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Appendix 2 - Financial statements

Financial statements

Independent audit report

Statement by the Accountable Authority and Chief Financial Officer

Statement of comprehensive income

Statement of financial position

Statement of changes in equity

Cash flow statement

Overview

Note 1: Expenses

Note 2: Income

Note 3: Financial assets

Note 4: Non-financial assets

Note 5: Payables

Note 6: Provisions

Note 7: Appropriations

Note 8: Cash flow reconciliation

Note 9: Employee provisions

Note 10: Key management personnel remuneration

Note 11: Related party disclosures

Note 12: Contingent assets and liabilities

Note 13: Financial instruments

Note 14: Fair value measurement

Note 15: Aggregate assets and liabilities

Independent Audit Report

Statement by the Accountable Authority and Chief Financial Officer

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Cash flow statement

Overview

Objectives of the Professional Services Review

Professional Services Review (PSR) is an Australian Government controlled entity. The objective of PSR is to investigate suspected cases of inappropriate practice by health practitioners on request from the Chief Executive Medicare.

PSR has one outcome:
Outcome 1: A reduction of the risks to patients and costs to the Australian Government of inappropriate clinical practice, including through investigating health services claimed under the Medicare and Pharmaceutical Benefits Schemes.

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 PSR administration and programs.

PSR activities contributing toward this outcome are classified as Departmental activities. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by PSR in its own right.

Basis of Preparation of the Financial Statements

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

The financial statements have been prepared in accordance with:
a) The 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 dollar unless otherwise specified.

Certain comparative amounts have been reclassified or adjusted to comply with current year’s presentation. There are minor changes to Note 1.

Adoption of New Australian Accounting Standard Requirements
No accounting standard has been adopted earlier than the application date as stated in the standard.

Future Australian Accounting Standard Requirements
During the 2018-19 financial year, accounting standards and interpretations were issued or amended by the Australian Accounting Standards Board which are effective for future reporting periods. However, none of these standards or interpretations are expected to have a material impact on PSR’s financial statements.

Accounting Judgements and Estimates
PSR have made the following judgements that have the most significant impact on the amounts recorded in the financial statements:

  • The fair value of leasehold improvements is taken to be the depreciated replacement cost as determined by an independent valuer. Make good was determined by taking into consideration the lease term, consumer price index, and the Australian Government Bond rate.
  • The long service leave liability is calculated using the shorthand method developed by the Australian Government Actuary. This method is influenced by fluctuations in the Commonwealth Government 10 year Treasury Bond rate and PSR's estimated salary growth rates.

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities with the next accounting period.

Transactions with the Government as Owner

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.

Taxation / Competitive Neutrality

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

Revenues, expenses and assets are recognised net of GST except:
a) where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
b) for receivables and payables.

Events After the Reporting Period

No events occurred after the balance date that would alter or influence PSR's financial statements and notes.

Explanation of major budget variances

AASB 1055: Budgetary Reporting requires explanations of major variances between the original budget as presented in the 2018-19 PBS. The variance commentary that appears in the face statements should be read in the context of the following:

1. The original budget was prepared before the 2018-19 final outcome could be known. As a result, the opening balance of the Statement of Financial Position was estimated and in some cases, variances between the 2018-19 outcome and budget estimates can be partly attributed to unanticipated movement in prior year figures.

2. PSR considers that major variances are those greater than 10% of the original estimate. Variances below this threshold are not included unless considered significant by their nature. Variances relating to cash flows are a result of factors detailed under expenses, own source income, assets or liabilities. Unless otherwise individually significant or unusual, no additional commentary has been included.

Note 1: Expenses

2019

2018

$

$

Note 1A: Employee Benefits

Wages and salaries

2,319,688

2,014,617

Superannuation

Defined contribution plans

303,006

263,927

Defined benefit plans

64,641

68,912

Leave and other entitlements

344,777

261,609

Separation and redundancies

-

-

Total employee benefits

3,032,112

2,609,065

Accounting Policy

Accounting policies for employee related expenses are contained in Note 9.

