Table of Contents
Statement by the Chief Executive Officer and Chief Financial Officer
National Audit Office report
Primary financial statements
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Cash flow statement
Overview
Notes to financial statements
Financial performance
Note 1.1 Expenses
Note 1.2 Own-source revenue and gains
Financial position
Note 2.1 Financial assets
Note 2.2 Non-financial assets including fair value measurement
Note 2.3 Payables
Note 2.4 Interest bearing liabilities
People and relationships
Note 3.1 Employee provisions
Note 3.2 Key management personnel remuneration
Note 3.3 Related party disclosures
Managing uncertainties
Note 4.1 Contingent assets and liabilities
Note 4.2 Cash and financial instruments
Statement by the Chief Executive Officer and Chief Financial Officer
In our opinion, the attached financial statements for the year ended 30 June 2020 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(2) of the PGPA Act.
In our opinion, at the date of this statement, there are reasonable grounds to believe that the Independent Hospital Pricing Authority will be able to pay its debts as and when they fall due.
Chief Executive Officer
2 October 2020
Chief Financial Officer
2 October 2020
National Audit Office report
Primary financial statements
Statement of comprehensive income
for the period ended 30 June 2020
Notes | 2020 $’000 | 2019 $’000 | Original Budget $’000 | |
NET COST OF SERVICES | ||||
EXPENSES | ||||
Employee benefits | 7,983 | 6,763 | 7,126 | |
Suppliers | 13,224 | 17,034 | 15,754 | |
Depreciation and amortisation | 1,323 | 365 | 465 | |
Finance costs | 75 | - | - | |
Losses from the disposal of assets | 152 | - | - | |
Total expenses | 22,757 | 24,162 | 23,345 | |
OWN-SOURCE INCOME | ||||
Own-source revenue | ||||
Sale of goods and rendering of services | 804 | 2,079 | 900 | |
Interest | 56 | 177 | 220 | |
Resources received free of charge | 7,722 | 6,423 | 7,201 | |
Total own-source revenue | 8,582 | 8,679 | 8,321 | |
Gains | ||||
Other gains | - | 27 | - | |
Total gains | - | 27 | - | |
Total own-source income | 8,582 | 8,706 | 8,321 | |
Net cost of services | 14,175 | 15,456 | 15,024 | |
Revenue from Government | 15,024 | 15,487 | 15.024 | |
Surplus | 849 | 31 | - | |
Total comprehensive surplus | 849 | 31 | - |
The above statement should be read in conjunction with the accompanying notes.
Budget Variances Commentary
Statement of Comprehensive Income
Total expenses of $22.757m were $0.588m lower than the budgeted amount of $23.345m. The main driver was lower supplier expenses of $2.530m which was partially offset by higher employee benefits of $0.857m and, depreciation and amortisation expense of $0.858m.
Supplier expenses were lower than budget primarily due to a greater proportion of projects being managed in-house which resulted in net savings and deferred program activity arising from state and territory hospital resources being reassigned to manage the COVID-19 pandemic.
Employee benefits were higher than budget due to a greater number of staff compared to budget assumptions and, depreciation and amortisation was higher primarily due to the exclusion of depreciation on right-of-use assets in the budget assumptions. Note that estimates from the adoption of AASB 16 Leases were excluded from budget assumptions consistent with Department of Finance advice provided to Commonwealth entities.
Total own source income of $8.582m was $0.261m greater than the budgeted amount of $8.321m, primarily due to higher resources received free of charge of $0.521m which was partially offset by lower sales of goods and rendering of services of $0.096m, and interest of $0.164m. Resources received free of charge exceeded the budget primarily due to the recovery of higher employee expenses. Sales of goods and rendering of services were lower than budget due to fewer sales of licences relating to the Australian Refined Diagnosis Related Groups classification systems and interest was lower than budget due to larger than anticipated reduction in interest rates.
