. Other long-term employee benefit liabilities are measured as the net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly. Leave The liability for employee benefits includes provision for annual leave and long service 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 DFAT’s employer superannuation contribution rates and other employment on-costs, to the extent that the leave is likely to be taken during service rather than paid out on separation. The liability for long service leave has been determined with reference to the work of an actuary as at 31 October 2019. The estimate of the present value of the liability takes into account attrition rates, pay increases through promotion and inflation. DFAT engages an actuary every three years unless it is assessed that there is a material movement in DFAT’s staff profile. Separation and Redundancy In some countries, locally engaged staff employed by DFAT at overseas posts are entitled to separation benefits under local labour laws. DFAT provides for these separation benefits, and they have been classified as an employee benefit. DFAT recognises a provision for redundancy when a decision by management has been made and affected employees have been informed that DFAT will carry out those terminations of employment. Superannuation The Australian-based staff of DFAT are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the Public Sector Superannuation accumulation plan (PSSap), or other superannuation schemes. The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap and the other superannuation schemes are defined contribution schemes. The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes. DFAT makes employer contributions to the employee superannuation schemes at rates determined by the Government. For defined benefit scheme employer contribution rates are determined by an actuary to be sufficient to meet the current cost to the Government. DFAT accounts for these as if they were contributions to defined contributions plans. Where required, DFAT makes superannuation contributions for locally engaged staff overseas to comply with local labour laws. Australian based staff who are engaged on a temporary basis and locally engaged staff overseas who are considered to be Australian residents for taxation purposes have compulsory employer superannuation contributions made on their behalf by DFAT. | ||
2020 | 2019 | |
$'000 | $'000 | |
Leave | 5,686 | 4,832 |
Superannuation | 428 | 353 |
Separations and redundancies | 4,947 | 4,145 |
Defined benefit pension schemes | 82,653 | 77,613 |
Total administered employee provisions | 93,714 | 86,943 |
Accounting Policy DFAT administers defined benefit pension schemes for some locally engaged staff in Washington, Ottawa, London, Port Louis and New Delhi on behalf of the Australian Government. DFAT recognises an administered liability for the present values of the Government's expected future payments arising from the unfunded components of the Washington, Ottawa, London and Port Louis Pension Schemes and the New Delhi Gratuity Scheme. Increases in the accrued benefits liability, pursuant to regular estimates of the liability taking account of actuarial reviews, are recognised as an expense and classified as employee superannuation expense. Re-measurement of the net defined benefit obligation is recognised in other comprehensive income as outlined in AASB 119 Employee Benefits. DFAT engages actuaries to estimate the unfunded provisions and expected future cash flows as at the end of the reporting period each year. More details on the defined benefit pension schemes are included in Note 7.6: Administered - Defined Benefit Pension Schemes. | ||
6.2 Key Management Personnel Remuneration
DFAT’s key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the department. DFAT has determined the key management personnel to be the Portfolio and Assisting Ministers, the Secretary, Deputy Secretaries, Chief People Officer, Chief Risk Officers and Chief Finance Officer. Key management personnel remuneration is reported in the table below:
2020 | 2019 | |
$'000 | $'000 | |
Short-term employee benefits | 3,804 | 3,517 |
Post-employment benefits | 622 | 526 |
Other long-term employee benefits | 154 | 75 |
Total key management personnel remuneration expenses1 | 4,580 | 4,118 |
The total number of key management personnel that are included in the above table are 12 (2019: 12).
| ||
6.3 Related Property Disclosures
Related party relationships:
DFAT is an Australian Government controlled entity. DFAT’s related parties are key management personnel including the DFAT Portfolio and Assisting Ministers, and other Australian Government entities.
Transactions with related parties:
Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens.
Transactions with related parties of DFAT have occurred within normal customer or supplier relationships on terms and conditions no more favourable than those which it is reasonable to expect DFAT would have entered into on an arm's-length basis. These transactions have not been separately disclosed in this note.
Giving consideration to relationships with related entities, and transactions entered into during the reporting period by DFAT, it has been determined that there are no related party transactions (2019: nil) to be separately disclosed.
7. Managing Uncertainties
7.1 Contingent Assets and Liabilities
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 reported when settlement is probable but not virtually certain and contingent liabilities are disclosed when the probability of settlement is greater than remote.