2019

2018

$

$

Note 1B: Suppliers

Goods and services supplied or rendered

Legal expenses

222,756

149,418

Case related fees

923,629

637,784

Other case related expenses

824,612

624,384

Consultant fees

641,067

415,758

Contractor expenses

372,996

133,171

Telephone and internet

75,863

74,146

Recruitment expenses

11,678

5,317

Other expenses

430,487

453,645

Total goods and services supplied or rendered

3,503,088

2,493,623

Other suppliers

Operating lease rentals

307,676

303,333

Workers compensation expenses

185,671

210,508

Total other suppliers

493,347

513,841

Total suppliers

3,996,435

3,007,464

PSR currently has an operating lease agreement which consists of the lease premises and car parking at the Canberra Airport from the Capital Airport Group Pty Ltd. PSR entered into a five year lease from 1 August 2017.

2019

2018

$

$

Commitments for minimum lease payments in relation to non-cancellable

operating leases are payable as follows:

Within 1 year

365,678

354,642

Between 1 to 5 years

747,893

1,128,812

More than 5 years

-

-

Total operating lease commitments

1,113,571

1,483,454

Accounting Policy

Leasing commitments

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

2019

2018

$

$

Note 1C: Finance Costs

Unwinding of discount

1,908

1,776

Total finance costs

1,908

1,776

Accounting Policy

Borrowing Costs

All borrowing costs are expensed as incurred.

2019

2018

$

$

Note 1D: Impairment Loss Allowance on Financial Instruments

Impairment on trade and other receivables

7,000

7,000

Total impairment on financial instruments

7,000

7,000

Note 1E: Losses on Disposal of Assets

Dispose of property, plant and equipment

-

979

Dispose of intangibles

9,858

-

Total losses on disposal of assets

9,858

979

Note 2: Income

2019

2018

Own-Source Revenue

$

$

Note 2A: Rendering of Services

Settlement from litigations

45,000

-

Total rendering of services

45,000

-

Accounting Policy

Revenue

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 entity.

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 entity.

2019

2018

$

$

Note 2B: Other Revenue

Resources received free of charge

35,000

32,500

Total other revenue

35,000

32,500

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.

Resources received free of charge are recorded as either revenue or gains depending on their nature.

2019

2018

$

$

Gains

Note 2C: Other Gains

Insurance refunds received and other

3,183

20,858

Total other gains

3,183

20,858

Revenue from Government

Note 2D: Revenue from Government

Appropriations

Departmental appropriations

6,946,000

5,518,000

Total revenue from Government

6,946,000

5,518,000

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. Appropriations receivable are recognised at their nominal amounts.

Note 3: Financial assets

2019

2018

$

$

Note 3A: Cash and Cash Equivalents

Cash on hand or on deposit

78,925

79,764

Total cash and cash equivalents

78,925

79,764

Accounting Policy

Cash

Cash is recognised at its nominal amount. Cash and cash equivalents include cash on hand.

2019

2018

$

$

Note 3B: Trade and Other Receivables

Good and services receivables

Settlement from litigations and leave transfers

33,963

27,943

Other

941,340

340

Total goods and services receivables

975,303

28,283

Appropriations receivable

Existing programs

1,221,141

1,911,286

Departmental capital budget

81,550

282,316

Total appropriations receivable

1,302,691

2,193,602

Other receivables

GST receivable from the Australian Taxation Office

26,892

28,005

Total other receivables

26,892

28,005

Total trade and other receivables (gross)

2,304,886

2,249,890

Less impairment loss allowance

Goods and services

(14,000)

(7,000)

Total impairment loss allowance

(14,000)

(7,000)

Total trade and other receivables (net)

2,290,886

2,242,890

Accounting Policy

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

Impairment of Financial Assets

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.

