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Financial position

This section analyses the DTA’s assets used to generate financial performance and the operating liabilities incurred as a result.

Leasehold improvements and plant and equipment are carried at fair value in accordance with AASB 13 Fair Value Measurement. The remaining assets and liabilities disclosed in the statement of financial position do not apply the fair value hierarchy.

Employee related information is disclosed in the People and Relationships section.

Financial assets

Note 2.1A: Cash and cash equivalents

2020

$’000

2019

$’000

Note 2.1A: Cash and cash equivalents

Cash on hand or on deposit

466

788

Special account – cash at bank

1,321

3,810

Special account – held in the OPA

89,916

91,928

Total cash and cash equivalents

91,703

96,526

Note 2.1B: Trade and other receivables

Goods and services receivables

Goods and services1

9,625

146,436

Total goods and services receivables

9,625

146,436

Appropriations receivables

Existing programs

42,205

23,572

Total appropriations receivable

42,205

23,572

Other receivables

Statutory receivables

297

-

Other receivables

602

474

Total other receivables

899

474

Total trade and other receivables (gross)

52,729

170,482

Less impairment loss allowance2

(103)

(535)

Total trade and other receivables (net)

52,626

169,947

Credit terms for goods and services were within 30 days (2019: 30 days).

1 The decrease in goods and services receivables relates to WoAG ICT procurement arrangements no longer recognised on implementation of AASB15 as these are pass-through arrangements.

2Receivables have been assessed for impairment at the end of each reporting period under the simplified approach for expected credit loss (ECL) model. Currently there is an allowance for impairment at 30 June 2020 of $0.103 million (2019: $0.535 million).

Refer Note 2.3A for information relating to contract liabilities

Accounting Policy

Financial assets

Trade receivables, loans and other receivables that are held for the purpose of collecting the contractual cash flows where the cash flows are solely payments of principal and interest, which are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance. Contractual receivables arising from the sale of goods and rendering of services have 30 day trading terms and are initially recognised at the nominal amounts due. Receivables that are statutory in nature are amounts determined under legislation or by court order.

Key accounting judgements and estimates

Impairment of financial assets

For information on impairment loss allowances see Note 5.2 Financial Instruments.

Non-financial assets

Note 2.2A: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles

Leasehold

improvements

$’000

Plant and

equipment

$’000

Intangibles

$’000

Total

$’000

As at 1 July 2019

Gross book value

6,174

1,392

841

8,407

Accumulated depreciation/amortisation and impairment

-

-

(841)

(841)

Total as at 1 July 2019

6,174

1,392

-

7,566

Recognition of right of use asset on initial application of

16,132

-

-

16,132

AASB 16

Adjusted Total as at 1 July 2019

22,306

1,392

-

23,698

Additions

Purchase

-

653

-

653

Depreciation and amortisation expense

(1,300)

(397)

-

(1,697)

Depreciation on right-of-use assets

(3,074)

-

-

(3,074)

Write-down and impairments recognised in net cost of

-

(2)

-

(2)

services

Total as at 30 June 2020

17,932

1,646

-

19,578

Total as at 30 June 2020 represented by

Gross book value

Fair value

22,306

2,041

-

24,347

Accumulated depreciation/ amortisation and impairment

(4,374)

(395)

-

(4,769)

Total as at 30 June 2020

17,932

1,646

-

19,578

Carrying amount of right-of-use assets

13,058

-

-

13,058

No significant items of property, plant and equipment are expected to be sold or disposed of within the next 12 months.

As at 30 June 2020, the value of contractual commitments for the acquisition of leasehold improvements and plant and equipment is nil (2019: nil).

Accounting Policy

Asset recognition threshold

Property, plant and equipment is the generic term that covers leasehold improvements and plant and equipment. Purchases of property, plant and equipment and intangibles are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $2,000, which are expensed in the year of acquisition.

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 the DTA where there is an obligation to restore the asset to its original condition. These costs are included in the value of the DTA’s leasehold improvements with a corresponding provision for the ‘make good’ recognised.

Leased Right of Use (ROU) Assets

Leased ROU assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received. These assets are accounted for by Commonwealth lessees as separate asset classes to corresponding assets owned outright but included in the same column as the corresponding underlying assets would be presented if they were owned.

On initial adoption of AASB 16, the DTA did not have a provision for onerous leases recognised immediately before the date of initial application therefore the ROU assets have not been adjusted. Following initial application, an impairment review is undertaken for any right of use lease asset to determine if indicators of impairment exist and an impairment loss should be recognised against any right of use lease asset that is impaired. Leased ROU assets continue to be measured at cost after initial recognition in Commonwealth agency, General Government Sector and Whole-of-Government financial statements.

Revaluations

Following initial recognition at cost, property, plant and equipment are carried at fair value (or an amount not materially different from fair value) less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets did not differ materially from the assets’ fair values as at the reporting date, generally this will be on a three year cycle unless a significant event occurs that would impact the fair value of assets.

Fair values for each class of asset are determined as shown below:

Asset class

Fair value measurement

2020

$’000

2019

$’000

Leasehold improvements

Current replacement cost – Level 3

4,874

6,174

Plant and equipment

Market selling price – Level 2

1,242

845

Plant and equipment

Market selling price – Level 3

324

434

Plant and equipment

Current replacement cost – Level 3

80

113

In 2019 a valuation of property, plant and equipment assets was undertaken by Jones Lang Lasalle (JLL). A desktop review of asset values by JLL in June 2020 confirmed that there was no material variation between carrying amount and fair value.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the DTA using, in all cases, the straight-line method of depreciation. Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

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

Leasehold improvements1

Lease term

Lease term

Plant and equipment

3 to 10 years

3 to 10 years

1 The depreciation rates for ROU assets are based on the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term.

Impairment

All assets were assessed for impairment during 2020. Where indications of impairment exist, the asset’s recoverable amount is estimated, and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

A write-down of $2,000 was recognised in 2020 (2019: $41,000) for plant and equipment assets which were disposed on completion of the DTA’s annual stocktake.