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Appendix 1: Financial Statements

Independent auditor's report

Statement by the Chief Executive Officer and Chief Finance Officer of the Federal Court of Australia

Statement by the Chief Executive Officer and Chief Finance Officer of the Federal Court of Australia

Statement of Comprehensive Income

for the period ended 30 June 2019

Notes

2019

$'000

2018

$'000

Original Budget

$'000

NET COST OF SERVICES

Expenses

Judicial benefits

1.1A

105,165

96,705

94,142

Employee benefits

1.1A

118,034

110,690

114,652

Suppliers

1.1B

117,297

116,005

117,901

Depreciation and amortisation

3.2A

13,882

16,253

14,956

Finance costs

1.1C

313

131

34

Impairment loss allowance on financial instruments

1.1D

1

-

-

Write-down and impairment of assets

1.1E

576

360

-

Total expenses

355,268

340,144

341,685

Own-Source income

Own-source revenue

Sale of goods and rendering of services

1.2A

4,081

4,586

3,894

Other revenue

1.2B

382

507

-

Total own-source revenue

4,463

5,093

3,894

Other gains

Resources received free of charge

42,557

41,821

38,971

Liabilities assumed by other agencies

33,394

27,111

26,637

Other gains

214

6

-

Total gains

1.2C

76,165

68,938

65,608

Total own-source income

80,628

74,031

69,502

Net cost of by services

(274,640)

(266,113)

(272,183)

Revenue from Government

1.2D

265,352

252,620

257,227

Deficit on continuing operations

(9,288)

(13,493)

(14,956)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation surplus

57

(211)

-

Total other comprehensive income

57

(211)

-

Total comprehensive loss

(9,231)

(13,704)

(14,956)

The above statement should be read in conjunction with the accompanying notes.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

Budget Variances Commentary

Statement of Comprehensive Income

Judicial benefits

Judicial benefits are higher than budgeted due to an increase to judicial salaries by the remuneration tribunal, the appointment of additional Judges by Government during 2018-19 and the revaluation of accrued leave liabilities to reflect movements in bond rates which added $0.6m to expenses.

Employee benefits

Employee expenses are higher than budget due to the revaluation of accrued leave liabilities to reflect movements in bond rates which added $2.6m to expenses. There were also higher than budgeted severance and redundancy costs.

Depreciation and amortisation

Depreciation expenses are lower than budgeted due to asset purchases during the year being lower than expected.

Finance costs

Finance costs are higher than budgeted due to the impact of bond rate changes impact on the unwinding of discount on make good expenses. There were also additional equipment leases entered into during the year.

Sale of goods and rendering of services

The Court received higher revenue than was anticipated in relation to its International Programs work.

Other revenue

The Court received unanticipated revenue in relation to ad-hoc international projects and for work related to a native title matter.

Other gains

The liabilities assumed by other agencies in relation to notional judicial superannuation costs was higher than budgeted due to an increase in the actuarial assessment of the value of these benefits.

Revenue from Government

This is higher than budgeted due to additional appropriation received from Government at additional estimates. This was appropriated for new measures and to cover the increase in judicial salaries.

Statement of Financial Position

as at 30 June 2019

Notes

2019

$'000

2018

$'000

Original Budget

$'000

ASSETS

Financial assets

Cash and cash equivalents

3.1A

1,237

1,353

1,675

Trade and other receivables

3.1B

90,552

78,993

70,987

Accrued revenue

8

14

30

Total financial assets

91,797

80,360

72,692

Non-financial assets

Buildings

3.2A

33,318

38,056

37,323

Plant and equipment

3.2A

14,781

14,445

15,032

Computer software

3.2A

11,397

10,417

10,967

Inventories

3.2B

39

39

49

Prepayments

1,767

2,563

2,145

Total non-financial assets

61,302

65,520

65,516

Total assets

153,099

145,880

138,208

LIABILITIES

Payables

Suppliers

3.3A

7,911

7,722

7,910

Other payables

3.3B

2,437

2,268

2,144

Total payables

10,348

9,990

10,054

Interest bearing liabilities

Leases

3.4A

2,574

2,506

1,649

Total interest bearing liabilities

2,574

2,506

1,649

Provisions

Employee provisions

6.1A

62,390

59,915

58,369

Other provisions

3.5A

4,065

2,811

3,012

Total provisions

66,455

62,726

61,381

Total liabilities

79,377

75,222

73,084

Net assets

73,722

70,658

65,124

EQUITY

Contributed equity

95,527

83,232

95,527

Reserves

8,737

8,680

8,891

Accumulated deficit

(30,542)

(21,254)

(39,294)

Total equity

73,722

70,658

65,124

The above statement should be read in conjunction with the accompanying notes.

Budget Variances Commentary

Statement of Financial Position

Trade and other receivables

Appropriation receivable is higher than budgeted due to appropriation received for projects that have not commenced as they require Government legislation to be passed. There was also an underspend of capital appropriation in 2019-20 due to delays in building and software development projects.

Buildings

The value of buildings is lower than budgeted due to two building projects which have been delayed.

Prepayments

There is a decrease in supplier prepayments due to the timing of supplier payments.

Other payables

Other payables includes $231k in staff leave liability transferred from another agency that was not expected at the time of the budget.

Employee provisions

Provisions for leave liability were revalued due to remuneration increases for judges and employees and movements in bond rates which led to an unbudgeted $4m increase in value.

Other provisions

Additional makegood provisions were required that were not known at the time of the budget.