Guarantees | Claims for damages or costs | Total | ||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
$'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
Contingent liabilities | ||||||
Balance from previous period | 709 | 706 | 1,905 | 423 | 2,614 | 1,129 |
New contingent liabilities recognised | - | - | - | 1,467 | - | 1,467 |
Re-measurement | 1 | 3 | 32 | 15 | 33 | 18 |
Obligations expired | - | - | (1,467) | - | (1,467) | - |
Total contingent liabilities | 710 | 709 | 470 | 1,905 | 1,180 | 2,614 |
Net contingent (liabilities) | (710) | (709) | (470) | (1,905) | (1,180) | (2,614) |
Quantifiable Contingencies The above table reports contingent liabilities in respect of claims for damages / costs of $0.470m (2019: $1.905m). This amount represents an estimate of DFAT's liability based on precedent cases and on advice from DFAT's external legal service providers. The department is defending the claims. The above table also reports contingent liabilities in respect of financial guarantees made by the department of $0.710m (2019: $0.709m) Unquantifiable Contingencies At 30 June 2020, DFAT was involved in a number of litigation matters for alleged losses suffered by claimants. DFAT is defending these claims. It is not possible to estimate the amounts of any eventual payments that may be required in relation to these claims. | ||||||
DFAT has no administered contingent assets or liabilities (2019: nil). | ||
Quantifiable Administered Contingencies | ||
There are no quantifiable administered contingencies disclosed in the Administered Schedule of Assets and Liabilities (2019: nil). | ||
Unquantifiable Administered Contingencies | ||
At 30 June 2020, DFAT was involved in a number of matters relating to the recovery of funds. It is not possible to estimate the amounts of any eventual recoveries that may be received in relation to these matters. There are no unquantifiable administered liabilities. | ||
Significant Remote Administered Contingencies | ||
Under section 62 of the Efic Act, the Australian Government guarantees EFA’s creditors the due payment of all monies payable, or that may at any time become payable, by EFA on the Commercial Account and has a $1.2B (2019: $1.2B) callable capital facility available for this purpose. This guarantee has never been utilised. Details of remote contingencies are shown in the following table. | ||
2020 | 2019 | |
$'000 | $'000 | |
Contracts of insurance and guarantees | 462,100 | 678,500 |
Statement of financial position liabilities | 1,943,100 | 2,433,100 |
NIA contracts of insurance, guarantees and statement of position liabilities | 843,000 | 395,600 |
Total | 3,248,200 | 3,507,200 |
7.2 Fair Value Measurements
The following tables provide an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the statement of financial position do not apply the fair value hierarchy.
The different levels of the fair value hierarchy are defined below.
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.
- Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
- Level 3: Unobservable inputs for the asset or liability.
Accounting policy
An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from their fair value. DFAT's assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all non-financial assets is considered their highest and best use. DFAT's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. There were no transfers between levels 1 and 2 for recurring fair value measurements during the year.
The methods utilised to determine and substantiate the unobservable inputs are derived and evaluated as follows:
Buildings and Leasehold Improvements - Replacement Cost of New Assets and Contracted Prices
DFAT also controls assets situated in locations where construction cost evidence is limited. In determining the replacement cost for new assets measured using the depreciated replacement cost approach, reference has been made to the available building cost information. The valuer has used significant professional judgement in determining the fair value measurements of these assets.
Leasehold improvements - Physical depreciation and obsolescence
Assets that are not transacted with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the Depreciated Replacement Cost approach. Under the Depreciated Replacement Cost approach, the estimated cost to replace the asset is calculated and then adjusted to take into account physical depreciation and obsolescence. Physical depreciation and obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration. For all leasehold improvement assets, the consumed economic benefit / asset obsolescence deduction is determined based on the term of the associated lease.
Land and Buildings - Adjusted Market Transactions, Estimated Market Rental Values and Capitalisation Rates
DFAT also controls assets situated in locations where property markets experience relatively few transactions. In determining fair value of these assets, reference has been made to available sales evidence together with other relevant information related to local economic conditions and property market conditions. The valuer has used significant professional judgement in determining the fair value measurements of these assets.
Investment in the EFA Commercial Account and Tourism Australia
DFAT has determined that the reported net asset values represent fair value at the end of the reporting period.
Financial Liabilities at Fair Value Through Profit or Loss
Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.
Other Financial Liabilities
Other 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 yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
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 | Category (Level 1, 2 or 3) | Valuation Technique | Inputs Used | |
$'000 | $'000 | ||||
Non-financial assets: | |||||
Land | 1,082,222 | 1,483,830 | 2 | Market approach | AMT |
Land | 906,842 | 489,708 | 3 | Market approach | AMT, SPJ |
Buildings | 181,560 | 173,597 | 2 | Market approach | AMT |
Buildings | 9,672 | 3,235 | 3 | Market approach | AMT, SPJ |
Buildings | 301,890 | 570,765 | 2 | Income approach | MRT, CR |
Buildings | 17,600 | 17,997 | 3 | Income approach | MRT, CR, SPJ |
Buildings | 819,349 | 553,090 | 3 | Cost approach | RCN, CEB |
Leasehold Improvements | 324,825 | 200,162 | 3 | Cost approach | RCN, CEB |
Plant and Equipment | 199,152 | 203,384 | 2 | Market approach | AMT |
Plant and Equipment | 831 | 956 | 3 | Market approach | AMT, SPJ |
Plant and Equipment | 76,620 | 99,899 | 3 | Cost approach | RCN, CEB |
Assets held for sale - land | 9,346 | 19,141 | 2 | Market approach | AMT |