Statement of financial position
as at 30 June 2020
Notes | 2020 $’000 | 2019 $’000 | Original Budget $’000 | |
ASSETS | ||||
Financial assets | ||||
Cash and cash equivalents | 14,119 | 13,896 | 13,085 | |
Trade and other receivables | 199 | 1,132 | 80 | |
Total financial assets | 14,318 | 15,028 | 13,165 | |
Non-financial assets | ||||
Buildings | 6,112 | - | - | |
Leasehold improvement | 1,686 | 234 | 1,433 | |
Plant and equipment | 2 | 201 | 214 | |
Computer software and other intangibles | 177 | 406 | 343 | |
Other - prepayments | 161 | 155 | 153 | |
Total non-financial assets | 8,138 | 996 | 2,143 | |
Total assets | 22,456 | 16,024 | 15,308 | |
LIABILITIES | ||||
Payables | ||||
Suppliers | 2,416 | 3,099 | 2,264 | |
Other payables | 12 | 72 | 60 | |
Total payables | 2,428 | 3,171 | 2,324 | |
Interest bearing liabilities | ||||
Lease liabilities | 6,433 | - | - | |
Total interest bearing liabilities | 6,433 | - | - | |
Provisions | ||||
Employee provisions | 101 | 85 | 96 | |
Other provisions | - | - | 151 | |
Total provisions | 101 | 85 | 247 | |
Total liabilities | 8,962 | 3,256 | 2,571 | |
Net assets | 13,494 | 12,768 | 12,737 | |
EQUITY | ||||
Contributed equity | 400 | 400 | 400 | |
Asset revaluation reserve | - | 74 | 88 | |
Retained surplus | 13,094 | 12,294 | 12,249 | |
Total equity | 13,494 | 12,768 | 12,737 |
The above statement should be read in conjunction with the accompanying notes.
Budget Variances Commentary
Statement of Financial Position
Total assets of $22.456m were $7.148m higher than the budget of $15.308m primarily due to the recognition of right-of-use assets in relation to the lease of office space of $6.112m. The cash balance was also $1.034m higher than budget primarily due to the current year surplus.
Total liabilities of $8.962m were $6.391m higher than the budget of $2.571m primarily due to the recognition of lease liabilities in relation to the lease of office space of $6.433m. Note that estimates from the adoption of AASB 16 Leases were excluded from budget assumptions consistent with Department of Finance advice provided to Commonwealth entities.
Total equity of $13.494m was $0.757m higher than the budget of $12.737m primarily due to the current period surplus noting that the budget is derived on a break-even assumption.
Statement of changes in equity
for the period ended 30 June 2020
Notes | 2020 $’000 | 2019 $’000 | Original Budget $’000 | |
CONTRIBUTED EQUITY | ||||
Opening balance | ||||
Balance carried forward from previous period | 400 | 400 | 400 | |
Closing balance as at 30 June | 400 | 400 | 400 | |
ASSET REVALUATION RESERVE | ||||
Opening balance | ||||
Balance carried forward from previous period | 74 | 88 | 88 | |
Transfer to retained earnings | ||||
From disposal of revalued assets | (74) | (14) | - | |
Closing balance as at 30 June | - | 74 | 88 | |
RETAINED EARNINGS | ||||
Opening balance | ||||
Balance carried forward from previous period | 12,294 | 12,249 | 12,294 | |
Adjustment for changes to accounting standards | ||||
Adjustment on initial application of AASB 16 | (123) | - | - | |
Transfer from asset revaluation reserve | ||||
From disposal of revalued assets | 74 | 14 | - | |
Comprehensive income | ||||
Surplus for the period | 849 | 31 | - | |
Closing balance as at 30 June | 13,094 | 12,294 | 12,294 | |
TOTAL EQUITY | ||||
Opening balance | ||||
Balance carried forward from previous period | 12,768 | 12,737 | 12,737 | |
Equity movements during the period | ||||
Adjustment on initial application of AASB 16 | (123) | - | - | |
Surplus for the period | 849 | 31 | - | |
Closing balance as at 30 June | 13,494 | 12,768 | 12,737 |
The above statement should be read in conjunction with the accompanying notes.