Statement of Changes in Equity

for the period ended 30 June 2019

Notes

2019
$'000

2018
$'000

Original Budget
$'000

CONTRIBUTED EQUITY

Opening balance

Balance carried forward from previous period

83,232

70,770

83,232

Adjusted opening balance

83,232

70,770

83,232

Comprehensive income

Other comprehensive income

-

-

-

Total comprehensive income

-

-

-

Transactions with owners

Contributions by owners

Departmental capital budget

12,295

12,462

12,295

Total transactions with owners

12,295

12,462

12,295

Closing balance as at 30 June

95,527

83,232

95,527

RETAINED EARNINGS/(ACCUMULATED DEFICIT)

Opening balance

Balance carried forward from previous period

(21,254)

(7,761)

(24,338)

Adjusted opening balance

(21,254)

(7,761)

(24,338)

Comprehensive income

Deficit for the period

(9,288)

(13,493)

(14,956)

Other comprehensive income

-

-

-

Total comprehensive loss

(9,288)

(13,493)

(14,956)

Closing balance as at 30 June

(30,542)

(21,254)

(39,294)

ASSET REVALUATION RESERVE

Opening balance

Balance carried forward from previous period

8,680

8,891

8,891

Adjusted opening balance

8,680

8,891

8,891

Comprehensive income

Other comprehensive income

57

(211)

-

Total comprehensive loss

57

(211)

-

Closing balance as at 30 June

8,737

8,680

8,891

TOTAL EQUITY

Opening balance

Balance carried forward from previous period

70,658

71,900

67,785

Adjusted opening balance

70,658

71,900

67,785

Comprehensive income

Deficit for the period

(9,288)

(13,493)

(14,956)

Other comprehensive income

57

(211)

-

Total comprehensive loss

(9,231)

(13,704)

(14,956)

Transactions with owners

Contributions by owners

Departmental capital budget

12,295

12,462

12,295

Total transactions with owners

12,295

12,462

12,295

Closing balance as at 30 June

73,722

70,658

65,124

Accounting Policy

Equity Injections

Amounts appropriated which are designated as 'equity injections' for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year.

Restructuring of Administrative Arrangements

Net assets received from or relinquished to another Government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.

Budget Variances Commentary

Statement of Changes in Equity

Accumulated deficit

The improved financial results of the Court compared to budget in 2017-18 and 2018-19 have led to a better than forecast equity position.

Cash Flow Statement

for the period ended 30 June 2019

Notes

2019
$'000

2018
$'000

Original Budget
$'000

OPERATING ACTIVITIES

Cash received

Appropriations

261,991

254,012

257,227

Sales of goods and rendering of services

4,067

4,715

3,894

GST received

7,469

6,170

-

Other

382

267

-

Total cash received

273,909

265,164

261,121

Cash used

Employees

187,134

178,993

182,777

Suppliers

82,334

82,712

78,273

Borrowing costs

64

78

71

Section 74 receipts transferred to OPA

4,706

3,708

-

Total cash used

274,238

265,491

261,121

Net cash used by operating activities

(329)

(327)

-

INVESTING ACTIVITIES

Cash received

Proceeds from sales of property, plant and equipment

214

6

-

Total cash received

214

6

-

Cash used

Purchase of property, plant and equipment

4,413

3,923

11,100

Purchase of intangibles

3,653

4,608

-

Total cash used

8,066

8,531

11,100

Net cash used by investing activities

(7,852)

(8,525)

(11,100)

FINANCING ACTIVITIES

Cash received

Contributed equity

8,769

9,244

12,295

Total cash received

8,769

9,244

12,295

Cash used

Repayment of finance lease

704

714

1,195

Total cash used

704

714

1,195

Net Cash from financing activities

8,065

8,530

11,100

Net decrease in cash held

(116)

(322)

-

Cash and cash equivalents at the beginning of the reporting period

1,353

1,675

1,675

Cash and cash equivalents at the end of the reporting period

3.1A

1,237

1,353

1,675

The above statement should be read in conjunction with the accompanying notes.

Budget Variances Commentary

Statement of Cash Flow Statement

Cash used for operating activities

Employee costs have increased in line with reasons outlined in the statement of comprehensive income.

Section 74 receipts relates to miscellaneous income received by the Courts in relation to services provided. This is not budgeted for due to their unpredictability.

Cash received from investing activities

Cash from the sale of assets was not budgeted for as it is unpredictable.

Cash used for investing activities and contributed equity

Asset purchases were lower than expected due to a delay in the completion of building and software development projects.

Repayment of borrowing

Repayments of borrowing are lower than budgeted due to different arrangements entered into for the lease of equipment than anticipated.

Administered Schedule of Comprehensive Income

for the period ended 30 June 2019

Notes

2019
$'000

2018
$'000

Original Budget
$'000

NET COST OF SERVICES

Expenses

Suppliers

2.1A

807

777

880

Impairment loss allowance on financial instruments

2.1B

3,289

-

1,000

Write-down and impairment of other assets

2.1C

-

3,730

-

Other expenses - refunds of fees

2.1D

918

536

900

Total expenses

5,014

5,043

2,780

Income

Revenue

Non-taxation revenue

Fees and fines

2.2A

89,034

107,890

77,353

Total non-taxation revenue

89,034

107,890

77,353

Total revenue

89,034

107,890

77,353

Total income

89,034

107,890

77,353

Net contribution by services

84,020

102,847

74,573

Total comprehensive income

84,020

102,847

74,573

The above schedule should be read in conjunction with the accompanying notes.

Budget Variances Commentary

Administered Schedule of Comprehensive Income

Fees and fines

The variance to budget is due to the uncertainty in estimating fee revenue.

Impairment loss allowance of financial instruments and write-down and impairment of other assets

The variance to budget is due to the uncertainty in estimating fees that may become impaired during the period and the change to impairment measurement methodology following the implementation of AASB9 Financial Instruments.

Other expenses

Other expenses relates to the refund of fees. The variance to budget is due to the uncertainty in estimating the amount of fees that may require refund during the period.

Administered Schedule of Assets and Liabilities

as at 30 June 2019

Notes

2019
$'000

2018
$'000

Original Budget
$'000

ASSETS

Financial Assets

Cash and cash equivalents

4.1A

142

136

8

Trade and other receivables

4.1B

2,250

4,599

4,006

Total assets administered on behalf of Government

2,392

4,735

4,014

LIABILITIES

Payables

Suppliers

4.2A

89

-

-

Other payables

4.2B

610

513

662

Total liabilities administered on behalf of Government

699

513

662

Net assets

1,693

4,222

3,352

The above schedule should be read in conjunction with the accompanying notes.