Assets held for sale - buildings | 3,082 | 477 | 2 | Market approach | AMT |
Total non-financial assets | 3,932,991 | 3,816,241 | |||
Total fair value measurement of assets in the statement of financial position | 3,932,991 | 3,816,241 | |||
Valuation Techniques:
Inputs Used:
The COVID-19 pandemic has had varied financial impacts on markets in which DFAT controls property, plant and equipment which has led to some uncertainty over values at year end. The external independent valuer has taken into account the impact of COVID-19 on the valuation inputs by using the best available market data, noting that in some cases the markets have experienced limited observable inputs. DFAT reclassified two land and two building assets in 2020 valued at $13.015m (2019: $19.618m) to assets held for sale. The land and building were measured at fair value less cost to sell at 30 June. | |||||
Non-Financial assets - 2020 | |||||
Land | Buildings | Leasehold improvements | Plant and equipment | Total | |
$'000 | $'000 | $'000 | $'000 | $'000 | |
Opening balance - 1 July 2019 | 489,708 | 574,322 | 200,162 | 100,855 | 1,365,047 |
Total gains / (losses) recognised in other comprehensive income1 | (14,918) | (3,796) | 49,490 | (23,785) | 6,991 |
Purchases | - | 6,557 | 75,591 | 1,074 | 83,222 |
Disposals | - | - | (418) | (693) | (1,111) |
Transfers into Level3 | 432,052 | 269,538 | - | - | 701,590 |
Transfers out of Level 33 | - | - | - | - | - |
Closing balance - 30 June 2020 | 906,842 | 846,621 | 324,825 | 77,451 | 2,155,739 |
Non-Financial assets - 2019 | |||||
Land | Buildings | Leasehold improvements | Plant and equipment | Total | |
$'000 | $'000 | $'000 | $'000 | $'000 | |
Opening balance - 1 July 2018 | 408,677 | 522,245 | 246,820 | 53,899 | 1,231,641 |
Total gains / (losses) recognised in other comprehensive income1 | 20,089 | 13,719 | (50,685) | (8,563) | (25,440) |
Purchases | 5,682 | 36,957 | 4,027 | 56,112 | 102,778 |
Disposals | - | - | - | (593) | (593) |
Transfers into Level 32 | 55,710 | 4,188 | - | - | 59,898 |
Transfers out of Level 33 | (450) | (2,787) | - | - | (3,237) |
Closing balance - 30 June 2019 | 489,708 | 574,322 | 200,162 | 100,855 | 1,365,047 |
| |||||
7.3 Financial Instruments
2020 | 2019 | ||
Notes | $'000 | $'000 | |
Financial assets | |||
Financial assets at amortised cost | |||
Cash and cash equivalents | 3.1A | 428,027 | 430,643 |
Goods and services receivables (gross) | 3.1B | 96,898 | 75,450 |
Cash held by outsiders | 3.1B | 168 | 159 |
Total financial assets at amortised cost | 525,093 | 506,252 | |
Total financial assets | 525,093 | 506,252 | |
Financial liabilities | |||
Financial liabilities measured at amortised cost | |||
Trade creditors and accruals | 3.3A | 79,152 | 97,347 |
Total financial liabilities measured at amortised cost | 79,152 | 97,347 | |
Total financial liabilities | 79,152 | 97,347 | |
Accounting policy Accounting policies for financial assets can be found in Note 3.1: Financial Assets. Accounting policies for financial liabilities can be found in Note 3.3: Payables. | |||
2020 | 2019 | ||
Note | $'000 | $'000 | |
Financial assets at amortised cost | |||
Foreign exchange (losses) / gains | (11,448) | 3,461 | |
Write-down of financial assets | 1.1C | (68) | (21) |
Movement in impairment loss allowance | 1.1C | (195) | 12 |
Net (losses) / gains on financial assets at amortised cost | (11,711) | 3,452 | |
Net (losses) / gains on financial assets | (11,711) | 3,452 | |
2020 | 2019 | |
$'000 | $'000 | |
Financial liabilities measured at amortised cost | ||
Foreign exchange gains | 1,986 | 1,682 |
Net gains on financial liabilities measured at amortised cost | 1,986 | 1,682 |
Net gains on financial liabilities | 1,986 | 1,682 |
7.4 Administered - Fair Value Measurements
The following tables provide an analysis of administered assets and liabilities measured at fair value. The remaining assets and liabilities disclosed in the Schedule of Administered Assets and Liabilities do not apply the fair value hierarchy. See Note 7.2: Fair Value Measurements for an overview of the different levels of the fair value hierarchy and techniques and inputs used to determine fair value.
Fair value measurements at the end of the reporting period using | For Levels 2 and 3 fair value measurements | ||||
2020 | 2019 | Level | Valuation | ||
$'000 | $'000 | (1, 2 or 3) | technique(s)1 | Inputs used2 | |
Financial assets: | |||||
Other investments: | |||||
Non-monetary IDA and ADF subscriptions at FVOCI | 2,556,415 | 2,445,947 | 3 | Discounted cash flow method | A discounted rate range using the “build up” method based on the following components: risk free rate (20 year US government bond rate), currency risk premium, sovereign risk premium and liquidity risk premium to discount the expected loan principal repayments of the loan portfolio of IDA and ADF. |
Investment in EFA's Commercial Account | 537,045 | 539,300 | 3 | Net asset position | Statement of financial position of EFA's Commercial Account. |
Tourism Australia | 62,247 | 20,991 | 3 | Net asset position | Statement of financial position of Tourism Australia. |
Total financial assets | 3,155,707 | 3,006,238 | |||
Total non-financial assets | - | - | |||
Total fair value measurements of assets in the administered schedule of assets and liabilities | 3,155,707 | 3,006,238 | |||
Financial liabilities: | |||||
Multilateral grants | 1,058,130 | 930,179 | 3 | Discounted cash flow method | A discounted rate range and a 10 year government bond rate is used to discount the expected payment schedules of each loan agreement. |
Multilateral contributions payable | 662,142 | 494,521 | 3 | Discounted cash flow method | A 10 year Australian government bond rate and a discounted rate range (comprising a risk free rate (20 year US government bond rate), and currency, sovereign and liquidity risk premium) is used to discount the expected payment schedules of each loan agreement. |
Total financial liabilities | 1,720,272 | 1,424,700 | |||
Total fair value measurements of liabilities in the administered schedule of assets and liabilities | 1,720,272 | 1,424,700 | |||
There have been no transfers between levels during the year (2019: nil). DFAT's policy for determining when transfers between levels are deemed to have occurred can be found in Note 7.2: Fair Value Measurements. Fair value measurements - highest and best use differs from current use for non-financial assets DFAT's Administered assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all controlled assets is considered their highest and best use.