Budget Variances Commentary
Statement of Changes in Equity
Total equity of $13.494m was $0.757m higher than the budget of $12.737m primarily due to the current period surplus noting the budget is derived on a break-even assumption. IHPA has applied AASB 16 Leases using the modified retrospective approach and applied adjustments on initial application against retained earnings in accordance with the standard.
Cash flow statement
for the period ended 30 June 2020
Notes | 2020 $’000 | 2019 $’000 | Original Budget $’000 | |
OPERATING ACTIVITIES | ||||
Cash received | ||||
Receipts from government | 15,714 | 14,797 | 15,024 | |
Sale of goods and rendering of services | 1,025 | 1,994 | 963 | |
Interest | 67 | 179 | 220 | |
Net GST received | 1,681 | 1,237 | 1,425 | |
Total cash received | 18,487 | 18,207 | 17,632 | |
Cash used | ||||
Employees | (835) | (768) | (850) | |
Suppliers | (14,988) | (17,223) | (16,367) | |
Interest payments on lease liabilities | (75) | - | - | |
Total cash used | (15,898) | (17,991) | (17,217) | |
Net cash from /(used by) operating activities | 2,589 | 216 | 415 | |
INVESTING ACTIVITIES | ||||
Cash used | ||||
Purchase of computer software | - | (10) | - | |
Purchase of leasehold improvements | (1,728) | (22) | (1,300) | |
Total cash used | (1,728) | (32) | (1,300) | |
Net cash from /(used by) investing activities | (1,728) | (32) | (1,300) | |
FINANCING ACTIVITIES | ||||
Cash used | ||||
Principal payments of lease liabilities | (638) | - | - | |
Total cash used | (638) | - | - | |
Net cash from/(used by) financing activities | (638) | - | - | |
Net increase in cash held | 223 | 184 | (885) | |
Cash and cash equivalents at the beginning of the reporting period | 13,896 | 13,712 | 13,970 | |
Cash and cash equivalents at the end of the reporting period | 14,119 | 13,896 | 13,085 |
The above statement should be read in conjunction with the accompanying notes.
Budget Variances Commentary
Statement of Changes in Cash Flow
The closing cash balance of $14.119m was $1.034m higher than the budgeted amount of $13.085m primarily due to the current period surplus, noting the budget is derived on a break-even assumption.
Overview
Objectives of the Independent Hospital Pricing Authority
The Independent Hospital Pricing Authority (IHPA) is a corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).
IHPA's role and functions are set out in the National Health Reform Act 2011.
IHPA’s functions include to:
- determine the National Efficient Price and National Efficient Cost for public hospital services
- develop national classifications for Activity Based Funding
- resolve disputes on cost-shifting and cross-border issues.
IHPA is structured to meet the following outcome: promote improved efficiency in, and access to, public hospital services primarily through setting the national efficient price and levels of block funding for hospital activities.
The continued existence of the entity in its present form, and with its present programs, is dependent on government policy and on continuing funding by Parliament for the entity's administration and programs.
The basis of preparation
The financial statements are general purpose financial statements and are required by section 42 of the PGPA Act.
The financial statements have been prepared in accordance with the:
- Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR), and
- Australian Accounting Standards and Interpretations — Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.
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.
Significant changes affecting IHPA during 2019–20
No significant changes affecting IHPA have occurred in this reporting period.
COVID-19 pandemic impacts
Due to state and territory hospital resources being reassigned to manage the COVID-19 pandemic, some forecast expenditure relating to the non-admitted costing study has been deferred until such time resources become available. There were no other financial impacts from the pandemic.