Budget Variances Commentary

Administered Schedule of Assets and Liabilities

Cash and cash equivalents

There is inherent uncertainty in estimating the cash balance on any particular day.

Trade and other receivables

The variance to budget is due to the uncertainty in estimating the number of unpaid fees and the effect of the implementation of AASB9 Financial Instruments.

Suppliers

The variance to budget is a timing difference due to invoices received after 30th June 2019.

Administered Reconciliation Schedule

for the period ended 30 June 2019

2019
$'000

2018
$'000

Opening assets less liabilities as at 1 July

4,222

3,352

Adjustment for change in accounting policies

(1,854)

-

Adjustments for rounding

(1)

-

Adjusted opening assets less liabilities

2,367

3,352

Net contribution by services

Income

89,034

107,890

Expenses

Payments to entities other than corporate Commonwealth entities

(5,014)

(5,043)

Transfers (to)/from the Australian Government

Appropriation transfers from Official Public Account

Annual appropriations

Payments to entities other than corporate Commonwealth entities

718

777

Special appropriations (unlimited) s77 PGPA Act repayments

Payments to entities other than corporate Commonwealth entities

923

553

GST increase to appropriations s74 PGPA Act

Payments to entities other than corporate Commonwealth entities

71

78

Appropriation transfers to OPA

Transfers to OPA

(86,406)

(103,385)

Restructuring

-

-

Closing assets less liabilities as at 30 June

1,693

4,222

The above schedule should be read in conjunction with the accompanying notes.

Accounting Policy

Administered cash transfers to and from the Official Public Account

Revenue collected by the entity for use by the Government rather than the entity is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government. These transfers to and from the OPA are adjustments to the administered cash held by the entity on behalf of the Government and reported as such in the schedule of administered cashflows and in the administered reconciliation schedule.

Administered Cash Flow Statement

Notes

2019
$'000

2018
$'000

OPERATING ACTIVITIES

Cash received

Fees

81,509

76,600

Fines

4,833

26,827

GST received

70

86

Total cash received

86,412

103,513

Cash used

Suppliers

789

855

Refunds of fees

918

536

Other

5

17

Total cash used

1,712

1,408

Net cash from operating activities

84,700

102,105

Net increase in cash held

84,700

102,105

Cash and cash equivalents at the beginning of the reporting period

136

8

Cash from Official Public Account for:

Appropriations

1,712

1,408

Total cash from official public account

1,712

1,408

Cash to Official Public Account for:

Transfer to OPA

(86,406)

(103,385)

Total cash to official public account

(86,406)

(103,385)

Cash and cash equivalents at the end of the reporting period

4.1A

142

136

The above statement should be read in conjunction with the accompanying notes.

Overview

The Basis of Preparation

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

The Financial Statements have been prepared in accordance with:

a) Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and

b) 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 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.

The Federal Court of Australia is a combined Courts Agency established under the Public Governance, Performance and Accountability Act 2013 (PGPA Act). The Entity has been established as a non-corporate Commonwealth entity under the PGPA Act to manage the operations of the Federal Court of Australia, Family Court of Australia, Federal Circuit Court of Australia, the National Native Title Tribunal and the Commonwealth Courts Corporate Services. The Federal Court of Australia, Family Court of Australia and Federal Circuit Court of Australia are Chapter III Courts under the Australian Constitution and continue to operate as individual judicial jurisdictions.

New Accounting Standards

AASB 9: Financial Instruments

The introduction of this revised standard has led to a change in the measurement of the impairment of financial instruments. This has had a material effect on the measurement of outstanding receivables related to administered fees.

In accordance with the standard the Court now recognises impairment on administered debt proportionally from the moment a debt becomes overdue. This has led to the following adjustments:

Opening doubtful debt provision has been increased by $1.854m.

Trade and other receivables is reduced by $1.854m.

Impairment Loss Allowance on Financial Instruments is $3.289m.

See Note 7.3 for detailed information.

The introduction of this standard did not have a material effect on the Court’s departmental financial statements.

All other new accounting standards that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect on the Court’s financial statements.

It is expected that the introduction of AASB 16: Leases will have a material effect on the presentation of the Court’s financial statements in the 2019-20 financial year.

Taxation

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

Reporting of Administered activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.

Except where otherwise stated, 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.

Events after the Reporting Period

Departmental

There were no subsequent events that had the potential to significantly affect the ongoing structure and financial activities of the Federal Court of Australia.

Administered

There were no subsequent events that had the potential to significantly affect the ongoing structure and financial activities of the Federal Court of Australia.

Notes to the financial statements

1. Financial Performance

This section analyses the financial performance of the Federal Court of Australia for the year ended 30 June 2019.

1.1 Expenses
Note 1.1A: Judicial and Employee Benefits

2019
$'000

2018
$'000

Judges’ remuneration

67,776

65,757

Judicial superannuation defined contribution

3,996

3,837

Judges’ notional superannuation

33,393

27,111

Total judicial benefits

105,165

96,705

Wages and salaries

83,942

80,410

Superannuation

Defined contribution plans

9,420

8,721

Defined benefit plans

5,733

5,898

Leave and other entitlements

16,056

13,885

Separation and redundancies

2,883

1,776

Total employee benefits

118,034

110,690

Total judicial and employee benefits

223,199

207,395

Accounting Policy

Accounting policies for employee related expenses are contained in the People and Relationships section.

Note 1.1B: Suppliers

2019
$'000

2018
$'000

Goods and services supplied or rendered

IT services

7,456

8,910

Consultants & contractors

2,815

3,458

Property operating costs

9,901

9,235

Courts operation and administration

13,723

13,432

Travel

8,410

7,513

Library expenses

4,312

4,253

Other

7,097

6,652

Total goods and services supplied or rendered

53,714

53,453

Goods supplied

3,692

5,790

Services rendered

50,022

47,663

Total goods and services supplied or rendered

53,714

53,453

Other suppliers

Operating lease rentals

62,090

61,598

Workers compensation expenses

1,493

954

Total other suppliers

63,583

62,552

Total suppliers

117,297

116,005

Leasing Commitments

The Federal Court in its capacity as lessee has 12 property leases. Contingent rent is payable for two of those properties on the basis of future movements in the CPI. There are fixed increases in rent on each of those leases ranging between 2.5% and 4% annually. Six of those leases have an option to renew at the end of the lease period.