Note 4: Non-financial assets

Note 4A: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles for 2019

Leasehold improvements

Plant & equipment

Computer software

Total

$

$

$

$

As at 1 July 2018

Gross book value

493,551

409,560

707,386

1,610,497

Accumulated depreciation, amortisation and impairment

-

(64,917)

(338,905)

(403,822)

Net book value as at 1 July 2018

493,551

344,643

368,481

1,206,675

Additions

Purchase or internally developed

1,200

71,703

135,995

208,898

Revaluations and impairments recognised in other comprehensive income

1,412

8,639

-

10,051

Revaluations recognised in net cost of services

-

-

-

-

Reversal of revaluation previously recognised in other comprehensive income

-

-

-

-

Impairments recognised in net cost of services

-

-

-

-

Reversal of impairments recognised in net cost of services

-

-

-

-

Depreciation and amortisation

(120,862)

(78,023)

(69,118)

(268,003)

Disposals

Other

(1)

1

(9,858)

(9,858)

Net book value as at 30 June 2019

375,300

346,963

425,500

1,147,763

Net book value as at 30 June 2019 represented by

Gross book value

375,300

346,963

550,122

1,272,385

Accumulated depreciation and impairment

-

-

(124,622)

(124,622)

Net book value as at 30 June 2019

375,300

346,963

425,500

1,147,763

The carrying amount for buildings of $375,300 (2018: $493,551) and plant and equipment of $346,963 (2018: $344,643) were included in the valuation figures above. No indicators of impairment were found for property, plant and equipment.

During the year, PSR completed work on upgrading its ICT servers and Standard Operating Environment. No other property, plant and equipment, or intangible assets 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 stated at Note 4. At 30 June 2019, an independent valuer, B&A Valuers, conducted a desktop valuation of PSR's leasehold improvements and property, plant & equipment.

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

No contractual commitments were entered into for property, plant and equipment at 30 June 2019. (2017-18: $147,096)

Accounting Policy

Acquisition of Assets
Assets are recorded at cost on acquisition except as stated below. The cost of 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 individual purchases costing less than $1,000, which are expensed in the year of acquisition.

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions in property leases taken up by PSR where there exists an obligation to restore the property to its original condition. These costs are included in the value of PSR’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 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 PSR 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:

2019

2018

Leasehold improvements

Lease term

Lease term

Plant and equipment

3 to 10 years

3 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 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
PSR’s intangibles comprise of purchased 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. The useful lives of PSR's software are 4 to 10 years (2018: 4 to 10 years).

All software assets were assessed for indications of impairment as at 30 June 2019.

2019

2018

$

$

Note 4B: Other Non-Financial Assets

Prepayments

51,709

44,898

Total other non-financial assets

51,709

44,898

No indicators of impairment were found for other non-financial assets.

Note 5: Payables

2019

2018

$

$

Note 5A: Suppliers

Trade creditors and accruals

292,829

308,998

Operating lease rentals

13,950

8,728

Total suppliers

306,779

317,726

Settlement is made within 30 days.

Note 5B: Other Payables

Wages and salaries

54,985

51,769

Superannuation

2,983

2,506

Lease incentive

61,667

81,667

Total other payables

119,635

135,942

Settlement is made within 30 days.

Note 6: Provisions

2019

2018

$

$

Note 6: Provision for restoration obligations

Make good obligation

96,300

95,400

Total provision for restoration obligations

96,300

95,400

Provision for restoration

$

Carrying amount 1 July 2018

95,400

Additional provisions made

-

Amounts used

-

Amounts reversed

(1,008)

Finance cost - unwinding discount

1,908

Closing balance 2019

96,300

PSR currently has an agreement for the leasing of premises which include provisions requiring PSR to restore the premises to its original condition at the conclusion of the lease. PSR has made a provision to reflect the present value of this obligation.

Note 7: Appropriations

7A: Annual Appropriations ('Recoverable GST exclusive')

Annual Appropriations for 2019

Annual Appropriation1

Adjustment to appropriation2

Total appropriation

Appropriation applied in 2019 (current and prior years)

Variance3

$

$

$

$

$

DEPARTMENTAL

Ordinary annual services

6,946,000

86,149

7,032,149

(6,782,295)

249,854

Capital Budget4

62,000

-

62,000

(262,766)

(200,766)

Total departmental

7,008,000

86,149

7,094,149

(7,045,061)

49,088

Notes:

1. In 2018-19, PSR received $6,006,000 under Appropriation Bill (No. 1) 2018-19 and an additional $940,000 which is to be received under Appropriation Bill (No.1) 2019-20.

2. Adjustment includes PGPA Act section 74 receipts.

3. Departmental appropriations were underspent by $249,854. The variance was due to the delayed announcement of the Medicare Compliance Expansion of Data Matching Activities Measure.

4. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts. Payments made on non-financial assets include purchases of assets, and expenditure on assets which have been capitalised.

Annual Appropriations for 2018

Annual Appropriation1

Adjustment to appropriation2

Total appropriation

Appropriation applied in 2018 (current and prior years)

Variance3

$

$

$

$

$

DEPARTMENTAL

Ordinary annual services

5,518,000

99,309

5,617,309

(5,567,139)

50,170

Capital Budget4

649,000

-

649,000

(509,863)

139,137

Total departmental

6,167,000

99,309

6,266,309

(6,077,002)

189,307

1. In 2017-18, PSR received $476,000 under Appropriation Bill (No. 5) 2017-18.

2. Adjustment includes PGPA Act section 74 receipts.

3. Departmental appropriations were underspent by $139,137. During the year, PSR's lessor contributed $100K as a lease incentive towards the office fitout.

4. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts. Payments made on non-financial assets include purchases of assets, and expenditure on assets which have been capitalised.

7B: Unspent Annual Appropriations ('Recoverable GST exclusive')

Authority

2019

2018

$

$

DEPARTMENTAL

Appropriation Act (No. 1) 2018-19

1,283,140

-

Appropriation Act (No. 1) 2017-18

19,550

1,709,977

Appropriation Act (No. 5) 2017-18

-

476,000

Cash balance

78,925

79,764

Total

1,381,615

2,265,741

Note 8: Cash flow reconciliation

2019

2018

$

$

Reconciliation of cash and cash equivalents as per Statement of Financial Position to Cash Flow Statement

Cash and cash equivalents as per:

Cash flow statement

78,925

79,764

Statement of financial position

78,925

79,764

Discrepancy

-

-

Reconciliation of net cost of services to net cash from/ (used by) operating activities:

Net cost of services

(7,232,133)

(5,756,359)

Add revenue from Government

6,946,000

5,518,000

Adjustments for non-cash items

Depreciation / amortisation

268,003

183,433

Net write down of non-financial assets

7,000

7,000

Loss on disposal of assets

9,858

979

Finance costs

1,908

1,776

Changes in assets / liabilities

(Increase) / decrease in net receivables

(255,762)

7,225

(Increase) / decrease in prepayments

(6,811)

15,802

Increase / (decrease) in employee provisions

234,484

1,197

Increase / (decrease) in supplier payables

(10,947)

29,868

Increase / (decrease) in other payables

(16,307)

92,908

Net cash from/ (used by) operating activities

(54,707)

101,829

Note 9: Employee provisions

2019

2018

$

$

Note 9: Employee Provisions

Leave

789,514

555,030

Total employee provisions

789,514

555,030

Accounting Policy

Employee benefits

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.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

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.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leaves is non-vesting and the average sick leave taken in future years by employees of PSR is estimated to be less than the annual entitlement for sick 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 PSR employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The long term leave liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees as at 30 June 2019. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation. The other factors which have been considered in determining the long term leave liability for long service leave include salary growth, probability factors and on costs.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The entity 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

PSR's staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the PSS accumulation plan (PSSap).

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.

PSR 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. PSR 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 for the final fortnight of the year.

Note 10: Key management personnel remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of PSR, directly or indirectly, including any director (whether executive or otherwise) of PSR. PSR has determined the key management personnel to be the Director, Executive Officer, Special Counsel, and the Chief Finance Officer. Key management personnel remuneration is reported in the table below:

2019

2018

$

$

Short-term employee benefits

908,242

887,603

Post-employment benefits

121,274

116,959

Other long-term employee benefits

105,879

92,540

Total key management personnel remuneration expenses1

1,135,395

1,097,102

The total number of key management personnel included in the above table represents 5 individuals (2018: 5 individuals). During the reporting period, 1 of the 5 individuals was on acting arrangements.

1. The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister's remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the entity.

Note 11: Related party disclosures

Related party relationships:

PSR is an Australian Government controlled entity. Related parties to this entity are Key Management Personnel including the Portfolio Minister and Executive, 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.

