Objectives of the Food Standards Australia New Zealand

Food Standards Australia New Zealand (FSANZ) was established to implement an agreement with States and Territories to achieve the goals of a high degree of consumer confidence in the quality and safety of food that is available in Australia and New Zealand; an effective, transparent and accountable regulatory framework within which industry can work efficiently; the provision of adequate information about food to support informed food choices; and the harmonisation of food standards in Australia and New Zealand, and internationally.

Basis of preparation

The financial statements are general purpose financial statements, which 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 – Reduced Disclosure Requirements and Interpretations 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 rounded to the nearest thousand dollars ($'000) unless otherwise specified.

New Accounting Standards

All new accounting standards, revised standards or amending 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 FSANZ’s financial statements.

AASB 15 & 1058

FSANZ 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 2018-19 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 FSANZ first determines 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), FSANZ applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, FSANZ considers whether AASB 1058 applies.

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

In terms of AASB 1058, FSANZ 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.

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:

Impact on Transition of AASB 15

Transitional Disclosure

AASB 16 Leases

FSANZ 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 2018-19 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

FSANZ 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. FSANZ 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 all 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;
• 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; 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, FSANZ 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, FSANZ recognises right-of-use assets and lease liabilities for most leases. However, FSANZ has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets 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, FSANZ 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 FSANZ’s incremental borrowing rate as at 1 July 2019. FSANZ’s incremental borrowing rate 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 0.087%.

The right-of-use assets were measured as follows:

Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

Impact on Transition of AASB 16

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:

Taxation

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

Foreign Currency

Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency bank account amounts are translated at the exchange rate current as at the reporting date. The primary foreign currency transactions are with New Zealand.

AASB 1055: Explanations of Actual to Budget Variances

The budget variance explanations provide a comparison of the original budget as presented in the 2019-20 Portfolio Budget Statements (PBS) to the 2019-20 final outcome as presented in accordance with Australian Accounting Standards for FSANZ. Variances are considered to be ‘major’ based on the following criteria:

• the variance between budget and actual is greater than 10% and greater than $0.200 million: and
• the variance between budget and actual is greater than 2% of total expenses or total own source revenues: or
• the variance between budget and actual is below this threshold but is considered important for the reader’s understanding or is relevant to an assessment of the discharge of accountability and to an analysis of performance of the agency.

In some instances, a budget has not been provided for in the PBS, for example non-cash items such as asset revaluations. Unless the variance is considered to be ‘major’ no explanation has been provided.

Prior Year Adjustment

The prior year Revenue from Contracts with Customers (2018-19: Sale of Goods and Rendering of Services) was reduced by an adjustment relating to an application of AASB 15 accounting standard that affected the 2018-19 opening balance of Retained Earnings. This is disclosed in the statement of changes in equity and Note 1.2A

Events After the Reporting Period

There has been no event since 30 June 2020 that had the potential to significantly affect the ongoing structure and financial activities of FSANZ.