2019
$'000

2018
$'000

Commitments for minimum lease payments in relation to non-cancellable operating leases are payables as follows:

Within 1 year

6,875

6,932

Between 1 to 5 years

22,509

16,112

More than 5 years

17,987

1,024

Total operating lease commitments

47,371

24,068

Accounting Policy

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits.

Where an asset is acquired by means of a finance lease, the asset is capitalised at either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability is recognised at the same time and for the same amount.

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.

Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.

Note 1.1C: Finance Costs

2019
$'000

2018
$'000

Finance leases

65

78

Unwinding of discount - make good

248

53

Total finance costs

313

131

Accounting Policy

All borrowing costs are expensed as incurred.

Note 1.1D: Impairment Loss Allowance on Financial Instruments

2019
$'000

2018
$'000

Impairment on financial instruments

1

-

Total impairment on financial instruments

1

-

Note 1.1E: Write-Down and Impairment of Other Assets

2019
$'000

2018
$'000

Impairment of inventories

9

15

Impairment of plant and equipment

72

16

Impairment on intangible assets

-

26

Impairment on buildings

495

303

Total write-down and impairment of other assets

576

360

1.2 Own-Source Revenue and Gains

2019
$'000

2018
$'000

Own-Source Revenue

Note 1.2A: Sale of Goods and Rendering of Services

Sale of goods

1

1

Rendering of services

4,080

4,585

Total sale of goods and rendering of services

4,081

4,586

Rendering of services includes the provision of services to other agencies in both Australia and overseas. This includes $2.40m received from the New Zealand Ministry of Foreign Affairs and Trade (MFAT).

Note 1.2B: Other Revenue

2019
$'000

2018
$'000

Reimbursements from other agencies

382

507

Total other revenue

382

507

Accounting Policy

Revenue from the sale of goods is recognised when:

a) the risks and rewards of ownership have been transferred to the buyer;
b) the entity retains no managerial involvement or effective control over the goods;
c) the revenue and transaction costs incurred can be reliably measured; and
d) it is probable that the economic benefits associated with the transaction will flow to the Federal Court of Australia.

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

a) the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and
b) the probable economic benefits associated with the transaction will flow to the Federal Court of Australia.

The stage of completion of contracts at the reporting date is determined by reference to the proportion of costs incurred to date compared to the estimated total costs of the transaction.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collection of the debt is no longer probable.

Note 1.2C: Other Gains

2019
$'000

2018
$'000

Resources received free of charge

42,557

41,821

Liabilities assumed by other agencies

33,394

27,111

Gain on sale of assets

214

6

Total other gains

76,165

68,938

Accounting Policy

Resources Received Free of Charge

Resources received free of charge are recognised as gains 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.

The major resources received free of charge are the use of property in the Commonwealth Law Courts Buildings in each capital city and the Law Courts Building in Sydney.

Liabilities assumed by other agencies refers to the notional cost of judicial pensions as calculated by actuaries on behalf of the Department of Finance.

Note 1.2D: Revenue from Government

2019
$'000

2018
$'000

Departmental appropriation

264,806

252,620

Revenue from Government (supplementation)

546

-

Total revenue from Government

265,352

252,620

Accounting Policy

Revenue from Government

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the entity gains control of the appropriation except for certain amounts that related 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.

2. Income and Expenses Administered on Behalf of Government

This section analyses the activities that the Federal Court of Australia does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

2.1 Administered – Expenses
Note 2.1A: Suppliers

2019
$'000

2018
$'000

Services rendered

Supply of primary dispute resolution services

807

777

Total suppliers

807

777

Note 2.1B: Impairment Loss Allowance on Financial Instruments

2019
$'000

2018
$'000

Impairment of financial instruments

3,289

-

Total impairment on financial instruments

3,289

-

Note 2.1C: Write-Down and Impairment of Other Assets

2019
$'000

2018
$'000

Impairment of financial assets

-

3,730

Total write-down and impairment of other assets

-

3,730

Note 2.1D: Other Expenses

2019
$'000

2018
$'000

Refunds of fees

918

536

Total other expenses

918

536

2.2 Administered – Income

Non-Taxation Revenue

Note 2.2A: Fees and Fines

2019
$'000

2018
$'000

Fees

84,201

81,063

Fines

4,833

26,827

Total fees and fines

89,034

107,890

Accounting Policy

All administered revenues relate to the course of ordinary activities performed by the Federal Court of Australia, the Federal Circuit Court and the Family Court of Australia on behalf of the Australian Government. As such administered revenues are not revenues of the Courts. Fees are charged for access to the Courts’ services. Administered fee revenue is recognised when the service occurs. The services are performed at the same time as or within two days of the fees becoming due and payable. Revenue from fines is recognised when a fine is paid to the Court on behalf of the Government. Fees and Fines are recognised at their nominal amount due less any impairment allowance. Collectability of debts is reviewed at the end of the reporting period. Impairment allowances are made when collectability of the debt is judged to be less, rather than more, likely.

3. Financial Position

This section analyses the Federal Court of Australia assets used to conduct its operations and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.

3.1 Financial Assets
Note 3.1A: Cash and Cash Equivalents

2019
$'000

2018
$'000

Cash at bank

1,224

1,336

Cash on hand

13

17

Total cash and cash equivalents

1,237

1,353

Note 3.1B: Trade and Other Receivables

2019
$'000

2018
$'000

Goods and services receivables

Goods and services

627

488

Total goods and services receivables

627

488

Appropriations receivable

Appropriation receivable - operating

72,730

65,209

Appropriation receivable - departmental capital budget

14,867

11,342

Total appropriations receivable

87,597

76,551

Other receivables

Statutory receivables (GST)

1,782

1,961

Revenue from Government

546

-

Total other receivables

2,288

1,961

Total trade and other receivables (gross)

90,552

79,000

Less impairment loss allowance

-

(7)

Total trade and other receivables (net)

90,552

78,993

Credit terms for goods and services were within 30 days (2018: 30 days).