The future economic benefits of DFAT's assets are not primarily dependent on their ability to generate cash flows. The determination of fair value and the use of observable and unobservable data is disclosed as part of Note 4.1C: Investments. | |||||
Recurring Level 3 fair value measurements - reconciliation for assets | ||
Financial assets | ||
Investments | Total | |
2020 | 2020 | |
$'000 | $'000 | |
Opening balance - 1 July 2019 | 3,006,238 | 3,006,238 |
Total gains recognised in other comprehensive income1 | 147,301 | 147,301 |
Closing balance - 30 June 2020 | 3,153,539 | 3,153,539 |
Changes in unrealised gains / (losses) recognised in net cost of services for assets held at the end of the reporting period3 | - | - |
Financial assets | ||
Investments | Total | |
2019 | 2019 | |
$'000 | $'000 | |
Opening balance - 1 July 2018 | 2,756,164 | 2,756,164 |
Total gains recognised in other comprehensive income1 | 250,074 | 250,074 |
Closing balance - 30 June 2019 | 3,006,238 | 3,006,238 |
Changes in unrealised gains / (losses) recognised in net cost of services for assets held at the end of the reporting period2 | - | - |
| ||
Recurring Level 3 fair value measurements - reconciliation for liabilities | |||
Financial Liabilities | |||
Multilateral grants | Multilateral | Total | |
contributions payable | |||
2020 | 2020 | 2020 | |
$'000 | $'000 | $'000 | |
Opening balance - 1 July 2019 | 930,179 | 494,521 | 1,424,700 |
Total gains recognised in net cost of services3 | 253,217 | 336,602 | 589,819 |
Settlements | (125,266) | (168,980) | (294,246) |
Closing balance - 30 June 2020 | 1,058,130 | 662,143 | 1,720,273 |
Changes in unrealised gains / (losses) recognised in net cost of services for assets held at the end of the reporting period2 | - | - | - |
Financial Liabilities | |||
Multilateral grants | Multilateral | Total | |
contributions payable | |||
2019 | 2019 | 2019 | |
$'000 | $'000 | $'000 | |
Opening balance - 1 July 2018 | 980,661 | 702,157 | 1,682,818 |
Total gains / (losses) recognised in net cost of services3 | 311,916 | (53,123) | 258,793 |
Settlements | (362,398) | (154,513) | (516,911) |
Closing balance - 30 June 2019 | 930,179 | 494,521 | 1,424,700 |
Changes in unrealised gains / (losses) recognised in net cost of services for assets held at the end of the reporting period2 | - | - | - |
| |||
7.5 Administered - Financial Instruments
2020 | 2019 | ||
Notes | $'000 | $'000 | |
Financial assets | |||
Financial assets at amortised cost | |||
Cash and cash equivalents | 4.1A | 23,138 | 41,796 |
Goods and services receivables | 4.1B | 4 | 6 |
Concessional loan receivable | 4.1B | 162,337 | 159,088 |
Net position of EFA - NIA | 4.1B | 12,749 | 15,120 |
Traveller Emergency Loans | 4.1B | 1,783 | 543 |
Total financial assets at amortised cost | 200,011 | 216,553 | |
Financial assets at fair value through other comprehensive income (FVOCI) | |||
Non-monetary equity instrument | 4.1C | 2,556,415 | 2,445,947 |
EFA - Commercial Account | 4.1C | 537,045 | 539,300 |
Tourism Australia | 4.1C | 62,247 | 20,991 |
Total financial assets at fair value through other comprehensive income | 3,155,707 | 3,006,238 | |
Total financial assets | 3,355,718 | 3,222,791 | |
Financial Liabilities | |||
Financial liabilities measured at amortised cost | |||
International development assistance | 4.3B | 144,402 | 136,599 |
Total financial liabilities measured at amortised cost | 144,402 | 136,599 | |
Financial liabilities at fair value through profit or loss | |||
Multilateral grants payable | 4.3A | 1,058,130 | 930,179 |
Multilateral contributions payable | 4.3B | 664,311 | 494,521 |
Total financial liabilities at fair value through profit or loss | 1,722,441 | 1,424,700 | |
Total financial liabilities | 1,866,843 | 1,561,299 | |
The carrying value of DFAT’s administered assets and liabilities has also been assessed as the fair value of the assets and liabilities. The process for determining fair value is regularly reviewed. The table at Note 7.4A: Fair value measurements, valuation techniques and inputs used provides an analysis of financial instruments that are measured at fair value, by valuation method. | |||
Financial assets at amortised cost | |||
Interest revenue | 13,310 | 12,868 | |
Impairment | 4.1B | (281) | (104) |
Write-off | 2.1D | (146) | (138) |
Dividend revenue | 2.2D | 13,425 | 6,941 |
Competitive neutrality revenue | 2.2D | 13,934 | 8,082 |
Net gain on financial assets at amortised cost | 40,243 | 27,649 | |
Financial assets at fair value through other comprehensive income | |||
Revaluation gain recognised in equity | 39,001 | 95,127 | |
Net gain on financial assets at fair value through other comprehensive income | 39,001 | 95,127 | |
Net gain on financial assets | 79,244 | 122,776 | |
2020 | 2019 | |
$'000 | $'000 | |
Financial liabilities measured at amortised cost | ||
Foreign exchange loss | (569) | (3,107) |
Net gain on financial liabilities measured at amortised cost | (569) | (3,107) |
Financial liabilities at fair value through profit or loss (held for trading) | ||
Loss on remeasuring at fair value through profit or loss | (341,228) | (137,056) |