New Accounting Standards
Adoption of new Australian Accounting Standard requirements
IHPA has adopted all new, revised and amending standards and interpretations that were issued by the Australian Accounting Standards Board (AASB) prior to the sign-off date and which are applicable to the current reporting period.
The following new, revised and amending standards and interpretations were issued by the AASB prior to the signing of the statement by the Chief Executive Officer and Chief Financial Officer:
New standard | Expected impact |
AASB 15 Revenue from Contracts with Customers | No impact |
AASB 1058 Income of Not-for-Profit Entities | No impact |
AASB 16 Leases | On adoption of AASB 16, IHPA recognised right-of-use assets and lease liabilities in relation to office space, which had previously been classified as an operating lease. As a result finance costs (representing an interest charge on the lease liability using the incremental borrowing rate as at the date of initial application) have been recognised for the first time and will decrease over the term term. Further information on the application of AASB 16 Leases and the impact on transition is provided below. |
All other new, revised and amending standards or interpretations that have been issued by the AASB prior to sign-off date that are applicable to future reporting periods are not expected to have a future material financial impact on IHPA's financial statements.
Application of AASB 16 Leases
On the 1 July 2019, IHPA 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.
Impact on transition
On transition to AASB 16, IHPA recognised additional right-of-use assets and lease liabilities and reduced lease payable to nil, recognising the difference in retained earnings. The impact on transition is summarised below:
1 July 2019 | |
Increase in Right-of-Use assets — office space (Buildings) | 6,884 |
Increase in lease liabilities | 7,071 |
Reduction in lease payable | 64 |
Reduction in retained earnings | 123 |
The following table reconciles IHPA's minimum lease commitments disclosed in IHPA's 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:
1 July 2019 | |
Minimum operating lease commitment at 30 June 2019 | 2,996 |
Plus: Effect of extension options reasonably certain to be exercised | 4,450 |
Undiscounted lease payments | 7,446 |
Less: Effect of discounting using the incremental borrowing rate as at the date of initial application | (375) |
Lease liabilities recognised at 1 July 2019 | 7,071 |
Significant accounting judgements and estimates
Except where specifically identified and disclosed, IHPA has determined that no accounting assumptions and estimates have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next accounting period.
Comparative figures
Comparative figures have been adjusted, where required, to conform to changes in presentation of the financial statements.
Taxation
IHPA is exempt from all forms of taxation, except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).
Revenues, expenses, assets and liabilities are recognised net of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office.
Events after the reporting period
No events have occurred since the reporting date which have had a material impact on the financial statements.
Notes to financial statements
Financial performance
This section analyses the financial performance of IHPA for the year ended 30 June 2020.
Note 1.1 Expenses
2020 | 2019 | |
Wages and salaries | 527 | 545 |
Superannuation | ||
Defined contribution plans | 61 | 60 |
Leave and other entitlements | 267 | 267 |
Wages and salaries for staff provided by Department of Health | 7,128 | 5,891 |
Total employee benefits | 7,983 | 6,763 |
Accounting Policy
Employee benefits
Accounting policies for employee benefits is contained in the People and Relationships section.
2020 | 2019 | |
Goods and services supplied or rendered | ||
Consultants | 4,244 | 7,330 |
Contractors | 3,955 | 3,932 |
IT services | 3,764 | 2,750 |
Travel | 211 | 371 |
Training | 168 | 170 |
Publishing materials | 175 | 512 |
Legal and audit expenses | 179 | 200 |
Conferences and seminars | 158 | 633 |
Other | 367 | 381 |
Total goods and services supplied or rendered | 13,221 | 16,279 |
Goods supplied | 307 | 658 |
Services rendered | 12,914 | 15,621 |
Total goods and services supplied or rendered | 13,221 | 16,279 |
Other suppliers | ||
Operating lease rentals in connection with minimum lease payments | - | 751 |
Workers’ compensation expenses | 3 | 4 |
Total other suppliers | 3 | 755 |
Total suppliers | 13,224 | 17,034 |
Leasing commitments
On the 1 June 2018, IHPA in its capacity as lessee entered into a 5 year lease (with 5 year extension option) for office space. The lease is subject to an annual cost increase and is not able to be cancelled.