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 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.

Impairment Loss Allowance

Financial assets are assessed for impairment at the end of each reporting period.

3.2 Non-Financial Assets
Note 3.2A: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles

Buildings -
Leasehold Improvements
$’000

Plant and equipment
$’000

Computer software 1

$’000

Total
$’000

As at 1 July 2018

Gross book value

45,844

22,837

27,340

96,021

Accumulated depreciation, amortisation and impairment

(7,788)

(8,392)

(16,923)

(33,103)

Total as at 1 July 2018

38,056

14,445

10,417

62,918

Additions

Purchase

1,349

3,064

3,653

8,066

Internally developed

-

-

-

-

Finance lease

-

834

-

834

Recognition of make-good provision

2,127

-

-

2,127

Depreciation and amortisation

(7,719)

(3,490)

(2,673)

(13,882)

Disposals

-

-

-

-

Write down

(495)

(72)

-

(567)

Total as at 30 June 2019

33,318

14,781

11,397

59,496

Total as at 30 June 2019 represented by

Gross book value

46,419

25,488

30,533

102,440

Accumulated depreciation and impairment

(13,101)

(10,707)

(19,136)

(42,944)

Total as at 30 June 2019

33,318

14,781

11,397

59,496

1. The carrying amount of computer software includes $1.66 million of purchased software and $9.74 million of internally generated software.

No indicators of impairment were found for property, plant and equipment and intangibles.
No property, plant and equipment and intangibles are expected to be sold or disposed of within the next 12 months.

Revaluations of non-financial assets

All revaluations were conducted in accordance with the revaluation policy. On 30 June 2017, an independent valuer conducted the revaluations and management conducted a review of the underlying drivers of the independent valuation.

Contractual commitments for the acquisition of property, plant, equipment and intangible assets

Capital commitments for property, plant and equipment are $0.13 million (2018: $0.12 million). Plant and equipment commitments were primarily contracts for purchases of furniture and IT equipment.

Accounting Policy

Property, plant and equipment

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in and liabilities undertaken.

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.

Asset Recognition Threshold

Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases of:

- assets other than information technology equipment costing less than $2,000, and
- information technology equipment costing less than $1,500,

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 Federal Court of Australia where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Federal Court of Australia’s leasehold improvements with a corresponding provision for the ‘make good’ recognised.

Revaluations

Following initial recognition at cost, property plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly through the Income Statement except to the extent that they reverse a previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Federal Court of Australia 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 and amortisation rates for each class of depreciable asset are based on the following useful lives:

2019

2018

Leasehold improvements

10 to 20 years or lease term

10 to 20 years or lease term

Plant and equipment – excluding library materials

3 to 100 years

3 to 100 years

Plant and equipment – library materials

5 to 10 years

5 to 10 years

Impairment

All assets were assessed for impairment at 30 June 2019. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the Federal Court of Australia were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Intangibles

The Federal Court of Australia’s intangibles comprise externally 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 of 5 years (2018: 5 years).

Note 3.2B: Inventories

2019
$'000

2018
$'000

Inventories held for distribution

39

39

Total inventories

39

39

During 2018-19, $9,141 of inventory held for distribution was recognised as an expense (2018: $14,513).

Accounting Policy

Inventories held for sale are valued at the lower of cost and net realisable value.

Inventories held for distribution are valued at cost, adjusted for any loss of service potential.

Costs incurred in bringing each item of inventory to its present location and condition are assigned as follows:

a) raw materials and stores - purchase cost on a first-in-first-out basis; and
b) finished goods and work in progress - cost of direct materials and labour plus attributable costs that can be allocated on a reasonable basis.

Inventories acquired at no cost or nominal consideration are initially measured at current replacement cost at the date of acquisition.

3.3 Payables
Note 3.3A: Suppliers

2019
$'000

2018
$'000

Trade creditors and accruals

6,618

6,313

Operating lease rentals

1,293

1,409

Total suppliers

7,911

7,722

Settlement was usually made within 30 days.

Note 3.3B: Other Payables

2019
$'000

2018
$'000

Salaries and wages

681

652

Superannuation

115

113

Separations and redundancies

651

622

Unearned income

83

83

Other

907

798

Total other payables

2,437

2,268

3.4 Interest Bearing Liabilities
Note 3.4A: Leases

2019
$'000

2018
$'000

Finance leases

2,574

2,506

Total leases

2,574

2,506

Minimum leases payments expected to be settled

Within 1 year

640

776

Between 1 to 5 years

1,934

1,730

More than 5 years

-

-

Total leases

2,574

2,506

In 2019, five finance leases existed in relation to building and property, plant and equipment assets. The leases were non-cancellable and for fixed terms averaging 5 years, with a maximum of 8 years. The interest rate implicit in the leases averaged 2.17% (2018: 2.54%). The lease assets secured the lease liabilities. The Federal Court of Australia guaranteed the residual values of all assets leased.

Accounting Policy

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease.

Where an asset is acquired by means of a finance lease, the asset is capitalised at either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability is recognised at the same time and for the same amount.

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.

Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.

3.5 Other Provisions
Note 3.5A: Other Provisions

2019
$'000

2018
$'000

Provision for restoration obligations

4,065

2,371

Provision for unused office space

-

440

Total other provisions

4,065

2,811

Provision for
restoration
$’000

Provision for
NSO unused
office space
$’000

Total
$’000

As at 1 July 2018

2,371

440

2,811

New provision

2,127

-

2,127

Amounts reversed

(393)

(79)

(472)

Amounts used

(288)

(361)

(649)

Unwindings of discount or change in discount rate

248

-

248

Total as at 30 June 2019

4,065

-

4,065

The Federal Court of Australia currently has 14 agreements for the leasing of premises which have provisions requiring the Federal Court of Australia to restore the premises to their original condition at the conclusion of the lease. The Federal Court of Australia has made a provision to reflect the present value of this obligation.