Net (loss) on financial liabilities at fair value through profit or loss (held for trading) | (341,228) | (137,056) |
Net (loss) on financial liabilities | (341,797) | (140,163) |
Recognised in the DFAT Administered Accounts DFAT's senior executive has endorsed policies and procedures for debt management (including the provision of credit terms) to reduce the incidence of credit risk. Collateral is not required on any loan. Credit risk is the possibility that a debtor will not repay all or a portion of a loan or will not repay in a timely manner and will therefore cause a loss to DFAT. DFAT has exposure to concentrations of credit risk with regard to the ‘loan receivable’ and the ‘non-monetary available for sale debt instrument at fair value’. The maximum exposure DFAT has to credit risk at reporting date in relation to each class of recognised financial assets is presented in the following table excluding any collateral or credit enhancements DFAT has assessed the risk of default on payment and has allocated $2,702 (2019: $2,422) to an impairment allowance for doubtful debts account. DFAT has no collateral to mitigate against credit risk. | |||||
Maximum exposure to credit risk (excluding any collateral or credit enhancements) | |||||
2020 | 2019 | ||||
$'000 | $'000 | ||||
Credit quality of financial instruments not best representing maximum exposure to credit risk | |||||
Amortised cost | 187,114 | 176,708 | |||
Fair value through other comprehensive income | 3,155,707 | 3,006,238 | |||
Total credit quality of financial instruments not best representing maximum exposure to credit risk | 3,342,821 | 3,182,946 | |||
Credit quality of financial liabilities not best representing maximum exposure to credit risk | |||||
Amortised cost | 144,402 | 136,599 | |||
Through profit or loss | 1,722,441 | 1,424,700 | |||
Total credit quality of financial liabilities not best representing maximum exposure to credit risk | 1,866,843 | 1,561,299 | |||
Credit quality of financial assets not past due or individually determined as impaired | |||||
Not past due | Not past due | Past due or | Past due or | ||
or impaired | or impaired | impaired | impaired | ||
2020 | 2019 | 2020 | 2019 | ||
$'000 | $'000 | $'000 | $'000 | ||
Loans and receivables | 185,822 | 175,716 | 1,292 | 992 | |
Fair value through other comprehensive income | 3,155,707 | 3,006,238 | - | - | |
Total | 3,341,529 | 3,181,954 | 1,292 | 992 | |
The continued existence of DFAT in its present form and with its present programs is dependent on government policy and on continuing appropriations by Parliament for DFAT’s administration and programs. The probability of the Government encountering difficulties meeting its administered financial obligations is less than remote. | ||||||
Maturities for non-derivative financial liabilities 2020 | ||||||
On | Within 1 | Between 1 | Between 2 | More than | ||
demand | year | to 2 years | to 5 years | 5 years | Total | |
$'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
Financial liabilities measured at amortised cost | - | 144,402 | - | - | - | 144,402 |
Financial liabilities at fair value through profit or loss | - | 274,461 | 284,312 | 728,036 | 435,632 | 1,722,441 |
Total | - | 418,863 | 284,312 | 728,036 | 435,632 | 1,866,843 |
Maturities for non-derivative financial liabilities 2019 | ||||||
On | Within 1 | Between 1 to | Between 2 to | More than | ||
demand | year | 2 years | 5 years | 5 years | Total | |
$'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
Financial liabilities measured at amortised cost | - | 136,599 | - | - | - | 136,599 |
Financial liabilities at fair value through profit or loss | - | 204,394 | 307,539 | 683,465 | 229,302 | 1,424,700 |
Total | - | 340,993 | 307,539 | 683,465 | 229,302 | 1,561,299 |
DFAT had no derivative financial liabilities in both the current and prior financial year. | ||||||
Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises the following types of risk, either alone or in combination: interest rate risk, sovereign risk and liquidity risk (for the purposes of discounting the future value of the non-monetary available-for-sale debt instrument); currency risk (for the purposes of converting to Australian dollars the discounted United States dollar value of the non-monetary available-for-sale debt instrument); and the 10-year government bond rate for the purposes of discounting future liabilities relating to multilateral loan and grant commitments. The following sensitivity analysis discloses the effect that a reasonable possible change in each risk variable, either alone, or in total, would have on DFAT’s administered income and expenses. The following table illustrates the effect on DFAT's administered net income less expenses and equity as at 30 June 2020 from 8.41% (2019: 8.70%) increase or decrease against the AUD in the currencies in which the financial instruments were administered by DFAT with all other variables held constant. | ||||
Sensitivity analysis of the risk that the entity is exposed to for 2020 | ||||
Risk variable | Change in risk variable | Effect on | ||
Profit and loss | Equity | |||
% | $'000 | $'000 | ||
Currency risk | $/USD | +8.41% | (198,366) | (198,366) |