2020 | 2019 | |
Interest on lease liabilities (office space lease) | 75 | - |
Total finance costs | 75 | - |
The Entity has applied AASB 16 Leases using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117. Refer to Overview section for accounting policy on leases.
Note 1.2 Own-source revenue and gains
2020 | 2019 | |
OWN-SOURCE REVENUE | ||
Sale of goods | 683 | 1,719 |
Rendering of services | 121 | 360 |
Total sale of goods and rendering of services | 804 | 2,079 |
Accounting Policy
Sale of goods and rendering of services
Revenue from the sale of goods is recognised when:
- the risks and rewards of ownership have been transferred to the buyer, and
- IHPA retains no managerial involvement or effective control over the goods.
Revenue from rendering of services is recognised by reference to the stage of completion at the reporting date. The revenue is recognised when the:
- amount of revenue, stage of completion and transaction costs incurred can be reliably measured, and
- probably economic benefits associated with the transactions will flow to IHPA.
The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear 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 account. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable.
2020 | 2019 | |
Departmental contribution received free of charge | 7,657 | 6,359 |
Other resources received free of charge | 65 | 64 |
Total other revenue | 7,722 | 6,423 |
Accounting Policy
Revenue received free of charge
Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as revenue.
2020 | 2019 | |
Reversal of restoration provision / make-good asset | - | 27 |
Total other gains | - | 27 |
2020 | 2019 | |
Amounts from Department of Health | 15,024 | 15,487 |
Total revenue from Government | 15,024 | 15,487 |
Accounting Policy
Revenue from Government
Funding received or receivable from non-corporate Commonwealth entities is recognised as Revenue from Government by IHPA unless the funding is in the nature of an equity injection or a loan.
Financial position
This section analyses the IHPA's 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.
Note 2.1 Financial assets
2020 | 2019 | |
Cash on deposit | 14,119 | 13,896 |
Total cash and cash equivalents | 14,119 | 13,896 |
Accounting Policy
Cash and cash equivalents
Cash is recognised at its nominal amount. Cash and cash equivalents includes:
- cash on hand, and
- demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.
2020 | 2019 | |
Other receivables | ||
GST receivable from the Australian Taxation Office | 187 | 281 |
Other amounts receivable | 12 | 851 |
Total other receivables | 199 | 1,132 |
Total trade and other receivables (gross) | 199 | 1,132 |
Less impairment allowance | - | - |
Total trade and other receivables (net) | 199 | 1,132 |
Trade and other receivables (net) expected to be recovered | ||
No more than 12 months | 199 | 1,132 |
More than 12 months | - | |
Total trade and other receivables (net) | 199 | 1,132 |
Accounting Policy
Trade and other receivables
IHPA's financial assets are comprised of trade receivables and other receivables that are held for the purpose of collecting the contractual cash flows. All of IHPA's financial assets are measured, and carried, at amortised cost.
Impairment
All assets were assessed for impairment as at 30 June 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.