4. Assets and Liabilities Administered on Behalf of Government

This section analyses assets used to generate financial performance and the operating liabilities incurred as a result. The Federal Court of Australia does not control but administers these assets on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

4.1 Administered – Financial Assets
Note 4.1A: Cash and Cash Equivalents

2019
$'000

2018
$'000

Cash on hand or on deposit

142

136

Total cash and cash equivalents

142

136

Credit terms for goods and services receivable were in accordance with the Federal Courts Legislation Amendment (Fees) Regulation 2015 and the Family Law (Fees) Regulation 2012.

Note 4.1B: Trade and Other Receivables

2019
$'000

2018
$'000

Goods and services receivables

7,434

7,170

Total goods and services receivables

7,434

7,170

Other receivables

Statutory receivable (GST)

7

6

Total other receivables

7

6

Total trade and other receivables (gross)

7,441

7,176

Less impairment loss allowance account:

Goods and services

(5,191)

(2,577)

Total impairment loss allowance

(5,191)

(2,577)

Total trade and other receivables (net)

2,250

4,599

Accounting Policy

Trade and other receivables

Collectability of debts is reviewed at the end of the reporting period. The impairment loss allowance is calculated based on the Courts’ historical rate of debt collection. Credit terms for services were within 30 days (2018: 30 days).

4.2 Administered – Payables
Note 4.2A: Suppliers

2019
$'000

2018
$'000

Trade creditors and accruals

89

-

Total supplier payables

89

-

Note 4.2B: Other Payables

2019
$'000

2018
$'000

Unearned income

610

513

Total other payables

610

513

5. Funding

This section identifies the Federal Court of Australia funding structure.

5.1 Appropriations
Note 5.1A: Annual Appropriations ('Recoverable GST exclusive')

Annual Appropriations for 2019

Annual

Appropriation1

$'000

Adjustments to

Appropriation

$'000

Total

appropriation

$'000

Appropriation applied in 2019 (current and prior years)

$'000

Variance2
$'000

Departmental

Ordinary annual services

264,806

4,706

269,512

262,108

7,404

Capital Budget

12,295

-

12,295

8,769

3,526

Total departmental

277,101

4,706

281,807

270,877

10,930

Administered

Ordinary annual services

Administered items

880

880

718

162

Payments to corporate Commonwealth entities

-

Other services

Administered assets and liabilities

-

Payments to corporate Commonwealth entities

-

Total administered

880

-

880

718

162

1. Departmental Capital Budgets are appropriated through Appropriation Acts (No. 1, 3). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.

2. The Court has received appropriation related to new Government measures. These measures have not yet been fully implemented. The Court has therefore not spent appropriation related to these measures, causing an underspend of annual appropriation.

3. Receipts collected under Section 74 of the PGPA Act.

Annual Appropriations for 2018

Annual Appropriation1
$'000

Adjustments to Appropriation
$'000

Total appropriation
$'000

Appropriation applied in 2018 (current and prior years)
$'000

Variance2
$'000

Departmental

Ordinary annual services

252,620

3,708

256,328

254,333

1,995

Capital Budget

12,462

-

12,462

9,245

3,217

Total departmental

265,082

3,708

268,790

263,578

5,212

Administered

Ordinary annual services

Administered items

883

-

883

777

106

Total administered

883

-

883

777

106

1. Departmental Capital Budgets are appropriated through Appropriation Acts (No. 1, 3). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.

2. The variance in the expenditure for ordinary annual services is due to expenditure being lower than anticipated, resulting in a small surplus for the year excluding depreciation. The underspend of capital appropriation is due to capital projects which were delayed and not completed prior to the end of the financial year.

3. Receipts collected under Section 74 of the PGPA Act.

Note 5.1B: Unspent Annual Appropriations ('Recoverable GST exclusive')

2019
$'000

2018
$'000

Departmental

Appropriation Act (No. 2) 2016-17 - Equity injection

-

150

Appropriation Act (No. 1) 2017-18

-

63,180

Appropriation Act (No. 1) 2017-18 - Capital budget

2,654

11,192

Appropriation Act (No. 3) 2017-18

-

2,030

Appropriation Act (No. 1) 2018-19

65,151

-

Appropriation Act (No. 1) 2018-19 - Capital budget

12,214

-

Appropriation Act (No. 3) 2018-19

7,579

-

Cash at bank

1,237

1,353

Total departmental

88,834

77,905

Administered

Appropriation Act (No 1) 2018-2019

162

106

Total administered

162

106

Note 5.1C: Special Appropriations ('Recoverable GST exclusive')

Appropriation applied

2019
$'000

2018
$'000

Authority

Public Governance, Performance and Accountability Act 2013, Section 77, Administered

923

553

Total

923

553

5.2 Special Accounts
Note 5.2A: Special Accounts ('Recoverable GST exclusive')

Departmental

Administered

Services for other entities and Trust Moneys Special Account1

Federal Court Of Australia Litigants Fund Special Account2

Family Court and Federal Circuit Court Litigants Fund Special Account3

2019
$'000

2018
$'000

2019
$'000

2018
$'000

2019
$'000

2018
$'000

Balance brought forward from previous period

22

-

22,225

22,878

1,074

969

Increases

374

161

29,592

27,250

837

1,615

Total increases

374

161

29,592

27,250

837

1,615

Available for payments

396

161

51,817

50,128

1,911

2,584

Decreases

Departmental

152

139

-

-

-

-

Total departmental

152

139

-

-

-

-

Decreases

Administered

-

-

13,092

27,903

1,167

1,510

Total administered

-

-

13,092

27,903

1,167

1,510

Total decreases

152

139

13,092

27,903

1,167

1,510

Total balance carried to the next period

244

22

38,725

22,225

744

1,074

Balance represented by:

Cash held in entity bank accounts

244

22

38,725

22,225

744

1,074

Cash held in the Official Public Account

-

-

-

-

-

Total balance carried to the next period

244

22

38,725

22,225

744

1,074

1. Appropriation: Public Governance Performance and Accountability Act section 78. Establishing Instrument: FMA Determination 2012/11. Purpose: To disburse amounts held in trust or otherwise for the benefit of a person other than the Commonwealth.