Currency risk | $/USD | -8.41% | 234,540 | 234,540 |
Interest rate risk | Discount rates | +0.09% | (9,431) | (9,431) |
Interest rate risk | Discount rates | -0.09% | 16,659 | 16,659 |
Sensitivity analysis of the risk that the entity is exposed to for 2019 | ||||
Risk variable | Change in risk variable | Effect on | ||
Profit and loss | Equity | |||
% | $'000 | $'000 | ||
Currency risk | $/USD | +8.70% | (195,766) | (195,766) |
Currency risk | $/USD | -8.70% | 233,075 | 233,075 |
Interest rate risk | Discount rates | +0.20% | (70,312) | (70,312) |
Interest rate risk | Discount rates | -0.20% | (30,694) | (30,694) |
All other items are denominated in AUD and are not subject to market risk due to exchange fluctuations. | ||||
7.6 Administered - Defined Benefit Pension Schemes
2020 | 2019 | ||||
$'000 | $'000 | ||||
The amounts recognised in the Administered Schedule of Assets and Liabilities are as follows: | |||||
Present value of funded obligations | 63,070 | 61,970 | |||
Fair value of plan assets | (41,092) | (40,361) | |||
21,978 | 21,609 | ||||
Present value of unfunded obligations | 60,675 | 56,004 | |||
Net liability in schedule of administered assets and liabilities | 82,653 | 77,613 | |||
Movements in the net liability recognised in the Administered Schedule of Assets and Liabilities as follows: | |||||
Net liability at the start of the year | 77,613 | 69,609 | |||
Adjustment for addition of Port Louis Scheme net liability | - | 76 | |||
Exchange differences on foreign plans | 622 | 3,126 | |||
Net expense recognised in the Administered Schedule of Comprehensive Income | 3,089 | 3,792 | |||
Net actuarial losses | 6,696 | 5,309 | |||
Contributions by employers | (5,367) | (4,299) | |||
Net liability at the end of the year | 82,653 | 77,613 | |||
Reconciliation of opening and closing balance of the defined benefit obligation: | |||||
Opening liability | 117,974 | 107,375 | |||
Adjustment for addition of Port Louis Scheme liabilities | - | 554 | |||
Exchange differences on foreign plans | 104 | 3,860 | |||
Service cost | 771 | 1,328 | |||
Interest cost | 3,371 | 3,529 | |||
Contributions by plan participants (funded schemes) | 18 | 56 | |||
Actuarial gains due to experience | (14) | (1,758) | |||
Actuarial losses due to changes in financial assumptions | 7,469 | 8,060 | |||
Actuarial gains due to changes in demographic assumptions | (698) | (168) | |||
Benefits paid | (5,250) | (4,862) | |||
Closing liability | 123,745 | 117,974 | |||
Reconciliation of opening and closing balance of the fair value of plan assets: | |||||
Opening assets | 40,361 | 37,767 | |||
Adjustment for addition of Port Louis Scheme assets | - | 477 | |||
Exchange differences on foreign plans | (518) | 734 | |||
Expected return on plan assets | 1,053 | 1,065 | |||
Contributions by plan participants (funded schemes) | 18 | 56 | |||
Contributions by employer | 2,143 | 1,068 | |||
Actuarial gains | 61 | 825 | |||
Benefits paid | (2,026) | (1,631) | |||
Closing liability | 41,092 | 40,361 | |||
The amounts recognised in the Administered Schedule of Comprehensive Income are as follows: | |||||
Current service cost | 771 | 1,328 | |||
Net interest on net defined benefit liability | 2,318 | 2,464 | |||
Total included 'employee benefit expense account' | 3,089 | 3,792 | |||
Amounts recognised directly in administered equity | |||||
Financial year ended | 2020 | 2019 | |||
$'000 | $'000 | ||||
Actuarial losses | (6,696) | (5,309) | |||
Cumulative amounts of losses recognised in administered equity | |||||
Financial year ended | 2020 | 2019 | |||
$'000 | $'000 | ||||
Actuarial losses | (49,655) | (42,959) | |||
Pension Scheme Assets | |||||
The fair value of scheme assets is represented by: | |||||
Financial year ended | 2020 | 2019 | |||
Cash | 0.8% | N/A | |||
Insured Pensioner | 1.7% | 1.7% | |||
Investment in LIC India | 5.3% | 4.5% | |||
Diversified Growth Fund | 74.9% | 76.2% | |||
Liability Driven Investments | 16.0% | 16.3% | |||
Deposite Administration Policy | 1.3% | 1.3% | |||
Fair Value of pension scheme assets | |||||
The fair value of scheme assets does not include amounts relating to: | |||||
- any of DFAT's (and the Australian Government's) own financial instruments, and | |||||
- any property occupied by, or other assets used by DFAT (or the Australian Government). | |||||
Principal actuarial assumptions at the reporting date (expressed as weighted averages): | |||||
Financial year ended | 2020 | 2019 | |||
Discount rate at 30 June | 2.09% | 2.79% | |||
Expected return on assets at 30 June | |||||
Salary growth | 2.60% | 3.04% | |||
Price inflation | 2.81% | 3.07% | |||
Pension growth | 2.66% | 2.82% | |||
Historical Information | |||||
Financial year ended | 2020 | 2019 | 2018 | 2017 | 2016 |
$'000 | $'000 | $'000 | $'000 | $'000 | |
Present value of defined benefit obligations | (123,745) | (117,974) | (107,375) | (110,624) | (116,122) |
Fair value of scheme assets | 41,092 | 40,361 | 37,767 | 37,221 | 36,095 |
Deficit in the scheme | (82,653) | (77,613) | (69,608) | (73,403) | (80,028) |
Actuarial gains / (losses) - net liabilities | (6,696) | (5,309) | 6,414 | 2,991 | (8,618) |
Effect of exchange rate gains / (losses) | (622) | (3,126) | (2,966) | 3,213 | 254 |
