Go to top of page

Digital Transformation Agency Notes to and forming part of the financial statements

for the period ending 30 June 2020

Overview

Objectives of the Digital Transformation Agency

The Digital Transformation Agency (DTA) is an Australian Government controlled entity. It is a not-for-profit entity. The DTA’s outcome is to improve the user experience for all Australians accessing government information and services by leading the design, development and continual enhancement of whole-of-government service delivery policies and standards, platforms and joined-up services.

Basis of preparation of the financial statements

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements have been prepared in accordance with:

  1. Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR)
  2. Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except where certain assets and liabilities are recorded 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.

New Australian accounting standards

All new, revised or amended standards and interpretations that were issued prior to the sign-off date and are applicable to the current reporting period (as listed below) have been reflected in the DTA’s financial statements.

Nature of change in accounting policy, transitional provisions1, and adjustment to financial statements

Standard/

Interpretation

Nature of change in accounting policy, transitional provisions1, and adjustment to financial statements

AASB 15 Revenue

from Contracts

with Customers

/ AASB 2016–8

Amendments

to Australian

Accounting

Standards

– Australian

Implementation

Guidance for

Not-for-Profit

Entities and AASB

1058 Income of

Not-For-Profit

Entities

AASB 15, 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 to ‘recognise 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, transitional provisions and adjustments are isclosed below and in the relevant notes to the financial statements.

Nature of change in accounting policy, transitional provisions1, and adjustment to financial statements

Standard/Interpretation

Nature of change in accounting policy, transitional provisions1, and adjustment to

AASB 16 Leases

AASB 16 became effective on 1 July 2019.

This new standard has replaced AASB 117 Leases, Interpretation 4

Determining whether an Arrangement contains a Lease,

Interpretation 115 Operating Leases—Incentives and Interpretation 127 Evaluating the

Substance of Transactions Involving the Legal Form of a Lease.

AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

Application of AASB 15 Revenue from Contracts with Customers / AASB 1058 Income of Not-For-Profit Entities

The DTA adopted AASB 15 and AASB 1058 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under the various applicable AASBs and related interpretations.

Under the new income recognition model the DTA shall first determine whether an enforceable agreement exists and whether the promises to transfer goods or services to the customer are ‘sufficiently specific’. If an enforceable agreement exists and the promises are ‘sufficiently specific’ (to a transaction or part of a transaction), the DTA applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, the DTA shall consider whether AASB 1058 applies.

In relation to AASB 15, the DTA elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The DTA is required to aggregate the effect of all contract modifications that occur before the date of initial application.

In terms of AASB 1058, the DTA is required to recognise volunteer services at fair value if those services would have been purchased if not provided voluntarily, and the fair value of those services can be measured reliably.

Predominantly, the DTA’s revenue previously recognised relates to ICT WoAG Procurement contracts. On assessment the DTA is an Agent in respect of most of these transactions, as well as other Departmental activities, and therefore both revenue and expense transactions are treated as pass-throughs under the new standard. DTA only recognises the amount of any fee or commission to which it expects to be entitled in exchange for arranging the specified goods or services to be provided by the supplier. The estimated impact for 2020 is a decrease in revenue and expense of $215.123 million, as well as a decrease in assets and liabilities of $141.048 million.

The table below shows the impact of transition to AASB 15 and AASB 1058 on 1 July 2019.

impact of transition to AASB 15 and AASB 1058 on 1 July 2019:

Impact on transition of AASB 15

Departmental

Assets

Receivables

(100,957)

Prepayments

(16,187)

Total assets

(117,144)

Liabilities

Contract liabilities

(81,150)

Unearned revenue

198,294

Total liabilities

117,144

Total adjustment recognised in retained earnings

-

Set out below are the amounts by which each financial statement line item is affected as at 30 June 2020 as a result of the adoption of AASB 15 and AASB 1058. The first column shows amounts prepared under AASB 15 and AASB 1058 and the second column shows what the amounts would have been had AASB 15 and AASB 1058 not been adopted:

Transitional disclosure

AASB 15 /AASB 1058

$’000

Previous

AAS

$’000

Increase /

(decrease)

$’000

Expenses

Suppliers

45,192

260,315

(215,123)

Total expenses

45,192

260,315

(215,123)

Revenue

Rendering of services

24,462

239,585

(215,123)

Total revenue

24,462

239,585

(215,123)

Net (cost of)/contribution by services

(20,730)

(20,730)

-

Assets

Receivables

9,625

139,772

(130,147)

Prepayments

588

11,525

(10,937)

Total assets

10,213

151,297

(141,084)

Liabilities

Contract liabilities

68,367

-

68,367

Unearned revenue

-

209,451

(209,451)

Total liabilities

68,367

209,451

(141,084)

Retained earnings

(58,154)

(58,154)

-

Application of AASB 16 Leases

The DTA 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.

The DTA 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. The DTA applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:

  • Apply a single discount rate to a portfolio of leases with reasonably similar characteristics.
  • 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.
  • Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
  • Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of assets as at the date of initial application.
  • 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, the DTA 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, the DTA recognises right-of-use assets and lease liabilities for leases. In 2019–20, the DTA has no right-of-use assets and lease liabilities of low value based on the value of the underlying asset when new or short-term leases with a lease term of 12 months or less.

On adoption of AASB 16, the DTA recognised right-of-use assets and lease liabilities in relation to leases of office space 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 DTA’s incremental borrowing rate (IBR) as at 1 July 2019. The IBR 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 1.01%.

The right-of-use assets for office space were measured at an amount equal to the lease liability, adjusted by the amount of prepayments made in 2019 and less a lease incentive taken as a rent abatement.

On transition to AASB 16, the DTA recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:

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:

Impact on Transition of AASB 16

1 July 2019

$’000

Departmental

Right-of-use assets – property, plant and equipment

16,132

Lease liabilities

15,890

Retained earnings

227

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:

Minimum operating lease commitment at 30 June 2019 1

16,344

Plus: straight-line payable recognised in retained earnings

227

Less: prepayment of rent in 2019

242

Undiscounted lease payments

16,329

Less: effect of discounting using the incremental borrowing rate as at the date of initial application

439

Lease liabilities recognised at 1 July 2019

15,890

1 The minimum operating lease commitment published in 2019 has been adjusted for GST (reported as GST inclusive), an amendment to the 50 Marcus Clarke Street lease and a minor correction.

Taxation

The DTA is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and Goods and Services Tax (GST).

Events after the reporting period

There are no known events occurring after the reporting period that could impact on the financial statements. To the extent that the COVID‑19 pandemic has been identified as having an effect on the DTA’s financial statements, including valuations, this impact has been included.