2. Appropriation: Public Governance Performance and Accountability Act section 78. Establishing Instrument: PGPA Act Determination (Establishment of FCA Litigants’ Fund Special Account 2017). Purpose: The purpose of the Federal Court of Australia Litigants’ Fund Special Account in relation to which amounts may be debited from the Special Account are:

a) In accordance with:

(i) An order of the Federal Court of Australia or a Judge of that Court under Rule 2.43 of the Federal Court Rules; or

(ii) A direction of a Registrar under that Order; and

b) In any other case in accordance with the order of the Federal Court of Australia or a Judge of that Court.

3. Appropriation: Public Governance Performance and Accountability Act section 78. Establishing Instrument: Determination 2013/06.

The Finance Minister has issued a determination under Subsection 20(1) of the FMA ACT 1997 (repealed) establishing the Federal Court of Australia Litigants’ Fund Special Account when the Federal Circuit Court of Australia and Family Court of Australia merged on 1 July 2014.

Purpose: Litigants Fund Special Account

(a) for amounts received in respect of proceedings of the Family Court of Australia or the Federal Circuit Court of Australia (formerly the Federal Magistrates Court of Australia);

(b) for amounts received in respect of proceedings that have been transferred from another court to the Family Court of Australia or to the Federal Circuit Court of Australia (formerly the Federal Magistrates Court of Australia);

(c) for amounts received from the Family Court of Australia Litigants’ Fund Special Account or the Federal Magistrates Court Litigants’ Fund Special Account;

(d) to make payments in accordance with an order (however described) made by a court under the Family Law Act 1975, the Family Court of Australia, or a Judge of that Court;

(e) to make payments in accordance with an order (however described) made by a court under the Federal Circuit Court of Australia Act 1999 (formerly the Federal Magistrates Act 1999), the Federal Circuit Court of Australia (formerly the Federal Magistrates Court of Australia), or a Judge (formerly Federal Magistrate) of that Court;

(f) to repay amounts received by the Commonwealth and credited to this Special Account where an Act of Parliament or other law requires or permits the amount to be repaid; and

g) to reduce the balance of this Special Account without making a real or notional payment.

5.3 Net Cash Appropriation Arrangements

2019
$'000

2018
$'000

Total comprehensive income less depreciation/amortisation expenses previously funded through revenue appropriations

4,651

2,549

Plus: depreciation/amortisation expenses previously funded through revenue appropriation

(13,882)

(16,253)

Total comprehensive loss - as per the Statement of Comprehensive Income

(9,231)

(13,704)

6. People and Relationships

This section describes a range of employment and post-employment benefits provided to our people and our relationships with other key people.

6.1 Employee Provisions
Note 6.1A: Employee Provisions

2019
$'000

2018
$'000

Leave

29,541

27,119

Judges’ leave

32,849

32,796

Total employee provisions

62,390

59,915

Accounting Policy

Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits) and termination benefits expected within twelve months of the end of the reporting period are measured at their nominal amounts.

Other long-term judicial and employee benefits are measured as 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 the Federal Court of Australia’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for annual leave and long service leave has been determined by reference to the work of an actuary as at 30 June 2017. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The Federal Court of Australia recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

The Federal Court of Australia’s staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

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.

The entity makes employer contributions to the employees' superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The entity accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

Judges’ Pension

Under the Judges’ Pension Act 1968, Federal Court and Family Court Judges are entitled to a non-contributory pension upon retirement 10 years service. As the liability for these pension payments is assumed by the Australian Government, the entity has not recognised a liability for unfunded superannuation liability. The Federal Court of Australia does, however, recognise a revenue and corresponding expense item, "Liabilities assumed by other agencies”, in respect of the notional amount of the employer contributions to Judges’ pensions for the reporting period amounting to $33.149 million (2018: $27.111 million). The contribution rate has been provided by the Department of Finance following an actuarial review.

6.2 Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The entity has determined the key management personnel to be the Chief Justice of the Federal Court of Australia, the Chief Justice of the Family Court of Australia, the Chief Judge of the Federal Circuit Court of Australia, the Chief Executive Officers of the Federal Court of Australia, the Family Court of Australia and the Federal Circuit Court of Australia, the President and Registrar of the National Native Title Tribunal and the Executive Director of Corporate Services.

The 2017/18 financial statements also included 3 Executive Directors as Key Management Personnel. This assessment has been reassessed and confirmed that although these positions make operational decisions in their respective areas of responsibility, they do not satisfy the definition of a key management personnel in accordance with AASB 124 Related Party Disclosures. As a result the 2017/18 comparative key management personnel remuneration has been restated to exclude those 3 key management personnel and their remuneration expenses of $711k, consisting of Short-term employee benefits $558k, Post-employment benefits $96k and Other long-term employee benefits $57k.

2019
$'000

2018
$'000

Short-term employee benefits

2,905

3,225

Post-employment benefits

1,300

1,283

Other long-term employee benefits

165

333

Termination benefits

-

-

Total key management personnel remuneration expenses

4,370

4,841

The total number of key management personnel that are included in the above table are 8 (2018: 12).

6.3 Related Party Disclosures

Related party relationships:

The entity is an Australian Government controlled entity within the Attorney-General’s portfolio. Related parties include key management personnel as well as other Australian Government entities.

Transactions with related parties:

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher educational loans. These transactions have not been separately disclosed in this note.

Significant transactions with related parties can include:

  • the payments of grants or loans;
  • purchases of goods and services;
  • asset purchases, sales transfers or leases;
  • debts forgiven; and
  • guarantees.

Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the entity, it has been determined that there are no related party transactions to be separately disclosed.

The Courts have no transactions with related parties to disclose as at 30 June 2019 (2018: none).

7. Managing Uncertainties

This section analyses how the Federal Court of Australia manages financial risks within its operating environment.