Expected Employer Contributions | |||||
Financial year ended | 2021 | 2020 | |||
$'000 | $'000 | ||||
Expected employer contributions | 4,747 | 4,174 | |||
Scheme information | |||||
DFAT administers on behalf of the Australian Government, defined benefit pension schemes for locally engaged staff across a number of agencies at posts in London, Port Louis and New Delhi, and also Ottawa and Washington (the North American Pension Scheme). Port Louis and New Delhi are still open to new employees. All schemes, with the exception of the New Delhi Gratuity Scheme, provide pensions that are linked to final salaries. Figures disclosed are based on formal actuarial reviews that are generally conducted triennially and reviewed and updated by the actuary on an annual basis. The New Delhi, Port Louis and London schemes are partially funded and the North American Pension Scheme is fully unfunded. Contributions for the North American Scheme are made to the Consolidated Revenue Fund, which will provide funding for the benefits payable under the scheme. | |||||
Weighted average maturity profile of defined benefit obligation | |||||
Financial year ended | 2020 | 2019 | |||
Weighted average duration of defined benefit obligation (years) | 13.83 | 13.55 | |||
Sensitivity to assumptions | |||||
DFAT’s defined benefit obligation at the reporting date has been determined using actuarial calculations that require assumptions about future events. The estimated sensitivity of the defined benefit obligation to each significant assumption shown below has been determined at an individual scheme level if each assumption were changed in isolation. In practice, the schemes are subject to multiple externally experienced items which may vary the defined benefit obligation over time. The methods and assumptions used in preparing these sensitivity results remain consistent with those used in previous reporting periods. | |||||
The estimated effects of variations in the principal actuarial assumptions on DFAT’s defined benefit obligation at the reporting date are as follows: | |||||
Increase / (decrease) in defined benefit obligation | |||||
Financial year ended | 2020 | 2019 | |||
$'000 | $'000 | ||||
Discount rate | |||||
Increase of 0.5% | (8,629) | (8,100) | |||
Decrease of 0.5% | 9,008 | 8,419 | |||
Future salary increases | |||||
Increase of 0.5% | 579 | 554 | |||
Decrease of 0.5% | (556) | (533) | |||
Future inflation increases | |||||
Increase of 0.5% | 8,495 | 8,277 | |||
Decrease of 0.5% | (8,215) | (8,033) | |||
8. Other Information
8.1 Aggregate Assets and Liabilities
2020 | 2019 | |
$'000 | $'000 | |
Assets expected to be recovered in: | ||
No more than 12 months | 885,607 | 1,036,576 |
More than 12 months | 5,306,473 | 3,942,010 |
Total assets | 6,192,080 | 4,978,586 |
Liabilities expected to be settled in: | ||
No more than 12 months | 384,271 | 275,565 |
More than 12 months | 1,242,331 | 212,489 |
Total liabilities | 1,626,602 | 488,054 |
2020 | 2019 | |
$'000 | $'000 | |
Assets expected to be recovered in: | ||
No more than 12 months | 63,423 | 72,492 |
More than 12 months | 3,322,057 | 3,168,544 |
Total assets | 3,385,480 | 3,241,036 |
Liabilities expected to be recovered in: | ||
No more than 12 months | 362,080 | 346,833 |
More than 12 months | 1,598,477 | 1,301,409 |
Total liabilities | 1,960,557 | 1,648,242 |
8.2 Budgetary Reporting - Explanation of Major Variances
8.2A: Explanation of major departmental variances
The following provides explanations of major variances between DFAT’s original budget estimates, as published in the 2019-20 Portfolio Budget Statements (PBS) and the final outcome for the financial year, as presented, in accordance with the Australian Accounting Standards. Major variances are those relevant to an analysis of DFAT’s performance, not merely on numerical
differences between the actual amounts and budget. Unless otherwise individually significant, no additional commentary has been included.
There are a number of items not incorporated into PBS estimates due to their unpredictable, uncontrollable and/or unplanned nature. This includes:
- The write-down, impairment and sale of assets reported in the Statement of Comprehensive Income;
- Gains or losses from foreign exchange differences reported in the Statement of Comprehensive Income and Cash Flow Statement;
- Accounting adjustments for DFAT's provision for the future make-good of leasehold improvements in leased properties reported in the Statement of Comprehensive Income and Statement of Changes in Equity; and
- Adjustments to revenue from Government for no-win / no-loss funding arrangements with the Department of Finance which are reported in the Statement of Comprehensive Income and Statement of Financial Position.
DFAT does not estimate or factor in revaluation adjustments for land, buildings and plant and equipment assets as these movements are beyond DFAT's control and are difficult to predict. This item impacts other comprehensive income reported in the Statement of Comprehensive Income and Statement of Changes in Equity and non-financial asset balances reported in the Statement of Financial Position.