The following transactions with related parties occurred during the financial year:

The entity transacts with other Australian Government controlled entities consistent with normal day-to-day business operations provided under normal terms and conditions, including the payment of workers compensation and insurance premiums. These are not considered individually significant to warrant separate disclosure as related party transactions (2018: nil).

Refer to Note 9 Employee Provisions for details on superannuation arrangements with the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), and the PSS accumulation plan (PSSap).


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 (2018: nil).

Note 12: Contingent assets and liabilities

Quantifiable Contingencies

At 30 June 2019, PSR did not have any quantifiable contingencies (2018: nil).

Unquantifiable Contingencies

PSR is currently involved in a litigation case before the Federal Court which may result in costs awarded in favour of PSR. PSR has been advised by its solicitors that the amount cannot be reliably estimated. No further disclosure has been made on the grounds that it can be expected to prejudice seriously the outcome of the litigation (2018: nil).

Significant Remote Contingencies

At 30 June 2019 PSR did not have any significant remote contingencies (2018: nil).

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.

Note 13: Financial instruments

2019

2018

$

$

Note 13A: Categories of Financial Instruments

Financial Assets under AASB 139

Loans and receivables

Cash and cash equivalents

-

79,764

Trade and other receivables

-

21,283

Total loans and receivables

-

101,047

Total financial assets

-

101,047

Financial Assets under AASB 9

Financial assets at amortised cost

Cash and cash equivalents

78,925

-

Trade and other receivables

961,303

-

Total financial assets at amortised cost

1,040,228

-

Total financial assets

1,040,228

-

Financial Liabilities

Financial liabilities measured at amortised cost

Payables - Suppliers

306,779

317,726

Total financial liabilities

306,779

317,726

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

AASB 139 Original classification

AASB 9 New classification

AASB 139 carrying amount at 30 June 2018

AASB 9 carrying amount at 1 July 2018

$

$

Financial Assets Class

Note

Cash and cash equivalents

3A

Loans and receivables

Amortised cost

79,764

79,764

Trade and other receivables

3B

Loans and receivables

Amortised cost

21,283

21,283

Total financial assets

101,047

101,047

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

AASB 139 carrying amount at 30 June 2018

Reclassification

Remeasurement

AASB 9 carrying amount at 1 July 2018

Financial Assets at amortised cost

$

$

$

$

Loans and receivables

Cash and cash equivalents

79,764

-

-

79,764

Trade and other receivables

21,283

-

-

21,283

Total Financial Assets at amortised cost

101,047

-

-

101,047

-

-

1. The carrying amount of cash and trade and other receivables under AASB 139 has not changed on transition to AASB 9.

Accounting Policy

Financial Assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, PSR classifies its financial assets as 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.

Effective Interest Method
Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

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
PSR classifies its financial liabilities as financial liabilities at amortised cost. Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial Liabilities at Amortised Cost
Financial liabilities, including borrowings, 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).

Note 14: Fair value measurement

Accounting Policy

Fair Value Measurement
PSR deems transfers between levels of the fair value hierarchy to have occurred at the end of the reporting period.

Note 14: Fair Value Measurements

Fair value measurements at the end of the reporting period

Fair value measurements at the end of the reporting period

2019

2018

$

$

Non-financial assets

Leasehold improvements

375,300

493,551

Other property, plant and equipment

346,963

344,643

Total non-financial assets

722,263

838,194

Total fair value measurements of assets in the statement of financial position

722,263

838,194

1. No change in valuation technique occurred during the period

2. Recurring level 3 fair value measurements reconciliation - valuation process

PSR procured valuation services from B&A Valuers and relied on valuation models provided by B&A Valuers. PSR tests the procedures of the valuation model at least once every 12 months. B&A Valuers has provided written assurance to PSR that the model developed is in compliance with AASB 13.

Note 15: Aggregate assets and liabilities

2019

2018

$

$

Note 15: Aggregate Assets and Liabilities

Assets expected to be recovered in

No more than 12 months

2,422,487

2,368,363

More than 12 months

1,146,796

1,205,864

Total assets

3,569,283

3,574,227

Liabilities expected to be settled in

No more than 12 months

545,632

523,124

More than 12 months

766,596

580,974

Total liabilities

1,312,228

1,104,098