7.1 Contingent Liabilities and Assets

Note 7.1A: Contingent Liabilities and Assets

Quantifiable Contingencies

The Federal Court of Australia has no quantifiable contingent assets or liabilities as at 30 June 2019 (2018: none).

Unquantifiable Contingencies

The Federal Court of Australia has no unquantifiable contingent assets or liabilities as at 30 June 2019 (2018: none).

Accounting Policy

Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

The Courts have no quantifiable or unquantifiable administered contingent liabilities or assets as at 30 June 2019 (2018: none).

7.2 Financial Instruments
Note 7.2A: Categories of Financial Instruments

2019
$'000

2018
$'000

Financial assets under AASB 139

Loans and receivables

Cash and cash equivalents

1,353

Trade and other receivables

481

Total loans and receivables

1,834

Financial assets under AASB 9

Financial assets at amortised cost

Cash and cash equivalents

1,237

Trade and other receivables

627

Total financial assets at amortised cost

1,864

Total financial assets

1,864

1,834

Financial Liabilities

Financial liabilities measured at amortised cost

Trade creditors

7,911

7,722

Finance leases

2,574

2,506

Total financial liabilities

10,485

10,228

Accounting Policy

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the entity classifies 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 the entity's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition.

Financial assets are recognised when the entity becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

Comparatives have not been restated on initial application.

Financial Assets at Amortised Cost

Financial assets included in this category need to meet two criteria:

  1. the financial asset is held in order to collect the contractual cash flows; and
  2. the cash flows are solely payments of principal and interest(SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest method.

Impairment of financial assets

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12‐month expected credit losses if risk has not increased.

The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

Financial Liabilities

Financial liabilities are classified as either financial liabilities 'at fair value through profit or loss' or other financial liabilities. Financial liabilities are recognised and derecognised upon 'trade date'.

Other Financial Liabilities

Other financial liabilities are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

The fair value of financial instruments approximates its carrying value.

Classification of financial assets on the date of initial application of AASB 9

Financial assets class

Notes

AASB 139 original classification

AASB 9 new classification

AASB 139 carrying amount at 1 July 2018
$'000

AASB 9 carrying amount at 1 July 2018
$'000

Cash and cash equivalents

3.1A

Loans and receivables

Amortised Cost

1,353

1,353

Trade and other receivables

3.1B

Loans and receivables

Amortised Cost

481

481

Total financial assets

1,834

1,834

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB 9

Financial assets class

AASB 139 carrying amount at 1 July 2018
$'000

Reclassification
$'000

Re-measurement
$'000

AASB 9 carrying amount at 1 July 2018
$'000

Financial assets at amortised cost

Loan and receivables

Cash and cash equivalents

1,353

-

-

1,353

Trade and other receivables

481

-

-

481

Total amortised cost

1,834

-

-

1,834

Note 7.2B: Net Gains or Losses on Financial Liabilities

2019
$'000

2018
$'000

Financial liabilities measured at amortised cost

Interest expense

65

78

Net gains/(losses) on financial liabilities measured at amortised cost

65

78

7.3 Administered – Financial Instruments
Note 7.3A: Categories of Financial Instruments

2019
$'000

2018
$'000

Financial assets under AASB 139

Loans and receivables

Cash and cash equivalents

136

Other receivables

4,599

Total loans and receivables

4,735

Financial assets under AASB 9

Financial assets at amortised cost

Cash and cash equivalents

142

Other receivables

2,250

Total financial assets at amortised cost

2,392

Total financial assets

2,392

4,735

Classification of financial assets on the date of initial application of AASB 9

Financial assets class

Notes

AASB 139 original classification

AASB 9 new classification

AASB 139 carrying amount at 1 July 2018
$'000

AASB 9 carrying amount at 1 July 2018
$'000

Cash and cash equivalents

Loans and receivable

At amortised cost

136

136

Other receivables

Loans and receivable

At amortised cost

4,599

2,745

Total financial assets

4,735

2,881

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB 9

Financial assets class

AASB 139 carrying amount at 1 July 2018
$'000

Reclassification
$'000

Re-measurement
$'000

AASB 9 carrying amount at 1 July 2018
$'000

Cash and cash equivalents

136

-

-

136

Other receivables

4,599

-

(1,854)

2,745

Total amortised cost

4,735

-

(1,854)

2,881

7.4 Fair Value Measurement

Accounting Policy

AASB 2015-7 provides relief for not-for-profit public sector entities from making certain specified disclosures about the fair value measurement of assets measured at fair value and categorised within Level 3 of the fair value hierarchy.

Valuations are performed regularly so as to ensure that the carrying amount does not materially differ from fair value at the reporting date. A valuation was made by an external valuer in 2017. The Federal Court of Australia reviews the method used by the valuer annually.

Note 7.4A: Fair Value Measurement

Fair value measurements at the end of the reporting period

2019
$'000

2018
$'000

Non-financial assets

Leasehold improvements

33,318

38,056

Plant and equipment

14,781

14,445

The Court's assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of these assets is considered to be the highest and best use.

There have been no transfers between the levels of the hierarchy during the year. The Court deems transfers between levels of the fair value hierarchy to have occurred when advised by an independent valuer or a change in the market for particular items.

8. Other Information

This section provides other disclosures relevant to the Federal Court of Australia financial information environment for the year.

8.1 Aggregate Assets and Liabilities
Note 8.1A: Aggregate Assets and Liabilities

2019
$'000

2018
$'000

Assets expected to be recovered in:

No more than 12 months

93,579

82,954

More than 12 months

59,520

62,926

Total assets

153,099

145,880

Liabilities expected to be settled in:

No more than 12 months

25,817

26,279

More than 12 months

53,560

48,943

Total liabilities

79,377

75,222

Note 8.1B: Administered Aggregate Assets and Liabilities

2019
$'000

2018
$'000

Assets expected to be recovered in:

No more than 12 months

2,392

4,735

More than 12 months

-

-

Total assets

2,392

4,735

Liabilities expected to be settled in:

No more than 12 months

699

513

More than 12 months

-

-

Total liabilities

699

513