Major variances between actual figures reported in the financial statements and the PBS estimates include:
- Employee benefits increased by $80.2m (9.9%) and employee provisions increased by $47.3m (20.4%) primarily due to a decrease in the long term Government bond rate used for valuing employee provisions, an increase in staff related expenses due to COVID-19 crisis impacts and the devaluation of the Australian dollar;
- Gain on sale of assets increased by $12.5m (100%) due to the sale of a Manila staff residence which was not known at the time of preparing the budget;
- Cash and cash equivalents are $171.1m (66.7%) higher due to several Posts holding additional cash balances to accommodate emergency needs for payments during the COVID-19 crisis. In addition, payments relating to building the Washington Chancery have been delayed due to COVID-19 and DFAT received additional funds from the sale of the Manila staff residence, which were not budgeted;
- Trade and other receivables are $111.7m (22.2%) lower from the spend of prior year appropriation receivable balances in the current financial year to fund the operating deficit after excluding the surplus from the Overseas Property Office, and from use of capital appropriation receivable to fund completion of projects that had been delayed from the prior year;
- Impacts from implementation of the new accounting standard AASB 16 Leases were not quantified at the time of budget preparation, and therefore were not factored into the budget. This impacts a number of line items including Buildings (77.9%), Lease liabilities (100%) and Retained earnings (14.2%) on the Statement of Financial Position; Depreciation (90.1%), Suppliers (23.5%) and Finance costs (100%) on the Statement of Comprehensive Income and Interest (100%) and Principal payments of lease liabilities (100%) on the Cash Flow Statement.
The Cash Flow Statement variances to budget also include variances due to items excluded from PBS estimates. Excluded items are section s74 receipts transferred to the Official Public Account (OPA) and subsequently re-drawn as appropriations, GST payments to suppliers and subsequent refunds received from the Australian Taxation Office.
There are a number of items excluded from the Portfolio Budget Statement (PBS) estimates on the Administered Schedule of Comprehensive Income, due to the unpredictable, uncontrollable and/or unplanned nature of some transactions, specifically items such as contributions, unplanned revenue and gains and EFA NIA income. Further, DFAT does not estimate or factor in adjustments for re-measurement of the net liability for defined benefit pension schemes or movements in the carrying amount of investments, on the Administered Schedule of Assets and Liabilities for PBS purposes. Nor does it estimate the corresponding entries in Other Comprehensive Income (100.0% variance) as part of the PBS estimates. This is because the main factors that drive these movements are beyond DFAT's control, such as movements due to changes in the value of the Australian Dollar (AUD) on currency markets. Overall expenses are $33.4m (0.8%) lower then budget with other grants and contributions decreasing by $80.4m (13.7%), offset by increases in multilateral replenishment expenses of $33.1m (5.9%). The actuals for multilateral replenishments include the effects of discounting ($17.9m) not budgeted for as discussed above. The original PBS estimates for other grants and contributions were based on obligations to pay as assessed by international organisations such as the United Nations (UN), whereas the actual contributions paid depend on resolutions passed by UN members. Driving the reduction are a range of resolutions passed by UN members during the year, which discontinued or reduced certain peacekeeping missions as well as foreign exchange fluctuations. Total administered revenue is $83.2m (12.5%) lower than budget. Passport and consular fees, which comprise the majority of fees and charges collected, has decreased by $105.2m (18.5%) due to a significant drop in demand for passports and notarial services since March associated with the COVID-19 pandemic and restrictions on travel. This is offset by higher EFA NIA revenue of $4.1m (12.9%) resulting from increased activity on the NIA and as amounts are settled in foreign currencies before being converted to AUD. The EFA dividend and competitive neutrality revenue is $9.7m (55.0%) higher than budgeted and based on a percentage of prior year (i.e. 18/19) net after tax profits and can therefore be difficult to accurately determine when preparing PBS estimates. Returns of prior year administered expenses reported as revenue were higher than budget by $2.7m (7.7%). These funds relate to unspent monies from previous funding arrangements and the amounts are dependent on acquittals being completed, requires estimations of funding requirements upfront and can be subject to unforeseen circumstances in the delivery that can significantly influence the amounts spent. Accordingly, the actual funds returned and the budget can be difficult to anticipate. The actual cash on hand or on deposit balance reported in the Administered Schedule of Assets and Liabilities include a non-trust special account balance of $17.5m held for the Dubai Exposition 2020. Movements in this account can be difficult to estimate resulting in the variance of $4.5m (16.4%). Other payables, which includes international development assistance accruals, were $85.6m (37.2%) lower than budget. This was due to the focus of the aid program changing to providing more upfront grant funding due to the COVID-19 pandemic rather than contract payments, which are normally accrued at 30 June. The timing of the preparation of estimates included in the PBS can also result in variances to actual results. PBS estimates generally prepared in March for inclusion in the Federal Budget, are based on the current financial year estimates at that point in time. Significant movements and adjustments that occur late in a financial year are not able to be incorporated into the estimates, resulting in variances. The impacts of the timing of PBS estimates are most pronounced through higher variances to budget for investments (12.9%), employee provisions including defined benefit pension schemes (17.7%) and multilateral grants and contributions payables (7.3%) administered on behalf of Government and reported in the Administered Schedule of Assets and Liabilities. The higher values result from revaluation and discounting factors applied at 30 June including the government bond rate and exchange rate fluctuations. |
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https://www.transparency.gov.au/annual-reports/department-foreign-affairs-and-trade/reporting-year/2019-20-49