Note 2.2 Non-financial assets including fair value measurement
Buildings $’000 | Leasehold improvement $’000 | Plant and equipment $’000 | Computer software and other intangibles $’000 | Total $’000 | |
As at 1 July 2019 | |||||
Gross book value | - | 292 | 282 | 1,075 | 1,649 |
Accumulated depreciation, amortisation and impairment | - | (58) | (81) | (669) | (808) |
Total as at 1 July 2019 | - | 234 | 201 | 406 | 841 |
Recognition of right-of-use asset on initial application of AASB 16 | 6,884 | - | - | - | 6,884 |
Adjusted total as at 1 July 2019 | 6,884 | 234 | 201 | 406 | 7,725 |
Additions | |||||
Purchase | - | 1,728 | - | - | 1,728 |
Depreciation and amortisation | - | (276) | (46) | (229) | (551) |
Depreciation on right-of-use assets | (772) | - | - | - | (772) |
Disposals | |||||
Non-cash consideration | - | (173) | (276) | (288) | (737) |
Writeback of depreciation and other adjustments | - | 173 | 123 | 288 | 584 |
Total as at 30 June 2020 | 6,112 | 1,686 | 2 | 177 | 7,977 |
Total as at 30 June 2020 represented by | |||||
Gross book value | 6,884 | 1,847 | 6 | 787 | 9,524 |
Accumulated depreciation, amortisation and impairment | (772) | (161) | (4) | (610) | (1,547) |
Total as at 30 June 2020 | 6,112 | 1,686 | 2 | 177 | 7,977 |
Carrying amount of right-of-use assets | 6,112 | - | - | - | 6,112 |
No indicators of impairment were found for property, plant and equipment or intangibles.
Note 2.2B: Fair Value Measurement
The following tables provide an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the statement of financial position do not apply the fair value hierarchy.
The different levels of the fair value hierarchy are defined below.
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
Fair value measurements | Valuation technique(s) and inputs used1 | ||||
2020 | 2019 | Category (Level 1,2 or 3) | |||
Non-financial assets | |||||
Leasehold improvements | 1,686 | 234 | 3 | Valuation technique is depreciated replacement costs. Inputs used are replacement cost new (price per square metre) and consumed economic benefit/obsolescence of asset. | |
Plant and equipment | 2 | 201 | 2 | Valuation technique is market approach and inputs used are adjusted market transactions. |
1No change in valuation technique occurred during the period.
Accounting Policy
Property, plant and equipment, and intangibles
Assets are recorded at cost on acquisition except as stated below. The cost on acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.
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 costing less than $5,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).
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 did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depended 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 reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class.
Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.
Depreciation
Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the entity 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:
2020 | 2019 | |
Leasehold improvements | Lease terms | Lease terms |
Plant and equipment | 3 to 6 years | 3 to 6 years |
Impairment
All assets were assessed for impairment at 30 June 2020. Where indications of impairment exist, the assets 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 of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the entity 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 entity's intangibles comprise internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.
Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the entity's software are 1 to 4 years (2019: 1 to 4 years). All software assets were assessed for indications of impairment as at 30 June 2020.
Fair value measurement
IHPA tests the procedures of the valuation model as an internal management review at least once every 12 months (with a formal revaluation undertaken once every three years). If a particular asset class experiences significant and volatile changes in fair value (i.e. where indicators suggest that the value of the class has changed materially since the previous reporting period), that class is subject to specific valuation in the reporting period, where practicable, regardless of the timing of the last specific valuation.
Note 2.3 Payables
2020 | 2019 | |
Trade creditors and accruals | 2,416 | 3,099 |
Total suppliers | 2,416 | 3,099 |
Amounts are expected to be settled in no more than 12 months. |
2020 | 2019 | |
Payable to Department of Health | 2 | 2 |
Salaries and wages | 10 | 6 |
Lease payable | - | 64 |
Total other payables | 12 | 72 |
Other payables to be settled | ||
No more than 12 months | 12 | 72 |
More than 12 months | - | - |
Total other payables | 12 | 72 |
Note 2.4 Interest bearing liabilities
2020 | 2019 | |
Lease liability (office space) | 6,433 | - |
Total lease liabilities | 6,433 | - |
Lease liabilities expected to be settled | ||
No more than 12 months | 677 | - |
More than 12 months | 5,756 | - |
Total lease liabilities | 6,433 | - |
IHPA has applied AASB 16 Leases using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported as an operating lease expense under AASB 117. Refer to Overview section for accounting policy on leases.
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.
Note 3.1 Employee provisions
2020 | 2019 | |
Leave | 101 | 85 |
Total employee provisions | 101 | 85 |
Employee provisions expected to be settled | ||
No more than 12 months | 16 | 13 |
More than 12 months | 85 | 72 |
Total employee provisions | 101 | 85 |
Accounting Policy
Employee provisions
Liabilities for short-term employee benefits and termination benefits expected within 12 months of the end of reporting period are measured at their nominal amounts.
Other long-term 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 entity’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 estimate of the present value of the liability takes into account attrition rates, and pay increases through promotion and inflation.
Superannuation
The entity'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' defined benefit 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.
Note 3.2 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 Pricing Authority member. The entity has determined the key management personnel to be the Chief Executive Officer and the Pricing Authority members.
Key management personnel remuneration is reported in the table below:
2020 | 2019 | |
Short-term employee benefits | 774 | 768 |
Post-employment benefits | 53 | 54 |
Other long-term benefits | 9 | 8 |
Termination benefits | - | - |
Total key management personnel remuneration expenses1 | 836 | 830 |
The total number of key management personnel that are included in the above table is 10 (2019: 10).
1 The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Ministers whose remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the entity.
Note 3.3 Related party disclosures
Related party relationships:
The entity is an Australian Government controlled entity. Related parties to this entity are the key management personnel as per Note 3.2 Key Management Personnel Remuneration and other Australian Government entities.
Transactions with related parties:
Given the breadth of Government activities, related parties may transact with the Government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.
Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the entity, it has been determined that there are no related party transactions to be separately disclosed.
Managing uncertainties
This section analyses how IHPA manages financial risks within its operating environment.
Note 4.1 Contingent assets and liabilities
Quantifiable contingencies
There were no quantifiable contingent assets or liabilities in this reporting period (2019: nil).
Unquantifiable contingencies
There were no unquantifiable contingent assets or liabilities in this reporting period (2019: nil)
Significant remote contingencies
There were no significant remote contingent assets or liabilities in this reporting period (2019: nil).
Accounting Policy
Contingent asset and liabilities
Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset, or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain, and contingent liabilities are disclosed when settlement is greater than remote.
Note 4.2 Cash and financial instruments
2020 | 2019 | |
Cash on deposit | 14,119 | 13,896 |
2020 | 2019 | |
Financial assets at amortised cost | ||
Trade and other receivables | 12 | 851 |
Less: Impairment allowance | - | - |
Total assets at amortised cost | 12 | 851 |
2020 | 2019 | |
Financial liabilities measured at amortised cost | ||
Trade creditors and accruals | 2,416 | 3,099 |
Total financial liabilities measured at amortised cost | 2,416 | 3,099 |
Accounting Policy
Cash and cash equivalents
Cash is recognised at its nominal amount.
Classification and measurement
The classification and measurement of IHPA's financial assets under AASB 9 is determined by its business model for managing its financial assets and the contractual cash flow characterisitcs of those assets.
Financial assets
IHPA's financial assets are comprised of trade receivables and other receivables that are held for the purpose of collecting the contractual cash flows. All of IHPA's financial assets are measured, and carried, at amortised cost.
Financial liabilities
IHPA's financial liabilities are measured, and carried, at amortised cost. Supplier and other payables are recognised to the extent that the goods or services have been received, irrespective of having been invoiced. Lease liabilities are measured using the effective interest method.
Impairment
AASB 9 requires IHPA to impair its financial assets by applying the 'expected credit losses' (ECL) model. IHPA has taken advantage of the practical expedient which allows the use of a Provision Matrix to calculate expected credit losses on trade receivables. IHPA has assessed the loss allowance for its financial assets at an amount equal to lifetime expected credit losses.
Due to the nature of IHPA's receivables, a nil loss allowance has been calculated. There is no impairment of IHPA's financial assets for 2019-20.
Visit
https://www.transparency.gov.au/annual-reports/independent-hospital-pricing-authority/reporting-year/2019-20-39